[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3795 Introduced in House (IH)]
111th CONGRESS
1st Session
H. R. 3795
To enact the Over-the-Counter Derivatives Markets Act of 2009.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
October 13, 2009
Mr. Frank of Massachusetts introduced the following bill; which was
referred to the Committee on Financial Services, and in addition to the
Committee on Agriculture, 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 enact the Over-the-Counter Derivatives Markets Act of 2009.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
TITLE I--IMPROVEMENTS TO REGULATION OF OVER-THE-COUNTER DERIVATIVES
MARKETS
SECTION 101. SHORT TITLE.
This title may be cited as the ``Over-the-Counter Derivatives
Markets Act of 2009''.
Subtitle A--Regulation of Swap Markets
SEC. 111. DEFINITIONS.
(a) Amendments to Definitions in the Commodity Exchange Act.--
Section 1a of the Commodity Exchange Act (7 U.S.C. 1a) is amended--
(1) by redesignating paragraphs (9) through (34) as
paragraphs (10) through (35), respectively;
(2) by adding after paragraph (8) the following:
``(9) Derivative.--The term `derivative' means--
``(A) a contract of sale of a commodity for future
delivery; or
``(B) a swap.'';
(3) by redesignating paragraph (35) (as redesignated by
subsection (a)) as paragraph (36);
(4) by adding after paragraph (34) (as redesignated by
subsection (a)) the following:
``(35) Swap.--
``(A) In general.--Except as provided in
subparagraph (B), the term `swap' means any agreement,
contract, or transaction that--
``(i) is a put, call, cap, floor, collar,
or similar option of any kind for the purchase
or sale of, or based on the value of, one or
more interest or other rates, currencies,
commodities, securities, instruments of
indebtedness, indices, quantitative measures,
or other financial or economic interests or
property of any kind;
``(ii) provides for any purchase, sale,
payment, or delivery (other than a dividend on
an equity security) that is dependent on the
occurrence, non-occurrence, or the extent of
the occurrence of an event or contingency
associated with a potential financial,
economic, or commercial consequence;
``(iii) provides on an executory basis for
the exchange, on a fixed or contingent basis,
of one or more payments based on the value or
level of one or more interest or other rates,
currencies, commodities, securities,
instruments of indebtedness, indices,
quantitative measures, or other financial or
economic interests or property of any kind, or
any interest therein or based on the value
thereof, and that transfers, as between the
parties to the transaction, in whole or in
part, the financial risk associated with a
future change in any such value or level
without also conveying a current or future
direct or indirect ownership interest in an
asset (including any enterprise or investment
pool) or liability that incorporates the
financial risk so transferred, including any
agreement, contract, or transaction commonly
known as an interest rate swap, a rate floor,
rate cap, rate collar, cross-currency rate
swap, basis swap, currency swap, total return
swap, equity index swap, equity swap, debt
index swap, debt swap, credit spread, credit
default swap, credit swap, weather swap, energy
swap, metal swap, agricultural swap, emissions
swap, or commodity swap;
``(iv) is an agreement, contract, or
transaction that is, or in the future becomes,
commonly known to the trade as a swap; or
``(v) is any combination or permutation of,
or option on, any agreement, contract, or
transaction described in any of clauses (i)
through (iv).
``(B) Exclusions.--The term `swap' does not
include:
``(i) any contract of sale of a commodity
for future delivery or security futures product
traded on or subject to the rules of any board
of trade designated as a contract market under
section 5 or 5f;
``(ii) any sale of a nonfinancial commodity
for deferred shipment or delivery, so long as
such transaction is physically settled;
``(iii) any put, call, straddle, option, or
privilege on any security, certificate of
deposit, or group or index of securities,
including any interest therein or based on the
value thereof, that is subject to the
Securities Act of 1933 (15 U.S.C. 77a et seq.)
and the Securities Exchange Act of 1934 (15
U.S.C. 78a et seq.);
``(iv) any put, call, straddle, option, or
privilege relating to foreign currency entered
into on a national securities exchange
registered pursuant to section 6(a) of the
Securities Exchange Act of 1934 (15 U.S.C.
78f(a));
``(v) any agreement, contract, or
transaction providing for the purchase or sale
of one or more securities on a fixed basis that
is subject to the Securities Act of 1933 (15
U.S.C. 77a et seq.) and the Securities Exchange
Act of 1934 (15 U.S.C. 78a et seq.);
``(vi) any agreement, contract, or
transaction providing for the purchase or sale
of one or more securities on a contingent basis
that is subject to the Securities Act of 1933
(15 U.S.C. 77a et seq.) and the Securities
Exchange Act of 1934 (15 U.S.C. 78a et seq.),
unless such agreement, contract, or transaction
predicates such purchase or sale on the
occurrence of a bona fide contingency that
might reasonably be expected to affect or be
affected by the creditworthiness of a party
other than a party to the agreement, contract,
or transaction;
``(vii) any note, bond, or evidence of
indebtedness that is a security as defined in
section 2(a)(1) of the Securities Act of 1933
(15 U.S.C. 77b(a)(1));
``(viii) any agreement, contract, or
transaction that is--
``(I) based on a security; and
``(II) entered into directly or
through an underwriter (as defined in
section 2(a)(11) of the Securities Act
of 1933) (15 U.S.C. 77b(a)(11)) by the
issuer of such security for the
purposes of raising capital, unless
such agreement, contract, or
transaction is entered into to manage a
risk associated with capital raising;
``(ix) any foreign exchange swap;
``(x) any foreign exchange forward;
``(xi) any agreement, contract, or
transaction a counterparty of which is a
Federal Reserve bank or the United States
Government, or an agency of the United States
Government that is expressly backed by the full
faith and credit of the United States; and
``(xii) any security-based swap, other than
a security-based swap as described in paragraph
(38)(C).
``(C) Rule of construction regarding master
agreements.--The term `swap' shall be construed to
include a master agreement that provides for an
agreement, contract, or transaction that is a swap
pursuant to subparagraph (A), together with all
supplements to any such master agreement, without
regard to whether the master agreement contains an
agreement, contract, or transaction that is not a swap
pursuant to subparagraph (A), except that the master
agreement shall be considered to be a swap only with
respect to each agreement, contract, or transaction
under the master agreement that is a swap pursuant to
subparagraph (A).'';
(5) in paragraph (13) (as redesignated by subsection (a))--
(A) in subparagraph (A)--
(i) in clause (vii), by striking
``$25,000,000'' and inserting ``$50,000,000'';
and
(ii) in clause (xi), by striking ``total
assets in an amount'' and inserting ``amounts
invested on a discretionary basis''; and
(B) in paragraph (C), by striking ``determines''
and inserting ``and the Securities and Exchange
Commission may jointly determine'';
(6) in paragraph (30) (as redesignated by subsection (a)),
by--
(A) redesignating subparagraph (E) as subparagraph
(G);
(B) in subparagraph (D), by striking ``and''; and
(C) inserting after subparagraph (D) the following:
``(E) a swap execution facility registered under
section 5h;
``(F) a swap repository; and'';
(7) by adding after paragraph (36) (as redesignated by
subsection (c)) the following:
``(37) Board.--The term `Board' means the Board of
Governors of the Federal Reserve System.'';
(8) by adding after paragraph (37) the following:
``(38) Security-based swap.--
``(A) In general.--Except as provided in
subparagraph (B), the term `security-based swap' means
any agreement, contract, or transaction that would be a
swap under paragraph (35) (without regard to paragraph
(35)(B)(xii)), and that--
``(i) is based on an index that is a
narrow-based security index, including any
interest therein or based on the value thereof;
``(ii) is based on a single security or
loan, including any interest therein or based
on the value thereof; or
``(iii) is based on the occurrence, non-
occurrence, or extent of the occurrence of an
event relating to a single issuer of a security
or the issuers of securities in a narrow-based
security index, provided that such event must
directly affect the financial statements,
financial condition, or financial obligations
of the issuer.
``(B) Exclusion.--The term `security-based swap'
does not include any agreement, contract, or
transaction that meets the definition of security-based
swap only because it references or is based upon a
government security.
``(C) Mixed swap.--The term `security-based swap'
includes any agreement, contract, or transaction that
is as described in subparagraph (A) and also is based
on the value of one or more interest or other rates,
currencies, commodities, instruments of indebtedness,
indices, quantitative measures, other financial or
economic interest or property of any kind (other than a
single security or a narrow-based security index), or
the occurrence, non-occurrence, or the extent of the
occurrence of an event or contingency associated with a
potential financial, economic, or commercial
consequence (other than an event described in
subparagraph (A)(iii)).
``(D) Rule of construction regarding master
agreements.--The term `security-based swap' shall be
construed to include a master agreement that provides
for an agreement, contract, or transaction that is a
security-based swap pursuant to subparagraph (A),
together with all supplements to any such master
agreement, without regard to whether the master
agreement contains an agreement, contract, or
transaction that is not a security-based swap pursuant
to subparagraph (A), except that the master agreement
shall be considered to be a security-based swap only
with respect to each agreement, contract, or
transaction under the master agreement that is a
security-based swap pursuant to subparagraph (A).'';
(9) by adding after paragraph (38) the following:
``(39) Swap dealer.--
``(A) In general.--The term `swap dealer' means any
person engaged in the business of buying and selling
swaps for such person's own account, through a broker
or otherwise.
``(B) Exception.--The term `swap dealer' does not
include a person that buys or sells swaps for such
person's own account, either individually or in a
fiduciary capacity, but not as a part of a regular
business.'';
(10) by adding after paragraph (39) the following:
``(40) Major swap participant.--
``(A) In general.--The term `major swap
participant' means any person who is not a swap dealer
and who maintains a substantial net position in
outstanding swaps, excluding positions held primarily
for hedging (including balance sheet hedging) or risk
management purposes. A person may be designated as a
major swap participant for 1 or more individual types
of swaps.
``(B) Definition of `substantial net position'.--
The Commission and the Securities and Exchange
Commission shall jointly define by rule or regulation
the term `substantial net position' at a threshold that
the regulators determine prudent for the effective
monitoring, management and oversight of the financial
system. In the event that the regulators are unable to
agree upon a level within 60 days of the commencement
of such consultations, the Secretary of the Treasury
shall make such determination, which shall be binding
on and adopted by such regulators.'';
(11) by adding after paragraph (40) the following:
``(41) Major security-based swap participant.--
``(A) In general.--The term `major security-based
swap participant' means any person who is not a
security-based swap dealer and who maintains a
substantial net position in outstanding security-based
swaps, excluding positions held primarily for hedging
(including balance sheet hedging) or risk management
purposes. A person may be designated as a major
security-based swap participant for 1 or more
individual types of security-based swaps.
``(B) Definition of `substantial net position'.--
The Commission and the Securities and Exchange
Commission shall jointly define by rule or regulation
the term `substantial net position' at a threshold that
the regulators determine prudent for the effective
monitoring, management and oversight of the financial
system. In the event that the regulators are unable to
agree upon a level within 60 days of the commencement
of such consultations, the Secretary of the Treasury
shall make such determination, which shall be binding
on and adopted by such regulators.'';
(12) by adding after paragraph (41) the following:
``(42) Appropriate federal banking agency.--The term
`appropriate Federal banking agency' has the same meaning as in
section 3(q) of the Federal Deposit Insurance Act (12 U.S.C.
1813(q)).'';
(13) by adding after paragraph (42) the following:
``(43) Prudential regulator.--The term `Prudential
Regulator' means--
``(A) the Board in the case of a swap dealer, major
swap participant, security-based swap dealer or major
security-based swap participant that is--
``(i) a State-chartered bank that is a
member of the Federal Reserve System; or
``(ii) a State-chartered branch or agency
of a foreign bank;
``(B) the Office of the Comptroller of the Currency
in the case of a swap dealer, major swap participant,
security-based swap dealer or major security-based swap
participant that is--
``(i) a national bank; or
``(ii) a federally chartered branch or
agency of a foreign bank; and
``(C) the Federal Deposit Insurance Corporation in
the case of a swap dealer, major swap participant,
security-based swap dealer or major security-based swap
participant that is a State-chartered bank that is not
a member of the Federal Reserve System.'';
(14) by adding after paragraph (43) the following:
``(44) Security-based swap dealer.--
``(A) In general.--The term `security-based swap
dealer' means any person engaged in the business of
buying and selling security-based swaps for such
person's own account, through a broker or otherwise.
``(B) Exception.--The term `security-based swap
dealer' does not include a person that buys or sells
security-based swaps for such person's own account,
either individually or in a fiduciary capacity, but not
as a part of a regular business.'';
(15) by adding after paragraph (44) the following:
``(45) Government security.--The term `government security'
has the same meaning as in section 3(a)(42) of the Securities
Exchange Act of 1934 (15 U.S.C. 78c(a)(42)).'';
(16) by adding after paragraph (45) the following:
``(46) Foreign exchange forward.--The term `foreign
exchange forward' means a transaction that solely involves the
exchange of 2 different currencies on a specific future date at
a fixed rate agreed at the inception of the contract.'';
(17) by adding after paragraph (46) the following:
``(47) Foreign exchange swap.--The term `foreign exchange
swap' means a transaction that solely involves the exchange of
2 different currencies on a specific date at a fixed rate
agreed at the inception of the contract, and a reverse exchange
of the same 2 currencies at a date further in the future and at
a fixed rate agreed at the inception of the contract.'';
(18) by adding after paragraph (47) the following:
``(48) Person associated with a security-based swap dealer
or major security-based swap participant.--The term `person
associated with a security-based swap dealer or major security-
based swap participant' or `associated person of a security-
based swap dealer or major security-based swap participant'
means any partner, officer, director, or branch manager of such
security-based swap dealer or major security-based swap
participant (or any person occupying a similar status or
performing similar functions), any person directly or
indirectly controlling, controlled by, or under common control
with such security-based swap dealer or major security-based
swap participant, or any employee of such security-based swap
dealer or major security-based swap participant, except that
any person associated with a security-based swap dealer or
major security-based swap participant whose functions are
solely clerical or ministerial shall not be included in the
meaning of such term other than for purposes of section
15F(e)(2) of the Securities Exchange Act of 1934 (15 U.S.C.
78o-10).'';
(19) by adding after paragraph (48) the following:
``(49) Person associated with a swap dealer or major swap
participant.--The term `person associated with a swap dealer or
major swap participant' or `associated person of a swap dealer
or major swap participant' means any partner, officer,
director, or branch manager of such swap dealer or major swap
participant (or any person occupying a similar status or
performing similar functions), any person directly or
indirectly controlling, controlled by, or under common control
with such swap dealer or major swap participant, or any
employee of such swap dealer or major swap participant, except
that any person associated with a swap dealer or major swap
participant whose functions are solely clerical or ministerial
shall not be included in the meaning of such term other than
for purposes of section 4s(b)(6).''; and
(20) by adding after paragraph (49) the following:
``(50) Swap repository.--The term `swap repository' means
an entity that collects and maintains the records of the terms
and conditions of swaps or security-based swaps entered into by
third parties.''.
(b) Joint Rulemaking on Further Definition of Terms.--
(1) In general.--The Commodity Futures Trading Commission
and the Securities and Exchange Commission shall jointly adopt
a rule further defining the terms ``swap'', ``security-based
swap'', ``swap dealer'', ``security-based swap dealer'',
``major swap participant'',``major security-based swap
participant'', and ``eligible contract participant'' no later
than 180 days after the effective date of this Act.
(2) Prevention of evasions.--The Commodity Futures Trading
Commission and the Securities and Exchange Commission may
prescribe rules defining the term ``swap'' or ``security-based
swap'' to include transactions that have been structured to
evade this Act.
(c) Joint Rulemaking Under This Act.--
(1) Uniform rules.--Rules and regulations prescribed
jointly under this Act by the Commodity Futures Trading
Commission and the Securities and Exchange Commission shall be
uniform.
(2) Treasury department.--In the event that the Commodity
Futures Trading Commission and the Securities and Exchange
Commission fail to jointly prescribe uniform rules and
regulations under any provision of this Act in a timely manner,
the Secretary of the Treasury, in consultation with the
Commodity Futures Trading Commission and the Securities and
Exchange Commission, shall prescribe rules and regulations
under such provision. A rule prescribed by the Secretary of the
Treasury shall be enforced as if prescribed jointly by the
Commodity Futures Trading Commission and the Securities and
Exchange Commission and shall remain in effect until the
Secretary rescinds the rule or until the effective date of a
corresponding rule prescribed jointly by the Commodity Futures
Trading Commission and the Securities and Exchange Commission
in accordance with this section, whichever is later.
(3) Deadline.--The Secretary of the Treasury shall adopt
rules and regulations under paragraph (2) within 180 days of
the time that the Commodity Futures Trading Commission and the
Securities and Exchange Commission failed to adopt uniform
rules and regulations.
(4) Treatment of similar products.--In adopting joint rules
and regulations under this Act, the Commodity Futures Trading
Commission and the Securities and Exchange Commission shall
prescribe requirements to treat functionally or economically
similar products similarly.
(5) Treatment of dissimilar products.--Nothing in this Act
shall be construed to require the Commodity Futures Trading
Commission and the Securities and Exchange Commission to adopt
joint rules that treat functionally or economically different
products identically.
(6) Joint interpretation.--Any interpretation of, or
guidance regarding, a provision of this Act, shall be effective
only if issued jointly by the Commodity Futures Trading
Commission and the Securities and Exchange Commission if this
Act requires the Commodity Futures Trading Commission and the
Securities and Exchange Commission to issue joint regulations
to implement the provision.
(d) Exemptions.--Section 4(c) of the Commodity Exchange Act (7
U.S.C. 4(c)) is amended by adding at the end the following: ``The
Commission shall not have the authority to grant exemptions from the
swap-related provisions of the Over-the-Counter Derivatives Markets Act
of 2009, except as expressly authorized under the provisions of that
Act.''.
SEC. 112. JURISDICTION.
(a) Exclusive Jurisdiction.--The first sentence of section
2(a)(1)(A) of the Commodity Exchange Act (7 U.S.C. 2(a)(1)(A)) is
amended--
(1) by striking ``(C) and (D)'' and inserting ``(C), (D),
and (G)'';
(2) by striking ``subsections (c) through (i)'' and
inserting ``subsections (c) and (f)''; and
(3) by striking ``involving contracts of sale'' and
inserting ``involving swaps or contracts of sale''.
(b) No Limitation.--Section 2(a)(1) of the Commodity Exchange Act
(7 U.S.C. 2(a)(1)) is amended by inserting after subparagraph (F) the
following:
``(G) Nothing contained in this paragraph shall
supersede or limit the jurisdiction conferred on the
Securities and Exchange Commission or other regulatory
authority by, or otherwise restrict the authority of
the Securities and Exchange Commission or other
regulatory authority under, the Over-the-Counter
Derivatives Markets Act of 2009, including with respect
to a security-based swap as described in section
1a(38)(C) of this Act.''.
(c) Additions.--Section 2(c)(2)(A) of the Commodity Exchange Act (7
U.S.C. 2(c)(2)(A)) is amended--
(1) in clause (i), by striking ``or'' at the end;
(2) by redesignating clause (ii) as clause (iii); and
(3) by inserting after clause (i) the following:
``(ii) a swap; or''.
SEC. 113. CLEARING.
(a) Clearing Requirement.--
(1) Sections 2(d), 2(e), 2(g), and 2(h) of the Commodity
Exchange Act (7 U.S.C. 2(d), 2(e), 2(g), and 2(h)) are
repealed.
(2) Section 2 of the Commodity Exchange Act (7 U.S.C. 2) is
further amended by inserting after subsection (c) the
following:
``(d) Swaps.--Nothing in this Act (other than subsections
(a)(1)(A), (a)(1)(B), (f), and (j), sections 4a, 4b, 4b-1, 4c(a),
4c(b), 4o, 4r, 4s, 4t, 4u, 5b, 5c, 5h, 6(c), 6(d), 6c, 6d, 8, 8a, 9,
12(e)(2), 12(f), 13(a), 13(b), 21, and 22(a)(4) and such other
provisions of this Act as are applicable by their terms to registered
entities and Commission registrants) governs or applies to a swap.
``(e) Limitation on Participation.--It shall be unlawful for any
person, other than an eligible contract participant, to enter into a
swap unless the swap is entered into on or subject to the rules of a
board of trade designated as a contract market under section 5.''.
(3) Section 2 of the Commodity Exchange Act (7 U.S.C. 2) is
further amended by inserting after subsection (i) the
following:
``(j) Clearing of Swaps.--
``(1) Clearing requirement.--The Commission shall monitor
swap activity and transaction data and by rule or regulation
identify specific swap contracts that it determines are
required to be cleared consistent with the public interest,
after taking into account the following factors:
``(A) the existence of significant outstanding
notional exposures, trading liquidity and adequate
pricing data;
``(B) the availability of one or more swap
clearinghouses with the rule framework, capacity,
operational expertise and resources, and credit support
infrastructure to clear the contract on terms that are
consistent with the material terms and trading
conventions on which the contract is then traded;
``(C) the impact on the mitigation of systemic
risk, taking into account the size of the market for
such contract and the resources of the swap
clearinghouses available to clear the contract;
``(D) the impact on competition; and
``(E) the existence of reasonable legal certainty
in the event of the insolvency of the relevant swap
clearinghouse or one or more of its clearing members
with regard to the treatment of customer and swap
counterparty positions, funds, and property.
``(2) Scope of clearing functions.--The Commission shall by
rule or regulation define the scope of the clearing functions
that are necessary to satisfy the requirements of paragraph
(1).
``(3) Prevention of evasion.--The Commission and the
Securities and Exchange Commission shall have authority to
prescribe rules under this subsection, or issue interpretations
of such rules, as necessary to prevent evasions of this Act
provided that any such rules or interpretations must be issued
jointly to be effective.
``(4) Required reporting.--
``(A) In general.--All swap transactions that are
not accepted for clearing by any derivatives clearing
organization shall be reported to either a swap
repository described in section 21 or, if there is no
repository that would accept the swap, to the
Commission pursuant to section 4r within such time
period as the Commission may by rule or regulation
prescribe.
``(B) Authority of swap dealer to report.--
Counterparties may agree which counterparty will report
the swap transaction. In transactions where only 1
counterparty is a swap dealer, the swap dealer will
report the transaction.
``(5) Transition rules.--Rules adopted by the Commission
under this section shall provide for the reporting of data, as
follows:
``(A) Swaps that were entered into before the date
of enactment of the Over-the-Counter Derivatives
Markets Act of 2009 shall be reported to a registered
swap repository or the Commission no later than 180
days after the effective date of the Over-the-Counter
Derivatives Markets Act of 2009.
``(B) Swaps that were entered into on or after the
date of enactment of the Over-the-Counter Derivatives
Markets Act of 2009 shall be reported to a registered
swap repository or the Commission no later than the
later of--
``(i) 90 days after the effective date of
the Over-the-Counter Derivatives Markets Act of
2009; or
``(ii) such other time after entering into
the swap as the Commission may prescribe by
rule or regulation.
``(6) Trade execution.--With respect to transactions
involving swaps subject to the requirement of paragraph (1) and
where both counterparties are either swap dealers or major swap
participants, such counterparties must either:
``(A) Execute the transaction on a board of trade
designated as a contract market under section 5 (in
which event, such transaction shall be subject to
regulation under this Act as a transaction in a
contract of sale of a commodity for future delivery or
commodity option, as applicable);
``(B) Execute the transaction on a swap execution
facility registered with the Commission;
``(C) Execute the transaction on a foreign swap
execution facility that is subject to regulation as
such under the laws of a foreign jurisdiction; or
``(D) If the transaction is not executed on an
entity listed in subparagraph (A), (B), or (C), comply
with any recordkeeping and end-of-day transaction
reporting requirements--
``(i) as may be prescribed by the
Commission with respect to commodity swaps
subject to the requirements of paragraph (3);
or
``(ii) as may be prescribed by the relevant
foreign regulator in the case of commodity
swaps subject to the requirements of paragraph
(3) entered into by--
``(I) a foreign swap dealer or a
foreign swap market participant; or
``(II) a U.S. swap dealer or U.S.
major swap participant that is entering
into the commodity swap either outside
of the United States, its territories
and possessions or with a foreign
counterparty.
``(7) Exchange trading.--In adopting rules and regulations,
the Commission shall endeavor to eliminate unnecessary
impediments to the trading on boards of trade designated as
contract markets under section 5 of contracts, agreements or
transactions that would be security-based swaps but for the
trading of such contracts, agreements or transactions on such a
designated contract market.
``(8) Exceptions.--The requirements of paragraph (1) shall
not apply to a swap if--
``(A) no derivatives clearing organization
registered under this Act will accept the swap for
clearing; or
``(B) one of the counterparties to the swap is not
a swap dealer or major swap participant.''.
(b) Derivatives Clearing Organizations.--
(1) Subsections (a) and (b) of section 5b of the Commodity
Exchange Act (7 U.S.C. 7a-1) are amended to read as follows:
``(a) Registration Requirement.--It shall be unlawful for a
derivatives clearing organization, unless registered with the
Commission, directly or indirectly to make use of the mails or any
means or instrumentality of interstate commerce to perform the
functions of a derivatives clearing organization described in section
1a(10) of this Act with respect to--
``(1) a contract of sale of a commodity for future delivery
(or option on such a contract) or option on a commodity, in
each case unless the contract or option is--
``(A) excluded from this Act by section
2(a)(1)(C)(i), 2(c), or 2(f); or
``(B) a security futures product cleared by a
clearing agency registered with the Securities and
Exchange Commission under the Securities Exchange Act
of 1934 (15 U.S.C. 78a et seq.); or
``(2) a swap.
``(b) Voluntary Registration.--
``(1) Derivatives clearing organizations.--A person that
clears agreements, contracts, or transactions that are not
required to be cleared under this Act may register with the
Commission as a derivatives clearing organization.
``(2) Clearing agencies.--A derivatives clearing
organization may clear security-based swaps that are required
to be cleared by a person who is registered as a clearing
agency under the Securities Exchange Act of 1934 (15 U.S.C. 78a
et seq.).''.
(2) Section 5b of the Commodity Exchange Act (7 U.S.C. 7a-
1) is amended by adding at the end the following:
``(g) Required Registration for Banks and Clearing Agencies.--A
person that is required to be registered as a derivatives clearing
organization under this section shall register with the Commission
regardless of whether the person is also a bank or a clearing agency
registered with the Securities and Exchange Commission under the
Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.).
``(h) Harmonization of Rules.--Not later than 180 days after the
effective date of the Over-the-Counter Derivatives Markets Act of 2009,
the Commission and the Securities and Exchange Commission shall jointly
adopt uniform rules governing persons that are registered as
derivatives clearing organizations for swaps under this subsection and
persons that are registered as clearing agencies for security-based
swaps under the Securities Exchange Act of 1934 (15 U.S.C. 78a et
seq.).
``(i) Consultation.--The Commission and the Securities and Exchange
Commission shall consult with the appropriate Federal banking agencies
prior to adopting rules under this section with respect to swaps.
``(j) Exemptions.--The Commission may exempt, conditionally or
unconditionally, a derivatives clearing organization from registration
under this section for the clearing of swaps if the Commission finds
that such derivatives clearing organization is subject to comparable,
comprehensive supervision and regulation on a consolidated basis by the
Securities and Exchange Commission, a Prudential Regulator or the
appropriate governmental authorities in the organization's home
country.
``(k) Designation of Compliance Officer.--
``(1) In general.--Each derivatives clearing organization
shall designate an individual to serve as a compliance officer.
``(2) Duties.--The compliance officer--
``(A) shall report directly to the board or to the
senior officer of the derivatives clearing
organization; and
``(B) shall--
``(i) review compliance with the core
principles in section 5b(c)(2);
``(ii) in consultation with the board of
the derivatives clearing organization, a body
performing a function similar to that of a
board, or the senior officer of the derivatives
clearing organization, resolve any conflicts of
interest that may arise;
``(iii) be responsible for administering
the policies and procedures required to be
established pursuant to this section; and
``(iv) ensure compliance with commodity
laws and the rules and regulations issued
thereunder, including rules prescribed by the
Commission pursuant to this section; and
``(C) shall establish procedures for remediation of
noncompliance issues found during compliance office
reviews, lookbacks, internal or external audit
findings, self-reported errors, or through validated
complaints. Procedures will establish the handling,
management response, remediation, retesting, and
closing of noncompliant issues.
``(3) Annual reports required.--The compliance officer
shall annually prepare and sign a report on the compliance of
the derivatives clearing organization with the commodity laws
and its policies and procedures, including its code of ethics
and conflict of interest policies, in accordance with rules
prescribed by the Commission. Such compliance report shall
accompany the financial reports of the derivatives clearing
organization that are required to be furnished to the
Commission pursuant to this section and shall include a
certification that, under penalty of law, the report is
accurate and complete.''.
(3) Section 5b(c)(2) of the Commodity Exchange Act (7
U.S.C. 7a-1(c)(2)) is amended to read as follows:
``(2) Core principles for derivatives clearing
organizations.--
``(A) In general.--To be registered and to maintain
registration as a derivatives clearing organization, a
derivatives clearing organization shall comply with the
core principles specified in this paragraph, and any
requirement that the Commission may impose by rule or
regulation pursuant to section 8a(5). The Commission
may conform the core principles to reflect evolving
United States and international standards. Except where
the Commission determines otherwise by rule or
regulation, a derivatives clearing organization shall
have reasonable discretion in establishing the manner
in which it complies with the core principles.
``(B) Financial resources.--
``(i) The derivatives clearing organization
shall have adequate financial, operational, and
managerial resources to discharge its
responsibilities.
``(ii) Financial resources shall at a
minimum exceed the total amount that would--
``(I) enable the derivatives
clearing organization to meet its
financial obligations to its members
and participants notwithstanding a
default by the member or participant
creating the largest financial exposure
for that derivatives clearing
organization in extreme but plausible
market conditions; and
``(II) enable the derivatives
clearing organization to cover its
operating costs for a period of one
year, calculated on a rolling basis.
``(C) Participant and product eligibility.--
``(i) The derivatives clearing organization
shall establish--
``(I) appropriate admission and
continuing eligibility standards
(including sufficient financial
resources and operational capacity to
meet obligations arising from
participation in the derivatives
clearing organization) for members of
and participants in the organization;
and
``(II) appropriate standards for
determining eligibility of agreements,
contracts, or transactions submitted to
the derivatives clearing organization
for clearing.
``(ii) The derivatives clearing
organization shall have procedures in place to
verify that participation and membership
requirements are met on an ongoing basis.
``(iii) The derivatives clearing
organization's participation and membership
requirements shall be objective, publicly
disclosed, and permit fair and open access.
``(iv) The rules of the derivatives
clearing organization shall provide for
acceptance of a standardized swap regardless of
the system on which the transaction was
executed.
``(D) Risk management.--
``(i) The derivatives clearing organization
shall have the ability to manage the risks
associated with discharging the
responsibilities of a derivatives clearing
organization through the use of appropriate
tools and procedures.
``(ii) The derivatives clearing
organization shall measure its credit exposures
to its members and participants at least once
each business day and shall monitor such
exposures throughout the business day.
``(iii) Through margin requirements and
other risk control mechanisms, a derivatives
clearing organization shall limit its exposures
to potential losses from defaults by its
members and participants so that the operations
of the derivatives clearing organization would
not be disrupted and nondefaulting members or
participants would not be exposed to losses
that they cannot anticipate or control.
``(iv) Margin required from all members and
participants shall be sufficient to cover
potential exposures in normal market
conditions.
``(v) The models and parameters used in
setting margin requirements shall be risk-based
and reviewed regularly.
``(E) Settlement procedures.--The derivatives
clearing organization shall--
``(i) complete money settlements on a
timely basis, and not less than once each
business day;
``(ii) employ money settlement arrangements
that eliminate or strictly limit the
derivatives clearing organization's exposure to
settlement bank risks, such as credit and
liquidity risks from the use of banks to effect
money settlements;
``(iii) ensure money settlements are final
when effected;
``(iv) maintain an accurate record of the
flow of funds associated with each money
settlement;
``(v) have the ability to comply with the
terms and conditions of any permitted netting
or offset arrangements with other clearing
organizations; and
``(vi) for physical settlements, establish
rules that clearly state the derivatives
clearing organization's obligations with
respect to physical deliveries. The risks from
these obligations shall be identified and
managed.
``(F) Treatment of funds.--
``(i) The derivatives clearing organization
shall have standards and procedures designed to
protect and ensure the safety of member and
participant funds and assets.
``(ii) The derivatives clearing
organization shall hold member and participant
funds and assets in a manner whereby risk of
loss or of delay in the derivatives clearing
organization's access to the assets and funds
is minimized.
``(iii) Assets and funds invested by the
derivatives clearing organization shall be held
in instruments with minimal credit, market, and
liquidity risks.
``(G) Default rules and procedures.--
``(i) The derivatives clearing organization
shall have rules and procedures designed to
allow for the efficient, fair, and safe
management of events when members or
participants become insolvent or otherwise
default on their obligations to the derivatives
clearing organization.
``(ii) The derivatives clearing
organization's default procedures shall be
clearly stated, and they shall ensure that the
derivatives clearing organization can take
timely action to contain losses and liquidity
pressures and to continue meeting its
obligations.
``(iii) The default procedures shall be
publicly available.
``(H) Rule enforcement.--The derivatives clearing
organization shall--
``(i) maintain adequate arrangements and
resources for the effective monitoring and
enforcement of compliance with rules of the
derivatives clearing organization and for
resolution of disputes; and
``(ii) have the authority and ability to
discipline, limit, suspend, or terminate a
member's or participant's activities for
violations of rules of the derivatives clearing
organization.
``(I) System safeguards.--The derivatives clearing
organization shall--
``(i) establish and maintain a program of
risk analysis and oversight to identify and
minimize sources of operational risk through
the development of appropriate controls and
procedures, and the development of automated
systems, that are reliable, secure, and have
adequate scalable capacity;
``(ii) establish and maintain emergency
procedures, backup facilities, and a plan for
disaster recovery that allows for the timely
recovery and resumption of operations and the
fulfillment of the derivatives clearing
organization's responsibilities and
obligations; and
``(iii) periodically conduct tests to
verify that backup resources are sufficient to
ensure continued order processing and trade
matching, price reporting, market surveillance,
and maintenance of a comprehensive and accurate
audit trail.
``(J) Reporting.--The derivatives clearing
organization shall provide to the Commission all
information necessary for the Commission to conduct
oversight of the derivatives clearing organization.
``(K) Recordkeeping.--The derivatives clearing
organization shall maintain records of all activities
related to the business of the derivatives clearing
organization as a derivatives clearing organization in
a form and manner acceptable to the Commission for a
period of 5 years.
``(L) Public information.--
``(i) The derivatives clearing organization
shall provide market participants with
sufficient information to identify and evaluate
accurately the risks and costs associated with
using the derivatives clearing organization's
services.
``(ii) The derivatives clearing
organization shall make information concerning
the rules and operating procedures governing
its clearing and settlement systems (including
default procedures) available to market
participants.
``(iii) The derivatives clearing
organization shall disclose publicly and to the
Commission information concerning--
``(I) the terms and conditions of
contracts, agreements, and transactions
cleared and settled by the derivatives
clearing organization;
``(II) clearing and other fees that
the derivatives clearing organization
charges its members and participants;
``(III) the margin-setting
methodology and the size and
composition of the financial resource
package of the derivatives clearing
organization;
``(IV) other information relevant
to participation in the settlement and
clearing activities of the derivatives
clearing organization; and
``(V) daily settlement prices,
volume, and open interest for all
contracts settled or cleared by it.
``(M) Information-sharing.--The derivatives
clearing organization shall--
``(i) enter into and abide by the terms of
all appropriate and applicable domestic and
international information-sharing agreements;
and
``(ii) use relevant information obtained
from the agreements in carrying out the
clearing organization's risk management
program.
``(N) Antitrust considerations.--Unless appropriate
to achieve the purposes of this chapter, the
derivatives clearing organization shall avoid--
``(i) adopting any rule or taking any
action that results in any unreasonable
restraint of trade; or
``(ii) imposing any material
anticompetitive burden.
``(O) Governance fitness standards.--
``(i) The derivatives clearing organization
shall establish governance arrangements that
are transparent in order to fulfill public
interest requirements and to support the
objectives of owners and participants.
``(ii) The derivatives clearing
organization shall establish and enforce
appropriate fitness standards for directors,
members of any disciplinary committee, and
members of the derivatives clearing
organization, and any other persons with direct
access to the settlement or clearing activities
of the derivatives clearing organization,
including any parties affiliated with any of
the persons described in this subparagraph.
``(P) Conflicts of interest.--The derivatives
clearing organization shall establish and enforce rules
to minimize conflicts of interest in the decisionmaking
process of the derivatives clearing organization and
establish a process for resolving such conflicts of
interest.
``(Q) Composition of the boards.--The derivatives
clearing organization shall ensure that the composition
of the governing board or committee includes market
participants.
``(R) Legal risk.--The derivatives clearing
organization shall have a well-founded, transparent,
and enforceable legal framework for each aspect of its
activities.''.
(4) Section 5b of the Commodity Exchange Act (7 U.S.C. 7a-
1) is further amended by adding after subsection (k), as added
by paragraph (2), the following:
``(l) Reporting.--
``(1) In general.--A derivatives clearing organization that
clears swaps shall provide to the Commission all information
determined by the Commission to be necessary to perform its
responsibilities under this Act. The Commission shall adopt
data collection and maintenance requirements for swaps cleared
by derivatives clearing organizations that are comparable to
the corresponding requirements for swaps accepted by swap
repositories and swaps traded on swap execution facilities.
Subject to section 8, the Commission shall share such
information, upon request, with the Board, the Securities and
Exchange Commission, the appropriate Federal banking agencies,
the Financial Services Oversight Council, and the Department of
Justice or to other persons the Commission deems appropriate,
including foreign financial supervisors (including foreign
futures authorities), foreign central banks, and foreign
ministries.
``(2) Public information.--A derivatives clearing
organization that clears swaps shall provide to the Commission,
or its designee, such information as is required by, and in a
form and at a frequency to be determined by, the Commission, in
order to comply with the public reporting requirements
contained in section 8(j).''.
(5) Section 8(e) of the Commodity Exchange Act (7 U.S.C.
12(e)) is amended in the last sentence by adding ``central bank
and ministries'' after ``department'' each place it appears.
(c) Legal Certainty for Identified Banking Products.--
(1) Repeal.--Sections 402(d), 404, 407, 408(b), and
408(c)(2) of the Legal Certainty for Bank Products Act of 2000
(7 U.S.C. 27(d), 27b, 27e, 27f(b), and 27f(c)(2)) are repealed.
(2) Legal certainty.--Section 403 of the Legal Certainty
for Bank Products Act of 2000 (7 U.S.C. 27a) is amended to read
as follows:
``SEC. 403. EXCLUSION OF IDENTIFIED BANKING PRODUCT.
``(a) Exclusion.--Except as provided in subsection (b), no
provisions of the Commodity Exchange Act (7 U.S.C. 1 et seq.) shall
apply to, and the Commodity Futures Trading Commission and the
Securities and Exchange Commission shall not exercise regulatory
authority under the Commodity Exchange Act with respect to, an
identified banking product.
``(b) Exception.--An appropriate Federal banking agency may except
an identified banking product from the exclusion in subsection (a) if
the agency determines, in consultation with the Commodity Futures
Trading Commission and the Securities and Exchange Commission, that the
product--
``(1) would meet the definition of swap in section 1a(35)
of the Commodity Exchange Act (7 U.S.C. 1a(35)) or security-
based swap in section 1a(38) of the Commodity Exchange Act (7
U.S.C. 1a(38)); and
``(2) has become known to the trade as a swap or security-
based swap, or otherwise has been structured as an identified
banking product for the purpose of evading the provisions of
the Commodity Exchange Act (7 U.S.C. 1 et seq.), the Securities
Act of 1933 (15 U.S.C. 77a et seq.), or the Securities Exchange
Act of 1934 (15 U.S.C. 78a et seq.).''.
SEC. 114. PUBLIC REPORTING OF AGGREGATE SWAP DATA.
Section 8 of the Commodity Exchange Act (7 U.S.C. 12) is amended by
adding after subsection (i) the following:
``(j) Public Reporting of Aggregate Swap Data.--
``(1) In general.--The Commission, or a person designated
by the Commission pursuant to paragraph (2), shall make
available to the public, in a manner that does not disclose the
business transactions and market positions of any person,
aggregate data on swap trading volumes and positions from the
sources set forth in paragraph (3).
``(2) Designee of the commission.--The Commission may
designate a derivatives clearing organization or a swap
repository to carry out the public reporting described in
paragraph (1).
``(3) Sources of information.--The sources of the
information to be publicly reported as described in paragraph
(1) are--
``(A) derivatives clearing organizations pursuant
to section 5b(k)(2);
``(B) swap repositories pursuant to section
21(c)(3); and
``(C) reports received by the Commission pursuant
to section 4r.''.
SEC. 115. SWAP REPOSITORIES.
The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by
inserting after section 20 the following:
``SEC. 21. SWAP REPOSITORIES.
``(a) Registration Requirement.--
``(1) In general.--It shall be unlawful for any person,
unless registered with the Commission, directly or indirectly
to make use of the mails or any means or instrumentality of
interstate commerce to perform the functions of a swap
repository.
``(2) Inspection and examination.--Registered swap
repositories shall be subject to inspection and examination by
any representative of the Commission.
``(b) Standard Setting.--
``(1) Data identification.--The Commission shall prescribe
standards that specify the data elements for each swap that
shall be collected and maintained by each registered swap
repository.
``(2) Data collection and maintenance.--The Commission
shall prescribe data collection and data maintenance standards
for swap repositories.
``(3) Comparability.--The standards prescribed by the
Commission under this subsection shall be comparable to the
data standards imposed by the Commission on derivatives
clearing organizations that clear swaps.
``(c) Duties.--A swap repository shall--
``(1) accept data prescribed by the Commission for each
swap under subsection (b);
``(2) maintain such data in such form and manner and for
such period as may be required by the Commission;
``(3) provide to the Commission, or its designee, such
information as is required by, and in a form and at a frequency
to be determined by, the Commission, in order to comply with
the public reporting requirements contained in section 8(j);
and
``(4) make available, on a confidential basis pursuant to
section 8, all data obtained by the swap repository, including
individual counterparty trade and position data, to the
Commission, the appropriate Federal banking agencies, the
Financial Services Oversight Council, the Securities and
Exchange Commission, and the Department of Justice or to other
persons the Commission deems appropriate, including foreign
financial supervisors (including foreign futures authorities),
foreign central banks, and foreign ministries.
``(d) Required Registration for Security-based Swap Repositories.--
Any person that is required to be registered as a swap repository under
this section shall register with the Commission regardless of whether
that person also is registered with the Securities and Exchange
Commission as a security-based swap repository.
``(e) Harmonization of Rules.--Not later than 180 days after the
effective date of the Over-the-Counter Derivatives Markets Act of 2009,
the Commission and the Securities and Exchange Commission shall jointly
adopt uniform rules governing persons that are registered under this
section and persons that are registered as security-based swap
repositories under the Securities Exchange Act of 1934 (15 U.S.C. 78a
et seq.), including uniform rules that specify the data elements that
shall be collected and maintained by each repository.
``(f) Exemptions.--The Commission may exempt, conditionally or
unconditionally, a swap repository from the requirements of this
section if the Commission finds that such swap repository is subject to
comparable, comprehensive supervision and regulation on a consolidated
basis by the Securities and Exchange Commission, a Prudential Regulator
or the appropriate governmental authorities in the organization's home
country.''.
SEC. 116. REPORTING AND RECORDKEEPING.
The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by
inserting after section 4q the following:
``SEC. 4R. REPORTING AND RECORDKEEPING FOR CERTAIN SWAPS.
``(a) In General.--Any person who enters into a swap and--
``(1) did not clear the swap in accordance with section
2(j)(1); and
``(2) did not have data regarding the swap accepted by a
swap repository in accordance with rules (including time
frames) adopted by the Commission under section 21,
shall meet the requirements in subsection (b).
``(b) Reports.--Any person described in subsection (a) shall--
``(1) make such reports in such form and manner and for
such period as the Commission shall prescribe by rule or
regulation regarding the swaps held by the person; and
``(2) keep books and records pertaining to the swaps held
by the person in such form and manner and for such period as
may be required by the Commission, which books and records
shall be open to inspection by any representative of the
Commission, an appropriate Federal banking agency, the
Securities and Exchange Commission, the Financial Services
Oversight Council, and the Department of Justice.
``(c) Identical Data.--In adopting rules under this section, the
Commission shall require persons described in subsection (a) to report
the same or a more comprehensive set of data than the Commission
requires swap repositories to collect under section 21.''.
SEC. 117. REGISTRATION AND REGULATION OF SWAP DEALERS AND MAJOR SWAP
PARTICIPANTS.
The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by
inserting after section 4r (as added by section 116) the following:
``SEC. 4S. REGISTRATION AND REGULATION OF SWAP DEALERS AND MAJOR SWAP
PARTICIPANTS.
``(a) Registration.--
``(1) It shall be unlawful for any person to act as a swap
dealer unless such person is registered as a swap dealer with
the Commission.
``(2) It shall be unlawful for any person to act as a major
swap participant unless such person shall have registered as a
major swap participant with the Commission.
``(b) Requirements.--
``(1) In general.--A person shall register as a swap dealer
or major swap participant by filing a registration application
with the Commission.
``(2) Contents.--The application shall be made in such form
and manner as prescribed by the Commission, giving any
information and facts as the Commission may deem necessary
concerning the business in which the applicant is or will be
engaged. Such person, when registered as a swap dealer or major
swap participant, shall continue to report and furnish to the
Commission such information pertaining to such person's
business as the Commission may require.
``(3) Expiration.--Each registration shall expire at such
time as the Commission may by rule or regulation prescribe.
``(4) Rules.--Except as provided in subsections (c), (d)
and (e), the Commission may prescribe rules applicable to swap
dealers and major swap participants, including rules that limit
the activities of swap dealers and major swap participants.
``(5) Transition.--Rules adopted under this section shall
provide for the registration of swap dealers and major swap
participants no later than one year after the effective date of
the Over-the-Counter Derivatives Markets Act of 2009.
``(6) Statutory disqualification.--Except to the extent
otherwise specifically provided by rule, regulation, or order,
it shall be unlawful for a swap dealer or a major swap
participant to permit any person associated with a swap dealer
or a major swap participant who is subject to a statutory
disqualification to effect or be involved in effecting swaps on
behalf of such swap dealer or major swap participant, if such
swap dealer or major swap participant knew, or in the exercise
of reasonable care should have known, of such statutory
disqualification.
``(c) Dual Registration.--
``(1) Swap dealer.--Any person that is required to be
registered as a swap dealer under this section shall register
with the Commission regardless of whether that person also is a
bank or is registered with the Securities and Exchange
Commission as a security-based swap dealer.
``(2) Major swap participant.--Any person that is required
to be registered as a major swap participant under this section
shall register with the Commission regardless of whether that
person also is a bank or is registered with the Securities and
Exchange Commission as a major security-based swap participant.
``(d) Joint Rules.--
``(1) In general.--Not later than 180 days after the
effective date of the Over-the-Counter Derivatives Markets Act
of 2009, the Commission and the Securities and Exchange
Commission shall jointly adopt uniform rules for persons that
are registered as swap dealers or major swap participants under
this section and persons that are registered as security-based
swap dealers or major security-based swap participants under
the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.).
``(2) Exception for prudential requirements.--The
Commission and the Securities and Exchange Commission shall not
prescribe rules imposing prudential requirements (including
activity restrictions) on swap dealers, major swap
participants, security-based swap dealers, or major security-
based swap participants for which there is a Prudential
Regulator. This provision shall not be construed as limiting
the authority of the Commission and the Securities and Exchange
Commission to prescribe appropriate business conduct,
reporting, and recordkeeping requirements to protect investors.
``(e) Capital and Margin Requirements.--
``(1) In general.--
``(A) Bank swap dealers and major swap
participants.--Each registered swap dealer and major
swap participant for which there is a Prudential
Regulator shall meet such minimum capital requirements
and minimum initial and variation margin requirements
as the Prudential Regulators shall by rule or
regulation jointly prescribe to help ensure the safety
and soundness of the swap dealer or major swap
participant.
``(B) Nonbank swap dealers and major swap
participants.--Each registered swap dealer and major
swap participant for which there is not a Prudential
Regulator shall meet such minimum capital requirements
and minimum initial and variation margin requirements
as the Commission and the Securities and Exchange
Commission shall by rule or regulation jointly
prescribe to help ensure the safety and soundness of
the swap dealer or major swap participant.
``(2) Joint rules.--
``(A) Bank swap dealers and major swap
participants.--Within 180 days of the enactment of the
Over-the-Counter Derivatives Markets Act of 2009, the
Prudential Regulators, in consultation with the
Commission and the Securities and Exchange Commission,
shall jointly adopt rules imposing capital and margin
requirements under this subsection for swap dealers and
major swap participants.
``(B) Nonbank swap dealers and major swap
participants.--Within 180 days of the enactment of the
Over-the-Counter Derivatives Markets Act of 2009, the
Commission and the Securities and Exchange Commission,
in consultation with the Prudential Regulators, shall
jointly adopt rules imposing capital and margin
requirements under this subsection for swap dealers and
major swap participants for which there is no
Prudential Regulator.
``(3) Capital.--
``(A) Bank swap dealers and major swap
participants.--In setting capital requirements under
this subsection, the Prudential Regulators shall
impose:
``(i) a capital requirement that is greater
than zero for swaps that are cleared by a
derivatives clearing organization; and
``(ii) to offset the greater risk to the
swap dealer or major swap participant and to
the financial system arising from the use of
swaps that are not centrally cleared, higher
capital requirements for swaps that are not
cleared by a registered derivatives clearing
organization than for swaps that are centrally
cleared.
``(B) Nonbank swap dealers and major swap
participants.--Capital requirements set by the
Commission and the Securities and Exchange Commission
under this subsection shall be as strict as or stricter
than the capital requirements set by the Prudential
Regulators under this subsection.
``(C) Bank holding companies.--Capital requirements
set by the Board for swaps of bank holding companies
and Tier 1 financial holding companies on a
consolidated basis shall be as strict as or stricter
than the capital requirements set by the Prudential
Regulators under this subsection.
``(D) A futures commission merchant, introducing
broker, broker or dealer shall maintain sufficient
capital to comply with the stricter of any applicable
capital requirements to which it is subject.
``(4) Margin.--
``(A) Bank swap dealers and major swap
participants.--The Prudential Regulators shall impose
both initial and variation margin requirements under
this subsection on all swaps that are not cleared by a
registered derivatives clearing organization.
``(B) Non-swap dealers or major swap
participants.--The Prudential Regulators may, but are
not required to, impose margin requirements with
respect to swaps in which one of the counterparties is
neither a swap dealer, major swap participant,
security-based swap dealer nor a major security-based
swap participant. Margin requirements for swaps set by
the Commission and the Securities and Exchange
Commission shall provide for the use of non-cash assets
as collateral.
``(C) Nonbank swap dealers and major swap
participants.--Margin requirements for swaps set by the
Commission and the Securities and Exchange Commission
under this subsection shall be as strict as or stricter
than margin requirements for swaps set by the
Prudential Regulators.
``(f) Reporting and Recordkeeping.--
``(1) In general.--Each registered swap dealer and major
swap participant--
``(A) shall make such reports as are prescribed by
the Commission by rule or regulation regarding the
transactions and positions and financial condition of
such person;
``(B) for which--
``(i) there is a Prudential Regulator shall
keep books and records of all activities
related to its business as a swap dealer or
major swap participant in such form and manner
and for such period as may be prescribed by the
Commission by rule or regulation;
``(ii) there is no Prudential Regulator
shall keep books and records in such form and
manner and for such period as may be prescribed
by the Commission by rule or regulation;
``(C) shall keep such books and records open to
inspection and examination by any representative of the
Commission; and
``(D) shall keep any such books and records
relating to transactions in swaps based on one or more
securities open to inspection and examination by the
Securities and Exchange Commission.
``(2) Rules.--Within 365 days of the enactment of the Over-
the-Counter Derivatives Markets Act of 2009, the Commission and
the Securities and Exchange Commission, in consultation with
the appropriate Federal banking agencies, shall jointly adopt
rules governing reporting and recordkeeping for swap dealers,
major swap participants, security-based swap dealers, and major
security-based swap participants.
``(g) Daily Trading Records.--
``(1) In general.--Each registered swap dealer and major
swap participant shall maintain daily trading records of its
swaps and all related records (including related cash or
forward transactions) and recorded communications including but
not limited to electronic mail, instant messages, and
recordings of telephone calls, for such period as may be
prescribed by the Commission by rule or regulation.
``(2) Information requirements.--The daily trading records
shall include such information as the Commission shall
prescribe by rule or regulation.
``(3) Customer records.--Each registered swap dealer and
major swap participant shall maintain daily trading records for
each customer or counterparty in such manner and form as to be
identifiable with each swap transaction.
``(4) Audit trail.--Each registered swap dealer and major
swap participant shall maintain a complete audit trail for
conducting comprehensive and accurate trade reconstructions.
``(5) Rules.--Within 365 days of the enactment of the Over-
the-Counter Derivatives Markets Act of 2009, the Commission and
the Securities and Exchange Commission, in consultation with
the appropriate Federal banking agencies, shall jointly adopt
rules governing daily trading records for swap dealers, major
swap participants, security-based swap dealers, and major
security-based swap participants.
``(h) Business Conduct Standards.--
``(1) In general.--Each registered swap dealer and major
swap participant shall conform with business conduct standards
as may be prescribed by the Commission by rule or regulation
addressing--
``(A) fraud, manipulation, and other abusive
practices involving swaps (including swaps that are
offered but not entered into);
``(B) diligent supervision of its business as a
swap dealer;
``(C) adherence to all applicable position limits;
and
``(D) such other matters as the Commission shall
determine to be necessary or appropriate.
``(2) Business conduct requirements.--Business conduct
requirements adopted by the Commission shall--
``(A) establish the standard of care for a swap
dealer or major swap participant to verify that any
counterparty meets the eligibility standards for an
eligible contract participant;
``(B) require disclosure by the swap dealer or
major swap participant to any counterparty to the
transaction (other than a swap dealer, major swap
participant, security-based swap dealer or major
security-based swap participant) of--
``(i) information about the material risks
and characteristics of the swap;
``(ii) the source and amount of any fees or
other material remuneration that the swap
dealer or major swap participant would directly
or indirectly expect to receive in connection
with the swap; and
``(iii) any other material incentives or
conflicts of interest that the swap dealer or
major swap participant may have in connection
with the swap; and
``(C) establish such other standards and
requirements as the Commission may determine are
necessary or appropriate in the public interest, for
the protection of investors, or otherwise in
furtherance of the purposes of this Act.
``(3) Rules.--The Commission and the Securities and
Exchange Commission, in consultation with the appropriate
Federal banking agencies, shall jointly prescribe rules under
this subsection governing business conduct standards for swap
dealers, major swap participants, security-based swap dealers,
and major security-based swap participants within 365 days of
the enactment of the Over-the-Counter Derivatives Markets Act
of 2009.
``(i) Documentation and Back Office Standards.--
``(1) In general.--Each registered swap dealer and major
swap participant shall conform with standards, as may be
prescribed by the Commission by rule or regulation, addressing
timely and accurate confirmation, processing, netting,
documentation, and valuation of all swaps.
``(2) Rules.--Within 365 days of the enactment of the Over-
the-Counter Derivatives Markets Act of 2009, the Commission and
the Securities and Exchange Commission, in consultation with
the appropriate Federal banking agencies, shall adopt rules
governing documentation and back office standards for swap
dealers, major swap participants, security-based swap dealers,
and major security-based swap participants.
``(j) Dealer Responsibilities.--Each registered swap dealer and
major swap participant at all times shall comply with the following
requirements:
``(1) Monitoring of trading.--The swap dealer or major swap
participant shall monitor its trading in swaps to prevent
violations of applicable position limits.
``(2) Disclosure of general information.--The swap dealer
or major swap participant shall disclose to the Commission and
to the Prudential Regulator for such swap dealer or major swap
participant, as applicable, information concerning--
``(A) terms and conditions of its swaps;
``(B) swap trading operations, mechanisms, and
practices;
``(C) financial integrity protections relating to
swaps; and
``(D) other information relevant to its trading in
swaps.
``(3) Ability to obtain information.--The swap dealer or
major swap participant shall--
``(A) establish and enforce internal systems and
procedures to obtain any necessary information to
perform any of the functions described in this section;
and
``(B) provide the information to the Commission and
to the Prudential Regulator for such swap dealer or
major swap participant, as applicable, upon request.
``(4) Conflicts of interest.--The swap dealer and major
swap participant shall implement conflict-of-interest systems
and procedures that--
``(A) establish structural and institutional
safeguards to assure that the activities of any person
within the firm relating to research or analysis of the
price or market for any commodity are separated by
appropriate informational partitions within the firm
from the review, pressure, or oversight of those whose
involvement in trading or clearing activities might
potentially bias their judgment or supervision; and
``(B) address such other issues as the Commission
determines appropriate.
``(5) Antitrust considerations.--Unless necessary or
appropriate to achieve the purposes of this Act, the swap
dealer or major swap participant shall avoid--
``(A) adopting any processes or taking any actions
that result in any unreasonable restraints of trade; or
``(B) imposing any material anticompetitive burden
on trading.
``(k) Rules.--The Commission, the Securities and Exchange
Commission, and the Prudential Regulators shall consult with each other
prior to adopting any rules under the Over-the-Counter Derivatives
Markets Act of 2009.
``(l) Recognition of Comparable Non-u.s. Regulation.--The
Commission, in consultation with the Secretary of the Treasury, the
Securities and Exchange Commission and the Prudential Regulators, shall
adopt rules exempting from registration and the other requirements of
the Over-the-Counter Derivatives Market Act of 2009 foreign financial
institutions that the Commission finds are subject to comparable
regulation in the financial institution's home country.''.
SEC. 118. SEGREGATION OF ASSETS HELD AS COLLATERAL IN SWAP
TRANSACTIONS.
The Commodity Exchange Act (7 U.S.C. 1 et seq.) is further amended
by inserting after section 4s the following:
``SEC. 4T. SEGREGATION OF ASSETS HELD AS COLLATERAL IN SWAP
TRANSACTIONS.
``(a) Cleared Swaps.--A swap dealer, futures commission merchant,
or derivatives clearing organization by or through which funds or other
property are held as margin or collateral to secure the obligations of
a counterparty under a swap to be cleared by or through a derivatives
clearing organization shall segregate, maintain, and use the funds or
other property for the benefit of the counterparty, in accordance with
such rules and relations as the Commission or Prudential Regulator
shall prescribe. Any such funds or other property shall be treated as
customer property under this Act.
``(b) Over-the-counter Swaps.--At the request of a swap
counterparty who provides funds or other property to a swap dealer as
margin or collateral to secure the obligations of the counterparty
under a swap between the counterparty and the swap dealer that is not
submitted for clearing to a derivatives clearing organization, the swap
dealer shall segregate the funds or other property for the benefit of
the counterparty, and maintain the funds or other property in an
account which is carried by a third-party custodian and designated as a
segregated account for the counterparty, in accordance with such rules
and regulations as the Commission or Prudential Regulator may
prescribe. This subsection shall not be interpreted to preclude
commercial arrangements regarding the investment of the segregated
funds or other property and the related allocation of gains and losses
resulting from any such investment.''.
SEC. 119. CONFLICTS OF INTEREST.
Section 4d of the Commodity Exchange Act (7 U.S.C. 6d) is amended
by--
(1) redesignating subsection (c) as subsection (d); and
(2) inserting after subsection (b) the following:
``(c) Conflicts of Interest.--The Commission shall require that
futures commission merchants and introducing brokers implement
conflict-of-interest systems and procedures that--
``(1) establish structural and institutional safeguards to
assure that the activities of any person within the firm
relating to research or analysis of the price or market for any
commodity are separated by appropriate informational partitions
within the firm from the review, pressure, or oversight of
those whose involvement in trading or clearing activities might
potentially bias their judgment or supervision; and
``(2) address such other issues as the Commission
determines appropriate.''.
SEC. 120. SWAP EXECUTION FACILITIES.
The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by
inserting after section 5g the following:
``SEC. 5H. SWAP EXECUTION FACILITIES.
``(a) Registration.--
``(1) In general.--No person may operate a facility for the
trading of swaps unless the facility is registered as a swap
execution facility under this section.
``(2) Dual registration.--Any person that is required to be
registered as a swap execution facility under this section
shall register with the Commission regardless of whether that
person also is registered with the Securities and Exchange
Commission as a swap execution facility.
``(b) Requirements for Trading.--A swap execution facility that is
registered under subsection (a) may trade any swap.
``(c) Trading by Contract Markets.--A board of trade that operates
a contract market shall, to the extent that the board of trade also
operates a swap execution facility and uses the same electronic trade
execution system for trading on the contract market and the swap
execution facility, identify whether the electronic trading is taking
place on the contract market or the swap execution facility.
``(d) Criteria for Registration.--
``(1) In general.--To be registered as a swap execution
facility, the facility shall be required to demonstrate to the
Commission that it meets the criteria specified herein.
``(2) Deterrence of abuses.--The swap execution facility
shall establish and enforce trading and participation rules
that will deter abuses and have the capacity to detect,
investigate, and enforce those rules, including means to--
``(A) obtain information necessary to perform the
functions required under this section; or
``(B) use means to--
``(i) provide market participants with
impartial access to the market; and
``(ii) capture information that may be used
in establishing whether rule violations have
occurred.
``(3) Trading procedures.--The swap execution facility
shall establish and enforce rules or terms and conditions
defining, or specifications detailing, trading procedures to be
used in entering and executing orders traded on or through its
facilities.
``(4) Financial integrity of transactions.--The swap
execution facility shall establish and enforce rules and
procedures for ensuring the financial integrity of swaps
entered on or through its facilities, including the clearance
and settlement of the swaps pursuant to section 2(j)(1).
``(e) Core Principles for Swap Execution Facilities.--
``(1) In general.--To maintain its registration as a swap
execution facility, the facility shall comply with the core
principles specified in this subsection and any requirement
that the Commission may impose by rule or regulation pursuant
to section 8a(5). Except where the Commission determines
otherwise by rule or regulation, the facility shall have
reasonable discretion in establishing the manner in which it
complies with these core principles.
``(2) Compliance with rules.--The swap execution facility
shall monitor and enforce compliance with any of the rules of
the facility, including the terms and conditions of the swaps
traded on or through the facility and any limitations on access
to the facility.
``(3) Swaps not readily susceptible to manipulation.--The
swap execution facility shall permit trading only in swaps that
are not readily susceptible to manipulation.
``(4) Monitoring of trading.--The swap execution facility
shall monitor trading in swaps to prevent manipulation, price
distortion, and disruptions of the delivery or cash settlement
process through surveillance, compliance, and disciplinary
practices and procedures, including methods for conducting
real-time monitoring of trading and comprehensive and accurate
trade reconstructions.
``(5) Ability to obtain information.--The swap execution
facility shall--
``(A) establish and enforce rules that will allow
the facility to obtain any necessary information to
perform any of the functions described in this
subsection;
``(B) provide the information to the Commission
upon request; and
``(C) have the capacity to carry out such
international information-sharing agreements as the
Commission may require.
``(6) Emergency authority.--The swap execution 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
liquidate or transfer open positions in any swap or to suspend
or curtail trading in a swap.
``(7) Timely publication of trading information.--The swap
execution facility shall make public timely information on
price, trading volume, and other trading data on swaps to the
extent prescribed by the Commission.
``(8) Recordkeeping and reporting.--The swap execution
facility shall maintain records of all activities related to
the business of the facility, including a complete audit trail,
in a form and manner acceptable to the Commission for a period
of 5 years, and report to the Commission all information
determined by the Commission to be necessary or appropriate for
the Commission to perform its responsibilities under this Act
in a form and manner acceptable to the Commission. The
Commission shall adopt data collection and reporting
requirements for swap execution facilities that are comparable
to corresponding requirements for derivatives clearing
organizations and swap repositories.
``(9) Antitrust considerations.--Unless necessary or
appropriate to achieve the purposes of this Act, the swap
execution facility shall avoid--
``(A) adopting any rules or taking any actions that
result in any unreasonable restraints of trade; or
``(B) imposing any material anticompetitive burden
on trading on the swap execution facility.
``(10) Conflicts of interest.--The swap execution facility
shall--
``(A) establish and enforce rules to minimize
conflicts of interest in its decisionmaking process;
and
``(B) establish a process for resolving the
conflicts of interest.
``(11) Designation of compliance officer.--
``(A) In general.--Each swap execution facility
shall designate an individual to serve as a compliance
officer.
``(B) Duties.--The compliance officer shall--
``(i) report directly to the board or to
the senior officer of the facility; and
``(ii) shall--
``(I) review compliance with the
core principles in this subsection;
``(II) in consultation with the
board of the facility, a body
performing a function similar to that
of a board, or the senior officer of
the facility, resolve any conflicts of
interest that may arise;
``(III) be responsible for
administering the policies and
procedures required to be established
pursuant to this section; and
``(IV) ensure compliance with
commodity laws and the rules and
regulations issued thereunder,
including rules prescribed by the
Commission pursuant to this section;
and
``(iii) establish procedures for
remediation of non-compliance issues found
during compliance office reviews, lookbacks,
internal or external audit findings, self-
reported errors, or through validated
complaints. Procedures will establish the
handling, management response, remediation, re-
testing, and closing of non-compliant issues.
``(C) Annual reports required.--The compliance
officer shall annually prepare and sign a report on the
compliance of the facility with the commodity laws and
its policies and procedures, including its code of
ethics and conflict of interest policies, in accordance
with rules prescribed by the Commission. Such
compliance report shall accompany the financial reports
of the facility that are required to be furnished to
the Commission pursuant to this section and shall
include a certification that, under penalty of law, the
report is accurate and complete.
``(f) Exemptions.--The Commission may exempt, conditionally or
unconditionally, a swap execution facility from registration under this
section if the Commission finds that such facility is subject to
comparable, comprehensive supervision and regulation on a consolidated
basis by the Securities and Exchange Commission, a Prudential Regulator
or the appropriate governmental authorities in the organization's home
country.
``(g) Harmonization of Rules.--Within 180 days of the enactment of
the Over-the-Counter Derivatives Markets Act of 2009, the Commission
and the Securities and Exchange Commission shall jointly prescribe
rules governing the regulation of swap execution facilities under this
section and section 3B of the Securities Exchange Act of 1934 (15
U.S.C. 78c-2).''.
SEC. 121. DERIVATIVES TRANSACTION EXECUTION FACILITIES AND EXEMPT
BOARDS OF TRADE.
Sections 5a and 5d of the Commodity Exchange Act (7 U.S.C. 7 and
7a-3) are repealed.
SEC. 122. DESIGNATED CONTRACT MARKETS.
(a) Section 5(d) of the Commodity Exchange Act (7 U.S.C. 7(d)) is
amended by striking paragraph (9) and inserting the following:
``(9) Execution of transactions.--
``(A) The board of trade shall provide a
competitive, open, and efficient market and mechanism
for executing transactions that protects the price
discovery process of trading in the board of trade's
centralized market.
``(B) The rules may authorize, for bona fide
business purposes--
``(i) transfer trades or office trades;
``(ii) an exchange of--
``(I) futures in connection with a
cash commodity transaction;
``(II) futures for cash
commodities; or
``(III) futures for swaps; or
``(iii) a futures commission merchant,
acting as principal or agent, to enter into or
confirm the execution of a contract for the
purchase or sale of a commodity for future
delivery if the contract is reported, recorded,
or cleared in accordance with the rules of the
contract market or a derivatives clearing
organization.''.
(b) Section 5(d) of the Commodity Exchange Act (7 U.S.C. 7(d)) is
amended by adding after paragraph (18) the following:
``(19) Financial resources.--The board of trade shall
demonstrate that it has adequate financial, operational, and
managerial resources to discharge the responsibilities of a
contract market. For the board of trade's financial resources
to be considered adequate, their value shall exceed the total
amount that would enable the contract market to cover its
operating costs for a period of one year, calculated on a
rolling basis.
``(20) System safeguards.--The board of trade shall--
``(A) establish and maintain a program of risk
analysis and oversight to identify and minimize sources
of operational risk through the development of
appropriate controls and procedures, and the
development of automated systems, that are reliable,
secure, and give adequate scalable capacity;
``(B) establish and maintain emergency procedures,
backup facilities, and a plan for disaster recovery
that allow for the timely recovery and resumption of
operations and the fulfillment of the board of trade's
responsibilities and obligations; and
``(C) periodically conduct tests to verify that
back-up resources are sufficient to ensure continued
order processing and trade matching, price reporting,
market surveillance, and maintenance of a comprehensive
and accurate audit trail.''.
SEC. 123. MARGIN.
Section 8a of the Commodity Exchange Act (7 U.S.C. 12a) is amended
in paragraph (7)(C), by striking ``, excepting the setting of levels of
margin''.
SEC. 124. POSITION LIMITS.
(a) Section 4a(a) of the Commodity Exchange Act (7 U.S.C. 6a(a)) is
amended by--
(1) inserting ``(1)'' after ``(a)'';
(2) striking ``on electronic trading facilities with
respect to a significant price discovery contract'' in the
first sentence and inserting ``swaps that perform or affect a
significant price discovery function with respect to regulated
markets'';
(3) inserting ``, including any group or class of
traders,'' in the second sentence after ``held by any person'';
(4) striking ``on an electronic trading facility with
respect to a significant price discovery contract,'' in the
second sentence and inserting ``swaps that perform or affect a
significant price discovery function with respect to regulated
markets,''; and
(5) inserting at the end the following:
``(2) Aggregate position limits.--The Commission may, by
rule or regulation, establish limits (including related hedge
exemption provisions) on the aggregate number or amount of
positions in contracts based upon the same underlying commodity
(as defined by the Commission) that may be held by any person,
including any group or class of traders, for each month
across--
``(A) contracts listed by designated contract
markets;
``(B) contracts traded on a foreign board of trade
that provides members or other participants located in
the United States with direct access to its electronic
trading and order matching system; and
``(C) swap contracts that perform or affect a
significant price discovery function with respect to
regulated markets.
``(3) Significant price discovery function.--In making a
determination whether a swap performs or affects a significant
price discovery function with respect to regulated markets, the
Commission shall consider, as appropriate:
``(A) Price linkage.--The extent to which the swap
uses or otherwise relies on a daily or final settlement
price, or other major price parameter, of another
contract traded on a regulated market based upon the
same underlying commodity, to value a position,
transfer or convert a position, financially settle a
position, or close out a position.
``(B) Arbitrage.--The extent to which the price for
the swap is sufficiently related to the price of
another contract traded on a regulated market based
upon the same underlying commodity so as to permit
market participants to effectively arbitrage between
the markets by simultaneously maintaining positions or
executing trades in the swaps on a frequent and
recurring basis.
``(C) Material price reference.--The extent to
which, on a frequent and recurring basis, bids, offers,
or transactions in a contract traded on a regulated
market are directly based on, or are determined by
referencing, the price generated by the swap.
``(D) Material liquidity.--The extent to which the
volume of swaps being traded in the commodity is
sufficient to have a material effect on another
contract traded on a regulated market.
``(E) Other material factors.--Such other material
factors as the Commission specifies by rule or
regulation as relevant to determine whether a swap
serves a significant price discovery function with
respect to a regulated market.
``(4) Exemptions.--The Commission, by rule, regulation, or
order, may exempt, conditionally or unconditionally, any person
or class of persons, any swap or class of swaps, or any
transaction or class of transactions from any requirement it
may establish under this section with respect to position
limits.''.
(b) Section 4a(b) of the Commodity Exchange Act (7 U.S.C. 6a(b)) is
amended--
(1) in paragraph (1), by striking ``or derivatives
transaction execution facility or facilities or electronic
trading facility'' and inserting ``or swap execution facility
or facilities''; and
(2) in paragraph (2), by striking ``or derivatives
transaction execution facility or facilities or electronic
trading facility'' and inserting ``or swap execution
facility''.
SEC. 125. ENHANCED AUTHORITY OVER REGISTERED ENTITIES.
(a) Section 5(d)(1) of the Commodity Exchange Act (7 U.S.C.
7(d)(1)) is amended by striking ``The board of trade shall have'' and
inserting ``Except where the Commission otherwise determines by rule or
regulation pursuant to section 8a(5), the board of trade shall have''.
(b) Section 5b(c)(2)(A) of the Commodity Exchange Act (7 U.S.C. 7a-
1(c)(2)(A)) is amended by striking ``The applicant shall have'' and
inserting ``Except where the Commission otherwise determines by rule or
regulation pursuant to section 8a(5), the applicant shall have''.
(c) Section 5c(a) of the Commodity Exchange Act (7 U.S.C. 7a-2(a))
is amended--
(1) in paragraph (1), by striking ``5a(d) and 5b(c)(2)''
and inserting ``5b(c)(2) and 5h(e)''; and
(2) in paragraph (2), by striking ``shall not'' and
inserting ``may''.
(d) Section 5c(c)(1) of the Commodity Exchange Act (7 U.S.C. 7a-
2(c)(1)) is amended by inserting ``(A)'' after ``In general.--'' and
adding at the end the following:
``(B) Unless section 805(e) of the Payment,
Clearing, and Settlement Supervision Act of 2009
applies, the new contract or instrument or clearing of
the new contract or instrument, new rule, or rule
amendment shall become effective, pursuant to the
registered entity's certification, 10 business days
after the Commission's receipt of the certification (or
such shorter period determined by the Commission by
rule or regulation) unless the Commission notifies the
registered entity within such time that it is staying
the certification because there exist novel or complex
issues that require additional time to analyze, an
inadequate explanation by the submitting registered
entity, or a potential inconsistency with this Act
(including regulations under this Act).
``(C) A notification by the Commission pursuant to
subparagraph (B) shall stay the certification of the
new contract or instrument or clearing of the new
contract or instrument, new rule or new amendment for
up to an additional 90 days from the date of such
notification.''.
(e) Section 5c(d) of the Commodity Exchange Act (7 U.S.C. 7a-2(d))
is repealed.
SEC. 126. FOREIGN BOARDS OF TRADE.
(a) ___.--Section 4(b) of the Commodity Exchange Act (7 U.S.C.
6(b)) is amended by striking ``No rule or regulation'' and inserting
``Except as provided in paragraphs (1) and (2), no rule or
regulation''.
(b) ___.--Section 4(b) of the Commodity Exchange Act (7 U.S.C.
6(b)) is further amended by inserting before ``The Commission'' the
following:
``(1) Registration.--The Commission may adopt rules and
regulations requiring registration with the Commission for a
foreign board of trade that provides the members of the foreign
board of trade or other participants located in the United
States direct access to the electronic trading and order
matching system of the foreign board of trade, including rules
and regulations prescribing procedures and requirements
applicable to the registration of such foreign boards of trade.
For purposes of this paragraph, `direct access' refers to an
explicit grant of authority by a foreign board of trade to an
identified member or other participant located in the United
States to enter trades directly into the trade matching system
of the foreign board of trade.
``(2) Linked contracts.--It shall be unlawful for a foreign
board of trade to provide to the members of the foreign board
of trade or other participants located in the United States
direct access to the electronic trading and order-matching
system of the foreign board of trade with respect to an
agreement, contract, or transaction that settles against any
price (including the daily or final settlement price) of 1 or
more contracts listed for trading on a registered entity,
unless the Commission determines that--
``(A) the foreign board of trade makes public daily
trading information regarding the agreement, contract,
or transaction that is comparable to the daily trading
information published by the registered entity for the
1 or more contracts against which the agreement,
contract, or transaction traded on the foreign board of
trade settles; and
``(B) the foreign board of trade (or the foreign
futures authority that oversees the foreign board of
trade)--
``(i) adopts position limits (including
related hedge exemption provisions) for the
agreement, contract, or transaction that are
comparable to the position limits (including
related hedge exemption provisions) adopted by
the registered entity for the 1 or more
contracts against which the agreement,
contract, or transaction traded on the foreign
board of trade settles;
``(ii) has the authority to require or
direct market participants to limit, reduce, or
liquidate any position the foreign board of
trade (or the foreign futures authority that
oversees the foreign board of trade) determines
to be necessary to prevent or reduce the threat
of price manipulation, excessive speculation as
described in section 4a, price distortion, or
disruption of delivery or the cash settlement
process;
``(iii) agrees to promptly notify the
Commission, with regard to the agreement,
contract, or transaction that settles against
any price (including the daily or final
settlement price) of 1 or more contracts listed
for trading on a registered entity, of any
change regarding--
``(I) the information that the
foreign board of trade will make
publicly available;
``(II) the position limits that the
foreign board of trade or foreign
futures authority will adopt and
enforce;
``(III) the position reductions
required to prevent manipulation,
excessive speculation as described in
section 4a, price distortion, or
disruption of delivery or the cash
settlement process; and
``(IV) any other area of interest
expressed by the Commission to the
foreign board of trade or foreign
futures authority;
``(iv) provides information to the
Commission regarding large trader positions in
the agreement, contract, or transaction that is
comparable to the large trader position
information collected by the Commission for the
1 or more contracts against which the
agreement, contract, or transaction traded on
the foreign board of trade settles; and
``(v) provides the Commission with
information necessary to publish reports on
aggregate trader positions for the agreement,
contract, or transaction traded on the foreign
board of trade that are comparable to such
reports on aggregate trader positions for the 1
or more contracts against which the agreement,
contract, or transaction traded on the foreign
board of trade settles.
``(3) Existing foreign boards of trade.--Paragraphs (1) and
(2) shall not be effective with respect to any foreign board of
trade to which the Commission has granted direct access
permission before the date of the enactment of this subsection
until the date that is 180 days after such date of enactment.
``(4) Persons located in the united states.--''.
(c) Liability of Registered Persons Trading on a Foreign Board of
Trade.--
(1) Section 4(a) of the Commodity Exchange Act (7. U.S.C.
6(a)) is amended by inserting ``or by subsection (f)'' after
``Unless exempted by the Commission pursuant to subsection
(c)''; and
(2) Section 4 of the Commodity Exchange Act (7 U.S.C. 6) is
further amended by adding at the end the following:
``(f) A person registered with the Commission, or exempt from
registration by the Commission, under this Act may not be found to have
violated subsection (a) with respect to a transaction in, or in
connection with, a contract of sale of a commodity for future delivery
if the person has reason to believe that the transaction and the
contract is made on or subject to the rules of a foreign board of trade
that has complied with subsections (b)(1) and (b)(2).''.
(d) Contract Enforcement for Foreign Futures Contracts.--Section
22(a) of the Commodity Exchange Act (7 U.S.C. 25(a)) is amended by
adding at the end the following:
``(5) Contract enforcement for foreign futures contracts.--
A contract of sale of a commodity for future delivery traded or
executed on or through the facilities of a board of trade,
exchange, or market located outside the United States for
purposes of section 4(a) shall not be void, voidable, or
unenforceable, and a party to such a contract shall not be
entitled to rescind or recover any payment made with respect to
the contract, based on the failure of the foreign board of
trade to comply with any provision of this Act.''.
SEC. 127. LEGAL CERTAINTY FOR SWAPS.
Section 22(a)(4) of the Commodity Exchange Act (7 U.S.C. 25(a)(4))
is amended to read as follows:
``(4) Contract enforcement between eligible
counterparties.--
``(A) No hybrid instrument sold to any investor
shall be void, voidable, or unenforceable, and no party
to such hybrid instrument shall be entitled to rescind,
or recover any payment made with respect to, such a
hybrid instrument under this section or any other
provision of Federal or State law, based solely on the
failure of the hybrid instrument to comply with the
terms or conditions of section 2(f) or regulations of
the Commission.
``(B) No agreement, contract, or transaction
between eligible contract participants or persons
reasonably believed to be eligible contract
participants shall be void, voidable, or unenforceable,
and no party thereto shall be entitled to rescind, or
recover any payment made with respect to, such
agreement, contract, or transaction under this section
or any other provision of Federal or State law, based
solely on the failure of the agreement, contract, or
transaction to meet the definition of a swap set forth
in section 1a or to be cleared pursuant to section
2(j)(1).''.
SEC. 128. MULTILATERAL CLEARING ORGANIZATIONS.
(a) Section 408(2)(C) of the Federal Deposit Insurance Corporation
Improvement Act of 1991 (12 U.S.C. 4421(2)(C)) is amended by striking
``section 2(c), 2(d), 2(f), or 2(g) of such Act, or exempted under
section 2(h) or 4(c) of such Act'' and inserting ``section 2(c) or 2(f)
of such Act''.
(b) Section 408 of the Federal Deposit Insurance Corporation
Improvement Act of 1991 (12 U.S.C. 4421) is further amended by
inserting at the end the following:
``(4) The term `over-the-counter derivative instrument'
does not include a swap or a security-based swap as defined in
sections 1a(35) and 1a(38) of the Commodity Exchange Act (7
U.S.C. 1a(35) and 1a(38)).''.
SEC. 129. PRIMARY ENFORCEMENT AUTHORITY.
The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by
adding the following new section after section 4b:
``SEC. 4B-1. PRIMARY ENFORCEMENT AUTHORITY.
``(a) CFTC.--Except as provided in subsections (b), (c), and (d),
the Commission shall have primary authority to enforce the provisions
of Subtitle A of the Over-the-Counter Derivatives Markets Act of 2009
with respect to any person.
``(b) Prudential Regulators.--The Prudential Regulators shall have
exclusive authority to enforce the provisions of section 4s(e) and
other prudential requirements of this Act with respect to banks, and
branches or agencies of foreign banks that are swap dealers or major
swap participants.
``(c) Referral.--If the Prudential Regulator for a swap dealer or
major swap participant has cause to believe that such swap dealer or
major swap participant may have engaged in conduct that constitutes a
violation of the nonprudential requirements of section 4s or rules
adopted by the Commission thereunder, that Prudential Regulator may
recommend in writing to the Commission that the Commission initiate an
enforcement proceeding as authorized under this Act. The recommendation
shall be accompanied by a written explanation of the concerns giving
rise to the recommendation.
``(d) Backstop Enforcement Authority.--If the Commission does not
initiate an enforcement proceeding before the end of the 90-day period
beginning on the date on which the Commission receives a recommendation
under subsection (c), the Prudential Regulator may initiate an
enforcement proceeding as permitted under Federal law.''.
SEC. 130. ENFORCEMENT.
(a) Section 4b(a)(2) of the Commodity Exchange Act (7 U.S.C.
6b(a)(2)) is amended by striking ``or other agreement, contract, or
transaction subject to paragraphs (1) and (2) of section 5a(g),'' and
inserting ``or swap,''.
(b) Section 4b(b) of the Commodity Exchange Act (7 U.S.C. 6b(b)) is
amended by striking ``or other agreement, contract or transaction
subject to paragraphs (1) and (2) of section 5a(g),'' and inserting
``or swap,''.
(c) Section 4c(a) of the Commodity Exchange Act (7 U.S.C. 6c(a)) is
amended by inserting ``or swap'' before ``if the transaction is used or
may be used''.
(d) Section 9(a)(2) of the Commodity Exchange Act (7 U.S.C.
13(a)(2)) is amended by inserting ``or of any swap,'' before ``or to
corner''.
(e) Section 9(a)(4) of the Commodity Exchange Act (7 U.S.C.
13(a)(4)) is amended by inserting ``swap repository,'' before ``or
futures association''.
(f) Section 9(e)(1) of the Commodity Exchange Act (7 U.S.C.
13(e)(1)) is amended by inserting ``swap repository,'' before ``or
registered futures association'' and by inserting ``, or swaps,''
before ``on the basis''.
(g) Section 8(b) of the Federal Deposit Insurance Act (12 U.S.C.
1818(b)) is amended by adding the following new paragraph (6) and
renumber existing paragraphs (6) through (10) as (7) through (11):
``(6) This section shall apply to any swap dealer, major
swap participant, security-based swap dealer, major security-
based swap participant, derivatives clearing organization, swap
repository or swap execution facility, whether or not it is an
insured depository institution, for which the Board, the
Corporation, or the Office of the Comptroller of the Currency
is the appropriate Federal banking agency or Prudential
Regulator for purposes of the Over-the-Counter Derivatives
Markets Act of 2009.''.
SEC. 131. RETAIL COMMODITY TRANSACTIONS.
Section 2(c) of the Commodity Exchange Act (7 U.S.C. 2(c)) is
amended--
(1) in paragraph (1), by striking ``(to the extent provided
in section 5a(g), 5b, 5d, or 12(e)(2)(B))'' and inserting ``5b,
or 12(e)(2)(B))'';
(2) in paragraph (2), by inserting after subparagraph (C)
the following:
``(D) Retail commodity transactions.--
``(i) This subparagraph shall apply to any
agreement, contract, or transaction in any
commodity that is--
``(I) entered into with, or offered
to (even if not entered into with), a
person that is not an eligible contract
participant or eligible commercial
entity; and
``(II) entered into, or offered
(even if not 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) Clause (i) shall not apply to--
``(I) an agreement, contract, or
transaction described in paragraph (1)
or subparagraphs (A), (B), or (C),
including any agreement, contract, or
transaction specifically excluded from
subparagraph (A), (B), or (C);
``(II) any security;
``(III) a contract of sale that--
``(aa) results in actual
delivery within 28 days or such
other period as the Commission
may determine by rule or
regulation based upon the
typical commercial practice in
cash or spot markets for the
commodity involved; or
``(bb) creates an
enforceable obligation to
deliver between a seller and a
buyer that have the ability to
deliver and accept delivery,
respectively, in connection
with their line of business;
``(IV) an agreement, contract, or
transaction that is listed on a
national securities exchange registered
under section 6(a) of the Securities
Exchange Act of 1934 (15 U.S.C.
78f(a)); or
``(V) an identified banking
product, as defined in section 402(b)
of the Legal Certainty for Bank
Products Act of 2000 (7 U.S.C. 27(b)).
``(iii) Sections 4(a), 4(b) and 4b shall
apply to any agreement, contract or transaction
described in clause (i), that is not excluded
from clause (i) by clause (ii), as if the
agreement, contract, or transaction were a
contract of sale of a commodity for future
delivery.
``(iv) 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.
``(v) 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
provisions of this Act with respect to security
futures products and persons effecting
transactions in security futures products.
``(vi) For the purposes of this
subparagraph, an agricultural producer, packer,
or handler shall be considered an eligible
commercial entity for any agreement, contract,
or transaction for a commodity in connection
with its line of business.''.
SEC. 132. LARGE SWAP TRADER REPORTING.
The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by
adding after section 4t (as added by section 118) the following:
``SEC. 4U. LARGE SWAP TRADER REPORTING.
``(a) It shall be unlawful for any person to enter into any swap
that performs or affects a significant price discovery function with
respect to regulated markets if--
``(1) such person shall directly or indirectly enter into
such swaps during any one day in an amount equal to or in
excess of such amount as shall be fixed from time to time by
the Commission; and
``(2) such person shall directly or indirectly have or
obtain a position in such swaps equal to or in excess of such
amount as shall be fixed from time to time by the Commission,
unless such person files or causes to be filed with the properly
designated officer of the Commission such reports regarding any
transactions or positions described in paragraphs (1) and (2) as the
Commission may by rule or regulation require and unless, in accordance
with the rules and regulations of the Commission, such person shall
keep books and records of all such swaps and any transactions and
positions in any related commodity traded on or subject to the rules of
any board of trade, and of cash or spot transactions in, inventories
of, and purchase and sale commitments of, such a commodity.
``(b) Such books and records shall show complete details concerning
all transactions and positions as the Commission may by rule or
regulation prescribe.
``(c) Such books and records shall be open at all times to
inspection and examination by any representative of the Commission.
``(d) For the purpose of this subsection, the swaps, futures and
cash or spot transactions and positions of any person shall include
such transactions and positions of any persons directly or indirectly
controlled by such person.
``(e) In making a determination whether a swap performs or affects
a significant price discovery function with respect to regulated
markets, the Commission shall consider the factors set forth in section
4a(a)(3).''.
SEC. 133. AUTHORITY TO BAN ABUSIVE SWAPS.
The Commodity Futures Trading Commission and the Securities and
Exchange Commission may jointly, by rule or order, prohibit
transactions in any swap (as defined in section 1a(35) of the Commodity
Exchange Act) or security-based swap (as defined in section 1a(38) of
such Act) which the Commodity Futures Trading Commission and the
Securities Exchange Commission find would be detrimental to the
stability of a financial market or of participants in a financial
market.
SEC. 134. INTERNATIONAL HARMONIZATION.
In order to promote effective and consistent global regulation of
swaps, the Securities and Exchange Commission, the Commodity Futures
Trading Commission, the Prudential Regulators (as defined in section
1a(43) of the Commodity Exchange Act), the financial stability
regulator, and the Office of Derivatives Supervision shall consult and
coordinate with foreign regulatory authorities on the establishment of
consistent international standards with respect to the regulation of
swaps, and may agree to such information-sharing arrangements as may be
deemed to be necessary or appropriate in the public interest or for the
protection of investors and swap counterparties.
SEC. 135. AUTHORITY TO BAN ACCESS TO THE UNITED STATES FINANCIAL
SYSTEM.
The Secretary of the Treasury may prohibit any entity domiciled in
a foreign country that regulates swaps (as defined in section 1a(35) of
the Commodity Exchange Act) or security-based swaps (as defined in
section 1a(38) of such Act) in a manner which the Secretary of the
Treasury finds undermines the stability of a financial market, from
participating in such financial activities in the United States as the
Secretary deems appropriate.
SEC. 136. OTHER AUTHORITY.
Unless otherwise provided by its terms, this title does not divest
any appropriate Federal banking agency, the Commission, the Securities
and Exchange Commission, or other Federal or State agency, of any
authority derived from any other applicable law.
SEC. 137. ANTITRUST.
Nothing in the amendments made by this title shall be construed to
modify, impair, or supersede the operation of any of the antitrust
laws. For purposes of this subtitle, the term ``antitrust laws'' has
the same meaning given such term in subsection (a) of the first section
of the Clayton Act, except that such term includes section 5 of the
Federal Trade Commission Act to the extent that such section 5 applies
to unfair methods of competition.
SEC. 138. EFFECTIVE DATE.
This subtitle is effective 180 days after the date of enactment.
Subtitle B--Regulation of Security-Based Swap Markets
SEC. 151. DEFINITIONS UNDER THE SECURITIES EXCHANGE ACT OF 1934.
Section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C.
78c(a)) is amended--
(1) in paragraph (5)(A) and (B), by inserting ``(but not
security-based swaps, other than security-based swaps with or
for persons that are not eligible contract participants)''
after the word ``securities'' in each place it appears;
(2) in paragraph (13), by adding at the end the following:
``For security-based swaps, such terms include the execution,
termination (prior to its scheduled maturity date), assignment,
exchange, or similar transfer or conveyance of, or
extinguishing of rights or obligations under, a security-based
swap, as the context may require.'';
(3) in paragraph (14), by adding at the end the following:
``For security-based swaps, such terms include the execution,
termination (prior to its scheduled maturity date), assignment,
exchange, or similar transfer or conveyance of, or
extinguishing of rights or obligations under, a security-based
swap, as the context may require.'';
(4) in paragraph (39)--
(A) by striking ``or government securities dealer''
and adding ``government securities dealer, security-
based swap dealer or major security-based swap
participant'' in its place in subparagraph (B)(i)(I);
(B) by adding ``security-based swap dealer, major
security-based swap participant,'' after ``government
securities dealer,'' in subparagraph (B)(i)(II);
(C) by striking ``or government securities dealer''
and adding ``government securities dealer, security-
based swap dealer or major security-based swap
participant'' in its place in subparagraph (C); and
(D) by adding ``security-based swap dealer, major
security-based swap participant,'' after ``government
securities dealer,'' in subparagraph (D); and
(5) by adding at the end the following:
``(65) Eligible contract participant.--The term `eligible
contract participant' has the same meaning as in section 1a(13)
of the Commodity Exchange Act (7 U.S.C. 1a(13)).
``(66) Major swap participant.--The term `major swap
participant' has the same meaning as in section 1a(40) of the
Commodity Exchange Act (7 U.S.C. 1a(40)).
``(67) Major security-based swap participant.--The term
`major security-based swap participant' has the same meaning as
in section 1a(41) of the Commodity Exchange Act (7 U.S.C.
1a(41)).
``(68) Security-based swap.--The term `security-based swap'
has the same meaning as in section 1a(38) of the Commodity
Exchange Act (7 U.S.C. 1a(38)).
``(69) Swap.--The term `swap' has the same meaning as in
section 1a(35) of the Commodity Exchange Act (7 U.S.C. 1a(35)).
``(70) Person associated with a security-based swap dealer
or major security-based swap participant.--The term `person
associated with a security-based swap dealer or major security-
based swap participant' or `associated person of a security-
based swap dealer or major security-based swap participant' has
the same meaning as in section 1a(48) of the Commodity Exchange
Act (7 U.S.C. 1a(48)).
``(71) Security-based swap dealer.--The term `security-
based swap dealer' has the same meaning as in section 1a(44) of
the Commodity Exchange Act (7 U.S.C. 1a(44)).
``(72) Appropriate federal banking agency.--The term
`appropriate Federal banking agency' has the same meaning as in
section 3(q) of the Federal Deposit Insurance Act (12 U.S.C.
1813(q)).
``(73) Board.--The term `Board' means the Board of
Governors of the Federal Reserve System.
``(74) Prudential regulator.--The term `Prudential
Regulator' has the same meaning as in section 1a(43) of the
Commodity Exchange Act (7 U.S.C. 1a(43)).
``(75) Swap dealer.--The term `swap dealer' has the same
meaning as in section 1a(39) of the Commodity Exchange Act (7
U.S.C. 1a(39)).
``(76) Security-based swap agreement.--
``(A) In general.--For purposes of sections 10, 16,
20, and 21A of this Act, and section 17 of the
Securities Act of 1933 (15 U.S.C. 77q), the term
`security-based swap agreement' means a swap agreement
as defined in section 206A of the Gramm-Leach-Bliley
Act (15 U.S.C. 78c note) of which a material term is
based on the price, yield, value, or volatility of any
security or any group or index of securities, or any
interest therein.
``(B) Exclusions.--The term `security-based swap
agreement' does not include any security-based swap.''.
SEC. 152. REPEAL OF PROHIBITION ON REGULATION OF SECURITY-BASED SWAPS.
(a) Repeal of Law.--Section 206B of the Gramm-Leach-Bliley Act (15
U.S.C. 78c note) is repealed.
(b) Conforming Amendments to the Securities Act of 1933.--
(1) Section 2A(b) is amended by striking ``(as defined in
section 206B of the Gramm-Leach-Bliley Act)'' each place that
such term appears.
(2) Section 17 of the Securities Act of 1933 (15 U.S.C.
77q) is amended--
(A) in subsection (a)--
(i) by inserting ``(including security-
based swaps)'' after ``securities''; and
(ii) by striking ``206B of the Gramm-Leach-
Bliley Act'' and inserting ``3(a)(76) of the
Securities Exchange Act of 1934''; and
(B) in subsection (d), by striking ``206B of the
Gramm-Leach-Bliley Act'' and inserting ``3(a)(76) of
the Securities Exchange Act of 1934''.
(c) Conforming Amendments to the Securities Exchange Act of 1934.--
The Securities Exchange Act of 1934 (15 U.S.C. 78a, et seq.) is amended
as follows:
(1) Section 3A (15 U.S.C. 78c-1) is amended by striking
``(as defined in section 206B of the Gramm-Leach-Bliley Act)''
each place that the term appears.
(2) Section 9(a) (15 U.S.C. 78i(a)) is amended by striking
paragraphs (2) through (5) and inserting:
``(2) To effect, alone or with one or more other persons, a
series of transactions in any security registered on a national
securities exchange or in connection with any security-based
swap with respect to such security creating actual or apparent
active trading in such security, or raising or depressing the
price of such security, for the purpose of inducing the
purchase or sale of such security by others.
``(3) If a dealer, broker, security-based swap dealer,
major security-based swap participant or other person selling
or offering for sale or purchasing or offering to purchase the
security to induce the purchase or sale of any security
registered on a national securities exchange or any security-
based swap with respect to such security by the circulation or
dissemination in the ordinary course of business of information
to the effect that the price of any such security will or is
likely to rise or fall because of market operations of any one
or more persons conducted for the purpose of raising or
depressing the price of such security.
``(4) If a dealer, broker, security-based swap dealer,
major security-based swap participant or other person selling
or offering for sale or purchasing or offering to purchase the
security, to make, regarding any security registered on a
national securities exchange or any security-based swap with
respect to such security, for the purpose of inducing the
purchase or sale of such security or such security-based swap,
any statement which was at the time and in the light of the
circumstances under which it was made, false or misleading with
respect to any material fact, and which he knew or had
reasonable ground to believe was so false or misleading.
``(5) For a consideration, received directly or indirectly
from a dealer, broker, security-based swap dealer, major
security-based swap participant or other person selling or
offering for sale or purchasing or offering to purchase the
security, to induce the purchase of any security registered on
a national securities exchange or any security-based swap with
respect to such security by the circulation or dissemination of
information to the effect that the price of any such security
will or is likely to rise or fall because of the market
operations of any one or more persons conducted for the purpose
of raising or depressing the price of such security.''.
(3) Section 10 (15 U.S.C. 78j) is amended by striking ``(as
defined in section 206B of the Gramm-Leach-Bliley Act)'' each
place that the term appears.
(4) Section 15(c)(1) is amended--
(A) in subparagraph (A, by striking ``, or any
security-based swap agreement (as defined in section
206B of the Gramm-Leach-Bliley Act),''; and
(B) in subparagraphs (B) and (C), by striking
``agreement (as defined in section 206B of the Gramm-
Leach-Bliley Act)'' in each place that the term
appears.
(5) Section 15(i) (15 U.S.C. 78o(i), as added by section
303(f) of the Commodity Futures Modernization Act of 2000
(Public Law 106-554; 114 Stat. 2763A-455) is amended by
striking ``(as defined in section 206B of the Gramm-Leach-
Bliley Act)''.
(6) Section 16 (15 U.S.C. 78p) is amended--
(A) in subsection (a)(2)(C), by striking ``(as
defined in section 206(b) of the Gramm-Leach-Bliley
Act)'';
(B) in subsection (b), by striking ``(as defined in
section 206B of the Gramm-Leach-Bliley Act)'' in each
place that the term appears; and
(C) in subsection (g), by striking ``(as defined in
section 206B of the Gramm-Leach-Bliley Act)'';
(7) Section 20 (15 U.S.C. 78t) is amended--
(A) in subsection (d), by striking ``(as defined in
section 206B of the Gramm-Leach-Bliley Act)''; and
(B) in subsection (f), by striking ``(as defined in
section 206B of the Gramm-Leach-Bliley Act)''; and
(8) Section 21A (15 U.S.C. 78u-1) is amended--
(A) in subsection (a)(1), by striking ``(as defined
in section 206B of the Gramm-Leach-Bliley Act)''; and
(B) in subsection (g), by striking ``(as defined in
section 206B of the Gramm-Leach-Bliley Act)''.
SEC. 153. AMENDMENTS TO THE SECURITIES EXCHANGE ACT OF 1934.
(a) Clearing for Security-based Swaps.--The Securities Exchange Act
of 1934 (15 U.S.C. 78a, et seq.) is amended by adding the following
section after section 3A:
``SEC. 3B. CLEARING OF SECURITY-BASED SWAPS.
``(a) Clearing Requirement.--
``(1) Clearing of security-based swaps.--
``(A) Clearing requirement.--The Commission shall
monitor security-based swap activity and transaction
data and by rule or regulation identify specific
security-based swap contracts that it determines are
required to be cleared consistent with the public
interest, after taking into account--
``(i) the existence of significant
outstanding notional exposures, trading
liquidity and adequate pricing data;
``(ii) the availability of one or more swap
clearinghouses with the rule framework,
capacity, operational expertise and resources,
and credit support infrastructure to clear the
contract on terms that are consistent with the
material terms and trading conventions on which
the contract is then traded;
``(iii) the impact on the mitigation of
systemic risk, taking into account the size of
the market for such contract and the resources
of the swap clearinghouses available to clear
the contract;
``(iv) the impact on competition; and
``(v) the existence of reasonable legal
certainty in the event of the insolvency of the
relevant swap clearinghouse or one or more of
its clearing members with regard to the
treatment of customer and swap counterparty
positions, funds, and property.
``(B) Scope of clearing functions.--The Commission
shall by rule or regulation define the scope of the
clearing functions that are necessary to satisfy the
requirements of subparagraph (A).
``(2) Prevention of evasion.--The Commission and the
Commodities Futures Trading Commission shall have authority to
prescribe rules under this section, or issue interpretations of
such rules, as necessary to prevent evasions of this Act. Any
such rules or interpretations of rules shall be prescribed and
issued jointly by both Commissions.
``(3) Required reporting.--
``(A) In general.--Any security-based swap that is
not accepted for clearing by any clearing agency shall
be reported to either a security-based swap repository
described in section 13(n) or, if there is no
repository that would accept the security-based swap,
to the Commission pursuant to section 13A within such
time period as the Commission may by rule prescribe.
``(B) Authority of swap dealer to report.--
Counterparties to a security-based swap may agree as to
which counterparty will report such swap as required by
subparagraph (A). In any security-based swap where only
one counterparty is a swap dealer, the swap dealer
shall report the swap.
``(4) Transition rules.--Rules adopted by the Commission
under this section shall provide for the reporting of data, as
follows:
``(A) Security-based swaps that were entered into
before the date of enactment of the Over-the-Counter
Derivatives Markets Act of 2009 shall be reported to a
registered security-based swap repository or the
Commission no later than 180 days after the effective
date of such Act.
``(B) Security-based swaps that were entered into
on or after the date of enactment of the Over-the-
Counter Derivatives Markets Act of 2009 shall be
reported to a registered security-based swap repository
or the Commission no later than the later of--
``(i) 90 days after the effective date of
such Act; or
``(ii) such other time after entering into
the swap as the Commission may prescribe by
rule or regulation.
``(b) Consultation.--The Commission and the Commodity Futures
Trading Commission shall consult with the appropriate Federal banking
agencies and each other prior to adopting rules under this section.''.
(b) Clearing Agency Requirements.--Section 17A of the Securities
Exchange Act of 1934 (15 U.S.C. 78q) is amended by adding at the end
the following new subsections:
``(g) Registration Requirement.--It shall be unlawful for a
clearing agency, unless registered with the Commission, directly or
indirectly to make use of the mails or any means or instrumentality of
interstate commerce to perform the functions of a clearing agency with
respect to a swap.
``(h) Voluntary Registration.--
``(1) Clearing agencies.--A person that clears agreements,
contracts, or transactions that are not required to be cleared
under this Act may register with the Commission as a clearing
agency.
``(2) Derivatives clearing organizations.--A clearing
agency may clear swaps that are required to be cleared by a
person who is registered as a derivatives clearing organization
under the Commodity Exchange Act (7 U.S.C. 1, et seq.).
``(i) Required Registration for Banks and Clearing Agencies.--A
person that is required to be registered as a clearing agency under
this section shall register with the Commission regardless of whether
the person is also a bank or a derivatives clearing organization
registered with the Commodity Futures Trading Commission under the
Commodity Exchange Act (7 U.S.C. 1, et seq.).
``(j) Reporting.--
``(1) In general.--A clearing agency that clears security-
based swaps shall provide to the Commission all information
determined by the Commission to be necessary to perform its
responsibilities under this Act. The Commission shall adopt
data collection and maintenance requirements for security-based
swaps cleared by clearing agencies that are comparable to the
corresponding requirements for security-based swaps accepted by
security-based swap repositories and security-based swaps
traded on alternative swap execution facilities. The Commission
shall share such information, upon request, with the Board, the
Commodity Futures Trading Commission, the appropriate Federal
banking agencies, the Financial Services Oversight Council, and
the Department of Justice or to other persons the Commission
deems appropriate, including foreign financial supervisors
(including foreign futures authorities), foreign central banks,
and foreign ministries.
``(2) Public information.--A clearing agency that clears
security-based swaps shall provide to the Commission, or its
designee, such information as is required by, and in a form and
at a frequency to be determined by, the Commission, in order to
comply with the public reporting requirements contained in
section 13.
``(k) Designation of Compliance Officer.--
``(1) In general.--Each clearing agency that clears
security-based swaps shall designate an individual to serve as
a compliance officer.
``(2) Duties.--The compliance officer shall--
``(A) report directly to the board or to the senior
officer of the clearing agency;
``(B) in consultation with the board of the
clearing agency, a body performing a function similar
to that of a board, or the senior officer of the
clearing agency, resolve any conflicts of interest that
may arise;
``(C) be responsible for administering the policies
and procedures required to be established pursuant to
this section;
``(D) ensure compliance with securities laws and
the rules and regulations issued thereunder, including
rules prescribed by the Commission pursuant to this
section; and
``(E) establish procedures for remediation of
noncompliance issues found during compliance office
reviews, lookbacks, internal or external audit
findings, self-reported errors, or through validated
complaints which will establish the handling,
management response, remediation, retesting, and
closing of noncompliance issues.
``(3) Annual reports required.--The compliance officer
shall annually prepare and sign a report on the compliance of
the clearing agency with the securities laws and its policies
and procedures, including its code of ethics and conflict of
interest policies, in accordance with rules prescribed by the
Commission. Such compliance report shall accompany the
financial reports of the clearing agency that are required to
be furnished to the Commission pursuant to this section and
shall include a certification that, under penalty of law, the
report is accurate and complete.
``(l) Core Principles for Clearing Agencies.--
``(1) In general.--To be registered and to maintain
registration as a clearing agency, a clearing agency shall
comply with the core principles specified in this subsection.
The Commission may conform the core principles to reflect
evolving United States and international standards. Except
where the Commission determines otherwise by rule or
regulation, a clearing agency shall have reasonable discretion
in establishing the manner in which it complies with the core
principles.
``(2) Financial resources.--
``(A) The clearing agency shall have adequate
financial, operational, and managerial resources to
discharge its responsibilities.
``(B) Financial resources shall at a minimum exceed
the total amount that would--
``(i) enable the clearing agency to meet
its financial obligations to its members and
participants notwithstanding a default by the
member or participant creating the largest
financial exposure for that clearing agency in
extreme but plausible market conditions; and
``(ii) enable the clearing agency to cover
its operating costs for a period of one year,
calculated on a rolling basis.
``(3) Participant and product eligibility.--
``(A) The clearing agency shall establish--
``(i) appropriate admission and continuing
eligibility standards (including sufficient
financial resources and operational capacity to
meet obligations arising from participation in
the clearing agency) for members of and
participants in the organization; and
``(ii) appropriate standards for
determining eligibility of agreements,
contracts, or transactions submitted to the
clearing agency for clearing.
``(B) The clearing agency shall have procedures in
place to verify that participation and membership
requirements are met on an ongoing basis.
``(C) The clearing agency's participation and
membership requirements shall be objective, publicly
disclosed, and permit fair and open access.
``(D) The rules of the clearing agency shall
provide for acceptance of a standardized security-based
swap regardless of the system on which the transaction
was executed.
``(4) Risk management.--
``(A) The clearing agency shall have the ability to
manage the risks associated with discharging the
responsibilities of a clearing agency through the use
of appropriate tools and procedures.
``(B) The clearing agency shall measure its credit
exposures to its members and participants at least once
each business day and shall monitor such exposures
throughout the business day.
``(C) Through margin requirements and other risk
control mechanisms, a clearing agency shall limit its
exposures to potential losses from defaults by its
members and participants so that the operations of the
clearing agency would not be disrupted and
nondefaulting members or participants would not be
exposed to losses that they cannot anticipate or
control.
``(D) Margin required from all members and
participants shall be sufficient to cover potential
exposures in normal market conditions.
``(E) The models and parameters used in setting
margin requirements shall be risk-based and reviewed
regularly.
``(5) Settlement procedures.--The clearing agency shall--
``(A) complete money settlements on a timely basis,
and not less than once each business day;
``(B) employ money settlement arrangements that
eliminate or strictly limit the clearing agency's
exposure to settlement bank risks, such as credit and
liquidity risks from the use of banks to effect money
settlements;
``(C) ensure money settlements are final when
effected;
``(D) maintain an accurate record of the flow of
funds associated with each money settlement;
``(E) have the ability to comply with the terms and
conditions of any permitted netting or offset
arrangements with other clearing organizations; and
``(F) for physical settlements, establish rules
that clearly state the clearing agency's obligations
with respect to physical deliveries. The risks from
these obligations shall be identified and managed.
``(6) Treatment of funds.--
``(A) The clearing agency shall have standards and
procedures designed to protect and ensure the safety of
member and participant funds and assets.
``(B) The clearing agency shall hold member and
participant funds and assets in a manner whereby risk
of loss or of delay in the clearing agency's access to
the assets and funds is minimized.
``(C) Assets and funds invested by the clearing
agency shall be held in instruments with minimal
credit, market, and liquidity risks.
``(7) Default rules and procedures.--
``(A) The clearing agency shall have rules and
procedures designed to allow for the efficient, fair,
and safe management of events when members or
participants become insolvent or otherwise default on
their obligations to the clearing agency.
``(B) The clearing agency's default procedures
shall be clearly stated, and they shall ensure that the
clearing agency can take timely action to contain
losses and liquidity pressures and to continue meeting
its obligations.
``(C) The default procedures shall be publicly
available.
``(8) Rule enforcement.--The clearing agency shall--
``(A) maintain adequate arrangements and resources
for the effective monitoring and enforcement of
compliance with rules of the clearing agency and for
resolution of disputes; and
``(B) have the authority and ability to discipline,
limit, suspend, or terminate a member's or
participant's activities for violations of rules of the
clearing agency.
``(9) System safeguards.--The clearing agency shall--
``(A) establish and maintain a program of risk
analysis and oversight to identify and minimize sources
of operational risk through the development of
appropriate controls and procedures, and the
development of automated systems, that are reliable,
secure, and have adequate scalable capacity;
``(B) establish and maintain emergency procedures,
backup facilities, and a plan for disaster recovery
that allows for the timely recovery and resumption of
operations and the fulfillment of the clearing agency's
responsibilities and obligations; and
``(C) periodically conduct tests to verify that
backup resources are sufficient to ensure continued
order processing and trade matching, price reporting,
market surveillance, and maintenance of a comprehensive
and accurate audit trail.
``(10) Reporting.--The clearing agency shall provide to the
Commission all information necessary for the Commission to
conduct oversight of the clearing agency.
``(11) Recordkeeping.--The clearing agency shall maintain
records of all activities related to the business of the
clearing agency as a clearing agency in a form and manner
acceptable to the Commission for a period of 5 years.
``(12) Public information.--
``(A) The clearing agency shall provide market
participants with sufficient information to identify
and evaluate accurately the risks and costs associated
with using the clearing agency's services.
``(B) The clearing agency shall make information
concerning the rules and operating procedures governing
its clearing and settlement systems (including default
procedures) available to market participants.
``(C) The clearing agency shall disclose publicly
and to the Commission information concerning--
``(i) the terms and conditions of
contracts, agreements, and transactions cleared
and settled by the clearing agency;
``(ii) clearing and other fees that the
clearing agency charges its members and
participants;
``(iii) the margin-setting methodology and
the size and composition of the financial
resource package of the clearing agency;
``(iv) other information relevant to
participation in the settlement and clearing
activities of the clearing agency; and
``(v) daily settlement prices, volume, and
open interest for all contracts settled or
cleared by it.
``(13) Information-sharing.--The clearing agency shall--
``(A) enter into and abide by the terms of all
appropriate and applicable domestic and international
information-sharing agreements; and
``(B) use relevant information obtained from the
agreements in carrying out the clearing organization's
risk management program.
``(14) Antitrust considerations.--Unless appropriate to
achieve the purposes of this chapter, the clearing agency shall
avoid--
``(A) adopting any rule or taking any action that
results in any unreasonable restraint of trade; or
``(B) imposing any material anticompetitive burden.
``(15) Governance fitness standards.--
``(A) The clearing agency shall establish
governance arrangements that are transparent in order
to fulfill public interest requirements and to support
the objectives of owners and participants.
``(B) The clearing agency shall establish and
enforce appropriate fitness standards for directors,
members of any disciplinary committee, and members of
the clearing agency, and any other persons with direct
access to the settlement or clearing activities of the
clearing agency, including any parties affiliated with
any of the persons described in this subparagraph.
``(16) Conflicts of interest.--The clearing agency shall
establish and enforce rules to minimize conflicts of interest
in the decisionmaking process of the clearing agency and
establish a process for resolving such conflicts of interest.
``(17) Composition of the boards.--The clearing agency
shall ensure that the composition of the governing board or
committee includes market participants.
``(18) Legal risk.--The clearing agency shall have a well-
founded, transparent, and enforceable legal framework for each
aspect of its activities.
``(m) Consultation.--The Commission and the Commodity Futures
Trading Commission shall consult with the appropriate Federal banking
agencies and each other prior to adopting rules under this section.
``(n) Harmonization of Rules.--Not later than 180 days after the
effective date of the Over-the-Counter Derivatives Markets Act of 2009,
the Commission and the Commodity Futures Trading Commission shall
jointly adopt uniform rules governing persons that are registered as
derivatives clearing organizations for swaps under the Commodity
Exchange Act (7 U.S.C. 1, et seq.) and persons that are registered as
clearing agencies for security-based swaps under the Securities
Exchange Act of 1934 (15 U.S.C. 78a, et seq.).''.
(c) Execution of Security-based Swaps.--The Securities Exchange Act
of 1934 (15 U.S.C. 78a, et seq.) is amended by inserting after section
5 the following:
``SEC. 5A. EXECUTION OF SECURITY-BASED SWAPS.
``(a) Trade Execution.--With respect to transactions involving
security-based swaps subject to the requirement of section 3B and where
both counterparties are either security-based swap dealers or major
security-based swap participants, such counterparties must either:
``(1) execute the transaction on a national securities
exchange registered pursuant to section 6(a) (in which event
such transaction shall be subject to regulation under this
title as a transaction in a security);
``(2) execute the transaction on a swap execution facility
registered with the Commission;
``(3) execute the transaction on a foreign swap execution
facility that is subject to regulation as such under the laws
of a foreign jurisdiction; or
``(4) if the transaction is not executed on an entity
listed in paragraph (1), (2), or (3), comply with any
recordkeeping and end-of-day transaction reporting
requirements--
``(A) as may be prescribed by the Commission with
respect to security-based swaps subject to the
requirements of section 3B and where both
counterparties are either security-based swap dealers
or major security-based swap participants; or
``(B) as may be prescribed by the relevant foreign
regulator in the case of security-based swaps subject
to the requirements of section 3B and where both
counterparties are either security-based swap dealers
or major security-based swap participants entered into
by--
``(i) a foreign swap dealer or a foreign
swap market participant; or
``(ii) a non-foreign swap dealer or major
swap participant that is entering into the
security-based swap either outside of the
United States, its territories and possessions
or with a foreign counterparty.
``(b) Exchange Trading.--In adopting rules and regulations, the
Commission shall endeavor to eliminate unnecessary impediments to the
trading on national securities exchanges or swap execution facilities,
agreements or transactions that would be commodity swaps but for the
trading of such contracts, agreements or transactions on such a
designated contract market.''''.
(d) Alternative Swap Execution Facilities.--The Securities Exchange
Act of 1934 (15 U.S.C. 78a, et seq.) is amended by adding after section
3B the following:
``SEC. 3C. ALTERNATIVE SWAP EXECUTION FACILITIES.
``(a) Registration.--
``(1) In general.--No person may operate a facility for the
trading of security-based swaps unless the facility is
registered as an alternative swap execution facility under this
section.
``(2) Dual registration.--Any person that is required to be
registered as an alternative swap execution facility under this
section shall register with the Commission regardless of
whether that person also is registered with the Commodity
Futures Trading Commission as an alternative swap execution
facility.
``(b) Requirements for Trading.--An alternative swap execution
facility that is registered under subsection (a) may trade any
security-based swap.
``(c) Trading by Exchanges.--An exchange shall, to the extent that
the exchange also operates an alternative swap execution facility and
uses the same electronic trade execution system for trading on the
exchange and the alternative swap execution facility, identify whether
the electronic trading is taking place on the exchange or the
alternative swap execution facility.
``(d) Criteria for Registration.--
``(1) In general.--To be registered as an alternative swap
execution facility, the facility shall be required to
demonstrate to the Commission that it meets the criteria
specified herein.
``(2) Deterrence of abuses.--The swap execution facility
shall establish and enforce trading and participation rules
that will deter abuses and have the capacity to detect,
investigate, and enforce those rules, including means to--
``(A) obtain information necessary to perform the
functions required under this section; or
``(B) use means to--
``(i) provide market participants with
impartial access to the market; and
``(ii) capture information that may be used
in establishing whether rule violations have
occurred.
``(3) Trading procedures.--The swap execution facility
shall establish and enforce rules or terms and conditions
defining, or specifications detailing, trading procedures to be
used in entering and executing orders traded on or through its
facilities.
``(4) Financial integrity of transactions.--The swap
execution facility shall establish and enforce rules and
procedures for ensuring the financial integrity of security-
based swaps entered on or through its facilities, including the
clearance and settlement of the security-based swaps.
``(e) Core Principles for Alternative Swap Execution Facilities.--
``(1) In general.--To maintain its registration as an
alternative swap execution facility, the facility shall comply
with the core principles specified in this subsection and any
requirement that the Commission may impose by rule or
regulation. Except where the Commission determines otherwise by
rule or regulation, the facility shall have reasonable
discretion in establishing the manner in which it complies with
these core principles.
``(2) Compliance with rules.--The swap execution facility
shall monitor and enforce compliance with any of the rules of
the facility, including the terms and conditions of the
security-based swaps traded on or through the facility and any
limitations on access to the facility.
``(3) Security-based swaps not readily susceptible to
manipulation.--The swap execution facility shall permit trading
only in security-based swaps that are not readily susceptible
to manipulation.
``(4) Monitoring of trading.--The swap execution facility
shall monitor trading in security-based swaps to prevent
manipulation and price distortion through surveillance,
compliance, and disciplinary practices and procedures,
including methods for conducting real-time monitoring of
trading and comprehensive and accurate trade reconstructions.
``(5) Ability to obtain information.--The swap execution
facility shall--
``(A) establish and enforce rules that will allow
the facility to obtain any necessary information to
perform any of the functions described in this
subsection;
``(B) provide the information to the Commission
upon request; and
``(C) have the capacity to carry out such
international information-sharing agreements as the
Commission may require.
``(6) Emergency authority.--The swap execution 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
suspend or curtail trading in a security-based swap.
``(7) Timely publication of trading information.--The swap
execution facility shall make public timely information on
price, trading volume, and other trading data to the extent
prescribed by the Commission.
``(8) Recordkeeping and reporting.--The swap execution
facility shall maintain records of all activities related to
the business of the facility, including a complete audit trail,
in a form and manner acceptable to the Commission for a period
of 5 years, and report to the Commission all information
determined by the Commission to be necessary or appropriate for
the Commission to perform its responsibilities under this Act
in a form and manner acceptable to the Commission. The
Commission shall adopt data collection and reporting
requirements for alternative swap execution facilities that are
comparable to corresponding requirements for clearing agencies
and security-based swap repositories.
``(9) Antitrust considerations.--Unless necessary or
appropriate to achieve the purposes of this Act, the swap
execution facility shall avoid--
``(A) adopting any rules or taking any actions that
result in any unreasonable restraints of trade; or
``(B) imposing any material anticompetitive burden
on trading on the swap execution facility.
``(10) Conflicts of interest.--The swap execution facility
shall--
``(A) establish and enforce rules to minimize
conflicts of interest in its decision-making process;
and
``(B) establish a process for resolving the
conflicts of interest.
``(11) Designation of compliance officer.--
``(A) In general.--Each alternative swap execution
facility shall designate an individual to serve as a
compliance officer.
``(B) Duties.--The compliance officer--
``(i) shall report directly to the board or
to the senior officer of the facility;
``(ii) shall--
``(I) review compliance with the
core principles in section 3B(e).
``(II) in consultation with the
board of the facility, a body
performing a function similar to that
of a board, or the senior officer of
the facility, resolve any conflicts of
interest that may arise;
``(III) be responsible for
administering the policies and
procedures required to be established
pursuant to this section; and
``(IV) ensure compliance with
securities laws and the rules and
regulations issued thereunder,
including rules prescribed by the
Commission pursuant to this section;
and
``(iii) shall establish procedures for
remediation of non-compliance issues found
during compliance office reviews, lookbacks,
internal or external audit findings, self-
reported errors, or through validated
complaints. Procedures will establish the
handling, management response, remediation,
retesting, and closing of noncompliant issues.
``(C) Annual reports required.--The compliance
officer shall annually prepare and sign a report on the
compliance of the facility with the securities laws and
its policies and procedures, including its code of
ethics and conflict of interest policies, in accordance
with rules prescribed by the Commission. Such
compliance report shall accompany the financial reports
of the facility that are required to be furnished to
the Commission pursuant to this section and shall
include a certification that, under penalty of law, the
report is accurate and complete.
``(f) Exemptions.--The Commission may exempt, conditionally or
unconditionally, an alternative swap execution facility from
registration under this section if the Commission finds that such
organization is subject to comparable, comprehensive supervision and
regulation on a consolidated basis by the Commodity Futures Trading
Commission, a Prudential Regulator or the appropriate governmental
authorities in the organization's home country.
``(g) Harmonization of Rules.--Not later than 180 days after the
date of enactment of the Over-the-Counter Derivatives Markets Act of
2009, the Commission and the Commodity Futures Trading Commission shall
jointly prescribe rules governing the regulation of alternative swap
execution facilities under this section and section 5h of the Commodity
Exchange Act (7 U.S.C. 7b-3).''.
(e) Segregation of Assets Held as Collateral in Swap
Transactions.--The Securities Exchange Act of 1934 (15 U.S.C. 78a, et
seq.) is further amended by adding after section 3C (as added by
subsection (b) the following:
``SEC. 3D. SEGREGATION OF ASSETS HELD AS COLLATERAL IN SWAP
TRANSACTIONS.
``(a) Cleared Swaps.--A security-based swap dealer or clearing
agency by or through which funds or other property are held as margin
or collateral to secure the obligations of a counterparty under a
security-based swap to be cleared by or through a derivatives clearing
agency shall segregate, maintain, and use the funds or other property
for the benefit of the counterparty, in accordance with such rules and
regulations as the Commission or Prudential Regulator shall prescribe.
Any such funds or other property shall be treated as customer property
under this Act.
``(b) Over-the-counter Swaps.--At the request of a counterparty to
a security-based swap who provides funds or other property to a swap
dealer as margin or collateral to secure the obligations of the
counterparty under a security-based swap between the counterparty and
the swap dealer that is not submitted for clearing to a derivatives
clearing agency, the swap dealer shall segregate the funds or other
property for the benefit of the counterparty, and maintain the funds or
other property in an account which is carried by a third-party
custodian and designated as a segregated account for the counterparty,
in accordance with such rules and regulations as the Commission or
Prudential Regulator may prescribe. This subsection shall not be
interpreted to preclude commercial arrangements regarding the
investment of the segregated funds or other property and the related
allocation of gains and losses resulting from any such investment.''.
(f) Trading in Security-based Swap Agreements.--Section 6 of the
Securities Exchange Act of 1934 (15 U.S.C. 78f) is amended by adding at
the end the following:
``(l) It shall be unlawful for any person to effect a transaction
in a security-based swap with or for a person that is not an eligible
contract participant unless such transaction is effected on a national
securities exchange registered pursuant to subsection (b).''.
(g) Additions of Security-based Swaps to Certain Enforcement
Provisions.--Paragraphs (1) through (3) of section 9(b) of the
Securities Exchange Act of 1934 (15 U.S.C. 78i(b)(1)-(3)) are amended
to read as follows:
``(1) any transaction in connection with any security
whereby any party to such transaction acquires (A) any put,
call, straddle, or other option or privilege of buying the
security from or selling the security to another without being
bound to do so; (B) any security futures product on the
security; or (C) any security-based swap involving the security
or the issuer of the security;
``(2) any transaction in connection with any security with
relation to which he has, directly or indirectly, any interest
in any (A) such put, call, straddle, option, or privilege; (B)
such security futures product; or (C) such security-based swap;
or
``(3) any transaction in any security for the account of
any person who he has reason to believe has, and who actually
has, directly or indirectly, any interest in any (A) such put,
call, straddle, option, or privilege; (B) such security futures
product with relation to such security; or (C) any security-
based swap involving such security or the issuer of such
security.''.
(h) Rulemaking Authority To Prevent Fraud, Manipulation, and
Deceptive Conduct in Security-based Swaps.--Section 9 of the Securities
Exchange Act of 1934 (15 U.S.C. 78i) is amended by adding at the end
the following:
``(i) It shall be unlawful for any person, directly or indirectly,
by the use of any means or instrumentality of interstate commerce or of
the mails, or of any facility of any national securities exchange, to
effect any transaction in, or to induce or attempt to induce the
purchase or sale of, any security-based swap, in connection with which
such person engages in any fraudulent, deceptive, or manipulative act
or practice, makes any fictitious quotation, or engages in any
transaction, practice, or course of business which operates as a fraud
or deceit upon any person. The Commission shall, for the purposes of
this paragraph, by rules and regulations define, and prescribe means
reasonably designed to prevent, such transactions, acts, practices, and
courses of business as are fraudulent, deceptive, or manipulative, and
such quotations as are fictitious.''.
(i) Position Limits and Position Accountability for Security-based
Swaps.--The Securities Exchange Act of 1934 is amended by inserting
after section 10A (15 U.S.C. 78j-1) the following new section:
``SEC. 10B. POSITION LIMITS AND POSITION ACCOUNTABILITY FOR SECURITY-
BASED SWAPS AND LARGE TRADER REPORTING.
``(a) Position Limits.--As a means reasonably designed to prevent
fraud and manipulation, the Commission may, by rule or regulation, as
necessary or appropriate in the public interest or for the protection
of investors, establish limits (including related hedge exemption
provisions) on the size of positions in any security-based swap or
security-based swap agreement that may be held by any person. In
establishing such limits, the Commission may require any person to
aggregate positions in--
``(1) any security-based swap and any security or loan or
group or index of securities or loans on which such security-
based swap is based, which such security-based swap references,
or to which such security-based swap is related as described in
section (a)(3) of the Over-the-Counter Derivatives Markets Act
of 2009, and any security-based swap agreement and any other
instrument relating to such security or loan or group or index
of securities or loans; or
``(2) any security-based swap and (A) any security or group
or index of securities, the price, yield, value, or volatility
of which, or of which any interest therein, is the basis for a
material term of such security-based swap as described in
section 3(a)(76) of the Securities Exchange Act of 1934 and (B)
any security-based swap and any other instrument relating to
the same security or group or index of securities.
``(b) Exemptions.--The Commission, by rule, regulation, or order,
may conditionally or unconditionally exempt any person or class of
persons, any security-based swap or class of security-based swaps, or
any transaction or class of transactions from any requirement it may
establish under this section with respect to position limits.
``(c) SRO Rules.--
``(1) In general.--As a means reasonably designed to
prevent fraud or manipulation, the Commission, by rule,
regulation, or order, as necessary or appropriate in the public
interest, for the protection of investors, or otherwise in
furtherance of the purposes of this title, may direct a self-
regulatory organization--
``(A) to adopt rules regarding the size of
positions in any security-based swap that may be held
by--
``(i) any member of such self-regulatory
organization; or
``(ii) any person for whom a member of such
self-regulatory organization effects
transactions in such security-based swap or
other security-based swap agreement; and
``(B) to adopt rules reasonably designed to ensure
compliance with requirements prescribed by the
Commission under paragraph (c)(1)(A).
``(2) Requirement to aggregate positions.--In establishing
such limits, the self-regulatory organization may require such
member or person to aggregate positions in--
``(A) any security-based swap and any security or
loan or group or index of securities or loans on which
such security-based swap is based, which such security-
based swap references, or to which such security-based
swap is related as described in section 3(a) of the
Over-the-Counter Derivatives Markets Act of 2009, and
any security-based swap agreement and any other
instrument relating to such security or loan or group
or index of securities or loans; or
``(B)(i) any security-based swap;
``(ii) any security or group or index of
securities, the price, yield, value, or volatility of
which, or of which any interest therein, is the basis
for a material term of such security-based swap as
described in section 3(a)(76) of the Securities
Exchange Act of 1934; and
``(iii) any security-based swap and any other
instrument relating to the same security or group or
index of securities.
``(d) Large Trader Reporting.--The Commission, by rule or
regulation, may require any person that effects transactions for such
person's own account or the account of others in any securities-based
swap or security-based swap agreement and any security or loan or group
or index of securities or loans as set forth in paragraphs (a)(1) and
(2) under this section to report such information as the Commission may
prescribe regarding any position or positions in any security-based
swap or security-based swap agreement and any security or loan or group
or index of securities or loans and any other instrument relating to
such security or loan or group or index of securities or loans as set
forth in paragraphs (a)(1) and (2) under this section.''.
(j) Public Reporting and Repositories for Security-based Swap
Agreements.--Section 13 of the Securities Exchange Act of 1934 (15
U.S.C. 78m) is amended by adding at the end the following:
``(m) Public Reporting of Aggregate Security-based Swap Data.--
``(1) In general.--The Commission, or a person designated
by the Commission pursuant to paragraph (2), shall make
available to the public, in a manner that does not disclose the
business transactions and market positions of any person,
aggregate data on security-based swap trading volumes and
positions from the sources set forth in paragraph (3).
``(2) Designee of the commission.--The Commission may
designate a clearing agency or a security-based swap repository
to carry out the public reporting described in paragraph (1).
``(3) Sources of information.--The sources of the
information to be publicly reported as described in paragraph
(1) are--
``(A) clearing agencies pursuant to section 3A;
``(B) security-based swap repositories pursuant to
subsection (n); and
``(C) reports received by the Commission pursuant
to section 13A.
``(n) Security-based Swap Repositories.--
``(1) Registration requirement.--
``(A) In general.--It shall be unlawful for a
security-based swap repository, unless registered with
the Commission, directly or indirectly to make use of
the mails or any means or instrumentality of interstate
commerce to perform the functions of a security-based
swap repository.
``(B) Inspection and examination.--Registered
security-based swap repositories shall be subject to
inspection and examination by any representatives of
the Commission.
``(2) Standard setting.--
``(A) Data identification.--The Commission shall
prescribe standards that specify the data elements for
each security-based swap that shall be collected and
maintained by each security-based swap repository.
``(B) Data collection and maintenance.--The
Commission shall prescribe data collection and data
maintenance standards for security-based swap
repositories.
``(C) Comparability.--The standards prescribed by
the Commission under this subsection shall be
comparable to the data standards imposed by the
Commission on clearing agencies that clear security-
based swaps.
``(3) Duties.--A security-based swap repository shall--
``(A) accept data prescribed by the Commission for
each security-based swap under this paragraph (2);
``(B) maintain such data in such form and manner
and for such period as may be required by the
Commission;
``(C) provide to the Commission, or its designee,
such information as is required by, and in a form and
at a frequency to be determined by, the Commission, in
order to comply with the public reporting requirements
contained in subsection (m); and
``(D) make available, on a confidential basis, all
data obtained by the security-based swap repository,
including individual counterparty trade and position
data, to the Commission, the appropriate Federal
banking agencies, the Commodity Futures Trading
Commission, the Financial Services Oversight Council,
and the Department of Justice or to other persons the
Commission deems appropriate, including foreign
financial supervisors (including foreign futures
authorities), foreign central banks, and foreign
ministries.
``(4) Required registration for security-based swap
repositories.--Any person that is required to be registered as
a securities-based swap repository under this subsection shall
register with the Commission, regardless of whether that person
also is registered with the Commodity Futures Trading
Commission as a swap repository.
``(5) Harmonization of rules.--Not later than 180 days
after the date of enactment of the Over-the-Counter Derivatives
Markets Act of 2009, the Commission and the Commodity Futures
Trading Commission shall jointly adopt uniform rules governing
persons that are registered under this section and persons that
are registered as swap repositories under the Commodity
Exchange Act (7 U.S.C. 1, et seq.), including uniform rules
that specify the data elements that shall be collected and
maintained by each repository.
``(6) Exemptions.--The Commission may exempt, conditionally
or unconditionally, a security-based swap repository from the
requirements of this section if the Commission finds that such
security-based swap repository is subject to comparable,
comprehensive supervision or regulation on a consolidated basis
by the Commodity Futures Trading Commission, a Prudential
Regulator or the appropriate governmental authorities in the
organization's home country.''.
SEC. 154. REGISTRATION AND REGULATION OF SWAP DEALERS AND MAJOR SWAP
PARTICIPANTS.
The Securities Exchange Act of 1934 (15 U.S.C. 78a, et seq.) is
amended by inserting after section 15E (15 U.S.C. 78o-7) the following:
``SEC. 15F. REGISTRATION AND REGULATION OF SECURITY-BASED SWAP DEALERS
AND MAJOR SECURITY-BASED SWAP PARTICIPANTS.
``(a) Registration.--
``(1) It shall be unlawful for any person to act as a
security-based swap dealer unless such person is registered as
a security-based swap dealer with the Commission.
``(2) It shall be unlawful for any person to act as a major
security-based swap participant unless such person is
registered as a major security-based swap participant with the
Commission.
``(b) Requirements.--
``(1) In general.--A person shall register as a security-
based swap dealer or major security-based swap participant by
filing a registration application with the Commission.
``(2) Contents.--The application shall be made in such form
and manner as prescribed by the Commission, giving any
information and facts as the Commission may deem necessary
concerning the business in which the applicant is or will be
engaged. Such person, when registered as a security-based swap
dealer or major security-based swap participant, shall continue
to report and furnish to the Commission such information
pertaining to such person's business as the Commission may
require.
``(3) Expiration.--Each registration shall expire at such
time as the Commission may by rule or regulation prescribe.
``(4) Rules.--Except as provided in subsections (c), (d)
and (e), the Commission may prescribe rules applicable to
security-based swap dealers and major security-based swap
participants, including rules that limit the activities of
security-based swap dealers and major security-based swap
participants. Except as provided in subsections (c) and (e),
the Commission may provide conditional or unconditional
exemptions from rules prescribed under this section for
security-based swap dealers and major security-based swap
participants that are subject to substantially similar
requirements as brokers or dealers.
``(5) Transition.--Rules adopted under this section shall
provide for the registration of security-based swap dealers and
major security-based swap participants no later than 1 year
after the effective date of the Over-the-Counter Derivatives
Markets Act of 2009.
``(c) Dual Registration.--
``(1) Security-based swap dealers.--Any person that is
required to be registered as a security-based swap dealer under
this section shall register with the Commission regardless of
whether that person also is a bank or is registered with the
Commodity Futures Trading Commission as a swap dealer.
``(2) Major security-based swap participants.--Any person
that is required to be registered as a major security-based
swap participant under this section shall register with the
Commission regardless of whether that person also is a bank or
is registered with the Commodity Futures Trading Commission as
a major swap participant.
``(d) Joint Rules.--
``(1) In general.--Not later than 180 days after the
effective date of the Over-the-Counter Derivatives Markets Act
of 2009, the Commission and the Commodity Futures Trading
Commission shall jointly adopt uniform rules for persons that
are registered as security-based swap dealers or major
security-based swap participants under this Act and persons
that are registered as swap dealers or major swap participants
under the Commodity Exchange Act (7 U.S.C. 1, et seq.).
``(2) Exception for prudential requirements.--The
Commission and the Commodity Futures Trading Commission shall
not prescribe rules imposing prudential requirements (including
activity restrictions) on security-based swap dealers or major
security-based swap participants for which there is a
Prudential Regulator. This provision shall not be construed as
limiting the authority of the Commission and the Commodity
Futures Trading Commission to prescribe appropriate business
conduct, reporting, and recordkeeping requirements to protect
investors.
``(e) Capital and Margin Requirements.--
``(1) In general.--
``(A) Bank security-based swap dealers and major
security-based swap participants.--Each registered
security-based swap dealer and major security-based
swap participant for which there is a Prudential
Regulator shall meet such minimum capital requirements
and minimum initial and variation margin requirements
as the Prudential Regulators shall by rule or
regulation jointly prescribe to help ensure the safety
and soundness of the security-based swap dealer or
major security-based swap participant.
``(B) Nonbank security-based swap dealers and major
security-based swap participants.--Each registered
security-based swap dealer and major security-based
swap participant for which there is not a Prudential
Regulator shall meet such minimum capital requirements
and minimum initial and variation margin requirements
as the Commission and the Commodity Futures Trading
Commission shall by rule or regulation jointly
prescribe to help ensure the safety and soundness of
the security-based swap dealer or major security-based
swap participant.
``(2) Joint rules.--
``(A) Bank security-based swap dealers and major
security-based swap participants.--Within 180 days of
the enactment of the Over-the-Counter Derivatives
Markets Act of 2009, the Prudential Regulators, in
consultation with the Commission and the Commodity
Futures Trading Commission, shall jointly adopt rules
imposing capital and margin requirements under this
subsection for security-based swap dealers and major
security-based swap participants.
``(B) Nonbank security-based swap dealers and major
security-based swap participants.--Within 180 days of
the enactment of the Over-the-Counter Derivatives
Markets Act of 2009, the Commission and the Commodity
Futures Trading Commission, in consultation with the
Prudential Regulators, shall jointly adopt rules
imposing capital and margin requirements under this
subsection for security-based swap dealers and major
security-based swap participants for which there is no
Prudential Regulator.
``(3) Capital.--
``(A) Bank security-based swap dealers and major
security-based swap participants.--In setting capital
requirements under this subsection, the Prudential
Regulators shall impose--
``(i) a capital requirement that is greater
than zero for security-based swaps that are
cleared by a clearing agency; and
``(ii) to offset the greater risk to the
security-based swap dealer or major security-
based swap participant and to the financial
system arising from the use of security-based
swaps that are not centrally cleared, higher
capital requirements for security-based swaps
that are not cleared by a clearing agency than
for security-based swaps that are centrally
cleared.
``(B) Nonbank security-based swap dealers and major
security-based swap participants.--Capital requirements
set by the Commission and the Commodity Futures Trading
Commission under this subsection shall be as strict as
or stricter than the capital requirements set by the
Prudential Regulators under this subsection.
``(C) Bank holding companies.--Capital requirements
set by the Board for security-based swaps of bank
holding companies on a consolidated basis shall be as
strict as or stricter than the capital requirements set
by the Prudential Regulators under this subsection.
``(4) Margin.--
``(A) Bank security-based swap dealers and major
security-based swap participants.--The Prudential
Regulators shall impose both initial and variation
margin requirements under this subsection on all
security-based swaps that are not cleared by a
registered clearing agency.
``(B) Non-swap dealers and major market
participants.--The Prudential Regulators may, but are
not required to, impose margin requirements with
respect to security-based swaps in which one of the
counterparties is not a swap dealer, major swap
participant, security-based swap dealer or major
security-based swap participant. Margin requirements
for swaps set by the Commission and the Commodity
Futures Trading Commission shall provide for the use of
non-cash assets as collateral.
``(C) Nonbank security-based swap dealers and major
security-based swap participants.--Margin requirements
for security-based swaps set by the Commission and the
Commodity Futures Trading Commission under this
subsection shall be as strict as or stricter than
margin requirements for security-based swaps set by the
Prudential Regulators.
``(f) Reporting and Recordkeeping.--
``(1) In general.--Each registered security-based swap
dealer and major security-based swap participant--
``(A) shall make such reports as are prescribed by
the Commission by rule or regulation regarding the
transactions and positions and financial condition of
such person;
``(B) for which--
``(i) there is a Prudential Regulator,
shall keep books and records of all activities
related to its business as a security-based
swap dealer or major security-based swap
participant in such form and manner and for
such period as may be prescribed by the
Commission by rule or regulation; or
``(ii) there is no Prudential Regulator,
shall keep books and records in such form and
manner and for such period as may be prescribed
by the Commission by rule or regulation;
``(C) shall keep such books and records open to
inspection and examination by any representative of the
Commission; and
``(D) shall keep any such books and records
relating to transactions in swaps based on 1 or more
securities open to inspection and examination by the
Commission.
``(2) Rules.--Not later than 1 year after the date of
enactment of the Over-the-Counter Derivatives Markets Act of
2009, the Commission and the Commodity Futures Trading
Commission, in consultation with the appropriate Federal
banking agencies, shall jointly adopt rules governing reporting
and recordkeeping for swap dealers, major swap participants,
security-based swap dealers and major security-based swap
participants.
``(g) Daily Trading Records.--
``(1) In general.--Each registered security-based swap
dealer and major security-based swap participant shall maintain
daily trading records of its security-based swaps and all
related records (including related transactions) and recorded
communications including but not limited to electronic mail,
instant messages, and recordings of telephone calls, for such
period as may be prescribed by the Commission by rule or
regulation.
``(2) Information requirements.--The daily trading records
shall include such information as the Commission shall
prescribe by rule or regulation.
``(3) Customer records.--Each registered security-based
swap dealer or major security-based swap participant shall
maintain daily trading records for each customer or
counterparty in such manner and form as to be identifiable with
each security-based swap transaction.
``(4) Audit trail.--Each registered security-based swap
dealer or major security-based swap participant shall maintain
a complete audit trail for conducting comprehensive and
accurate trade reconstructions.
``(5) Rules.--Not later than 1 year after the date of
enactment of the Over-the-Counter Derivatives Markets Act of
2009, the Commission and the Commodity Futures Trading
Commission, in consultation with the appropriate Federal
banking agencies, shall jointly adopt rules governing daily
trading records for swap dealers, major swap participants,
security-based swap dealers, and major security-based swap
participants.
``(h) Business Conduct Standards.--
``(1) In general.--Each registered security-based swap
dealer and major security-based swap participant shall conform
with business conduct standards as may be prescribed by the
Commission by rule or regulation addressing--
``(A) fraud, manipulation, and other abusive
practices involving security-based swaps (including
security-based swaps that are offered but not entered
into);
``(B) diligent supervision of its business as a
security-based swap dealer;
``(C) adherence to all applicable position limits;
and
``(D) such other matters as the Commission shall
determine to be necessary or appropriate.
``(2) Business conduct requirements.--Business conduct
requirements adopted by the Commission shall--
``(A) establish the standard of care for a
security-based swap dealer or major security-based swap
participant to verify that any security-based swap
counterparty meets the eligibility standards for an
eligible contract participant;
``(B) require disclosure by the security-based swap
dealer or major security-based swap participant to any
counterparty to the security-based swap (other than a
swap dealer, major swap participant, security-based
swap dealer or major security-based swap participant)
of--
``(i) information about the material risks
and characteristics of the security-based swap;
``(ii) the source and amount of any fees or
other material remuneration that the security-
based swap dealer or major security-based swap
participant would directly or indirectly expect
to receive in connection with the security-
based swap; and
``(iii) any other material incentives or
conflicts of interest that the security-based
swap dealer or major security-based swap
participant may have in connection with the
security-based swap; and
``(C) establish such other standards and
requirements as the Commission may determine are
necessary or appropriate in the public interest, for
the protection of investors, or otherwise in
furtherance of the purposes of this title.
``(3) Rules.--Not later than 1 year after the date of
enactment of the Over-the-Counter Derivatives Markets Act of
2009, the Commission and the Commodity Futures Trading
Commission, in consultation with the appropriate Federal
banking agencies, shall jointly prescribe rules under this
subsection governing business conduct standards for swap
dealers, major swap participants, security-based swap dealers,
and major security-based swap participants.
``(i) Documentation and Back Office Standards.--
``(1) In general.--Each registered security-based swap
dealer and major security-based swap participant shall conform
with standards, as may be prescribed by the Commission by rule
or regulation, addressing timely and accurate confirmation,
processing, netting, documentation, and valuation of all
security-based swaps.
``(2) Rules.--Not later than 1 year after the date of
enactment of the Over-the-Counter Derivatives Markets Act of
2009, the Commission and the Commodity Futures Trading
Commission, in consultation with the appropriate Federal
banking agencies, shall jointly adopt rules governing
documentation and back office standards for swap dealers, major
swap participants, security-based swap dealers, and major
security-based swap participants.
``(j) Dealer Responsibilities.--Each registered security-based swap
dealer and major security-based swap participant at all times shall
comply with the following requirements:
``(1) Monitoring of trading.--The security-based swap
dealer or major security-based swap participant shall monitor
its trading in security-based swaps to prevent violations of
applicable position limits.
``(2) Disclosure of general information.--The security-
based swap dealer or major security-based swap participant
shall disclose to the Commission and to the Prudential
Regulator for such security-based swap dealer or major
security-based swap participant, as applicable, information
concerning--
``(A) terms and conditions of its security-based
swaps;
``(B) security-based swap trading operations,
mechanisms, and practices;
``(C) financial integrity protections relating to
security-based swaps; and
``(D) other information relevant to its trading in
security-based swaps.
``(3) Ability to obtain information.--The security-based
swap dealer or major swap security-based participant shall--
``(A) establish and enforce internal systems and
procedures to obtain any necessary information to
perform any of the functions described in this section;
and
``(B) provide the information to the Commission and
to the Prudential Regulator for such security-based
swap dealer or major security-based swap participant,
as applicable, upon request.
``(4) Conflicts of interest.--The security-based swap
dealer and major security-based swap participant shall
implement conflict-of-interest systems and procedures that--
``(A) establish structural and institutional
safeguards to assure that the activities of any person
within the firm relating to research or analysis of the
price or market for any security are separated by
appropriate informational partitions within the firm
from the review, pressure, or oversight of those whose
involvement in trading or clearing activities might
potentially bias their judgment or supervision; and
``(B) address such other issues as the Commission
determines appropriate.
``(5) Antitrust considerations.--Unless necessary or
appropriate to achieve the purposes of this Act, the security-
based swap dealer or major security-based swap participant
shall avoid--
``(A) adopting any processes or taking any actions
that result in any unreasonable restraints of trade; or
``(B) imposing any material anticompetitive burden
on trading.
``(k) Rules.--The Commission, the Commodity Futures Trading
Commission, and the Prudential Regulators shall consult with each other
prior to adopting any rules under the Over-the-Counter Derivatives
Markets Act of 2009.
``(l) Statutory Disqualification.--Except to the extent otherwise
specifically provided by rule, regulation, or order of the Commission,
it shall be unlawful for a security-based swap dealer or a major
security-based swap participant to permit any person associated with a
security-based swap dealer or a major security-based swap participant
who is subject to a statutory disqualification to effect or be involved
in effecting security-based swaps on behalf of such security-based swap
dealer or major security-based swap participant, if such security-based
swap dealer or major security-based swap participant knew, or in the
exercise of reasonable care should have known, of such statutory
disqualification.
``(m) Enforcement and Administrative Proceeding Authority.--
``(1) Primary enforcement authority.--
``(A) SEC.--Except as provided in subsection (b),
the Commission shall have primary authority to enforce
the provisions of the amendments made by subtitle B of
the Over-the-Counter Derivatives Markets Act of 2009
with respect to any person.
``(B) Prudential regulators.--The Prudential
Regulators shall have exclusive authority to enforce
the provisions of subsection (e) and other prudential
requirements of this Act with respect to banks, and
branches or agencies of foreign banks that are
security-based swap dealers or major security-based
swap participants.
``(C) Referral.--If the Prudential Regulator for a
security-based swap dealer or major security-based swap
participant has cause to believe that such security-
based swap dealer or major security-based swap
participant may have engaged in conduct that
constitutes a violation of the nonprudential
requirements of section 15F or rules adopted by the
Commission thereunder, that Prudential Regulator may
recommend in writing to the Commission that the
Commission initiate an enforcement proceeding as
authorized under this Act. The recommendation shall be
accompanied by a written explanation of the concerns
giving rise to the recommendation.
``(D) Backstop enforcement authority.--If the
Commission does not initiate an enforcement proceeding
before the end of the 90 day period beginning on the
date on which the Commission receives a recommendation
under subparagraph (C), the Prudential Regulator may
initiate an enforcement proceeding as permitted under
Federal law.
``(2) Censure, denial, suspension; notice and hearing.--The
Commission, by order, shall censure, place limitations on the
activities, functions, or operations of, or revoke the
registration of any security-based swap dealer or major
security-based swap participant that has registered with the
Commission pursuant to subsection (b) if it finds, on the
record after notice and opportunity for hearing, that such
censure, placing of limitations, or revocation is in the public
interest and that such security-based swap dealer or major
security-based swap participant, or any person associated with
such security-based swap dealer or major security-based swap
participant effecting or involved in effecting transactions in
security-based swaps on behalf of such security-based swap
dealer or major security-based swap participant, whether prior
or subsequent to becoming so associated--
``(A) has committed or omitted any act, or is
subject to an order or finding, enumerated in
subparagraph (A), (D), or (E) of paragraph (4) of
section 15(b);
``(B) has been convicted of any offense specified
in subparagraph (B) of such paragraph (4) within 10
years of the commencement of the proceedings under this
subsection;
``(C) is enjoined from any action, conduct, or
practice specified in subparagraph (C) of such
paragraph (4);
``(D) is subject to an order or a final order
specified in subparagraph (F) or (H), respectively, of
such paragraph (4); or
``(E) has been found by a foreign financial
regulatory authority to have committed or omitted any
act, or violated any foreign statute or regulation,
enumerated in subparagraph (G) of such paragraph (4).
``(3) With respect to any person who is associated, who is
seeking to become associated, or, at the time of the alleged
misconduct, who was associated or was seeking to become
associated with a security-based swap dealer or major security-
based swap participant for the purpose of effecting or being
involved in effecting security-based swaps on behalf of such
security-based swap dealer or major security-based swap
participant, the Commission, by order, shall censure, place
limitations on the activities or functions of such person, or
suspend for a period not exceeding 12 months, or bar such
person from being associated with a security-based swap dealer
or major security-based swap participant, if the Commission
finds, on the record after notice and opportunity for a
hearing, that such censure, placing of limitations, suspension,
or bar is in the public interest and that such person--
``(A) has committed or omitted any act, or is
subject to an order or finding, enumerated in
subparagraph (A), (D), or (E) of paragraph (4) of
section 15(b);
``(B) has been convicted of any offense specified
in subparagraph (B) of such paragraph (4) within 10
years of the commencement of the proceedings under this
subsection;
``(C) is enjoined from any action, conduct, or
practice specified in subparagraph (C) of such
paragraph (4);
``(D) is subject to an order or a final order
specified in subparagraph (F) or (H), respectively, of
such paragraph (4); or
``(E) has been found by a foreign financial
regulatory authority to have committed or omitted any
act, or violated any foreign statute or regulation,
enumerated in subparagraph (G) of such paragraph (4).
``(4) It shall be unlawful--
``(A) for any person as to whom an order under
paragraph (3) is in effect, without the consent of the
Commission, willfully to become, or to be, associated
with a security-based swap dealer or major security-
based swap participant in contravention of such order;
or
``(B) for any security-based swap dealer or major
security-based swap participant to permit such a
person, without the consent of the Commission, to
become or remain a person associated with the security-
based swap dealer or major security-based swap
participant in contravention of such order, if such
security-based swap dealer or major security-based swap
participant knew, or in the exercise of reasonable care
should have known, of such order.
``(5) Recognition of comparable non-u.s. regulation.--The
Commission, in consultation with the Secretary of the Treasury,
the Commodity Futures Trading Commission and the Prudential
Regulators, shall adopt rules exempting from registration and
the other requirements of title I of the Over-the-Counter
Derivatives Market Act of 2009 foreign financial institutions
that the Commission finds are subject to comparable regulation
in the financial institution's home country.''.
SEC. 155. REPORTING AND RECORDKEEPING.
(a) In General.--The Securities Exchange Act of 1934 (15 U.S.C.
78a, et seq.) is amended by inserting after section 13 the following
section:
``SEC. 13A. REPORTING AND RECORDKEEPING FOR CERTAIN SECURITY-BASED
SWAPS.
``(a) In General.--Any person who enters into a security-based swap
and--
``(1) did not clear the security-based swap in accordance
with section 3A; and
``(2) did not have data regarding the security-based swap
accepted by a security-based swap repository in accordance with
rules adopted by the Commission under section 13(n),
shall meet the requirements in subsection (b).
``(b) Reports.--Any person described in subsection (a) shall--
``(1) make such reports in such form and manner and for
such period as the Commission shall prescribe by rule or
regulation regarding the security-based swaps held by the
person; and
``(2) keep books and records pertaining to the security-
based swaps held by the person in such form and manner and for
such period as may be required by the Commission, which books
and records shall be open to inspection by any representative
of the Commission, an appropriate Federal banking agency, the
Commodity Futures Trading Commission, the Financial Services
Oversight Council, and the Department of Justice.
``(c) Identical Data.--In adopting rules under this section, the
Commission shall require persons described in subsection (a) to report
the same or more comprehensive data than the Commission requires
security-based swap repositories to collect under subsection (n).''.
(b) Beneficial Ownership Reporting.--
(1) Section 13(d)(1) of the Securities Exchange Act of 1934
(15 U.S.C. 78m(d)(1)) is amended by inserting ``or otherwise
becomes or is deemed to become a beneficial owner of any of the
foregoing upon the purchase or sale of a security-based swap or
other derivative instrument as the Commission may define by
rule, and'' after ``Alaska Native Claims Settlement Act,''.
(2) Section 13(g)(1) of the Securities Exchange Act of 1934
(15 U.S.C. 78m(g)(1)) is amended by inserting ``or otherwise
becomes or is deemed to become a beneficial owner of any
security of a class described in subsection (d)(1) upon the
purchase or sale of a security-based swap or other derivative
instrument, as the Commission may define by rule'' after
``subsection (d)(1) of this section''.
(c) Reports by Institutional Investment Managers.--Section 13(f)(1)
of the Securities Exchange Act of 1934 (15 U.S.C. 78m(f)(1)) is amended
by inserting ``or otherwise becomes or is deemed to become a beneficial
owner of any security of a class described in subsection (d)(1) upon
the purchase or sale of a security-based swap or other derivative
instrument, as the Commission may define by rule,'' after ``subsection
(d)(1) of this section''.
(d) Administrative Proceeding Authority.--Section 15(b)(4) of the
Securities Exchange Act of 1934 (15 U.S.C. 78o(b)(4)) is amended--
(1) in subparagraph (C), by inserting ``security-based swap
dealer, major security-based swap participant,'' after
``government securities dealer,''; and
(2) in subparagraph (F), by inserting ``, or security-based
swap dealer, or a major security-based swap participant'' after
``or dealer''.
(e) Transactions by Corporate Insiders.--Section 16(f) of the
Securities Exchange Act of 1934 (15 U.S.C. 78p) is amended by inserting
``or security-based swaps'' after ``security futures products''.
SEC. 156. STATE GAMING AND BUCKET SHOP LAWS.
Section 28(a) of the Securities Exchange Act of 1934 (15 U.S.C.
78bb(a)) is amended to read as follows:
``(a) Except as provided in subsection (f), the rights and remedies
provided by this title shall be in addition to any and all other rights
and remedies that may exist at law or in equity; but no person
permitted to maintain a suit for damages under the provisions of this
title shall recover, through satisfaction of judgment in one or more
actions, a total amount in excess of his actual damages on account of
the act complained of. Except as otherwise specifically provided in
this title, nothing in this title shall affect the jurisdiction of the
securities commission (or any agency or officer performing like
functions) of any State over any security or any person insofar as it
does not conflict with the provisions of this title or the rules and
regulations thereunder. No State law which prohibits or regulates the
making or promoting of wagering or gaming contracts, or the operation
of `bucket shops' or other similar or related activities, shall
invalidate (1) any put, call, straddle, option, privilege, or other
security subject to this title (except a security-based swap agreement
and any security that has a pari-mutuel payout or otherwise is
determined by the Commission, acting by rule, regulation, or order, to
be appropriately subject to such laws), or apply to any activity which
is incidental or related to the offer, purchase, sale, exercise,
settlement, or closeout of any such security, (2) any security-based
swap between eligible contract participants, or (3) any security-based
swap effected on a national securities exchange registered pursuant to
section 6(b). No provision of State law regarding the offer, sale, or
distribution of securities shall apply to any transaction in a
security-based swap or a security futures product, except that this
sentence shall not be construed as limiting any State antifraud law of
general applicability.''.
SEC. 157. AMENDMENTS TO THE SECURITIES ACT OF 1933; TREATMENT OF
SECURITY-BASED SWAPS.
(a) Definitions.--Section 2(a) of the Securities Act of 1933 (15
U.S.C. 77b(a)) is amended--
(1) in paragraph (1), by inserting ``security-based swap,''
after ``security future,'';
(2) in paragraph (3) by adding at the end the following:
``Any offer or sale of a security-based swap by or on behalf of
the issuer of the securities upon which such security-based
swap is based or is referenced, an affiliate of the issuer, or
an underwriter, shall constitute a contract for sale of, sale
of, offer for sale, or offer to sell such securities,''; and
(3) by adding at the end the following:
``(17) The terms `swap' and `security-based swap' have the
same meanings as provided in sections 1a(35) and (38) of the
Commodity Exchange Act (7 U.S.C. 1a(35) and (38)).
``(18) The terms `purchase' or `sale' of a security-based
swap shall be deemed to mean the execution, termination (prior
to its scheduled maturity date), assignment, exchange, or
similar transfer or conveyance of, or extinguishing of rights
or obligations under, a security-based swap, as the context may
require.''.
(b) Registration of Security-based Swaps.--Section 5 of the
Securities Act of 1933 (15 U.S.C. 77e) is amended by adding at the end
the following:
``(d) Notwithstanding the provisions of section 3 or section 4,
unless a registration statement meeting the requirements of subsection
(a) of section 10 is in effect as to a security-based swap, it shall be
unlawful for any person, directly or indirectly, to make use of any
means or instruments of transportation or communication in interstate
commerce or of the mails to offer to sell, offer to buy or purchase or
sell a security-based swap to any person who is not an eligible
contract participant as defined in section 1a(13) of the Commodity
Exchange Act (7 U.S.C. 1a(13)).''.
SEC. 158. OTHER AUTHORITY.
Unless otherwise provided by its terms, this subtitle does not
divest any appropriate Federal banking agency, the Commission, the
Commodity Futures Trading Commission, or other Federal or State agency,
of any authority derived from any other applicable law.
SEC. 159. JURISDICTION.
Section 36 of the Securities Exchange Act of 1934 (15 U.S.C. 78mm)
is amended by adding at the end the following new subsection:
``(c) Derivatives.--The Commission shall not have the authority to
grant exemptions from the security-based swap provisions of the Over-
the-Counter Derivatives Markets Act of 2009, except as expressly
authorized under the provisions of that Act.''.
SEC. 160. EFFECTIVE DATE.
This subtitle is effective 180 days after the date of enactment.
<all>