[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4203 Introduced in House (IH)]







106th CONGRESS
  2d Session
                                H. R. 4203

To establish a comprehensive regulatory framework over the clearing of 
  over-the-counter derivative instruments that will operate under the 
supervision of the Federal banking agencies, to clarify the lawfulness 
   of the use of multilateral clearing systems for over-the-counter 
      derivative instrument transactions, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             April 6, 2000

  Mr. Leach (for himself, Mr. LaFalce, Mr. Baker, and Mr. Kanjorski) 
 introduced the following bill; which was referred to the Committee on 
 Banking and Financial Services, and in addition to the Committees on 
     Commerce, Agriculture, 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 establish a comprehensive regulatory framework over the clearing of 
  over-the-counter derivative instruments that will operate under the 
supervision of the Federal banking agencies, to clarify the lawfulness 
   of the use of multilateral clearing systems for over-the-counter 
      derivative instrument transactions, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Over-the-Counter Derivatives 
Systemic Risk Reduction Act of 2000''.

SEC. 2. FINDINGS AND PURPOSES.

    The Congress finds as follows:
            (1) Banks and other financial institutions regulated under 
        Federal banking laws--
                    (A) are dominant participants in the market for 
                over-the-counter derivative instruments; and
                    (B) use such instruments in their capital market 
                activities for, among other purposes, controlling 
                financial risks and facilitating investment strategies.
            (2) Multilateral clearing systems can reduce risks to the 
        financial system posed by certain categories of over-the-
        counter derivative instruments by mutualizing the credit risk 
        of each transaction.
            (3) A multilateral clearing system may--
                    (A) mitigate losses that the parties to 
                transactions involving over-the-counter derivative 
                instruments would suffer if their counterparties fail 
                to settle obligations in connection with such 
                transactions; and
                    (B) make such transactions more economically 
                efficient by facilitating the offset and netting of 
                obligations arising under contracts cleared through the 
                system.
            (4) Although it is evident that the establishment of 
        multilateral clearing systems in the United States for 
        transactions involving over-the-counter derivative instruments 
        would enhance the competitiveness of United States financial 
        institutions, efforts to establish such systems have been 
        hindered by concerns that the use of such a system may render 
        the underlying transactions illegal under existing Federal law.
            (5) In November 1999, the Secretary of the Treasury, the 
        Chairman of the Board of Governors of the Federal Reserve 
        System, the Chairman of the Securities and Exchange Commission, 
        and the Chairman of the Commodity Futures Trading Commission 
        all agreed to foster the development of multilateral clearing 
        systems for over-the-counter derivative instruments 
        transactions.
            (6) Federal supervision of multilateral clearing systems 
        for over-the-counter derivative instruments markets will foster 
        the effectiveness and integrity of the operations, the risk 
        management of such systems, and the stability of the financial 
        markets and the safety and soundness of the banking system.
            (7) Questions about the enforceability of over-the-counter 
        derivatives contracts under Federal and State law could have a 
        negative impact on the stability of the financial institutions 
        that are parties to them and could threaten the safety and 
        soundness of the financial system.
            (8) Interpretations of Federal law suggesting that the use 
        of certain electronic technologies in the trading of over-the-
        counter derivative instruments might raise questions about 
        their lawfulness have hampered the development of more 
        efficient trading systems and, therefore, more effective risk 
        management for financial institutions.

SEC. 3. MULTILATERAL CLEARING ORGANIZATIONS.

    (a) In General.--Subtitle A of title IV of the Federal Deposit 
Insurance Corporation Improvement Act of 1991 is amended--
            (1) by inserting before the section heading for section 
        401, the following new heading:

      ``CHAPTER 1--BILATERAL AND CLEARING ORGANIZATION NETTING'';

            (2) in section 401, by striking ``this subtitle'' and 
        inserting ``this chapter''; and
            (3) by inserting after section 407, the following new 
        chapter:

            ``CHAPTER 2--MULTILATERAL CLEARING ORGANIZATIONS

``SEC. 408. DEFINITIONS.

    For purposes of this chapter, the following definitions shall 
apply:
            ``(1) Multilateral clearing organization.--The term 
        `multilateral clearing organization' means a system utilized by 
        more than 2 participants in which the bilateral credit 
        exposures of participants arising from the transactions cleared 
        are effectively eliminated and replaced by a system of 
        guarantees, insurance, or mutualized risk of loss.
            ``(2) Over-the-counter derivative instrument.--The term 
        `over-the-counter derivative instrument' means--
                    ``(A) any agreement, including the terms and 
                conditions incorporated by reference in any such 
                agreement, which is an interest rate swap, option, or 
                forward agreement, including a rate floor, rate cap, 
                rate collar, cross-currency rate swap, basis swap, and 
                forward rate agreement; a spot, same day-tomorrow, 
                tomorrow-next, forward, or other foreign exchange or 
                precious metals agreement; a currency swap, option, or 
                forward agreement; an equity index or equity swap, 
                option, or forward 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 or transaction similar to any 
                other agreement or transaction referred to in this 
                clause that is presently, or in the future becomes, 
                regularly entered into by parties that participate in 
                swap transactions (including terms and conditions 
                incorporated by reference in such agreement) and that 
                is a forward, swap, or option on 1 or more rates, 
                currencies, commodities, equity securities or other 
                equity instruments, debt securities or other debt 
                instruments, or economic or other indices or measures 
                of economic or other risk or value; and
                    ``(C) any option to enter into any, or any 
                combination of, agreements or transactions referred to 
                in this subparagraph.
            ``(3) Other definitions.--The terms `bank' and `affiliate' 
        have the meanings given the terms in section 2 of the Bank 
        Holding Company Act of 1956.

``SEC. 409. MULTILATERAL CLEARING ORGANIZATIONS.

    ``(a) In General.--Except with respect to clearing organizations 
described in subsection (b), no person may operate a multilateral 
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 bank, or a corporation 
chartered under section 25A of the Federal Reserve Act.
    ``(b) Clearing Organizations.--Subsection (a) shall not apply to 
any clearing organization 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 financial regulator that 
        an appropriate Federal financial regulatory agency has 
        determined satisfies appropriate standards.
    ``(c) Rules of Construction.--
            ``(1) Over-the-counter derivative instruments.--The fact 
        that an over-the-counter derivative instrument is cleared or 
        settled through a multilateral clearing organization shall not 
        be construed to mean, or used to support a conclusion, that 
        such transaction is subject to the Commodity Exchange Act.
            ``(2) CFTC jurisdiction.--No provision of this chapter 
        shall be construed as altering, limiting, or otherwise 
        affecting the applicability of the Commodity Exchange Act to, 
        or the jurisdiction of the Commodity Futures Trading Commission 
        over--
                    ``(A) trading in or clearing of transactions in, or 
                based on, nonfinancial commodities with finite 
                supplies; and
                    ``(B) clearing by organizations that clear 
                exchange-traded contracts for the purchase or sale of a 
                commodity for future delivery, commodity options, and 
                options on contracts for the purchase or sale of a 
                commodity for future delivery under the Commodity 
                Exchange Act.
            ``(3) SEC jurisdiction.--No provision of this chapter shall 
        be construed as altering, limiting, or otherwise affecting the 
        jurisdiction of the Securities and Exchange Commission over 
        clearance and settlement by a clearing agency registered under 
        the Securities Exchange Act of 1934.
            ``(4) No effect on applicability of securities exchange act 
        of 1934 to clearing of securities.--No provision of this 
        chapter shall be construed as altering, limiting, or otherwise 
        affecting the applicability of the Securities Exchange Act of 
        1934 to the clearing of securities, including the applicability 
        of section 17A(d) of such Act to the clearing through a 
        multilateral clearing organization under this chapter of over-
        the-counter derivative instruments that are securities within 
        the meaning of the Federal securities laws.
            ``(5) Federal reserve board and occ jurisdiction.--A 
        multilateral clearing organization under the jurisdiction of 
        the Board of Governors of the Federal Reserve System or the 
        Comptroller of the Currency in accordance with subsection (a) 
        shall not be subject to the jurisdiction of any other Federal 
        department or agency as a result of clearing any over-the-
        counter derivative instrument.''.
    (b) Enforcement Powers of the Board of Governors of the Federal 
Reserve System.--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.--Section 3(u), subsections 
        (j) and (k) of section 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 Deposit 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.''.

SEC. 4. LEGAL CERTAINTY.

    No over-the-counter derivative instrument (as defined in section 
408(2) of the Federal Deposit Insurance Corporation Improvement Act of 
1991) to which a financial institution (as defined in or under section 
402(9) of such Act or in or under section 509(3)(A) of the Gramm-Leach-
Bliley Act) is a party shall be held void, subject to rescission, or 
unenforceable based solely on the regulatory status of, or regulatory 
jurisdiction over, such agreement, contract, or transaction under 
Federal or State law.

SEC. 5. ELECTRONIC TRADING.

    (a) Rules of Construction.--
            (1) Over-the-counter derivative instruments.--The fact that 
        an over-the-counter derivative instrument is the subject of 
        communication on, or is entered into or traded through or by 
        means of, a financial electronic trading system shall not be 
        construed to mean, or used to support a conclusion, that such 
        transaction is subject to the Commodity Exchange Act.
            (2) CFTC jurisdiction.--No provision of this section shall 
        be construed as altering, limiting, or otherwise affecting the 
        applicability of the Commodity Exchange Act to, or the 
        jurisdiction of the Commodity Futures Trading Commission over, 
        trading in transactions in, or based on, nonfinancial 
        commodities with finite supplies.
    (b) Definitions.--For purposes of this section, the following 
definitions shall apply:
            (1) Eligible contract participant.--The term ``eligible 
        contract participant'' means any of the following persons 
        acting for its own account:
                    (A) Any depository institution (as defined in 
                section 3 of the Federal Deposit Insurance Act), 
                foreign bank (as defined in section 1(b) of the 
                International Banking Act of 1978), Federal or State 
                credit union (as defined in section 101 of the Federal 
                Credit Union Act), corporation organized under section 
                25A of the Federal Reserve Act, corporation operating 
                under section 25 of such Act, trust company, or 
                affiliate of any such person.
                    (B) An insurance company (as defined in section 
                2(q) of the Bank Holding Company Act of 1956).
                    (C) An investment company subject to regulation 
                under the Investment Company Act of 1940 or a foreign 
                person performing a similar role or function subject as 
                such to foreign regulation (regardless of whether the 
                investors in such investment company or foreign person 
                are themselves eligible contract participants).
                    (D) A commodity pool which has total assets 
                exceeding $5,000,000 and which is formed and operated 
                by a person subject to regulation under the Commodity 
                Exchange Act or a foreign person performing a similar 
                role or function subject as such to foreign regulation 
                (regardless of whether the investors in such commodity 
                pool are themselves eligible contract participants).
                    (E) A corporation, partnership, proprietorship, 
                organization, trust, or other entity--
                            (i) which has total assets exceeding 
                        $10,000,000;
                            (ii) the obligations of which under an 
                        agreement, contract, or transaction are 
                        guaranteed or otherwise supported by a letter 
                        of credit or any other agreement by any entity 
                        referred to in clause (i) of this subparagraph 
                        or subparagraph (A), (B), (C), or (D); or
                            (iii) which has a net worth of $1,000,000 
                        and enters into an agreement, contract, or 
                        transaction in connection with the conduct of 
                        its business or to manage the risk associated 
                        with an asset or liability owned or incurred or 
                        reasonably likely to be owned or incurred by 
                        such person in the conduct of its business.
                    (F) A broker or dealer subject to regulation under 
                the Securities Exchange Act of 1934 or a foreign person 
                performing a similar role or function subject as such 
                to foreign regulation, except that if such broker or 
                dealer is a natural person or proprietorship, the 
                broker or dealer shall not be deemed an eligible 
                contract participant unless the broker or dealer also 
                meets the requirements of subparagraph (E) or owns and 
                invests on a discretionary basis not less than 
                $25,000,000 in investments.
                    (G) A futures commission merchant, floor broker, or 
                floor trader subject to regulation under the Commodity 
                Exchange Act or a foreign person performing a similar 
                role or function subject as such to foreign regulation, 
                except that if such futures commission merchant, floor 
                broker, or floor trader is a natural person or 
                proprietorship, the futures commission merchant, floor 
                broker, or floor trader shall not be deemed an eligible 
                contract participant, unless the futures commission 
                merchant, floor broker, or floor trader also meets the 
                requirements of subparagraph (E) or owns and invests on 
                a discretionary basis not less than $25,000,000 in 
                investments.
            (2) Financial electronic trading system.--The term 
        ``financial electronic trading system'' means any person or 
        group of persons, including any exchange that has been 
        designated as a contract market by the Commodity Futures 
        Trading Commission, that constitutes, maintains, or provides an 
        electronic facility or system, including a computer system or 
        network, in which--
                    (A) each participant is a financial institution (as 
                defined in or under section 402(9) of the Federal 
                Deposit Insurance Corporation Improvement Act of 1991 
                or in or under section 509(3)(A) of the Gramm-Leach-
                Bliley Act) that is an eligible contract participant;
                    (B) participants have the ability to communicate 
                information or to execute or trade agreements, 
                contracts, or transactions that are open to 
                participants in such facility or system; and
                    (C) no participant may act as an agent for another 
                person in using the system.
            (3) Over-the-counter derivative instrument.--The term 
        `over-the-counter derivative instrument' has the same meaning 
        as in section 408(2) of the Federal Deposit Insurance 
        Corporation Improvement Act of 1991.

SEC. 6. CLEARING BANKS.

    (a) In General.--The Federal Reserve Act (12 U.S.C. 221 et seq.) is 
amended by inserting after section 9A the following new section:

``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 a State bank which 
        operates, or operates as, a multilateral clearing organization 
        pursuant to section 409 of the Federal Deposit Insurance 
        Corporation Improvement Act of 1991 to the same extent 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 receiver for a State 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 subsection 
(a), and the State bank for which the conservator or receiver 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 Comptroller of the Currency (in 
the case of a national bank which operates, or operates as, a 
multilateral clearing organization pursuant to section 409 of the 
Federal Deposit Insurance Corporation Improvement Act of 1991) or the 
Board (in the case of a State bank which operates, or operates as, such 
a multilateral clearing organization) may direct 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.''.
    (b) Technical and Conforming Amendments to Title 11, United States 
Code.--
            (1) Bankruptcy code debtors.--Section 109(b)(2) of title 
        11, United States Code, is amended by striking `; or' and 
        inserting the following: `, except that a bank or a corporation 
        organized under section 25A of the Federal Reserve Act which 
        operates, or operates as, a multilateral clearing organization 
        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 Comptroller of the 
        Currency (in the case of a national bank) or the Board of 
        Governors of the Federal Reserve System (in the case of a State 
        bank or such a corporation); or''.
            (2) Chapter 7 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 a 
bank or a corporation organized under section 25A of the Federal 
Reserve Act which operates, or operates as, a multilateral clearing 
organization pursuant to section 409 of the Federal Deposit Insurance 
Corporation Improvement Act of 1991 may be a debtor under chapter 11 of 
this title.''.
            (3) Definition of financial institution.--Section 101(22) 
        of title 11, United States Code, is amended to read as follows:
            ``(22) the term `financial institution'--
                    ``(A) means a person that is a commercial or 
                savings bank, industrial savings bank, savings and loan 
                association, trust company, a bank or a corporation 
                organized under section 25A of the Federal Reserve Act 
                and, when any such person is acting as agent or 
                custodian for a customer in connection with a 
                securities contract, as defined in section 741 of this 
                title, such customer; and
                    ``(B) includes any person described in subparagraph 
                (A) which operates, or operates as, a multilateral 
                clearing organization pursuant to section 409 of the 
                Federal Deposit Insurance Corporation Improvement Act 
                of 1991;''.
            (4) Subchapter v of chapter 7.--
                    (A) In general.--Section 103 of title 11, United 
                States Code, is amended--
                            (i) by redesignating subsections (e) 
                        through (i) as subsections (f) through (j), 
                        respectively; and
                            (ii) by inserting after subsection (d) the 
                        following new subsection:
    ``(e) Scope of Application.--Subchapter V of chapter 7 of this 
title shall apply only in a case under such chapter concerning the 
liquidation of a bank or a corporation organized under section 25A of 
the Federal Reserve Act which operates, or operates as, a multilateral 
clearing organization pursuant to section 409 of the Federal Deposit 
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

``Sec. Sec. 781. Definitions.
    ``For purposes of this subchapter, the following 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 `clearing bank' means a 
        national or State bank, or a corporation organized under 
        section 25A of the Federal Reserve Act, which operates, or 
        operates as, a multilateral clearing organization pursuant to 
        section 409 of the Federal Deposit Insurance Corporation 
        Improvement Act of 1991.
``Sec. Sec. 782. Selection of trustee
    ``(a) In General.--
            ``(1) Appointment.--Notwithstanding any other provision of 
        this title, the conservator or receiver who files the petition 
        shall be the trustee under this chapter, unless the Comptroller 
        of the Currency (in the case of a clearing bank for which the 
        Comptroller of the Currency appointed a conservator or 
        receiver) or the Board (in the case of any clearing bank for 
        which the Board appointed a conservator or receiver) designates 
        an alternative trustee.
            ``(2) Successor.--The Comptroller of the Currency or the 
        Board of Governors of the Federal Reserve System (as the case 
        may be) may designate a successor trustee, if required.
    ``(b) Authority of Trustee.--Whenever the Comptroller of the 
Currency or the Board appoints or designates a trustee, chapter 3 and 
sections 704 and 705 of this title shall apply to the Comptroller or 
the Board, as applicable, in the same way and to the same extent that 
they apply to a United States trustee.
``Sec. Sec. 783. Additional powers of trustee
    ``(a) Distribution of Nonestate Property.--The trustee under this 
subchapter has power to distribute property not of the estate, 
including distributions to customers that are mandated by subchapters 
III and IV of this chapter.
    ``(b) Disposition of Institution.--The trustee under this 
subchapter may, after notice and a hearing--
            ``(1) sell the clearing bank to a depository institution or 
        consortium of depository 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 extent as could a 
        receiver for a depository institution under paragraphs (9) and 
        (10) of section 11(e) of the Federal Deposit Insurance 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, paragraphs (9) through 
        (13) of such section, and subparagraphs (A) through (H) and 
        subparagraph (K) of paragraph (4) of such section 11(n), except 
        that--
                    ``(A) the bridge bank to which such assets or 
                liabilities are transferred shall be treated as a 
                clearing bank for the purpose of this subsection; and
                    ``(B) any references in any such provision of law 
                to the Federal Deposit Insurance Corporation shall be 
                construed to be references to the appointing agency and 
                that references to deposit insurance shall be omitted.
    ``(c) Certain Transfers Included.--Any reference in this section to 
transfers of liabilities includes a ratable transfer of liabilities 
within a priority class.
``Sec. Sec. 784. Right to be heard
    ``The Comptroller of the Currency (in the case of a clearing bank 
for which the Comptroller of the Currency appointed a conservator or 
receiver), the Board of Governors of the Federal Reserve System (in the 
case of any clearing bank for which the Board appointed a conservator 
or receiver), 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.''.
    (c) Conforming Amendment.--The table of sections for chapter 7 of 
title 11, United States Code, is amended by adding at the end the 
following new items:

               ``Subchapter V--Clearing Bank Liquidation

``Sec.
``781. Definitions.
``782. Selection of trustee.
``783. Additional powers of trustee.
``784. Right to be heard.''.
    (d) Resolution of Edge Act Corporations.--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 appoint 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 limitations, as a 
                conservator or receiver for a national bank.
                    ``(B) Equivalent authority.--The Board shall have 
                the same authority with respect to any conservator or 
                receiver appointed for a corporation organized 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 11 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.''.

SEC. 7. RELATION TO STATE LAW.

    No state or local law that prohibits or regulates gaming or the 
operation of ``bucket shops'' (other than anti-fraud provisions of 
general applicability) shall be deemed to govern or be in any way 
applicable to any over-the-counter derivative instrument (as defined in 
section 408(2) of the Federal Deposit Insurance Corporation Improvement 
Act of 1991) to which a financial institution (as defined in or under 
section 402(9) of such Act or in or under section 509(3)(A) of the 
Gramm-Leach-Bliley Act) is a party.
                                 <all>