[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4626 Introduced in House (IH)]







110th CONGRESS
  1st Session
                                H. R. 4626

 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

                           December 13, 2007

Mr. Etheridge (for himself, Mr. Moran of Kansas, Mr. Goodlatte, and Mr. 
    Peterson of Minnesota) introduced the following bill; which was 
                referred to the Committee on Agriculture

_______________________________________________________________________

                                 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.

    This Act may be cited as the ``CFTC Reauthorization Act of 2007''.

                      TITLE I--GENERAL PROVISIONS

SEC. 101. COMMISSION AUTHORITY OVER AGREEMENTS, CONTRACTS OR 
              TRANSACTIONS IN FOREIGN CURRENCY.

    (a) In General.--Section 2(c)(2) of the Commodity Exchange Act (7 
U.S.C. 2(c)(2)) is amended by striking subparagraphs (B) and (C) and 
inserting the following:
                    ``(B) Agreements, contracts, and transactions in 
                retail foreign currency.--
                            ``(i) 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 of a 
                                commodity for future delivery (or an 
                                option on such a contract) or an option 
                                (other than an option executed or 
                                traded on a national securities 
                                exchange registered pursuant to section 
                                6(a) of the Securities Exchange Act of 
                                1934 (15 U.S.C. 78f(a))); 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--
                                            ``(aa) a financial 
                                        institution;
                                            ``(bb)(AA) a broker or 
                                        dealer registered under section 
                                        15(b) (except paragraph (11) 
                                        thereof) or 15C of the 
                                        Securities Exchange Act of 1934 
                                        (15 U.S.C. 78o(b), 78o-5); or
                                            ``(BB) an associated person 
                                        of a broker or dealer 
                                        registered under section 15(b) 
                                        (except paragraph (11) thereof) 
                                        or 15C of the Securities 
                                        Exchange Act of 1934 (15 U.S.C. 
                                        78o(b), 78o-5) concerning the 
                                        financial or securities 
                                        activities of which the broker 
                                        or dealer 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));
                                            ``(cc)(AA) a futures 
                                        commission merchant that is 
                                        primarily or substantially 
                                        engaged in the business 
                                        activities described in section 
                                        1a(20) of this Act, is 
                                        registered under this Act, is 
                                        not a person described in item 
                                        (bb) of this subclause, and 
                                        maintains adjusted net capital 
                                        equal to or in excess of 
                                        $20,000,000; or
                                            ``(BB) an affiliated person 
                                        of a futures commission 
                                        merchant that is primarily or 
                                        substantially engaged in the 
                                        business activities described 
                                        in section 1a(20) of this Act, 
                                        is registered under this Act, 
                                        and is not a person described 
                                        in item (bb) of this subclause, 
                                        if the affiliated person 
                                        maintains adjusted net capital 
                                        equal to or in excess of 
                                        $20,000,000 and is not a person 
                                        described in such item (bb), 
                                        and the futures commission 
                                        merchant makes and keeps 
                                        records under section 
                                        4f(c)(2)(B) of this Act 
                                        concerning the futures and 
                                        other financial activities of 
                                        the affiliated person;
                                            ``(dd) an insurance company 
                                        described in section 
                                        1a(12)(A)(ii) of this Act, or a 
                                        regulated subsidiary or 
                                        affiliate of such an insurance 
                                        company;
                                            ``(ee) a financial holding 
                                        company (as defined in section 
                                        2 of the Bank Holding Company 
                                        Act of 1956);
                                            ``(ff) an investment bank 
                                        holding company (as defined in 
                                        section 17(i) of the Securities 
                                        Exchange Act of 1934 (15 U.S.C. 
                                        78q(i))); or
                                            ``(gg) a retail foreign 
                                        exchange dealer that maintains 
                                        adjusted net capital equal to 
                                        or in excess of $20,000,000 and 
                                        is registered in such capacity 
                                        with the Commission, subject to 
                                        such terms and conditions as 
                                        the Commission shall prescribe.
                            ``(ii) Notwithstanding items (cc) and (gg) 
                        of clause (i)(II) of this subparagraph, 
                        agreements, contracts, or transactions 
                        described in clause (i) of this subparagraph 
                        shall be subject to subsection (a)(1)(B) of 
                        this section and sections 4(b), 4b, 4c(b), 4o, 
                        6(c) and 6(d) (except to the extent that 
                        sections 6(c) and 6(d) prohibit manipulation of 
                        the market price of any commodity in interstate 
                        commerce, or for future delivery on or subject 
                        to the rules of any market), 6c, 6d, 8(a), 
                        13(a), and 13(b) if the agreements, contracts, 
                        or transactions are offered, or entered into, 
                        by a person that is registered as a futures 
                        commission merchant or retail foreign exchange 
                        dealer, or an affiliated person of a futures 
                        commission merchant registered under this Act 
                        that is not also a person described in any of 
                        item (aa), (bb), (dd), (ee), or (ff) of clause 
                        (i) of this subparagraph.
                            ``(iii)(I) Notwithstanding items (cc) and 
                        (gg) of clause (i)(II), a person, unless 
                        registered in such capacity as the Commission 
                        by rule, regulation, or order shall determine 
                        and a member of a futures association 
                        registered under section 17, shall not--
                                    ``(aa) solicit or accept orders 
                                from any person that is not an eligible 
                                contract participant in connection with 
                                agreements, contracts, or transactions 
                                described in clause (i) entered into 
                                with or to be entered into with a 
                                person who is not described in item 
                                (aa), (bb), (dd), (ee), or (ff) of 
                                clause (i);
                                    ``(bb) exercise discretionary 
                                trading authority or obtain written 
                                authorization to exercise discretionary 
                                trading authority over any account for 
                                or on behalf of any person that is not 
                                an eligible contract participant in 
                                connection with agreements, contracts, 
                                or transactions described in clause (i) 
                                entered into with or to be entered into 
                                with a person who is not described in 
                                item (aa), (bb), (dd), (ee), or (ff) of 
                                clause (i); or
                                    ``(cc) operate or solicit funds, 
                                securities, or property for any pooled 
                                investment vehicle that is not an 
                                eligible contract participant in 
                                connection with agreements, contracts, 
                                or transactions described in clause (i) 
                                entered into with or to be entered into 
                                with a person who is not described in 
                                item (aa), (bb), (dd), (ee), or (ff) of 
                                clause (i).
                            ``(II) Subclause (I) shall not apply to--
                                    ``(aa) any person described in any 
                                of item (aa), (bb), (dd), (ee), or (ff) 
                                of subparagraph (B)(i)(II);
                                    ``(bb) any such person's associated 
                                persons; or
                                    ``(cc) any person who would be 
                                exempt from registration if engaging in 
                                the same activities in connection with 
                                transactions conducted on or subject to 
                                the rules of a contract market or a 
                                derivatives transaction execution 
                                facility.
                            ``(III) Notwithstanding items (cc) and (gg) 
                        of clause (i)(II), the Commission may make, 
                        promulgate, and enforce such rules and 
                        regulations as, in the judgment of the 
                        Commission, are reasonably necessary to 
                        effectuate any of the provisions of, or to 
                        accomplish any of the purposes of, this Act in 
                        connection with the activities of persons 
                        subject to subclause (I).
                            ``(IV) Subclause (III) shall not apply to--
                                    ``(aa) any person described in any 
                                of item (aa) through (ff) of 
                                subparagraph (B)(i)(II);
                                    ``(bb) any such person's associated 
                                persons; or
                                    ``(cc) any person who would be 
                                exempt from registration if engaging in 
                                the same activities in connection with 
                                transactions conducted on or subject to 
                                the rules of a contract market or a 
                                derivatives transaction execution 
                                facility.
                            ``(iv) Notwithstanding items (cc) and (gg) 
                        of clause (i)(II), the Commission may make, 
                        promulgate, and enforce such rules and 
                        regulations as, in the judgment of the 
                        Commission, are reasonably necessary to 
                        effectuate any of the provisions of, or to 
                        accomplish any of the purposes of, this Act in 
                        connection with agreements, contracts, or 
                        transactions described in clause (i) which are 
                        offered, or entered into, by a person described 
                        in item (cc) or (gg) of clause (i)(II).
                    ``(C)(i)(I) This subparagraph shall apply to any 
                agreement, contract, or transaction in foreign currency 
                that is--
                                    ``(aa) offered to, or entered into 
                                with, a person that is not an eligible 
                                contract participant (except that this 
                                subparagraph shall not apply if the 
                                counterparty, or the person offering to 
                                be the counterparty, of the person that 
                                is not an eligible contract participant 
                                is a person described in any of item 
                                (aa), (bb), (dd), (ee), or (ff) of 
                                subparagraph (B)(i)(II)); and
                                    ``(bb) offered, or entered into, on 
                                a leveraged or margined basis, or 
                                financed by the offeror, the 
                                counterparty, or a person acting in 
                                concert with the offeror or 
                                counterparty on a similar basis.
                    ``(II) Subclause (I) shall not apply to--
                            ``(aa) a security that is not a security 
                        futures product; or
                            ``(bb) a contract of sale that--
                                    ``(AA) results in actual delivery 
                                within 2 days; or
                                    ``(BB) creates an enforceable 
                                obligation to deliver between a seller 
                                and buyer that have the ability to 
                                deliver and accept delivery, 
                                respectively, in connection with their 
                                line of business.
                    ``(ii)(I) Agreements, contracts, or transactions 
                described in clause (i) of this subparagraph shall be 
                subject to subsection (a)(1)(B) of this section and 
                sections 4(b), 4b, 4c(b), 4o, 6(c) and 6(d) (except to 
                the extent that sections 6(c) and 6(d) prohibit 
                manipulation of the market price of any commodity in 
                interstate commerce, or for future delivery on or 
                subject to the rules of any market), 6c, 6d, 8(a), 
                13(a), and 13(b).
                    ``(II) Subclause (I) of this clause shall not apply 
                to--
                            ``(aa) any person described in any of item 
                        (aa), (bb), (dd), (ee), or (ff) of subparagraph 
                        (B)(i)(II); or
                            ``(bb) any such person's associated 
                        persons.
                    ``(III) The Commission may make, promulgate, and 
                enforce such rules and regulations as, in the judgment 
                of the Commission, are reasonably necessary to 
                effectuate any of the provisions of or to accomplish 
                any of the purposes of this Act in connection with 
                agreements, contracts, or transactions described in 
                clause (i) of this subparagraph if the agreements, 
                contracts, or transactions are offered, or entered 
                into, by a person that is not described in item (aa) 
                through (ff) of subparagraph (B)(i)(II).
                    ``(iii)(I) A person, unless registered in such 
                capacity as the Commission by rule, regulation, or 
                order shall determine and a member of a futures 
                association registered under section 17, shall not--
                            ``(aa) solicit or accept orders from any 
                        person that is not an eligible contract 
                        participant in connection with agreements, 
                        contracts, or transactions described in clause 
                        (i) of this subparagraph entered into with or 
                        to be entered into with a person who is not 
                        described in item (aa), (bb), (dd), (ee), or 
                        (ff) of subparagraph (B)(i);
                            ``(bb) exercise discretionary trading 
                        authority or obtain written authorization to 
                        exercise written trading authority over any 
                        account for or on behalf of any person that is 
                        not an eligible contract participant in 
                        connection with agreements, contracts, or 
                        transactions described in clause (i) of this 
                        subparagraph entered into with or to be entered 
                        into with a person who is not described in item 
                        (aa), (bb), (dd), (ee), or (ff) of subparagraph 
                        (B)(i); or
                            ``(cc) operate or solicit funds, 
                        securities, or property for any pooled 
                        investment vehicle that is not an eligible 
                        contract participant in connection with 
                        agreements, contracts, or transactions 
                        described in clause (i) of this subparagraph 
                        entered into with or to be entered into with a 
                        person who is not described in item (aa), (bb), 
                        (dd), (ee), or (ff) of subparagraph (B)(i).
                    ``(II) Subclause (I) shall not apply to--
                            ``(aa) any person described in item (aa), 
                        (bb), (dd), (ee), or (ff) of subparagraph 
                        (B)(i)(II);
                            ``(bb) any such person's associated 
                        persons; or
                            ``(cc) any person who would be exempt from 
                        registration if engaging in the same activities 
                        in connection with transactions conducted on or 
                        subject to the rules of a contract market or a 
                        derivatives transaction execution facility.
                    ``(III) The Commission may make, promulgate, and 
                enforce such rules and regulations as, in the judgment 
                of the Commission, are reasonably necessary to 
                effectuate any of the provisions of, or to accomplish 
                any of the purposes of, this Act in connection with the 
                activities of persons subject to subclause (I).
                    ``(IV) Subclause (III) shall not apply to--
                            ``(aa) any person described in item (aa) 
                        through (ff) of subparagraph (B)(i)(II);
                            ``(bb) any such person's associated 
                        persons; or
                            ``(cc) any person who would be exempt from 
                        registration if engaging in the same activities 
                        in connection with transactions conducted on or 
                        subject to the rules of a contract market or a 
                        derivatives transaction execution facility.
                    ``(iv) Sections 4(b) and 4b shall apply to any 
                agreement, contract, or transaction described in clause 
                (i) of this subparagraph as if the agreement, contract, 
                or transaction were a contract of sale of a commodity 
                for future delivery.
                    ``(v) This subparagraph shall not be construed to 
                limit any jurisdiction that the Commission may 
                otherwise have under any other provision of this Act 
                over an agreement, contract, or transaction that is a 
                contract of sale of a commodity for future delivery.
                    ``(vi) This subparagraph shall not be construed to 
                limit any jurisdiction that the Commission or the 
                Securities and Exchange Commission may otherwise have 
                under any other provision of this Act with respect to 
                security futures products and persons effecting 
                transactions in security futures products.''.
    (b) Effective Date.--The following provisions of the Commodity 
Exchange Act, as amended by subsection (a) of this section, shall be 
effective 120 days after the date of the enactment of this Act or at 
such other time as the Commodity Futures Trading Commission shall 
determine:
            (1) Subparagraphs (B)(i)(II)(gg), (B)(iii), and (C)(iii) of 
        section 2(c)(2).
            (2) The provisions of section 2(c)(2)(B)(i)(II)(cc) that 
        set forth adjusted net capital requirements, and the provisions 
        of such section that require a futures commission merchant to 
        be primarily or substantially engaged in certain business 
        activities.

SEC. 102. ANTIFRAUD AUTHORITY.

    Section 4b of the Commodity Exchange Act (7 U.S.C. 6b) is amended--
            (1) by redesignating subsections (b) and (c) as subsections 
        (c) and (d), respectively; and
            (2) by striking ``SEC. 4b.'' and all that follows through 
        the end of subsection (a) and inserting the following:

``SEC. 4B. CONTRACTS DESIGNED TO DEFRAUD OR MISLEAD.

    ``(a) Unlawful Actions.--It shall be unlawful--
            ``(1) for any person, in or in connection with any order to 
        make, or the making of, any contract of sale of any commodity 
        in interstate commerce or for future delivery 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
            ``(2) 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--
                    ``(A) to cheat or defraud or attempt to cheat or 
                defraud the other person;
                    ``(B) willfully to make or cause to be made to the 
                other person any false report or statement or willfully 
                to enter or cause to be entered for the other person 
                any false record;
                    ``(C) 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 paragraph (2), with the other 
                person; or
                    ``(D)(i) to bucket an order if the order is 
                represented by the person as an order to be executed, 
                or is required to be executed, on or subject to the 
                rules of a designated contract market; or
                    ``(ii) to fill an order by offset against the order 
                or orders of any other person, or willfully and 
                knowingly and without the prior consent of the other 
                person to become the buyer in respect to any selling 
                order of the other person, or become the seller in 
                respect to any buying order of the other person, if the 
                order is represented by the person as an order to be 
                executed, or is required to be executed, on or subject 
                to the rules of a designated contract market unless the 
                order is executed in accordance with the rules of the 
                designated contract market.
    ``(b) Clarification.--Subsection (a)(2) of this section shall not 
obligate any person, in or in connection with a transaction in a 
contract of sale of a commodity for future delivery, or other 
agreement, contract or transaction subject to paragraphs (1) and (2) of 
section 5a(g), with another person, to disclose to the other person 
nonpublic information that may be material to the market price, rate, 
or level of the commodity or transaction, except as necessary to make 
any statement made to the other person in or in connection with the 
transaction, not misleading in any material respect.''.

SEC. 103. AUTHORIZATION OF APPROPRIATIONS.

    Section 12(d) of the Commodity Exchange Act (7 U.S.C. 16(d)) is 
amended to read as follows:
    ``(d) There are authorized to be appropriated such sums as are 
necessary to carry out this Act for each of the fiscal years 2008 
through 2013.''.

SEC. 104. TECHNICAL AND CONFORMING AMENDMENTS.

    (a) Section 4a(e) of the Commodity Exchange Act (7 U.S.C 6a(e)) is 
amended in the last proviso by striking ``section 9(c)'' and inserting 
``section 9(a)(5)''.
    (b) Section 4f(c)(4)(B)(i) of such Act (7 U.S.C. 6f(c)(4)(B)(i)) is 
amended by striking ``compiled'' and inserting ``complied''.
    (c) Section 4k of such Act (7 U.S.C. 6k) is amended by 
redesignating the second paragraph (5) as paragraph (6).
    (d) The Commodity Exchange Act is amended--
            (1) by redesignating the first section 4p (7 U.S.C. 6o-1), 
        as added by section 121 of the Commodity Futures Modernization 
        Act of 2000, as section 4q; and
            (2) by moving such section to after the second section 4p, 
        as added by section 206 of Public Law 93-446.
    (e) Subsections (a)(1) and (d)(1) of section 5c of such Act (7 
U.S.C. 7a-2(a)(1), (d)(1)) are each amended by striking ``5b(d)(2)'' 
and inserting ``5b(c)(2)''.
    (f) Sections 5c(f) and 17(r) of such Act (7 U.S.C. 7a-2(f), 21(r)) 
are each amended by striking ``4d(3)'' and inserting ``4d(c)''.
    (g) Section 8(a)(1) of such Act (7 U.S.C. 12(a)(1)) is amended in 
the matter following subparagraph (B)--
            (1) by striking ``commenced'' the 2nd place it appears; and
            (2) by inserting ``commenced'' after ``in a judicial 
        proceeding''.
    (h) Section 9 of such Act (7 U.S.C. 13) is amended--
            (1) in subsection (f)(1), by striking the period and 
        inserting ``; or''; and
            (2) by redesignating subsection (f) as subsection (e).
    (i) Section 22(a)(2) of such Act (7 U.S.C. 25(a)(2)) is amended by 
striking ``5b(b)(1)(E)'' and inserting ``5b(c)(2)(H)''.

SEC. 105. CRIMINAL AND CIVIL PENALTIES.

    (a) Enforcement Powers of the 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 or attempted 
        manipulation in violation of this subsection, subsection (d) of 
        this section, or section 9(a)(2), 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) 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 or attempted manipulation in violation of 
        section 6(c), 6(d), or 9(a)(2), 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(a)(2), 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(a)(2)'' before the period.
    (c) 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 the 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 or attempted manipulation 
        in violation of section 6(c), 6(d), or 9(a)(2), 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.''.
    (d) 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)''; and
            (2) by striking ``five years'' and inserting ``10 years''.

                  TITLE II--EXEMPT COMMERCIAL MARKETS

SEC. 201. SIGNIFICANT PRICE DISCOVERY CONTRACTS.

    (a) Definition.--Section 1a of the Commodity Exchange Act (7 U.S.C. 
1a) is amended by redesignating paragraph (33) as paragraph (34) and by 
inserting after paragraph (32) the following:
            ``(33) Significant price discovery contract.--The term 
        `significant price discovery contract' means an agreement, 
        contract, or transaction subject to section 2(h)(7).''.
    (b) Standards Applicable to Significant Price Discovery 
Contracts.--Section 2(h) of such Act (7 U.S.C. 2(h)) is amended by 
adding at the end the following:
            ``(7) Significant price discovery contracts.--
                    ``(A) In general.--An agreement, contract, or 
                transaction conducted in reliance on the exemption 
                provided in paragraph (3) shall be subject to 
                subparagraphs (B) through (D) of this paragraph, under 
                such rules and regulations as the Commission shall 
                promulgate if the Commission determines that the 
                agreement, contract, or transaction performs a 
                significant price discovery function as described in 
                subparagraph (B) of this paragraph.
                    ``(B) Significant price discovery determination.--
                In determining whether an agreement, contract, or 
                transaction performs a significant price discovery 
                function, the Commission shall consider, as 
                appropriate, the following:
                            ``(i) Price linkage.--
                                    ``(I) Whether the agreement, 
                                contract, or transaction uses or 
                                otherwise relies on a daily or final 
                                settlement price, or other major price 
                                parameter, of a contract listed for 
                                trading on or subject to the rules of a 
                                designated contract market or a 
                                derivatives transaction execution 
                                facility, or a significant price 
                                discovery contract traded on an 
                                electronic trading facility, to value a 
                                position, transfer or convert a 
                                position, cash or financially settle a 
                                position, or close out a position.
                                    ``(II) Whether the price for the 
                                agreement, contract, or transaction is 
                                sufficiently related to the price of a 
                                contract listed for trading on or 
                                subject to the rules of a designated 
                                contract market or derivatives 
                                transaction execution facility so as to 
                                permit market participants to 
                                effectively arbitrage between the 
                                markets by simultaneously maintaining 
                                positions or executing trades in the 
                                contracts on the electronic trading 
                                facility and the designated contract 
                                market or derivatives transaction 
                                execution facility on a frequent and 
                                recurring basis.
                            ``(ii) Material price reference.--Whether, 
                        on a frequent and recurring basis, bids, 
                        offers, or transactions in a commodity are 
                        directly based on, or are determined by 
                        referencing, the prices generated by 
                        agreements, contracts, or transactions being 
                        traded or executed on the electronic trading 
                        facility.
                            ``(iii) Material liquidity.--Whether the 
                        volume of agreements, contracts, or 
                        transactions in the commodity being traded on 
                        the electronic trading facility is sufficient 
                        to have a material effect on other agreements, 
                        contracts, or transactions listed for trading 
                        on or subject to the rules of a designated 
                        contract market, a derivatives transaction 
                        execution facility, or an electronic trading 
                        facility operating in reliance on the exemption 
                        provided in paragraph (3).
                            ``(iv) Other material factors.--Such other 
                        material factors as the Commission specifies in 
                        its rules and regulations as relevant to the 
                        determination.
                    ``(C) Core principles applicable to significant 
                price discovery contracts.--An electronic trading 
                facility on which significant price discovery contracts 
                are traded or executed shall, with respect to the 
                contracts, comply with the core principles specified in 
                this subparagraph. The electronic trading facility 
                shall have reasonable discretion in establishing the 
                manner in which it complies with the following core 
                principles:
                            ``(i) Contracts not readily susceptible to 
                        manipulation.--The electronic trading facility 
                        shall list only significant price discovery 
                        contracts that are not readily susceptible to 
                        manipulation.
                            ``(ii) Monitoring of trading.--The 
                        electronic trading facility shall monitor 
                        trading in significant price discovery 
                        contracts to prevent market manipulation, price 
                        distortion, and disruptions of the delivery or 
                        cash-settlement process through market 
                        surveillance, compliance, and disciplinary 
                        practices and procedures, including methods for 
                        conducting real-time monitoring of trading and 
                        comprehensive and accurate trade 
                        reconstructions.
                            ``(iii) Ability to obtain information.--The 
                        electronic trading facility shall establish and 
                        enforce rules that will allow the electronic 
                        trading facility to obtain any necessary 
                        information to perform any of the functions 
                        described in this subparagraph, shall provide 
                        such information to the Commission on request, 
                        and shall have the capacity to carry out such 
                        international information-sharing agreements as 
                        the Commission may require.
                            ``(iv) Position limitations or 
                        accountability.--The electronic trading 
                        facility shall adopt position limitations or 
                        position accountability for speculators in 
                        significant price discovery contracts, where 
                        necessary and appropriate to reduce the 
                        potential threat of market manipulation or 
                        congestion, especially during trading in the 
                        delivery month.
                            ``(v) Emergency authority.--The electronic 
                        trading facility 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--
                                    ``(I) liquidate open positions in a 
                                significant price discovery contract; 
                                and
                                    ``(II) suspend or curtail trading 
                                in a significant price discovery 
                                contract.
                            ``(vi) Daily publication of trading 
                        information.--The electronic trading facility 
                        shall make public daily information on price, 
                        trading volume, and other trading data to the 
                        extent appropriate for significant price 
                        discovery contracts.
                            ``(vii) Compliance with rules.--The 
                        electronic trading facility shall monitor and 
                        enforce compliance with any rules of the 
                        electronic trading facility applicable to 
                        significant price discovery contracts, 
                        including the terms and conditions of the 
                        contracts and any limitations on access to the 
                        electronic trading facility with respect to the 
                        contracts.
                            ``(viii) Conflict of interest.--The 
                        electronic trading facility shall establish and 
                        enforce rules to minimize conflicts of interest 
                        in its decision-making process, and establish a 
                        process for resolving the conflicts.
                    ``(D) Implementation.--
                            ``(i) An electronic trading facility may 
                        implement any rule or rule amendment relating 
                        to a significant price discovery contract, 
                        including the terms and conditions of such a 
                        contract, by providing to the Commission a 
                        written certification that the rule or rule 
                        amendment complies with the requirements of 
                        this subsection (including regulations under 
                        this subsection).
                            ``(ii) With respect to the core principles 
                        described in clauses (iv) and (v) of 
                        subparagraph (C), the Commission shall take 
                        into account the differences between cleared 
                        and non-cleared significant price discovery 
                        contracts.''.

SEC. 202. LARGE TRADER REPORTING.

    (a) Section 4g(a) of the Commodity Exchange Act (7 U.S.C. 6g(a)) is 
amended by striking ``elsewhere'' and inserting ``elsewhere, and in any 
significant price discovery contract traded or executed on an 
electronic trading facility''.
    (b) Section 4i of such Act (7 U.S.C. 6i) is amended--
            (1) by inserting ``, or any significant price discovery 
        contract on an electronic trading facility'' before ``--'' ; 
        and
            (2) by inserting after ``board of trade'' the following: 
        ``or electronic trading facility''.

SEC. 203. COMMISSION EMERGENCY AUTHORITY.

    Section 8a of the Commodity Exchange Act (7 U.S.C. 12a) is 
amended--
            (1) in paragraph (6)--
                    (A) by inserting after ``registered entity'' the 
                first place it appears the following: ``or, with 
                respect to a significant price discovery contract, an 
                electronic trading facility,''; and
                    (B) by inserting after ``registered entity'' the 
                second place it appears the following: ``, electronic 
                trading facility'';
            (2) in paragraph (7)--
                    (A) by inserting after ``registered entity'' the 
                first place it appears the following: ``or, with 
                respect to a significant price discovery contract, an 
                electronic trading facility''; and
                    (B) by inserting after ``registered entity'' each 
                other place it appears, the following: ``or electronic 
                trading facility''; and
            (3) in paragraph (9)--
                    (A) by inserting after ``to direct the registered 
                entity,'' the following: ``or, with respect to a 
                significant price discovery contract, an electronic 
                trading facility,''; and
                    (B) by inserting after ``meaning or interpretation 
                given by a registered entity'' the following: ``or 
                electronic trading facility''.

SEC. 204. CONFORMING AMENDMENTS.

    (a) Section 2(a)(1)(A) of the Commodity Exchange Act (7 U.S.C. 
2(a)(1)(A)) is amended by striking ``of this Act'' and inserting ``, 
and significant price discovery contracts traded or executed on an 
electronic trading facility''.
    (b) Section 2(h)(3) of such Act (7 U.S.C. 2(h)(3)) is amended by 
striking ``paragraph (4)'' and inserting ``paragraphs (4) and (7)''.
    (c) Section 2(h)(4) of such Act (7 U.S.C. 2(h)(4)) is amended--
            (1) in subparagraph (B), by inserting ``and'' after the 
        semicolon;
            (2) in subparagraph (C), by striking ``; and'' and 
        inserting a period; and
            (3) by striking subparagraph (D).
    (d) Section 2(h)(5)(B)(iii)(I) of such Act (7 U.S.C. 
2(h)(5)(B)(iii)(I)) is amended by inserting ``or to make the 
determination described in paragraph (7)(B)'' before the semicolon.
    (e) Section 5c(a)(1) of such Act (7 U.S.C. 7a-2(a)(1)), as amended 
by section 104(e) of this Act, is amended by inserting after 
``5b(c)(2)'' the following: ``, and section 2(h)(7) with respect to 
significant price discovery contracts,''.
    (f) Section 5c(b) of such Act (7 U.S.C. 7a-2(b)) is amended--
            (1) in paragraph (1), by striking ``or derivatives 
        transaction execution facility'' and inserting ``, derivatives 
        transaction execution facility or, with respect to a 
        significant price discovery contract, an electronic trading 
        facility''; and
            (2) in each of paragraphs (2) and (3), by striking ``or 
        derivatives transaction execution facility'' and inserting ``, 
        derivatives transaction execution facility, or electronic 
        trading facility''.
    (g) Section 5c(d) of such Act (7 U.S.C. 7a-2(d)), as amended by 
section 104(e) of this Act, is amended--
            (1) in paragraph (1)--
                    (A) by inserting after ``registered entity'' the 
                first place it appears the following: ``or, with 
                respect to a significant price discovery contract, an 
                electronic trading facility'';
                    (B) by inserting after ``registered entity'' each 
                other place it appears the following: ``or electronic 
                trading facility''; and
                    (C) by inserting after ``5b(c)(2),'' the following: 
                ``or section 2(h)(7)(C) with respect to a significant 
                price discovery contract traded or executed on an 
                electronic trading facility,''; and
            (2) in paragraph (2), by inserting after ``registered 
        entity'' the following: ``or electronic trading facility''.
                                 <all>