[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1638 Introduced in House (IH)]






109th CONGRESS
  1st Session
                                H. R. 1638

  To reinstate regulation under the Commodity Exchange Act of futures 
  contracts, swaps, and hybrid instruments involving natural gas, to 
require review and approval by the Commodity Futures Trading Commission 
 of rules applicable to transactions involving natural gas, to provide 
  for the reporting of large positions in natural gas, to provide for 
 cash settlement for certain contracts of sale for future delivery of 
 natural gas, to temporarily prohibit members of the Commodity Futures 
  Trading Commission from going to work for organizations subject to 
         regulation by the Commission, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             April 14, 2005

Mr. Graves (for himself and Mr. Barrow) introduced the following bill; 
           which was referred to the Committee on Agriculture

_______________________________________________________________________

                                 A BILL


 
  To reinstate regulation under the Commodity Exchange Act of futures 
  contracts, swaps, and hybrid instruments involving natural gas, to 
require review and approval by the Commodity Futures Trading Commission 
 of rules applicable to transactions involving natural gas, to provide 
  for the reporting of large positions in natural gas, to provide for 
 cash settlement for certain contracts of sale for future delivery of 
 natural gas, to temporarily prohibit members of the Commodity Futures 
  Trading Commission from going to work for organizations subject to 
         regulation by the Commission, and for other purposes.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Commodities Exchange Improvements 
Act of 2005''.

SEC. 2. REINSTATEMENT OF REGULATION UNDER THE COMMODITY EXCHANGE ACT OF 
              FUTURES CONTRACTS, SWAPS, AND HYBRID INSTRUMENTS 
              INVOLVING NATURAL GAS.

    (a) Natural Gas Treated as an Agricultural Commodity.--Section 
1a(4) of the Commodity Exchange Act (7 U.S.C. 1a(4)) is amended--
            (1) by inserting ``natural gas,'' before ``livestock,''; 
        and
            (2) by adding at the end the following: ``For purposes of 
        this Act and any other Act referencing this paragraph, natural 
        gas shall be considered an agricultural commodity enumerated in 
        this paragraph.''.
    (b) Hybrid Instruments.--Section 405(a) of the Commodity Futures 
Modernization Act of 2000 (7 U.S.C. 27c(a)) is amended by inserting 
``not having one or more payments indexed to the value, level, or rate 
of, or providing delivery of, natural gas)'' after ``hybrid 
instrument''.
    (c) Elimination of Authority to Exempt Natural Gas Transactions 
From Statutory Requirements.--Section 4(c) of the Commodity Exchange 
Act (7 U.S.C. 6(c)) is amended by adding at the end the following:
            ``(6) Inapplicability to certain contracts involving 
        natural gas.--The preceding provisions of this subsection shall 
        not apply to an agreement, contract, or transaction involving 
        natural gas.''.
    (d) Effective Date.--The amendments made by this section shall take 
effect 90 days after the date of the enactment of this Act.

SEC. 3. REGULATORY REVIEW OF RULE CHANGES AND RULES APPLICABLE TO 
              TRANSACTIONS INVOLVING NATURAL GAS.

    (a) Regulatory Review of Rule Changes Applicable to Natural Gas 
Transactions.--
            (1) In general.--Section 5 of the Commodity Exchange Act (7 
        U.S.C. 7) is amended by adding at the end the following:
    ``(f) Regulatory Review of Rule Changes Applicable to Natural Gas 
Transactions.--
            ``(1) Prior approval of rule changes required.--
        Notwithstanding any other provision of this section, a board of 
        trade that is a designated contract market shall not, without 
        prior approval of the Commission, change a rule, regulation, or 
        contract specification of the board of trade that applies to 
        any agreement, contract, or transactions involving natural gas.
            ``(2) Consideration.--The Commission shall not approve a 
        proposal to make such a change, unless--
                    ``(A) a period of at least 60 days has elapsed 
                since the Commission received the proposal;
                    ``(B) the Commission has evaluated the economic 
                effects that may result from the change;
                    ``(C) the change, if implemented, would be 
                consistent with the core principles specified in 
                section 5(d); and
                    ``(D) for not less than 30 days in the 60-day 
                period, the Commission has sought public comment on the 
                proposal.
            ``(3) Criteria.--The Commission shall not consider such a 
        change to be consistent with the core principles specified in 
        section 5(d), unless--
                    ``(A) the rules, regulations, or contract 
                specifications limit the maximum daily price 
                fluctuation applicable to the agreement, contract, or 
                transaction to not more than 8 percent of the 
                settlement price of the prior day's trading in the 
                agreement, contract, or transaction; and
                    ``(B) the Commission finds on the basis of 
                substantial evidence that the resulting rules, 
                regulations, and contract specifications referred to in 
                paragraph (1) are consistent with the core 
                principles.''.
            (2) Sense of the congress.--It is the sense of the Congress 
        that the Commodity Futures Trading Commission should evaluate 
        all public comments submitted to the Commission in response to 
        a proposal to change a rule, regulation, or contract 
        specification of a board of trade that applies to agreements, 
        contracts, or transactions involving natural gas, based on how 
        the change relates to the core principles specified in section 
        5(d) of the Commodity Exchange Act.
            (3) Effective date.--The amendment made by paragraph (1) 
        shall take effect 90 days after the date of the enactment of 
        this Act.
    (b) Regulatory Review of Rules Applicable to Transactions Involving 
Natural Gas.--
            (1) In general.--Not later than 180 days after the date of 
        the enactment of this Act, the Commodity Futures Trading 
        Commission (in this subsection referred to as the 
        ``Commission'') shall complete a review of the rules, 
        regulations, and contract specifications of each board of trade 
        (as defined in section 1a(2) of the Commodity Exchange Act) 
        designated as a contract market under section 5 of such Act, in 
        force as of the date of the enactment of this subsection, that 
        apply to any agreement, contract, or transaction involving 
        natural gas subject to the rules of the contract market.
            (2) Consideration.--In conducting the review required by 
        paragraph (1), the Commission shall--
                    (A) seek public comment for a period of not less 
                than 30 days; and
                    (B) determine that each rule, regulation, and 
                contract specification is consistent with the core 
                principles specified in section 5(d) of the Commodity 
                Exchange Act, or require that the rule, regulation, or 
                contract specification be changed to make it so 
                consistent.
            (3) Criteria.--The Commission shall not consider the rules, 
        regulations, and contract specifications that apply to an 
        agreement, contract, or transaction involving natural gas to be 
        consistent with the core principles specified in section 5(d) 
        of the Commodity Exchange Act, unless--
                    (A) the rules, regulations, or contract 
                specifications limit the maximum daily price 
                fluctuation applicable to the agreement, contract, or 
                transaction to not more than 8 percent of the 
                settlement price of the prior day's trading in the 
                agreement, contract, or transaction; and
                    (B) the Commission finds on the basis of 
                substantial evidence that the rules, regulations, and 
                contract specifications are consistent with the core 
                principles.

SEC. 4. BACK-UP REPORTING OF LARGE POSITIONS INVOLVING NATURAL GAS.

    (a) In General.--Section 4a of the Commodity Exchange Act (7 U.S.C. 
6a) is amended--
            (1) in subsection (e), by striking the last sentence; and
            (2) by adding at the end the following:
    ``(f) Reporting of Large Positions Involving Natural Gas.--
            ``(1) In general.--In accordance with such rules as shall 
        be prescribed by the Commission, any person holding, 
        maintaining, or controlling any position in any agreement, 
        contract, or transaction made in connection with any contract 
        for the present or for future delivery of natural gas, any 
        position in any agreement, contract, or transaction having one 
        or more payments indexed to the value, level, or rate of 
        providing natural gas for the present or future delivery, or 
        any quantity of natural gas that is readily available for 
        delivery shall file such reports regarding the position or 
        quantity as the Commission determines to be necessary and 
        appropriate to prevent or deter actual or potential 
        manipulation of the price of contracts of sale of natural gas 
        for future delivery. Notwithstanding any other provision of 
        law, including any provision of law that excludes any 
        agreement, contract, transaction, or trading facility from this 
        Act (other than as specifically provided in paragraph (2)), any 
        rule, bylaw, or other requirement to file any report regarding 
        a position in any agreement, contract, or transaction involving 
        natural gas or quantity of natural gas prescribed in accordance 
        with this subsection shall apply to any person holding any such 
        position or quantity.
            ``(2) No duplicate reports.--Except as otherwise provided 
        in this paragraph, the rules prescribed under paragraph (1) 
        shall not apply to any holding or position that otherwise is 
        required to be reported to any agency of the United States 
        Government if the report would otherwise satisfy the 
        requirements of this subsection and the report is available to 
        the Commission at the request of the Commission. 
        Notwithstanding the preceding sentence, any report of any such 
        holding or position to any agency of the United States shall 
        constitute a statement, report, or document required for 
        purposes of section 9.
            ``(3) Criteria for rules.--
                    ``(A) In general.--In prescribing rules under 
                paragraph (1), the Commission shall consider--
                            ``(i) the purposes for monitoring large 
                        positions and quantities in natural gas;
                            ``(ii) the effect of such reporting 
                        requirements on the efficiency and liquidity of 
                        the market for natural gas and the market for 
                        any agreement, contract, or transaction made in 
                        connection with any contract for the present or 
                        for future delivery of natural gas; and
                            ``(iii) the costs and burden on the persons 
                        that would be required to file such reports.
                    ``(B) Frequency.--The Commission shall require 
                reports under paragraph (1) only in circumstances where 
                manipulation is suspected, except that the Commission 
                may prescribe rules requiring regular or continuous 
                reporting if the Commission finds that such reporting 
                would help to deter or to detect manipulation in any 
                market for any agreement, contract, or transaction made 
                in connection with any contract for the present or for 
                future delivery of natural gas.
                    ``(C) Filing requirements.--Reports required under 
                paragraph (1) shall be filed with the Commission in 
                accordance with such requirements regarding the form, 
                timing, and manner of filing such reports, as the 
                Commission may prescribe by rule.
                    ``(D) Recordkeeping requirements.--Rules prescribed 
                under paragraph (1) may require any person holding, 
                maintaining, or controlling a quantity of natural gas 
                that is readily available for delivery, or any position 
                in any agreement, contract, or transaction made in 
                connection with any agreement, contract, or transaction 
                for the present or future delivery of natural gas or 
                any contract requiring one or more payments indexed to 
                the value, level, or rate of, or providing for the 
                present or future delivery of natural gas to make and 
                keep for prescribed periods such records as the 
                Commission determines are necessary or appropriate to 
                ensure that persons covered by reporting requirements 
                of paragraph (1) can comply with the reporting 
                requirements.
            ``(4) Exemptions.--Consistent with the public interest and 
        the purposes of this section, the Commission by rule or by 
        order may exempt, in whole or in part, conditionally or 
        unconditionally, any person or class of persons from the 
        requirements of this subsection.
            ``(5) Other rules not affected.--This subsection shall not 
        be interpreted to prohibit or impair the adoption by any board 
        of trade licensed, designated, or registered by the Commission 
        of any bylaw, rule, regulation, or resolution requiring reports 
        of positions in any agreement, contract, or transaction made in 
        connection with a contract of sale for future delivery of 
        natural gas (including such a contract of sale), including any 
        bylaw, rule, regulation, or resolution pertaining to filing or 
        recordkeeping, which may be held by any person subject to the 
        rules of the board of trade, except that any bylaw, rule, 
        regulation, or resolution established by the board of trade 
        shall not be inconsistent with any requirement prescribed by 
        the Commission under this subsection.
    ``(g) Violation of Certain Rules Is a Violation of This Act.--It 
shall be a violation of this Act for any person to violate any bylaw, 
rule, regulation, or resolution of any board of trade licensed, 
designated, or registered by the Commission that--
            ``(1) fixes limits on the amount of trading which may be 
        done or positions which may be held by any person under 
        contracts of sale of any commodity for future delivery or under 
        options on such contracts or commodities; or
            ``(2) establishes requirements regarding reports of any 
        position or quantity which may be held by any person (including 
        any requirements pertaining to filing and keeping records of 
        reports of any such positions),
if the bylaw, rule, regulation, or resolution has been approved by the 
Commission: Provided, That section 9(c) shall apply only to those who 
knowingly violate such limits.''.
    (b) Deadline.--The Commission shall prescribe the rules required by 
section 4a(f) of the Commodity Exchange Act not later than 180 days 
after the date of the enactment of this Act.
    (c) Conforming Amendments.--Section 2 of the Commodity Exchange Act 
(7 U.S.C. 2) is amended--
            (1) in each of subsections (g) and (h)(4)(A), by inserting 
        ``4a(f),'' before ``5a (to'';
            (2) in subsection (h)(2)(A), by striking ``5b'' and 
        inserting ``4a(f), 5b,''; and
            (3) in subsection (i)(2), by inserting ``4a(f) of this 
        Act,'' before ``5a of''.

SEC. 5. ADDITIONAL AUTHORITY TO PROVIDE FOR CASH SETTLEMENT OF 
              TRANSACTIONS INVOLVING NATURAL GAS.

    (a) In General.--Section 4a of the Commodity Exchange Act (7 U.S.C. 
6a) is further amended by adding at the end the following:
    ``(h) Cash Settlement of Natural Gas Contracts.--
            ``(1) For the purpose of diminishing, eliminating, or 
        preventing the burden on interstate commerce associated with 
        excessive speculation in any commodity under contracts of sale 
        of such commodity for future delivery made on or subject to the 
        rules of contract markets, the Commission shall prescribe rules 
        requiring any board of trade to implement rules that provide 
        for any contract of sale for future delivery of natural gas to 
        be settled in cash in lieu of making delivery of the natural 
        gas but only in circumstances in which the Commission has 
        determined that market conditions suggest the possibility of 
        manipulation.
            ``(2) Any rules prescribed under paragraph (1) shall not be 
        construed as limiting or otherwise impairing any authority 
        granted to the Commission or to a board of trade, respectively, 
        under section 5.''.
    (b) Conforming Amendments.--Section 5 of such Act (7 U.S.C. 7) is 
amended--
            (1) in subsection (b)(3)--
                    (A) by striking ``or'' at the end of subparagraph 
                (B)(iii);
                    (B) by striking the period at the end of 
                subparagraph (C) and inserting ``; or''; and
                    (C) by adding at the end the following:
                    ``(D) any contract of sale for future delivery of 
                natural gas to be settled in cash in lieu of making 
                delivery of the commodity.''; and
            (2) in subsection (d)(6)--
                    (A) by striking ``and'' at the end of subparagraph 
                (B);
                    (B) by striking the period at the end of 
                subparagraph (C) and inserting `` and''; and
                    (C) by adding at the end the following:
                    ``(D) require market participants in any contract 
                to settle any contract of sale for future delivery of 
                natural gas in cash in lieu of making delivery of such 
                commodity.''.
    (c) Deadline.--The Commodity Futures Trading Commission shall 
prescribe the rules required by section 4a(h) of the Commodity Exchange 
Act not later than 180 days after the date of the enactment of this 
Act.

SEC. 6. CRIMINAL AND CIVIL PENALTIES.

    (a) Enforcement Powers of Commission.--Section 6(c) of the 
Commodity Exchange Act (7 U.S.C. 9, 15) is amended in clause (3) of the 
10th sentence--
            (1) by inserting ``(A)'' after ``assess such person''; and
            (2) by inserting after ``each such violation'' the 
        following: ``or (B) in any case of manipulation of, or attempt 
        to manipulate, the price of any commodity, a civil penalty of 
        not more than the greater of $1,000,000 or triple the monetary 
        gain to such person for each such violation,''.
    (b) Manipulations and Other Violations.--Section 6(d) of such Act 
(7 U.S.C. 13b(d)) is amended in the 1st sentence--
            (1) by striking ``paragraph (a) or (b) of section 9 of this 
        Act'' and inserting ``subsection (a), (b), or (f) of section 
        9''; and
            (2) by striking ``said paragraph 9(a) or 9(b)'' and 
        inserting ``such subsection (a), (b), or (f)''.
    (c) Nonenforcement of Rules of Government or Other Violations.--
Section 6b of such Act (7 U.S.C. 13a) is amended--
            (1) in the 1st sentence, by inserting ``, or, in any case 
        of manipulation of, or an attempt to manipulate, the price of 
        any commodity, a civil penalty of not more than $1,000,000 for 
        each such violation'' before the period; and
            (2) in the 2nd sentence, by inserting ``, except that if 
        the failure or refusal to obey or comply with the order 
        involved any offense under section 9(f), the registered entity, 
        director, officer, agent, or employee shall be guilty of a 
        felony and, on conviction, shall be subject to penalties under 
        section 9(f)'' before the period.
    (d) Action to Enjoin or Restrain Violations.--Section 6c(d) of such 
Act (7 U.S.C. 13a-1(d)) is amended by striking ``(d)'' and all that 
follows through the end of paragraph (1) and inserting the following:
    ``(d) Civil Penalties.--(1) In any action brought under this 
section, the Commission may seek and the court shall have jurisdiction 
to impose, on a proper showing, on any person found in the action to 
have committed any violation--
            ``(A) a civil penalty in the amount of not more than the 
        greater of $100,000 or triple the monetary gain to the person 
        for each violation; or
            ``(B) in any case of manipulation of, or an attempt to 
        manipulate, the price of any commodity, a civil penalty in the 
        amount of not more than the greater of $1,000,000 or triple the 
        monetary gain to the person for each violation.''.
    (e) Violations Generally.--Section 9(a) of such Act (7 U.S.C. 
13(a)) is amended--
            (1) by striking ``(or $500,000 in the case of a person who 
        is an individual)'';
            (2) by striking ``five years'' and inserting ``10 years''; 
        and
            (3) in paragraph (2), by striking ``false or misleading or 
        knowingly inaccurate reports'' and inserting ``knowingly false, 
        misleading, or inaccurate reports''.

SEC. 7. 1-YEAR BAN ON MEMBERS OF THE COMMODITY FUTURES TRADING 
              COMMISSION WORKING FOR ORGANIZATIONS SUBJECT TO 
              REGULATION BY THE COMMISSION.

    (a) In General.--Section 9 of the Commodity Exchange Act (7 U.S.C. 
13) is amended by adding at the end the following:
    ``(g)(1)(A) During the 1-year period that begins with the date an 
individual ceases to be a member of the Commission, the individual 
shall not become an employee or agent of any entity subject to 
regulation by the Commission.
    ``(B) Subparagraph (A) shall apply in the case of an individual who 
becomes an employee or agent of an entity subject to regulation by the 
Commission, as a result of a merger or takeover.
    ``(2) Whoever violates paragraph (1) shall be liable for a civil 
money penalty of $100,000.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect 90 days after the date of the enactment of this Act.
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