[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4541 Introduced in House (IH)]







106th CONGRESS
  2d Session
                                H. R. 4541

 To reauthorize and amend the Commodity Exchange Act to promote legal 
certainty, enhance competition, and reduce systemic risk in markets for 
   futures and over-the-counter derivatives, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              May 25, 2000

  Mr. Ewing introduced the following bill; which was referred to the 
Committee on Agriculture, and in addition to the Committees on Banking 
 and Financial Services, and Commerce, 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 reauthorize and amend the Commodity Exchange Act to promote legal 
certainty, enhance competition, and reduce systemic risk in markets for 
   futures and over-the-counter derivatives, 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; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Commodity Futures 
Modernization Act of 2000''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Purposes.
Sec. 3. Definitions.
Sec. 4. Agreements, contracts, and transactions in foreign currency, 
                            government securities, and certain other 
                            commodities.
Sec. 5. Legal certainty for excluded derivative transactions.
Sec. 6. Excluded electronic trading facilities.
Sec. 7. Hybrid instruments.
Sec. 8. Futures on securities.
Sec. 9. Transactions in exempt commodities.
Sec. 10. Protection of the public interest.
Sec. 11. Prohibited transactions.
Sec. 12. Designation of boards of trade as contract markets.
Sec. 13. Derivatives transaction execution facilities.
Sec. 14. Derivatives clearing organizations.
Sec. 15. Common provisions applicable to registered entities.
Sec. 16. Exempt boards of trade.
Sec. 17. Suspension or revocation of designation as contract market.
Sec. 18. Authorization of appropriations.
Sec. 19. Preemption.
Sec. 20. Predispute resolution agreements for institutional customers.
Sec. 21. Consideration of costs and benefits and antitrust laws.
Sec. 22. Contract enforcement between eligible counterparties.
Sec. 23. Rule of construction.
Sec. 24. Technical and conforming amendments.
Sec. 25. Effective date.

SEC. 2. PURPOSES.

    The purposes of this Act are--
            (1) to reauthorize the Commodity Exchange Act (7 U.S.C. 1 
        et seq.);
            (2) to streamline and eliminate unnecessary regulation for 
        the commodity futures exchanges and other entities regulated 
        under the Commodity Exchange Act;
            (3) to transform the role of the Commodity Futures Trading 
        Commission in its oversight of the futures markets;
            (4) to provide a legislative and regulatory framework for 
        allowing the trading of futures on securities;
            (5) to provide the Commission jurisdiction over the retail 
        foreign exchange market and bucket shops that are not otherwise 
        regulated;
            (6) to promote innovation for futures and derivatives and 
        to reduce systemic risk by enhancing legal certainty in the 
        markets for certain futures and derivatives transactions;
            (7) to reduce systemic risk and provide greater stability 
        to markets during times of market disorder by allowing the 
        clearing of transactions in over-the-counter derivatives 
        through appropriately regulated clearing organizations; and
            (8) to enhance the competitive position of United States 
        financial institutions and financial markets.

SEC. 3. DEFINITIONS.

    Section 1a of the Commodity Exchange Act (7 U.S.C. 1a) is amended--
            (1) by redesignating paragraphs (8) through (12), (13) 
        through (15), and (16) as paragraphs (16) through (20), (22) 
        through (24), and (29), respectively;
            (2) by inserting after paragraph (7) the following:
            ``(8) Derivatives clearing organization.--
                    ``(A) In general.--The term `derivatives clearing 
                organization' means a clearinghouse, clearing 
                association, clearing corporation, or similar entity, 
                facility, system, or organization that, with respect to 
                a derivative agreement, contract, or transaction (other 
                than a security)--
                            ``(i) enables each party to the derivative 
                        agreement, contract, or transaction to 
                        substitute, through novation or otherwise, the 
                        credit of the derivatives clearing organization 
                        for the credit of the parties;
                            ``(ii) arranges or provides, on a 
                        multilateral basis, for the settlement or 
                        netting of obligations resulting from such 
                        agreements, contracts, or transactions executed 
                        by parties in the derivatives clearing 
                        organization; or
                            ``(iii) otherwise provides clearing 
                        services or arrangements that mutualize or 
                        transfer among parties in the derivatives 
                        clearing organization the credit risk arising 
                        from such agreements, contracts, or 
                        transactions executed by the parties.
                    ``(B) Exclusions.--The term `derivatives clearing 
                organization' does not include an entity, facility, 
                system, or organization solely because it arranges or 
                provides for--
                            ``(i) settlement, netting, or novation of 
                        obligations resulting from agreements, 
                        contracts, or transactions, on a bilateral 
                        basis and without a centralized counterparty;
                            ``(ii) settlement or netting of cash 
                        payments through an interbank payment system; 
                        or
                            ``(iii) settlement, netting, or novation of 
                        obligations resulting from a sale of a 
                        commodity in a transaction in the spot market 
                        for the commodity.
            ``(9) Electronic trading facility.--The term `electronic 
        trading facility' means a trading facility that--
                    ``(A) operates by means of an electronic network; 
                and
                    ``(B) maintains a real-time audit trail of bids, 
                offers, and the matching of orders or the execution of 
                transactions.
            ``(10) Eligible contract participant.--The term `eligible 
        contract participant' means--
                    ``(A) acting for its own account--
                            ``(i) a financial institution;
                            ``(ii) an insurance company regulated by a 
                        State (including a subsidiary or affiliate of 
                        such an insurance company);
                            ``(iii) an investment company subject to 
                        regulation under the Investment Company Act of 
                        1940 (15 U.S.C. 80a-1 et seq.) or a foreign 
                        person performing a similar role or function 
                        subject as such to foreign regulation 
                        (regardless of whether each investor in the 
                        investment company or the foreign person is 
                        itself an eligible contract participant);
                            ``(iv) a commodity pool that--
                                    ``(I) has total assets exceeding 
                                $5,000,000; and
                                    ``(II) is formed and operated by a 
                                person subject to regulation under this 
                                Act or a foreign person performing a 
                                similar role or function subject as 
                                such to foreign regulation (regardless 
                                of whether each investor in the 
                                commodity pool or the foreign person is 
                                itself an eligible contract 
                                participant);
                            ``(v) a corporation, partnership, 
                        proprietorship, organization, trust, or other 
                        entity--
                                    ``(I) that 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 
                                keepwell, support, or other agreement 
                                by an entity described in subclause 
                                (I), in clause (i), (ii), (iii), (iv), 
                                or (vii), or in subparagraph (C); or
                                    ``(III) that--
                                            ``(aa) has a net worth 
                                        exceeding $1,000,000; and
                                            ``(bb) enters into an 
                                        agreement, contract, or 
                                        transaction in connection with 
                                        the conduct of the entity's 
                                        business or to manage the risk 
                                        associated with an asset or 
                                        liability owned or incurred or 
                                        reasonably likely to be owned 
                                        or incurred by the entity in 
                                        the conduct of the entity's 
                                        business;
                            ``(vi) an employee benefit plan subject to 
                        the Employee Retirement Income Security Act of 
                        1974 (29 U.S.C. 1001 et seq.) or a foreign 
                        person performing a similar role or function 
                        subject as such to foreign regulation--
                                    ``(I) that has total assets 
                                exceeding $5,000,000; or
                                    ``(II) the investment decisions of 
                                which are made by--
                                            ``(aa) an investment 
                                        advisor or commodity trading 
                                        advisor subject to regulation 
                                        under the Investment Advisers 
                                        Act of 1940 (15 U.S.C. 80b-1 et 
                                        seq.) or this Act;
                                            ``(bb) a foreign person 
                                        performing a similar role or 
                                        function subject as such to 
                                        foreign regulation;
                                            ``(cc) a financial 
                                        institution; or
                                            ``(dd) an insurance company 
                                        regulated by a State (including 
                                        a subsidiary or affiliate of 
                                        such an insurance company);
                            ``(vii)(I) a governmental entity (including 
                        the United States, a State, or a foreign 
                        government) or political subdivision of a 
                        governmental entity;
                            ``(II) a multinational or supranational 
                        government entity; or
                            ``(III) an instrumentality, agency, or 
                        department of an entity described in subclause 
                        (I) or (II);
                            ``(viii) a broker or dealer subject to 
                        regulation under the Securities Exchange Act of 
                        1934 (15 U.S.C. 78a et seq.) or a foreign 
                        person performing a similar role or function 
                        subject as such to foreign regulation, except 
                        that, if the broker or dealer or foreign person 
                        is a natural person or proprietorship, the 
                        broker or dealer or foreign person shall not be 
                        considered to be an eligible contract 
                        participant unless the broker or dealer or 
                        foreign person also meets the requirements of 
                        clause (v) or (xi);
                            ``(ix) a futures commission merchant 
                        subject to regulation under this Act or a 
                        foreign person performing a similar role or 
                        function subject as such to foreign regulation, 
                        except that, if the futures commission merchant 
                        or foreign person is a natural person or 
                        proprietorship, the futures commission merchant 
                        or foreign person shall not be considered to be 
                        an eligible contract participant unless the 
                        futures commission merchant or foreign person 
                        also meets the requirements of clause (v) or 
                        (xi);
                            ``(x) a floor broker or floor trader 
                        subject to regulation under this Act in 
                        connection with any transaction that takes 
                        place on or through the facilities of a 
                        registered entity or an exempt board of trade, 
                        or any affiliate thereof, on which such person 
                        regularly trades; or
                            ``(xi) a natural person with total assets 
                        exceeding $10,000,000;
                    ``(B)(i) a person described in any of clauses (i) 
                through (x) of subparagraph (A) or in subparagraph (C), 
acting as broker or performing an equivalent agency function on behalf 
of another person described in subparagraph (A) or (C); or
                    ``(ii) an investment adviser subject to regulation 
                under the Investment Advisors Act of 1940, a commodity 
                trading advisor subject to regulation under this Act, a 
                foreign person performing a similar role or function 
                subject as such to foreign regulation, or a person 
                described in any of clauses (i) through (x) of 
                subparagraph (A) or in subparagraph (C), in any such 
                case acting as investment manager or fiduciary (but 
                excluding a person acting as broker or performing an 
                equivalent agency function) for another person 
                described in subparagraph (A) or (C) and who is 
                authorized by such person to commit such person to the 
                transaction;
                    ``(C) any other person that the Commission 
                determines to be eligible in light of the financial or 
                other qualifications of the person.
            ``(11) Energy commodity.--The term `energy commodity' means 
        coal, condensates, crude oil, electricity, natural gas, or 
        natural gas liquids.
            ``(12) Excluded commodity.--The term `excluded commodity' 
        means any commodity other than an agricultural commodity 
        enumerated in paragraph (3) or an exempt commodity.
            ``(13) Exempt commodity.--The term `exempt commodity' means 
        an energy commodity or a metal commodity.
            ``(14) Financial commodity.--The term `financial commodity' 
        means--
                    ``(A) an interest rate, exchange rate, currency, 
                security, security index, credit risk, debt or equity 
                instrument, or widely published index or measure of 
                inflation; or
                    ``(B) any other rate, differential, index, or 
                measure of economic risk, return, or value (excluding 
                any rate, differential, index, or measure based on a 
                commodity not described in subparagraph (A) that has a 
                finite supply).
            ``(15) Financial institution.--The term `financial 
        institution' means--
                    ``(A) a corporation operating under the fifth 
                undesignated paragraph of section 25 of the Federal 
                Reserve Act (12 U.S.C. 603), commonly known as `an 
                agreement corporation';
                    ``(B) a corporation organized under section 25A of 
                the Federal Reserve Act (12 U.S.C. 611 et seq.), 
                commonly known as an `Edge Act corporation';
                    ``(C) an institution that is regulated by the Farm 
                Credit Administration;
                    ``(D) a Federal credit union or State credit union 
                (as defined in section 101 of the Federal Credit Union 
                Act (12 U.S.C. 1752));
                    ``(E) a depository institution (as defined in 
                section 3 of the Federal Deposit Insurance Act (12 
                U.S.C. 1813));
                    ``(F) a foreign bank or a branch or agency of a 
                foreign bank (each as defined in section 1(b) of the 
                International Banking Act of 1978 (12 U.S.C. 3101(b)));
                    ``(G) a trust company; or
                    ``(H) a similarly regulated subsidiary or affiliate 
                of an entity described in any of subparagraphs (A) 
                through (F).'';
            (3) by inserting after paragraph (20) (as redesignated by 
        paragraph (1)) the following:
            ``(21) Hybrid instrument.--The term `hybrid instrument' 
        means a deposit (as defined in section 3 of the Federal Deposit 
        Insurance Act (12 U.S.C. 1813)) offered by a financial 
        institution, or a security, having 1 or more payments indexed 
        to the value, level, or rate of 1 or more commodities.'';
            (4) by inserting after paragraph (24) (as redesignated by 
        paragraph (1)) the following:
            ``(25) Metal commodity.--The term `metal commodity' means 
        aluminum, copper, gold, palladium, platinum, or silver.
            ``(26) Nonexempt security.--The term `nonexempt security' 
        means a security that is not an exempted security under section 
        3 of the Securities Act of 1933 or section 3(a)(12) of the 
        Securities Exchange Act of 1934 (other than any municipal 
        security, as defined in section 3(a)(29) of the Securities 
        Exchange Act of 1934).
            ``(27) Option.--The term `option' means an agreement, 
        contract, or transaction that is of the character of, or is 
        commonly known to the trade as, an `option,' `privilege,' 
        `indemnity,' `bid,' `offer,' `put,' `call,' `advance guaranty,' 
        or `decline guaranty.'
            ``(28) Organized exchange.--The term `organized exchange' 
        means a trading facility that--
                    ``(A) permits trading--
                            ``(i) by or on behalf of a person that is 
                        not an eligible contract participant; or
                            ``(ii) by persons other than on a bona fide 
                        principal-to-principal basis; or
                    ``(B) has adopted (directly or through another 
                nongovernmental entity) rules that--
                            ``(i) govern the conduct of participants, 
                        other than rules that govern the submission of 
                        orders or execution of transactions on the 
                        trading system; or
                            ``(ii) include disciplinary sanctions other 
                        than the exclusion of participants from 
                        trading.''; and
            (5) by adding at the end the following:
            ``(30) Registered entity.--The term `registered entity' 
        means--
                    ``(A) a board of trade designated as a contract 
                market under section 5;
                    ``(B) a derivatives transaction execution facility 
                registered under section 5a; or
                    ``(C) a derivatives clearing organization 
                registered under section 5b.
            ``(31) Security.--The term `security' has the meaning given 
        the term in section 3(a) of the Securities Exchange Act of 1934 
        (15 U.S.C. 78c(a)).
            ``(32) Trading facility.--
                    ``(A) In general.--The term `trading facility' 
                means a person or group of persons that constitutes, 
                maintains, or provides a physical or electronic 
                facility or system in which multiple participants have 
                the ability to execute or trade agreements, contracts, 
                or transactions by accepting bids and offers made by 
                other participants that are open to multiple 
                participants in the facility or system.
                    ``(B) Exclusions.--The term `trading facility' does 
                not include--
                            ``(i) a person or group of persons solely 
                        because the person or group of persons 
                        constitutes, maintains, or provides an 
                        electronic facility or system that enables 
                        participants to negotiate the terms of and 
                        enter into bilateral transactions as a result 
                        of communications exchanged by the parties and 
                        not from interaction of multiple orders within 
                        a predetermined, nondiscretionary automated 
                        trade matching algorithm;
                            ``(ii) a government securities dealer or 
                        government securities broker, to the extent 
                        that the dealer or broker executes or trades 
                        agreements, contracts, or transactions in 
                        government securities, or assists persons in 
                        communicating about, negotiating, entering 
                        into, executing, or trading an agreement, 
                        contract, or transaction in government 
                        securities (as the terms `government securities 
                        dealer', `government securities broker', and 
                        `government securities' are defined in section 
                        3(a) of the Securities Exchange Act of 1934 (15 
                        U.S.C. 78c(a))); or
                            ``(iii) facilities on which bids and 
                        offers, and acceptances of bids and offers 
                        effected on the facility, are not binding.''.

SEC. 4. AGREEMENTS, CONTRACTS, AND TRANSACTIONS IN FOREIGN CURRENCY, 
              GOVERNMENT SECURITIES, AND CERTAIN OTHER COMMODITIES.

    Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a) 
is amended by adding at the end the following:
    ``(c) Agreements, Contracts, and Transactions in Foreign Currency, 
Government Securities, and Certain Other Commodities.--
            ``(1) In general.--Except as provided in paragraph (2), 
        nothing in this Act (other than section 5b or 12(e)(2)(B)) 
        governs or applies to an agreement, contract, or transaction 
        in--
                    ``(A) foreign currency;
                    ``(B) government securities;
                    ``(C) security warrants;
                    ``(D) security rights;
                    ``(E) resales of installment loan contracts;
                    ``(F) repurchase transactions in a financial 
                commodity; or
                    ``(G) mortgages or mortgage purchase commitments.
            ``(2) Commission jurisdiction.--
                    ``(A) Agreements, contracts, and transactions that 
                are futures traded on an organized exchange.--This Act 
                applies to, and the Commission shall have jurisdiction 
                over, an agreement, contract, or transaction described 
                in paragraph (1) that is--
                            ``(i) a contract of sale of a commodity for 
                        future delivery (or an option thereon), or an 
                        option on a commodity (other than foreign 
                        currency or a security), that is executed or 
                        traded on an organized exchange; or
                            ``(ii) an option on foreign currency and is 
                        executed or traded on an organized exchange 
                        that is not a national securities exchange.
                    ``(B) Agreements, contracts, and transactions in 
                retail foreign currency.--This Act applies to, and the 
                Commission shall have jurisdiction over, an agreement, 
                contract, or transaction in foreign currency that--
                            ``(i) is a contract of sale for future 
                        delivery (or an option on such a contract); and
                            ``(ii) is offered to, or entered into with, 
                        a person that is not an eligible contract 
                        participant, unless the counterparty, or the 
                        person offering to be the counterparty, of the 
                        person is--
                                    ``(I) a financial institution;
                                    ``(II) a broker or dealer 
                                registered under section 15(b) or 15C 
                                of the Securities Exchange Act of 1934 
                                (15 U.S.C. 78o(b), 78o-5);
                                    ``(III) an associated person of a 
                                broker or dealer registered under 
                                section 15(b) or 15C of the Securities 
                                Exchange Act of 1934 (15 U.S.C. 78o(b), 
                                78o-5) concerning the financial or 
                                securities activities of which the 
                                registered person makes and keeps 
                                records under section 15C(b) or 17(h) 
                                of the Securities Exchange Act of 1934 
                                (15 U.S.C. 78o-5(b), 78q(h)) or section 
                                4f(c)(2)(B) of this Act;
                                    ``(IV) an insurance company that is 
                                subject to State regulation (including 
                                a subsidiary or affiliate of such an 
                                insurance company);
                                    ``(V) a financial holding company 
                                (as defined in section 2 of the Bank 
                                Holding Company Act of 1956); or
                                    ``(VI) an investment bank holding 
                                company (as defined in section 17(i) of 
                                the Securities Exchange Act of 
                                1934).''.

SEC. 5. LEGAL CERTAINTY FOR EXCLUDED DERIVATIVE TRANSACTIONS.

    Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a) 
(as amended by section 4) is amended by adding at the end the 
following:
    ``(d) Excluded Derivative Transactions.--
            ``(1) In general.--Nothing in this Act (other than section 
        5b or 12(e)(2)(B)) governs or applies to an agreement, 
        contract, or transaction in an excluded commodity if--
                    ``(A) the agreement, contract, or transaction is 
                entered into only between persons that are eligible 
                contract participants at the time at which the persons 
                enter into the agreement, contract, or transaction; and
                    ``(B) the agreement, contract, or transaction is 
                not executed or traded on a trading facility.
            ``(2) Electronic trading facility exclusion.--Nothing in 
        this Act (other than section 5b or 12(e)(2)(B)) governs or 
        applies to an agreement, contract, or transaction in an 
        excluded commodity if--
                    ``(A) the agreement, contract, or transaction is 
                entered into on a bona fide principal-to-principal 
                basis between parties trading for their own accounts or 
                as described in section 1a(10)(B)(ii) of this Act;
                    ``(B) the agreement, contract, or transaction is 
                entered into only between persons that are eligible 
                contract participants (as defined in sections 
                1a(10)(A), (B)(ii), and (C)) at the time at which the 
                persons enter into the agreement, contract, or 
                transaction; and
                    ``(C) the agreement, contract, or transaction is 
                executed or traded on an electronic trading 
                facility.''.

SEC. 6. EXCLUDED ELECTRONIC TRADING FACILITIES.

    Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a) 
(as amended by section 5) is amended by adding at the end the 
following:
    ``(e) Excluded Electronic Trading Facilities.--
            ``(1) In general.--Nothing in this Act (other than section 
        12(e)(2)(B)) governs or is applicable to an electronic trading 
        facility that limits transactions authorized to be conducted on 
        its facilities to those satisfying the requirements of sections 
        2(d)(2) and 2(h)(1)(B) of this Act.
            ``(2) Effect on authority to establish and operate.--
        Nothing in this Act shall prohibit a board of trade designated 
        by the Commission as a contract market or derivatives 
        transaction execution facility, or an exempt board of trade, 
        from establishing and operating an excluded electronic trading 
        facility excluded under this Act pursuant to paragraph (1).''.

SEC. 7. HYBRID INSTRUMENTS.

    Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a) 
(as amended by section 6) is amended by adding at the end the 
following:
    ``(f) Exclusion for Qualifying Hybrid Instruments.--
            ``(1) In general.--Nothing in this Act (other than section 
        12(e)(2)(B)) governs or is applicable to a hybrid instrument 
        that is predominantly a security or depository instrument.
            ``(2) Predominance.--A hybrid instrument shall be 
        considered to be predominantly a security or depository 
        instrument if--
                    ``(A) the issuer of the hybrid instrument receives 
                payment in full of the purchase price of the hybrid 
                instrument, substantially contemporaneously with 
                delivery of the hybrid instrument;
                    ``(B) the purchaser or holder of the hybrid 
                instrument is not required to make any payment to the 
                issuer in addition to the purchase price paid under 
                subparagraph (A), whether as margin, settlement 
                payment, or otherwise, during the life of the hybrid 
                instrument or at maturity;
                    ``(C) the issuer of the hybrid instrument is not 
                subject by the terms of the instrument to mark-to-
                market margining requirements; and
                    ``(D) the hybrid instrument is not marketed as a 
                contract of sale for future delivery of a commodity (or 
                option on such a contract) subject to this Act.
            ``(3) Mark-to-market margining requirements.--For the 
        purposes of paragraph (2)(C), mark-to-market margining 
        requirements do not include the obligation of an issuer of a 
        secured debt instrument to increase the amount of collateral 
        held in pledge for the benefit of the purchaser of the secured 
        debt instrument to secure the repayment obligations of the 
        issuer under the secured debt instrument.''.

SEC. 8. FUTURES ON SECURITIES.

    Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a) 
(as amended by section 7) is amended by adding at the end the 
following:
    ``(g) Notwithstanding any other provision of law:
            ``(1) This Act shall not apply to and the Commission shall 
        have no jurisdiction to designate a board of trade as a 
        contract market for any transaction whereby any party to the 
        transaction acquires a put, call, or other option on 1 or more 
        securities (as defined in section 2(a)(1) of the Securities Act 
        of 1933 or section 3(a)(10) of the Securities Exchange Act of 
        1934, on the date of enactment of the Futures Trading Act of 
        1982), including any group or index of securities and any 
        interest in or based on the value of securities.
            ``(2) Nothing in this subsection governs or applies to--
                    ``(A) an agreement, contract, or transaction in a 
                commodity that is excluded under subsection (c) or (d); 
                or
                    ``(B) a hybrid instrument that is covered by an 
                exclusion under subsection (f) or an exemption granted 
                by the Commission under section 4(c) (whether or not 
                the hybrid instrument is otherwise subject to this 
                Act).
            ``(3) Except as provided in paragraph (4) of this 
        subsection, or unless excluded by paragraph (2) of this 
        subsection, a person shall not offer to enter into, enter into, 
        or confirm the execution of any contract of sale (or option on 
        the contract) for future delivery of any security or interest 
        in or based on the value of a nonexempt security.
            ``(4)(A) Except as excluded by paragraph (2) of this 
        subsection, this Act shall apply to and the Commission shall 
        have exclusive jurisdiction with respect to accounts, 
        agreements (including any transaction which is of the character 
        of, or is commonly known to the trade as an option, privilege, 
        indemnity, bid, offer, put, call, advance guaranty, or decline 
        guaranty), and transactions involving, and may designate a 
        board of trade as a contract market under section 5 or register 
        the board of trade as a derivatives transaction execution 
        facility under section 5a in, contracts of sale (or options on 
        the contracts) for future delivery of 1 or more securities (as 
        defined in section 2(a)(1) of the Securities Act of 1933 or 
        section 3(a)(10) of the Securities Exchange Act of 1934), 
        including any group or index of securities and any interest in 
        or based on the value of securities.
            ``(B) The Commission shall not designate a board of trade 
        as a contract market under section 5 or register a board of 
        trade as a derivatives transaction execution facility under 
        section 5a with respect to any such contracts of sale (or 
        options on the contracts) for future delivery unless the board 
        of trade demonstrates and the Commission expressly finds that 
        the specific contract (or option on the contract) with respect 
        to which the application for the designation or recognition has 
        been made meets the following requirements:
                    ``(i) Settlement of or delivery on the contract (or 
                option on the contract) shall be effected in cash or by 
                means other than the transfer or receipt of a nonexempt 
                security.
                    ``(ii) Susceptibility to price manipulation.--
                Trading in a contract (or option on such a contract) 
                described in subparagraph (A) shall not be readily 
                susceptible to--
                            ``(I) manipulation of the price of the 
                        contract (or option on such a contract); or
                            ``(II) causing or being used in the 
                        manipulation of the price of any underlying 
                        security, option on a security, or option on a 
                        group or index that includes a security.
                    ``(iii) If the contract is based on a single 
                nonexempt security, an option on the security 
                underlying the contract would meet all Securities and 
                Exchange Commission requirements for listing on a 
                national securities exchange.
                    ``(iv) If the contract is based on any group or 
                index of nonexempt securities comprised of fewer than 5 
                securities, or on an index in which a single nonexempt 
                security predominates, an option on each security 
                comprising the group or index would meet all 
                requirements for listing on a national securities 
                exchange.
                    ``(v) The contract will be traded on a board of 
                trade that establishes the level of margin for futures 
                contracts (or options on the contracts) based on a 
                single nonexempt security, an index of fewer than 5 
                nonexempt securities, or an index in which a single 
                nonexempt security predominates, that are no less than 
                the level of margin on comparable option contracts 
                listed on any national securities exchange.
                    ``(vi) The contract will be traded on a board of 
                trade that prohibits a person who acts as a floor 
                broker for any contract of sale (or options on the 
                contract) for future delivery of a nonexempt security, 
                an index based on fewer than 5 nonexempt securities, or 
                an index in which a single nonexempt security 
                predominates, from trading that contract for the 
                broker's own account during the same trading session.
                    ``(vii) The contract will be traded on a board of 
                trade that collects, maintains, and promptly provides 
                to the Securities and Exchange Commission such 
                information as the Commission and the Securities and 
                Exchange Commission jointly consider necessary to 
                perform the enforcement responsibilities described in 
                paragraph (6).
            ``(5) The Commission shall consult with the Securities and 
        Exchange Commission with respect to any application submitted 
        by a board of trade for designation as a contract market or 
        derivatives transaction execution facility with respect to any 
        contract of sale (or option on the contract) for future 
        delivery of a nonexempt security or a group or index of such 
securities. If, not later than 15 days after the consultation, the 
Securities and Exchange Commission objects to the designation of a 
board of trade as a contract market or derivatives transaction 
execution facility in the contract (or option on the contract) on the 
ground that any requirement of paragraph (3) is not met, the Commission 
shall afford the Securities and Exchange Commission an opportunity for 
an oral hearing to be transcribed before the Commission, and shall give 
appropriate weight to the views of the Securities and Exchange 
Commission. The oral hearing shall be held before Commission action 
upon the application for the designation, and not less than 30 nor more 
than 45 days after the Securities and Exchange Commission has objected. 
If such an oral hearing is held, the Securities and Exchange Commission 
fails to withdraw its objections, and the Commission issues an order 
designating a board of trade as a contract market or recognizes the 
board of trade as a derivatives transaction execution facility with 
respect to any such contract (or option on the contract), the 
Securities and Exchange Commission may seek judicial review of the 
order in accordance with the procedural requirements set forth in 
section 6(c). If, pursuant to section 6, there is a hearing on the 
record with respect to an application for such designation, the 
Securities and Exchange Commission may participate in that hearing as 
an interested party.
            ``(6) Notwithstanding any other provision of this Act, the 
        Securities and Exchange Commission may enforce against a person 
        that purchases or sells any contract of sale (or option on the 
        contract) for future delivery of any nonexempt security, any 
        index comprised of fewer than 5 nonexempt securities, or any 
        index in which a single nonexempt security predominates to the 
        same extent as if the person had purchased or sold an option on 
        the security or index under the following provisions of the 
        securities laws and regulations with respect to the following 
        categories of conduct:
                    ``(A) Section 10(b) and 21A of the Securities 
                Exchange Act of 1934 (15 U.S.C. 78j(b), 78u-1) with 
                respect to insider trading.
                    ``(B) Section 16(b) of such Act (15 U.S.C. 78p(b)) 
                with respect to unfair use of information in short 
                swing trading by a corporate insider.
                    ``(C) Section 9 of such Act (15 U.S.C. 78i) with 
                respect to manipulation of securities prices.
                    ``(D) Section 10(b) of such Act (15 U.S.C. 78J(b)) 
                and section 204A of the Investment Adviser's Act of 
                1940 (15 U.S.C. 80b-4a) with respect to frontrunning.
                    ``(E) Section 14 of the Securities Exchange Act of 
                1934 (15 U.S.C. 78n) with respect to the pricing and 
                integrity of tender offers.
                    ``(F) Rule 144 of the rules of the Securities and 
                Exchange Commission (17 C.F.R. 230.144) with respect to 
                trading in restricted securities.
            ``(7)(A) Notwithstanding any other provision of this Act, 
        any contract market or derivatives transaction execution 
        facility in a stock or stock index futures contract (or option 
        thereon) shall file with the Board of Governors of the Federal 
        Reserve System any rule establishing or changing the levels of 
        margin (initial and maintenance) for the nonexempt stock or 
        stock index futures contract (or option on the contract).
            ``(B) The Board may at any time request any contract market 
        or derivatives transaction execution facility to set the level 
        of margin for any stock or stock index futures contract (or 
        option on the contract) at such levels as the Board in its 
        judgment determines are appropriate to preserve the financial 
        integrity of the contract market or derivatives transaction 
        execution facility or its clearing system or to prevent 
        systemic risk. If the contract market or derivatives 
        transaction execution facility fails to do so within the time 
        specified by the Board in its request, the Board may direct the 
        contract market or derivatives transaction execution facility 
        to alter or supplement the rules of the contract market or 
        derivatives transaction execution facility as specified in the 
        request.
            ``(C) Subject to such conditions as the Board may 
        determine, the Board may delegate any or all of its authority 
        under this paragraph to the Commission or an intermarket margin 
        board as provided in subparagraph (D).
            ``(D) Intermarket margin board.--
                    ``(i) Establishment.--With the concurrence of the 
                Securities and Exchange Commission and the Commission, 
                the Board may establish an intermarket margin board, 
                consisting of representatives of any or all of the 
                three agencies.
                    ``(ii) Duties.--The intermarket margin board may 
                set and maintain margin levels and rules pertaining to 
                margin for futures on a single nonexempt security, an 
                index of fewer than 5 nonexempt securities, or an index 
                in which a single nonexempt security predominates, 
                listed on a contract market or derivatives transaction 
                execution facility.
            ``(E) This paragraph shall not be construed to supersede or 
        limit the authority granted to the Commission in section 8a(9) 
        to direct a contract market or derivatives transaction 
        execution facility, on finding an emergency to exist, to raise 
        temporary emergency margin levels on any futures contract or 
        option on the contract covered by this paragraph.
            ``(F) Any action taken by the Board under this paragraph, 
        or by the Commission acting under the delegation of authority 
        under subparagraph (C), directing a contract market or 
        derivatives transaction execution facility to alter or 
        supplement a contract market or derivatives transaction 
        execution facility rule shall be subject to review only in the 
        United States Court of Appeals for the judicial circuit in 
which the party seeking review resides or has its principal place of 
business, or in the United States Court of Appeals for the District of 
Columbia Circuit. The review shall be based on the examination of all 
information before the Board or the Commission, as the case may be, at 
the time the determination was made. The court reviewing the action of 
the Board or the Commission shall not enter a stay or order of mandamus 
unless the court determines, after notice and a hearing before a panel 
of the court, that the agency action complained of was arbitrary, 
capricious, an abuse of discretion, or otherwise not in accordance with 
law.
            ``(8) This subsection shall not be construed to prohibit--
                    ``(A) an agreement, contract, or transaction 
                excluded from this Act by paragraph (2); or
                    ``(B) any hybrid instrument that is covered by the 
                terms of any exemption granted by the Commission under 
                section 4(c) (whether or not any such hybrid instrument 
                is otherwise subject to this Act).
            ``(9)(A) No futures commission merchant or introducing 
        broker shall recommend to any customer the purchase or sale of 
        any contract of sale for future delivery of a single nonexempt 
        security, an index of fewer than 5 nonexempt securities, or an 
        index in which a single nonexempt security predominates, unless 
        the futures commission merchant or introducing broker complies 
        with the rules described in subparagraph (B) of a registered 
        futures association of which such person is a member.
            ``(B) Within 9 months of the date of enactment of the 
        Commodity Futures Modernization Act of 2000 a registered 
        futures association shall adopt rules requiring a futures 
        commission merchant or an introducing broker which recommends 
        to any customer the purchase or sale of any contract of sale 
        for future delivery of a single nonexempt security, an index of 
        fewer than 5 nonexempt securities, or an index in which a 
        single nonexempt security predominates to ascertain through 
        reasonable due diligence that the recommendation is suitable 
        for that customer in light of the customer's financial position 
        and trading goals. The registered futures association shall 
        consult with the Commission and the Securities and Exchange 
        Commission prior to the adoption of any such rule, and shall 
        submit any such rule to the Commission for approval in the 
        manner and according to the procedures described in section 
        17(j) of this Act, provided, that in such case the rule shall 
        become effective if the Commission fails to disapprove such 
        rule within 90 days of submission.''.

SEC. 9. TRANSACTIONS IN EXEMPT COMMODITIES.

    Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a) 
(as amended by section 8) is amended by adding at the end the 
following.
    ``(h) Legal Certainty for Certain Transactions in Exempt 
Commodities.--
            ``(1) Except as provided in paragraph (2) of this 
        subsection, nothing in this Act shall apply to a contract, 
        agreement or transaction in an exempt commodity which--
                    ``(A)(i) is entered into between persons that are 
                eligible contract participants at the time they enter 
                into the agreement, contract, or transaction; and
                    ``(ii) is not entered into on a trading facility; 
                or
                    ``(B)(i) is entered into on a bona fide principal-
                to-principal basis between parties trading for their 
                own accounts (or as described in section 1a(10)(B)(ii) 
                of this Act);
                    ``(ii) is entered into between persons that are 
                eligible contract participants (as defined in sections 
                1a(10)(A), (B)(ii) or (C) of this Act) at the time at 
                which the persons enter into the agreement, contract, 
                or transaction; and
                    ``(iii) is executed or traded on an electronic 
                trading facility.
            ``(2) An agreement, contract, or transaction described in 
        paragraph (1) of this subsection shall be subject to--
                    ``(A) sections 5b and 12(e)(2)(B) of this Act;
                    ``(B) sections 4b and 4n of this Act and the 
                regulations of the Commission pursuant to section 4c(b) 
                of this Act proscribing fraud in connection with 
                commodity option transactions;
                    ``(C) sections 6(c) and 9(a)(2) of this Act to the 
                extent these provisions prohibit manipulation of the 
                market price of any commodity in interstate commerce; 
                and
                    ``(D) such rules and regulations as the Commission 
                may prescribe in the case of any agreement, contract, 
                or transaction described in paragraph (1)(B) of this 
                subsection, if necessary to ensure timely dissemination 
                by the electronic trading facility of price, trading 
                volume, and other trading data to the extent 
                appropriate to the exempt commodity and electronic 
                trading facility, if the Commission determines the 
                electronic trading facility performs a significant 
                price discovery function for related transactions in 
                the exempt commodity underlying the agreement, 
                contract, or transaction.''.

SEC. 10. PROTECTION OF THE PUBLIC INTEREST.

    The Commodity Exchange Act is amended by striking section 3 (7 
U.S.C. 5) and inserting the following:

``SEC. 3. FINDINGS AND PURPOSE.

    ``(a) Findings.--The futures contracts and options contracts that 
are subject to this Act are entered into regularly in interstate and 
international commerce and are affected with a national public interest 
by providing a means for managing and assuming price risks, discovering 
prices, and disseminating pricing information through trading in 
liquid, fair and financially secure trading facilities.
    ``(b) Purpose.--It is the purpose of this Act to serve the public 
interests described in subsection (a) through a system of effective 
self-regulation of trading facilities, clearing systems, market 
participants and market professionals under the oversight of the 
Commission. To foster these public interests, it is further the purpose 
of this Act to authorize the Commission to deter and prevent price 
manipulation or any other disruptions to market integrity; to ensure 
the financial integrity of all transactions subject to this Act and the 
avoidance of systemic risk; to protect all market participants from 
fraudulent or other abusive sales practices and misuses of customer 
assets; and to promote responsible innovation and fair competition 
among boards of trade, other markets and market participants.''.

SEC. 11. PROHIBITED TRANSACTIONS.

    Section 4c of the Commodity Exchange Act (7 U.S.C. 6c) is amended 
by striking ``Sec. 4c.'' and all that follows through subsection (a) 
and inserting the following:

``SEC. 4C. PROHIBITED TRANSACTIONS.

    ``(a) In General.--
            ``(1) Prohibition.--It shall be unlawful for any person to 
        offer to enter into, enter into, or confirm the execution of a 
        transaction described in paragraph (2) involving any commodity 
        if the transaction is used or may be used to--
                    ``(A) hedge any transaction in interstate commerce 
                in the commodity or the product or byproduct of the 
                commodity;
                    ``(B) determine the price basis of any such 
                transaction in interstate commerce in the commodity; or
                    ``(C) deliver any such commodity sold, shipped, or 
                received in interstate commerce for the execution of 
                the transaction.
            ``(2) Transaction.--A transaction referred to in paragraph 
        (1) is a transaction that--
                    ``(A)(i) is, is of the character of, or is commonly 
                known to the trade as, a `wash sale', `cross trade', or 
                `accommodation trade'; or
                    ``(ii) is a fictitious sale; or
                    ``(B) is used to cause any price to be reported, 
                registered, or recorded that is not a true and bona 
                fide price.
            ``(3) Effect of subsection.--Nothing in this subsection--
                    ``(A) makes unlawful an exchange of--
                            ``(i) futures in connection with a cash 
                        commodity transaction;
                            ``(ii) futures for cash commodities;
                            ``(iii) transfer trades or office trades; 
                        or
                            ``(iv) futures for swaps;
                if the exchange is made in accordance with rules of the 
                contract market or derivatives transaction execution 
                facility that apply to such transactions, and those 
                rules have been approved by the Commission; or
                    ``(B) makes it unlawful for a futures commission 
                merchant, acting as principal or agent, to enter into, 
                execute, or confirm the execution of a contract for the 
                purchase or sale of a commodity for future delivery if 
                the contract is entered into, executed, reported, 
                recorded, and cleared in accordance with the rules of a 
                contract market or derivatives transaction execution 
                facility.''.

SEC. 12. DESIGNATION OF BOARDS OF TRADE AS CONTRACT MARKETS.

    The Commodity Exchange Act is amended--
            (1) by redesignating section 5b (7 U.S.C. 7b) as section 
        5e; and
            (2) by striking sections 5 and 5a (7 U.S.C. 7, 7a) and 
        inserting the following:

``SEC. 5. DESIGNATION OF BOARDS OF TRADE AS CONTRACT MARKETS.

    ``(a) Applications.--A board of trade applying to the Commission 
for designation as a contract market shall submit an application to the 
Commission that includes any relevant materials and records the 
Commission may require consistent with this Act.
    ``(b) Criteria for Designation.--
            ``(1) In general.--To be designated as a contract market, 
        the board of trade shall demonstrate to the Commission that the 
        board of trade meets the criteria specified in this subsection.
            ``(2) Prevention of market manipulation.--The board of 
        trade shall have the capacity to prevent market manipulation 
        through market surveillance, compliance, and enforcement 
        practices and procedures, including methods for conducting 
        real-time monitoring of trading and comprehensive and accurate 
        trade reconstructions.
            ``(3) Fair and equitable trading.--The board of trade shall 
        establish and enforce trading rules to ensure fair and 
        equitable trading through the facilities of the contract 
        market, and the capacity to detect, investigate, and discipline 
        any person that violates the rules.
            ``(4) Trade execution facility.--The board of trade shall--
                    ``(A) establish and enforce rules defining, or 
                specifications detailing, the manner of operation of 
                the trade execution facility maintained by the board of 
                trade, including rules or specifications describing the 
                operation of any electronic matching platform; and
                    ``(B) demonstrate that the trading facility 
                operates in accordance with the rules or 
                specifications.
            ``(5) Financial integrity of transactions.--The board of 
        trade shall establish and enforce rules and procedures for 
        ensuring the financial integrity of transactions entered into 
        by or through the facilities of the contract market.
            ``(6) Disciplinary procedures.--The board of trade shall 
        establish and enforce disciplinary procedures that authorize 
        the board of trade to discipline, suspend, or expel members or 
        market participants that violate the rules of the board of 
        trade, or similar methods for performing the same functions, 
        including delegation of the functions to third parties.
            ``(7) Public access.--The board of trade shall provide the 
        public with access to the rules, regulations, and contract 
        specifications of the board of trade.
            ``(8) Ability to obtain information.--The board of trade 
        shall establish and enforce rules that will allow the board of 
        trade to obtain any necessary information to perform any of the 
        functions described in this subsection, including the capacity 
        to carry out such international information-sharing agreement 
        as the Commission may require.
    ``(c) Existing Contract Markets.--A board of trade that is 
designated as a contract market on the effective date of the Commodity 
Futures Modernization Act of 2000 shall be considered to be a 
designated contract market under this section.
    ``(d) Core Principles for Contract Markets.--
            ``(1) In general.--To maintain the designation of a board 
        of trade as a contract market, a board of trade shall comply 
        with the core principles specified in this subsection.
            ``(2) Compliance with rules.--The board of trade shall 
        monitor and enforce compliance with the rules of the contract 
        market, including the terms and conditions of any contracts to 
        be traded and any limitations on access to the contract market.
            ``(3) Contracts not readily subject to manipulation.--The 
        board of trade shall list on the contract market only contracts 
        that are not readily susceptible to manipulation.
            ``(4) Monitoring of trading.--The board of trade shall 
        monitor trading to prevent manipulation, price distortion, and 
        disruptions of the delivery or cash-settlement process.
            ``(5) Position limitations or accountability.--To reduce 
        the potential threat of market manipulation or congestion, 
        especially during trading in the delivery month, the board of 
        trade shall adopt position limitations or position 
        accountability for speculators, where necessary and 
        appropriate.
            ``(6) Emergency authority.--The board of trade shall adopt 
        rules to provide for the exercise of emergency authority, in 
        consultation or cooperation with the Commission, where 
        necessary and appropriate, including the authority to--
                    ``(A) liquidate or transfer open positions in any 
                contract;
                    ``(B) suspend or curtail trading in any contract; 
                and
                    ``(C) require market participants in any contract 
                to meet special margin requirements.
            ``(7) Availability of general information.--The board of 
        trade shall make available to market authorities, market 
        participants, and the public information concerning--
                    ``(A) the terms and conditions of the contracts of 
                the contract market; and
                    ``(B) the mechanisms for executing transactions on 
                or through the facilities of the contract market.
            ``(8) Daily publication of trading information.--The board 
        of trade shall make public daily information on settlement 
        prices, volume, open interest, and opening and closing ranges 
        for actively traded contracts on the contract market.
            ``(9) Execution of transactions.--The board of trade shall 
        provide a competitive, open, and efficient market and mechanism 
        for executing transactions.
            ``(10) Trade information.--The board of trade shall 
        maintain rules and procedures to provide for the recording and 
        safe storage of all identifying trade information in a manner 
        that enables the contract market to use the information for 
        purposes of assisting in the prevention of customer and market 
        abuses and providing evidence of any violations of the rules of 
        the contract market.
            ``(11) Financial integrity of contracts.--The board of 
        trade shall establish and enforce rules providing for the 
        financial integrity of any contracts traded on the contract 
        market, including rules to ensure the financial integrity of 
        any futures commission merchants and introducing brokers and 
        the protection of customer funds.
            ``(12) Protection of market participants.--The board of 
        trade shall establish and enforce rules to protect market 
        participants from any abusive practices committed by any party 
        acting as an agent for the participants.
            ``(13) Dispute resolution.--The board of trade shall 
        establish and enforce rules regarding and provide facilities 
        for alternative dispute resolution as appropriate for market 
        participants and any market intermediaries.
            ``(14) Governance fitness standards.--The board of trade 
        shall establish and enforce appropriate fitness standards for 
        directors, members of any disciplinary committee, members of 
        the contract market, and any other persons with direct access 
        to the facility (including any parties affiliated with any of 
        the persons described in this paragraph).
            ``(15) Conflicts of interest.--The board of trade shall 
        establish and enforce rules to minimize conflicts of interest 
        in the decisionmaking process of the contract market and 
        establish a process for resolving such conflicts of interest.
            ``(16) Composition of boards of mutually owned contract 
        markets.--In the case of a mutually owned contract market, the 
        board of trade shall ensure that the composition of the 
        governing board reflects market participants.
            ``(17) Recordkeeping.--The board of trade shall--
                    ``(A) maintain full records of all activities 
                related to the business of the contract market in a 
                form and manner acceptable to the Commission for a 
                period of at least 5 years;
                    ``(B) make the records readily available during at 
                least the first 2 years of the 5-year period and 
                provide the records to the Commission at the expense of 
                the person required to maintain the records; and
                    ``(C) keep the records open to inspection by any 
                representative of the Commission or the Department of 
                Justice.
            ``(18) Antitrust considerations.--Unless necessary or 
        appropriate to achieve the purposes of this Act, the board of 
        trade shall endeavor to avoid--
                    ``(A) adopting any rules or taking any actions that 
                result in any unreasonable restraints of trade; or
                    ``(B) imposing any material anticompetitive burden 
                on trading on the contract market.''.

SEC. 13. DERIVATIVES TRANSACTION EXECUTION FACILITIES.

    The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by 
inserting after section 5 (as amended by section 12(2)) the following:

``SEC. 5A. DERIVATIVES TRANSACTION EXECUTION FACILITIES.

    ``(a) In General.--In lieu of compliance with the contract market 
designation requirements of section 5, a board of trade may elect to 
operate as a registered derivatives transaction execution facility if 
the facility is--
            ``(1) designated as a contract market and meets the 
        requirements of this section; or
            ``(2) registered as a derivatives transaction execution 
        facility under subsection (c).
    ``(b) Requirements for Trading Futures Contracts or Other 
Derivatives Transactions.--
            ``(1) In general.--A registered derivatives transaction 
        execution facility under subsection (a) may trade any futures 
        contract (or option on such a contract) on a security on or 
        through the facility only by satisfying the requirements of 
        this section.
            ``(2) Requirements for underlying commodities.--A 
        registered derivatives transaction execution facility may trade 
        any futures contract only if--
                    ``(A) the underlying commodity has a nearly 
                inexhaustible deliverable supply;
                    ``(B) the underlying commodity has a deliverable 
                supply that is sufficiently large that the contract is 
                highly unlikely to be susceptible to the threat of 
                manipulation;
                    ``(C) the underlying commodity has no cash market; 
                or
                    ``(D) the Commission determines, based on the 
                market characteristics, surveillance history, self-
                regulatory record, and capacity of the facility that 
                trading in the futures contract is highly unlikely to 
                be susceptible to the threat of manipulation.
            ``(3) Eligible traders.--To trade on a registered 
        derivatives transaction execution facility, a person shall--
                    ``(A) be authorized by the board of trade to trade 
                on the facility; and
                    ``(B)(i) be an eligible contract participant; or
                    ``(ii) be a person trading through a futures 
                commission merchant that--
                            ``(I) is registered with the Commission;
                            ``(II) is a member of a futures self-
                        regulatory organization;
                            ``(III) is a clearing member of a 
                        derivatives clearing organization; and
                            ``(IV) has net capital of at least 
                        $20,000,000.
            ``(4) Trading by contract markets.--A board of trade that 
        is designated as a contract market shall, to the extent that 
        the contract market also operates a registered derivatives 
        transaction execution facility--
                    ``(A) provide a physical location for the contract 
                market trading of the board of trade that is separate 
                from trading on the derivatives transaction execution 
                facility of the board of trade; or
                    ``(B) if the board of trade uses the same 
                electronic trading system for trading on the contract 
                market and derivatives transaction execution facility 
                of the board of trade, identify whether the electronic 
                trading is taking place on the contract market or the 
                derivatives transaction execution facility.
    ``(c) Criteria for Registration.--
            ``(1) In general.--To be registered as a registered 
        derivatives transaction execution facility, the board of trade 
        shall demonstrate to the Commission that the board of trade 
        meets the criteria specified in this paragraph.
            ``(2) Deterrence of abuses.--The board of trade shall 
        establish and enforce trading rules that will deter abuses and 
        has the capacity to detect, investigate, and enforce those 
        rules, including means to--
                    ``(A) obtain information necessary to perform the 
                functions required under this section; or
                    ``(B) use technological means to--
                            ``(i) provide market participants with 
                        impartial access to the market; and
                            ``(ii) capture information that may be used 
                        in establishing whether rule violations have 
                        occurred.
            ``(3) Trading procedures.--The board of trade shall 
        establish and enforce rules or terms and conditions defining, 
        or specifications detailing, trading procedures to be used in 
        entering and executing orders traded on the facilities of the 
        board of trade.
            ``(4) Financial integrity of transactions.--The board of 
        trade shall establish and enforce rules or terms and conditions 
        providing for the financial integrity of transactions entered 
        on or through the facilities of the board of trade, including 
        rules or terms and conditions to ensure the financial integrity 
        of any futures commission merchants and introducing brokers and 
        the protection of customer funds.
    ``(d) Core Principles for Registered Derivatives Transaction 
Execution Facilities.--
            ``(1) In general.--To maintain the registration of a board 
        of trade as a derivatives transaction execution facility, a 
        board of trade shall comply with the core principles specified 
        in this subsection.
            ``(2) Compliance with rules.--The board of trade shall 
        monitor and enforce the rules of the facility, including any 
        terms and conditions of any contracts traded on or through the 
        facility and any limitations on access to the facility.
            ``(3) Monitoring of trading.--The board of trade shall 
        monitor trading in the contracts of the facility to ensure 
        orderly trading in the contract and to maintain an orderly 
        market while providing any necessary trading information to the 
        Commission to allow the Commission to discharge the 
        responsibilities of the Commission under the Act.
            ``(4) Disclosure of general information.--The board of 
        trade shall disclose publicly and to the Commission information 
        concerning--
                    ``(A) contract terms and conditions;
                    ``(B) trading conventions, mechanisms, and 
                practices;
                    ``(C) financial integrity protections; and
                    ``(D) other information relevant to participation 
                in trading on the facility.
            ``(5) Provision of trading information.--The board of trade 
        shall provide to market participants on a fair, equitable, and 
        timely basis--
                    ``(A) information regarding prices, bids, and 
                offers; and
                    ``(B) for actively traded contracts, daily 
                information on settlement prices, volume, open 
                interest, and opening and closing ranges.
            ``(6) Fitness standards.--The board of trade shall 
        establish and enforce appropriate fitness standards for 
        directors, members of any disciplinary committee, members, and 
        any other persons with direct access to the facility, including 
        any parties affiliated with any of the persons described in 
        this paragraph.
            ``(7) Conflicts of interest.--The board of trade shall 
        establish and enforce rules to minimize conflicts of interest 
        in the decisionmaking process of the derivatives transaction 
        execution facility and establish a process for resolving such 
        conflicts of interest.
            ``(8) Recordkeeping.--The board of trade shall--
                    ``(A) maintain full records of all activities 
                related to the business of the derivatives transaction 
                execution facility in a form and manner acceptable to 
                the Commission for a period of at least 5 years;
                    ``(B) make the records readily available during at 
                least the first 2 years of the 5-year period and 
                provide the records to the Commission at the expense of 
                the person required to maintain the records; and
                    ``(C) keep the records open to inspection by any 
                representatives of the Commission or the Department of 
                Justice.
            ``(9) Antitrust considerations.--Unless necessary or 
        appropriate to achieve the purposes of this Act, the board of 
        trade shall endeavor to avoid--
                    ``(A) adopting any rules or taking any actions that 
                result in any unreasonable restraint of trade; or
                    ``(B) imposing any material anticompetitive burden 
                on trading on the derivatives transaction execution 
                facility.
    ``(e) Use of Broker-Dealers and Depository Institutions as 
Intermediaries.--
            ``(1) In general.--A registered derivatives transaction 
        execution facility may by rule allow a broker-dealer or 
        depository institution that meets the requirements of paragraph 
        (2) to--
                    ``(A) act as an intermediary in transactions 
                executed on the facility on behalf of customers of the 
                broker-dealer or depository institution; and
                    ``(B) receive funds of customers to serve as margin 
                or security for such transactions.
            ``(2) Requirements.--The requirements referred to in 
        paragraph (1) are that--
                    ``(A) a broker-dealer be in good standing with the 
                Securities and Exchange Commission and a depository 
                institution be in good standing with Federal bank 
                regulatory agencies (including the Farm Credit 
                Administration), as applicable; and
                    ``(B) if a broker-dealer or depository institution 
                carries or holds customer accounts or funds for 
                transactions on the derivatives transaction execution 
                facility for more than 1 business day, the broker-
                dealer or depository institution is registered as a 
                futures commission merchant and is a member of a 
                registered futures association.
            ``(3) Implementation.--The Commission shall cooperate and 
        coordinate with the Securities and Exchange Commission and 
        Federal banking regulatory agencies (including the Farm Credit 
Administration) in adopting rules and taking any other appropriate 
action to facilitate the implementation of this subsection.
    ``(f) Segregation of Customer Funds.--Not later than 180 days after 
the effective date of the Commodity Futures Modernization Act of 2000, 
consistent with regulations adopted by the Commission, a registered 
derivatives transaction execution facility may authorize a futures 
commission merchant to offer any customer of the futures commission 
merchant that is an eligible contract participant the right to not 
segregate the customer funds of the futures commission merchant for 
purposes of trading on or through the facilities of the registered 
derivatives transaction execution facility.
    ``(g) Election To Trade Excluded Commodities.--
            ``(1) In general.--A board of trade that is a registered 
        derivatives transaction execution facility may trade on the 
        facility any agreements, contracts, or transactions involving 
        excluded commodities that are otherwise excluded from this Act 
        under section 2(c) or 2(d).
            ``(2) Exclusive jurisdiction of the commission.--The 
        Commission shall have exclusive jurisdiction over agreements, 
        contracts, or transactions described in paragraph (1) to the 
        extent that the agreements, contracts, or transactions are 
        traded on a derivatives transaction execution facility.''.

SEC. 14. DERIVATIVES CLEARING ORGANIZATIONS.

    The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by 
inserting after section 5a (as added by section 13) the following:

``SEC. 5B. DERIVATIVES CLEARING ORGANIZATIONS.

    ``(a) Application.--A derivatives clearing organization for a board 
of trade that is designated as a contract market under section 5 or is 
registered as a derivatives transaction execution facility under 
section 5b, or for an exempt board of trade, or a derivatives clearing 
organization for transactions excluded by subsection (c), (d) or (h) of 
section 2, desiring to be registered with the Commission as a 
registered derivatives clearing organization may submit to the 
Commission an application for such registration which shall be in such 
form and in accordance with such procedures as the Commission may 
prescribe by regulation, and which shall contain the rules of the 
derivatives clearing organization and such other information and 
documents as the Commission may prescribe by regulation. An applicant 
may withdraw an application submitted under this subsection by filing 
with the Commission a written notice of withdrawal.
    ``(b) Qualifications.--The Commission shall not approve an 
application submitted under subsection (a), unless the Commission 
determines that--
            ``(1) the rules of the applicant are in accordance with 
        such rules as the Commission may adopt with respect to--
                    ``(A) standards of financial responsibility, 
                operational capability, experience, competence, and 
                conduct applicable to participants in derivatives 
                clearing organizations;
                    ``(B) governance of derivatives clearing 
                organizations;
                    ``(C) qualifications of management of derivatives 
                clearing organization;
                    ``(D) dues, fees, and other charges imposed by 
                derivatives clearing organizations; and
                    ``(E) procedures for resolving disputes and 
                redressing grievances;
            ``(2) the applicant--
                    ``(A) has sufficient financial resources, standards 
                for participant eligibility, and adequate risk 
                management policies and procedures to protect the 
financial integrity of the applicant, consistent with international 
standards;
                    ``(B) has adequate operational systems and 
                settlement and default procedures designed to ensure 
                orderly settlement of contracts;
                    ``(C) has procedures and mechanisms to ensure the 
                performance of obligations in the event of participant 
                default;
                    ``(D) has such other resources and mechanisms as 
                are necessary to ensure compliance with this Act; and
                    ``(E) meets such other requirements as the 
                Commission may prescribe by rule or order; and
            ``(3) the operation of the applicant would not be 
        inconsistent with the public interest protected by the 
        antitrust laws.
    ``(c) Publication of Notice of Application.--On the filing of an 
application under subsection (a), the Commission shall publish notice 
of the filing and afford interested persons an opportunity to submit 
written data, views, and arguments concerning the application.
    ``(d) Disposition of Application.--
            ``(1) In general.--Within 90 days after the publication of 
        a notice under subsection (c) (or within such longer period as 
        the applicant may agree to), the Commission shall--
                    ``(A) by order, approve the application; or
                    ``(B) institute proceedings to determine whether to 
                disapprove the application.
            ``(2) Rules applicable to administrative disposition 
        proceedings.--
                    ``(A) The proceedings referred to in paragraph 
                (1)(B) shall include notice of the grounds for 
                disapproval under consideration and shall provide an 
                opportunity for a hearing, and shall be concluded 
                within 180 days after the filing of the application for 
                registration.
                    ``(B) At the conclusion of the proceedings, the 
                Commission, by order, shall approve or disapprove the 
                application.
                    ``(C) The Commission shall approve the application 
                unless the Commission determines that the applicant 
                does not meet the qualifications set forth in 
                subsection (b).
            ``(3) Judicial review of application disapproval.--An 
        applicant whose application submitted under subsection (a) is 
        disapproved may appeal the disapproval to the United States 
        Court of Appeals for the judicial circuit in which the 
        applicant has its principal place of business, in accordance 
        with the procedural requirements set forth in section 6(b).
    ``(e) Revocation of Registration.--
            ``(1) Notice.--If the Commission makes a preliminary 
        determination that finds that a registered derivatives clearing 
        organization has ceased to exist or is operating in violation 
        of this Act, the Commission shall notify the registered 
        derivatives clearing organization in writing of the reasons for 
        the preliminary determination, including any data, materials, 
        and specific findings the Commission has relied on in reaching 
        the preliminary determination. The Commission shall allow the 
        registered derivatives clearing organization not fewer than 21 
        days to respond in writing to such a notice. The Commission 
        may, in its discretion, extend the period of time for filing 
        such a response.
            ``(2) Discussions.--After the Commission receives the 
        response, the Commission shall promptly initiate discussions 
        with the registered derivatives clearing organization to 
        attempt to remedy the alleged violation in a mutually 
        acceptable manner.
            ``(3) Revocation authority.--If, after a reasonable period 
        of time, no mutually acceptable resolution is reached, the 
        Commission may make a final determination to revoke the 
        registration of the registered derivatives clearing 
        organization under this section.
            ``(4) Judicial review.--A derivatives clearing organization 
        may appeal a final determination to revoke its registration 
        under this section to the United States Court of Appeals for 
        the judicial circuit in which the derivatives clearing 
        organization has its principal place of business, in accordance 
        with the procedural requirements set forth in section 6(b).
    ``(f) Recordkeeping and Examination.--A registered derivatives 
clearing organization shall make and keep for prescribed periods such 
records, furnish such copies of the records, and make and disseminate 
such reports as the Commission prescribes by regulation or order.
    ``(g) Authority To Clear Over-The-Counter Transactions.--A 
derivatives clearing organization described in subsection (a) of this 
section may clear an agreement, contract, or transaction excluded from 
this Act by subsection (c), (d) or (h) of section 2.
    ``(h) Exclusive Jurisdiction of the Commission.-- The Commission 
shall have exclusive jurisdiction with respect to any registered 
derivatives clearing organization.
    ``(i) Registered Derivatives Clearing Organization.--In this 
section, the term `registered derivatives clearing organization' means 
a derivatives clearing organization registered under this section.''.

SEC. 15. COMMON PROVISIONS APPLICABLE TO REGISTERED 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 REGISTERED 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 
        interpretations submitted to the Commission, of sections 5(d), 
        5a(d), and 5b(b) to describe what would constitute an 
        acceptable business practice under such sections.
            ``(2) Effect of interpretation.--An interpretation issued 
        under paragraph (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 facility may comply with any applicable 
        core principle through delegation of any relevant function to a 
        registered futures association or another registered entity.
            ``(2) Responsibility.--A contract market 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 paragraph (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 amendment, by providing to the Commission a written 
        certification that the new contract, new rule, or rule 
        amendment complies with this Act (including regulations under 
        this Act).
            ``(2) Prior approval.--
                    ``(A) In general.--A registered entity may request 
                that the Commission grant prior approval to any new 
                contract or other instrument, new rule, or rule 
                amendment.
                    ``(B) Prior approval required.--Notwithstanding any 
                other provision of this section, for three years from 
                the effective date of the Commodity Futures Trading 
                Modernization Act of 2000, a designated contract market 
                shall submit to the Commission for prior approval each 
                rule amendment that materially changes the terms and 
                conditions in any contract of sale for future delivery 
                of a commodity specifically enumerated in section 1a(3) 
                of this Act (or any option thereon) traded through its 
                facilities if such rule amendment applies to contracts 
                and delivery months which have already been listed for 
                trading and have substantial open interest.
                    ``(C) Deadline.--If prior approval is requested 
                under subparagraph (A), the Commission shall take final 
                action on the request not later than 90 days after 
                submission of the request, unless the person submitting 
                the request 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 provision 
        specified in section 5(d), 5a(d), or 5b(b), the Commission 
        shall notify the registered entity in writing of the reasons 
        for the preliminary determination by the Commission of a 
        violation, including any data, materials, and facts the 
        Commission relied on in making the preliminary determination.
            ``(2) Injunctive or administrative action.--The Commission 
        may initiate an action for an injunction under section 6c or an 
        administrative proceeding, to demonstrate, by the preponderance 
        of the evidence, that--
                    ``(A) the registered entity is violating any 
                applicable provision specified in section 5(f), 5a(d), 
                or 5b(b); and
                    ``(B) the Commission has recommended an appropriate 
                remedial action to remove the deficiency based on an 
                analysis of the costs and benefits of the Commission 
                recommendation.
            ``(3) Burden of proof.--In making a determination any that 
        a registered entity is violating any applicable provision 
        specified in section 5(d), 5a(d), or 5b(b), the Commission 
        shall have the burden of proving that the registered entity is 
        violating the applicable core principle.
    ``(e) Reservation of Emergency Authority.--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. 16. 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 15) 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 facilities 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 contracts of sale of a commodity 
for future delivery (or options on such contracts)--
            ``(1) that have--
                    ``(A) a nearly inexhaustible deliverable supply;
                    ``(B) a deliverable supply that is sufficiently 
                large, and a cash market sufficiently liquid, to render 
                any contract traded on the commodity highly unlikely to 
                be susceptible to the threat of manipulation; or
                    ``(C) no cash market; and
            ``(2) that are entered into only between persons that--
                    ``(A) are eligible contract participants at the 
                time at which the persons enter into the contract; or
                    ``(B) enter into the contract or option for the 
                benefit only of eligible contract participants.
    ``(c) Antimanipulation Requirements.--A party to a futures contract 
or related option that is traded on an exempt board of trade 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 significant source of price discovery for any 
underlying 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 interest, 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 
contract of sale of a commodity for future delivery, 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 establishing a 
separate subsidiary or other legal entity and otherwise satisfying the 
requirements of this section.''.

SEC. 17. SUSPENSION OR REVOCATION OF DESIGNATION AS CONTRACT MARKET.

    Section 5e of the Commodity Exchange Act (7 U.S.C. 7b) (as 
redesignated by section 12(1)) is amended to read as follows:

``SEC. 5E. SUSPENSION OR REVOCATION OF DESIGNATION AS REGISTERED 
              ENTITY.

    ``The failure of a registered entity to comply with any provision 
of this Act, or any regulation 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 procedures and subject to the 
judicial review provided in section 6(b).''.

SEC. 18. 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''.

SEC. 19. 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 agreement, contract, 
                or transaction--
                            ``(i) that is conducted on or subject to 
                        the rules of a registered entity or exempt 
                        board of trade;
                            ``(ii) that is conducted on or subject to 
                        the rules of any board of trade, exchange, or 
                        market located 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
                            ``(iii) that is subject to regulation 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 
                applicability) in the case of--
                            ``(i) an electronic trading facility 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. 20. PREDISPUTE RESOLUTION AGREEMENTS FOR INSTITUTIONAL CUSTOMERS.

    Section 14 of the Commodity Exchange Act (7 U.S.C. 18) is amended 
by striking subsection (g) and inserting the following:
    ``(g) Predispute Resolution Agreements for Institutional 
Customers.--Nothing in this section prohibits a registered futures 
commission merchant from requiring a customer 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. 21. 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 following:

``SEC. 15. CONSIDERATION OF COSTS AND BENEFITS AND ANTITRUST LAWS.

    ``(a) Costs and Benefits.--
            ``(1) In general.--Before promulgating a regulation under 
        this Act or issuing an order (except as provided in paragraph 
        (3)), the Commission shall consider the costs and benefits of 
        the action of the Commission.
            ``(2) Considerations.--The costs and benefits of the 
        proposed Commission action shall be evaluated in light of--
                    ``(A) considerations of protection of market 
                participants and the public;
                    ``(B) considerations of the efficiency, 
                competitiveness, and financial integrity of futures 
                markets;
                    ``(C) considerations of price discovery;
                    ``(D) considerations of sound risk management 
                practices; and
                    ``(E) other public interest considerations.
            ``(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 adjudicatory or investigative process 
                of the Commission.
                    ``(B) An emergency action.
                    ``(C) A finding of fact regarding compliance with a 
                requirement of the Commission.
    ``(b) Antitrust Laws.--The Commission''.

SEC. 22. CONTRACT ENFORCEMENT BETWEEN ELIGIBLE COUNTERPARTIES.

    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 eligible 
        counterparties.--No agreement, contract, or transaction between 
        eligible contract participants shall be void, voidable, or 
        unenforceable, and no such eligible contract participant shall 
        be entitled to rescind, or recover any payment made with 
        respect to, such an agreement, contract, or transaction, under 
        this section based solely on the failure of the agreement, 
        contract, or transaction to comply with the terms or conditions 
        of an exemption or exclusion from any provision of this Act or 
        regulations of the Commission.''.

SEC. 23. RULE OF CONSTRUCTION.

    Except as expressly provided in this Act or an amendment made by 
this Act, nothing in this Act or an amendment made by the Act 
supersedes, affects, or otherwise limits or expands the scope and 
applicability of laws governing the Securities and Exchange Commission.

SEC. 24. TECHNICAL AND CONFORMING AMENDMENTS.

    (a) Commodity Exchange Act.--
            (1) Section 1a of the Commodity Exchange Act (7 U.S.C. 1a) 
        is amended--
                    (A) in paragraphs (4), (5), (8), (9), (12), and 
                (14), by inserting ``or derivatives transaction 
                execution facility'' after ``contract market'' each 
                place it appears; and
                    (B) in paragraph (15)--
                            (i) in the paragraph heading, by striking 
                        ``contract market'' and inserting ``registered 
                        entity''; and
                            (ii) by striking ``contract market'' each 
                        place it appears and inserting ``registered 
                        entity''.
            (2) Section 2 of the Commodity Exchange 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:

``SEC. 2. JURISDICTION OF COMMISSION; LIABILITY OF PRINCIPAL FOR ACT OF 
              AGENT; COMMODITY FUTURES TRADING COMMISSION; TRANSACTION 
              IN INTERSTATE COMMERCE.

    ``(a) Jurisdiction of Commission; Commodity 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 subparagraph (B);
                                    (II) by striking ``subparagraph (B) 
                                of this subparagraph'' and inserting 
                                ``subsection (g)'';
                                    (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'';
                                    (IV) by striking clause (ii); and
                                    (V) in clause (iii), by striking 
                                ``(iii) The'' and inserting the 
                                following:
                    ``(B) Liability of principal for act of agent.--
                The'';
                            (ii) in paragraph (7), by striking 
                        ``contract market'' and inserting ``registered 
                        entity''; and
                            (iii) in paragraph (8)(B)(ii)--
                                    (I) in the first sentence, by 
                                striking ``designation as a contract 
                                market'' and inserting ``designation or 
                                registration as a contract market or 
                                derivatives transaction execution 
                                facility'';
                                    (II) in the second sentence, by 
                                striking ``designate a board of trade 
                                as a contract market'' and inserting 
                                ``designate or register a board of 
                                trade as a contract market or 
                                derivatives transaction execution 
                                facility''; and
                                    (III) in the fourth sentence, by 
                                striking ``designating, or refusing, 
                                suspending, or revoking the designation 
                                of, a board of trade as a contract 
                                market'' and inserting ``designating, 
                                registering, or refusing, suspending, 
                                or revoking the designation or 
                                registration of, a board of trade as a 
                                contract market or derivatives 
                                transaction execution facility''.
            (3) Section 4 of the Commodity Exchange Act (7 U.S.C. 6) is 
        amended--
                    (A) in subsection (a)--
                            (i) in paragraph (1), by striking 
                        ``designated by the Commission as a `contract 
                        market' for'' and inserting ``designated or 
                        registered by the Commission as a contract 
                        market or derivatives transaction execution 
                        facility for'';
                            (ii) in paragraph (2), by striking ``member 
                        of such''; and
                            (iii) in paragraph (3), by inserting ``or 
                        derivatives transaction execution facility'' 
                        after ``contract market''; and
                    (B) in subsection (c)--
                            (i) in paragraph (1)--
                                    (I) by striking ``designated as a 
                                contract market'' and inserting 
                                ``designated or registered as a 
                                contract market or derivatives 
                                transaction execution facility''; and
                                    (II) by striking ``section 
                                2(a)(1)(B)'' and inserting ``section 
                                2(g)''; and
                            (ii) in paragraph (2)(B)(ii), by inserting 
                        ``or derivatives transaction execution 
                        facility'' after ``contract market''.
            (4) Section 4a of the Commodity Exchange Act (7 U.S.C. 6a) 
        is amended--
                    (A) in subsection (a)--
                            (i) in the first sentence, by inserting 
                        ``or derivatives transaction execution 
                        facilities'' after ``contract markets''; and
                            (ii) in the second sentence, by inserting 
                        ``or derivatives transaction execution 
                        facility'' after ``contract market'';
                    (B) in subsection (b), by inserting ``or 
                derivatives transaction execution facility'' after 
                ``contract market'' each place it appears; and
                    (C) in subsection (e)--
                            (i) by striking ``contract market or'' each 
                        place it appears and inserting ``contract 
                        market, derivatives transaction execution 
                        facility, or'';
                            (ii) by striking ``licensed or designated'' 
                        each place it appears and inserting ``licensed, 
                        designated, or registered''; and
                            (iii) by striking ``contract market, 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 entity''.
            (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 facility'' 
        after ``contract market'' each place it appears.
            (7) Section 4g of the Commodity Exchange 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 ``registered entities''.
            (8) Section 4h of the Commodity Exchange 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 Exchange Act (7 U.S.C. 6i) 
        is amended in the first sentence by inserting ``or derivatives 
        transaction execution facility'' after ``contract market''.
            (10) Section 4j of the Commodity Exchange Act (7 U.S.C. 6j) 
        is repealed.
            (11) Section 4l of the Commodity Exchange Act (7 U.S.C. 6l) 
        is amended by inserting ``or derivatives transaction execution 
        facilities'' after ``contract markets'' each place it appears.
            (12) Section 4p of the Commodity Exchange Act (7 U.S.C. 6p) 
        is amended--
                    (A) in the third sentence of subsection (a), by 
                striking ``Act or contract markets'' and inserting 
                ``Act, contract markets, or derivatives transaction 
                execution facilities''; and
                    (B) in subsection (b), by inserting ``derivatives 
                transaction execution facility,'' 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 Exchange 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 designated a `contract 
                                market' shall make application to the 
                                Commission for such designation'' and 
                                inserting ``person desiring to be 
                                designated or registered as a contract 
                                market or derivatives transaction 
                                execution facility shall make 
                                application to the Commission for such 
                                designation or registration'';
                                    (II) by striking ``above 
                                conditions'' and inserting ``conditions 
                                set forth in this Act''; and
                                    (III) by striking ``above 
                                requirements'' and inserting ``the 
                                requirements of this Act'';
                            (ii) in the second sentence, by striking 
                        ``designation as a contract market within one 
                        year'' and inserting ``designation or 
                        registration as a contract market or 
                        derivatives 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
                            (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 inserting ``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 ``designation of 
                                any board of trade as a `contract 
                                market' upon'' and inserting 
                                ``designation or registration of any 
                                contract market or derivatives 
                                transaction execution facility on'';
                                    (II) by striking ``board of trade'' 
                                each place it appears and inserting 
                                ``contract market or derivatives 
                                transaction execution facility''; and
                                    (III) by striking ``designation as 
                                set forth in section 5 of this Act'' 
                                and inserting ``designation 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 appears and 
                                inserting ``contract market or 
                                derivatives transaction execution 
                                facility''; and
                                    (II) by striking ``board of trade'' 
                                the second and third places it appears 
                                and inserting ``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 market'' each 
                        place it appears and inserting ``registered 
                        entity'';
                            (ii) by striking ``contract markets'' each 
                        place it appears and inserting ``registered 
                        entities''; and
                            (iii) by striking ``trading privileges'' 
                        each place it appears and inserting 
                        ``privileges'';
                    (D) in subsection (d), by striking ``contract 
                market'' each place it appears and inserting 
                ``registered entity''; and
                    (E) in subsection (e), by striking ``trading on all 
                contract markets'' each place it appears and inserting 
                ``the privileges of all registered entities''.
            (15) Section 6a of the Commodity Exchange Act (7 U.S.C. 
        10a) is amended--
                    (A) in the first sentence of subsection (a), by 
                striking ``designated as a `contract market' shall'' 
                and inserting ``designated or registered as a contract 
                market or a derivatives transaction execution 
                facility''; and
                    (B) in subsection (b), by striking ``designated as 
                a contract market'' and inserting ``designated or 
                registered as a contract market or a derivatives 
                transaction execution facility''.
            (16) Section 6b of the Commodity Exchange 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 striking 
                ``designation as set forth in section 5 of this Act'' 
                and inserting ``designation or registration as set 
                forth in sections 5 through 5c''; and
                    (C) in the last sentence, by striking ``the 
                contract market's ability'' and inserting ``the ability 
                of the registered entity''.
            (17) Section 6c(a) of the Commodity Exchange Act (7 U.S.C. 
        13a-1(a)) by striking ``contract market'' and inserting 
        ``registered entity''.
            (18) Section 6d(1) of the Commodity Exchange Act (7 U.S.C. 
        13a-2(1)) is amended by inserting ``derivatives transaction 
        execution facility,'' after ``contract market,''.
            (19) Section 7 of the Commodity Exchange 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 registered'' after 
                        ``designated'';
                            (iii) by inserting ``or registration'' 
                        after ``designation'' each place it appears; 
                        and
                            (iv) by striking ``contract market'' each 
                        place it appears and inserting ``registered 
                        entity'';
                    (B) in the second sentence--
                            (i) by striking ``designation of such board 
                        of trade as a contract market'' and inserting 
                        ``designation or registration of the registered 
                        entity''; and
                            (ii) by striking ``contract markets'' 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 inserting ``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 Exchange 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 striking ``trading 
                privileges'' and inserting ``privileges''.
            (22) Sections 8b and 8c(e) of the Commodity Exchange Act (7 
        U.S.C. 12b, 12c(e)) are amended by striking ``contract market'' 
        each place it appears and inserting ``registered entity''.
            (23) Section 8e of the Commodity Exchange 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 ``sections 5 through 5c'';
                    (C) in subsection (b)--
                            (i) in paragraph (1), by striking ``a 
                        contract market's trade monitoring system 
                        implemented pursuant to section 5a(b)'' and 
                        inserting ``the trade monitoring system of a 
                        registered entity implemented 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 require the registered entity to--
                    ``(A) institute appropriate improvements in its 
                trade monitoring system necessary to correct the 
                deficiencies in the order;
                    ``(B) satisfy stated objective performance criteria 
                to correct the deficiencies;
                    ``(C) upgrade or reconfigure existing systems for 
                collecting or processing 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 heading, by 
                                striking ``Designation as contract 
                                market'' and inserting ``Designation or 
                                registration as registered entity'';
                                    (II) by inserting ``or 
                                registration'' after ``designation''; 
                                and
                                    (III) by striking ``board of 
                                trade'' and inserting ``person'';
                    (D) in subsection (d)(2), by striking ``section 
                5b'' and inserting ``section 5e''; and
                    (E) in the paragraph heading of subsection (e)(2), 
                by striking ``Contract markets'' and inserting 
                ``Registered entities''.
            (24) Section 9 of the Commodity Exchange 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 striking ``section 
                4o(1),'' and inserting ``section 4n(1),''.
            (25) Section 14 of the Commodity Exchange Act (7 U.S.C. 18) 
        is amended--
                    (A) in subsection (a)(1)(B), by striking ``contract 
                market'' and inserting ``registered entity''; and
                    (B) in subsection (f), by striking ``contract 
                markets'' and inserting ``registered entities''.
            (26) Section 17 of the Commodity Exchange Act (7 U.S.C. 21) 
        is amended by striking ``contract market'' each place it 
        appears and inserting ``registered entity''.
            (27) Section 22 of the Commodity Exchange 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 ``registered entity'';
                            (ii) in paragraph (2), by striking 
                        ``sections 5a(11),'' and inserting ``sections 
                        5(d)(13), 5b(b)(1)(E),''; and
                            (iii) in paragraph (3), by striking 
                        ``contract market'' and inserting ``registered 
                        entity''; and
                    (B) in subsection (b)--
                            (i) in paragraph (1)--
                                    (I) by striking ``contract market 
                                or clearing organization 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 licensed board of 
                                trade'' and inserting ``registered 
                                entity''; and
                                    (IV) by striking ``contract market 
                                or licensed board of trade'' and 
                                inserting ``registered entity'';
                            (ii) in paragraph (3)--
                                    (I) by striking ``a contract 
                                market, clearing organization, licensed 
                                board of trade,'' and inserting 
                                ``registered entity''; and
                                    (II) by striking ``contract market, 
                                licensed board of trade'' and inserting 
                                ``registered entity'';
                            (iii) in paragraph (4), by striking 
                        ``contract market, licensed board of trade, 
                        clearing organization,'' and inserting 
                        ``registered entity''; and
                            (iv) in paragraph (5), by striking 
                        ``contract market, licensed board of trade, 
                        clearing organization,'' and inserting 
                        ``registered entity''.
    (b) Federal Deposit Insurance Corporation Improvement Act of 
1991.--Section 402(2) of the Federal Deposit Insurance Corporation 
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 derivatives clearing 
                organization under section 5b of the Commodity Exchange 
                Act.''.

SEC. 25. EFFECTIVE DATE.

    (a) In General.--Except as provided in subsection (b), this Act 
takes effect on the date of enactment of this Act.
    (b) Jurisdiction of Commission.--Section 8, and the amendments made 
by that section, take effect 1 year after the date of enactment of this 
Act.
                                 <all>