109 HR 5248 IH: To regulate over-the-counter trading of energy U.S. House of Representatives 2006-04-27 text/xml EN Pursuant to Title 17 Section 105 of the United States Code, this file is not subject to copyright protection and is in the public domain.
I 109th CONGRESS 2d Session H. R. 5248 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.
1.
Short title
This Act may be cited as the Prevent Unfair Manipulation of Prices Act of 2006.
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. .
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. .
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.).
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. .
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.
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.