[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5248 Introduced in House (IH)]








109th CONGRESS
  2d Session
                                H. R. 5248

      To regulate over-the-counter trading of energy derivatives.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             April 27, 2006

 Mr. Stupak (for himself, Mr. Dingell, Mr. Larson of Connecticut, Mr. 
  Nadler, Mrs. McCarthy, Mr. Hinchey, Mr. Baird, Mrs. Napolitano, Mr. 
 Chandler, Ms. Schwartz of Pennsylvania, Mr. Tierney, Mr. Inslee, Ms. 
 McKinney, Mr. Allen, Mr. Al Green of Texas, Mr. DeFazio, Mrs. Capps, 
  Mr. Pascrell, Mr. Doggett, Mr. Ruppersberger, and Mr. Bishop of New 
    York) introduced the following bill; which was referred to the 
                        Committee on Agriculture

_______________________________________________________________________

                                 A BILL


 
      To regulate over-the-counter trading of energy derivatives.

    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 ``Prevent Unfair Manipulation of 
Prices Act of 2006''.

SEC. 2. OVER-THE-COUNTER TRANSACTIONS IN ENERGY COMMODITIES.

    (a) Definitions.--Section 1a of the Commodity Exchange Act (7 
U.S.C. 1a) is amended by adding at the end the following:
            ``(34) Included energy transaction.--The term `included 
        energy transaction' means a contract, agreement, or transaction 
        in an energy commodity that is--
                    ``(A)(i) executed or traded on an electronic 
                trading facility; and
                    ``(ii) entered into on a principal-to-principal 
                basis solely between persons that are eligible 
                commercial entities at the time the persons enter into 
                the agreement, contract, or transaction; or
                    ``(B)(i) executed or traded not on or through a 
                trading facility; and
                    ``(ii) entered into solely between persons that are 
                eligible contract participants at the time the persons 
                enter into the agreement, contract, or transaction, 
                regardless of the means of execution of the agreement, 
                contract, or transaction.
            ``(35) Energy commodity.--
                    ``(A) In general.--The term `energy commodity' 
                means a commodity (other than an excluded commodity, a 
                metal, or an agricultural commodity) that is used as a 
                source of energy.
                    ``(B) Inclusions.--The term `energy commodity' 
                includes--
                            ``(i) coal;
                            ``(ii) crude oil, gasoline, diesel fuel, 
                        heating oil, and propane;
                            ``(iii) electricity; and
                            ``(iv) natural gas.
            ``(36) Electronic energy trading facility.--The term 
        `electronic energy trading facility' means an electronic 
        trading facility on or through which included energy 
        transactions are traded or executed.''.
    (b) Off-Exchange Transactions in Energy Commodities.--Section 2(g) 
of the Commodity Exchange Act (7 U.S.C. 2(g)) is amended--
            (1) by inserting ``or an energy commodity'' after 
        ``agricultural commodity'';
            (2) by redesignating paragraphs (1) through (3) as 
        subparagraphs (A) through (C), respectively;
            (3) by striking ``No provision'' and inserting the 
        following:
            ``(1) In general.--No provision''; and
            (4) by adding at the end the following:
            ``(2) Transactions in energy commodities.--
                    ``(A) In general.--Except as provided in 
                subparagraphs (B) and (C) and subsection (h)(7), 
                nothing in this Act applies to an included energy 
                transaction.
                    ``(B) Prohibited conduct.--
                            ``(i) In general.--An included energy 
                        transaction shall be subject to--
                                    ``(I) sections 5b, 12(e)(2)(B), and 
                                22(a)(4); and
                                    ``(II) the prohibitions in sections 
                                4b, 4c(a), 4c(b), 4o, 6(c), 6(d), 6c, 
                                6d, 8a, and 9(a)(2).
                            ``(ii) Transactions exempted by commission 
                        action.--Notwithstanding any exemption by the 
                        Commission under section 4(c), an included 
                        energy transaction shall be subject to the 
                        sections specified in clause (i) of this 
                        subparagraph, subparagraph (C), and subsection 
                        (h)(7).
                    ``(C) Reporting and recordkeeping requirements.--
                            ``(i) In general.--An eligible contract 
                        participant that enters into or executes an 
                        included energy transaction that performs, or 
                        together with other such transactions performs, 
                        a significant price discovery function in the 
                        cash market for an energy commodity or in any 
                        other market for agreements, contracts, or 
                        transactions relating to an energy commodity, 
                        and an eligible commercial entity that enters 
                        into or executes an included energy transaction 
                        described in section 1a(34)(A) shall--
                                    ``(I) provide to the Commission on 
                                a timely basis the information required 
                                under clause (ii); and
                                    ``(II)(aa) consistent with section 
                                4i, maintain books and records relating 
                                to each included energy transaction, 
                                for a period of at least 5 years after 
                                the date of the transaction, in such 
                                form as the Commission shall require; 
                                and
                                    ``(bb) keep the books and records 
                                open to inspection by any 
                                representative of the Commission or the 
                                Attorney General.
                            ``(ii) Required information.--
                                    ``(I) In general.--The Commission 
                                shall require that such information 
                                regarding included energy transactions 
                                be provided to the Commission as the 
                                Commission considers necessary to 
                                assist in detecting and preventing 
                                price manipulation.
                                    ``(II) Information to be 
                                included.--Such information shall 
                                include information regarding large 
                                trading positions obtained through 1 or 
                                more included energy transactions that 
                                involve--
                                            ``(aa) substantial 
                                        quantities of the commodity in 
                                        the cash market; or
                                            ``(bb) substantial 
                                        positions, investments, or 
                                        trades in agreements or 
                                        contracts related to energy 
                                        commodities.
                                    ``(III) Manner of compliance.--The 
                                Commission shall specify when and how 
                                such information shall be provided and 
                                maintained by eligible contract 
                                participants and eligible commercial 
                                entities.
                                    ``(IV) Price discovery 
                                transactions.--
                                            ``(aa) In general.--In 
                                        specifying the information to 
                                        be provided under this 
                                        paragraph, the Commission shall 
                                        identify the transactions or 
                                        class of transactions that the 
                                        Commission considers to perform 
                                        a significant price discovery 
                                        function.
                                            ``(bb) Considerations.--In 
                                        determining which included 
                                        energy transactions perform a 
                                        significant price discovery 
                                        function, the Commission shall 
                                        consider the extent to which--

                                                    ``(AA) standardized 
                                                agreements are used to 
                                                execute the 
                                                transactions;

                                                    ``(BB) the 
                                                transactions involve 
                                                standardized types or 
                                                measures of a 
                                                commodity;

                                                    ``(CC) the prices 
                                                of the transactions are 
                                                reported to third 
                                                parties, published, or 
                                                disseminated;

                                                    ``(DD) the prices 
                                                of the transactions are 
                                                referenced in other 
                                                transactions; and

                                                    ``(EE) other 
                                                factors considered 
                                                appropriate by the 
                                                Commission.

                                    ``(V) Persons filing.--
                                            ``(aa) In general.--The 
                                        Commission, in its discretion, 
                                        may allow large trader position 
                                        reports required to be provided 
                                        by an eligible commercial 
                                        entity to be provided by an 
                                        electronic energy trading 
                                        facility if the eligible 
                                        commercial entity authorizes 
                                        the facility to provide such 
                                        information on its behalf.
                                            ``(bb) Information and 
                                        enforcement.--Nothing in an 
                                        authorization under item (aa) 
                                        shall impair the ability of the 
                                        Commission to obtain 
                                        information from an eligible 
                                        commercial entity or otherwise 
                                        enforce this Act.
                                    ``(VI) Regulations.--Not later than 
                                180 days after the date of enactment of 
                                this paragraph, the Commission shall 
                                issue a notice of proposed rulemaking, 
                                and not later than 1 year after the 
                                date of enactment of this paragraph, 
                                the Commission shall promulgate final 
                                regulations, specifying the information 
                                to be provided and maintained under 
                                this subparagraph.''.

SEC. 3. ELECTRONIC TRADING FACILITIES FOR ENERGY COMMODITIES.

    Section 2(h) of the Commodity Exchange Act (7 U.S.C. 2(h)) is 
amended--
            (1) in paragraph (1), by inserting after ``an exempt 
        commodity'' the following: ``, other than an energy 
        commodity,'';
            (2) in paragraph (3), by inserting after ``an exempt 
        commodity'' the following: ``, other than an energy 
        commodity,''; and
            (3) by adding at the end the following:
            ``(7) Energy transactions.--
                    ``(A) In general.--To the extent that the 
                Commission determines to be appropriate under 
                subparagraph (C), an electronic energy trading facility 
                shall--
                            ``(i) be subject to the requirements of 
                        section 5a, to the extent provided in sections 
                        5a(g) and 5d;
                            ``(ii)(I) consistent with section 4i, 
                        maintain books and records relating to the 
                        business of the electronic energy trading 
                        facility, including books and records relating 
                        to each transaction in such form as the 
                        Commission may require; and
                            ``(II) make the books and records required 
                        under this section available to representatives 
                        of the Commission and the Attorney General for 
                        inspection for a period of at least 5 years 
                        after the date of each included energy 
                        transaction;
                            ``(iii) make available to the public 
                        information on trading volumes, settlement 
                        prices, open interest (where applicable), and 
                        opening and closing ranges (or daily highs and 
                        lows, as appropriate) for included energy 
                        transactions; and
                            ``(iv) provide the information to the 
                        Commission in such form and at such times as 
                        the Commission may require.
                    ``(B) Applicability of other provisions.--
                            ``(i) Paragraph (5).--An electronic energy 
                        trading facility shall comply with paragraph 
                        (5).
                            ``(ii) Paragraph (6).--Paragraph (6) shall 
                        apply with respect to a subpoena issued to any 
                        foreign person that the Commission believes is 
                        conducting or has conducted transactions on or 
                        through an electronic energy trading facility.
                    ``(C) Regulations.--Not later than 180 days after 
                the date of enactment of this paragraph, the Commission 
                shall issue a notice of proposed rulemaking, and not 
                later than 1 year after the date of enactment of this 
                paragraph, the Commission shall promulgate final 
                regulations, specifying the information to be provided, 
                maintained, or made available to the public under 
                subparagraphs (A) and (B).
            ``(8) Nondisclosure of proprietary information.--In 
        carrying out paragraph (7) and subsection (g)(2), the 
        Commission shall not--
                    ``(A) require the real-time publication of 
                proprietary information;
                    ``(B) prohibit the commercial sale or licensing of 
                real-time proprietary information; or
                    ``(C) publicly disclose information regarding 
                market positions, business transactions, trade secrets, 
                or names of customers, except as provided in section 
                8.''.

SEC. 4. NO EFFECT ON OTHER AUTHORITY.

    (a) No Effect on FERC Authority.--Nothing contained in this title 
shall affect the jurisdiction of the Federal Energy Regulatory 
Commission with respect to the authority of the Federal Energy 
Regulatory Commission under the Federal Power Act (16 U.S.C. 791a et 
seq.), the Natural Gas Act (15 U.S.C. 717 et seq.), or other law to 
obtain information or otherwise carry out the responsibilities of the 
Federal Energy Regulatory Commission.
    (b) No Effect on Excluded Commodities.--The amendments made by this 
title have no effect on the regulation of excluded commodities under 
the Commodity Exchange Act (7 U.S.C. 1a et seq.).
    (c) No Effect on Metals.--The amendments made by this title have no 
effect on the regulation of metals under the Commodity Exchange Act (7 
U.S.C. 1a et seq.).

SEC. 5. PROHIBITION OF FRAUDULENT TRANSACTIONS.

    Section 4b of the Commodity Exchange Act (7 U.S.C. 6b) is amended 
by striking subsection (a) and inserting the following:
    ``(a) Prohibitions.--
            ``(1) In general.--It shall be unlawful(A) for any person, 
        in or in connection with any order to make, or the making of, 
        any contract of sale of any commodity for future delivery or in 
        interstate commerce, that is made, or to be made, on or subject 
        to the rules of a designated contract market, for or on behalf 
        of any other person, or(B) for any person, in or in connection 
        with any order to make, or the making of, any contract of sale 
        of any commodity for future delivery or other agreement, 
        contract or transaction subject to paragraphs (1) and (2) of 
        section 5a(g), that is made, or to be made, for or on behalf of 
        or with, any other person, other than on or subject to the 
        rules of a designated contract market--
                    ``(i) to cheat or defraud or attempt to cheat or 
                defraud the other person;
                    ``(ii) willfully to make or cause to be made to 
                such other person any false report or statement or 
                willfully to enter or cause to be entered for the other 
                person any false record;
                    ``(iii) willfully to deceive or attempt to deceive 
                the other person by any means whatsoever in regard to 
                any order or contract or the disposition or execution 
                of any order or contract, or in regard to any act of 
                agency performed, with respect to any order or contract 
                for (or, in the case of a contract described in 
                subparagraph (B), with the other person) such person; 
                or
                    ``(iv)(I) to bucket an order represented by the 
                person as an order to be executed, for or on behalf of 
                the other person, on an organized exchange; or
                    ``(II) to--
                            ``(aa) fill an order by offset against the 
                        order or orders of the other person; or
                            ``(bb) willfully and knowingly and without 
                        the prior consent of the other person, to--
                                    ``(AA) become the buyer in respect 
                                to any selling order of the other 
                                person; or
                                    ``(BB) become the seller in respect 
                                to any buying order of the other 
                                person,
                if the order is to be executed on or subject to the 
                rules of a designated contract market.
            ``(2) Limitation.--This subsection does not obligate any 
        person, in connection with a transaction in a contract of sale 
        of a commodity for future delivery with another person, to 
        disclose to any other person nonpublic information that may be 
        material to the market price of the commodity or transaction, 
        except as necessary to make any statement made to the other 
        person in connection with the transaction not misleading in any 
        material respect.''.

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 
tenth 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 the 
Commodity Exchange Act (7 U.S.C. 13b) is amended in the first 
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 ``subsection (a), (b), or (f) of section 9''.
    (c) Nonenforcement of Rules of Government or Other Violations.--
Section 6b of the Commodity Exchange Act (7 U.S.C. 13a) is amended--
            (1) in the first sentence, by inserting before the period 
        at the end the following: ``, 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''; and
            (2) in the second sentence, by inserting before the period 
        at the end the following: ``, 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)''.
    (d) Action to Enjoin or Restrain Violations.--Section 6c(d) of the 
Commodity Exchange 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 the Commodity Exchange 
Act (7 U.S.C. 13) 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. CONFORMING AMENDMENTS.

    (a) Section 2 of the Commodity Exchange Act (7 U.S.C. 2) is 
amended--
            (1) in subsection (d)(1), by striking ``section 5b'' and 
        inserting ``section 5a(g), 5b,'';
            (2) in subsection (e)(1), by inserting ``(1)'' after 
        ``(g)''; and
            (3) in subsection (i)--
                    (A) in paragraph (1)--
                            (i) by striking ``No provision'' and 
                        inserting ``In general.--Subject to subsections 
                        (g)(2) and (h)(7), no provision''; and
                            (ii) in subparagraph (A), by inserting 
                        ``(1)'' after ``2(g)''; and
                    (B) in paragraph (2), by striking ``No provision'' 
                and inserting ``In general.--Subject to subsections 
                (g)(2) and (h)(7), no provision''.
    (b) Section 4i of the Commodity Exchange Act (7 U.S.C. 6i) is 
amended in the first sentence by inserting ``, or pursuant to an 
exemption under section 4(c)'' after ``transaction execution 
facility''.
    (c) Section 8a(9) of the Commodity Exchange Act (7 U.S.C. 12a(9)) 
is amended--
            (1) by inserting ``or an electronic energy trading 
        facility'' after ``direct the contract market'';
            (2) by inserting after ``liquidation of any futures 
        contract'' the following: ``or included energy transaction''; 
        and
            (3) by inserting ``or an electronic energy trading 
        facility'' after ``given by a contract market''.
                                 <all>