[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5768 Introduced in House (IH)]







110th CONGRESS
  2d Session
                                H. R. 5768

 To amend the Commodity Exchange Act to provide the Commodity Futures 
Trading Commission authority over off-exchange retail foreign currency 
                 transactions, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             April 10, 2008

Mr. Frelinghuysen introduced the following bill; which was referred to 
   the Committee on Agriculture, and in addition to the Committee on 
 Financial Services, for a period to be subsequently determined by the 
  Speaker, in each case for consideration of such provisions as fall 
           within the jurisdiction of the committee concerned

_______________________________________________________________________

                                 A BILL


 
 To amend the Commodity Exchange Act to provide the Commodity Futures 
Trading Commission authority over off-exchange retail foreign currency 
                 transactions, 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 title may be cited as the ``CFTC Improvement Act of 2008''.

                      TITLE I--GENERAL PROVISIONS

SEC. 101. CFTC AUTHORITY OVER OFF-EXCHANGE RETAIL FOREIGN CURRENCY 
              TRANSACTIONS.

    (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) a futures commission 
                                        merchant registered under this 
                                        Act (that is not also a person 
                                        described in item (bb)), or an 
                                        affiliated person of such a 
                                        futures commission merchant 
                                        (that is not also a person 
                                        described in item (bb)) if 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); or
                                            ``(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))).
                            ``(ii) Notwithstanding item (cc) 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 
                        an affiliated person of a futures commission 
                        merchant registered under this Act that is not 
                        also a person described in any of items (aa), 
                        (bb), (dd), (ee), or (ff) of clause (i)(II) of 
                        this subparagraph.
                            ``(iii)(I) Notwithstanding item (cc) of 
                        clause (i)(II), a person shall not participate 
                        in the solicitation or recommendation of any 
                        agreement, contract, or transaction described 
                        in clause (i) entered into with or to be 
                        entered into with a person described in such 
                        item, unless the person--
                                    ``(aa) is registered in such 
                                capacity as the Commission by rule, 
                                regulation, or order shall determine; 
                                and
                                    ``(bb) is a member of a futures 
                                association registered under section 
                                17.
                                    ``(II) Subclause (I) shall not 
                                apply to--
                                            ``(aa) any person described 
                                        in any of items (aa), (bb), 
                                        (dd), (ee), or (ff) of 
                                        subparagraph (B)(i)(II); or
                                            ``(bb) any such person's 
                                        associated persons.
                    ``(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 
                        items (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 items (aa), 
                (bb), (dd), (ee), or (ff) of subparagraph (B)(i)(II); 
                or
                    ``(bb) any such person's associated persons.
    ``(iii)(I) A person shall not participate in the solicitation or 
recommendation of any agreement, contract, or transaction described in 
clause (i) of this subparagraph unless the person is registered in such 
capacity as the Commission by rule, regulation, or order shall 
determine, and is a member of a futures association registered under 
section 17.
    ``(II) Subclause (I) shall not apply to--
            ``(aa) any person described in any of items (aa), (bb), 
        (dd), (ee), or (ff) of subparagraph (B)(i)(II); or
            ``(bb) any such person's associated persons.
                            ``(iv)(I) 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.
                            ``(II) The Commission may, after issuing 
                        notice and soliciting comment, issue rules 
                        proscribing fraud in connection with any 
                        agreement, contract, or transaction described 
                        in clause (i) of this subparagraph in an exempt 
                        commodity or an agricultural commodity. Nothing 
                        in this provision shall affect the 
                        determination of whether the agreement, 
                        contract, or transaction is a contract for the 
                        purchase or sale of a commodity for future 
                        delivery for purposes of section 4(a).
                            ``(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.--Clause (iii) of section 2(c)(2)(B) and clause 
(iii) of section 2(c)(2)(C) of such Act, as amended by subsection (a) 
of this section, shall be effective 120 days after the date of the 
enactment of this Act or such other time as the Commodity Futures 
Trading Commission shall determine.

SEC. 102. LIAISON WITH DEPARTMENT OF JUSTICE.

    Section 2(a)(9) of the Commodity Exchange Act (7 U.S.C. 2(a)(9)) is 
amended by adding at the end the following:
                    ``(C) Liaison with department of justice.--
                            ``(i) In general.--The Commission shall, in 
                        cooperation with the Attorney General, maintain 
                        a liaison between the Commission and the 
                        Department of Justice to coordinate civil and 
                        criminal investigations and prosecutions of 
                        violations of this Act as appropriate.
                            ``(ii) Designation.--The Attorney General 
                        shall designate a person as liaison and take 
                        such steps as are necessary to facilitate 
                        communications described in clause (i).''.

SEC. 103. ANTI-FRAUD AUTHORITY OVER PRINCIPAL-TO-PRINCIPAL 
              TRANSACTIONS.

    Section 4b of the Commodity Exchange Act (7 U.S.C. Section 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
    ``(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 section 5a(g)(2), with the other 
                person; or
                    ``(D)(i) to bucket an order if the order is either 
                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 either 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. 104. 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 paragraph (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 
        the 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 first sentence, by inserting before the period 
        at the end the following: ``, 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''; 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(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)''.
    (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 paragraph (1) and inserting the following:
    ``(d) Civil Penalties.--
            ``(1) In general.--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 of such Act (7 U.S.C. 13) is 
amended--
            (1) in subsection (a), in the matter preceding paragraph 
        (1)--
                    (A) by striking ``(or $500,000 in the case of a 
                person who is an individual)''; and
                    (B) by striking ``five years'' and inserting ``10 
                years'';
            (2) by re-designating subsection (f) as subsection (e); and
            (3) in paragraph (1) of subsection (e) (as redesignated by 
        paragraph (2)), by striking the period at the end and inserting 
        ``; or''.

SEC. 105. 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. 106. 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'' in the 2nd place it appears; 
        and
            (2) by inserting ``commenced'' after ``in a judicial 
        proceeding''.
    (h) 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. 107. PORTFOLIO MARGINING AND SECURITY INDEX ISSUES.

    (a) The agencies represented on the President's Working Group on 
Financial Markets shall work to ensure that the Securities and Exchange 
Commission (SEC), the Commodity Futures Trading Commission (CFTC), or 
both, as appropriate, have taken the actions required under subsection 
(b).
    (b) The SEC, the CFTC, or both, as appropriate, shall take action 
under their existing authorities to permit--
            (1) by September 30, 2008, risk-based portfolio margining 
        for security options and security futures products; and
            (2) by June 30, 2008, the trading of futures on certain 
        security indexes by resolving issues related to foreign 
        security indexes.

 TITLE II--SIGNIFICANT PRICE DISCOVERY CONTRACTS ON EXEMPT COMMERCIAL 
                                MARKETS

SEC. 201. SIGNIFICANT PRICE DISCOVERY CONTRACTS.

    (a) Definitions.--Section 1a of the Commodity Exchange Act (7 
U.S.C. 1a) is amended--
            (1) by redesignating paragraph (33) as paragraph (34); and
            (2) 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)(A).''.
    (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) Standards applicable to significant price discover 
        contracts.--
                    ``(A) In general.--An agreement, contract, or 
                transaction conducted in reliance on the exemption in 
                paragraph (3) shall be subject to the provisions of 
                subparagraphs (B) through (E), under such rules and 
                regulations as the Commission may promulgate, provided 
                that the Commission determines, in its discretion, that 
                the agreement, contract, or transaction performs a 
                significant price discovery function as described in 
                subparagraph (B).
                    ``(B) Significant price discovery determination.--
                In making a determination whether an agreement, 
                contract, or transaction performs a significant price 
                discovery function, the Commission shall consider, as 
                appropriate:
                            ``(i) Price linkage.--The extent to which 
                        the agreement, contract, or transaction uses or 
                        otherwise relies on a daily or final settlement 
                        price, or other major price parameter, of a 
                        contract or contracts 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) Arbitrage.--The extent to which the 
                        price for the agreement, contract, or 
                        transaction is sufficiently related to the 
                        price of a contract or contracts 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.
                            ``(iii) Material price reference.--The 
                        extent to which, 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.
                            ``(iv) Material liquidity.--The extent to 
                        which the volume of agreements, contracts, or 
                        transactions in the commodity being traded on 
                        the electronic trading facility is sufficient 
                        to have a material impact on other agreements, 
                        contracts, or transactions listed for trading 
                        on or subject to the rules of a designated 
                        contract market, a derivatives trading 
                        execution facility, or an electronic trading 
                        facility operating in reliance on the exemption 
                        in paragraph (3).
                            ``(v) Other material factors.--Such other 
                        material factors as the Commission specifies by 
                        rule as relevant to determine whether an 
                        agreement, contract, or transaction serves a 
                        significant price discovery function.
                    ``(C) Core principles applicable to significant 
                price discovery contracts.--
                            ``(i) In general.--An electronic trading 
                        facility on which significant price discovery 
                        contracts are traded or executed shall, with 
                        respect to those contracts, comply with the 
                        core principles specified in this subparagraph.
                            ``(ii) Core principles.--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--
                                            ``(aa) 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;
                                            ``(bb) provide the 
                                        information to the Commission 
                                        upon request; and
                                            ``(cc) 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, price distortion, and 
                                disruptions of the delivery or cash-
                                settlement process 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--
                                            ``(aa) to liquidate open 
                                        positions in a significant 
                                        price discovery contract; and
                                            ``(bb) to 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 for significant 
                                price discovery contracts, as the 
                                Commission considers appropriate.
                                    ``(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--
                                            ``(aa) establish and 
                                        enforce rules to minimize 
                                        conflicts of interest in its 
                                        decision-making process; and
                                            ``(bb) establish a process 
                                        for resolving the conflicts.
                                    ``(IX) Antitrust considerations.--
                                Unless necessary or appropriate to 
                                achieve the purposes of this Act, the 
                                electronic trading facility shall 
                                endeavor to avoid--
                                            ``(aa) adopting any rules 
                                        or taking any actions that 
                                        result in any unreasonable 
                                        restraints of trade; or
                                            ``(bb) imposing any 
                                        material anticompetitive burden 
                                        on trading on the electronic 
                                        trading facility.
                    ``(D) Implementation.--The electronic trading 
                facility shall have discretion to take into account 
                differences between cleared and uncleared significant 
                price discovery contracts in applying core principles 
                in subclauses (IV) and (V) of subparagraph (C)(ii), and 
                the Commission shall take the differences into 
                consideration when reviewing the implementation of the 
                core principles by an electronic trading facility.
                    ``(E) New significant price discovery contracts.--
                            ``(i) Notification.--An electronic trading 
                        facility shall notify the Commission whenever 
                        the electronic trading facility has reason to 
                        believe that an agreement, contract, or 
                        transaction conducted in reliance on the 
                        exemption provided in paragraph (3) displays 
                        any of the factors relating to a significant 
                        price discovery function as described in 
                        subparagraph (B) (including regulations under 
                        this paragraph).
                            ``(ii) Review.--In addition to any review 
                        conducted upon receiving a notification 
                        pursuant to clause (i), at any other such time 
                        the Commission determines to be appropriate, 
                        but at least on an annual basis, the Commission 
                        shall conduct an evaluation, appropriate to the 
                        agreement, contract, or transaction, to 
                        determine whether any agreement, contract, or 
                        transaction conducted on an electronic trading 
                        facility in reliance on the exemption provided 
                        in paragraph (3) is performing a significant 
                        price discovery function.''.

SEC. 202. LARGE TRADER REPORTING.

    (a) Reporting and Recordkeeping.--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) Reports of Positions Equal to or in Excess of Trading Limits.--
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'' after ``subject to 
        the rules of any contract market or derivatives transaction 
        execution facility'' ; and
            (2) by inserting in the matter following paragraph (2), 
        ``or electronic trading facility'' after ``subject to the rules 
        of any other board of trade''.

SEC. 203. CONFORMING AMENDMENTS.

    (a) Section 1a(12)(A)(x) of the Commodity Exchange Act (7 U.S.C. 
1a(12)(A)(x)) is amended by inserting ``(other than an electronic 
trading facility with respect to a significant price discovery 
contract)'' after ``registered entity''.
    (b) Section 1a(29) of such Act (7 U.S.C. 1a(29)) is amended--
            (1) in subparagraph (C), by striking ``and'' at the end;
            (2) in subparagraph (D), by striking the period and 
        inserting ``; and''; and
            (3) by adding at the end the following:
                    ``(E) with respect to a contract that the 
                Commission determines is a significant price discovery 
                contract, any electronic trading facility on which the 
                contract is executed or traded.''.
    (c)(1) Section 2(a)(1)(A) of such Act (7 U.S.C. 2(a)(1)(A)) is 
amended by inserting after ``section 19 of this Act'' the following: 
``, and significant price discovery contracts traded or executed on an 
electronic trading facility''.
    (2) Nothing contained in this title or amendments made by this 
title shall be construed to affect the jurisdiction that the Commission 
or any regulatory authority may otherwise have under any other 
provision of law with respect to contracts, agreements, or transactions 
that are not significant price discovery contracts.
    (d) 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)''.
    (e) Section 2(h)(4) of such Act (7 U.S.C. 2(h)(4)) is amended by 
striking subparagraph (D) and inserting the following:
                    ``(D) such rules, regulations, and orders as the 
                Commission may issue to ensure timely compliance with 
                any of the provisions of this Act applicable to a 
                significant price discovery contract traded on or 
                executed on any electronic trading facility.''.
    (f) 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 subparagraph (B) of paragraph (7)'' after 
``paragraph (4)''.
    (g) Section 4a of such Act (7 U.S.C. 6a) is amended--
            (1) in subsection (a)--
                    (A) in the first sentence, by inserting ``, or on 
                electronic trading facilities with respect to a 
                significant price discovery contract'' after 
                ``derivatives transaction execution facilities''; and
                    (B) in the second sentence, by inserting ``, or on 
                an electronic trading facility with respect to a 
                significant price discovery contract,'' after 
                ``derivatives transaction execution facility''; and
            (2) in subsection (b)--
                    (A) in paragraph (1), by inserting ``or electronic 
                trading facility with respect to a significant price 
                discovery contract'' after ``facility or facilities''; 
                and
                    (B) in paragraph (2), by inserting ``or electronic 
                trading facility with respect to a significant price 
                discovery contract'' after ``derivatives transaction 
                execution facility''; and
            (3) in subsection (e)--
                    (A) in the first sentence--
                            (i) by inserting ``or by any electronic 
                        trading facility'' after ``registered by the 
                        Commission'';
                            (ii) by inserting ``or on an electronic 
                        trading facility'' after ``derivatives 
                        transaction execution facility'' the second 
                        place it appears; and
                            (iii) by inserting ``or electronic trading 
                        facility'' before ``or such board of trade'' 
                        each place it appears; and
                    (B) in the second sentence, by inserting ``or 
                electronic trading facility with respect to a 
                significant price discovery contract'' after 
                ``registered by the Commission''.
    (h) Section 5a(d) of such Act (7 U.S.C. 7a(d)(1)) is amended--
            (1) by redesignating paragraphs (4) through (9) as 
        paragraphs (5) through (10); and
            (2) by inserting after paragraph (3) the following:
            ``(4) Position limits or accountability.--To reduce the 
        potential threat of market manipulation, price distortion, and 
        disruption of the delivery or cash-settled process or 
        congestion, especially during trading in the delivery month, 
        the derivatives transaction execution facility shall adopt 
        position limits or position accountability for speculators, 
        where necessary and appropriate for a contract, agreement or 
        transaction with an underlying commodity that has a physically 
        deliverable supply.''.
    (i) Section 5c(a) of such Act (7 U.S.C. 7a-2(a)) is amended in 
paragraph (1) by inserting ``, and section 2(h)(7) with respect to 
significant price discovery contracts,'' after ``, and 5b(d)(2)''.
    (j) Section 5c(b) of such Act (7 U.S.C. 7a-2(b)) is amended--
            (1) by striking paragraph (1) and inserting following:
            ``(1) In general.--A contract market, derivatives 
        transaction execution facility, or electronic trading facility 
        with respect to a significant price discovery contract may 
        comply with any applicable core principle through delegation of 
        any relevant function to a registered futures association or a 
        registered entity that is not an electronic trading 
        facility.'';
            (2) in paragraph (2), by striking ``contract market or 
        derivatives transaction execution facility'' and inserting 
        ``contract market, derivatives transaction execution facility, 
        or electronic trading facility''; and
            (3) in paragraph (3), by striking ``contract market or 
        derivatives transaction execution facility'' each place it 
        appears and inserting ``contract market, derivatives 
        transaction execution facility, or electronic trading 
        facility''.
    (k) Section 5c(d)(1) of such Act (7 U.S.C. 7a-2(d)(1)) is amended 
by inserting ``or 2(h)(7)(C) with respect to a significant price 
discovery contract traded or executed on an electronic trading 
facility,'' after ``5b(d)(2)''.
    (l) Section 5e of such Act (7 U.S.C. 7b) is amended by inserting 
``, or revocation of the right of an electronic trading facility to 
rely on the exemption set forth in section 2(h)(3) with respect to a 
significant price discovery contract,'' after ``revocation of 
designation as a registered entity'' ;
    (m) Section 6(b) of such Act (7 U.S.C. 8(b)) is amended by striking 
the first sentence and all that follows through ``Provided,'' and 
inserting the following: ``The Commission may suspend for a period not 
to exceed 6 months or revoke the designation or registration of any 
contract market or derivatives transaction execution facility, or 
revoke the right of an electronic trading facility to rely on the 
exemption set forth in section 2(h)(3) with respect to a significant 
price discovery contract, on a showing that the contract market or 
derivatives transaction execution facility is not enforcing or has not 
enforced its rules of government, made a condition of its designation 
or registration as set forth in sections 5 through 5b or section 5f, or 
that the contract market, derivatives transaction execution facility, 
or electronic trading facility, or any director, officer, agent, or 
employee thereof, otherwise is violating or has violated any of the 
provisions of this Act or any of the rules, regulations, or orders of 
the Commission under this Act. The suspension or revocation shall only 
be made after a notice to the officers of the contract market, 
derivatives transaction execution facility, or electronic trading 
facility and upon a hearing on the record: Provided,''.

SEC. 204. EFFECTIVE DATE.

    (a) In General.--Except as provided in this section, this title 
shall become effective on the date of enactment of this Act.
    (b) Significant Price Discovery Standards Rulemaking.--The 
Commodity Futures Trading Commission shall--
            (1) not later than 180 days after the date of the enactment 
        of this Act, issue a proposed rule regarding the significant 
        price discovery standards in section 2(h)(7) of the Commodity 
        Exchange Act; and
            (2) not later than 270 days after the date of enactment of 
        this Act, issue a final rule.
    (c) Significant Price Discovery Determinations.--With respect to 
any electronic trading facility (as defined in section 1a(10) of the 
Commodity Exchange Act) operating on the effective date of the final 
rule regarding the significant price discovery standards referred to in 
subsection (b) of this section, the Commodity Futures Trading 
Commission shall complete a review of the agreements, contracts, and 
transactions of the facilities not later than 180 days after that 
effective date to determine whether any such agreement, contract, or 
transaction performs a significant price discovery function.
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