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

                                                 Union Calendar No. 477
106th CONGRESS
  2d Session
                                H. R. 4541

               [Report No. 106-711, Parts I, II, and III]

 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

                             June 29, 2000

      Reported from the Committee on Agriculture with an amendment
 [Strike out all after the enacting clause and insert the part printed 
                               in italic]

                           September 6, 2000

  Reported from the Committee on Banking and Financial Services with 
                               amendments
 [Strike out all after the enacting clause and insert the part printed 
                           in boldface roman]

                           September 6, 2000

 Additional sponsors: Mr. Barrett of Nebraska, Mr. Chambliss, and Mr. 
                               Gutknecht

                           September 6, 2000

Reported from the Committee on Commerce with an amendment, committed to 
the Committee of the Whole House on the State of the Union, and ordered 
                             to be printed
 [Strike out all after the enacting clause and insert the part printed 
                          in boldface italic]
[For text of introduced bill, see copy of bill as introduced on May 25, 
                                 2000]

_______________________________________________________________________

                                 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. Special procedures to encourage and facilitate bona fide 
                            hedging by agricultural producers.
Sec. 24. Rule of construction.
Sec. 25. Technical and conforming amendments.
Sec. 26. Report to Congress.
Sec. 27. Effective date.
Sec. 28. International activities of the Commodity Futures Trading 
                            Commission.

SEC. 2. PURPOSES.

    The purposes of this Act are--
            (1) to reauthorize the appropriation for the Commodity 
        Futures Trading Commission;
            (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 to oversight of the futures markets;
            (4) to provide a statutory and regulatory framework for 
        allowing the trading of futures on securities;
            (5) to provide the Commission jurisdiction over certain 
        retail foreign exchange transactions and bucket shops that may 
        not be 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 (15) through (19), (21) 
        through (23), and (27), 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--
                            ``(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 commercial participant.--The term `eligible 
        commercial participant' means a party or entity described in 
        paragraph (11)(A)(i), (ii), (v), or (vii) or paragraph (11)(C), 
        who, in connection with its business--
                    ``(A) has a demonstrable capacity or ability, 
                directly or through separate contractual arrangements, 
                to make or take delivery of the underlying physical 
                commodity;
                    ``(B) incurs risks, in addition to price risk, 
                related to the commodity; or
                    ``(C) is a dealer that regularly provides hedging, 
                risk management, or market-making services to the 
                foregoing entities.
            ``(11) 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);
                    ``(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; or
                    ``(iii) a commodity trading advisor subject to 
                regulation under this Act, having assets under 
                management of not less than $25,000,000 and acting as 
                investment manager or fiduciary for another person and 
                authorized by such person to commit such person to the 
                transaction; or
                    ``(C) any other person that the Commission 
                determines to be eligible in light of the financial or 
                other qualifications of the person.
            ``(12) Excluded commodity.--The term `excluded commodity' 
        means--
                    ``(A) an interest rate, exchange rate, currency, 
                security, security index, credit risk or measure, debt 
                or equity instrument, or index or measure of inflation;
                    ``(B) any other rate, differential, index, or 
                measure of economic or commercial risk, return, or 
                value that--
                            ``(i) is not within the control of any 
                        party to the relevant contract, agreement, or 
                        transaction; or
                            ``(ii) is not based in substantial part on 
                        the value of a limited number of commodities 
                        not described in subparagraph (A) that have a 
                        finite supply; or
                    ``(C) an occurrence, extent of an occurrence, or 
                contingency beyond the control of the parties to the 
                relevant contract, agreement, or transaction.
            ``(13) Exempt commodity.--The term `exempt commodity' means 
        a commodity that is not an excluded commodity or an 
        agricultural commodity.
            ``(14) 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 (19) (as redesignated by 
        paragraph (1)) the following:
            ``(20) 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 (23) (as redesignated by 
        paragraph (1)) the following:
            ``(24) 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).
            ``(25) 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'.
            ``(26) 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 
                        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 facility; or
                            ``(ii) include disciplinary sanctions other 
                        than the exclusion of participants from 
                        trading.''; and
            (5) by adding at the end the following:
            ``(28) 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.
            ``(29) 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)) as in effect on date of the enactment of 
        this paragraph.
            ``(30) 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 an excluded 
                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) or 
                        an option; 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) or a futures 
                                commission merchant registered under 
                                this Act;
                                    ``(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), or an affiliated person of a 
                                futures commission merchant registered 
                                under this Act, 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 5a, 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 principal-to-principal basis between 
                parties trading for their own accounts or as described 
                in section 1a(11)(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(11)(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)(3)(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);
                    ``(B) an electronic trading facility that is 
                excluded under subsection (e); or
                    ``(C) 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, at a level consistent 
                with 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 (4)(B) 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 nonexempt security 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 security 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 nonexempt security 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. In discharging these duties, the 
                intermarket margin board shall endeavor to make the 
                levels of margin for futures and options on a single 
                nonexempt security consistent taking into account any 
                material differences in such contracts, including--
                            ``(I) the price volatility of the 
                        contracts;
                            ``(II) the frequency with which margin 
                        calls are made; and
                            ``(III) the period of time within which 
                        margin calls must be met.
            ``(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, commodity trading 
        advisor, 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, 
        commodity trading advisor, or introducing broker complies with 
        the rules described in subparagraph (B) of a registered futures 
        association of which such merchant, advisor, or broker 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, a commodity trading advisor, 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.
            ``(10)(A) Nothing in this Act shall be construed to require 
        or authorize the Commission to review or approve, directly or 
        indirectly, any contract, rule, regulation, or action adopted 
        by a foreign board of trade, exchange, or market, or a 
        clearinghouse for such a board of trade, exchange, or market, 
        relating to any transaction involving a contract of sale for 
        future delivery (or option on such a contract) in or involving 
        any security, including any foreign government debt security, 
        or group or index of such securities, if--
                    ``(i)(I) in the case of a contract of sale for 
                future delivery (or option on such a contract) in or 
                involving a single equity security, the United States 
                is not the primary trading market for the underlying 
                security; or
                    ``(II) in the case of a contract of sale for future 
                delivery (or option on such a contract) in or involving 
                a group or index of equity securities, less than 25 
                percent of the weighting of the group or index is 
                derived from securities for which the United States is 
                the primary trading market for the securities 
                underlying the contract for future delivery (or option 
                on the contract); and
                    ``(ii) settlement of or delivery on the contract 
                for future delivery (or option on such a contract) is 
                to be effected in cash or by means other than the 
                transfer or receipt of a security in the United States 
                other than an exempted security.
            ``(B) Within 90 days after the date of the enactment of 
        this paragraph, the Commission shall adopt such procedures as 
        it deems appropriate pursuant to which, consistent with this 
        Act, the Commission shall authorize the offer and sale in the 
        United States of any contract of sale for future delivery (or 
        option on such a contract) of a security, other than a security 
        of the type described in subparagraph (A)(i)(I) or a group or 
        index of securities of the type described in subparagraph 
        (A)(i)(II), traded on or subject to the rules of a foreign 
        board of trade, exchange, or market, or a clearinghouse for 
        such a board of trade, exchange, or market, except that such 
        procedures shall not require a foreign board of trade, 
        exchange, or market, or a clearinghouse for such a board of 
        trade, exchange, or market to apply for designation as a 
        contract market under this Act with respect to such a contract 
        for future delivery (or option on such a contract).''.

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) is entered into solely between persons that 
                are eligible contract participants at the time they 
                enter into the agreement, contract, or transaction; and
                    ``(B) is not entered into on a 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, to the extent such 
                agreement, contract, or transaction is not between 
                eligible commercial participants and would otherwise be 
                subject to those provisions; and
                    ``(C) sections 6(c) and 9(a)(2) of this Act to the 
                extent they prohibit manipulation of the market price 
                of any commodity in interstate commerce, to the extent 
                such agreement, contract, or transaction would 
                otherwise be subject to those provisions.
            ``(3) Except as provided in paragraph (4) of this 
        subsection, nothing in this Act shall apply to an agreement, 
        contract, or transaction in an exempt commodity (other than a 
        metal commodity enumerated in section 1a(3) of this Act) 
        which--
                    ``(A) is entered into solely between persons that 
                are eligible contract participants at the time at which 
                the persons enter into the agreement, contract, or 
                transaction; and
                    ``(B) is executed or traded on an electronic 
                trading facility.
            ``(4) An agreement, contract, or transaction described in 
        paragraph (3) 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 and section 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, to the extent such 
                agreement, contract, or transaction would otherwise be 
                subject to those provisions; and
                    ``(C) such rules and regulations as the Commission 
                may prescribe if necessary to ensure timely 
                dissemination by the electronic trading facility of 
                price, trading volume, and other trading data to the 
                extent appropriate, if the Commission determines that 
                the electronic trading facility performs a significant 
                price discovery function for transactions related to 
                the commodity executed or traded on the electronic 
                trading facility.''.

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 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' 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.''.

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. Such rules may authorize--
                    ``(A) 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; and
                    ``(B) a futures commission merchant, acting as 
                principal or agent, to enter into or confirm the 
                execution of a contract for the purchase or sale of a 
                commodity for future delivery if the contract is 
                reported, recorded, or cleared in accordance with the 
                rules of the contract market or a derivatives clearing 
                organization.
            ``(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 agreements 
        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 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.
    ``(e) Current Agricultural and Metal Commodities.--
            ``(1) Subject to paragraph (2), a contract for purchase or 
        sale for future delivery of an agricultural or metal commodity 
        enumerated in section 1a(3) that is available for trade on a 
        contract market, as of the date of the enactment of this 
        subsection, may be traded only on a contract market designated 
        under this section.
            ``(2) In order to promote responsible economic or financial 
        innovation and fair competition, the Commission, on application 
        by any person, after notice and public comment and opportunity 
        for hearing, may prescribe rules and regulations to provide for 
        the offer and sale of contracts for future delivery or options 
        thereon to be conducted on a derivatives transaction execution 
        facility.''.

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 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. Such rules may authorize--
                    ``(A) 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; and
                    ``(B) a futures commission merchant, acting as 
                principal or agent, to enter into or confirm the 
                execution of a contract for the purchase or sale of a 
                commodity for future delivery if the contract is 
                reported, recorded, or cleared in accordance with the 
                rules of the registered derivatives transaction 
                execution facility or a derivatives clearing 
                organization.
            ``(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) 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 facility.
            ``(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, Depository Institutions, and Farm 
Credit System Institutions as Intermediaries.--
            ``(1) In general.--A registered derivatives transaction 
        execution facility may by rule allow a broker-dealer, 
        depository institution, or institution of the Farm Credit 
        System 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, depository institution, or institution 
                of the Farm Credit System; 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) the broker-dealer be in good standing with 
                the Securities and Exchange Commission, or the 
                depository institution or institution of the Farm 
                Credit System be in good standing with Federal bank 
                regulatory agencies (including the Farm Credit 
                Administration), as applicable; and
                    ``(B) if the broker-dealer, depository institution, 
                or institution of the Farm Credit System carries or 
                holds customer accounts or funds for transactions on 
                the derivatives transaction execution facility for more 
                than 1 business day, the broker-dealer, depository 
                institution, or institution of the Farm Credit System 
                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, the 
        Secretary of the Treasury, 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), 2(d), or 2(h).
            ``(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) Registration Requirement.--Except as provided in subsection 
(b), it shall be unlawful for a derivatives clearing organization, 
unless registered with the Commission, directly or indirectly to make 
use of the mails or any means or instrumentality of interstate commerce 
to perform the functions of a derivatives clearing organization 
described in section 1a(8).
    ``(b) Exclusion of Derivatives Clearing Organizations Subject to 
Other Regulatory Authorities.--A derivatives clearing organization 
shall not be required to register with the Commission, and the 
Commission shall have no jurisdiction with respect to the derivatives 
clearing organization, if the derivatives clearing organization--
            ``(1)(A) is registered as a clearing agency under the 
        Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.);
            ``(B) is subject to the supervisory jurisdiction of a 
        Federal banking agency (as defined in section 3 of the Federal 
        Deposit Insurance Act (12 U.S.C. 1813)) or the National Credit 
        Union Administration; or
            ``(C) is subject to the supervisory jurisdiction of a 
        foreign regulatory authority that is recognized by the 
        Securities and Exchange Commission, the Board of Governors of 
        the Federal Reserve System, the Comptroller of the Currency, or 
        the Commission as overseeing a system of consolidated 
        supervision comparable to that provided under applicable United 
        States law; and
            ``(2) does not clear a contract of sale for future 
        delivery, option on a contract of sale for future delivery, or 
        option on a commodity that is not a security (unless the 
        contract or option is excluded under subsection (c) or (d) of 
        section 2).
    ``(c) Voluntary Registration.--A derivatives clearing organization 
that is exempt from registration under subsection (b) may register with 
the Commission as a derivatives clearing organization.
    ``(d) Registration of Derivatives Clearing Organizations.--
            ``(1) Application.--A person desiring to register as a 
        derivatives clearing organization shall submit to the 
        Commission an application in such form and containing such 
        information as the Commission may require for the purpose of 
        making the determinations required for approval under paragraph 
        (2).
            ``(2) Core principles.--
                    ``(A) In general.--To be registered and to maintain 
                registration as a derivatives clearing organization, an 
                applicant shall demonstrate to the Commission that the 
                applicant complies with the core principles specified 
                in this paragraph. 
                    ``(B) Financial resources.--The applicant shall 
                demonstrate that the applicant has adequate financial, 
                operational, and managerial resources to discharge the 
                responsibilities of a derivatives clearing organization 
                without interruption in various market conditions.
                    ``(C) Participant and product eligibility.--The 
                applicant shall establish--
                            ``(i) appropriate admission and continuing 
                        eligibility standards (including appropriate 
                        minimum financial requirements) for members of 
                        and participants in the organization; and
                            ``(ii) appropriate standards for 
                        determining eligibility of agreements, 
                        contracts, or transactions submitted to the 
                        applicant.
                    ``(D) Risk management.--The applicant shall have 
                the ability to manage the risks associated with 
                discharging the responsibilities of a derivatives 
                clearing organization through the use of appropriate 
                tools and procedures.
                    ``(E) Settlement procedures.--The applicant shall 
                have the ability to--
                            ``(i) complete settlements on a timely 
                        basis under varying circumstances;
                            ``(ii) maintain an adequate record of the 
                        flow of funds associated with each transaction 
                        that the applicant clears; and
                            ``(iii) comply with the terms and 
                        conditions of any permitted netting or offset 
                        arrangements with other clearing organizations.
                    ``(F) Treatment of funds.--The applicant shall have 
                standards and procedures designed to protect and ensure 
                the safety of member and participant funds.
                    ``(G) Default rules and procedures.--The applicant 
                shall have rules and procedures designed to allow for 
                efficient, fair, and safe management of events when 
                members or participants become insolvent or otherwise 
                default on their obligations to the derivatives 
                clearing organization.
                    ``(H) Rule enforcement.--The applicant shall--
                            ``(i) maintain adequate arrangements and 
                        resources for the effective monitoring and 
                        enforcement of compliance with rules of the 
                        applicant and for resolution of disputes; and
                            ``(ii) have the authority and ability to 
                        discipline, limit, suspend, or terminate a 
                        member's or participant's activities for 
                        violations of rules of the applicant.
                    ``(I) System safeguards.--The applicant shall 
                demonstrate that the applicant--
                            ``(i) has established and will maintain a 
                        program of oversight and risk analysis to 
                        ensure that the automated systems of the 
                        applicant function properly and have adequate 
                        capacity and security; and
                            ``(ii) has established and will maintain 
                        emergency procedures and a plan for disaster 
                        recovery, and will periodically test backup 
                        facilities sufficient to ensure daily 
                        processing, clearing, and settlement of 
                        transactions.
                    ``(J) Reporting.--The applicant shall provide to 
                the Commission all information necessary for the 
                Commission to conduct the oversight function of the 
                applicant with respect to the activities of the 
                derivatives clearing organization.
                    ``(K) Recordkeeping.--The applicant shall--
                            ``(i) maintain full records of all 
                        activities related to the business of the 
                        applicant as a derivatives clearing 
                        organization in a form and manner acceptable to 
                        the Commission for a period of at least 5 
                        years;
                            ``(ii) 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
                            ``(iii) keep the records open to inspection 
                        by any representative of the Commission or the 
                        Department of Justice.
                    ``(L) Public information.--The applicant shall make 
                information concerning the rules and operating 
                procedures governing the clearing and settlement 
                systems (including default procedures) available to 
                market participants.
                    ``(M) Information sharing.--The applicant shall--
                            ``(i) enter into and abide by the terms of 
                        all appropriate and applicable domestic and 
                        international information-sharing agreements; 
                        and
                            ``(ii) use relevant information obtained 
                        from the agreements in carrying out the 
                        clearing organization's risk management 
                        program.
                    ``(N) Antitrust considerations.--Unless appropriate 
                to achieve the purposes of this Act, the derivatives 
                clearing organization shall avoid--
                            ``(i) adopting any rule or taking any 
                        action that results in any unreasonable 
                        restraint of trade; or
                            ``(ii) imposing any material 
                        anticompetitive burden on trading on the 
                        contract market.
            ``(3) Orders concerning competition.--A derivatives 
        clearing organization may request the Commission to issue an 
        order concerning whether a rule or practice of the applicant is 
        the least anticompetitive means of achieving the objectives, 
        purposes, and policies of this Act.
    ``(e) Existing Derivatives Clearing Organizations.--A derivatives 
clearing organization shall be deemed to be registered under this 
section to the extent that--
            ``(1) the derivatives clearing organization clears 
        agreements, contracts, or transactions for a board of trade 
        that has been designated by the Commission as a contract market 
        for such agreements, contracts, or transactions before the date 
        of enactment of this section; and
            ``(2) the Commission has reviewed and approved the rules of 
        the derivatives clearing organization before that date.
    ``(f) Appointment of Trustee.--
            ``(1) In general.--If a proceeding under section 5e results 
        in the suspension or revocation of the registration of a 
        derivatives clearing organization, or if a derivatives clearing 
        organization withdraws from registration, the Commission, on 
        notice to the derivatives clearing organization, may apply to 
        the appropriate United States district court where the 
        derivatives clearing organization is located for the 
        appointment of a trustee.
            ``(2) Assumption of jurisdiction.--If the Commission 
        applies for appointment of a trustee under paragraph (1)--
                    ``(A) the court may take exclusive jurisdiction 
                over the derivatives clearing organization and the 
                records and assets of the derivatives clearing 
                organization, wherever located; and
                    ``(B) if the court takes jurisdiction under 
                subparagraph (A), the court shall appoint the 
                Commission, or a person designated by the Commission, 
                as trustee with power to take possession and continue 
                to operate or terminate the operations of the 
                derivatives clearing organization in an orderly manner 
                for the protection of participants, subject to such 
                terms and conditions as the court may prescribe.
    ``(g) Linking of Regulated Clearing Facilities.--
            ``(1) In general.--The Commission shall facilitate the 
        linking or coordination of derivatives clearing organizations 
        registered under this Act with other regulated clearance 
        facilities for the coordinated settlement of cleared 
        transactions.
            ``(2) Coordination.--In carrying out paragraph (1), the 
        Commission shall coordinate with the Federal banking agencies 
        and the Securities and Exchange Commission.''.

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(d)(2) 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 (and the 
        Secretary of the Treasury, in the case of a contract of sale 
        for future delivery of a government security (or option 
        thereon) or a rule or rule amendment specifically related to 
        such a contract) 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, a designated contract 
                market shall submit to the Commission for prior 
                approval each rule amendment that materially changes 
                the terms and conditions, as determined by the 
                Commission, 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 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(d)(2), 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(d), 5a(d), 
                or 5b(d)(2); and
                    ``(B) the Commission has recommended an appropriate 
                remedial action to remove the deficiency based on an 
                analysis of the costs and benefits in the public 
                interest of the Commission recommendation.
            ``(3) Burden of proof.--In making a determination that a 
        registered entity is violating any applicable provision 
        specified in section 5(d), 5a(d), or 5b(d)(2), 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;
            ``(2) that are entered into only between persons that are 
        eligible contract participants at the time at which the persons 
        enter into the contract; and
            ``(3) that are not contracts of sale (or options on the 
        contract) for future delivery of any security, including any 
        group or index of securities or any interest in, or interest 
        that is based on the value of, any security.
    ``(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. SPECIAL PROCEDURES TO ENCOURAGE AND FACILITATE BONA FIDE 
              HEDGING BY AGRICULTURAL PRODUCERS.

    The Commodity Exchange Act, as otherwise amended by this Act, is 
amended by inserting after section 4o the following:

``SEC. 4P. SPECIAL PROCEDURES TO ENCOURAGE AND FACILITATE BONA FIDE 
              HEDGING BY AGRICULTURAL PRODUCERS.

    ``(a) Authority.--The Commission shall consider issuing rules or 
orders which--
            ``(1) prescribe procedures under which each contract market 
        is to provide for orderly delivery, including temporary storage 
        costs, of any agricultural commodity enumerated in section 
        1a(3) which is the subject of a contract for purchase or sale 
        for future delivery;
            ``(2) increase the ease with which domestic agricultural 
        producers may participate in contract markets, including by 
        addressing cost and margin requirements, so as to better enable 
        such producers to hedge price risk associated with their 
        production;
            ``(3) provide flexibility in the minimum quantities of such 
        agricultural commodities that may be the subject of a contract 
        for purchase or sale for future delivery that is traded on a 
        contract market, to better allow domestic agricultural 
        producers to hedge such price risk; and
            ``(4) encourage exchanges to provide information and 
        otherwise facilitate the participation of domestic agricultural 
        producers in contract markets.
    ``(b) Report.--Within 1 year after the date of enactment of this 
section, the Commission shall submit to the Committee on Agriculture of 
the House of Representatives and the Committee on Agriculture, 
Nutrition, and Forestry of the Senate a report on the steps it has 
taken to implement this section and on the activities of contract 
markets pursuant to this section.''.

SEC. 24. 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. 25. 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 paragraph (3), by inserting ``aluminum, 
                copper, gold, palladium, platinum, silver,'' after 
                ``orange juice,'';
                    (B) in paragraphs (4), (5), (8), (9), (12), and 
                (14), by inserting ``or derivatives transaction 
                execution facility'' after ``contract market'' each 
                place it appears; and
                    (C) 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'';
                            (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 involving transactions for 
                                future delivery referred to in this 
                                clause or in considering possible 
                                emergency action under section 8a(9) of 
                                this Act'' 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 
                                involving transactions for future 
                                delivery referred to in this clause or 
                                in considering any possible action 
                                under this Act (including without 
                                limitation emergency action under 
                                section 8a(9))'', and by striking 
                                ``designation, suspension, revocation, 
                                or emergency action'' and inserting 
                                ``designation, registration, 
                                suspension, revocation, or action''; 
                                and
                            (iv) by moving paragraphs (2) through (9) 2 
                        ems to the right.
            (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)--
                            (i) in paragraph (1), by inserting ``, or 
                        derivatives transaction execution facility or 
                        facilities,'' after ``markets''; and
                            (ii) in paragraph (2), by inserting ``or 
                        derivatives transaction execution facility'' 
                        after ``contract market''; 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 
                        ``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. 26. REPORT TO CONGRESS.

    (a) The Commodity Futures Trading Commission (in this section 
referred to as the ``Commission'') shall undertake and complete a study 
of the Commodity Exchange Act (in this section referred to as ``the 
Act'') and the Commission's rules, regulations and orders governing the 
conduct of persons required to be registered under the Act, not later 
than 1 year after the date of the enactment of this Act. The study 
shall identify--
            (1) the core principles and interpretations of acceptable 
        business practices that the Commission has adopted or intends 
        to adopt to replace the provisions of the Act and the 
        Commission's rules and regulations thereunder;
            (2) the rules and regulations that the Commission has 
        determined must be retained and the reasons therefor;
            (3) the extent to which the Commission believes it can 
        effect the changes identified in paragraph (1) of this 
        subsection through its exemptive authority under section 4(c) 
        of the Act; and
            (4) the regulatory functions the Commission currently 
        performs that can be delegated to a registered futures 
        association (within the meaning of the Act) and the regulatory 
        functions that the Commission has determined must be retained 
        and the reasons therefor.
    (b) In conducting the study, the Commission shall solicit the views 
of the public as well as Commission registrants, registered entities, 
and registered futures associations (all within the meaning of the 
Act).
    (c) The Commission shall transmit to the Committee on Agriculture 
of the House of Representatives and the Committee on Agriculture, 
Nutrition, and Forestry of the Senate a report of the results of its 
study, which shall include an analysis of comments received.

SEC. 27. 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.

SEC. 28. INTERNATIONAL ACTIVITIES OF THE COMMODITY FUTURES TRADING 
              COMMISSION.

    (a) Findings.--The Congress finds that--
            (1) derivatives markets serving United States industry are 
        increasingly global in scope;
            (2) developments in data processing and communications 
        technologies enable users of risk management services to 
        analyze and compare those services on a worldwide basis;
            (3) financial services regulatory policy must be flexible 
        to account for rapidly changing derivatives industry business 
        practices;
            (4) regulatory impediments to the operation of global 
        business interests can compromise the competitiveness of United 
        States businesses;
            (5) events that disrupt financial markets and economies are 
        often global in scope, require rapid regulatory response, and 
        coordinated regulatory effort across international 
        jurisdictions;
            (6) through its membership in the International 
        Organisation of Securities Commissions, the Commodity Futures 
        Trading Commission has promoted beneficial communication among 
        market regulators and international regulatory cooperation; and
            (7) the Commodity Futures Trading Commission and other 
        United States financial regulators and self-regulatory 
        organizations should continue to foster productive and 
        cooperative working relationships with their counterparts in 
        foreign jurisdictions.
    (b) Sense of the Congress.--It is the sense of the Congress that, 
consistent with its responsibilities under the Commodity Exchange Act, 
the Commodity Futures Trading Commission should, as part of its 
international activities, continue to coordinate with foreign 
regulatory authorities, to participate in international regulatory 
organizations and forums, and to provide technical assistance to 
foreign government authorities, in order to encourage--
            (1) the facilitation of cross-border transactions through 
        the removal or lessening of any unnecessary legal or practical 
        obstacles;
            (2) the development of internationally accepted regulatory 
        standards of best practice;
            (3) the enhancement of international supervisory 
        cooperation and emergency procedures;
            (4) the strengthening of international cooperation for 
        customer and market protection; and
            (5) improvements in the quality and timeliness of 
        international information sharing.

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

Sec. 1. Short title; table of contents.
                TITLE I--COMMODITY FUTURES MODERNIZATION

Sec. 101. Short title.
Sec. 102. Purposes.
Sec. 103. Definitions.
Sec. 104. Agreements, contracts, and transactions in foreign currency, 
                            government securities, and certain other 
                            commodities.
Sec. 105. Legal certainty for excluded derivative transactions.
Sec. 106. Excluded electronic trading facilities.
Sec. 107. Conformity with the Gramm-Leach-Bliley Act; hybrid 
                            instruments.
Sec. 108. Futures on securities.
Sec. 109. Transactions in exempt commodities.
Sec. 110. Swap transactions.
Sec. 111. Application of the Commodity Exchange Act.
Sec. 112. Protection of the public interest.
Sec. 113. Prohibited transactions.
Sec. 114. Designation of boards of trade as contract markets.
Sec. 115. Derivatives transaction execution facilities.
Sec. 116. Derivatives clearing.
Sec. 117. Common provisions applicable to registered entities.
Sec. 118. Exempt boards of trade.
Sec. 119. Suspension or revocation of designation as contract market.
Sec. 120. Authorization of appropriations.
Sec. 121. Preemption.
Sec. 122. Predispute resolution agreements for institutional customers.
Sec. 123. Consideration of costs and benefits and antitrust laws.
Sec. 124. Contract enforcement.
Sec. 125. Special procedures to encourage and facilitate bona fide 
                            hedging by agricultural producers.
Sec. 126. Rule of construction.
Sec. 127. Authority of agencies to construe the term ``contract 
                            market''.
Sec. 128. Technical and conforming amendments.
Sec. 129. Report to Congress.
Sec. 130. Effective date.
Sec. 131. International activities of the Commodity Futures Trading 
                            Commission.
Sec. 132. Antifraud provisions.
Sec. 133. Retail swap customer protections.
            TITLE II--FINANCIAL CONTRACT NETTING IMPROVEMENT

Sec. 201. Short title.
Sec. 202. Treatment of certain agreements by conservators or receivers 
                            of insured depository institutions.
Sec. 203. Authority of the Corporation with respect to failed and 
                            failing institutions.
Sec. 204. Amendments relating to transfers of qualified financial 
                            contracts.
Sec. 205. Amendments relating to disaffirmance or repudiation of 
                            qualified financial contracts.
Sec. 206. Clarifying amendment relating to master agreements.
Sec. 207. Federal Deposit Insurance Corporation Improvement Act of 
                            1991.
Sec. 208. Bankruptcy code amendments.
Sec. 209. Recordkeeping requirements.
Sec. 210. Exemptions from contemporaneous execution requirement.
Sec. 211. Damage measure.
Sec. 212. SIPC stay.
Sec. 213. Asset-backed securitizations.
Sec. 214. Application of amendments.

                TITLE I--COMMODITY FUTURES MODERNIZATION

SEC. 101. SHORT TITLE.

    This title may be cited as the ``Commodity Futures Modernization 
Act of 2000''.

SEC. 102. PURPOSES.

    The purposes of this title are--
            (1) to reauthorize the appropriation for the Commodity 
        Futures Trading Commission;
            (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 to oversight of the futures markets;
            (4) to provide a statutory and regulatory framework for 
        allowing the trading of futures on securities;
            (5) to provide the Commission jurisdiction over certain 
        retail foreign exchange transactions and bucket shops that may 
        not be 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. 103. DEFINITIONS.

    Section 1a of the Commodity Exchange Act (7 U.S.C. 1a) is amended--
            (1) by redesignating--
                    (A) paragraphs (1) through (7) as paragraphs (2) 
                through (8), respectively;
                    (B) paragraphs (8) through (12) as paragraphs (16) 
                through (20), respectively;
                    (C) paragraphs (13) through (15) as paragraphs (22) 
                through (24), respectively; and
                    (D) paragraph (16) as paragraph (28);
            (2) by inserting before paragraph (2) (as so redesignated 
        by paragraph (1) of this section) the following new paragraph:
            ``(1) Banking product.--
                    ``(A) In general.--The term `banking product' means 
                any agreement, contract, or transaction that is an 
                identified banking product (as defined in section 
                206(a) of the Gramm-Leach-Bliley Act).
                    ``(B) Exclusion.--The term `banking product' does 
                not include a contract for the sale of a commodity for 
                future delivery traded on a contract market designated 
                under section 5 of this Act or an agreement, contract, 
                or transaction traded on a derivatives transaction 
                execution facility registered under section 5a.'';
            (3) by inserting after paragraph (8) (as so redesignated by 
        paragraph (1) of this section) the following new paragraphs:
            ``(9) 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--
                            ``(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.
            ``(10) 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.
            ``(11) Eligible commercial participant.--The term `eligible 
        commercial participant' means a party or entity described in 
        paragraph (11)(A)(i), (ii), (v), or (vii) or paragraph (11)(C), 
        who, in connection with its business--
                    ``(A) has a demonstrable capacity or ability, 
                directly or through separate contractual arrangements, 
                to make or take delivery of the underlying physical 
                commodity;
                    ``(B) incurs risks, in addition to price risk, 
                related to the commodity; or
                    ``(C) is a dealer that regularly provides hedging, 
                risk management, or market-making services to the 
                foregoing entities.
            ``(12) 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) an individual who has total assets 
                        in an amount in excess of--
                                    ``(I) $10,000,000; or
                                    ``(II) $5,000,000 and who enters 
                                into the agreement, contract, or 
                                transaction in order to manage the risk 
                                associated with an asset owned or 
                                liability incurred, or reasonably 
                                likely to be owned or incurred, by such 
                                individual 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);
                    ``(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; or
                    ``(iii) a commodity trading advisor subject to 
                regulation under this Act, having assets under 
                management of not less than $25,000,000 and acting as 
                investment manager or fiduciary for another person and 
                authorized by such person to commit such person to the 
                transaction; or
                    ``(C) any other person that the Commission 
                determines to be eligible in light of the financial or 
                other qualifications of the person.
            ``(13) Exclusion-eligible commodity.--
                    ``(A) In general.--The term `exclusion-eligible 
                commodity' means--
                            ``(i) an interest rate, exchange rate, 
                        currency, security, security index, credit risk 
                        or measure, debt or equity instrument, index or 
                        measure of inflation, or other macroeconomic 
                        index or measure;
                            ``(ii) any other rate, differential, index, 
                        or measure of economic or commercial risk, 
                        return, or value that is--
                                    ``(I) not based in substantial part 
                                on the value of a narrow group of 
                                commodities not described in clause 
                                (i); or
                                    ``(II) based solely on 1 or more 
                                commodities that have no cash market;
                            ``(iii) any economic or commercial index 
                        based on prices, rates, values, or levels that 
                        are not within the control of any party to the 
                        relevant contract, agreement, or transaction; 
                        or
                            ``(iv) an occurrence, extent of an 
                        occurrence, or contingency (other than a change 
                        in the price, rate, value, or level of a 
                        commodity not described in clause (i)) that 
                        is--
                                    ``(I) beyond the control of the 
                                parties to the relevant contract, 
                                agreement, or transaction; and
                                    ``(II) associated with a financial, 
                                commercial, or economic consequence.
                    ``(B) Reference to excluded commodity.--Any 
                reference in this Act to the term `excluded commodity' 
                shall be deemed to be a reference to `exclusion-
                eligible commodity'.
            ``(14) Exempt commodity.--The term `exempt commodity' means 
        a commodity that is not an excluded commodity or an 
        agricultural commodity.
            ``(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) any financial holding company (as defined in 
                section 2 of the Bank Holding Company Act of 1956);
                    ``(H) a trust company; or
                    ``(I) a similarly regulated subsidiary or affiliate 
                of an entity described in any of subparagraphs (A) 
                through (H).'';
            (3) by inserting after paragraph (20) (as so redesignated 
        by paragraph (1)) the following new paragraph:
            ``(21) Hybrid instrument.--
                    ``(A) In general.--The term `hybrid instrument' 
                means a deposit instrument 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.
                    ``(B) Deposit instrument defined.--The term 
                `deposit instrument' means an instrument representing 
                an interest described in paragraph (1), (2), (3), (4), 
                or (5) of section 3(l) of the Federal Deposit Insurance 
                Act, other than in subparagraph (A), (B), or (C) at the 
                end of paragraph (5).'';
            (4) by inserting after paragraph (24) (as so redesignated 
        by paragraph (1)) the following new paragraphs:
            ``(25) 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).
            ``(26) 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'.
            ``(27) Organized exchange.--The term `organized exchange' 
        means a trading facility that--
                    ``(A) permits trading by persons other than--
                            ``(i) eligible contract participants 
                        trading on a principal-to-principal basis; or
                            ``(ii) eligible contract participants 
                        described in subclause (I), (II), (III), (IV), 
                        (V) or (VI) of section 2(c)(2)(B), acting as a 
                        broker or performing an equivalent agency 
                        function on behalf of eligible contract 
                        participants; 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 facility; or
                            ``(ii) include disciplinary sanctions other 
                        than the exclusion of participants from 
                        trading.''; and
            (5) by adding at the end the following new paragraphs:
            ``(29) 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.
            ``(30) 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)) as in effect on date of the enactment of 
        this paragraph.
            ``(31) 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)));
                            ``(iii) facilities on which bids and 
                        offers, and acceptances of bids and offers 
                        effected on the facility, are not binding; or
                            ``(iv) a person or group of persons solely 
                        because the person or group of persons 
                        constitutes, maintains, or provides an 
                        electronic facility or system that--
                                    ``(I) enables participants to enter 
                                into bilateral transactions with other 
                                participants; and
                                    ``(II) incorporates credit screens 
                                or filters that prevent any participant 
                                from executing a transaction with 
                                another participant unless both 
                                participants have approved the 
                                extension of credit to the other.''.

SEC. 104. 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 an excluded 
                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) or 
                        an option; 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) or a futures 
                                commission merchant registered under 
                                this Act;
                                    ``(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), or an affiliated person of a 
                                futures commission merchant registered 
                                under this Act, 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. 105. 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 104) 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 5a, 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--
                            ``(i) entered into--
                                    ``(I) on a principal-to-principal 
                                basis between parties trading for their 
                                own accounts or as described in section 
                                1a(12)(B)(ii) of this Act; and
                                    ``(II) only between eligible 
                                contract participants (as defined in 
                                subparagraphs (A), (B)(ii), and (C) 
                                section 1a(12)) at the time at which 
                                the persons enter into the agreement, 
                                contract, or transaction; or
                            ``(ii) entered into only between eligible 
                        contract participants described in subclause 
                        (I), (II), (III), (IV), (V), or (VI) of section 
                        2(c)(2)(B)(ii) acting as a broker or performing 
                        a similar agency function on behalf of 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 
                executed or traded on an electronic trading 
                facility.''.

SEC. 106. EXCLUDED ELECTRONIC TRADING FACILITIES.

    Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a) 
(as amended by section 105) 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)(3)(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 electronic trading facility 
        excluded under this Act pursuant to paragraph (1).''.

SEC. 107. CONFORMITY WITH THE GRAMM-LEACH-BLILEY ACT; HYBRID 
              INSTRUMENTS.

    Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a) 
(as amended by section 106) 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) a banking product or security sold or 
                provided by an entity that is listed in any of 
                subclauses (I) through (VI) of section 2(c)(2)(B)(ii); 
                or
                    ``(B) a hybrid instrument that is predominantly a 
                security or a deposit instrument.
            ``(2) Exception.--Paragraph (1)(A) shall not apply to any 
        swap agreement (as defined in section 206(b) of the Gramm-
        Leach-Bliley Act) with any party who is not an eligible 
        contract participant unless such swap agreement is entered into 
        after final regulations have been prescribed under section 49 
        of the Federal Deposit Insurance Act.
            ``(3) Predominance.--A hybrid instrument shall be 
        considered to be predominantly a security or deposit 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.
            ``(4) Mark-to-market margining requirements.--For the 
        purposes of paragraph (3)(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. 108. FUTURES ON SECURITIES.

    Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a) 
(as amended by section 107) 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);
                    ``(B) an electronic trading facility that is 
                excluded under subsection (e); or
                    ``(C) 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)(I) In general.--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, at a 
                level consistent with the level of margin on comparable 
                option contracts listed on any national securities 
                exchange.
                                    ``(II) Consistency.--For the 
                                purposes of subclause (I), a margin for 
                                designated futures on securities and 
                                options on securities shall be 
                                considered to be consistent if the 
                                margin provides a similar level of 
                                protection against defaults by 
                                counterparties, taking into account any 
                                differences in--
                                            ``(aa) the price volatility 
                                        of the contracts;
                                            ``(bb) the frequency with 
                                        which margin requirements are 
                                        made; and
                                            ``(cc) the period of time 
                                        within which margin calls must 
                                        be met.
                    ``(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 (4)(B) 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 nonexempt security 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 security 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 nonexempt security 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. In discharging these duties, the 
                intermarket margin board shall endeavor to make the 
                levels of margin for futures and options on a single 
                nonexempt security consistent taking into account any 
                material differences in such contracts, including--
                            ``(I) the price volatility of the 
                        contracts;
                            ``(II) the frequency with which margin 
                        calls are made; and
                            ``(III) the period of time within which 
                        margin calls must be met.
            ``(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, commodity trading 
        advisor, 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, 
        commodity trading advisor, or introducing broker complies with 
        the rules described in subparagraph (B) of a registered futures 
        association of which such merchant, advisor, or broker 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, a commodity trading advisor, 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.
            ``(10)(A) Nothing in this Act shall be construed to require 
        or authorize the Commission to review or approve, directly or 
        indirectly, any contract, rule, regulation, or action adopted 
        by a foreign board of trade, exchange, or market, or a 
        clearinghouse for such a board of trade, exchange, or market, 
        relating to any transaction involving a contract of sale for 
        future delivery (or option on such a contract) in or involving 
        any security, including any foreign government debt security, 
        or group or index of such securities, if--
                    ``(i)(I) in the case of a contract of sale for 
                future delivery (or option on such a contract) in or 
                involving a single equity security, the United States 
                is not the primary trading market for the underlying 
                security; or
                    ``(II) in the case of a contract of sale for future 
                delivery (or option on such a contract) in or involving 
                a group or index of equity securities, less than 25 
                percent of the weighting of the group or index is 
                derived from securities for which the United States is 
                the primary trading market for the securities 
                underlying the contract for future delivery (or option 
                on the contract); and
                    ``(ii) settlement of or delivery on the contract 
                for future delivery (or option on such a contract) is 
                to be effected in cash or by means other than the 
                transfer or receipt of a security in the United States 
                other than an exempted security.
            ``(B) Within 90 days after the date of the enactment of 
        this paragraph, the Commission shall adopt such procedures as 
        it deems appropriate pursuant to which, consistent with this 
        Act, the Commission shall authorize the offer and sale in the 
        United States of any contract of sale for future delivery (or 
        option on such a contract) of a security, other than a security 
        of the type described in subparagraph (A)(i)(I) or a group or 
        index of securities of the type described in subparagraph 
        (A)(i)(II), traded on or subject to the rules of a foreign 
        board of trade, exchange, or market, or a clearinghouse for 
        such a board of trade, exchange, or market, except that such 
        procedures shall not require a foreign board of trade, 
        exchange, or market, or a clearinghouse for such a board of 
        trade, exchange, or market to apply for designation as a 
        contract market under this Act with respect to such a contract 
        for future delivery (or option on such a contract).''.

SEC. 109. TRANSACTIONS IN EXEMPT COMMODITIES.

    Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a) 
(as amended by section 108) 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) is entered into solely between persons that 
                are eligible contract participants at the time they 
                enter into the agreement, contract, or transaction; and
                    ``(B) is not entered into on a 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, to the extent such 
                agreement, contract, or transaction is not between 
                eligible commercial participants and would otherwise be 
                subject to those provisions; and
                    ``(C) sections 6(c) and 9(a)(2) of this Act to the 
                extent they prohibit manipulation of the market price 
                of any commodity in interstate commerce, to the extent 
                such agreement, contract, or transaction would 
                otherwise be subject to those provisions.
            ``(3) Except as provided in paragraph (4) of this 
        subsection, nothing in this Act shall apply to an agreement, 
        contract, or transaction in an exempt commodity (other than a 
        metal commodity enumerated in section 1a(3) of this Act) 
        which--
                    ``(A) is entered into solely between persons that 
                are eligible contract participants at the time at which 
                the persons enter into the agreement, contract, or 
                transaction; and
                    ``(B) is executed or traded on an electronic 
                trading facility.
            ``(4) An agreement, contract, or transaction described in 
        paragraph (3) 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 and section 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, to the extent such 
                agreement, contract, or transaction would otherwise be 
                subject to those provisions; and
                    ``(C) such rules and regulations as the Commission 
                may prescribe if necessary to ensure timely 
                dissemination by the electronic trading facility of 
                price, trading volume, and other trading data to the 
                extent appropriate, if the Commission determines that 
                the electronic trading facility performs a significant 
                price discovery function for transactions related to 
                the commodity executed or traded on the electronic 
                trading facility.''.

SEC. 110. SWAP TRANSACTIONS.

    Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a) 
(as amended by section 109) is amended by adding at the end the 
following new subsection:
    ``(i) Excluded Swap Transactions.--
            ``(1) In general.--No provision of this Act (other than 
        section 5b or 12(e)(2)(B)) shall apply to or govern any 
        agreement, contract, or transaction in a commodity other than 
        an agricultural commodity enumerated in section 1a(3) if--
                    ``(A) the agreement, contract, or transaction is 
                entered into only between persons that are eligible 
                contract participants at the time they enter into the 
                agreement, contract, or transaction; and
                    ``(B) the material economic terms of the agreement, 
                contract, or transaction are subject to individual 
                negotiation and are not specified by the rules terms or 
                conditions of a trading facility.
            ``(2) Exclusion.--Paragraph (1) shall not apply to--
                    ``(A) a contract for the sale of a commodity for 
                future delivery traded on a contract market designated 
                under section 5; or
                    ``(B) any agreement, contract, or transaction 
                traded on a derivatives transaction execution facility 
                registered under section 5a.''.

SEC. 111. APPLICATION OF THE COMMODITY EXCHANGE ACT.

    Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a) 
(as amended by section 110) is amended by adding at the end the 
following new subsection:
    ``(j) Application of the Act.--No provision of this Act shall be 
construed as--
            ``(1) implying or creating any presumption that--
                    ``(A) any agreement, contract, or transaction that 
                is eligible for an exclusion or exemption from 
                regulation under this Act; or
                    ``(B) any agreement, contract, or transaction that 
                is not eligible for an exclusion or exemption from 
                regulation under this Act,
        is or would otherwise be subject to this Act; or
            ``(2) conferring jurisdiction on the Commission with 
        respect to any such agreement, contract, or transaction, except 
        as expressly provided in section 5b.''.

SEC. 112. 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 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. 113. 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' 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.''.

SEC. 114. 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. Such rules may authorize--
                    ``(A) 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; and
                    ``(B) a futures commission merchant, acting as 
                principal or agent, to enter into or confirm the 
                execution of a contract for the purchase or sale of a 
                commodity for future delivery if the contract is 
                reported, recorded, or cleared in accordance with the 
                rules of the contract market or a derivatives clearing 
                organization.
            ``(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 agreements 
        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 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.
    ``(e) Current Agricultural and Metal Commodities.--
            ``(1) Subject to paragraph (2), a contract for purchase or 
        sale for future delivery of an agricultural or metal commodity 
        enumerated in section 1a(3) that is available for trade on a 
        contract market, as of the date of the enactment of this 
        subsection, may be traded only on a contract market designated 
        under this section.
            ``(2) In order to promote responsible economic or financial 
        innovation and fair competition, the Commission, on application 
        by any person, after notice and public comment and opportunity 
        for hearing, may prescribe rules and regulations to provide for 
        the offer and sale of contracts for future delivery or options 
        thereon to be conducted on a derivatives transaction execution 
        facility.''.

SEC. 115. 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 112(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 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. Such rules may authorize--
                    ``(A) 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; and
                    ``(B) a futures commission merchant, acting as 
                principal or agent, to enter into or confirm the 
                execution of a contract for the purchase or sale of a 
                commodity for future delivery if the contract is 
                reported, recorded, or cleared in accordance with the 
                rules of the registered derivatives transaction 
                execution facility or a derivatives clearing 
                organization.
            ``(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) 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 facility.
            ``(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, Depository Institutions, and Farm 
Credit System Institutions as Intermediaries.--
            ``(1) In general.--A registered derivatives transaction 
        execution facility may by rule allow a broker-dealer, 
        depository institution, or institution of the Farm Credit 
        System 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, depository institution, or institution 
                of the Farm Credit System; 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) the broker-dealer be in good standing with 
                the Securities and Exchange Commission, or the 
                depository institution or institution of the Farm 
                Credit System be in good standing with Federal bank 
                regulatory agencies (including the Farm Credit 
                Administration), as applicable; and
                    ``(B) if the broker-dealer, depository institution, 
                or institution of the Farm Credit System carries or 
                holds customer accounts or funds for transactions on 
                the derivatives transaction execution facility for more 
                than 1 business day, the broker-dealer, depository 
                institution, or institution of the Farm Credit System 
                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, the 
        Secretary of the Treasury, 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), 2(d), or 2(h).
            ``(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. 116. DERIVATIVES CLEARING.

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

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

            (2) in section 402, by striking ``this subtitle'' and 
        inserting ``this chapter''; and
            (3) by inserting after section 407, the following new 
        chapter:

            ``CHAPTER 2--MULTILATERAL CLEARING ORGANIZATIONS

``SEC. 408. DEFINITIONS.

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

``SEC. 409. MULTILATERAL CLEARING ORGANIZATIONS.

    ``(a) In General.--Except with respect to clearing organizations 
described in subsection (b), no person may operate a multilateral 
clearing organization for over-the-counter derivative instruments, or 
otherwise engage in activities that constitute such a multilateral 
clearing organization unless the person is a national bank, State 
member bank, an affiliate of a national bank or a State member bank, or 
a corporation chartered under section 25A of the Federal Reserve Act.
    ``(b) Clearing Organizations.--Subsection (a) shall not apply to 
any clearing organization that--
            ``(1) is registered as a clearing agency under the 
        Securities Exchange Act of 1934;
            ``(2) performs clearing functions for a contract market 
        designated pursuant to the Commodity Exchange Act; or
            ``(3) is supervised by a foreign financial regulator that 
        an appropriate Federal financial regulatory agency has 
        determined satisfies appropriate standards.''.
    (b) Enforcement Powers of the Board of Governors of the Federal 
Reserve System.--Section 9 of the Federal Reserve Act (12 U.S.C. 221) 
is amended by adding at the end the following new paragraph:
            ``(24) Enforcement authority.--Section 3(u), subsections 
        (j) and (k) of section 7, subsections (b) through (n), (s), 
        (u), and (v) of section 8, and section 19 of the Federal 
        Deposit Insurance Act shall apply to a State member bank which 
        is not an insured depository institution (as defined in section 
        3 of the Federal Deposit Insurance Act) in the same manner and 
        to the same extent as such provisions apply to State member 
        insured banks, and any reference in such sections to an insured 
        depository institution shall be deemed to include a reference 
        to any such noninsured State member bank.''.
    (c) Resolution of Clearing Banks.--The Federal Reserve Act (12 
U.S.C. 221 et seq.) is amended by inserting after section 9A the 
following new section:

``SEC. 9B. RESOLUTION OF CLEARING BANKS.

    ``(a) Conservatorship or Receivership.--
            ``(1) Appointment.--The Board may appoint a conservator or 
        receiver to take possession and control of any uninsured State 
        member bank which operates, or operates as, a multilateral 
        clearing organization pursuant to section 409 of the Federal 
        Deposit Insurance Corporation Improvement Act of 1991 to the 
        same extent and in the same manner as the Comptroller of the 
        Currency may appoint a conservator or receiver for a national 
        bank.
            ``(2) Powers.--The conservator or receiver for an uninsured 
        State member bank referred to in paragraph (1) shall exercise 
        the same powers, functions, and duties, subject to the same 
        limitations, as a conservator or receiver for a national bank.
    ``(b) Board Authority.--The Board shall have the same authority 
with respect to any conservator or receiver appointed under subsection 
(a), and the uninsured State member bank for which the conservator or 
receiver has been appointed, as the Comptroller of the Currency has 
with respect to a conservator or receiver for a national bank and the 
national bank for which the conservator or receiver has been appointed.
    ``(c) Bankruptcy Proceedings.--The Board (in the case of an 
uninsured State member bank which operates, or operates as, such a 
multilateral clearing organization) may direct a conservator or 
receiver appointed for such bank to file a petition pursuant to title 
11, United States Code, in which case, title 11, United States Code, 
shall apply to such bank in lieu of otherwise applicable Federal or 
State insolvency law.''.
    (d) Technical and Conforming Amendments to Title 11, United States 
Code.--
            (1) Bankruptcy code debtors.--Section 109(b)(2) of title 
        11, United States Code, is amended by striking ``; or'' and 
        inserting the following: ``, except that an uninsured State 
        member bank, or a corporation organized under section 25A of 
        the Federal Reserve Act, which operates, or operates as, a 
        multilateral clearing organization pursuant to section 409 of 
        the Federal Deposit Insurance Corporation Improvement Act of 
        1991 may be a debtor if a petition is filed at the direction of 
        the Board of Governors of the Federal Reserve System; or''.
            (2) Chapter 7 debtors.--Section 109(d) of title 11, United 
        States Code, is amended to read as follows:
    ``(d) Only a railroad, a person that may be a debtor under chapter 
7 of this title (except a stockbroker or a commodity broker), and an 
uninsured State member bank, or a corporation organized under section 
25A of the Federal Reserve Act, which operates, or operates as, a 
multilateral clearing organization pursuant to section 409 of the 
Federal Deposit Insurance Corporation Improvement Act of 1991 may be a 
debtor under chapter 11 of this title.''.
            (3) Definition of financial institution.--Section 101(22) 
        of title 11, United States Code, is amended to read as follows:
            ``(22) the term `financial institution'--
                    ``(A) means a Federal reserve bank or an entity 
                (domestic or foreign) that is a commercial or savings 
                bank, industrial savings bank, savings and loan 
                association, trust company, a bank or a corporation 
                organized under section 25A of the Federal Reserve Act 
                and, when any such bank or entity is acting as agent or 
                custodian for a customer in connection with a 
                securities contract, as defined in section 741, such 
                customer; and
                    ``(B) includes any person described in subparagraph 
                (A) which operates, or operates as, a multilateral 
                clearing organization pursuant to section 409 of the 
                Federal Deposit Insurance Corporation Improvement Act 
                of 1991;''.
            (4) Definition of uninsured state member bank.--Section 101 
        of title 11, United States Code, is amended by inserting after 
        paragraph (54) the following new paragraph--
    ``(54A) the term `uninsured State member bank' means a State member 
bank (as defined in section 3 of the Federal Deposit Insurance Act) the 
deposits of which are not insured by the Federal Deposit Insurance 
Corporation; and''.
    (5) Subchapter v of chapter 7.--
                    (A) In general.--Section 103 of title 11, United 
                States Code, is amended--
                            (i) by redesignating subsections (e) 
                        through (i) as subsections (f) through (j), 
                        respectively; and
                            (ii) by inserting after subsection (d) the 
                        following new subsection:
    ``(e) Scope of Application.--Subchapter V of chapter 7 of this 
title shall apply only in a case under such chapter concerning the 
liquidation of an uninsured State member bank, or a corporation 
organized under section 25A of the Federal Reserve Act, which operates, 
or operates as, a multilateral clearing organization pursuant to 
section 409 of the Federal Deposit Insurance Corporation Improvement 
Act of 1991.''.
                    (B) Clearing bank liquidation.--Chapter 7 of title 
                11, United States Code, is amended by adding at the end 
                the following new subchapter:

               ``SUBCHAPTER V--CLEARING BANK LIQUIDATION

``Sec. 781. Definitions
    ``For purposes of this subchapter, the following definitions shall 
apply:
            ``(1) Board.--The term `Board' means the Board of Governors 
        of the Federal Reserve System.
            ``(2) Depository institution.--The term `depository 
        institution' has the same meaning as in section 3 of the 
        Federal Deposit Insurance Act, and includes any wholesale bank.
            ``(3) Clearing bank.--The term `clearing bank' means an 
        uninsured State member bank, or a corporation organized under 
        section 25A of the Federal Reserve Act, which operates, or 
        operates as, a multilateral clearing organization pursuant to 
        section 409 of the Federal Deposit Insurance Corporation 
        Improvement Act of 1991.
``Sec. 782. Selection of trustee
    ``(a) In General.--
            ``(1) Appointment.--Notwithstanding any other provision of 
        this title, the conservator or receiver who files the petition 
        shall be the trustee under this chapter, unless the Board 
        designates an alternative trustee.
            ``(2) Successor.--The Board may designate a successor 
        trustee if required.
    ``(b) Authority of Trustee.--Whenever the Board appoints or 
designates a trustee, chapter 3 and sections 704 and 705 of this title 
shall apply to the Board in the same way and to the same extent that 
they apply to a United States trustee.
``Sec. 783. Additional powers of trustee
    ``(a) Distribution of Property Not of the Estate.--The trustee 
under this subchapter has power to distribute property not of the 
estate, including distributions to customers that are mandated by 
subchapters III and IV of this chapter.
    ``(b) Disposition of Institution.--The trustee under this 
subchapter may, after notice and a hearing--
            ``(1) sell the clearing bank to a depository institution or 
        consortium of depository institutions (which consortium may 
agree on the allocation of the clearing bank among the consortium);
            ``(2) merge the clearing bank with a depository 
        institution;
            ``(3) transfer contracts to the same extent as could a 
        receiver for a depository institution under paragraphs (9) and 
        (10) of section 11(e) of the Federal Deposit Insurance Act;
            ``(4) transfer assets or liabilities to a depository 
        institution;
            ``(5) transfer assets and liabilities to a bridge bank as 
        provided in paragraphs (1), (3)(A), (5), (6), of section 11(n) 
        of the Federal Deposit Insurance Act, paragraphs (9) through 
        (13) of such section, and subparagraphs (A) through (H) and 
        subparagraph (K) of paragraph (4) of such section 11(n), except 
        that--
                    ``(A) the bridge bank to which such assets or 
                liabilities are transferred shall be treated as a 
                clearing bank for the purpose of this subsection; and
                    ``(B) any references in any such provision of law 
                to the Federal Deposit Insurance Corporation shall be 
                construed to be references to the appointing agency and 
                that references to deposit insurance shall be omitted.
    ``(c) Certain Transfers Included.--Any reference in this section to 
transfers of liabilities includes a ratable transfer of liabilities 
within a priority class.
``Sec. 784. Right to be heard
    ``The Board or a Federal reserve bank (in the case of a clearing 
bank that is a member of that bank) may raise and may appear and be 
heard on any issue in a case under this subchapter.''.
    (e) Clerical Amendment.--The table of sections for chapter 7 of 
title 11, United States Code, is amended by adding at the end the 
following new items:

               ``SUBCHAPTER V--CLEARING BANK LIQUIDATION

``Sec.
``781. Definitions.
``782. Selection of trustee.
``783. Additional powers of trustee.
``784. Right to be heard.''.
    (f) Resolution of Edge Act Corporations.--The 16th undesignated 
paragraph of section 25A of the Federal Reserve Act (12 U.S.C. 624) is 
amended to read as follows:
            ``(16) Appointment of receiver or conservator.--
                    ``(A) In general.--The Board may appoint a 
                conservator or receiver for a corporation organized 
                under the provisions of this section to the same extent 
                and in the same manner as the Comptroller of the 
                Currency may appoint a conservator or receiver for a 
                national bank, and the conservator or receiver for such 
                corporation shall exercise the same powers, functions, 
                and duties, subject to the same limitations, as a 
                conservator or receiver for a national bank.
                    ``(B) Equivalent authority.--The Board shall have 
                the same authority with respect to any conservator or 
                receiver appointed for a corporation organized under 
                the provisions of this section under this paragraph and 
                any such corporation as the Comptroller of the Currency 
                has with respect to a conservator or receiver of a 
                national bank and the national bank for which a 
                conservator or receiver has been appointed.
                    ``(C) Title 11 petitions.--The Board may direct the 
                conservator or receiver of a corporation organized 
                under the provisions of this section to file a petition 
                pursuant to title 11, United States Code, in which 
                case, title 11, United States Code, shall apply to the 
                corporation in lieu of otherwise applicable Federal or 
                State insolvency law.''.
    (g) 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 15) the following new section:

``SEC. 5B. DERIVATIVES CLEARING ORGANIZATIONS.

    ``(a) Registration Requirement.--Except as provided in subsection 
(b), it shall be unlawful for a derivatives clearing organization, 
unless registered with the Commission, directly or indirectly to make 
use of the mails or any means or instrumentality of interstate commerce 
to perform the functions of a derivatives clearing organization 
described in section 1a(8) with respect to a contract of sale of a 
commodity for future delivery, option on a contract of sale of a 
commodity for future delivery, or option on a commodity that is not an 
exclusion-eligible commodity (unless the contract or option is 
described in subsection (c), (d), (f), (h), or (i) of section 2 or 
exempted under section 4(c)).
    ``(b) Voluntary Registration.--A derivatives clearing organization 
that clears agreements, contracts, or transactions described in 
subsection (c), (d), (f), (h), or (i) of section 2 or exempted under 
section 4(c) may register with the Commission as a derivatives clearing 
organization.
    ``(c) Registration of Derivatives Clearing Organizations.--
            ``(1) Application.--A person desiring to register as a 
        derivatives clearing organization shall submit to the 
        Commission an application in such form and containing such 
        information as the Commission may require for the purpose of 
        making the determinations required for approval under paragraph 
        (2).
            ``(2) Core principles.--
                    ``(A) In general.--To be registered and to maintain 
                registration as a derivatives clearing organization, an 
                applicant shall demonstrate to the Commission that the 
                applicant complies with the core principles specified 
                in this paragraph. 
                    ``(B) Financial resources.--The applicant shall 
                demonstrate that the applicant has adequate financial, 
                operational, and managerial resources to discharge the 
                responsibilities of a derivatives clearing organization 
                without interruption in various market conditions.
                    ``(C) Participant and product eligibility.--The 
                applicant shall establish--
                            ``(i) appropriate admission and continuing 
                        eligibility standards (including appropriate 
                        minimum financial requirements) for members of 
                        and participants in the organization; and
                            ``(ii) appropriate standards for 
                        determining eligibility of agreements, 
                        contracts, or transactions submitted to the 
                        applicant.
                    ``(D) Risk management.--The applicant shall have 
                the ability to manage the risks associated with 
                discharging the responsibilities of a derivatives 
                clearing organization through the use of appropriate 
                tools and procedures.
                    ``(E) Settlement procedures.--The applicant shall 
                have the ability to--
                            ``(i) complete settlements on a timely 
                        basis under varying circumstances;
                            ``(ii) maintain an adequate record of the 
                        flow of funds associated with each transaction 
                        that the applicant clears; and
                            ``(iii) comply with the terms and 
                        conditions of any permitted netting or offset 
                        arrangements with other clearing organizations.
                    ``(F) Treatment of funds.--The applicant shall have 
                standards and procedures designed to protect and ensure 
                the safety of member and participant funds.
                    ``(G) Default rules and procedures.--The applicant 
                shall have rules and procedures designed to allow for 
                efficient, fair, and safe management of events when 
                members or participants become insolvent or otherwise 
                default on their obligations to the derivatives 
                clearing organization.
                    ``(H) Rule enforcement.--The applicant shall--
                            ``(i) maintain adequate arrangements and 
                        resources for the effective monitoring and 
                        enforcement of compliance with rules of the 
                        applicant and for resolution of disputes; and
                            ``(ii) have the authority and ability to 
                        discipline, limit, suspend, or terminate a 
                        member's or participant's activities for 
                        violations of rules of the applicant.
                    ``(I) System safeguards.--The applicant shall 
                demonstrate that the applicant--
                            ``(i) has established and will maintain a 
                        program of oversight and risk analysis to 
                        ensure that the automated systems of the 
                        applicant function properly and have adequate 
                        capacity and security; and
                            ``(ii) has established and will maintain 
                        emergency procedures and a plan for disaster 
                        recovery, and will periodically test backup 
                        facilities sufficient to ensure daily 
                        processing, clearing, and settlement of 
                        transactions.
                    ``(J) Reporting.--The applicant shall provide to 
                the Commission all information necessary for the 
                Commission to conduct the oversight function of the 
                applicant with respect to the activities of the 
                derivatives clearing organization.
                    ``(K) Recordkeeping.--The applicant shall--
                            ``(i) maintain full records of all 
                        activities related to the business of the 
                        applicant as a derivatives clearing 
                        organization in a form and manner acceptable to 
                        the Commission for a period of at least 5 
                        years;
                            ``(ii) 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
                            ``(iii) keep the records open to inspection 
                        by any representative of the Commission or the 
                        Department of Justice.
                    ``(L) Public information.--The applicant shall make 
                information concerning the rules and operating 
                procedures governing the clearing and settlement 
                systems (including default procedures) available to 
                market participants.
                    ``(M) Information sharing.--The applicant shall--
                            ``(i) enter into and abide by the terms of 
                        all appropriate and applicable domestic and 
                        international information-sharing agreements; 
                        and
                            ``(ii) use relevant information obtained 
                        from the agreements in carrying out the 
                        clearing organization's risk management 
                        program.
                    ``(N) Antitrust considerations.--Unless appropriate 
                to achieve the purposes of this Act, the derivatives 
                clearing organization shall avoid--
                            ``(i) adopting any rule or taking any 
                        action that results in any unreasonable 
                        restraint of trade; or
                            ``(ii) imposing any material 
                        anticompetitive burden on trading on the 
                        contract market.
            ``(3) Orders concerning competition.--A derivatives 
        clearing organization may request the Commission to issue an 
        order concerning whether a rule or practice of the applicant is 
        the least anticompetitive means of achieving the objectives, 
        purposes, and policies of this Act.
    ``(d) Existing Derivatives Clearing Organizations.--A derivatives 
clearing organization shall be deemed to be registered under this 
section to the extent that--
            ``(1) the derivatives clearing organization clears 
        agreements, contracts, or transactions for a board of trade 
        that has been designated by the Commission as a contract market 
        for such agreements, contracts, or transactions before the date 
        of enactment of this section; and
            ``(2) the Commission has reviewed and approved the rules of 
        the derivatives clearing organization before that date.
    ``(e) Appointment of Trustee.--
            ``(1) In general.--If a proceeding under section 5e results 
        in the suspension or revocation of the registration of a 
        derivatives clearing organization, or if a derivatives clearing 
        organization withdraws from registration, the Commission, on 
        notice to the derivatives clearing organization, may apply to 
        the appropriate United States district court where the 
        derivatives clearing organization is located for the 
        appointment of a trustee.
            ``(2) Assumption of jurisdiction.--If the Commission 
        applies for appointment of a trustee under paragraph (1)--
                    ``(A) the court may take exclusive jurisdiction 
                over the derivatives clearing organization and the 
                records and assets of the derivatives clearing 
                organization, wherever located; and
                    ``(B) if the court takes jurisdiction under 
                subparagraph (A), the court shall appoint the 
                Commission, or a person designated by the Commission, 
                as trustee with power to take possession and continue 
                to operate or terminate the operations of the 
                derivatives clearing organization in an orderly manner 
                for the protection of participants, subject to such 
                terms and conditions as the court may prescribe.
    ``(f) Linking of Regulated Clearing Facilities.--
            ``(1) In general.--The Commission shall facilitate the 
        linking or coordination of derivatives clearing organizations 
        registered under this Act with other regulated clearance 
        facilities for the coordinated settlement of cleared 
        transactions.
            ``(2) Coordination.--In carrying out paragraph (1), the 
        Commission shall coordinate with the Federal banking agencies 
        and the Securities and Exchange Commission.''.

SEC. 117. 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(d)(2) 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 (and the 
        Secretary of the Treasury, in the case of a contract of sale 
        for future delivery of a government security (or option 
        thereon) or a rule or rule amendment specifically related to 
        such a contract) 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, a designated contract 
                market shall submit to the Commission for prior 
                approval each rule amendment that materially changes 
                the terms and conditions, as determined by the 
                Commission, 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 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(d)(2), 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(d), 5a(d), 
                or 5b(d)(2); and
                    ``(B) the Commission has recommended an appropriate 
                remedial action to remove the deficiency based on an 
                analysis of the costs and benefits in the public 
                interest of the Commission recommendation.
            ``(3) Burden of proof.--In making a determination that a 
        registered entity is violating any applicable provision 
        specified in section 5(d), 5a(d), or 5b(d)(2), 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. 118. 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 115) 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;
            ``(2) that are entered into only between persons that are 
        eligible contract participants at the time at which the persons 
        enter into the contract; and
            ``(3) that are not contracts of sale (or options on the 
        contract) for future delivery of any security, including any 
        group or index of securities or any interest in, or interest 
        that is based on the value of, any security.
    ``(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. 119. SUSPENSION OR REVOCATION OF DESIGNATION AS CONTRACT MARKET.

    Section 5e of the Commodity Exchange Act (7 U.S.C. 7b) (as 
redesignated by section 112(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. 120. 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. 121. 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. 122. 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. 123. 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. 124. CONTRACT ENFORCEMENT.

    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.--
            ``(A) In general.--No agreement, contract, or transaction 
        involving a party described in subclauses (I) through (VI) of 
        section 2(c)(2)(B)(ii) or between eligible contract 
        participants shall be void, voidable, or unenforceable, and no 
        such counterparty or 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 or any other provision of Federal or State law 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.
            ``(B) Exception.--This paragraph shall not apply to any 
        swap agreement (as defined in section 206(b) of the Gramm-
        Leach-Bliley Act) with any party who is not an eligible 
        contract participant unless such swap agreement is entered into 
        after final regulations have been prescribed under section 49 
        of the Federal Deposit Insurance Act.

SEC. 125. SPECIAL PROCEDURES TO ENCOURAGE AND FACILITATE BONA FIDE 
              HEDGING BY AGRICULTURAL PRODUCERS.

    The Commodity Exchange Act, as otherwise amended by this Act, is 
amended by inserting after section 4o the following:

``SEC. 4P. SPECIAL PROCEDURES TO ENCOURAGE AND FACILITATE BONA FIDE 
              HEDGING BY AGRICULTURAL PRODUCERS.

    ``(a) Authority.--The Commission shall consider issuing rules or 
orders which--
            ``(1) prescribe procedures under which each contract market 
        is to provide for orderly delivery, including temporary storage 
        costs, of any agricultural commodity enumerated in section 
        1a(3) which is the subject of a contract for purchase or sale 
        for future delivery;
            ``(2) increase the ease with which domestic agricultural 
        producers may participate in contract markets, including by 
        addressing cost and margin requirements, so as to better enable 
        such producers to hedge price risk associated with their 
        production;
            ``(3) provide flexibility in the minimum quantities of such 
        agricultural commodities that may be the subject of a contract 
        for purchase or sale for future delivery that is traded on a 
        contract market, to better allow domestic agricultural 
        producers to hedge such price risk; and
            ``(4) encourage exchanges to provide information and 
        otherwise facilitate the participation of domestic agricultural 
        producers in contract markets.
    ``(b) Report.--Within 1 year after the date of enactment of this 
section, the Commission shall submit to the Committee on Agriculture of 
the House of Representatives and the Committee on Agriculture, 
Nutrition, and Forestry of the Senate a report on the steps it has 
taken to implement this section and on the activities of contract 
markets pursuant to this section.''.

SEC. 126. RULE OF CONSTRUCTION.

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

SEC. 127. AUTHORITY OF AGENCIES TO CONSTRUE THE TERM ``CONTRACT 
              MARKET''.

    Each executive agency of the United States Government that has 
authority to prescribe regulations under a statute that uses the term 
``contract market'' may prescribe regulations construing such term as 
referring to any contract market, derivatives transaction execution 
facility, or derivatives clearing organization that is registered with 
the Commodity Futures Trading Commission.

SEC. 128. 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 paragraph (3), by inserting ``aluminum, 
                copper, gold, palladium, platinum, silver,'' after 
                ``orange juice,'';
                    (B) in paragraphs (4), (5), (8), (9), (12), and 
                (14), by inserting ``or derivatives transaction 
                execution facility'' after ``contract market'' each 
                place it appears; and
                    (C) 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 paragraph'' and inserting 
                                ``subsection (c), (d), (e), (f), (g), 
                                or (i)'';
                                    (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 redesignating subclauses 
                                (I) and (II) as clauses (i) and (ii);
                                    (V) by striking clause (ii); and
                                    (VI) 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'';
                            (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 involving transactions for 
                                future delivery referred to in this 
                                clause or in considering possible 
                                emergency action under section 8a(9) of 
                                this Act'' 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 
                                involving transactions for future 
                                delivery referred to in this clause or 
                                in considering any possible action 
                                under this Act (including without 
                                limitation emergency action under 
                                section 8a(9))'', and by striking 
                                ``designation, suspension, revocation, 
                                or emergency action'' and inserting 
                                ``designation, registration, 
                                suspension, revocation, or action''; 
                                and
                            (iv) by moving paragraphs (2) through (11) 
                        2 ems to the right.
            (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)--
                            (i) in paragraph (1), by inserting ``, or 
                        derivatives transaction execution facility or 
                        facilities,'' after ``markets''; and
                            (ii) in paragraph (2), by inserting ``or 
                        derivatives transaction execution facility'' 
                        after ``contract market''; 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) 
        (as determined before the redesignation by paragraph (13) of 
        this subsection) 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 ``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. 129. REPORT TO CONGRESS.

    (a) The Commodity Futures Trading Commission (in this section 
referred to as the ``Commission'') shall undertake and complete a study 
of the Commodity Exchange Act (in this section referred to as ``the 
Act'') and the Commission's rules, regulations and orders governing the 
conduct of persons required to be registered under the Act, not later 
than 1 year after the date of the enactment of this Act. The study 
shall identify--
            (1) the core principles and interpretations of acceptable 
        business practices that the Commission has adopted or intends 
        to adopt to replace the provisions of the Act and the 
        Commission's rules and regulations thereunder;
            (2) the rules and regulations that the Commission has 
        determined must be retained and the reasons therefor;
            (3) the extent to which the Commission believes it can 
        effect the changes identified in paragraph (1) of this 
        subsection through its exemptive authority under section 4(c) 
        of the Act; and
            (4) the regulatory functions the Commission currently 
        performs that can be delegated to a registered futures 
        association (within the meaning of the Act) and the regulatory 
        functions that the Commission has determined must be retained 
        and the reasons therefor.
    (b) In conducting the study, the Commission shall solicit the views 
of the public as well as Commission registrants, registered entities, 
and registered futures associations (all within the meaning of the 
Act).
    (c) The Commission shall transmit to the Committee on Agriculture 
of the House of Representatives and the Committee on Agriculture, 
Nutrition, and Forestry of the Senate a report of the results of its 
study, which shall include an analysis of comments received.

SEC. 130. EFFECTIVE DATE.

    (a) In General.--Except as provided in subsection (b), this title 
shall take effect on the date of enactment of this Act.
    (b) Jurisdiction of Commission.--Section 108, and the amendments 
made by that section, shall take effect 1 year after the date of 
enactment of this Act.

SEC. 131. INTERNATIONAL ACTIVITIES OF THE COMMODITY FUTURES TRADING 
              COMMISSION.

    (a) Findings.--The Congress finds that--
            (1) derivatives markets serving United States industry are 
        increasingly global in scope;
            (2) developments in data processing and communications 
        technologies enable users of risk management services to 
        analyze and compare those services on a worldwide basis;
            (3) financial services regulatory policy must be flexible 
        to account for rapidly changing derivatives industry business 
        practices;
            (4) regulatory impediments to the operation of global 
        business interests can compromise the competitiveness of United 
        States businesses;
            (5) events that disrupt financial markets and economies are 
        often global in scope, require rapid regulatory response, and 
        coordinated regulatory effort across international 
        jurisdictions;
            (6) through its membership in the International 
        Organisation of Securities Commissions, the Commodity Futures 
        Trading Commission has promoted beneficial communication among 
        market regulators and international regulatory cooperation; and
            (7) the Commodity Futures Trading Commission and other 
        United States financial regulators and self-regulatory 
        organizations should continue to foster productive and 
        cooperative working relationships with their counterparts in 
        foreign jurisdictions.
    (b) Sense of the Congress.--It is the sense of the Congress that, 
consistent with its responsibilities under the Commodity Exchange Act, 
the Commodity Futures Trading Commission should, as part of its 
international activities, continue to coordinate with foreign 
regulatory authorities, to participate in international regulatory 
organizations and forums, and to provide technical assistance to 
foreign government authorities, in order to encourage--
            (1) the facilitation of cross-border transactions through 
        the removal or lessening of any unnecessary legal or practical 
        obstacles;
            (2) the development of internationally accepted regulatory 
        standards of best practice;
            (3) the enhancement of international supervisory 
        cooperation and emergency procedures;
            (4) the strengthening of international cooperation for 
        customer and market protection; and
            (5) improvements in the quality and timeliness of 
        international information sharing.

SEC. 132. ANTIFRAUD PROVISIONS.

    (a) In General.--It shall be unlawful to commit retail derivatives 
fraud by the use of any means or instruments of transportation or 
communication in interstate commerce or of the mails.
    (b) Definitions.--For purposes of this section, the following 
definitions shall apply:
            (1) Eligible contract participant.--The term ``eligible 
        contract participant'' has the same meaning as in section 1a of 
        the Commodity Exchange Act.
            (2) Federal financial institution regulator.--The term 
        ``Federal financial institution regulator'' means--
                    (A) any Federal functional regulator (as defined in 
                section 509(2) of the Gramm-Leach-Bliley Act) in the 
                case of any financial institution described in 
                paragraph (3)(A); and
                    (B) the Commodity Futures Trading Commission, in 
                the case of a financial institution described in 
                paragraph (3)(B).
            (3) Financial institution.--The term ``financial 
        institution''--
                    (A) has the meaning given to such term in 
                subparagraph (A) of section 509(3) of the Gramm-Leach-
                Bliley Act; and
                    (B) includes any person or entity described in 
                subparagraph (B) of such section 509(3).
            (4) Retail derivatives fraud.--The term ``retail 
        derivatives fraud'' means any fraud perpetrated by a party on a 
        counterparty (other than a counterparty that is an eligible 
        contract participant) to any agreement, contract, transaction, 
        warrant, note or option (other than a contract of sale of a 
        commodity for future delivery or an option on such contract 
        (unless such contract or option has been excluded from the 
        Commodity Exchange Act under subsection (c), (d), (f), or (i) 
        of section 2 of such Act), or a security) that is based, in 
        whole or in part, on the value of any interest in, or a 
        quantitative measure relating to 1 or more commodities, 
        securities, currencies, interest or other rates, indices, or 
        other assets, or the occurrence of any event.
            (5) Security.--The term ``security'' has the same meaning 
        as in section 3 of the Securities Exchange Act of 1934.
    (c) Enforcement.--This section shall be enforced by the appropriate 
Federal financial institution regulator, any appropriate State 
insurance authority, and the Federal Trade Commission with respect to 
financial institutions and other persons subject to the jurisdiction of 
such agency or authority under applicable law, as follows:
            (1) Under section 8 of the Federal Deposit Insurance Act, 
        in the case of--
                    (A) national banks, Federal branches and Federal 
                agencies of foreign banks, and any subsidiaries of such 
                entities (except brokers, dealers, futures commission 
                merchants, persons providing insurance, investment 
                companies, and investment advisers), by the office of 
                the Comptroller of the Currency;
                    (B) member banks of the Federal Reserve System 
                (other than national banks), branches and agencies of 
                foreign banks (other than Federal branches, Federal 
                agencies, and insured State branches of foreign banks), 
                commercial lending companies owned or controlled by 
                foreign banks, organizations operating under section 25 
                or 25A of the Federal Reserve Act, and bank holding 
                companies and their nonbank affiliates (other than 
                financial institutions of whom the Securities and 
                Exchange Commission is the federal functional 
                regulator), by the Board of Governors of the Federal 
                Reserve System;
                    (C) banks insured by the Federal Deposit Insurance 
                Corporation (other than members of the Federal Reserve 
                System), insured State branches of foreign banks, and 
                any subsidiaries of such entities (other than 
                subsidiaries of whom the Securities and Exchange 
                Commission is the Federal functional regulator), by the 
                Board of Directors of the Federal Deposit Insurance 
                Corporation; and
                    (D) savings associations the deposits of which are 
                insured by the Federal Deposit Insurance Corporation, 
                and any subsidiaries of such savings associations 
                (other than a subsidiary of whom the Securities and 
                Exchange Commission is the Federal functional 
                regulator), by the Director of the Office of Thrift 
                Supervision.
            (2) Under the Federal Credit Union Act, by the Board of the 
        National Credit Union Administration with respect to any 
        federally insured credit union, and any subsidiary of any such 
        credit union (other than a subsidiary of whom the Securities 
        and Exchange Commission is the Federal functional regulator).
            (3) Under the Securities Exchange Act of 1934, by the 
        Securities and Exchange Commission with respect to--
                    (A) any broker, dealer, or investment bank holding 
                company; or
                    (B) any associated person of a broker or dealer, 
                concerning the financial or securities activities of 
                which the broker or dealer makes and keeps records 
                under section 15C(b) or 17(h) of the Securities 
                Exchange Act of 1934.
            (4) Under the Investment Company Act of 1940, by the 
        Securities and Exchange Commission with respect to investment 
        companies.
            (5) Under the Investment Advisers Act of 1940, by the 
        Securities and Exchange Commission with respect to investment 
        advisers.
            (6) Under the Commodity Exchange Act, by the Commodity 
        Futures Trading Commission with respect to a commodity trading 
        adviser, commodity pool operator, or futures commission 
        merchant.
            (7) Under State insurance law, in the case of any person 
        engaged in providing insurance, by the applicable State 
        insurance authority of the State in which the defrauded person 
        is domiciled.
            (8) Under the Federal Trade Commission Act, by the Federal 
        Trade Commission for any other financial institution or other 
        person that is not subject to the jurisdiction of any agency or 
        authority under any other paragraph of this subsection.
    (d) Criminal Penalties.--Any person who willfully violates 
subsection (a) shall be fined not more than $1,000,000, in the case of 
an individual, or $2,500,000 in the case of any person other than an 
individual, or imprisoned not more than 10 years, or both.

SEC. 133. RETAIL SWAP CUSTOMER PROTECTIONS.

    (a) In General.--The Federal Deposit Insurance Act (12 U.S.C. 1811 
et seq.) is amended by adding at the end the following new section:

``SEC. 49. RETAIL SWAP CUSTOMER PROTECTIONS.

    ``(a) Regulations Authorized.--The Board of Governors of the 
Federal Reserve System and the Secretary of the Treasury may, in 
consultation with appropriate Federal banking agencies, the Securities 
and Exchange Commission, and the Commodity Futures Trading Commission, 
jointly prescribe customer protection regulations that apply to sales 
practices relating to swap agreements (as defined in section 206(b) of 
the Gramm-Leach-Bliley Act) between financial institutions and retail 
customers.
    ``(b) Sales Practice Regulations.--The regulations prescribed under 
subsection (a) may address--
            ``(1) the information that financial institutions shall 
        obtain from retail customers in order to determine whether swap 
        agreements recommended by the financial institution to retail 
        customers are appropriate in light of the retail customer's net 
        worth, ability and willingness to incur losses, risk management 
        needs, financial goals, investment experience and history, and 
        other indicia of appropriateness;
            ``(2) information that financial institutions shall provide 
        to retail customers to help the retail customers understand the 
        economic characteristics and risks of swap agreements 
        recommended by financial institutions;
            ``(3) measures to protect retail customers against 
        fraudulent, deceptive, and manipulative acts and practices;
            ``(4) the extent to which access of retail customers to 
        particular classes of swap agreements should be restricted; and
            ``(5) such other matters as the Secretary of the Treasury 
        and the Board of Governors of the Federal Reserve System 
        determine are necessary or appropriate for the protection of 
        retail customers of swap agreements.
    ``(c) Definitions.--
            ``(1) Financial Institution.--The term `financial 
        institution' means a person described in subclause (I), (II), 
        (III), (IV), (V), or (VI) of section 2(c)(2)(B)(ii) of the 
        Commodity Exchange Act.
            ``(2) Retail Customer.--The term `retail customer' means a 
        person other than an eligible contract participant (as defined 
        in section 1a(11) of the Commodity Exchange Act).
    ``(d) Enforcement.--The regulations prescribed under subsection (a) 
shall be enforced as follows:
            ``(1) Subject to section 45 of the Federal Deposit 
        Insurance Act, under section 8 of the Federal Deposit Insurance 
        Act, in the case of--
                    ``(A) any national bank, Federal branch or Federal 
                agency of a foreign bank, or any subsidiary of a 
                national bank (other than any broker, dealer, 
                investment company or investment adviser) by the 
                Comptroller of the Currency;
                    ``(B) any member bank (other than a national bank), 
                branch or agency of a foreign bank (other than a 
                Federal branch, Federal agency, or insured State branch 
                of a foreign bank), commercial lending company owned or 
                controlled by a foreign bank, organization operating 
                under section 25 or 25A of the Federal Reserve Act, any 
                subsidiary of any such entity (other than any broker, 
                dealer, investment company or investment adviser) and 
                any bank holding company and any nonbank affiliate of 
                any such company (other than any broker, dealer, 
                investment company or investment adviser) by the Board 
                of Governors of the Federal Reserve System;
                    ``(C) any insured State nonmember bank, insured 
                State branch of a foreign bank, or any subsidiary of 
                any such entity (other than any broker, dealer, 
                investment company, or investment adviser) by the Board 
                of Directors of the Federal Deposit Insurance 
                Corporation; and
                    ``(D) any savings association the deposits of which 
                are insured by the Corporation, any savings and loan 
                holding company, or any subsidiary of any such savings 
                association or holding company (other than any broker, 
                dealer, investment company or investment adviser) by 
                the Director of the Office of Thrift Supervision.
            ``(2) Under the Federal Credit Union Act, by the National 
        Credit Union Administration Board with respect to any federally 
        insured credit union, and any subsidiaries of such an entity.
            ``(3) Under the Securities Exchange Act of 1934, by the 
        Securities and Exchange Commission with respect to any 
        registered broker or dealer, or any associated person thereof 
        that is not otherwise regulated.
            ``(4) Under the Commodity Exchange Act, by the Commodity 
        Futures Trading Commission, with respect to any registered 
        futures commission merchant, or any affiliated person of any 
        such futures commission merchant that is not otherwise 
        regulated.
            ``(5) Under State insurance law, in the case of any person 
        engaged in providing insurance, or any affiliate of any such 
        person that is not otherwise regulated, by the applicable State 
        insurance authority of the State in which the person is 
        domiciled.''.
    (b) Report.--If regulations authorized under the amendment made by 
subsection (a) have not been prescribed in final form before the end of 
the 1-year period beginning on the date of the enactment of this Act, 
the Board of Governors of the Federal Reserve System and the Secretary 
of the Treasury shall each submit a report to the Congress within 15 
days after the end of such period containing an explanation of why such 
regulations were not prescribed in final form by the end of such 
period.

            TITLE II--FINANCIAL CONTRACT NETTING IMPROVEMENT

SEC. 201. SHORT TITLE.

    This title may be cited as the ``Financial Contract Netting 
Improvement Act of 2000''.

SEC. 202. TREATMENT OF CERTAIN AGREEMENTS BY CONSERVATORS OR RECEIVERS 
              OF INSURED DEPOSITORY INSTITUTIONS.

    (a) Definition of Qualified Financial Contract.--Section 
11(e)(8)(D)(i) of the Federal Deposit Insurance Act (12 U.S.C. 
1821(e)(8)(D)(i)) is amended by inserting ``, resolution or order'' 
after ``any similar agreement that the Corporation determines by 
regulation''.
    (b) Definition of Securities Contract.--Section 11(e)(8)(D)(ii) of 
the Federal Deposit Insurance Act (12 U.S.C. 1821(e)(8)(D)(ii)) is 
amended to read as follows:
                            ``(ii) Securities contract.--The term 
                        `securities contract'--
                                    ``(I) means a contract for the 
                                purchase, sale, or loan of a security, 
                                a certificate of deposit, a mortgage 
                                loan, or any interest in a mortgage 
                                loan, a group or index of securities, 
                                certificates of deposit, or mortgage 
                                loans or interests therein (including 
                                any interest therein or based on the 
                                value thereof) or any option on any of 
                                the foregoing, including any option to 
                                purchase or sell any such security, 
                                certificate of deposit, loan, interest, 
                                group or index, or option;
                                    ``(II) does not include any 
                                purchase, sale, or repurchase 
                                obligation under a participation in a 
                                commercial mortgage loan unless the 
                                Corporation determines by regulation, 
                                resolution, or order to include any 
                                such agreement within the meaning of 
                                such term;
                                    ``(III) means any option entered 
                                into on a national securities exchange 
                                relating to foreign currencies;
                                    ``(IV) means the guarantee by or to 
                                any securities clearing agency of any 
                                settlement of cash, securities, 
                                certificates of deposit, mortgage loans 
                                or interests therein, group or index of 
                                securities, certificates of deposit, or 
                                mortgage loans or interests therein 
                                (including any interest therein or 
                                based on the value thereof) or option 
                                on any of the foregoing, including any 
                                option to purchase or sell any such 
                                security, certificate of deposit, loan, 
                                interest, group or index, or option;
                                    ``(V) means any margin loan;
                                    ``(VI) means any other agreement or 
                                transaction that is similar to any 
                                agreement or transaction referred to in 
                                this clause;
                                    ``(VII) means any combination of 
                                the agreements or transactions referred 
                                to in this clause;
                                    ``(VIII) means any option to enter 
                                into any agreement or transaction 
                                referred to in this clause;
                                    ``(IX) means a master agreement 
                                that provides for an agreement or 
                                transaction referred to in subclause 
                                (I), (III), (IV), (V), (VI), (VII), or 
                                (VIII), together with all supplements 
                                to any such master agreement, without 
                                regard to whether the master agreement 
                                provides for an agreement or 
                                transaction that is not a securities 
                                contract under this clause, except that 
                                the master agreement shall be 
                                considered to be a securities contract 
                                under this clause only with respect to 
                                each agreement or transaction under the 
                                master agreement that is referred to in 
                                subclause (I), (III), (IV), (V), (VI), 
                                (VII), or (VIII); and
                                    ``(X) means any security agreement 
                                or arrangement or other credit 
                                enhancement related to any agreement or 
                                transaction referred to in this 
                                clause.''.
    (c) Definition of Commodity Contract.--Section 11(e)(8)(D)(iii) of 
the Federal Deposit Insurance Act (12 U.S.C. 1821(e)(8)(D)(iii)) is 
amended to read as follows:
                            ``(iii) Commodity contract.--The term 
                        `commodity contract' means--
                                    ``(I) with respect to a futures 
                                commission merchant, a contract for the 
                                purchase or sale of a commodity for 
                                future delivery on, or subject to the 
                                rules of, a contract market or board of 
                                trade;
                                    ``(II) with respect to a foreign 
                                futures commission merchant, a foreign 
                                future;
                                    ``(III) with respect to a leverage 
                                transaction merchant, a leverage 
                                transaction;
                                    ``(IV) with respect to a clearing 
                                organization, a contract for the 
                                purchase or sale of a commodity for 
                                future delivery on, or subject to the 
                                rules of, a contract market or board of 
                                trade that is cleared by such clearing 
                                organization, or commodity option 
                                traded on, or subject to the rules of, 
                                a contract market or board of trade 
                                that is cleared by such clearing 
                                organization;
                                    ``(V) with respect to a commodity 
                                options dealer, a commodity option;
                                    ``(VI) any other agreement or 
                                transaction that is similar to any 
                                agreement or transaction referred to in 
                                this clause;
                                    ``(VII) any combination of the 
                                agreements or transactions referred to 
                                in this clause;
                                    ``(VIII) any option to enter into 
                                any agreement or transaction referred 
                                to in this clause;
                                    ``(IX) a master agreement that 
                                provides for an agreement or 
                                transaction referred to in subclause 
                                (I), (II), (III), (IV), (V), (VI), 
                                (VII), or (VIII), together with all 
                                supplements to any such master 
                                agreement, without regard to whether 
                                the master agreement provides for an 
                                agreement or transaction that is not a 
                                commodity contract under this clause, 
                                except that the master agreement shall 
                                be considered to be a commodity 
                                contract under this clause only with 
                                respect to each agreement or 
                                transaction under the master agreement 
                                that is referred to in subclause (I), 
                                (II), (III), (IV), (V), (VI), (VII), or 
                                (VIII); or
                                    ``(X) any security agreement or 
                                arrangement or other credit enhancement 
                                related to any agreement or transaction 
                                referred to in this clause.''.
    (d) Definition of Forward Contract.--Section 11(e)(8)(D)(iv) of the 
Federal Deposit Insurance Act (12 U.S.C. 1821(e)(8)(D)(iv)) is amended 
to read as follows:
                            ``(iv) Forward contract.--The term `forward 
                        contract' means--
                                    ``(I) a contract (other than a 
                                commodity contract) for the purchase, 
                                sale, or transfer of a commodity or any 
                                similar good, article, service, right, 
                                or interest which is presently or in 
                                the future becomes the subject of 
                                dealing in the forward contract trade, 
                                or product or byproduct thereof, with a 
                                maturity date more than 2 days after 
                                the date the contract is entered into, 
                                including a repurchase transaction, 
                                reverse repurchase transaction, 
                                consignment, lease, swap, hedge 
                                transaction, deposit, loan, option, 
                                allocated transaction, unallocated 
                                transaction, or any other similar 
                                agreement;
                                    ``(II) any combination of 
                                agreements or transactions referred to 
                                in subclauses (I) and (III);
                                    ``(III) any option to enter into 
                                any agreement or transaction referred 
                                to in subclause (I) or (II);
                                    ``(IV) a master agreement that 
                                provides for an agreement or 
                                transaction referred to in subclause 
                                (I), (II), or (III), together with all 
                                supplements to any such master 
                                agreement, without regard to whether 
                                the master agreement provides for an 
                                agreement or transaction that is not a 
                                forward contract under this clause, 
                                except that the master agreement shall 
                                be considered to be a forward contract 
                                under this clause only with respect to 
                                each agreement or transaction under the 
                                master agreement that is referred to in 
                                subclause (I), (II), or (III); or
                                    ``(V) any security agreement or 
                                arrangement or other credit enhancement 
                                related to any agreement or transaction 
                                referred to in subclause (I), (II), 
                                (III), or (IV).''.
    (e) Definition of Repurchase Agreement.--Section 11(e)(8)(D)(v) of 
the Federal Deposit Insurance Act (12 U.S.C. 1821(e)(8)(D)(v)) is 
amended to read as follows:
                            ``(v) Repurchase agreement.--The term 
                        `repurchase agreement' (which definition also 
                        applies to the term `reverse repurchase 
                        agreement')--
                                    ``(I) means an agreement, including 
                                related terms, which provides for the 
                                transfer of 1 or more certificates of 
                                deposit, mortgage-related securities 
                                (as such term is defined in the 
                                Securities Exchange Act of 1934), 
                                mortgage loans, interests in mortgage-
                                related securities or mortgage loans, 
                                eligible bankers' acceptances, 
                                qualified foreign government securities 
                                or securities that are direct 
                                obligations of, or that are fully 
                                guaranteed by, the United States or any 
                                agency of the United States against the 
                                transfer of funds by the transferee of 
                                such certificates of deposit, eligible 
                                bankers' acceptances, securities, 
                                loans, or interests with a simultaneous 
                                agreement by such transferee to 
                                transfer to the transferor thereof 
                                certificates of deposit, eligible 
                                bankers' acceptances, securities, 
                                loans, or interests as described above, 
                                at a date certain not later than 1 year 
                                after such transfers or on demand, 
                                against the transfer of funds, or any 
                                other similar agreement;
                                    ``(II) does not include any 
                                repurchase obligation under a 
                                participation in a commercial mortgage 
                                loan unless the Corporation determines 
                                by regulation, resolution, or order to 
                                include any such participation within 
                                the meaning of such term;
                                    ``(III) means any combination of 
                                agreements or transactions referred to 
                                in subclauses (I) and (IV);
                                    ``(IV) means any option to enter 
                                into any agreement or transaction 
                                referred to in subclause (I) or (III);
                                    ``(V) means a master agreement that 
                                provides for an agreement or 
                                transaction referred to in subclause 
                                (I), (III), or (IV), together with all 
                                supplements to any such master 
                                agreement, without regard to whether 
                                the master agreement provides for an 
                                agreement or transaction that is not a 
                                repurchase agreement under this clause, 
                                except that the master agreement shall 
                                be considered to be a repurchase 
                                agreement under this subclause only 
                                with respect to each agreement or 
                                transaction under the master agreement 
                                that is referred to in subclause (I), 
                                (III), or (IV); and
                                    ``(VI) means any security agreement 
                                or arrangement or other credit 
                                enhancement related to any agreement or 
                                transaction referred to in subclause 
                                (I), (III), (IV), or (V).
                        For purposes of this clause, the term 
                        `qualified foreign government security' means a 
                        security that is a direct obligation of, or 
                        that is fully guaranteed by, the central 
                        government of a member of the Organization for 
                        Economic Cooperation and Development (as 
                        determined by regulation or order adopted by 
                        the appropriate Federal banking authority).''.
    (f) Definition of Swap Agreement.--Section 11(e)(8)(D)(vi) of the 
Federal Deposit Insurance Act (12 U.S.C. 1821(e)(8)(D)(vi)) is amended 
to read as follows:
                            ``(vi) Swap agreement.--The term `swap 
                        agreement' means--
                                    ``(I) any agreement, including the 
                                terms and conditions incorporated by 
                                reference in any such agreement, which 
                                is an interest rate swap, option, 
                                future, or forward agreement, including 
                                a rate floor, rate cap, rate collar, 
                                cross-currency rate swap, and basis 
                                swap; a spot, same day-tomorrow, 
                                tomorrow-next, forward, or other 
                                foreign exchange or precious metals 
                                agreement; a currency swap, option, 
                                future, or forward agreement; an equity 
                                index or equity swap, option, future, 
                                or forward agreement; a debt index or 
                                debt swap, option, future, or forward 
                                agreement; a credit spread or credit 
                                swap, option, future, or forward 
                                agreement; a commodity index or 
                                commodity swap, option, future, or 
                                forward agreement; or a weather swap, 
                                weather derivative, or a weather 
                                option;
                                    ``(II) any agreement or transaction 
                                similar to any other agreement or 
                                transaction referred to in this clause 
                                that is presently, or in the future 
                                becomes, regularly entered into in the 
                                swap market (including terms and 
                                conditions incorporated by reference in 
                                such agreement) and that is a forward, 
                                swap, future, or option on 1 or more 
                                rates, currencies, commodities, equity 
                                securities or other equity instruments, 
                                debt securities or other debt 
                                instruments, or economic indices or 
                                measures of economic risk or value;
                                    ``(III) any combination of 
                                agreements or transactions referred to 
                                in this clause;
                                    ``(IV) any option to enter into any 
                                agreement or transaction referred to in 
                                this clause;
                                    ``(V) a master agreement that 
                                provides for an agreement or 
                                transaction referred to in subclause 
                                (I), (II), (III), or (IV), together 
                                with all supplements to any such master 
                                agreement, without regard to whether 
                                the master agreement contains an 
                                agreement or transaction that is not a 
                                swap agreement under this clause, 
                                except that the master agreement shall 
                                be considered to be a swap agreement 
                                under this clause only with respect to 
                                each agreement or transaction under the 
                                master agreement that is referred to in 
                                subclause (I), (II), (III), or (IV); 
                                and
                                    ``(VI) any security agreement or 
                                arrangement or other credit enhancement 
                                related to any agreements or 
                                transactions referred to in 
                                subparagraph (I), (II), (III), (IV), or 
                                (V).
                        Such term is applicable for purposes of this 
                        title only and shall not be construed or 
                        applied so as to challenge or affect the 
                        characterization, definition, or treatment of 
                        any swap agreement under any other statute, 
                        regulation, or rule, including the Securities 
                        Act of 1933, the Securities Exchange Act of 
                        1934, the Public Utility Holding Company Act of 
                        1935, the Trust Indenture Act of 1939, the 
                        Investment Company Act of 1940, the Investment 
                        Advisers Act of 1940, the Securities Investor 
                        Protection Act of 1970, the Commodity Exchange 
                        Act, and the regulations promulgated by the 
                        Securities and Exchange Commission or the 
                        Commodity Futures Trading Commission.''.
    (g) Definition of Transfer.--Section 11(e)(8)(D)(viii) of the 
Federal Deposit Insurance Act (12 U.S.C. 1821(e)(8)(D)(viii)) is 
amended to read as follows:
                            ``(viii) Transfer.--The term `transfer' 
                        means every mode, direct or indirect, absolute 
                        or conditional, voluntary or involuntary, of 
                        disposing of or parting with property or with 
                        an interest in property, including retention of 
                        title as a security interest and foreclosure of 
                        the depository institutions's equity of 
                        redemption.''.
    (h) Treatment of Qualified Financial Contracts.--Section 11(e)(8) 
of the Federal Deposit Insurance Act (12 U.S.C. 1821(e)(8)) is 
amended--
            (1) in subparagraph (A), by striking ``paragraph (10)'' and 
        inserting ``paragraphs (9) and (10)'';
            (2) in subparagraph (A)(i), by striking ``to cause the 
        termination or liquidation'' and inserting ``such person has to 
        cause the termination, liquidation, or acceleration'';
            (3) by amending subparagraph (A)(ii) to read as follows:
                            ``(ii) any right under any security 
                        agreement or arrangement or other credit 
                        enhancement related to 1 or more qualified 
                        financial contracts described in clause (i);''; 
                        and
            (4) by amending subparagraph (E)(ii) to read as follows:
                            ``(ii) any right under any security 
                        agreement or arrangement or other credit 
                        enhancement related to 1 or more qualified 
                        financial contracts described in clause (i);''.
    (i) Avoidance of Transfers.--Section 11(e)(8)(C)(i) of the Federal 
Deposit Insurance Act (12 U.S.C. 1821(e)(8)(C)(i)) is amended by 
inserting ``section 5242 of the Revised Statutes of the United States 
(12 U.S.C. 91) or any other Federal or State law relating to the 
avoidance of preferential or fraudulent transfers,'' before ``the 
Corporation''.

SEC. 203. AUTHORITY OF THE CORPORATION WITH RESPECT TO FAILED AND 
              FAILING INSTITUTIONS.

    (a) In General.--Section 11(e)(8) of the Federal Deposit Insurance 
Act (12 U.S.C. 1821(e)(8)) is amended--
            (1) in subparagraph (E), by striking ``other than paragraph 
        (12) of this subsection, subsection (d)(9)'' and inserting 
        ``other than subsections (d)(9) and (e)(10)''; and
            (2) by adding at the end the following new subparagraphs:
                    ``(F) Clarification.--No provision of law shall be 
                construed as limiting the right or power of the 
                Corporation, or authorizing any court or agency to 
                limit or delay, in any manner, the right or power of 
                the Corporation to transfer any qualified financial 
                contract in accordance with paragraphs (9) and (10) of 
                this subsection or to disaffirm or repudiate any such 
                contract in accordance with paragraph (1).
                    ``(G) Walkaway clauses not effective.--
                            ``(i) In general.--Notwithstanding the 
                        provisions of subparagraphs (A) and (E), and 
                        sections 403 and 404 of the Federal Deposit 
                        Insurance Corporation Improvement Act of 1991, 
                        no walkaway clause shall be enforceable in a 
                        qualified financial contract of an insured 
                        depository institution in default.
                            ``(ii) Walkaway clause defined.--For 
                        purposes of this subparagraph, the term 
                        `walkaway clause' means a provision in a 
                        qualified financial contract that, after 
                        calculation of a value of a party's position or 
                        an amount due to or from 1 of the parties in 
                        accordance with its terms upon termination, 
                        liquidation, or acceleration of the qualified 
                        financial contract, either does not create a 
                        payment obligation of a party or extinguishes a 
                        payment obligation of a party in whole or in 
                        part solely because of such party's status as a 
                        nondefaulting party.''.
    (b) Technical and Conforming Amendment.--Section 11(e)(12)(A) of 
the Federal Deposit Insurance Act (12 U.S.C. 1821(e)(12)(A)) is amended 
by inserting ``or the exercise of rights or powers'' after ``the 
appointment''.

SEC. 204. AMENDMENTS RELATING TO TRANSFERS OF QUALIFIED FINANCIAL 
              CONTRACTS.

    (a) Transfers of Qualified Financial Contracts to Financial 
Institutions.--Section 11(e)(9) of the Federal Deposit Insurance Act 
(12 U.S.C. 1821(e)(9)) is amended to read as follows:
            ``(9) Transfer of qualified financial contracts.--
                    ``(A) In general.--In making any transfer of assets 
                or liabilities of a depository institution in default 
                which includes any qualified financial contract, the 
                conservator or receiver for such depository institution 
                shall either--
                            ``(i) transfer to 1 financial institution, 
                        other than a financial institution for which a 
                        conservator, receiver, trustee in bankruptcy, 
                        or other legal custodian has been appointed or 
                        which is otherwise the subject of a bankruptcy 
                        or insolvency proceeding--
                                    ``(I) all qualified financial 
                                contracts between any person or any 
                                affiliate of such person and the 
                                depository institution in default;
                                    ``(II) all claims of such person or 
                                any affiliate of such person against 
                                such depository institution under any 
                                such contract (other than any claim 
                                which, under the terms of any such 
                                contract, is subordinated to the claims 
                                of general unsecured creditors of such 
                                institution);
                                    ``(III) all claims of such 
                                depository institution against such 
                                person or any affiliate of such person 
                                under any such contract; and
                                    ``(IV) all property securing or any 
                                other credit enhancement for any 
                                contract described in subclause (I) or 
                                any claim described in subclause (II) 
                                or (III) under any such contract; or
                            ``(ii) transfer none of the qualified 
                        financial contracts, claims, property or other 
                        credit enhancement referred to in clause (i) 
                        (with respect to such person and any affiliate 
                        of such person).
                    ``(B) Transfer to foreign bank, foreign financial 
                institution, or branch or agency of a foreign bank or 
                financial institution.--In transferring any qualified 
                financial contracts and related claims and property 
                pursuant to subparagraph (A)(i), the conservator or 
                receiver for such depository institution shall not make 
                such transfer to a foreign bank, financial institution 
                organized under the laws of a foreign country, or a 
                branch or agency of a foreign bank or financial 
                institution unless, under the law applicable to such 
                bank, financial institution, branch or agency, to the 
                qualified financial contracts, and to any netting 
                contract, any security agreement or arrangement or 
                other credit enhancement related to 1 or more qualified 
                financial contracts, the contractual rights of the 
                parties to such qualified financial contracts, netting 
                contracts, security agreements or arrangements, or 
                other credit enhancements are enforceable substantially 
                to the same extent as permitted under this section.
                    ``(C) Transfer of contracts subject to the rules of 
                a clearing organization.--In the event that a 
                conservator or receiver transfers any qualified 
                financial contract and related claims, property and 
                credit enhancements pursuant to subparagraph (A)(i) and 
                such contract is subject to the rules of a clearing 
                organization, the clearing organization shall not be 
                required to accept the transferee as a member by virtue 
                of the transfer.
                    ``(D) Definition.--For purposes of this section, 
                the term `financial institution' means a broker or 
                dealer, a depository institution, a futures commission 
                merchant, or any other institution as determined by the 
                Corporation by regulation to be a financial 
                institution.''.
    (b) Notice to Qualified Financial Contract Counterparties.--Section 
11(e)(10)(A) of the Federal Deposit Insurance Act (12 U.S.C. 
1821(e)(10)(A)) is amended by amending the flush material following 
clause (ii) to read as follows: ``the conservator or receiver shall 
notify any person who is a party to any such contract of such transfer 
by 5:00 p.m. (eastern time) on the business day following the date of 
the appointment of the receiver, in the case of a receivership, or the 
business day following such transfer, in the case of a 
conservatorship.''.
    (c) Rights Against Receiver and Treatment of Bridge Banks.--Section 
11(e)(10) of the Federal Deposit Insurance Act (12 U.S.C. 1821(e)(10)) 
is further amended--
            (1) by redesignating subparagraph (B) as subparagraph (D); 
        and
            (2) by inserting after subparagraph (A) the following new 
        subparagraphs:
                    ``(B) Certain rights not enforceable.--
                            ``(i) Receivership.--A person who is a 
                        party to a qualified financial contract with an 
                        insured depository institution may not exercise 
                        any right such person has to terminate, 
                        liquidate, or net such contract under paragraph 
                        (8)(A) or section 403 or 404 of the Federal 
                        Deposit Insurance Corporation Improvement Act 
                        of 1991 solely by reason of or incidental to 
                        the appointment of a receiver for the 
                        depository institution (or the insolvency or 
                        financial condition of the depository 
                        institution for which the receiver has been 
                        appointed)--
                                    ``(I) until 5:00 p.m. (eastern 
                                time) on the business day following the 
                                date of the appointment of the 
                                receiver; or
                                    ``(II) after the person has 
                                received notice that the contract has 
                                been transferred pursuant to paragraph 
                                (9)(A).
                            ``(ii) Conservatorship.--A person who is a 
                        party to a qualified financial contract with an 
                        insured depository institution may not exercise 
                        any right such person has to terminate, 
                        liquidate, or net such contract under paragraph 
                        (8)(E) or section 403 or 404 of the Federal 
                        Deposit Insurance Corporation Improvement Act 
                        of 1991, solely by reason of or incidental to 
                        the appointment of a conservator for the 
                        depository institution (or the insolvency or 
                        financial condition of the depository 
                        institution for which the conservator has been 
                        appointed).
                            ``(iii) Notice.--For purposes of this 
                        subsection, the Corporation as receiver or 
                        conservator of an insured depository 
                        institution shall be deemed to have notified a 
                        person who is a party to a qualified financial 
                        contract with such depository institution if 
                        the Corporation has taken steps reasonably 
                        calculated to provide notice to such person by 
                        the time specified in subparagraph (A) of this 
                        subsection.
                    ``(C) Treatment of bridge banks.--The following 
                institutions shall not be considered a financial 
                institution for which a conservator, receiver, trustee 
                in bankruptcy, or other legal custodian has been 
                appointed or which is otherwise the subject of a 
                bankruptcy or insolvency proceeding for purposes of 
                paragraph (9)--
                            ``(i) a bridge bank; or
                            ``(ii) a depository institution organized 
                        by the Corporation, for which a conservator is 
                        appointed either--
                                    ``(I) immediately upon the 
                                organization of the institution; or
                                    ``(II) at the time of a purchase 
                                and assumption transaction between such 
                                institution and the Corporation as 
                                receiver for a depository institution 
                                in default.''.

SEC. 205. AMENDMENTS RELATING TO DISAFFIRMANCE OR REPUDIATION OF 
              QUALIFIED FINANCIAL CONTRACTS.

    (a) In General.--Section 11(e) of the Federal Deposit Insurance Act 
(12 U.S.C. 1821(e)) is further amended--
            (1) by redesignating paragraphs (11) through (15) as 
        paragraphs (12) through (16), respectively; and
            (2) by inserting after paragraph (10) the following new 
        paragraph:
            ``(11) Disaffirmance or repudiation of qualified financial 
        contracts.--In exercising the rights of disaffirmance or 
        repudiation of a conservator or receiver with respect to any 
        qualified financial contract to which an insured depository 
        institution is a party, the conservator or receiver for such 
        institution shall either--
                    ``(A) disaffirm or repudiate all qualified 
                financial contracts between--
                            ``(i) any person or any affiliate of such 
                        person; and
                            ``(ii) the depository institution in 
                        default; or
                    ``(B) disaffirm or repudiate none of the qualified 
                financial contracts referred to in subparagraph (A) 
                (with respect to such person or any affiliate of such 
                person).''.
    (b) Technical and Conforming Amendments.--Section 11(e)(8) of the 
Federal Deposit Insurance Act (12 U.S.C. 1821(e)(8)) is amended in 
subparagraph (C)(i), by striking ``(11)'' and inserting ``(12)''.

SEC. 206. CLARIFYING AMENDMENT RELATING TO MASTER AGREEMENTS.

    Section 11(e)(8)(D)(vii) of the Federal Deposit Insurance Act (12 
U.S.C. 1821(e)(8)(D)(vii)) is amended to read as follows:
                            ``(vii) Treatment of master agreement as 1 
                        agreement.--Any master agreement for any 
                        contract or agreement described in any 
                        preceding clause of this subparagraph (or any 
                        master agreement for such master agreement or 
                        agreements), together with all supplements to 
                        such master agreement, shall be treated as a 
                        single agreement and a single qualified 
                        financial contract. If a master agreement 
                        contains provisions relating to agreements or 
                        transactions that are not themselves qualified 
                        financial contracts, the master agreement shall 
                        be deemed to be a qualified financial contract 
                        only with respect to those transactions that 
                        are themselves qualified financial 
                        contracts.''.

SEC. 207. FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 
              1991.

    (a) Definitions.--Section 402 of the Federal Deposit Insurance 
Corporation Improvement Act of 1991 (12 U.S.C. 4402) is amended--
            (1) in paragraph (2)--
                    (A) by inserting ``or exempt from such registration 
                pursuant to an order of the Securities and Exchange 
                Commission'' before the semicolon at the end of 
                subparagraph (A)(ii); and
                    (B) by inserting ``or that has been granted an 
                exemption pursuant to section 4(c)(1) of such Act'' 
                before the period at the end of subparagraph (B);
            (2) in paragraph (6)--
                    (A) by redesignating subparagraphs (B) through (D) 
                as subparagraphs (C) through (E), respectively;
                    (B) by inserting after subparagraph (A) the 
                following new subparagraph:
                    ``(B) an uninsured national bank or an uninsured 
                State bank that is a member of the Federal Reserve 
                System if the national bank or State member bank is not 
                eligible to make application to become an insured bank 
                under section 5 of the Federal Deposit Insurance 
                Act;''; and
                    (C) by amending subparagraph (C) (as redesignated) 
                to read as follows:
                    ``(C) a branch or agency of a foreign bank, a 
                foreign bank and any branch or agency of the foreign 
                bank, or the foreign bank that established the branch 
                or agency, as those terms are defined in section 1(b) 
                of the International Banking Act of 1978;'';
            (3) in paragraph (11), by adding before the period ``and 
        any other clearing organization with which such clearing 
        organization has a netting contract'';
            (4) by amending paragraph (14)(A)(i) to read as follows:
                            ``(i) means a contract or agreement between 
                        two or more financial institutions, clearing 
                        organizations, or members that provides for 
                        netting present or future payment obligations 
                        or payment entitlements (including liquidation 
                        or closeout values relating to such obligations 
                        or entitlements) among the parties to the 
                        agreement; and''; and
            (5) by adding at the end the following new paragraph:
            ``(15) Payment.--The term `payment' means a payment of 
        United States dollars, another currency, or a composite 
        currency, and a noncash delivery, including a payment or 
        delivery to liquidate an unmatured obligation.''.
    (b) Enforceability of Bilateral Netting Contracts.--Section 403 of 
the Federal Deposit Insurance Corporation Improvement Act of 1991 (12 
U.S.C. 4403) is amended--
            (1) by amending subsection (a) to read as follows:
    ``(a) General Rule.--Notwithstanding any other provision of State 
or Federal law (other than paragraphs (8)(E), (8)(F), and (10)(B) of 
section 11(e) of the Federal Deposit Insurance Act or any order 
authorized under section 5(b)(2) of the Securities Investor Protection 
Act of 1970), the covered contractual payment obligations and the 
covered contractual payment entitlements between any two financial 
institutions shall be netted in accordance with, and subject to the 
conditions of, the terms of any applicable netting contract (except as 
provided in section 561(b)(2) of title 11, United States Code).''; and
            (2) by adding at the end the following new subsection:
    ``(f) Enforceability of Security Agreements.--The provisions of any 
security agreement or arrangement or other credit enhancement related 
to 1 or more netting contracts between any two financial institutions 
shall be enforceable in accordance with their terms (except as provided 
in section 561(b)(2) of title 11, United States Code) and shall not be 
stayed, avoided, or otherwise limited by any State or Federal law 
(other than paragraphs (8)(E), (8)(F), and (10)(B) of section 11(e) of 
the Federal Deposit Insurance Act and section 5(b)(2) of the Securities 
Investor Protection Act of 1970).''.
    (c) Enforceability of Clearing Organization Netting Contracts.--
Section 404 of the Federal Deposit Insurance Corporation Improvement 
Act of 1991 (12 U.S.C. 4404) is amended--
            (1) by amending subsection (a) to read as follows:
    ``(a) General Rule.--Notwithstanding any other provision of State 
or Federal law (other than paragraphs (8)(E), (8)(F), and (10)(B) of 
section 11(e) of the Federal Deposit Insurance Act and any order 
authorized under section 5(b)(2) of the Securities Investor Protection 
Act of 1970), the covered contractual payment obligations and the 
covered contractual payment entitlements of a member of a clearing 
organization to and from all other members of a clearing organization 
shall be netted in accordance with and subject to the conditions of any 
applicable netting contract (except as provided in section 561(b)(2) of 
title 11, United States Code).''; and
            (2) by adding at the end the following new subsection:
    ``(h) Enforceability of Security Agreements.--The provisions of any 
security agreement or arrangement or other credit enhancement related 
to 1 or more netting contracts between any two members of a clearing 
organization shall be enforceable in accordance with their terms 
(except as provided in section 561(b)(2) of title 11, United States 
Code) and shall not be stayed, avoided, or otherwise limited by any 
State or Federal law (other than paragraphs (8)(E), (8)(F), and (10)(B) 
of section 11(e) of the Federal Deposit Insurance Act and section 
5(b)(2) of the Securities Investor Protection Act of 1970).''.
    (d) Enforceability of Contracts With Uninsured National Banks and 
Uninsured Federal Branches and Agencies.--The Federal Deposit Insurance 
Corporation Improvement Act of 1991 (12 U.S.C. 4401 et seq.) is 
amended--
            (1) by redesignating section 407 as section 407A; and
            (2) by adding after section 406 the following new section:

``SEC. 407. TREATMENT OF CONTRACTS WITH UNINSURED NATIONAL BANKS AND 
              UNINSURED FEDERAL BRANCHES AND AGENCIES.

    ``(a) In General.--Notwithstanding any other provision of law, 
paragraphs (8), (9), (10), and (11) of section 11(e) of the Federal 
Deposit Insurance Act shall apply to an uninsured national bank or 
uninsured Federal branch or Federal agency except--
            ``(1) any reference to the `Corporation as receiver' or 
        `the receiver or the Corporation' shall refer to the receiver 
        of an uninsured national bank or uninsured Federal branch or 
        Federal agency appointed by the Comptroller of the Currency;
            ``(2) any reference to the `Corporation' (other than in 
        section 11(e)(8)(D) of such Act), the `Corporation, whether 
        acting as such or as conservator or receiver', a `receiver', or 
        a `conservator' shall refer to the receiver or conservator of 
        an uninsured national bank or uninsured Federal branch or 
        Federal agency appointed by the Comptroller of the Currency; 
        and
            ``(3) any reference to an `insured depository institution' 
        or `depository institution' shall refer to an uninsured 
        national bank or an uninsured Federal branch or Federal agency.
    ``(b) Liability.--The liability of a receiver or conservator of an 
uninsured national bank or uninsured Federal branch or agency shall be 
determined in the same manner and subject to the same limitations that 
apply to receivers and conservators of insured depository institutions 
under section 11(e) of the Federal Deposit Insurance Act.
    ``(c) Regulatory Authority.--
            ``(1) In general.--The Comptroller of the Currency, in 
        consultation with the Federal Deposit Insurance Corporation, 
        may promulgate regulations to implement this section.
            ``(2) Specific requirement.--In promulgating regulations to 
        implement this section, the Comptroller of the Currency shall 
        ensure that the regulations generally are consistent with the 
        regulations and policies of the Federal Deposit Insurance 
        Corporation adopted pursuant to the Federal Deposit Insurance 
        Act.
    ``(d) Definitions.--For purposes of this section, the terms 
`Federal branch', `Federal agency', and `foreign bank' have the same 
meaning as in section 1(b) of the International Banking Act.''.

SEC. 208. BANKRUPTCY CODE AMENDMENTS.

    (a) Definitions of Forward Contract, Repurchase Agreement, 
Securities Clearing Agency, Swap Agreement, Commodity Contract, and 
Securities Contract.--Title 11, United States Code, is amended--
            (1) in section 101--
                    (A) in paragraph (25)--
                            (i) by striking ``means a contract'' and 
                        inserting ``means--
                    ``(A) a contract'';
                            (ii) by striking ``, or any combination 
                        thereof or option thereon;'' and inserting ``, 
                        or any other similar agreement;''; and
                            (iii) by adding at the end the following:
                    ``(B) any combination of agreements or transactions 
                referred to in subparagraphs (A) and (C);
                    ``(C) any option to enter into an agreement or 
                transaction referred to in subparagraph (A) or (B);
                    ``(D) a master agreement that provides for an 
                agreement or transaction referred to in subparagraph 
                (A), (B), or (C), together with all supplements to any 
                such master agreement, without regard to whether such 
                master agreement provides for an agreement or 
                transaction that is not a forward contract under this 
                paragraph, except that such master agreement shall be 
                considered to be a forward contract under this 
                paragraph only with respect to each agreement or 
                transaction under such master agreement that is 
                referred to in subparagraph (A), (B) or (C); or
                    ``(E) any security agreement or arrangement, or 
                other credit enhancement related to any agreement or 
                transaction referred to in subparagraph (A), (B), (C), 
                or (D), but not to exceed the actual value of such 
                contract on the date of the filing of the petition;'';
                    (B) in paragraph (46), by striking ``on any day 
                during the period beginning 90 days before the date 
                of'' and replacing it with ``at any time before'';
                    (C) by amending paragraph (47) to read as follows:
            ``(47) `repurchase agreement' (which definition also 
        applies to a `reverse repurchase agreement')--
                    (A) means--
                            ``(i) an agreement, including related 
                        terms, which provides for the transfer of 1 or 
                        more certificates of deposit, mortgage-related 
                        securities (as defined in the Securities 
                        Exchange Act of 1934), mortgage loans, 
                        interests in mortgage-related securities or 
                        mortgage loans, eligible bankers' acceptances, 
                        qualified foreign government securities, or 
                        securities that are direct obligations of, or 
                        that are fully guaranteed by, the United States 
                        or any agency of the United States against the 
                        transfer of funds by the transferee of such 
                        certificates of deposit, eligible bankers' 
                        acceptances, securities, loans, or interests, 
                        with a simultaneous agreement by such 
                        transferee to transfer to the transferor 
                        thereof certificates of deposit, eligible 
                        bankers' acceptance, securities, loans, or 
                        interests of the kind described above, at a 
                        date certain not later than 1 year after such 
                        transfer or on demand, against the transfer of 
                        funds;
                            ``(ii) any combination of agreements or 
                        transactions referred to in clauses (i) and 
                        (iii);
                            ``(iii) an option to enter into an 
                        agreement or transaction referred to in clause 
                        (i) or (ii);
                            ``(iv) a master agreement that provides for 
                        an agreement or transaction referred to in 
                        clause (i), (ii), or (iii), together with all 
                        supplements to any such master agreement, 
                        without regard to whether such master agreement 
                        provides for an agreement or transaction that 
                        is not a repurchase agreement under this 
                        paragraph, except that such master agreement 
                        shall be considered to be a repurchase 
                        agreement under this paragraph only with 
                        respect to each agreement or transaction under 
                        the master agreement that is referred to in 
                        clause (i), (ii), or (iii); or
                            ``(v) any security agreement or arrangement 
                        or other credit enhancement related to any 
                        agreement or transaction referred to in clause 
                        (i), (ii), (iii), or (iv), but not to exceed 
                        the actual value of such contract on the date 
                        of the filing of the petition; and
                    ``(B) does not include a repurchase obligation 
                under a participation in a commercial mortgage loan,
        and, for purposes of this paragraph, the term `qualified 
        foreign government security' means a security that is a direct 
        obligation of, or that is fully guaranteed by, the central 
        government of a member of the Organization for Economic 
        Cooperation and Development;'';
                    (D) in paragraph (48) by inserting ``or exempt from 
                such registration under such section pursuant to an 
                order of the Securities and Exchange Commission'' after 
                ``1934''; and
                    (E) by amending paragraph (53B) to read as follows:
            ``(53B) `swap agreement'--
                    ``(A) means--
                            ``(i) any agreement, including the terms 
                        and conditions incorporated by reference in 
                        such agreement, which is an interest rate swap, 
                        option, future, or forward agreement, including 
                        a rate floor, rate cap, rate collar, cross-
                        currency rate swap, and basis swap; a spot, 
                        same day-tomorrow, tomorrow-next, forward, or 
                        other foreign exchange or precious metals 
                        agreement; a currency swap, option, future, or 
                        forward agreement; an equity index or an equity 
                        swap, option, future, or forward agreement; a 
                        debt index or a debt swap, option, future, or 
                        forward agreement; a credit spread or a credit 
                        swap, option, future, or forward agreement; a 
                        commodity index or a commodity swap, option, 
                        future, or forward agreement; or a weather 
                        swap, weather derivative, or weather option;
                            ``(ii) any agreement or transaction similar 
                        to any other agreement or transaction referred 
                        to in this paragraph that--
                                    ``(I) is presently, or in the 
                                future becomes, regularly entered into 
                                in the swap market (including terms and 
                                conditions incorporated by reference 
                                therein); and
                                    ``(II) is a forward, swap, future, 
                                or option on 1 or more rates, 
                                currencies, commodities, equity 
                                securities, or other equity 
                                instruments, debt securities or other 
                                debt instruments, or economic indices 
                                or measures of economic risk or value;
                            ``(iii) any combination of agreements or 
                        transactions referred to in this paragraph;
                            ``(iv) any option to enter into an 
                        agreement or transaction referred to in this 
                        paragraph;
                            ``(v) a master agreement that provides for 
                        an agreement or transaction referred to in 
                        clause (i), (ii), (iii), or (iv), together with 
                        all supplements to any such master agreement, 
                        and without regard to whether the master 
                        agreement contains an agreement or transaction 
                        that is not a swap agreement under this 
                        paragraph, except that the master agreement 
                        shall be considered to be a swap agreement 
                        under this paragraph only with respect to each 
                        agreement or transaction under the master 
                        agreement that is referred to in clause (i), 
                        (ii), (iii), or (iv); or
                    ``(B) any security agreement or arrangement or 
                other credit enhancement related to any agreements or 
                transactions referred to in subparagraph (A), but not 
                to exceed the actual value of such contract on the date 
                of the filing of the petition; and
                    ``(C) is applicable for purposes of this title only 
                and shall not be construed or applied so as to 
                challenge or affect the characterization, definition, 
                or treatment of any swap agreement under any other 
                statute, regulation, or rule, including the Securities 
                Act of 1933, the Securities Exchange Act of 1934, the 
                Public Utility Holding Company Act of 1935, the Trust 
                Indenture Act of 1939, the Investment Company Act of 
                1940, the Investment Advisers Act of 1940, the 
                Securities Investor Protection Act of 1970, the 
                Commodity Exchange Act, and the regulations prescribed 
                by the Securities and Exchange Commission or the 
                Commodity Futures Trading Commission.'';
            (2) by amending section 741(7) to read as follows:
            ``(7) `securities contract'--
                    ``(A) means--
                            ``(i) a contract for the purchase, sale, or 
                        loan of a security, a certificate of deposit, a 
                        mortgage loan or any interest in a mortgage 
                        loan, a group or index of securities, 
                        certificates of deposit or mortgage loans or 
                        interests therein (including an interest 
                        therein or based on the value thereof), or 
                        option on any of the foregoing, including an 
                        option to purchase or sell any such security, 
                        certificate of deposit, loan, interest, group 
                        or index, or option;
                            ``(ii) any option entered into on a 
                        national securities exchange relating to 
                        foreign currencies;
                            ``(iii) the guarantee by or to any 
                        securities clearing agency of a settlement of 
                        cash, securities, certificates of deposit, 
                        mortgage loans or interests therein, group or 
                        index of securities, or mortgage loans or 
                        interests therein (including any interest 
                        therein or based on the value thereof), or 
                        option on any of the foregoing, including an 
                        option to purchase or sell any such security, 
                        certificate of deposit, loan, interest, group 
                        or index, or option;
                            ``(iv) any margin loan;
                            ``(v) any other agreement or transaction 
                        that is similar to an agreement or transaction 
                        referred to in this paragraph;
                            ``(vi) any combination of the agreements or 
                        transactions referred to in this paragraph;
                            ``(vii) any option to enter into any 
                        agreement or transaction referred to in this 
                        paragraph;
                            ``(viii) a master agreement that provides 
                        for an agreement or transaction referred to in 
                        clause (i), (ii), (iii), (iv), (v), (vi), or 
                        (vii), together with all supplements to any 
                        such master agreement, without regard to 
                        whether the master agreement provides for an 
                        agreement or transaction that is not a 
                        securities contract under this paragraph, 
                        except that such master agreement shall be 
                        considered to be a securities contract under 
                        this paragraph only with respect to each 
                        agreement or transaction under such master 
                        agreement that is referred to in clause (i), 
                        (ii), (iii), (iv), (v), (vi), or (vii); or
                            ``(ix) any security agreement or 
                        arrangement or other credit enhancement related 
                        to any agreement or transaction referred to in 
                        this paragraph, but not to exceed the actual 
                        value of such contract on the date of the 
                        filing of the petition; and
                    ``(B) does not include any purchase, sale, or 
                repurchase obligation under a participation in a 
                commercial mortgage loan.''; and
            (3) in section 761(4)--
                    (A) by striking ``or'' at the end of subparagraph 
                (D); and
                    (B) by adding at the end the following:
                    ``(F) any other agreement or transaction that is 
                similar to an agreement or transaction referred to in 
                this paragraph;
                    ``(G) any combination of the agreements or 
                transactions referred to in this paragraph;
                    ``(H) any option to enter into an agreement or 
                transaction referred to in this paragraph;
                    ``(I) a master agreement that provides for an 
                agreement or transaction referred to in subparagraph 
                (A), (B), (C), (D), (E), (F), (G), or (H), together 
                with all supplements to such master agreement, without 
                regard to whether the master agreement provides for an 
                agreement or transaction that is not a commodity 
                contract under this paragraph, except that the master 
                agreement shall be considered to be a commodity 
                contract under this paragraph only with respect to each 
                agreement or transaction under the master agreement 
                that is referred to in subparagraph (A), (B), (C), (D), 
                (E), (F), (G), or (H); or
                    ``(J) any security agreement or arrangement or 
                other credit enhancement related to any agreement or 
                transaction referred to in this paragraph, but not to 
                exceed the actual value of such contract on the date of 
                the filing of the petition;''.
    (b) Definitions of Financial Participant and Forward Contract 
Merchant.--Section 101 of title 11, United States Code, is amended--
            (1) by inserting after paragraph (22) the following:
            ``(22A) `financial participant' means an entity that, at 
        the time it enters into a securities contract, commodity 
        contract or forward contract, or at the time of the filing of 
        the petition, has 1 or more agreements or transactions 
        described in paragraph (1), (2), (3), (4), (5), or (6) of 
        section 561(a) with the debtor or any other entity (other than 
        an affiliate) of a total gross dollar value of at least 
        $1,000,000,000 in notional or actual principal amount 
        outstanding on any day during the previous 15-month period, or 
        has gross mark-to-market positions of at least $100,000,000 
        (aggregated across counterparties) in 1 or more such agreement 
        or transaction with the debtor or any other entity (other than 
        an affiliate) on any day during the previous 15-month 
        period;''; and
            (2) by amending paragraph (26) to read as follows:
            ``(26) `forward contract merchant' means a Federal reserve 
        bank, or an entity whose business consists in whole or in part 
        of entering into forward contracts as or with merchants or in a 
        commodity, as defined or in section 761, or any similar good, 
        article, service, right, or interest which is presently or in 
        the future becomes the subject of dealing or in the forward 
        contract trade;''.
    (c) Definition of Master Netting Agreement and Master Netting 
Agreement Participant.--Section 101 of title 11, United States Code, is 
amended by inserting after paragraph (38) the following new paragraphs:
            ``(38A) `master netting agreement' means an agreement 
        providing for the exercise of rights, including rights of 
        netting, setoff, liquidation, termination, acceleration, or 
        closeout, under or in connection with 1 or more contracts that 
        are described in any 1 or more of paragraphs (1) through (5) of 
        section 561(a), or any security agreement or arrangement or 
        other credit enhancement related to 1 or more of the foregoing. 
        If a master netting agreement contains provisions relating to 
        agreements or transactions that are not contracts described in 
        paragraphs (1) through (5) of section 561(a), the master 
        netting agreement shall be deemed to be a master netting 
        agreement only with respect to those agreements or transactions 
        that are described in any 1 or more of the paragraphs (1) 
        through (5) of section 561(a);
            ``(38B) `master netting agreement participant' means an 
        entity that, at any time before the filing of the petition, is 
        a party to an outstanding master netting agreement with the 
        debtor;''.
    (d) Swap Agreements, Securities Contracts, Commodity Contracts, 
Forward Contracts, Repurchase Agreements, and Master Netting Agreements 
Under the Automatic-Stay.--
            (1) In general.--Section 362(b) of title 11, United States 
        Code, is amended--
                    (A) in paragraph (6), by inserting ``, pledged to 
                and under the control of,'' after ``held by'';
                    (B) in paragraph (7), by inserting ``, pledged to 
                and under the control of,'' after ``held by'';
                    (C) by amending paragraph (17) to read as follows:
            ``(17) under subsection (a), of the setoff by a swap 
        participant of a mutual debt and claim under or in connection 
        with 1 or more swap agreements that constitutes the setoff of a 
        claim against the debtor for any payment or other transfer of 
        property due from the debtor under or in connection with any 
        swap agreement against any payment due to the debtor from the 
        swap participant under or in connection with any swap agreement 
        or against cash, securities, or other property held by, pledged 
        to and under the control of, or due from such swap participant 
        to margin, guarantee, secure, or settle any swap agreement;'';
                    (D) in paragraph (18) by striking the period at the 
                end and inserting ``; or''; and
                    (E) by inserting after paragraph (18) the following 
                new paragraph:
            ``(19) under subsection (a), of the setoff by a master 
        netting agreement participant of a mutual debt and claim under 
        or in connection with 1 or more master netting agreements or 
        any contract or agreement subject to such agreements that 
        constitutes the setoff of a claim against the debtor for any 
        payment or other transfer of property due from the debtor under 
        or in connection with such agreements or any contract or 
        agreement subject to such agreements against any payment due to 
        the debtor from such master netting agreement participant under 
        or in connection with such agreements or any contract or 
        agreement subject to such agreements or against cash, 
        securities, or other property held by, pledged to and under the 
        control of, or due from such master netting agreement 
        participant to margin, guarantee, secure, or settle such 
        agreements or any contract or agreement subject to such 
        agreements, to the extent such participant is eligible to 
        exercise such offset rights under paragraph (6), (7), or (17) 
        for each individual contract covered by the master netting 
        agreement in issue.''.
            (2) Limitation.--Section 362 of title 11, United States 
        Code, is amended by adding at the end the following:
    ``(i) Limitation.--The exercise of rights not subject to the stay 
arising under subsection (a) pursuant to paragraph (6), (7), or (17), 
or (32) of subsection (b) shall not be stayed by any order of a court 
or administrative agency in any proceeding under this title.''.
    (e) Limitation of Avoidance Powers Under Master Netting 
Agreement.--Section 546 of title 11, United States Code, is amended--
            (1) in subsection (g) (as added by section 103 of Public 
        Law 101-311)--
                    (A) by striking ``under a swap agreement''; and
                    (B) by striking ``in connection with a swap 
                agreement'' and inserting ``under or in connection with 
                any swap agreement''; and
            (2) by adding at the end the following:
    ``(j) Notwithstanding sections 544, 545, 547, 548(a)(1)(B), and 
548(b), the trustee may not avoid a transfer made by or to a master 
netting agreement participant under or in connection with any master 
netting agreement or any individual contract covered thereby that is 
made before the commencement of the case, except under section 
548(a)(1)(A), and except to the extent the trustee could otherwise 
avoid such a transfer made under an individual contract covered by such 
master netting agreement.''.
    (f) Fraudulent Transfers of Master Netting Agreements.--Section 
548(d)(2) of title 11, United States Code, is amended--
            (1) in subparagraph (C), by striking ``and'';
            (2) in subparagraph (D), by striking the period and 
        inserting ``; and''; and
            (3) by adding at the end the following new subparagraph:
            ``(E) a master netting agreement participant that receives 
        a transfer in connection with a master netting agreement or any 
        individual contract covered thereby takes for value to the 
        extent of such transfer, except, with respect to a transfer 
        under any individual contract covered thereby, to the extent 
        such master netting agreement participant otherwise did not 
        take (or is otherwise not deemed to have taken) such transfer 
        for value.''.
    (g) Termination or Acceleration of Securities Contracts.--Section 
555 of title 11, United States Code, is amended--
            (1) by amending the section heading to read as follows:
``Sec. 555. Contractual right to liquidate, terminate, or accelerate a 
              securities contract'';
        and
            (2) in the first sentence, by striking ``liquidation'' and 
        inserting ``liquidation, termination, or acceleration''.
    (h) Termination or Acceleration of Commodities or Forward 
Contracts.--Section 556 of title 11, United States Code, is amended--
            (1) by amending the section heading to read as follows:
``Sec. 556. Contractual right to liquidate, terminate, or accelerate a 
              commodities contract or forward contract'';
        and
            (2) in the first sentence, by striking ``liquidation'' and 
        inserting ``liquidation, termination, or acceleration''.
    (i) Termination or Acceleration of Repurchase Agreements.--Section 
559 of title 11, United States Code, is amended--
            (1) by amending the section heading to read as follows:
``Sec. 559. Contractual right to liquidate, terminate, or accelerate a 
              repurchase agreement'';
        and
            (2) in the first sentence, by striking ``liquidation'' and 
        inserting ``liquidation, termination, or acceleration''.
    (j) Liquidation, Termination, or Acceleration of Swap Agreements.--
Section 560 of title 11, United States Code, is amended--
            (1) by amending the section heading to read as follows:
``Sec. 560. Contractual right to liquidate, terminate, or accelerate a 
              swap agreement'';
            (2) in the first sentence, by striking ``termination of a 
        swap agreement'' and inserting ``liquidation, termination, or 
        acceleration of 1 or more swap agreements''; and
            (3) by striking ``in connection with any swap agreement'' 
        and inserting ``in connection with the termination, 
        liquidation, or acceleration of 1 or more swap agreements''.
    (k) Liquidation, Termination, Acceleration, or Offset Under a 
Master Netting Agreement and Across Contracts.--(1) Title 11, United 
States Code, is amended by inserting after section 560 the following:
``Sec. 561. Contractual right to terminate, liquidate, accelerate, or 
              offset under a master netting agreement and across 
              contracts
    ``(a) In General.--Subject to subsection (b), the exercise of any 
contractual right, because of a condition of the kind specified in 
section 365(e)(1), to cause the termination, liquidation, or 
acceleration of or to offset or net termination values, payment amounts 
or other transfer obligations arising under or in connection with 1 or 
more (or the termination, liquidation, or acceleration of 1 or more)--
            ``(1) securities contracts, as defined in section 741(7);
            ``(2) commodity contracts, as defined in section 761(4);
            ``(3) forward contracts;
            ``(4) repurchase agreements;
            ``(5) swap agreements; or
            ``(6) master netting agreements,
shall not be stayed, avoided, or otherwise limited by operation of any 
provision of this title or by any order of a court or administrative 
agency in any proceeding under this title.
    ``(b) Exception.--
            ``(1) A party may exercise a contractual right described in 
        subsection (a) to terminate, liquidate, or accelerate only to 
        the extent that such party could exercise such a right under 
        section 555, 556, 559, or 560 for each individual contract 
        covered by the master netting agreement in issue.
            ``(2) If a debtor is a commodity broker subject to 
        subchapter IV of chapter 7--
                    ``(A) a party may not net or offset an obligation 
                to the debtor arising under, or in connection with, a 
                commodity contract against any claim arising under, or 
                in connection with, other instruments, contracts, or 
                agreements listed in subsection (a), except to the 
                extent the party has positive net equity in the 
                commodity accounts at the debtor, as calculated under 
                such subchapter; and
                    ``(B) another commodity broker may not net or 
                offset an obligation to the debtor arising under, or in 
                connection with, a commodity contract entered into or 
                held on behalf of a customer of the debtor against any 
                claim arising under, or in connection with, other 
                instruments, contracts, or agreements listed in 
                subsection (a).
    ``(c) Rule of Application.--Subparagraphs (A) and (B) of subsection 
(b)(2) shall not be construed as prohibiting the offset of claims and 
obligations arising pursuant to--
            ``(1) a cross-margining arrangement that has been approved 
        by the Commodity Futures Trading Commission or that has been 
        submitted to such Commission pursuant to section 5a(a)(12) of 
        the Commodity Exchange Act and has been permitted to go into 
        effect; or
            ``(2) another netting arrangement, between a clearing 
        organization (as defined in section 761) and another entity, 
        that has been approved by the Commodity Futures Trading 
        Commission.
    ``(d) Definition.--As used in this section, the term `contractual 
right' includes a right set forth in a rule or bylaw of a national 
securities exchange, a national securities association, or a securities 
clearing agency, a right set forth in a bylaw of a clearing 
organization or contract market or in a resolution of the governing 
board thereof, and a right, whether or not evidenced in writing, 
arising under common law, under law merchant, or by reason of normal 
business practice.''.
    (2) Conforming amendment.--The table of sections of chapter 5 of 
title 11, United States Code, is amended by inserting after the item 
relating to section 560 the following:

``561. Contractual right to terminate, liquidate, accelerate, or offset 
                            under a master netting agreement and across 
                            contracts.''.
    (l) Municipal Bankruptcies.--Section 901(a) of title 11, United 
States Code, is amended--
            (1) by inserting ``555, 556,'' after ``553,''; and
            (2) by inserting ``559, 560, 561, 562,'' after ``557,''.
    (m) Ancillary Proceedings.--Section 304 of title 11, United States 
Code, is amended by adding at the end the following new subsection:
    ``(d) Any provisions of this title relating to securities 
contracts, commodity contracts, forward contracts, repurchase 
agreements, swap agreements, or master netting agreements shall apply 
in a case ancillary to a foreign proceeding under this section or any 
other section of this title so that enforcement of contractual 
provisions of such contracts and agreements in accordance with their 
terms will not be stayed or otherwise limited by operation of any 
provision of this title or by order of a court in any proceeding under 
this title, and to limit avoidance powers to the same extent as in a 
proceeding under chapter 7 or 11 (such enforcement not to be limited 
based on the presence or absence of assets of the debtor in the United 
States).''.
    (n) Commodity Broker Liquidations.--Title 11, United States Code, 
is amended by inserting after section 766 the following:
``Sec. 767. Commodity broker liquidation and forward contract 
              merchants, commodity brokers, stockbrokers, financial 
              institutions, financial participants, securities clearing 
              agencies, swap participants, repo participants, and 
              master netting agreement participants
    ``Notwithstanding any other provision of this title, the exercise 
of rights by a forward contract merchant, commodity broker, 
stockbroker, financial institution, financial participant, securities 
clearing agency, swap participant, repo participant, or master netting 
agreement participant under this title shall not affect the priority of 
any unsecured claim it may have after the exercise of such rights.''.
    (o) Stockbroker Liquidations.--Title 11, United States Code, is 
amended by inserting after section 752 the following:
``Sec. 753. Stockbroker liquidation and forward contract merchants, 
              commodity brokers, stockbrokers, financial institutions, 
              financial participants, securities clearing agencies, 
              swap participants, repo participants, and master netting 
              agreement participants
    ``Notwithstanding any other provision of this title, the exercise 
of rights by a forward contract merchant, commodity broker, 
stockbroker, financial institution, securities clearing agency, swap 
participant, repo participant, financial participant, or master netting 
agreement participant under this title shall not affect the priority of 
any unsecured claim it may have after the exercise of such rights.''.
    (p) Setoff.--Section 553 of title 11, United States Code, is 
amended--
            (1) in subsection (a)(3)(C), by inserting ``(except for a 
        setoff of a kind described in section 362(b)(6), 362(b)(7), 
        362(b)(17), 362(b)(32), 555, 556, 559, 560 or 561)'' before the 
        period; and
            (2) in subsection (b)(1), by striking ``362(b)(14)'' and 
        inserting ``362(b)(17), 362(b)(32), 555, 556, 559, 560, 561''.
    (q) Securities Contracts, Commodity Contracts, and Forward 
Contracts.--Title 11, United States Code, is amended--
            (1) in section 362(b)(6), by striking ``financial 
        institutions,'' each place such term appears and inserting 
        ``financial institution, financial participant'';
            (2) in section 546(e), by inserting ``financial 
        participant,'' after ``financial institution,'';
            (3) in section 548(d)(2)(B), by inserting ``financial 
        participant,'' after ``financial institution,'';
            (4) in section 555--
                    (A) by inserting ``financial participant,'' after 
                ``financial institution,''; and
                    (B) by inserting before the period at the end ``, a 
                right set forth in a bylaw of a clearing organization 
                or contract market or in a resolution of the governing 
                board thereof, and a right, whether or not in writing, 
                arising under common law, under law merchant, or by 
                reason of normal business practice''; and
            (5) in section 556, by inserting ``, financial 
        participant'' after ``commodity broker''.
    (r) Conforming Amendments.--Title 11, United States Code, is 
amended--
            (1) in the table of sections of chapter 5--
                    (A) by amending the items relating to sections 555 
                and 556 to read as follows:

``555. Contractual right to liquidate, terminate, or accelerate a 
                            securities contract.
``556. Contractual right to liquidate, terminate, or accelerate a 
                            commodities contract or forward 
                            contract.'';
                and
                    (B) by amending the items relating to sections 559 
                and 560 to read as follows:

``559. Contractual right to liquidate, terminate, or accelerate a 
                            repurchase agreement.
``560. Contractual right to liquidate, terminate, or accelerate a swap 
                            agreement.'';
                and
            (2) in the table of sections of chapter 7--
                    (A) by inserting after the item relating to section 
                766 the following:

``767. Commodity broker liquidation and forward contract merchants, 
                            commodity brokers, stockbrokers, financial 
                            institutions, financial participants, 
                            securities clearing agencies, swap 
                            participants, repo participants, and master 
                            netting agreement participants.'';
                and
                    (B) by inserting after the item relating to section 
                752 the following:

``753. Stockbroker liquidation and forward contract merchants, 
                            commodity brokers, stockbrokers, financial 
                            institutions, financial participants, 
                            securities clearing agencies, swap 
                            participants, repo participants, and master 
                            netting agreement participants.''.

SEC. 209. RECORDKEEPING REQUIREMENTS.

    Section 11(e)(8) of the Federal Deposit Insurance Act (12 U.S.C. 
1821(e)(8)) is amended by adding at the end the following new 
subparagraph:
                    ``(H) Recordkeeping requirements.--The Corporation, 
                in consultation with the appropriate Federal banking 
                agencies, may prescribe regulations requiring more 
                detailed recordkeeping with respect to qualified 
                financial contracts (including market valuations) by 
                insured depository institutions.''.

SEC. 210. EXEMPTIONS FROM CONTEMPORANEOUS EXECUTION REQUIREMENT.

    Section 13(e)(2) of the Federal Deposit Insurance Act (12 U.S.C. 
1823(e)(2)) is amended to read as follows:
            ``(2) Exemptions from contemporaneous execution 
        requirement.--An agreement to provide for the lawful 
        collateralization of--
                    ``(A) deposits of, or other credit extension by, a 
                Federal, State, or local governmental entity, or of any 
                depositor referred to in section 11(a)(2), including an 
                agreement to provide collateral in lieu of a surety 
                bond;
                    ``(B) bankruptcy estate funds pursuant to section 
                345(b)(2) of title 11, United States Code;
                    ``(C) extensions of credit, including any 
                overdraft, from a Federal reserve bank or Federal home 
                loan bank; or
                    ``(D) 1 or more qualified financial contracts, as 
                defined in section 11(e)(8)(D),
        shall not be deemed invalid pursuant to paragraph (1)(B) solely 
        because such agreement was not executed contemporaneously with 
        the acquisition of the collateral or because of pledges, 
        delivery, or substitution of the collateral made in accordance 
        with such agreement.''.

SEC. 211. DAMAGE MEASURE.

    (a) In General.--Title 11, United States Code, is amended--
            (1) by inserting after section 561 the following:
``Sec. 562. Damage measure in connection with swap agreements, 
              securities contracts, forward contracts, commodity 
              contracts, repurchase agreements, or master netting 
              agreements
    ``If the trustee rejects a swap agreement, securities contract as 
defined in section 741, forward contract, commodity contract (as 
defined in section 761) repurchase agreement, or master netting 
agreement pursuant to section 365(a), or if a forward contract 
merchant, stockbroker, financial institution, securities clearing 
agency, repo participant, financial participant, master netting 
agreement participant, or swap participant liquidates, terminates, or 
accelerates such contract or agreement, damages shall be measured as of 
the earlier of--
            ``(1) the date of such rejection; or
            ``(2) the date of such liquidation, termination, or 
        acceleration.''; and
            (2) in the table of sections of chapter 5 by inserting 
        after the item relating to section 561 the following:

``562. Damage measure in connection with swap agreements, securities 
                            contracts, forward contracts, commodity 
                            contracts, repurchase agreements, or master 
                            netting agreements.''.
    (b) Claims Arising From Rejection.--Section 502(g) of title 11, 
United States Code, is amended--
            (1) by designating the existing text as paragraph (1); and
            (2) by adding at the end the following:
    ``(2) A claim for damages calculated in accordance with section 562 
shall be allowed under subsection (a), (b), or (c), or disallowed under 
subsection (d) or (e), as if such claim had arisen before the date of 
the filing of the petition.''.

SEC. 212. SIPC STAY.

    Section 5(b)(2) of the Securities Investor Protection Act of 1970 
(15 U.S.C. 78eee(b)(2)) is amended by adding after subparagraph (B) the 
following new subparagraph:
                    ``(C) Exception from stay.--
                            ``(i) Notwithstanding section 362 of title 
                        11, United States Code, neither the filing of 
                        an application under subsection (a)(3) nor any 
                        order or decree obtained by the Securities 
                        Investor Protection Corporation from the court 
                        shall operate as a stay of any contractual 
                        rights of a creditor to liquidate, terminate, 
                        or accelerate a securities contract, commodity 
                        contract, forward contract, repurchase 
                        agreement, swap agreement, or master netting 
                        agreement, each as defined in title 11, United 
                        States Code, to offset or net termination 
                        values, payment amounts, or other transfer 
                        obligations arising under or in connection with 
                        1 or more of such contracts or agreements, or 
                        to foreclose on any cash collateral pledged by 
                        the debtor whether or not with respect to 1 or 
                        more of such contracts or agreements.
                            ``(ii) Notwithstanding clause (i), such 
                        application, order, or decree may operate as a 
                        stay of the foreclosure on or disposition of 
                        securities collateral pledged by the debtor, 
                        whether or not with respect to 1 or more of 
                        such contracts or agreements, securities sold 
                        by the debtor under a repurchase agreement or 
                        securities lent under a securities lending 
                        agreement.
                            ``(iii) As used in this section, the term 
                        `contractual right' includes a right set forth 
                        in a rule or bylaw of a national securities 
                        exchange, a national securities association, or 
                        a securities clearing agency, a right set forth 
                        in a bylaw of a clearing organization or 
                        contract market or in a resolution of the 
                        governing board thereof, and a right, whether 
                        or not in writing, arising under common law, 
                        under law merchant, or by reason of normal 
                        business practice.''.

SEC. 213. ASSET-BACKED SECURITIZATIONS.

    Section 541 of title 11, United States Code, is amended--
            (1) in subsection (b)--
                    (A) by striking ``or'' at the end of paragraph 
                (4)(B)(ii);
                    (B) by redesignating paragraph (5) as paragraph 
                (6); and
                    (C) by inserting after paragraph (4) the following 
                new paragraph:
            ``(5) any eligible asset (or proceeds thereof), to the 
        extent that such eligible asset was transferred by the debtor 
        before the date of commencement of the case, to an eligible 
        entity in connection with an asset-backed securitization, 
        except to the extent such asset (or proceeds or value thereof) 
        may be recovered by the trustee under section 550 by virtue of 
        avoidance under section 548(a)(1); or''; and
            (2) by adding at the end the following new subsection:
    ``(e) For purposes of this section, the following definitions shall 
apply:
            ``(1) the term `asset-backed securitization' means a 
        transaction in which eligible assets transferred to an eligible 
        entity are used as the source of payment on securities, 
        including all securities issued by governmental units, at least 
        1 class or tranche of which is rated investment grade by 1 or 
        more nationally recognized securities rating organizations, 
        when the securities are initially issued by an issuer;
            ``(2) the term `eligible asset' means--
                    ``(A) financial assets (including interests therein 
                and proceeds thereof), either fixed or revolving, 
                whether or not such assets are in existence as of the 
                date of the transfer, including residential and 
                commercial mortgage loans, consumer receivables, trade 
                receivables, assets of governmental units (including 
                payment obligations relating to taxes, receipts, fines, 
                tickets, and other sources of revenue), and lease 
                receivables, that, by their terms, convert into cash 
                within a finite time period, plus any residual interest 
                in property subject to receivables included in such 
                financial assets plus any rights or other assets 
                designed to assure the servicing or timely distribution 
                of proceeds to security holders;
                    ``(B) cash; and
                    ``(C) securities, including all securities issued 
                by governmental units.
            ``(3) the term `eligible entity' means--
                    ``(A) an issuer; or
                    ``(B) a trust, corporation, partnership, 
                governmental unit, limited liability company (including 
                a single member limited liability company), or other 
                entity engaged exclusively in the business of acquiring 
                and transferring eligible assets directly or indirectly 
                to an issuer and taking actions ancillary thereto;
            ``(4) the term `issuer' means a trust, corporation, 
        partnership, governmental unit, limited liability company 
        (including a single member limited liability company), or other 
        entity engaged exclusively in the business of acquiring and 
        holding eligible assets, issuing securities backed by eligible 
        assets, and taking actions ancillary thereto; and
            ``(5) the term `transferred' means the debtor, pursuant to 
        a written agreement, represented and warranted that eligible 
        assets were sold, contributed, or otherwise conveyed with the 
        intention of removing them from the estate of the debtor 
        pursuant to subsection (b)(5) (whether or not reference is made 
        to this title or any section of this title), irrespective, 
        without limitation, of--
                    ``(A) whether the debtor directly or indirectly 
                obtained or held an interest in the issuer or in any 
                securities issued by the issuer;
                    ``(B) whether the debtor had an obligation to 
                repurchase or to service or supervise the servicing of 
                all or any portion of such eligible assets; or
                    ``(C) the characterization of such sale, 
                contribution, or other conveyance for tax, accounting, 
                regulatory reporting, or other purposes.''.

SEC. 214. APPLICATION OF AMENDMENTS.

    The amendments made by this title shall apply with respect to cases 
commenced or appointments made under any Federal or State law after the 
date of the enactment of this Act, but shall not apply with respect to 
cases commenced or appointments made under any Federal or State law 
before the date of the enactment of this Act.
            Amend the title so as to read: ``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, to revise the banking 
        and bankruptcy insolvency laws with respect to the termination 
        and netting of financial contracts, and for other purposes.''.

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.
               TITLE I--COMMODITY EXCHANGE ACT AMENDMENTS

Sec. 101. Definitions.
Sec. 102. Agreements, contracts, and transactions in foreign currency, 
                            government securities, and certain other 
                            commodities.
Sec. 103. Legal certainty for excluded derivative transactions.
Sec. 104. Excluded electronic trading facilities.
Sec. 105. Hybrid instruments.
Sec. 106. Futures on securities.
Sec. 107. Transactions in exempt commodities and swap transactions.
Sec. 108. Protection of the public interest.
Sec. 109. Prohibited transactions.
Sec. 110. Designation of boards of trade as contract markets.
Sec. 111. Derivatives transaction execution facilities.
Sec. 112. Derivatives clearing organizations.
Sec. 113. Common provisions applicable to registered entities.
Sec. 114. Exempt boards of trade.
Sec. 115. Suspension or revocation of designation as contract market.
Sec. 116. Authorization of appropriations.
Sec. 117. Preemption.
Sec. 118. Consideration of costs and benefits and antitrust laws.
Sec. 119. Contract enforcement between eligible counterparties.
Sec. 120. Special procedures to encourage and facilitate bona fide 
                            hedging by agricultural producers.
Sec. 121. Rule of construction.
Sec. 122. Technical and conforming amendments.
Sec. 123. Privacy.
Sec. 124. Report to Congress.
Sec. 125. Effective date.
Sec. 126. International activities of the Commodity Futures Trading 
                            Commission.
                  TITLE II--SECURITIES ACTS AMENDMENTS

                         Subtitle A--Amendments

Sec. 201. Definitions under the Securities Exchange Act of 1934.
Sec. 202. Regulatory relief for markets trading security future 
                            products.
Sec. 203. Regulatory relief for intermediaries trading security future 
                            products.
Sec. 204. Special provisions for interagency cooperation.
Sec. 205. Maintenance of market integrity for security future products.
Sec. 206. Special provisions for the trading of security future 
                            products.
Sec. 207. Clearance and settlement.
Sec. 208. Amendments relating to registration and disclosure issues 
                            under the Securities Act of 1933 and the 
                            Securities Exchange Act of 1934.
Sec. 209. Amendments to the Investment Company Act of 1940 and the 
                            Investment Advisers Act of 1940.
Sec. 210. Preemption of state gaming and and bucket shop laws.
    Subtitle B--Conforming Amendments to the Commodity Exchange Act

Sec. 221. Jurisdiction of Securities and Exchange Commission; other 
                            provisions.
Sec. 222. Application of the Commodity Exchange Act to national 
                            securities exchanges and national 
                            securities associations that trade security 
                            futures.
Sec. 223. Notification of investigations and enforcement actions.
                       Subtitle C--Effective Date

Sec. 231. Effective date.

SEC. 2. PURPOSES.

    The purposes of this Act are--
            (1) to reauthorize the appropriation for the Commodity 
        Futures Trading Commission;
            (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 to oversight of the futures markets;
            (4) to provide a statutory and regulatory framework for 
        allowing the trading of futures on individual securities and 
        narrow-based securities indexes in a manner equivalent with the 
        treatment of other similar securities;
            (5) to provide the Commission jurisdiction over certain 
        retail foreign exchange transactions and bucket shops that may 
        not be 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.

               TITLE I--COMMODITY EXCHANGE ACT AMENDMENTS

SEC. 101. DEFINITIONS.

    Section 1a of the Commodity Exchange Act (7 U.S.C. 1a) is amended--
            (1) by redesignating paragraphs (1) through (7), (8) 
        through (12), (13), (14), (15), and (16) as paragraphs (2) 
        through (8), (16) through (20), (22), (23), (25), and (29), 
        respectively;
            (2) by inserting before paragraph (2) (as redesignated by 
        paragraph (1)) the following:
            ``(1) Alternative trading system.--The term `alternative 
        trading system' means an organization, association, or group of 
        persons that is registered as a broker or dealer pursuant to 
        section 15(b) of the Securities Exchange Act of 1934 (except 
        paragraph (11) thereof) and that performs the functions 
        commonly performed by an exchange (as defined in section 
        3(a)(1) of such Act) but that is exempt from the definition of 
        the term `exchange' under such section 3(a)(1) by rule or 
        regulation of the Securities and Exchange Commission on terms 
        that require compliance with regulations of the trading 
        functions of such organization, association, or group of 
        persons.'';
            (3) by inserting after paragraph (8) (as redesignated by 
        paragraph (1)) the following:
            ``(9) 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--
                            ``(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.
            ``(10) 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.
            ``(11) Eligible commercial participant.--The term `eligible 
        commercial participant' means a party or entity described in 
        paragraph (11)(A)(i), (ii), (v), or (viii) or paragraph 
        (11)(C), who, in connection with its business--
                    ``(A) has a demonstrable capacity or ability, 
                directly or through separate contractual arrangements, 
                to make or take delivery of the underlying physical 
                commodity;
                    ``(B) incurs risks, in addition to price risk, 
                related to the commodity; or
                    ``(C) is a dealer that regularly provides hedging, 
                risk management, or market-making services to the 
                foregoing entities.
            ``(12) 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 or a foreign government (including a 
                        regulated 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 or a 
                                        foreign government (including a 
                                        regulated 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)(I) 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);
                            ``(II) an associated person of a registered 
                        broker or dealer 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));
                            ``(III) an investment bank holding company 
                        (as defined in section 17(i) of the Securities 
                        Exchange Act of 1934 (15 U.S.C. 78q(i)));
                            ``(ix)(I) 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); or
                            ``(II) an affiliate of a registered futures 
                        commission merchant concerning the financial 
                        activities of which the registered person makes 
                        and keeps records under section 4f(c)(2)(B) of 
                        this Act;
                            ``(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 clause (i), (ii), 
                (viii), (ix), or (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 Advisers 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 clause (i), (ii), (viii), (ix), or (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; or
                    ``(C) any other person that the Commission 
                determines to be eligible in light of the financial or 
                other qualifications of the person;
        except that entities that are eligible contract participants 
        under clause (v), (vi), (vii)(I) or (III), or (xi) of 
        subparagraph (A) or subparagraph (C) and own and invest on a 
        discretionary basis less than $50,000,000 in investments, shall 
        only be considered eligible contract participants if the 
        agreement, contract, or transaction is offered by, and entered 
        into with, an entity that is listed in any of subclauses (I) 
        through (VI) of section 2(c)(2)(B)(ii) of this Act.
            ``(13) Excluded commodity.--The term `excluded commodity' 
        means--
                    ``(A) an interest rate, exchange rate, currency, 
                security, security index, credit risk or measure, debt 
                or equity instrument, or index or measure of inflation;
                    ``(B) any other rate, differential, index, or 
                measure of economic or commercial risk, return, or 
                value that--
                            ``(i) is not within the control of any 
                        party to the relevant contract, agreement, or 
                        transaction; and
                            ``(ii) is not based in substantial part on 
                        the value of a limited number of commodities 
                        not described in subparagraph (A) that have a 
                        finite supply; or
                    ``(C) an occurrence, extent of an occurrence, or 
                contingency associated with commercial or economic 
                consequences beyond the control of the parties to the 
                relevant contract, agreement, or transaction.
            ``(14) Exempt commodity.--The term `exempt commodity' means 
        a commodity that is not an excluded commodity and is not an 
        agricultural commodity.
            ``(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 financial holding company (as defined in 
                section 2 of the Bank Holding Company Act of 1956 (12 
                U.S.C. 1841));
                    ``(H) a trust company; or
                    ``(I) a similarly regulated subsidiary or affiliate 
                of an entity described in any of subparagraphs (A) 
                through (H).'';
            (4) 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.'';
            (5) by inserting after paragraph (23) (as redesignated by 
        paragraph (1)) the following:
            ``(24)(A) Margin.--The term `margin', when used with 
        respect to a security future product, means the amount, type, 
        and form of collateral required to secure any extension or 
        maintenance of credit, or the amount, type, and form of 
        collateral required as a performance bond related to the 
        purchase, sale, or carrying of a security future product, and 
        all other uses of collateral related to the purchasing, 
        selling, or carrying of a security future product.
            ``(B) The terms `margin level' and `level of margin', when 
        used with respect to a security future product, mean the amount 
        of margin required to secure any extension or maintenance of 
        credit, or the amount of margin required as a performance bond 
        related to the purchase, sale, or carrying of a security future 
        product.
            ``(C) The terms `higher margin level' and `higher level of 
        margin', when used with respect to a security future product, 
        mean a margin level established by a contract market that is 
        higher than the minimum amount established by the Securities 
        and Exchange Commission pursuant to section 7(c)(2)(B) of the 
        Securities Exchange Act of 1934.'';
            (6) by inserting after paragraph (25) (as redesignated by 
        paragraph (1)) the following:
            ``(26) Narrow-based security index.--The term `narrow-based 
        security index' means an index of securities on which contracts 
        for future delivery are not permitted under section 2(a)(1)(C) 
        of this Act, including any interest therein or based on the 
        value thereof.
            ``(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 
                        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 facility; or
                            ``(ii) include disciplinary sanctions other 
                        than the exclusion of participants from 
                        trading.''; and
            (7) 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;
                    ``(C) a derivatives clearing organization 
                registered under section 5b; or
                    ``(D) a board of trade designated as a contract 
                market under section 5f.
            ``(31) Security.--The term `security' means a security as 
        defined in section 2(a)(1) of the Securities Act of 1933 (15 
        U.S.C. 77b(a)(1)) or section 3(a)(10) of the Securities 
        Exchange Act of 1934 (15 U.S.C. 78c(a)(10)).
            ``(32) Security future.--The term `security future' means a 
        contract of sale for future delivery of a single security or of 
        a narrow-based security index, including any interest therein 
        or based on the value thereof, except an exempted security 
        under section 3(a)(12) of the Securities Exchange Act of 1934 
        as in effect on the date of enactment of the Futures Trading 
        Act of 1982 (other than any municipal security as defined in 
        section 3(a)(29) of the Securities Exchange Act of 1934 as in 
        effect on the date of enactment of the Futures Trading Act of 
        1982).
            ``(33) Security future product.--The term `security future 
        product' means a security future or any put, call, straddle, 
        option, or privilege on any security future.
            ``(34) 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--
                                    ``(I) 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; or
                                    ``(II) is a derivatives clearing 
                                organization;
                            ``(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. 102. 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 agreements in an excluded 
                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 or group or index of 
                        securities), 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 
                        registered pursuant to section 6(a) of the 
                        Securities Exchange Act of 1934.
                    ``(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) or 
                        an option; 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) or a futures 
                                commission merchant registered under 
                                this Act;
                                    ``(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), or an affiliated person of a 
                                futures commission merchant registered 
                                under this Act, 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. 103. 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 102) 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 5a, 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 principal-to-principal basis between 
                parties trading for their own accounts or as described 
                in section 1a(12)(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(12)(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. 104. EXCLUDED ELECTRONIC TRADING FACILITIES.

    Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a) 
(as amended by section 103) 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)(3) 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. 105. HYBRID INSTRUMENTS.

    Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a) 
(as amended by section 104) 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. 106. FUTURES ON SECURITIES.

    Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a) 
(as amended by section 105) is amended by adding at the end the 
following:
    ``(g) Nothing in subsection (a)(1)(C) or (a)(1)(D) governs or 
applies to--
            ``(1) an agreement, contract, or transaction that is 
        excluded under subsection (c) or (d) (whether or not the 
        agreement, contract, or transaction is otherwise subject to 
        this Act);
            ``(2) an electronic trading facility that is excluded under 
        subsection (e); or
            ``(3) 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).''.

SEC. 107. TRANSACTIONS IN EXEMPT COMMODITIES AND SWAP TRANSACTIONS.

    Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a) 
(as amended by section 106) 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) is entered into solely between persons that 
                are eligible contract participants at the time they 
                enter into the agreement, contract, or transaction; and
                    ``(B) is not entered into on a 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 4o 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, to the extent such 
                agreement, contract, or transaction is not between 
                eligible commercial participants and would otherwise be 
                subject to those provisions; and
                    ``(C) sections 6(c) and 9(a)(2) of this Act to the 
                extent they prohibit manipulation of the market price 
                of any commodity in interstate commerce, to the extent 
                such agreement, contract, or transaction would 
                otherwise be subject to those provisions.
            ``(3) Except as provided in paragraph (4) of this 
        subsection, nothing in this Act shall apply to an agreement, 
        contract, or transaction in an exempt commodity which--
                    ``(A) is entered into on a principal-to-principal 
                basis solely between persons that are eligible contract 
                participants at the time at which the persons enter 
                into the agreement, contract, or transaction;
                    ``(B) entered into only between persons that are 
                eligible contract participants (as defined in sections 
                1a(12)(A), (B)(ii), (B)(iii), and (C) at the time at 
                which the persons enter into the agreement, contract, 
                or transaction; and
                    ``(C) is executed or traded on an electronic 
                trading facility.
            ``(4) An agreement, contract, or transaction described in 
        paragraph (3) shall be subject to--
                    ``(A) sections 5a (to the extent so provided in 
                section 5a(g)), 5b, and 12(e)(2)(B) of this Act;
                    ``(B) sections 4b and 4o 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 to the extent such 
                agreement, contract, or transaction would otherwise be 
                subject to those provisions;
                    ``(C) sections 6(c) and 9(a)(2) of this Act, to the 
                extent they prohibit manipulation of the market price 
                of any commodity in interstate commerce and to the 
                extent such agreement, contract, or transaction would 
                otherwise be subject to those provisions; and
                    ``(D) such rules and regulations as the Commission 
                may prescribe if necessary to ensure timely 
                dissemination by the electronic trading facility of 
                price, trading volume, and other trading data to the 
                extent appropriate, if the Commission determines that 
                the electronic trading facility performs a significant 
                price discovery function for transactions in the cash 
                market for the commodity underlying any agreement, 
                contract, or transaction executed or traded on the 
                electronic trading facility.
    ``(i) Application of the Act.--Nothing in this Act shall be 
construed (1) as implying or creating any presumption that (A) any 
agreement, contract, or transaction that is eligible for an exclusion 
or exemption from regulation under this Act or (B) any agreement, 
contract, or transaction that is not eligible for an exclusion or 
exemption from regulation under this Act is or would otherwise be 
subject to this Act or (2) as conferring jurisdiction on the Commission 
with respect to any such agreement, contract, or transaction, except as 
expressly provided in section 5a (to the extent so provided in section 
5a(g)) and 5b.''.

SEC. 108. 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 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. 109. 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' 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.''.

SEC. 110. 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. Such rules may authorize--
                    ``(A) 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; and
                    ``(B) a futures commission merchant, acting as 
                principal or agent, to enter into or confirm the 
                execution of a contract for the purchase or sale of a 
                commodity for future delivery if the contract is 
                reported, recorded, or cleared in accordance with the 
                rules of the contract market or a derivatives clearing 
                organization.
            ``(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 agreements 
        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 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 not--
                    ``(A) adopt any rules or taking any actions that 
                result in any unreasonable restraints of trade; or
                    ``(B) impose any material anticompetitive burden on 
                trading on the contract market.
    ``(e) Current Agricultural and Metal Commodities.--
            ``(1) Subject to paragraph (2), a contract for purchase or 
        sale for future delivery of an agricultural or metal commodity 
        enumerated in section 1a(4) that is available for trade on a 
        contract market, as of the date of the enactment of this 
        subsection, may be traded only on a contract market designated 
        under this section.
            ``(2) In order to promote responsible economic or financial 
        innovation and fair competition, the Commission, on application 
        by any person, after notice and public comment and opportunity 
        for hearing, may prescribe rules and regulations to provide for 
        the offer and sale of contracts for future delivery or options 
        thereon to be conducted on a derivatives transaction execution 
        facility.''.

SEC. 111. 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 110(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 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 
                not readily susceptible to manipulation;
                    ``(C) the underlying commodity has no cash market; 
                or
                    ``(D) the Commission determines, based on the 
                market characteristics, surveillance history, self-
                regulatory record, or capacity of the facility that 
                trading in the futures contract is not readily 
                susceptible to 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.
            ``(5) Impermissible products.--It shall be unlawful for any 
        person to execute or trade a security future product or other 
        future involving a security, except an exempt security as 
        defined in section 3(a)(12) of the Securities Exchange Act of 
        1934 as in effect on the date of enactment of the Futures 
        Trading Act of 1982, on a designated 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 subsection.
            ``(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. Such rules may authorize--
                    ``(A) 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; and
                    ``(B) a futures commission merchant, acting as 
                principal or agent, to enter into or confirm the 
                execution of a contract for the purchase or sale of a 
                commodity for future delivery if the contract is 
                reported, recorded, or cleared in accordance with the 
                rules of the registered derivatives transaction 
                execution facility or a derivatives clearing 
                organization.
            ``(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) 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 facility.
            ``(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 not--
                    ``(A) adopt any rules or take any actions that 
                result in any unreasonable restraint of trade; or
                    ``(B) impose any material anticompetitive burden on 
                trading on the derivatives transaction execution 
                facility.
    ``(e) Use of Broker-Dealers, Depository Institutions, and Farm 
Credit System Institutions as Intermediaries.--
            ``(1) In general.--A registered derivatives transaction 
        execution facility may by rule allow a broker-dealer, 
        depository institution, or institution of the Farm Credit 
        System 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, depository institution, or institution 
                of the Farm Credit System; 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) the broker-dealer be in good standing with 
                the Securities and Exchange Commission, or the 
                depository institution or institution of the Farm 
                Credit System be in good standing with Federal bank 
                regulatory agencies (including the Farm Credit 
                Administration), as applicable; and
                    ``(B) if the broker-dealer, depository institution, 
                or institution of the Farm Credit System carries or 
                holds customer accounts or funds for transactions on 
                the derivatives transaction execution facility for more 
                than 1 business day, the broker-dealer, depository 
                institution, or institution of the Farm Credit System 
                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, the 
        Secretary of the Treasury, 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 other than securities, except exempt 
        securities under section 3(a)(12) of the Securities Exchange 
        Act of 1934 as in effect on the date of enactment of the 
        Futures Trading Act of 1982, that are otherwise excluded or 
        exempt from this Act under section 2(c), 2(d), or 2(h). 
        Notwithstanding section 5a(b)(2), a board of trade on which 
        agreements, contracts, or transactions excluded or exempt from 
        this Act under section 2(c), 2(d), or 2(h) are traded may 
        elect, but shall not be required, to register as a derivatives 
        transaction execution facility with respect to such agreements, 
        contracts, or transactions, other than any agreement, contract, 
        or transaction in a security other than such an exempt 
        security.
            ``(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. 112. 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 111) the following:

``SEC. 5B. DERIVATIVES CLEARING ORGANIZATIONS.

    ``(a) Registration Requirement.--Except as provided in subsection 
(b), it shall be unlawful for a derivatives clearing organization, 
unless registered with the Commission, directly or indirectly to make 
use of the mails or any means or instrumentality of interstate commerce 
to perform the functions of a derivatives clearing organization 
described in section 1a(9).
    ``(b) Exclusion of Derivatives Clearing Organizations Subject to 
Other Regulatory Authorities.--A derivatives clearing organization 
shall not be required to register with the Commission, and the 
Commission shall have no jurisdiction with respect to the derivatives 
clearing organization, if the derivatives clearing organization--
            ``(1)(A) is registered as a clearing agency under the 
        Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.);
            ``(B) is subject to the supervisory jurisdiction of a 
        Federal banking agency (as defined in section 3 of the Federal 
        Deposit Insurance Act (12 U.S.C. 1813)) or the National Credit 
        Union Administration; or
            ``(C) is subject to the supervisory jurisdiction of a 
        foreign regulatory authority that is recognized by the 
        Securities and Exchange Commission, the Board of Governors of 
        the Federal Reserve System, the Comptroller of the Currency, or 
        the Commission as overseeing a system of consolidated 
        supervision comparable to that provided under applicable United 
        States law; and
            ``(2) does not clear--
                    ``(A) a contract of sale for future delivery other 
                than a security future product;
                    ``(B) an option on a contract of sale for future 
                delivery other than a security future product; or
                    ``(C) an option on a commodity other than a 
                security.
    ``(c) Voluntary Registration.--A derivatives clearing organization 
that is not exempt from registration under subsection (b) may register 
with the Commission as a derivatives clearing organization.
    ``(d) Registration of Derivatives Clearing Organizations.--
            ``(1) Application.--A person desiring to register as a 
        derivatives clearing organization shall submit to the 
        Commission an application in such form and containing such 
        information as the Commission may require for the purpose of 
        making the determinations required for approval under paragraph 
        (2).
            ``(2) Core principles.--
                    ``(A) In general.--To be registered and to maintain 
                registration as a derivatives clearing organization, an 
                applicant shall demonstrate to the Commission that the 
                applicant complies with the core principles specified 
                in this paragraph.
                    ``(B) Financial resources.--The applicant shall 
                demonstrate that the applicant has adequate financial, 
                operational, and managerial resources to discharge the 
                responsibilities of a derivatives clearing organization 
                without interruption in various market conditions.
                    ``(C) Participant and product eligibility.--The 
                applicant shall establish--
                            ``(i) appropriate admission and continuing 
                        eligibility standards (including appropriate 
                        minimum financial requirements) for members of 
                        and participants in the organization; and
                            ``(ii) appropriate standards for 
                        determining eligibility of agreements, 
                        contracts, or transactions submitted to the 
                        applicant.
                    ``(D) Risk management.--The applicant shall have 
                the ability to manage the risks associated with 
                discharging the responsibilities of a derivatives 
                clearing organization through the use of appropriate 
                tools and procedures.
                    ``(E) Settlement procedures.--The applicant shall 
                have the ability to--
                            ``(i) complete settlements on a timely 
                        basis under varying circumstances;
                            ``(ii) maintain an adequate record of the 
                        flow of funds associated with each transaction 
                        that the applicant clears; and
                            ``(iii) comply with the terms and 
                        conditions of any permitted netting or offset 
                        arrangements with other clearing organizations.
                    ``(F) Treatment of funds.--The applicant shall have 
                standards and procedures designed to protect and ensure 
                the safety of member and participant funds.
                    ``(G) Default rules and procedures.--The applicant 
                shall have rules and procedures designed to allow for 
                efficient, fair, and safe management of events when 
                members or participants become insolvent or otherwise 
                default on their obligations to the derivatives 
                clearing organization.
                    ``(H) Rule enforcement.--The applicant shall--
                            ``(i) maintain adequate arrangements and 
                        resources for the effective monitoring and 
                        enforcement of compliance with rules of the 
                        applicant and for resolution of disputes; and
                            ``(ii) have the authority and ability to 
                        discipline, limit, suspend, or terminate a 
                        member's or participant's activities for 
                        violations of rules of the applicant.
                    ``(I) System safeguards.--The applicant shall 
                demonstrate that the applicant--
                            ``(i) has established and will maintain a 
                        program of oversight and risk analysis to 
                        ensure that the automated systems of the 
                        applicant function properly and have adequate 
                        capacity and security; and
                            ``(ii) has established and will maintain 
                        emergency procedures and a plan for disaster 
                        recovery, and will periodically test backup 
                        facilities sufficient to ensure daily 
                        processing, clearing, and settlement of 
                        transactions.
                    ``(J) Reporting.--The applicant shall provide to 
                the Commission all information necessary for the 
                Commission to conduct the oversight function of the 
                applicant with respect to the activities of the 
                derivatives clearing organization.
                    ``(K) Recordkeeping.--The applicant shall--
                            ``(i) maintain full records of all 
                        activities related to the business of the 
                        applicant as a derivatives clearing 
                        organization in a form and manner acceptable to 
                        the Commission for a period of at least 5 
                        years;
                            ``(ii) 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
                            ``(iii) keep the records open to inspection 
                        by any representative of the Commission or the 
                        Department of Justice.
                    ``(L) Public information.--The applicant shall make 
                information concerning the rules and operating 
                procedures governing the clearing and settlement 
                systems (including default procedures) available to 
                market participants.
                    ``(M) Information sharing.--The applicant shall--
                            ``(i) enter into and abide by the terms of 
                        all appropriate and applicable domestic and 
                        international information-sharing agreements; 
                        and
                            ``(ii) use relevant information obtained 
                        from the agreements in carrying out the 
                        clearing organization's risk management 
                        program.
                    ``(N) Antitrust considerations.--Unless necessary 
                or appropriate to achieve the purposes of this Act, the 
                derivatives clearing organization shall not--
                            ``(i) adopt any rule or take any action 
                        that results in any unreasonable restraint of 
                        trade; or
                            ``(ii) impose any material anticompetitive 
                        burden on trading on the contract market.
            ``(3) Orders concerning competition.--A derivatives 
        clearing organization may request the Commission to issue an 
        order concerning whether a rule or practice of the applicant is 
        the least anticompetitive means of achieving the objectives, 
        purposes, and policies of this Act.
    ``(e) Existing Derivatives Clearing Organizations.--A derivatives 
clearing organization shall be deemed to be registered under this 
section to the extent that--
            ``(1) the derivatives clearing organization clears 
        agreements, contracts, or transactions for a board of trade 
        that has been designated by the Commission as a contract market 
        for such agreements, contracts, or transactions before the date 
        of enactment of this section; and
            ``(2) the Commission has reviewed and approved the rules of 
        the derivatives clearing organization before that date.
    ``(f) Appointment of Trustee.--
            ``(1) In general.--If a proceeding under section 5e results 
        in the suspension or revocation of the registration of a 
        derivatives clearing organization, or if a derivatives clearing 
        organization withdraws from registration, the Commission, on 
        notice to the derivatives clearing organization, may apply to 
        the appropriate United States district court where the 
        derivatives clearing organization is located for the 
        appointment of a trustee.
            ``(2) Assumption of jurisdiction.--If the Commission 
        applies for appointment of a trustee under paragraph (1)--
                    ``(A) the court may take exclusive jurisdiction 
                over the derivatives clearing organization and the 
                records and assets of the derivatives clearing 
                organization, wherever located; and
                    ``(B) if the court takes jurisdiction under 
                subparagraph (A), the court shall appoint the 
                Commission, or a person designated by the Commission, 
                as trustee with power to take possession and continue 
                to operate or terminate the operations of the 
                derivatives clearing organization in an orderly manner 
                for the protection of participants, subject to such 
                terms and conditions as the court may prescribe.
    ``(g) Linking of Regulated Clearing Facilities.--
            ``(1) In general.--The Commission shall facilitate the 
        linking or coordination of derivatives clearing organizations 
        registered under this Act with other regulated clearance 
        facilities for the coordinated settlement of cleared 
        transactions.
            ``(2) Coordination.--In carrying out paragraph (1), the 
        Commission shall coordinate with the Federal banking agencies 
        and the Securities and Exchange Commission.''.

SEC. 113. 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 112) 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(d)(2) 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.--Except as provided in sections 
        2(a)(1)(C) and 2(a)(1)(D), and 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 (and the Secretary of the Treasury, in the case of a 
        contract of sale for future delivery of a government security 
        (or option thereon) or a rule or rule amendment specifically 
        related to such a contract) 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, a designated contract 
                market shall submit to the Commission for prior 
                approval each rule amendment that materially changes 
                the terms and conditions, as determined by the 
                Commission, in any contract of sale for future delivery 
                of a commodity specifically enumerated in section 1a(4) 
                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 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) 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. 114. 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 113) 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;
            ``(2) that are entered into only between persons that are 
        eligible contract participants at the time at which the persons 
        enter into the contract; and
            ``(3) that are not contracts of sale (or options on the 
        contract) for future delivery of any security, including any 
        group or index of securities or any interest in, or interest 
        that is based on the value of, any security.
    ``(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, 4o, 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, 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. 115. SUSPENSION OR REVOCATION OF DESIGNATION AS CONTRACT MARKET.

    Section 5e of the Commodity Exchange Act (7 U.S.C. 7b) (as 
redesignated by section 110(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. 116. 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. 117. 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 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) any Federal or State law, other than 
                antifraud provisions of general applicability and the 
                securities laws (as defined in section 3(a)(47) of the 
                Securities Exchange Act of 1934), as such Federal or 
                State law applies to 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); or
                            ``(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. 118. 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. 119. 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 a party to which is reasonably 
believed by another party to which to be an eligible contract 
participant shall be void, voidable, or unenforceable, and no such 
reasonably believed 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. 120. SPECIAL PROCEDURES TO ENCOURAGE AND FACILITATE BONA FIDE 
              HEDGING BY AGRICULTURAL PRODUCERS.

    The Commodity Exchange Act is amended by inserting after section 4p 
the following:

``SEC. 4Q. SPECIAL PROCEDURES TO ENCOURAGE AND FACILITATE BONA FIDE 
              HEDGING BY AGRICULTURAL PRODUCERS.

    ``(a) Authority.--The Commission shall consider issuing rules or 
orders which--
            ``(1) prescribe procedures under which each contract market 
        is to provide for orderly delivery, including temporary storage 
        costs, of any agricultural commodity enumerated in section 
        1a(4) which is the subject of a contract for purchase or sale 
        for future delivery;
            ``(2) increase the ease with which domestic agricultural 
        producers may participate in contract markets, including by 
        addressing cost and margin requirements, so as to better enable 
        such producers to hedge price risk associated with their 
        production;
            ``(3) provide flexibility in the minimum quantities of such 
        agricultural commodities that may be the subject of a contract 
        for purchase or sale for future delivery that is traded on a 
        contract market, to better allow domestic agricultural 
        producers to hedge such price risk; and
            ``(4) encourage exchanges to provide information and 
        otherwise facilitate the participation of domestic agricultural 
        producers in contract markets.
    ``(b) Report.--Within 1 year after the date of enactment of this 
section, the Commission shall submit to the Committee on Agriculture of 
the House of Representatives and the Committee on Agriculture, 
Nutrition, and Forestry of the Senate a report on the steps it has 
taken to implement this section and on the activities of contract 
markets pursuant to this section.''.

SEC. 121. RULE OF CONSTRUCTION.

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

SEC. 122. 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 (5), (6), (16), (17), (20), and 
                (23) (as redesignated by section 101), by inserting 
                ``or derivatives transaction execution facility'' after 
                ``contract market'' each place it appears; and
                    (B) in paragraph (25) (as redesignated by section 
                101)--
                            (i) in the paragraph heading, by striking 
                        ``contract market'' and inserting ``registered 
                        entity'';
                            (ii) by striking ``contract market'' each 
                        place it appears and inserting ``registered 
                        entity''; and
                            (iii) by inserting at the end the 
                        following:
        ``A participant in an alternative trading system that is 
        designated as a contract market pursuant to section 5f shall be 
        deemed a member of such contract market for purposes of 
        transactions in security future products through such contract 
        market.''.
            (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'';
                    (B) in subsection (a)(1)(A) (as amended by 
                subparagraph (A) of this paragraph)--
                            (i) by striking ``subparagraph (B) of this 
                        paragraph'' and inserting ``subparagraphs (C) 
                        and (D) of this paragraph and subsections (c), 
                        (d), (e), (f), (g), and (h) of this section'';
                            (ii) 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'';
                            (iii) by striking clause (ii); and
                            (iv) in clause (iii), by striking ``(iii) 
                        The'' and inserting the following:
                    ``(B) Liability of principal for act of agent.--
                The''; and
                    (C) in subsection (a)(1)(B)--
                            (i) by striking ``(B)'' and inserting 
                        ``(C)'';
                            (ii) in clause (ii)(I), by striking 
                        ``section 3 of the Securities Act of 1933 or'';
                            (iii) in clause (iv), by striking ``(I)'' 
                        and all that follows through ``(II)'';
                            (iv) in clause (v)--
                                    (I) by striking ``section 3 of the 
                                Securities Act of 1933 or''; and
                                    (II) by inserting ``or subparagraph 
                                (D)'' after ``subparagraph''; and
                            (v) by moving clauses (i) through (v) 4 ems 
                        to the right;
                    (D) in subsection (a)(7), by striking ``contract 
                market'' and inserting ``registered entity'';
                    (E) in subsection (a)(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 involving transactions for 
                        future delivery referred to in this clause or 
                        in considering possible emergency action under 
                        section 8a(9) of this Act'' 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 involving transactions for future 
                        delivery referred to in this clause or in 
                        considering any possible action under this Act 
                        (including without limitation emergency action 
                        under section 8a(9))'', and by striking 
                        ``designation, suspension, revocation, or 
                        emergency action'' and inserting ``designation, 
                        registration, suspension, revocation, or 
                        action''; and
                    (F) in subsection (a), by moving paragraphs (2) 
                through (9) 2 ems to the right.
            (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 ``sections 
                                2(a)(1)(C) and 2(a)(1)(D)''; 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)--
                            (i) in paragraph (1), by inserting ``, or 
                        derivatives transaction execution facility or 
                        facilities,'' after ``markets''; and
                            (ii) in paragraph (2), by inserting ``or 
                        derivatives transaction execution facility'' 
                        after ``contract market''; 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(a) of the Commodity Exchange Act (7 U.S.C. 
        6j(a)) is amended--
                    (A) in paragraph (1), by inserting ``for security 
                future products'' after ``contract market'';
                    (B) in paragraph (3)--
                            (i) in the matter preceding subparagraph 
                        (A), by inserting ``, other than a designated 
                        contract market in a security future product,'' 
                        after ``exempt a contract market''; and
                            (ii) in subparagraph (A), by striking 
                        ``section 5a(b)'' and inserting ``section 5''; 
                        and
                    (C) in paragraph (6)(ii), by striking ``section 
                5b'' and inserting ``section 5e''.
            (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) 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 section 5, 
                                5a, 5b, or 5f'';
                            (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''.
            (14) 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''.
            (15) 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''.
            (16) Section 6c(a) of the Commodity Exchange Act (7 U.S.C. 
        13a-1(a)) by striking ``contract market'' and inserting 
        ``registered entity''.
            (17) 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,''.
            (18) 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''.
            (19) 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''.
            (20) 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''.
            (21) 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''.
            (22) 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 
                        ``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''.
            (23) Section 9 of the Commodity Exchange Act (7 U.S.C. 13) 
        is amended by striking ``contract market'' each place it 
        appears and inserting ``registered entity''.
            (24) 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''.
            (25) 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''.
            (26) 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 or a 
                                derivatives clearing organization 
                                exempt from registration pursuant to 
                                section 5b(b)''; 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. 123. PRIVACY.

    The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by 
inserting after section 5f (as added by section 222) the following:

``SEC. 5G. PRIVACY.

    ``(a) Treatment as Financial Institutions.--Notwithstanding section 
509(3)(B) of the Gramm-Leach-Bliley Act, any person or entity that is 
subject to the jurisdiction of the Commission under this Act with 
respect to any financial activity shall be treated as a financial 
institution for purposes of title V of such Act with respect to such 
financial activity.
    ``(b) Treatment of CFTC as Federal Functional Regulator.--For 
purposes of title V of such Act, the Commodity Futures Trading 
Commission shall be treated as a Federal functional regulator within 
the meaning of section 509(2) of such Act and shall prescribe 
regulations under such title within 6 months after the date of 
enactment of this section.''.

SEC. 124. REPORT TO CONGRESS.

    (a) The Commodity Futures Trading Commission (in this section 
referred to as the ``Commission'') shall undertake and complete a study 
of the Commodity Exchange Act (in this section referred to as ``the 
Act'') and the Commission's rules, regulations and orders governing the 
conduct of persons required to be registered under the Act, not later 
than 1 year after the date of the enactment of this Act. The study 
shall identify--
            (1) the core principles and interpretations of acceptable 
        business practices that the Commission has adopted or intends 
        to adopt to replace the provisions of the Act and the 
        Commission's rules and regulations thereunder;
            (2) the rules and regulations that the Commission has 
        determined must be retained and the reasons therefor;
            (3) the extent to which the Commission believes it can 
        effect the changes identified in paragraph (1) of this 
        subsection through its exemptive authority under section 4(c) 
        of the Act; and
            (4) the regulatory functions the Commission currently 
        performs that can be delegated to a registered futures 
        association (within the meaning of the Act) and the regulatory 
        functions that the Commission has determined must be retained 
        and the reasons therefor.
    (b) In conducting the study, the Commission shall solicit the views 
of the public as well as Commission registrants, registered entities, 
and registered futures associations (all within the meaning of the 
Act).
    (c) The Commission shall transmit to the Committee on Agriculture 
of the House of Representatives and the Committee on Agriculture, 
Nutrition, and Forestry of the Senate a report of the results of its 
study, which shall include an analysis of comments received.

SEC. 125. EFFECTIVE DATE.

    This title takes effect on the date of enactment of this Act.

SEC. 126. INTERNATIONAL ACTIVITIES OF THE COMMODITY FUTURES TRADING 
              COMMISSION.

    (a) Findings.--The Congress finds that--
            (1) derivatives markets serving United States industry are 
        increasingly global in scope;
            (2) developments in data processing and communications 
        technologies enable users of risk management services to 
        analyze and compare those services on a worldwide basis;
            (3) financial services regulatory policy must be flexible 
        to account for rapidly changing derivatives industry business 
        practices;
            (4) regulatory impediments to the operation of global 
        business interests can compromise the competitiveness of United 
        States businesses;
            (5) events that disrupt financial markets and economies are 
        often global in scope, require rapid regulatory response, and 
        coordinated regulatory effort across international 
        jurisdictions;
            (6) through its membership in the International 
        Organization of Securities Commissions, the Commodity Futures 
        Trading Commission has promoted beneficial communication among 
        market regulators and international regulatory cooperation; and
            (7) the Commodity Futures Trading Commission and other 
        United States financial regulators and self-regulatory 
        organizations should continue to foster productive and 
        cooperative working relationships with their counterparts in 
        foreign jurisdictions.
    (b) Sense of the Congress.--It is the sense of the Congress that, 
consistent with its responsibilities under the Commodity Exchange Act, 
the Commodity Futures Trading Commission should, as part of its 
international activities, continue to coordinate with foreign 
regulatory authorities, to participate in international regulatory 
organizations and forums, and to provide technical assistance to 
foreign government authorities, in order to encourage--
            (1) the facilitation of cross-border transactions through 
        the removal or lessening of any unnecessary legal or practical 
        obstacles;
            (2) the development of internationally accepted regulatory 
        standards of best practice;
            (3) the enhancement of international supervisory 
        cooperation and emergency procedures;
            (4) the strengthening of international cooperation for 
        customer and market protection; and
            (5) improvements in the quality and timeliness of 
        international information sharing.

                  TITLE II--SECURITIES ACTS AMENDMENTS

                         Subtitle A--Amendments

SEC. 201. DEFINITIONS UNDER THE SECURITIES EXCHANGE ACT OF 1934.

    Section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 
78c(a)) is amended--
            (1) in paragraph (10), by inserting ``security future,'' 
        after ``treasury stock,'';
            (2) by striking paragraph (11) and inserting the following:
            ``(11) The term `equity security' means any stock or 
        similar security; or any security future; or any security 
        convertible, with or without consideration, into such a 
        security, or carrying any warrant or right to subscribe to or 
        purchase such a security; or any such warrant or right; or any 
        put, call, straddle, option, or privilege on any such security; 
        or any other security which the Commission shall deem to be of 
        similar nature and consider necessary or appropriate, by such 
        rules and regulations as it may prescribe in the public 
        interest or for the protection of investors, to treat as an 
        equity security.'';
            (3) in paragraph (13), by adding at the end the following: 
        ``For security future products, such term includes any 
        contract, agreement, or transaction for future delivery.'';
            (4) in paragraph (14), by adding at the end the following: 
        ``For security future products, such term includes any 
        contract, agreement, or transaction for future delivery.''; and
            (5) by adding at the end the following:
            ``(55)(A) The term `security future' means a contract of 
        sale for future delivery of a single security or of a narrow-
        based security index, including any interest therein or based 
        on the value thereof, except an exempted security under section 
        3(a)(12) of the Securities Exchange Act of 1934 as in effect on 
        the date of enactment of the Futures Trading Act of 1982 (other 
        than any municipal security as defined in section 3(a)(29) as 
        in effect on the date of enactment of the Futures Trading Act 
        of 1982). The term `security future' does not include any 
        agreement, contract, or transaction excluded under subsection 
        (c), (d), or (f) of section 2 of the Commodity Exchange Act as 
        in effect on the date of enactment of the Commodity Futures 
        Modernization Act of 2000.
            ``(B) The term `narrow-based security index' means an index 
        of securities on which contracts for future delivery are not 
        permitted under section 2(a)(1)(C) of the Commodity Exchange 
        Act, including any interest therein or based on the value 
        thereof.
            ``(C) The term `security future product' means a security 
        future or any put, call, straddle, option, or privilege on any 
        security future.
            ``(56)(A) The term `margin', when used with respect to a 
        security future product, means the amount, type, and form of 
        collateral required to secure any extension or maintenance of 
        credit, or the amount, type, and form of collateral required as 
        a performance bond related to the purchase, sale, or carrying 
        of a security future product, and all other uses of collateral 
        related to the purchasing, selling, or carrying of a security 
        future product.
            ``(B) The terms `margin level' and `level of margin', when 
        used with respect to a security future product, mean the amount 
        of margin required to secure any extension or maintenance of 
        credit, or the amount of margin required as a performance bond 
        related to the purchase, sale, or carrying of a security future 
        product.
            ``(C) The terms `higher margin level' and `higher level of 
        margin', when used with respect to a security future product, 
        mean a margin level established by a national securities 
        exchange registered pursuant to section 6(g) that is higher 
        than the minimum amount established by the Commission pursuant 
        to section 7(c)(2)(B).''.

SEC. 202. REGULATORY RELIEF FOR MARKETS TRADING SECURITY FUTURE 
              PRODUCTS.

    (a) Expedited Registration and Exemption.--Section 6 of the 
Securities Exchange Act of 1934 (15 U.S.C. 78f) is amended by adding at 
the end the following:
    ``(g) Notice Registration of Security Future Product Exchanges.--
            ``(1) Registration required.--An exchange that lists or 
        trades security future products may be registered as a national 
        securities exchange solely for the purposes of trading security 
        future products if--
                    ``(A) the exchange is a board of trade, as that 
                term is defined by the Commodity Exchange Act (7 U.S.C. 
                1a(2)), that has been designated a contract market by 
                the Commodity Futures Trading Commission and such 
                designation is not suspended by order by the Commodity 
                Futures Trading Commission; and
                    ``(B) such exchange does not serve as a market 
                place for transactions in securities other than--
                            ``(i) security future products; or
                            ``(ii) futures on exempted securities or 
                        groups or indexes of securities or options 
                        thereon that have been authorized under section 
                        2(a)(1)(C) of the Commodity Exchange Act by 
                        Commodity Futures Trading Commission order.
            ``(2) Registration by notice filing.--
                    ``(A) Form and content.--An exchange required to 
                register only because such exchange lists or trades 
                security future products may register for purposes of 
                this section by filing with the Commission a written 
                notice in such form, and containing the rules of the 
                exchange and such other information and documents 
                concerning such exchange as the Commission, by rule, 
                may prescribe as necessary or appropriate in the public 
                interest or for the protection of investors.
                    ``(B) Immediate effectiveness.--Such registration 
                shall be effective immediately upon filing of the 
                written notice with the Commission, except that such 
                registration shall not be effective if such 
                registration would be subject to suspension or 
                revocation.
                    ``(C) Termination.--Such registration shall be 
                terminated immediately if any of the conditions for 
                registration set forth in this subsection are no longer 
                satisfied.
            ``(3) Public availability.--The Commission shall make 
        available to the public all notices it receives under this 
        subsection.
            ``(4) Exemption of exchanges from specified provisions.--
                    ``(A) Transaction exemptions.--An exchange that is 
                registered under paragraph (1) of this subsection shall 
                be exempt from, and shall not be required to enforce 
                compliance by its members with, and its members shall 
                not, solely with respect to those transactions effected 
                on such exchange in security future products, be 
                required to comply with, the following provisions of 
                this title and the rules thereunder:
                            ``(i) Subsections (b)(2), (b)(3), (b)(4), 
                        (b)(7), (b)(9), (c), (d), and (e) of this 
                        section.
                            ``(ii) Subsection (a) of section 10.
                            ``(iii) Section 11.
                            ``(iv) Subsections (d), (f), and (k) of 
                        section 17.
                            ``(v) Subsections (a), (f), and (h) of 
                        section 19.
                    ``(B) Rule change exemptions.--An exchange that is 
                subject to the registration requirement of paragraph 
                (1) of this subsection shall also be exempt from 
                submitting proposed rule changes pursuant to section 
                19(b) of this title, except that--
                            ``(i) such exchange shall file proposed 
                        rule changes related to higher margin levels, 
                        fraud or manipulation, recordkeeping, 
                        reporting, listing standards, or decimal 
                        pricing for security future products, sales 
                        practices for security future products for 
                        persons who effect transactions in security 
                        future products or rules effectuating such 
                        exchange's obligation to enforce the securities 
                        laws pursuant to section 19(b)(7);
                            ``(ii) such exchange shall file pursuant to 
                        sections 19(b)(1) and 19(b)(2) proposed rule 
                        changes related to margin, except for changes 
                        resulting in higher margin levels; and
                            ``(iii) such exchange shall file pursuant 
                        to section 19(b)(1) proposed rule changes that 
                        have been abrogated by the Commission pursuant 
                        to section 19(b)(7)(C).
            ``(5) Association compliance with requirements.--No 
        exchange that is registered under paragraph (1) of this 
        subsection shall trade any security future product until a 
        futures association registered under section 17 of the 
        Commodity Exchange Act has met the requirements set forth in 
        section 15A(k)(2) of this title.
            ``(6) Trading in security future products.--It shall be 
        unlawful for any person to execute or trade a security future 
        product until the later of--
                    ``(A) one year after the date of enactment of the 
                Commodity Futures Modernization Act of 2000; or
                    ``(B) such date as the Federal income tax treatment 
                applicable to the security future products permitted 
                under this title are equivalent to the Federal income 
                tax treatment of equity options traded on a national 
                securities exchange.''.
    (b) Commission Review of Proposed Rule Changes.--
            (1) Expedited review.--Section 19(b) of the Securities 
        Exchange Act of 1934 (15 U.S.C. 78s(b)) is amended by adding at 
        the end the following:
            ``(7) Security future product rule changes.--
                    ``(A) Filing required.--A self-regulatory 
                organization that is an exchange registered with the 
                Commission pursuant to section 6(g) of this title or 
                that is a national securities association registered 
                pursuant to section 15A(k) of this title shall file 
                with the Commission, in accordance with such rules as 
                the Commission may prescribe, copies of any proposed 
                rule change or any proposed change in, addition to, or 
                deletion from the rules of such self-regulatory 
                organization (hereinafter in this paragraph 
                collectively referred to as a `proposed rule change') 
                that relates to higher margin levels, fraud or 
                manipulation, recordkeeping, reporting, listing 
                standards, or decimal pricing for security future 
                products, sales practices for security future products 
                for persons who effect transactions in security future 
                products or rules effectuating such self-regulatory 
                organization's obligation to enforce the securities 
                laws. Such proposed rule change shall be accompanied by 
                a concise general statement of the basis and purpose of 
                such proposed rule change. The Commission shall, upon 
                the filing of any proposed rule change, publish notice 
                thereof together with the terms of substance of the 
                proposed rule change or a description of the subjects 
                and issues involved. The Commission shall give 
                interested persons an opportunity to submit written 
                data, views, and arguments concerning such proposed 
                rule change.
                    ``(B) Filing with cftc.--A proposed rule change 
                filed with the Commission pursuant to subparagraph (A) 
                shall be filed concurrently with the Commodity Futures 
                Trading Commission. Such proposed rule change may take 
                effect upon filing of a written certification with the 
                Commodity Futures Trading Commission, upon a 
                determination by the Commodity Futures Trading 
                Commission that review of the proposed rule change is 
                not necessary or upon approval of the proposed rule 
                change by the Commodity Futures Trading Commission.
                    ``(C) Abrogation of rule changes.--Any proposed 
                rule change of a self-regulatory organization that has 
                taken effect pursuant to subparagraph (B) may be 
                enforced by such self-regulatory organization to the 
                extent such rule is not inconsistent with the 
                provisions of this title, the rules and regulations 
                thereunder, and applicable Federal law. At any time 
                within 60 days of the date of the filing of a written 
                certification with the Commodity Futures Trading 
                Commission, the date the Commodity Futures Trading 
                Commission determines that review of such proposed rule 
                change is not necessary, or the date the Commodity 
                Futures Trading Commission approves such proposed rule 
                change, the Commission, after consultation with the 
                Commodity Futures Trading Commission, summarily may 
                abrogate the proposed rule change and require that the 
                proposed rule change be refiled in accordance with the 
                provisions of paragraph (1), if it appears to the 
                Commission that such proposed rule change unduly 
                burdens competition, conflicts with the securities 
                laws, does not promote efficiency, or is inconsistent 
                with the public interest and the protection of 
                investors. Commission action pursuant to the preceding 
                sentence shall not affect the validity or force of the 
                rule change during the period it was in effect and 
                shall not be reviewable under section 25 nor deemed to 
                be a final agency action for purposes of section 704 of 
                title 5, United States Code.
                    ``(D) Review of resubmitted abrogated rules.--
                            ``(i) Proceedings.--Within 35 days of the 
                        date of publication of notice of the filing of 
                        a proposed rule change that is abrogated in 
                        accordance with subparagraph (C) and refiled in 
                        accordance with paragraph (1), or within such 
                        longer period as the Commission may designate 
                        up to 90 days after such date if the Commission 
                        finds such longer period to be appropriate and 
                        publishes its reasons for so finding or as to 
                        which the self-regulatory organization 
                        consents, the Commission shall--
                                    ``(I) by order approve such 
                                proposed rule change; or
                                    ``(II) after consultation with the 
                                Commodity Futures Trading Commission, 
                                institute proceedings to determine 
                                whether the proposed rule change should 
                                be disapproved.
                        Proceedings under subclause (II) shall include 
                        notice of the grounds for disapproval under 
                        consideration and opportunity for hearing and 
                        be concluded within 180 days after the date of 
                        publication of notice of the filing of the 
                        proposed rule change. At the conclusion of such 
                        proceedings, the Commission, by order, shall 
                        approve or disapprove such proposed rule 
                        change. The Commission may extend the time for 
                        conclusion of such proceedings for up to 60 
                        days if it finds good cause for such extension 
                        and publishes its reasons for so finding or for 
                        such longer period as to which the self-
                        regulatory organization consents.
                            ``(ii) Grounds for approval.--The 
                        Commission shall approve a proposed rule change 
                        of a self-regulatory organization under this 
                        subparagraph if it finds that such proposed 
                        rule change promotes efficiency, does not 
                        unduly burden competition, does not conflict 
                        with the securities laws, and is not 
                        inconsistent with the public interest or the 
                        protection of investors. The Commission shall 
                        disapprove such a proposed rule change of a 
                        self-regulatory organization if it does not 
                        make such finding. The Commission shall not 
                        approve any proposed rule change prior to the 
                        30th day after the date of publication of 
                        notice of the filing thereof, unless the 
                        Commission finds good cause for so doing and 
                        publishes its reasons for so finding.''.
            (2) Decimal pricing provisions.--Section 19(b) of the 
        Securities Exchange Act of 1934 (15 U.S.C. 78s(b)) is amended 
        by inserting after paragraph (7), as added by paragraph (1), 
        the following:
            ``(8) Decimal pricing.--Not later than 9 months after the 
        later of the dates specified in section 6(g)(5), all self-
        regulatory organizations listing or trading security future 
        products shall file proposed rule changes necessary to 
        implement decimal pricing of security future products. The 
        Commission may not require such rules to contain equal minimum 
        increments in such decimal pricing.''.
            (3) Consultation provisions.--Section 19(b) of the 
        Securities Exchange Act of 1934 (15 U.S.C. 78s(b)) is amended 
        by inserting after paragraph (8), as added by paragraph (2), 
        the following:
            ``(9) Consultation with cftc.--
                    ``(A) Consultation required.--The Commission shall 
                consult with and consider the views of the Commodity 
                Futures Trading Commission prior to approving a 
                proposed rule change filed by a national securities 
                association registered pursuant to section 15A(a) or a 
                national securities exchange subject to the provisions 
                of subsection (a) that primarily concerns conduct 
                related to transactions in security futures products, 
                except where the Commission determines that an 
                emergency exists requiring expeditious or summary 
                action and publishes its reasons therefor.
                    ``(B) Responses to cftc comments and findings.--If 
                the Commodity Futures Trading Commission comments in 
                writing to the Commission on a proposed rule that has 
                been published for comment, the Commission shall 
                respond in writing to such written comment before 
                approving the proposed rule. If the Commodity Futures 
                Trading Commission determines, and notifies the 
                Commission, that such rule, if implemented or as 
                applied, would--
                            ``(i) adversely affect the liquidity or 
                        efficiency of the market for security future 
                        products; or
                            ``(ii) impose any burden on competition not 
                        necessary or appropriate in furtherance of the 
                        purposes of this section,
                the Commission shall, prior to approving the proposed 
                rule, find that such rule is necessary and appropriate 
                in furtherance of the purposes of this section 
                notwithstanding the Commodity Futures Trading 
                Commission's determination.
                    ``(C) Considerations of existing regulation.--In 
                approving rules described in subparagraph (A), the 
                Commission shall consider the sufficiency and 
                appropriateness of then existing laws and rules 
                applicable to security futures products.''.
    (c) Review of Disciplinary Proceedings.--Section 19(d) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78s(d)) is amended by adding 
at the end the following:
    ``(3) The provisions of this subsection shall apply to an exchange 
registered pursuant to section 6(g) of this title or a national 
securities association registered pursuant to section 15A(k) of this 
title only to the extent that such exchange or association imposes any 
final disciplinary sanction for--
            ``(A) a violation of the federal securities laws or the 
        rules and regulations thereunder; or
            ``(B) a violation of a rule of such exchange or 
        association, as to which a proposed change would be required to 
        be filed under section 19 of this title, except that, to the 
        extent that the exchange or association rule violation relates 
        to any account, agreement, or transaction, this subsection 
        shall apply only to the extent such violation involves a 
        security future product.''.

SEC. 203. REGULATORY RELIEF FOR INTERMEDIARIES TRADING SECURITY FUTURE 
              PRODUCTS.

    (a) Expedited Registration and Exemptions.--
            (1) Amendment.--Section 15(b) of the Securities Exchange 
        Act of 1934 (15 U.S.C. 78o(b)) is amended by adding at the end 
        the following:
            ``(11) Broker/dealer registration with respect to 
        transactions in security future products.--
                    ``(A) Notice registration.--
                            ``(i) Contents of notice.--Notwithstanding 
                        paragraphs (1) and (2), a broker or dealer 
                        required to register only because it effects 
                        transactions in security future products on an 
                        exchange registered pursuant to section 6(g) 
                        may register for purposes of this section by 
                        filing with the Commission a written notice in 
                        such form and containing such information 
                        concerning such broker or dealer and any 
                        persons associated with such broker or dealer 
                        as the Commission, by rule, may prescribe as 
                        necessary or appropriate in the public interest 
                        or for the protection of investors. A broker or 
                        dealer may not register under this paragraph 
                        unless that broker or dealer is a member of a 
                        national securities association registered 
                        under section 15A(k).
                            ``(ii) Immediate effectiveness.--Such 
                        registration shall be effective immediately 
                        upon filing of the written notice with the 
                        Commission, except that such registration shall 
                        not be effective if the registration would be 
                        subject to suspension or revocation under 
                        paragraph (4).
                            ``(iii) Suspension.--Such registration 
                        shall be suspended immediately if a national 
                        securities association registered pursuant to 
                        section 15A(k) of this title suspends the 
                        membership of that broker or dealer.
                            ``(iv) Termination.--Such registration 
                        shall be terminated immediately if any of the 
                        above stated conditions for registration set 
                        forth in this paragraph are no longer 
                        satisfied.
                    ``(B) Exemptions for registered brokers and 
                dealers.--A broker or dealer registered pursuant to the 
                requirements of subparagraph (A) shall be exempt from 
                the following provisions of this title and the rules 
                thereunder with respect to transactions in security 
                future products:
                            ``(i) Section 8.
                            ``(ii) Subsection (a) of section 10.
                            ``(iii) Section 11.
                            ``(iv) Subsections (c)(3) and (c)(5) of 
                        this section.
                            ``(v) Section 15B.
                            ``(vi) Section 15C.
                            ``(vii) Subsections (d), (e), (f), (g), 
                        (h), and (i) of section 17.''.
            (2) Conforming amendment.--Section 28(e) of the Securities 
        Exchange Act of 1934 (15 U.S.C. 78bb(e)) is amended by adding 
        at the end the following:
    ``(4) The provisions of this subsection shall not apply with regard 
to securities that are security future products.''.
    (b) Floor Brokers and Floor Traders.--Section 15(b) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78o(b)) is amended by 
inserting after paragraph (11), as added by subsection (a), the 
following:
            ``(12) Exemption for security future product exchange 
        members.--
                    ``(A) Registration exemption.--A natural person 
                shall be exempt from the registration requirements of 
                this section if such person--
                            ``(i) is a member of a designated contract 
                        market registered with the Commission as an 
                        exchange pursuant to section 6(g);
                            ``(ii) effects transactions only in 
                        securities on the exchange of which such person 
                        is a member; and
                            ``(iii) has no direct contact with public 
                        customers.
                    ``(B) Other exemptions.--A natural person exempt 
                from registration pursuant to subparagraph (A) shall 
                also be exempt from the following provisions of this 
                title and the rules thereunder:
                            ``(i) Section 8.
                            ``(ii) Subsection (a) of section 10.
                            ``(iii) Section 11.
                            ``(iv) Subsections (c)(3), (c)(5), and (e) 
                        of this section.
                            ``(v) Section 15B.
                            ``(vi) Section 15C.
                            ``(vii) Subsections (d), (e), (f), (g), 
                        (h), and (i) of section 17.''.
    (c) Limited Purpose National Securities Association.--Section 15A 
of the Securities Exchange Act of 1934 (15 U.S.C. 78o-3) is amended by 
adding at the end the following:
    ``(k) Limited Purpose National Securities Association.--
            ``(1) Regulation of members with respect to security future 
        products.--A futures association registered under section 17 of 
        the Commodity Exchange Act shall be a registered national 
        securities association for the limited purpose of regulating 
        the activities of members who are registered as brokers or 
        dealers in security future products pursuant to section 
        15(b)(11).
            ``(2) Requirements for registration.--Such a securities 
        association shall--
                    ``(A) be so organized and have the capacity to 
                carry out the purposes of the securities laws 
                applicable to security future products and to comply, 
                and (subject to any rule or order of the Commission 
                pursuant to section 19(g)(2)) to enforce compliance by 
                its members and persons associated with its members, 
                with the provisions of the securities laws applicable 
                to security future products, the rules and regulations 
                thereunder, and its rules;
                    ``(B) have rules that--
                            ``(i) are designed to prevent fraudulent 
                        and manipulative acts and practices, to promote 
                        just and equitable principles of trade, and, in 
                        general, to protect investors and the public 
                        interest, including rules governing sales 
                        practices and the advertising of security 
                        future products comparable to those of other 
                        national securities associations registered 
                        pursuant to subsection (a); and
                            ``(ii) are not designed to regulate by 
                        virtue of any authority conferred by this title 
                        matters not related to the purposes of this 
                        title or the administration of the association;
                    ``(C) have rules that provide that (subject to any 
                rule or order of the Commission pursuant to section 
                19(g)(2)) its members and persons associated with its 
                members shall be appropriately disciplined for 
                violation of any provision of the securities laws 
                applicable to security future products, the rules or 
                regulations thereunder, or the rules of the 
                association, by expulsion, suspension, limitation of 
                activities, functions, and operations, fine, censure, 
                being suspended or barred from being associated with a 
                member, or any other fitting sanction; and
                    ``(D) have rules that ensure that members and 
                natural persons associated with members meet such 
                standards of training, experience, and competence 
                necessary to effect transactions in security future 
                products and are tested for their knowledge of 
                securities and security future products.
            ``(3) Exemption from rule change submission.--Such a 
        securities association shall be exempt from submitting proposed 
        rule changes pursuant to section 19(b) of this title, except 
        that--
                    ``(A) the association shall file proposed rule 
                changes related to higher margin levels, fraud or 
                manipulation, recordkeeping, reporting, listing 
                standards, or decimal pricing for security future 
                products, sales practices, advertising of security 
                future products, or standards of training, experience, 
                competence, or other qualifications for security future 
                products for persons who effect transactions in 
                security future products or rules effectuating the 
                association's obligation to enforce the securities laws 
                pursuant to section 19(b)(7);
                    ``(B) the association shall file pursuant to 
                sections 19(b)(1) and 19(b)(2) proposed rule changes 
                related to margin, except for changes resulting in 
                higher margin levels; and
                    ``(C) the association shall file pursuant to 
                section 19(b)(1) proposed rule changes that have been 
                abrogated by the Commission pursuant to section 
                19(b)(7)(C).
            ``(4) Other exemptions.--Such a securities association 
        shall be exempt from and shall not be required to enforce 
        compliance by its members, and its members shall not, solely 
        with respect to their transactions effected in security future 
        products, be required to comply, with the following provisions 
        of this title and the rules thereunder:
                    ``(A) Subsections (b)(1), (b)(3), (b)(4), (b)(5), 
                (b)(8), (b)(10), (b)(11), (b)(12), (b)(13), (c), (d), 
                (e), (f), (g), (h), and (i) of this section.
                    ``(B) Subsections (d), (f), and (k) of section 17.
                    ``(C) Subsections (a), (f), and (h) of section 
                19.''.
    (d) Exemption Under the Securities Investor Protection Act of 
1970.--
            (1) Section 16(14) of the Securities Investor Protection 
        Act of 1970 (15 U.S.C. 78lll(14)) is amended by inserting ``or 
        any security future as that term is defined in section 
        3(a)(55)(A) of the Securities Exchange Act of 1934,'' after 
        ``certificate of deposit for a security,''.
            (2) Section 3(a)(2)(A) of the Securities Investor 
        Protection Act of 1970 (15 U.S.C. 78ccc(a)(2)(A)) is amended--
                    (A) in clause (i), by striking ``and'' after the 
                semicolon;
                    (B) in clause (ii), by striking the period and 
                inserting ``; and'';
                    (C) by adding at the end the following:
                            ``(iii) persons who are registered as a 
                        broker or dealer pursuant to section 
                        15(b)(11)(A) of the Securities Exchange Act of 
                        1934.''.
    (e) Other Provision.--Section 15(i)(6)(A) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78o(i)(6)(A)) is amended--
            (1) in clause (ii), by striking ``and'' after the 
        semicolon;
            (2) in clause (iii), by striking the period and inserting 
        ``; and''; and
            (3) by adding at the end the following:
                            ``(iv) is not a security future product.''.

SEC. 204. SPECIAL PROVISIONS FOR INTERAGENCY COOPERATION.

    Section 17 of the Securities Exchange Act of 1934 (15 U.S.C. 78q) 
is amended by striking subsection (b) and inserting the following:
    ``(b) Records Subject to Examination.--
            ``(1) Procedures for cooperation with other agencies.--All 
        records of persons described in subsection (a) are subject at 
        any time, or from time to time, to such reasonable periodic, 
        special, or other examinations by representatives of the 
        Commission and the appropriate regulatory agency for such 
        persons as the Commission or the appropriate regulatory agency 
        for such persons deems necessary or appropriate in the public 
        interest, for the protection of investors, or otherwise in 
        furtherance of the purposes of this title if the Commission, 
        prior to conducting any such examination of a--
                    ``(A) registered clearing agency, registered 
                transfer agent, or registered municipal securities 
                dealer for which it is not the appropriate regulatory 
                agency, gives notice to the appropriate regulatory 
                agency for such clearing agency, transfer agent, or 
                municipal securities dealer, of such proposed 
                examination and consults with the appropriate 
                regulatory agency concerning the feasibility and 
                desirability of coordinating such examinations 
                conducted by the appropriate regulatory agency with a 
                view to avoiding unnecessary regulatory duplication or 
                undue regulatory burdens for such clearing agency, 
                transfer agent, or municipal securities dealer; or
                    ``(B) broker or dealer registered pursuant to 
                section 15(b)(11), exchange registered pursuant to 
                section 6(g), or national securities association 
                registered pursuant to section 15A(k) gives notice to 
                the Commodity Futures Trading Commission of such 
                proposed examination and consults with the Commodity 
                Futures Trading Commission concerning the feasibility 
                and desirability of coordinating such examination with 
                examinations conducted by the Commodity Futures Trading 
                Commission with a view to avoiding unnecessary 
                regulatory duplication or undue regulatory burdens for 
                such broker or dealer or exchange.
            ``(2) Furnishing data and reports to cftc.--The Commission 
        shall notify the Commodity Futures Trading Commission of any 
        examination conducted of any broker or dealer registered 
        pursuant to section 15(b)(11), exchange registered pursuant to 
        section 6(g), or national securities association registered 
        pursuant to section 15A(k) and, upon request, furnish to the 
        Commodity Futures Trading Commission any examination report and 
        data supplied to the Commission in connection with such 
        examination.
            ``(3) Use of cftc reports.--The Commission shall, to the 
        fullest extent possible, use the reports of examinations of any 
        broker or dealer registered pursuant to section 15(b)(11) or 
        exchange registered pursuant to section 6(g) made by the 
        Commodity Futures Trading Commission, a national securities 
        association registered pursuant to section 15A(k), or an 
        exchange registered pursuant to section 6(g).
            ``(4) Large trader reporting.--The Commission and the 
        Commodity Futures Trading Commission shall jointly prescribe 
        rules to require large trader reporting with respect to 
        security future products. Such rules shall specify a reporting 
        level for each security future product, a format for reporting, 
        and the procedures for filing such reports with the Commission 
        and the Commodity Futures Trading Commission.
            ``(5) Rule of construction.--Nothing in this subsection 
        shall be construed to impair or limit (other than by the 
        requirement of prior consultation) the power of the Commission 
        under this subsection to examine any clearing agency, transfer 
        agent, or municipal securities dealer, broker or dealer 
        registered pursuant to section 15(b)(11), exchange registered 
        pursuant to section 6(g), or national securities association 
        registered pursuant to section 15A(k), or to affect in any way 
        the power of the Commission under any other provision of this 
        title or otherwise to inspect, examine, or investigate any 
        clearing agency, transfer agent, or municipal securities 
        dealer, broker or dealer registered pursuant to section 
        15(b)(11), exchange registered pursuant to section 6(g), or 
        national securities association registered pursuant to section 
        15A(k).''.

SEC. 205. MAINTENANCE OF MARKET INTEGRITY FOR SECURITY FUTURE PRODUCTS.

    (a) Addition of Security Future Products to Option-Specific 
Enforcement Provisions.--
            (1) Prohibition against manipulation.--Section 9(b) of the 
        Securities Exchange Act of 1934 (15 U.S.C. 78i(b)) is amended--
                    (A) in paragraph (1)--
                            (i) by inserting ``(A)'' after 
                        ``acquires''; and
                            (ii) by striking ``; or'' and inserting ``, 
                        or (B) any security future product on the 
                        security; or'';
                    (B) in paragraph (2)--
                            (i) by inserting ``(A)'' after ``interest 
                        in any''; and
                            (ii) by striking ``; or'' and inserting ``, 
                        or (B) such security future product delivery; 
                        or''; and
                    (C) in paragraph (3)--
                            (i) by inserting ``(A)'' after ``interest 
                        in any''; and
                            (ii) by inserting ``, or (B) such security 
                        future product'' after ``privilege''.
            (2) Manipulation in options and other derivative 
        products.--Section 9(g) of the Securities Exchange Act of 1934 
        (15 U.S.C. 78i(g)) is amended--
                    (A) by inserting ``(1)'' after ``(g)'';
                    (B) by inserting ``other than a security future 
                product'' after ``future delivery''; and
                    (C) by adding at the end following:
    ``(2) Notwithstanding the Commodity Exchange Act, the Commission 
shall have the authority to regulate the trading of any security future 
product to the extent provided in the securities laws.''.
            (3) Liability of controlling persons and persons who aid 
        and abet violations.--Section 20(d) of the Securities Exchange 
        Act of 1934 (15 U.S.C. 78t(d)) is amended by striking ``or 
        privilege'' and inserting ``privilege, or security future 
        product''.
            (4) Liability to contemporaneous traders for insider 
        trading.--Section 21A(a)(1) of the Securities Exchange Act of 
        1934 (15 U.S.C. 78u-1(a)(1)) is amended by striking 
        ``standardized options, the Commission--'' and inserting 
        ``standardized options or security future products, the 
        Commission--''.
            (5) Enforcement consultation.--Section 21 of the Securities 
        Exchange Act of 1934 (15 U.S.C. 78u) is amended by adding at 
        the end the following:
    ``(i) Information to CFTC.--The Commission shall provide the 
Commodity Futures Trading Commission with notice of the commencement of 
any proceeding and a copy of any order entered by the Commission 
against any broker or dealer registered pursuant to section 15(b)(11) 
or any exchange registered pursuant to section 6(g).''.

SEC. 206. SPECIAL PROVISIONS FOR THE TRADING OF SECURITY FUTURE 
              PRODUCTS.

    (a) Listing Standards and Conditions for Trading.--Section 6 of the 
Securities Exchange Act of 1934 (15 U.S.C. 78f) is amended by inserting 
after subsection (g), as added by section 202, the following:
    ``(h) Trading in Security Future Products.--
            ``(1) Trading on exchange or association required.--It 
        shall be unlawful for any person to effect transactions in 
        security future products that are not listed on a national 
        securities exchange or a national securities association 
        registered pursuant to section 15A(a).
            ``(2) Listing standards and conditions for trading 
        required.--A national securities exchange or a national 
        securities association registered pursuant to section 15A(a) 
        may trade only security future products that (A) conform with 
        listing standards and conditions for trading that such exchange 
        or association files with the Commission under section 19(b), 
        and (B) meet the criteria specified in section 2(a)(1)(D)(i) of 
        the Commodity Exchange Act.
            ``(3) Requirements for listing standards and conditions for 
        trading.--Such listing standards and conditions for trading 
        shall--
                    ``(A) except as otherwise provided in a rule, 
                regulation, or order issued pursuant to paragraph (4), 
                require that any security underlying the security 
                future, including each component security of a narrow-
                based security index, be registered pursuant to section 
                12 of this title;
                    ``(B) except as otherwise provided in a rule, 
                regulation, or order issued pursuant to paragraph (4), 
                require that the security future product be cash 
                settled;
                    ``(C) be no less restrictive than comparable 
                listing standards for options traded on a national 
                securities exchange or a national securities 
                association registered pursuant to section 15A(a) of 
                this title;
                    ``(D) except as otherwise provided in a rule, 
                regulation, or order issued pursuant to paragraph (4), 
                require that the security future be based upon common 
                stock and such other equity securities as the 
                Commission and the Commodity Futures Trading Commission 
                jointly determine appropriate;
                    ``(E) require that the security future product is 
                cleared by a clearing agency that has in place 
                provisions for linked and coordinated clearing with 
                other clearing agencies that clear security future 
                products, which permits the security future product to 
                be purchased on one market and offset on any other 
                market on which the security future product is traded;
                    ``(F) require that only a broker or dealer subject 
                to suitability rules comparable to those of a national 
                securities association registered pursuant to section 
                15A(a) effect transactions in the security future 
                product;
                    ``(G) require that the security future product be 
                subject to the prohibition against dual trading in 
                section 4j of the Commodity Exchange Act (7 U.S.C. 6j) 
                and the rules and regulations thereunder or the 
                provisions of section 11(a) of this title and the rules 
                and regulations thereunder, except to the extent 
                otherwise permitted under this title and the rules and 
                regulations thereunder;
                    ``(H) require that trading in the security future 
                product not be readily susceptible to manipulation of 
                the price of such security future product, nor to 
                causing or being used in the manipulation of the price 
                of any underlying security, option on such security, or 
                option on a group or index including such securities;
                    ``(I) require that procedures be in place for 
                coordinated surveillance among the market on which the 
                security future product is traded, any market on which 
                any security underlying the security future product is 
                traded, and other markets on which any related security 
                is traded to detect manipulation and insider trading;
                    ``(J) require that the market on which the security 
                future product is traded has in place audit trails 
                necessary or appropriate to facilitate the coordinated 
                surveillance required in subparagraph (I);
                    ``(K) require that the market on which the security 
                future product is traded has in place procedures to 
                coordinate trading halts between such market and any 
                market on which any security underlying the security 
                future product is traded and other markets on which any 
                related security is traded; and
                    ``(L) require that the margin requirements for a 
                security future product be consistent with the margin 
                requirements for comparable option contracts traded on 
                an exchange registered pursuant to section 6(a) of this 
                title and that initial and maintenance margin levels 
                for a security future product not be lower than the 
                levels of margin required for comparable option 
                contracts traded on an exchange registered pursuant to 
                section 6(a) of this title, except that nothing in this 
                subparagraph shall be construed to prevent a national 
                securities exchange or national securities association 
                from requiring higher margin levels for a security 
                future product when it deems such action to be 
                necessary or appropriate.
            ``(4) Authority to modify certain listing standard 
        requirements.--The Commission and the Commodity Futures Trading 
        Commission, by rule, regulation, or order, may jointly modify 
        the listing standard requirements specified in subparagraph 
        (A), (B), or (D) of paragraph (3) to the extent such 
        modification fosters the development of fair and orderly 
        markets in security future products, is necessary or 
        appropriate in the public interest, and is consistent with the 
        protection of investors.
            ``(5) Requirements for other persons trading security 
        future products.--It shall be unlawful for any person (other 
        than a national securities exchange or a national securities 
        association registered pursuant to section 15A(a)) to 
        constitute, maintain, or provide a marketplace or facilities 
        for bringing together purchasers and sellers of security future 
        products or to otherwise perform with respect to security 
        future products the functions commonly performed by a stock 
        exchange as that term is generally understood, unless a 
        national securities association registered pursuant to section 
        15A(a)--
                    ``(A) has in place procedures for coordinated 
                surveillance among such person, the market trading the 
                securities underlying the security future products, and 
                other markets trading related securities to detect 
                manipulation and insider trading;
                    ``(B) has rules to require audit trails necessary 
                or appropriate to facilitate the coordinated 
                surveillance required in subparagraph (A); and
                    ``(C) has rules to require such person to 
                coordinate trading halts with markets trading the 
                securities underlying the security future products and 
                other markets trading related securities.
            ``(6) Deferral of options on security futures trading.--No 
        person shall offer to enter into, enter into, or confirm the 
        execution of any put, call, straddle, option, or privilege on a 
        security future, except that, after 3 years after the date of 
        enactment of this subsection, the Commission and the Commodity 
        Futures Trading Commission may by order jointly determine to 
        permit trading of puts, calls, straddles, options, or 
        privileges on any security future authorized to be traded under 
        the provisions of this Act and the Commodity Exchange Act. 
        Before any such determination, the Commission and the Commodity 
        Futures Trading Commission shall conduct a study of the effect 
        of the trading of security futures on the markets for futures 
        contracts, securities, and options and the adequacy of 
        protections for investors and other market participants.''.
    (b) Margin.--Section 7 of the Securities Exchange Act of 1934 (15 
U.S.C. 78g) is amended--
            (1) in subsection (a), by inserting ``or a security future 
        product'' after ``exempted security'';
            (2) in subsection (c)(1)(A), by inserting ``except as 
        provided in paragraph (2),'' after ``security),'';
            (3) by redesignating paragraph (2) of subsection (c) as 
        paragraph (3) of such subsection; and
            (4) by inserting after paragraph (1) of such subsection the 
        following:
            ``(2) Margin regulations.--
                    ``(A) Compliance with margin rules required.--It 
                shall be unlawful for any broker, dealer, or member of 
                a national securities exchange to, directly or 
                indirectly, extend or maintain credit to or for, or 
                collect margin from any customer on, any security 
                future product unless such activities comply with the 
                rules and regulations which the Commission, after 
                consultation with the Commodity Futures Trading 
                Commission shall prescribe pursuant to subparagraph 
                (B).
                    ``(B) Criteria for issuance of rules.--The 
                Commission shall issue such regulations to establish 
                margin requirements, including the establishment of 
                levels of margin (initial and maintenance) and use of 
                collateral for security future products under such 
                terms, and at such levels, as the Commission deems 
                appropriate--
                            ``(i) to preserve the financial integrity 
                        of markets trading security future products;
                            ``(ii) to prevent systemic risk;
                            ``(iii) to make consistent the margin 
                        levels (initial and maintenance) and other 
                        margin requirements between security future 
                        products and comparable options contracts 
                        traded on a national securities exchange; and
                            ``(iv) to ensure that the margin 
                        requirements (other than levels of margin), 
                        including the type, form, and use of collateral 
                        for security future products, are and remain 
                        consistent with the requirements established by 
                        the Federal Reserve Board, pursuant to 
                        subparagraphs (A) and (B) of paragraph (1).''.
    (c) Incorporation of Security Future Products Into the National 
Market System.--Section 11A of the Securities Exchange Act of 1934 (15 
U.S.C. 78k-1) is amended by adding at the end the following:
    ``(e) National Markets System for Security Future Products.--
            ``(1) Consultation and cooperation required.--With respect 
        to security future products, the Commission and the Commodity 
        Futures Trading Commission shall consult and cooperate so that, 
        to the maximum extent practicable, their respective regulatory 
        responsibilities may be fulfilled and the rules and regulations 
        applicable to security future products may foster a national 
        market system for security future products if the Commission 
        and the Commodity Futures Trading Commission jointly determine 
        that such a system would be consistent with the congressional 
        findings in subsection (a)(1). In accordance with this 
        objective, the Commission shall, at least 15 days prior to the 
        issuance for public comment of any proposed rule or regulation 
        under this section concerning security future products, consult 
        and request the views of the Commodity Futures Trading 
        Commission.
            ``(2) Application of rules by order of cftc.--No rule 
        adopted pursuant to this section shall be applied to any person 
        with respect to the trading of security future products on an 
        exchange that is registered under section 6(g) unless the 
        Commodity Futures Trading Commission has issued an order 
        directing that such rule is applicable to such persons.''.
    (d) Incorporation of Security Future Products Into the National 
System for Clearance and Settlement.--Section 17A(b) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78q-1(b)) is amended by adding at the 
end the following:
    ``(7) A clearing agency that is regulated directly or indirectly by 
the Commodity Futures Trading Commission through its association with a 
designated contract market for security future products, and that 
performs the functions of a clearing agency only with respect to 
security future products and transactions in securities effected 
pursuant to the rules of the designated contract market with which such 
agency is associated, is exempted from the provisions of this section 
and the rules and regulations thereunder, except that any clearing 
agency that performs the functions of a clearing agency with respect to 
security future products must coordinate with and develop fair and 
reasonable links with any and all other clearing agencies that perform 
the functions of a clearing agency with respect to security future 
products, in order to permit security future products to be purchased 
on a national securities exchange or national securities association 
registered pursuant to section 15A(a) and offset on another national 
securities exchange or national securities association registered 
pursuant to section 15A(a).''.
    (e) Market Emergency Powers and Circuit Breakers.--Section 12(k) of 
the Securities Exchange Act of 1934 (15 U.S.C. 78l(k)) is amended--
            (1) in paragraph (1), by adding at the end the following: 
        ``If the actions described in subparagraph (A) or (B) involve a 
        security future product, the Commission shall consult with and 
        consider the views of the Commodity Futures Trading 
        Commission.''; and
            (2) in paragraph (2)(B), by inserting after the first 
        sentence the following: ``If the actions described in 
        subparagraph (A) involve a security future product, the 
        Commission shall consult with and consider the views of the 
        Commodity Futures Trading Commission.''.
    (f) Obligation to Put in Place Procedures and Adopt Rules.--Section 
15A of the Securities Exchange Act of 1934 (15 U.S.C. 78o-3) is amended 
by inserting after subsection (k), as added by section 203, the 
following new subsection:
    ``(l) Procedures and Rules for Security Future Products.--A 
national securities association registered pursuant to subsection (a) 
shall, not later than one year after the date of enactment of the 
Commodity Futures Modernization Act of 2000, implement the procedures 
specified in section 6(h)(5)(A) of this title and adopt the rules 
specified in subparagraphs (B) and (C) of section 6(h)(5) of this 
title.''.

SEC. 207. CLEARANCE AND SETTLEMENT.

    Section 17A of the Securities Exchange Act of 1934 (15 U.S.C. 78q-
1) is amended--
            (1) in subsection (a)--
                    (A) in paragraph (1), by inserting after 
                subparagraph (D) the following:
            ``(E) The clearance and settlement of transactions in over-
        the-counter derivatives through clearing agencies registered 
        with the Commission will reduce systemic risk and provide 
        stability to financial markets during times of market 
        disorder.''; and
                    (B) in paragraph (2)(A)(ii), by striking ``and 
                commodity options'' and inserting ``commodity options, 
                and over-the-counter derivatives''; and
            (2) in subsection (b)--
                    (A) in paragraph (3)(A), by inserting ``and 
                derivative agreements, contracts, and transactions'' 
                after ``prompt and accurate clearance and settlement of 
                securities transactions'';
                    (B) in paragraph (3)(F), by inserting ``and, to the 
                extent applicable, derivative agreements, contracts, 
                and transactions'' after ``designed to promote the 
                prompt and accurate clearance and settlement of 
                securities transactions''; and
                    (C) by inserting after paragraph (7), as added by 
                section 206(d), the following:
    ``(8) A registered clearing agency shall be permitted to provide 
facilities for the clearance and settlement of any derivative 
agreements, contracts, or transactions that are excluded from the 
Commodity Exchange Act, subject to the requirements of this section and 
to such rules and regulations as the Commission may prescribe as 
necessary or appropriate in the public interest, for the protection of 
investors, or otherwise in furtherance of the purposes of this 
title.''.

SEC. 208. AMENDMENTS RELATING TO REGISTRATION AND DISCLOSURE ISSUES 
              UNDER THE SECURITIES ACT OF 1933 AND THE SECURITIES 
              EXCHANGE ACT OF 1934.

    (a) Amendments to the Securities Act of 1933.--
            (1) Treatment of security future products.--Section 2(a) of 
        the Securities Act of 1933 (15 U.S.C. 77b(a)) is amended--
                    (A) in paragraph (1), by inserting ``security 
                future,'' after ``treasury stock,'';
                    (B) in paragraph (3), by adding at the end the 
                following: ``Any offer or sale of a security future 
                product by or on behalf of the issuer of the securities 
                underlying the security future product, an affiliate of 
                the issuer, or an underwriter, shall constitute a 
                contract for sale of, sale of, offer for sale, or offer 
                to sell the underlying securities.''; and
                    (C) by adding at the end the following:
            ``(16) The terms `security future', `narrow-based security 
        index', and `security future product' have the same meanings as 
        provided in section 3(a)(55) of the Securities Exchange Act of 
        1934.''.
            (2) Exemption from registration.--Section 3(a) of the 
        Securities Act of 1933 (15 U.S.C. 77c(a)) is amended by adding 
        at the end the following:
            ``(14) Any security future product that is--
                    ``(A) cleared by a clearing agency registered under 
                section 17A of the Securities Exchange Act of 1934 or 
                exempt from registration under subsection (b)(7) of 
                such section 17A; and
                    ``(B) listed on a national securities exchange or a 
                national securities association registered pursuant to 
                section 15A(a) of the Securities Exchange Act of 
                1934.''.
            (3) Conforming amendment.--Section 12(a)(2) of the 
        Securities Act of 1933 (15 U.S.C. 77l(a)(2)) is amended by 
        striking ``paragraph (2)'' and inserting ``paragraphs (2) and 
        (14)''.
    (b) Amendments to the Securities Exchange Act of 1934.--
            (1) Exemption from registration.--Section 12(a) of the 
        Securities Exchange Act of 1934 (15 U.S.C. 78l(a)) is amended 
        by adding at the end the following: ``The provisions of this 
        subsection shall not apply in respect of a security future 
        product listed on a national securities exchange.''.
            (2) Exemptions from reporting requirement.--Section 
        12(g)(5) of the Securities Exchange Act of 1934 (15 U.S.C. 
        78l(g)(5)) is amended by adding at the end the following: ``For 
        purposes of this subsection, a security future product shall 
        not be considered a class of equity security of the issuer of 
        the securities underlying the security future product.''.
            (3) Transactions by corporate insiders.--Section 16 of the 
        Securities Exchange Act of 1934 (15 U.S.C. 78p) is amended by 
        adding at the end the following:
    ``(f) Treatment of Transactions in Security Future Products.--The 
provisions of this section shall apply to ownership of and transactions 
in security future products as if they were ownership of and 
transactions in the underlying equity security. The Commission may 
adopt such rules and regulations as it deems necessary or appropriate 
in the public interest to carry out the purposes of this section.''.

SEC. 209. AMENDMENTS TO THE INVESTMENT COMPANY ACT OF 1940 AND THE 
              INVESTMENT ADVISERS ACT OF 1940.

    (a) Definitions Under the Investment Company Act of 1940 and the 
Investment Advisers Act of 1940.--
            (1) Section 2(a)(36) of the Investment Company Act of 1940 
        (15 U.S.C. 80a-2(a)(36)) is amended by inserting ``security 
        future,'' after ``treasury stock,''.
            (2) Section 202(a)(18) of the Investment Advisers Act of 
        1940 (15 U.S.C. 80b-2(a)(18)) is amended by inserting 
        ``security future,'' after ``treasury stock,''.
            (3) Section 2(a) of the Investment Company Act of 1940 (15 
        U.S.C. 80a-2(a)) is amended by adding at the end the following:
            ``(52) The terms `security future' and `narrow-based 
        security index' have the same meanings as provided in section 
        3(a)(55) of the Securities Exchange Act of 1934.''.
            (4) Section 202(a) of the Investment Advisers Act of 1940 
        (15 U.S.C. 80b-2(a)) is amended by adding at the end the 
        following:
            ``(27) The terms `security future' and `narrow-based 
        security index' have the same meanings as provided in section 
        3(a)(55) of the Securities Exchange Act of 1934.''.
    (b) Other Provision.--Section 203(b) of the Investment Advisers Act 
of 1940 (15 U.S.C. 80b-3(b)) is amended--
            (1) by striking ``or'' at the end of paragraph (4);
            (2) by striking the period at the end of paragraph (5) and 
        inserting ``; or''; and
            (3) by adding at the end the following:
            ``(6) any investment adviser that is registered with the 
        Commodity Futures Trading Commission as a commodity trading 
        advisor whose business does not consist primarily of acting as 
        an investment adviser, as defined in section 202(a)(11) of this 
        title, and that does not act as an investment adviser to (A) an 
        investment company registered under title I of this Act, or (B) 
        a company which has elected to be a business development 
        company pursuant to section 54 of title I of this Act and has 
        not withdrawn its election.''.

SEC. 210. PREEMPTION OF STATE GAMING AND BUCKET SHOP LAWS.

    The last sentence of section 28(a) of the Securities Exchange Act 
of 1934 (15 U.S.C. 78bb(a)) is amended--
            (1) by inserting ``subject to this title'' after 
        ``privilege, or other security''; and
            (2) by striking ``any such instrument, if such instrument 
        is traded pursuant to rules and regulations of a self-
        regulatory organization that are filed with the Commission 
        pursuant to section 19(b) of this Act'' and inserting ``any 
        such security''.

    Subtitle B--Conforming Amendments to the Commodity Exchange Act

SEC. 221. JURISDICTION OF SECURITIES AND EXCHANGE COMMISSION; OTHER 
              PROVISIONS.

    (a) Jurisdiction of Securities and Exchange Commission.--Section 
2(a)(1) of the Commodity Exchange Act (7 U.S.C. 2, 2a, 4) is amended by 
adding at the end the following:
                    ``(D)(i) Notwithstanding any other provision of 
                this Act, the Securities and Exchange Commission shall 
                have jurisdiction and authority over security futures 
                as defined in section 3(a)(55) of the Securities 
                Exchange Act of 1934, section 2(a)(16) of the 
                Securities Act of 1933, section 2(a)(52) of the 
                Investment Company Act of 1940, and section 202(a)(27) 
                of the Investment Advisers Act of 1940, options on 
                security futures, and persons effecting transactions in 
                security futures and options thereon, and this Act 
                shall apply to and the Commission shall have 
                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 in, a security future 
                product as defined in section 1a(33) of this Act: 
                Provided, however, That, except as provided in clause 
                (v) of this subparagraph, no board of trade shall be 
                designated as a contract market with respect to any 
                such contracts of sale for future delivery unless the 
                board of trade making such application demonstrates and 
                the Commission expressly finds that the specific 
                contract with respect to which the application has been 
                made, or the board of trade, meets the following 
                criteria:
                            ``(I) Except as otherwise provided in a 
                        rule, regulation, or order issued pursuant to 
                        clause (vi) of this subparagraph, any security 
                        underlying the security future, including each 
                        component security of a contract of sale for 
                        future delivery on a narrow-based security 
                        index, is registered pursuant to section 12 of 
                        the Securities Exchange Act of 1934.
                            ``(II) Except as otherwise provided in a 
                        rule, regulation, or order issued pursuant to 
                        clause (vi) of this subparagraph, the security 
                        future product is cash settled.
                            ``(III) The security future product is not 
                        traded on an exempt board of trade or a 
                        designated transaction execution facility.
                            ``(IV) Except as otherwise provided in a 
                        rule, regulation, or order issued pursuant to 
                        clause (vi) of this subparagraph, the security 
                        future is based upon common stock and such 
                        other equity securities as the Commission and 
                        the Securities and Exchange Commission jointly 
                        determine appropriate.
                            ``(V) The security future product is 
                        cleared by a clearing agency that has in place 
                        provisions for linked and coordinated clearing 
                        with other clearing agencies that clear 
                        security future products, which permits the 
                        security future product to be purchased on a 
                        designated contract market, national securities 
                        exchange registered under section 6(a) of the 
                        Securities Exchange Act of 1934, or national 
                        securities association registered pursuant to 
                        section 15A(a) of the Securities Exchange Act 
                        of 1934 and offset on any other designated 
                        contract market, national securities exchange 
                        registered under section 6(a) of the Securities 
                        Exchange Act of 1934, or national securities 
                        association registered pursuant to section 
                        15A(a) of the Securities Exchange Act of 1934 
                        on which the security future product is traded.
                            ``(VI) Only futures commission merchants, 
                        introducing brokers, commodity trading 
                        advisers, commodity pool operators or 
                        associated persons subject to suitability rules 
                        comparable to those of a national securities 
                        association registered pursuant to section 
                        15A(a) of the Securities Exchange Act of 1934 
                        solicit, accept any order for, or otherwise 
                        deal in any transaction in or in connection 
                        with a security future product.
                            ``(VII) The security future product is 
                        subject to a prohibition against dual trading 
                        in section 4j of this Act and the rules and 
                        regulations thereunder or the provisions of 
                        section 11(a) of the Securities Exchange Act of 
                        1934 and the rules and regulations thereunder, 
                        except to the extent otherwise permitted under 
                        the Securities Exchange Act of 1934 and the 
                        rules and regulations thereunder.
                            ``(VIII) Trading in the security future 
                        product is not readily susceptible to 
                        manipulation of the price of such security 
                        future product, nor to causing or being used in 
                        the manipulation of the price of any underlying 
                        security, option on such security, or option on 
                        a group or index including such securities.
                            ``(IX) The board of trade on which the 
                        security future product is traded has 
                        procedures in place for coordinated 
                        surveillance among such board of trade, any 
                        market on which any security underlying the 
                        security future product is traded, and other 
                        markets on which any related security is traded 
                        to detect manipulation and insider trading, 
                        except that, if the board of trade is an 
                        alternative trading system, a national 
                        securities association registered pursuant to 
                        section 15A(a) of the Securities Exchange Act 
                        of 1934 of which such alternative trading 
                        system is a member has in place such 
                        procedures.
                            ``(X) The board of trade on which the 
                        security future product is traded has in place 
                        audit trails necessary or appropriate to 
                        facilitate the coordinated surveillance 
                        required in subclause (IX), except that, if the 
                        board of trade is an alternative trading 
                        system, a national securities association 
                        registered pursuant to section 15A(a) of the 
                        Securities Exchange Act of 1934 of which such 
                        alternative trading system is a member has 
                        rules to require such audit trails.
                            ``(XI) The board of trade on which the 
                        security future product is traded has in place 
                        procedures to coordinate trading halts between 
                        such board of trade and any market on which any 
                        security underlying the security future product 
                        is traded and other markets on which any 
                        related security is traded, except that, if the 
                        board of trade is an alternative trading 
                        system, a national securities association 
                        registered pursuant to section 15A(a) of the 
                        Securities Exchange Act of 1934 of which such 
                        alternative trading system is a member has 
                        rules to require such coordinated trading 
                        halts.
                            ``(XII) The margin requirements for a 
                        security future product are consistent with the 
                        margin requirements for comparable option 
                        contracts traded on an exchange registered 
                        pursuant to section 6(a) of the Securities 
                        Exchange Act of 1934 and initial and 
                        maintenance margin levels for a security future 
                        product are not lower than the levels of margin 
                        required for comparable option contracts traded 
                        on an exchange registered pursuant to section 
                        6(a) of the Securities Exchange Act of 1934, 
                        except that nothing in this subclause shall be 
                        construed to prevent a board of trade from 
                        requiring higher margin levels for a security 
                        future product when it deems such action to be 
                        necessary or appropriate.
                    ``(ii) It shall be unlawful for any person to 
                offer, to enter into, to execute, to confirm the 
                execution of, or to conduct any office or business 
                anywhere in the United States, its territories or 
                possessions, for the purpose of soliciting, or 
                accepting any order for, or otherwise dealing in, any 
                transaction in, or in connection with, a security 
                future product unless--
                            ``(I) such transaction is conducted on or 
                        subject to the rules of a board of trade which 
                        has been designated by the Commission as a 
                        contract market in such security future 
                        product;
                            ``(II) such security future product is 
                        executed or consummated by, through, or with a 
                        member of such contract market; and
                            ``(III) such security future product is 
                        evidenced by a record in writing which shows 
                        the date, the parties to such security future 
                        product and their addresses, the property 
                        covered and its price: Provided, That each 
                        contract market member shall keep such record 
                        for a period of 3 years from the date thereof, 
                        or for a longer period if the Commission so 
                        directs, which record shall at all times be 
                        open to the inspection of any representative of 
                        the Commission, the Securities and Exchange 
                        Commission, or the Department of Justice.
                    ``(iii)(I) Except as provided in subclause (II) but 
                notwithstanding any other provision of this Act, no 
                person shall offer to enter into, enter into, or 
                confirm the execution of any option on a security 
                future.
                    ``(II) After 3 years after the date of enactment of 
                the Commodity Futures Modernization Act of 2000, the 
                Commission and the Securities and Exchange Commission 
                may by order jointly determine to permit trading of 
                options on any security future authorized to be traded 
                under the provisions of this Act and the Securities 
                Exchange Act of 1934. Before any such determination, 
                the Commission and the Securities and Exchange 
                Commission shall conduct a study of the effect of the 
                trading of security futures on the markets for futures 
                contracts, securities, and options and the adequacy of 
                protections for investors and other market 
                participants.
                    ``(iv)(I) All records of a futures commission 
                merchant or introducing broker registered pursuant to 
                section 4f(a)(2), a floor broker or floor trader exempt 
                from registration pursuant to section 4f(a)(3), an 
                associated person exempt from registration pursuant to 
                section 4k(6), or a board of trade designated as a 
                contract market in a security future product pursuant 
                to section 5f shall be subject at any time, or from 
                time to time, to such reasonable periodic, special, or 
                other examinations by representatives of the Commission 
                as the Commission deems necessary or appropriate in the 
                public interest, for the protection of investors, or 
                otherwise in furtherance of the purposes of this title: 
                Provided, That the Commission, prior to conducting any 
                such examination, gives notice to the Securities and 
                Exchange Commission of such proposed examination and 
                consults with the Securities and Exchange Commission 
                concerning the feasibility and desirability of 
                coordinating such examination with examinations 
                conducted by the Securities and Exchange Commission 
                with a view to avoiding unnecessary regulatory 
                duplication or undue regulatory burdens for such 
                registrant or board of trade.
                    ``(II) The Commission shall notify the Securities 
                and Exchange Commission of any examination conducted of 
                any futures commission merchant or introducing broker 
                registered pursuant to section 4f(a)(2), floor broker 
                or floor trader exempt from registration pursuant to 
                section 4f(a)(3), associated person exempt from 
                registration pursuant to section 4k(6), or board of 
                trade designated as a contract market in a security 
                future product pursuant to section 5f, and, upon 
                request, furnish to the Securities and Exchange 
                Commission any examination report and data supplied to 
                the Commission in connection with such examination.
                    ``(III) The Commission shall, to the fullest extent 
                possible, use the reports of examinations of any 
                futures commission merchant or introducing broker 
                registered pursuant to section 4f(a)(2), floor broker 
                or floor trader exempt from registration pursuant to 
                section 4f(a)(3), associated person exempt from 
                registration pursuant to section 4k(6), or board of 
                trade designated as a contract market in a security 
                future product pursuant to section 5f, made by the 
                Securities and Exchange Commission, a national 
                securities association registered pursuant to section 
                15A(a) of the Securities Exchange Act of 1934 (15 
                U.S.C. 78o-3), or a national securities exchange 
                registered pursuant to section 6(a) of the Securities 
                Exchange Act of 1934 (15 U.S.C. 78f(g)).
                    ``(IV) Nothing in this subsection shall be 
                construed to impair or limit (other than by the 
                requirement of prior consultation) the power of the 
                Commission under this subsection to examine any futures 
                commission merchant or introducing broker registered 
                pursuant to section 4f(a)(2), floor broker or floor 
                trader exempt from registration pursuant to section 
                4f(a)(3), associated person exempt from registration 
                pursuant to section 4k(6), or board of trade designated 
                as a contract market in a security future product 
                pursuant to section 5f, or to affect in any way the 
                power of the Commission under any other provision of 
                this Act.
                    ``(v) A board of trade designated as a contract 
                market pursuant to section 5f shall be designated as a 
                contract market with respect to a security future 
                product by providing to the Commission a written 
                certification that the specific contract with respect 
                to which the application has been made, or the board of 
                trade, meets the criteria specified in subclauses (I) 
                through (XII) of clause (i).
                    ``(vi) The Commission and the Securities and 
                Exchange Commission, by rule, regulation, or order, may 
                jointly modify the criteria specified in subclause (I), 
                (II), or (IV) of clause (i) of this subparagraph to the 
                extent such modification fosters the development of 
                fair and orderly markets in security future products, 
                is necessary or appropriate in the public interest, and 
                is consistent with the protection of investors.''.
    (b) Margin on Security Futures.--Section 2(a)(1)(C)(vi) of the 
Commodity Exchange Act (7 U.S.C. 2a(vi)) (as redesignated by section 
122) is amended--
            (1) by redesignating subclause (V) as subclause (VI); and
            (2) by striking ``(vi)(I)'' and all that follows through 
        subclause (IV) and inserting the following:
                                    ``(vi)(I) Notwithstanding any other 
                                provision of this Act, any contract 
                                market in a stock index futures 
                                contract (or option thereon), other 
                                than a security future product, 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 
                                such stock index futures contract (or 
                                option thereon), other than security 
                                future products.
                                    ``(II) The Board may at any time 
                                request any contract market to set the 
                                margin for any stock index futures 
                                contract (or option thereon), other 
                                than for any security future product, 
                                at such levels as the Board in its 
                                judgment determines are appropriate to 
                                preserve the financial integrity of the 
                                contract market or its clearing system 
                                or to prevent systemic risk. If the 
                                contract market fails to do so within 
                                the time specified by the Board in its 
                                request, the Board may direct the 
                                contract market to alter or supplement 
                                the rules of the contract market as 
                                specified in the request.
                                    ``(III) Subject to such conditions 
                                as the Board may determine, the Board 
                                may delegate any or all of its 
                                authority, relating to margin for any 
                                stock index futures contract (or option 
                                thereon), other than security future 
                                products, under this clause to the 
                                Commission.
                                    ``(IV) Margin regulations.--It 
                                shall be unlawful for any futures 
                                commission merchant to, directly or 
                                indirectly, extend or maintain credit 
                                to or for, or collect margin from any 
                                customer on any security future product 
                                unless such activities comply with the 
                                rules and regulations which the 
                                Securities and Exchange Commission, 
                                after consultation with the Commission, 
                                shall prescribe pursuant to section 
                                7(c)(2)(B) of the Securities Exchange 
                                Act of 1934.
                                    ``(V) Nothing in this clause shall 
                                supersede or limit the authority 
                                granted to the Commission in section 
                                8a(9) to direct a contract market, on 
                                finding an emergency to exist, to raise 
                                temporary margin levels on any futures 
                                contract, or option on the contract 
                                covered by this clause, or on any 
                                security future product.''.
    (c) Exemption From Registration for Investment Advisers.--Section 
4m of the Commodity Exchange Act (7 U.S.C. 6m) is amended by adding at 
the end the following:
    ``(3) The provisions of subsection (1) of this section shall not 
apply to any commodity trading advisor that is registered with the 
Securities and Exchange Commission as an investment adviser whose 
business does not consist primarily of acting as a commodity trading 
advisor, as defined in section 1a of this Act, and that does not act as 
a commodity trading advisor to any investment trust, syndicate, or 
similar form of enterprise that is engaged primarily in trading in any 
commodity for future delivery on or subject to the rules of any 
contract market.''.
    (d) Exemption From Investigations of Markets in Underlying 
Securities.--Section 16 of the Commodity Exchange Act (7 U.S.C. 20) is 
amended by adding at the end the following:
    ``(e) The provisions of this section shall not apply to 
investigations involving any security underlying a security future 
product.''.

SEC. 222. APPLICATION OF THE COMMODITY EXCHANGE ACT TO NATIONAL 
              SECURITIES EXCHANGES AND NATIONAL SECURITIES ASSOCIATIONS 
              THAT TRADE SECURITY FUTURES.

    (a) Notice Designation of National Securities Exchanges and 
National Securities Associations.--The Commodity Exchange Act is 
amended by inserting after section 5e (7 U.S.C. 7b), as amended by 
section 115, the following:

``SEC. 5F. DESIGNATION OF SECURITIES EXCHANGES AND ASSOCIATIONS AS 
              CONTRACT MARKETS.

    ``(a) Any board of trade that is registered with the Securities and 
Exchange Commission as a national securities exchange, is a national 
securities association registered pursuant to section 15A(a) of the 
Securities Exchange Act of 1934, or is an alternative trading system 
shall be a designated contract market in security future products if--
            ``(1) such national securities exchange, national 
        securities association, or alternative trading system lists or 
        trades no other contracts of sale for future delivery, except 
        for security future products;
            ``(2) such national securities exchange, national 
        securities association, or alternative trading system files 
        written notice with the Commission in such form as the 
        Commission, by rule, may prescribe containing such information 
        as the Commission, by rule, may prescribe as necessary or 
        appropriate in the public interest or for the protection of 
        customers; and
            ``(3) the registration of such national securities 
        exchange, association, or alternative trading system is not 
        suspended pursuant to an order by the Securities and Exchange 
        Commission.
Such designation shall be effective immediately upon filing of the 
written notice with the Commission.
    ``(b)(1) A national securities exchange, national securities 
association, or alternative trading system that is designated as a 
contract market pursuant to section 5f of this Act shall be exempt from 
the following provisions of this Act and the rules thereunder:
            ``(A) Subsections (c), (e), and (g) of section 4c.
            ``(B) Subsections (a) and (d) of section 4j.
            ``(C) Section 5.
            ``(D) Section 5c.
            ``(E) Section 6a.
            ``(F) Section 8(d).
            ``(G) Section 8e.
            ``(H) Section 9(f).
            ``(I) Section 16.
            ``(J) Section 22(b).
    ``(2)(A) Except as provided in subparagraph (B), but 
notwithstanding any other provision of this Act, the Commission, by 
rule, regulation, or order, may conditionally or unconditionally exempt 
any designated contract market in security futures subject to the 
designation requirement of this section from any provision of this Act 
or of any rule or regulation thereunder, to the extent such exemption 
is necessary or appropriate in the public interest and is consistent 
with the protection of investors.
    ``(B) The Commission shall, by rule or regulation, determine the 
procedures under which an exemptive order under this section is granted 
and may, in its sole discretion, decline to entertain any application 
for an order of exemption under this section.''.
    (b) Notice Registration of Certain Securities Broker-Dealers; 
Exemption From Registration for Certain Securities Broker-Dealers.--
Section 4f(a) of the Commodity Exchange Act (7 U.S.C. 6f(a)) is 
amended--
            (1) by inserting ``(1)'' after ``(a)''; and
            (2) by adding at the end the following:
    ``(2) Notwithstanding paragraph (1), and except as provided in 
paragraph (3), any broker or dealer that is registered with the 
Securities and Exchange Commission shall be registered as a futures 
commission merchant or introducing broker, as applicable, if--
            ``(A) such broker or dealer limits its solicitation of 
        orders, acceptance of orders, or execution of orders, or 
        placing of orders on behalf of others involving any contracts 
        of sale of any commodity for future delivery, on or subject to 
        the rules of any contract market to security future products;
            ``(B) such broker or dealer files written notice with the 
        Commission in such form as the Commission, by rule, may 
        prescribe containing such information as the Commission, by 
        rule, may prescribe as necessary or appropriate in the public 
        interest or for the protection of investors;
            ``(C) the registration of such broker or dealer is not 
        suspended pursuant to an order of the Securities and Exchange 
        Commission; and
            ``(D) such broker or dealer is a member of a national 
        securities association registered pursuant to section 15A(a) of 
        the Securities Exchange Act of 1934.
Such registration shall be effective immediately upon filing of the 
written notice with the Commission.
    ``(3) A floor broker or floor trader shall be exempt from the 
registration requirements of section 4e and paragraph (1) of this 
subsection if--
            ``(A) such floor broker or floor trader is a broker or 
        dealer registered with the Securities and Exchange Commission;
            ``(B) such floor broker or floor trader limits its 
        solicitation of orders, acceptance of orders, or execution of 
        orders, or placing of orders on behalf of others involving any 
        contracts of sale of any commodity for future delivery, on or 
        subject to the rules of any contract market to security future 
        products; and
            ``(C) the registration of such floor broker or floor trader 
        is not suspended pursuant to an order of the Securities and 
        Exchange Commission.''.
    (c) Exemption for Securities Broker-Dealers.--Section 4f(a) of the 
Commodity Exchange Act (7 U.S.C. 6f(a)) is amended by inserting after 
paragraph (3), as added by subsection (b), the following:
    ``(4)(A) A broker or dealer that is registered as a futures 
commission merchant or introducing broker pursuant to paragraph (2), or 
that is a floor broker or floor trader exempt from registration 
pursuant to paragraph (3), shall be exempt from the following 
provisions of this Act and the rules thereunder:
            ``(i) Subsections (b), (d), (e), and (g) of section 4c.
            ``(ii) Sections 4d, 4e, and 4h.
            ``(iii) Subsections (b) and (c) of this section.
            ``(iv) Subsections (b) and (c) of section 4j.
            ``(v) Section 4k(1).
            ``(vi) Section 4p.
            ``(vii) Section 6d.
            ``(viii) Subsections (d) and (g) of section 8.
            ``(ix) Section 16.
            ``(x) Section 22(a).
    ``(B)(i) Except as provided in clause (ii), but notwithstanding any 
other provision of this Act, the Commission, by rule, regulation, or 
order, may conditionally or unconditionally exempt any broker or dealer 
subject to the registration requirement of paragraph (2) of this 
subsection, or exempt from registration pursuant to paragraph (3) of 
this subsection, from any provision of this Act or of any rule or 
regulation thereunder, to the extent such exemption is necessary or 
appropriate in the public interest and is consistent with the 
protection of investors.
    ``(ii) The Commission shall, by rule or regulation, determine the 
procedures under which an exemptive order under this section shall be 
granted and may, in its sole discretion, decline to entertain any 
application for an order of exemption under this section.
    ``(C)(i) A broker or dealer that is registered as a futures 
commission merchant or introducing broker pursuant to paragraph (2) or 
an associated person thereof, or that is a floor broker or floor trader 
exempt from registration pursuant to paragraph (3), shall not be 
required to become a member of any futures association registered under 
section 17 of this Act.
    ``(ii) No futures association registered under section 17 of this 
Act shall limit its members from carrying an account, accepting an 
order, or transacting business with a broker or dealer that is 
registered as a futures commission merchant or introducing broker 
pursuant to paragraph (2) or an associated person thereof, or that is a 
floor broker or floor trader exempt from registration pursuant to 
paragraph (3).''.
    (d) Exemptions for Associated Persons of Securities Broker-
Dealers.--Section 4k of the Commodity Exchange Act (7 U.S.C. 6k) is 
amended by adding at the end the following:
    ``(6) Any associated person of a broker or dealer that is 
registered with the Securities and Exchange Commission, and who limits 
its solicitation of orders, acceptance of orders, or execution of 
orders, or placing of orders on behalf of others involving any 
contracts of sale of any commodity for future delivery, on or subject 
to the rules of any contract market to security future products, shall 
be exempt from the following provisions of this Act and the rules 
thereunder:
            ``(A) Subsections (b), (d), (e), and (g) of section 4c.
            ``(B) Sections 4d, 4e, and 4h.
            ``(C) Subsections (b) and (c) of section 4f.
            ``(D) Subsections (b) and (c) of section 4j.
            ``(E) Paragraph (1) of this section.
            ``(F) Section 4p.
            ``(G) Section 6d.
            ``(H) Subsections (d) and (g) of section 8.
            ``(I) Section 16.
            ``(J) Section 22(a).''.

SEC. 223. NOTIFICATION OF INVESTIGATIONS AND ENFORCEMENT ACTIONS.

    (a) Section 8(a) of the Commodity Exchange Act (7 U.S.C. 12(a)) is 
amended by adding at the end the following:
    ``(3) The Commission shall provide the Securities and Exchange 
Commission with notice of the commencement of any proceeding and a copy 
of any order entered by the Commission against any futures commission 
merchant or introducing broker registered pursuant to section 4f(a)(2), 
any floor broker or floor trader exempt from registration pursuant to 
section 4f(a)(3), any associated person exempt from registration 
pursuant to section 4k(6), or any board of trade designated as a 
contract market pursuant to section 5f.''.
    (b) Section 6 of the Commodity Exchange Act (7 U.S.C. 8, 9, 9a, 9b, 
13b, 15) is amended by adding at the end the following:
    ``(g) The Commission shall provide the Securities and Exchange 
Commission with notice of the commencement of any proceeding and a copy 
of any order entered by the Commission pursuant to subsections (c) and 
(d) of this section against any futures commission merchant or 
introducing broker registered pursuant to section 4f(a)(2), any floor 
broker or floor trader exempt from registration pursuant to section 
4f(a)(3), any associated person exempt from registration pursuant to 
section 4k(6), or any board of trade designated as a contract market 
pursuant to section 5f.''.
    (c) Section 6c of the Commodity Exchange Act (7 U.S.C. 13a-1) is 
amended by adding at the end the following:
    ``(h) The Commission shall provide the Securities and Exchange 
Commission with notice of the commencement of any proceeding and a copy 
of any order entered by the Commission against any futures commission 
merchant or introducing broker registered pursuant to section 4f(a)(2), 
any floor broker or floor trader exempt from registration pursuant to 
section 4f(a)(3), any associated person exempt from registration 
pursuant to section 4k(6), or any board of trade designated as a 
contract market pursuant to section 5f.''.

                       Subtitle C--Effective Date

SEC. 231. EFFECTIVE DATE.

    This title and the amendments made by this title take effect on the 
date of enactment of this Act.




                                                 Union Calendar No. 477

106th CONGRESS

  2d Session

                               H. R. 4541

               [Report No. 106-711, Parts I, II, and III]

_______________________________________________________________________

                                 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.

_______________________________________________________________________

                           September 6, 2000

  Reported from the Committee on Banking and Financial Services with 
                               amendments

                           September 6, 2000

Reported from the Committee on Commerce with an amendment, committed to 
the Committee of the Whole House on the State of the Union, and ordered 
                             to be printed