[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[S. 447 Introduced in Senate (IS)]

111th CONGRESS
  1st Session
                                 S. 447

    To amend the Commodity Exchange Act to prevent excessive price 
 speculation with respect to energy and agricultural commodities, and 
                          for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           February 13, 2009

   Mr. Levin introduced the following bill; which was read twice and 
   referred to the Committee on Agriculture, Nutrition, and Forestry

_______________________________________________________________________

                                 A BILL


 
    To amend the Commodity Exchange Act to prevent excessive price 
 speculation with respect to energy and agricultural commodities, and 
                          for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Prevent Excessive 
Speculation Act''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Definition of energy and agricultural commodity.
Sec. 3. Speculative limits and transparency of off-shore trading.
Sec. 4. Authority of Commodity Futures Trading Commission with respect 
                            to certain traders.
Sec. 5. Working group of international regulators.
Sec. 6. Position limits for energy and agricultural commodities.
Sec. 7. Over-the-counter transactions.
Sec. 8. Index traders and swap dealers.
Sec. 9. Disaggregation of index funds and other data in energy and 
                            agricultural markets.
Sec. 10. Additional Commodity Futures Trading Commission employees for 
                            improved enforcement.

SEC. 2. DEFINITIONS OF ENERGY AND AGRICULTURAL COMMODITY.

    (a) Definition of Energy Commodity.--Section 1a of the Commodity 
Exchange Act (7 U.S.C. 1a) is amended--
            (1) by redesignating paragraphs (13) through (34) as 
        paragraphs (14) through (35), respectively; and
            (2) by inserting after paragraph (12) the following:
            ``(13) Energy commodity.--The term `energy commodity' 
        means--
            ``(A) crude oil;
            ``(B) natural gas;
            ``(C) coal;
            ``(D) gasoline, heating oil, diesel fuel, and any other 
        source of energy derived from coal, crude oil, or natural gas;
            ``(E) electricity;
            ``(F) ethanol and any other fuel derived from a renewable 
        biomass;
            ``(G) any commodity that results from the management of air 
        emissions, including but not limited to greenhouse gases, 
        sulfur dioxide, and nitrogen oxides; and
            ``(H) any other substance that is used as a source of 
        energy, as the Commission, in its discretion, deems 
        appropriate.''.
    (b) Definition of Agricultural Commodity.--Section 1a of the 
Commodity Exchange Act (7 U.S.C. 1a) is amended--
            (1) by redesignating paragraphs (1) through (35) as 
        paragraphs (2) through (36), respectively; and
            (2) by inserting a new paragraph (1) as follows:
            ``(1) Agricultural commodity.--The term `agricultural 
        commodity' means any commodity specifically described in 
        paragraph (5).''.
    (c) Conforming Amendments.--
            (1) Section 2(c)(2)(B)(i)(II)(cc) of the Commodity Exchange 
        Act (7 U.S.C. 2(c)(2)(B)(i)(II)(cc)) is amended--
                    (A) in subitem (AA), by striking ``section 1a(20)'' 
                and inserting ``section 1a(21)''; and
                    (B) in subitem (BB), by striking ``section 1a(20)'' 
                and inserting ``section 1a(21)''.
            (2) Section 13106(b)(1) of the Food, Conservation, and 
        Energy Act of 2008 is amended by striking ``section 1a(32)'' 
        and inserting ``section 1a''.
            (3) Section 402 of the Legal Certainty for Bank Products 
        Act of 2000 (7 U.S.C. 27) is amended--
                    (A) in subsection (a)(7), by striking ``section 
                1a(20)'' and inserting ``section 1a''; and
                    (B) in subsection (d)--
                            (i) in paragraph (1)(B), by striking 
                        ``section 1a(33)'' and inserting ``section 
                        1a''; and
                            (ii) in paragraph (2)(D), by striking 
                        ``section 1a(13)'' and inserting ``section 
                        1a''.

SEC. 3. SPECULATIVE LIMITS AND TRANSPARENCY OF OFF-SHORE TRADING.

    Section 4 of the Commodity Exchange Act (7 U.S.C. 6) is amended by 
adding at the end the following:
    ``(e) Foreign Boards of Trade.--
            ``(1) In general.--The Commission may not permit a foreign 
        board of trade to provide to the members of the foreign board 
        of trade or other participants located in the United States, or 
        otherwise subject to the jurisdiction of the Commission, direct 
        access to the electronic trading and order matching system of 
        the foreign board of trade with respect to an agreement, 
        contract, or transaction in an energy commodity that settles 
        against any price (including the daily or final settlement 
        price) of one or more contracts listed for trading on a 
        registered entity, unless--
                    ``(A) the foreign board of trade--
                            ``(i) 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 one or more contracts against 
                        which the agreement, contract or transaction 
                        traded on the foreign board of trade settles; 
                        and
                            ``(ii) promptly notifies the Commission of 
                        any change regarding--
                                    ``(I) the information that the 
                                foreign board of trade will make 
                                publicly available;
                                    ``(II) the position limits and 
                                position accountability provisions that 
                                the foreign board of trade will adopt 
                                and enforce;
                                    ``(III) the position reductions 
                                required to prevent manipulation; and
                                    ``(IV) any other area of interest 
                                expressed by the Commission to the 
                                foreign board of trade; and
                    ``(B) the foreign board of trade (or the foreign 
                futures authority that oversees the foreign board of 
                trade)--
                            ``(i) adopts position limits or position 
                        accountability provisions for the agreement, 
                        contract, or transaction that are comparable to 
                        the position limits or position accountability 
                        provisions adopted by the registered entity for 
                        the one or more contracts against which the 
                        agreement, contract or transaction traded on 
                        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, 
                        price distortion, or disruption of delivery or 
                        the cash settlement process; and
                            ``(iii) provides information to the 
                        Commission that is comparable to the 
                        information that the Commission determines to 
                        be necessary to publish the commitments of 
                        traders report of the Commission for the one or 
                        more contracts against which the agreement, 
                        contract or transaction traded on the foreign 
                        board of trade settles.
            ``(2) Existing foreign boards of trade.--Paragraph (1) 
        shall not be effective with respect to any agreement, contract, 
        or transaction in an energy commodity executed on a foreign 
        board of trade to which the Commission had granted direct 
        access permission prior to the date of enactment of this 
        subsection until the date that is 180 days after the date of 
        enactment of this subsection.
            ``(3) Existing contracts.--No 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 subsection (a) shall 
        be void, voidable or unenforceable and no party to such 
        contract shall be entitled to rescind or recover any payments 
        made with respect to such contract based upon the failure of 
        the foreign board of trade to comply with any provision of this 
        Act.''.

SEC. 4. AUTHORITY OF COMMODITY FUTURES TRADING COMMISSION WITH RESPECT 
              TO CERTAIN TRADERS.

    (a) In General.--
            (1) Restriction of futures trading to contract markets or 
        derivatives transaction execution facilities.--Section 4(b) of 
        the Commodity Exchange Act (7 U.S.C. 6(b)) is amended by 
        inserting after the first sentence the following: ``The 
        Commission may adopt rules and regulations requiring the 
        maintenance of books and records by any person that is located 
        within the United States (including the territories and 
        possessions of the United States) or that enters trades 
        directly into the trade matching system of a foreign board of 
        trade from the United States (including the territories and 
        possessions of the United States).''
            (2) Commission authority over traders.--Section 4 of the 
        Commodity Exchange Act (7 U.S.C. 6) is amended by adding at the 
        end the following:
    ``(e) The Commission shall have authority under this Act to require 
or direct a person located in the United States, or otherwise subject 
to the jurisdiction of the Commission, to limit, reduce, or liquidate 
any position on a foreign board of trade to prevent or reduce the 
threat of price manipulation, excessive speculation, price distortion, 
or disruption of delivery or the cash settlement process with respect 
to any contract listed for trading on a registered entity.
    ``(f) Consultation.--Before taking any action under subsection (e), 
the Commission shall consult with the appropriate--
            ``(1) foreign board of trade; and
            ``(2) foreign futures authority.''.
            (3) Violations.--Section 9(a) of the Commodity Exchange Act 
        (7 U.S.C. 13(a)) is amended by inserting ``(including any 
        person trading on a foreign board of trade)'' after ``Any 
        person'' each place it appears.
            (4) Effect.--No amendment made by this subsection limits 
        any of the otherwise applicable authorities of the Commodity 
        Futures Trading Commission.

SEC. 5. WORKING GROUP OF INTERNATIONAL REGULATORS.

    Section 4a of the Commodity Exchange Act (7 U.S.C. 6a) (as amended 
by section 4(a)(2)(B)) is amended by adding at the end the following:
    ``(g) Working Group of International Regulators.--Not later than 90 
days after the date of enactment of this subsection, the Commission 
shall invite regulators of foreign boards of trade to participate in a 
working group of international regulators to develop uniform 
international reporting and regulatory standards to ensure the 
protection of the energy and agricultural futures markets from 
excessive speculation, manipulation, and other trading practices that 
may pose systemic risks to energy and agricultural futures markets, 
countries, and consumers.''.

SEC. 6. POSITION LIMITS FOR ENERGY AND AGRICULTURAL COMMODITIES.

    Section 4a of the Commodity Exchange Act (7 U.S.C. 6a) is amended--
            (1) in subsection (a)--
                    (A) by inserting ``(1)'' after ``(a)''; and
                    (B) by adding after and below the end the 
                following:
            ``(2) In accordance with the standards set forth in 
        paragraph (1) of this subsection and consistent with the good 
        faith exception cited in subsection (b)(2), with respect to 
        energy and agricultural commodities, the Commission, within 90 
        days after the date of the enactment of this paragraph, shall 
        issue a proposed rule, and within 180 days after issuance of 
        such proposed rule shall adopt a final rule, after notice and 
        an opportunity for public comment, to establish limits on the 
        amount of positions that may be held by any person with respect 
        to contracts of sale for future delivery or with respect to 
        options on such contracts or commodities traded on or subject 
        to the rules of a contract market or derivatives transaction 
        execution facility, or on an electronic trading facility with 
        respect to a significant price discovery contract.
            ``(3) In establishing the limits required in paragraph (2), 
        the Commission shall set limits--
                    ``(A) on the number of positions that may be held 
                by any person for the spot month, each other month, and 
                the aggregate number of positions that may be held by 
                any person for all months; and
                    ``(B) to the maximum extent practicable, in its 
                discretion--
                            ``(i) to diminish, eliminate, or prevent 
                        excessive speculation;
                            ``(ii) to deter and prevent market 
                        manipulation, squeezes, and corners;
                            ``(iii) to ensure sufficient market 
                        liquidity; and
                            ``(iv) to ensure that the price discovery 
                        function of the underlying cash market is not 
                        distorted or disrupted.
            ``(4) In addition to the position limits for energy and 
        agricultural commodities that the Commission establishes under 
        paragraph (2), the Commission may require or permit a contract 
        market, derivatives transaction execution facility, or 
        electronic trading facility with respect to a significant price 
        discovery contract, to establish and enforce position 
        accountability, as the Commission determines may be necessary 
        and appropriate to accomplish the objectives set forth in 
        paragraph (3)(B), provided that the number of positions that 
        may be authorized under position accountability may not exceed 
        the position limits established under paragraph (2).
            ``(5) Nothing in this section shall require the Commission 
        to revise any position limit for an agricultural commodity that 
        is in effect on the date of enactment of this Act.''.

SEC. 7. OVER-THE-COUNTER TRANSACTIONS.

    Section 2 of the Commodity Exchange Act (7 U.S.C. 2) is amended by 
adding at the end the following:
    ``(j) Over-the-Counter Transactions.--
            ``(1) Definitions.--In this subsection:
                    ``(A) Covered person.--The term `covered person' 
                means a person that enters into an over-the-counter 
                transaction that is required to be reported under 
                paragraph (3)(C).
                    ``(B) Over-the-counter transaction.--The term 
                `over-the-counter transaction' means a contract, 
                agreement, or transaction in an energy or agricultural 
                commodity that is--
                            ``(i) entered into only between persons 
                        that are eligible contract participants at the 
                        time the persons enter into the agreement, 
                        contract, or transaction;
                            ``(ii) not entered into on a trading 
                        facility; and
                            ``(iii) not a sale of any cash commodity 
                        for delivery.
            ``(2) Authority in major market disturbances.--
                    ``(A) In general.--In the case of a major market 
                disturbance, as determined by the Commission, the 
                Commission may require any trader subject to the 
                reporting requirements described in paragraph (3) to 
                take such action as the Commission considers to be 
                necessary to maintain or restore orderly trading in any 
                contract listed for trading on a registered entity, 
                including--
                            ``(i) the liquidation of any futures 
                        contract; and
                            ``(ii) the fixing of any limit that may 
                        apply to a market position involving any over-
                        the-counter transaction acquired in good faith 
                        before the date of the determination of the 
                        Commission.
                    ``(B) Major market disturbance.--The term `major 
                market disturbance' means any disturbance in a 
                commodity market that disrupts the liquidity and price 
                discovery function of that market from accurately 
                reflecting the forces of supply and demand for a 
                commodity, including--
                            ``(i) a threatened or actual market 
                        manipulation or corner;
                            ``(ii) excessive speculation; and
                            ``(iii) any action of the United States or 
                        a foreign government that affects a commodity.
                    ``(C) The term `market disturbance' shall be 
                interpreted in a manner consistent with section 8a(9).
                    ``(D) Judicial review.--Any action taken by the 
                Commission under subparagraph (A) shall be subject to 
                judicial review carried out in accordance with section 
                8a(9).
            ``(3) Reporting; recordkeeping.--
                    ``(A) In general.--The Commission shall require 
                each covered person to submit to the Commission a 
                report--
                            ``(i) at such time and in such manner as 
                        the Commission determines to be appropriate; 
                        and
                            ``(ii) containing the information required 
                        under subparagraph (B) to assist the Commission 
                        in detecting and preventing potential price 
                        manipulation of, or excessive speculation in, 
                        any contract listed for trading on a registered 
                        entity.
                    ``(B) Contents of report.--A report required under 
                subparagraph (A) shall contain--
                            ``(i) information describing large trading 
                        positions of the covered person obtained 
                        through one or more over-the-counter 
                        transactions that involve--
                                    ``(I) substantial quantities of a 
                                commodity in the cash market; or
                                    ``(II) substantial positions, 
                                investments, or trades in agreements or 
                                contracts relating to the commodity; 
                                and
                            ``(ii) any other information relating to 
                        over-the-counter transactions required to be 
                        reported under subparagraph (C) carried out by 
                        the covered person that the Commission 
                        determines to be necessary to accomplish the 
                        purposes described in subparagraph (A).
                    ``(C) Over-the-counter transactions to be 
                reported.--
                            ``(i) In general.--The Commission shall 
                        identify each large over-the-counter 
                        transaction or class of large over-the-counter 
                        transactions the reporting of which the 
                        Commission determines to be appropriate to 
                        assist the Commission in detecting and 
                        preventing potential price manipulation of, or 
                        excessive speculation in, any contract listed 
                        for trading on a registered entity.
                            ``(ii) Mandatory factors for 
                        determinations.--
                                    ``(I) In general.--In carrying out 
                                a determination under clause (i), the 
                                Commission shall consider the extent to 
                                which each factor described in 
                                subclause (II) applies.
                                    ``(II) Factors.--The factors 
                                required for carrying out a 
                                determination under clause (i) include 
                                whether--
                                            ``(aa) a standardized 
                                        agreement is used to execute 
                                        the over-the-counter 
                                        transaction;
                                            ``(bb) the over-the-counter 
                                        transaction settles against any 
                                        price (including the daily or 
                                        final settlement price) of one 
                                        or more contracts listed for 
                                        trading on a registered entity;
                                            ``(cc) the price of the 
                                        over-the-counter transaction is 
                                        reported to a third party, 
                                        published, or otherwise 
                                        disseminated;
                                            ``(dd) the price of the 
                                        over-the-counter transaction is 
                                        referenced in any other 
                                        transaction;
                                            ``(ee) there is a 
                                        significant volume of the over-
                                        the-counter transaction or 
                                        class of over-the-counter 
                                        transactions; and
                                            ``(ff) there is any other 
                                        factor that the Commission 
                                        determines to be appropriate.
                            ``(iii) Periodic review.--The Commission 
                        shall periodically conduct a review, but not 
                        less than once every 2 years, to determine 
                        whether to initiate a rulemaking to include any 
                        additional transactions or classes of 
                        transactions or to exclude any transactions or 
                        classes of transactions from the reporting 
                        requirements of this paragraph.
                    ``(D) Alternate reporting.--The Commission may 
                permit any report required to be reported under 
                paragraph (A) by--
                            ``(i) a member of a derivatives clearing 
                        organization; or
                            ``(ii) only one of the persons entering 
                        into the transaction, provided that each person 
                        entering into the transaction or transactions 
                        has notified the Commission, in the manner 
                        specified by the Commission, that one of the 
                        persons to the transaction or transactions has 
                        assumed, on behalf of the other person to the 
                        transaction, the legal obligations for such 
                        other person to submit reports under this 
                        section, including liabilities for failure to 
                        file such reports in accordance with the 
                        Commission's regulations. Any notification 
                        provided under this paragraph shall be 
                        effective in imposing such legal obligations 
                        and liabilities upon such person.
                    ``(E) Recordkeeping.--The Commission, by rule, 
                shall require each covered person--
                            ``(i) in accordance with section 4i, to 
                        maintain such records as directed by the 
                        Commission for a period of 5 years, or longer, 
                        if directed by the Commission; and
                            ``(ii) to provide such records upon request 
                        to the Commission or the Department of Justice.
            ``(4) Position limits for over-the-counter transactions.--
        Upon review of the information reported to the Commission under 
        paragraph (3), or following a major market disturbance as 
        determined by the Commission under paragraph (2), the 
        Commission may establish, after due notice and opportunity for 
        hearing, by rule, regulation, or order, such limits on the 
        amount of trading in over-the-counter transactions as the 
        Commission determines are necessary and appropriate to 
        accomplish one or more of the following objectives with respect 
        to any contract listed for trading on a registered entity--
                    ``(A) diminish, eliminate, or prevent excessive 
                speculation;
                    ``(B) deter and prevent market manipulation, 
                squeezes, and corners;
                    ``(C) ensure sufficient market liquidity; and
                    ``(D) ensure that the price discovery function of 
                the underlying cash market is not distorted or 
                disrupted.
            ``(5) Protection of proprietary information.--In carrying 
        out this subsection, the Commission may not--
                    ``(A) require the publication of any proprietary 
                information;
                    ``(B) prohibit the commercial sale or licensing of 
                any proprietary information; and
                    ``(C) except as provided in section 8, publicly 
                disclose any information relating to any market 
                position, business transaction, trade secret, or name 
                of any customer of a covered person.
            ``(6) Applicability.--Notwithstanding subsections (g) and 
        (h), and any exemption issued by the Commission for any energy 
        or agricultural commodity, each over-the-counter transaction 
        shall be subject to this subsection.
            ``(7) Savings clause.--Nothing in this subsection modifies 
        or alters--
                    ``(A) the guidance of the Commission; or
                    ``(B) any applicable requirements with respect the 
                disclosure of proprietary information.
            ``(8) Bona fide hedging transaction review.--
                    ``(A) In general.--The Commission shall review and 
                revise the definition of bona fide hedging transaction 
                in subsection (c) of Section 4a of the Commodity 
                Exchange Act (7 U.S.C 2(h)(2)(A)) as the Commission 
                determines is necessary and appropriate to ensure that 
                the commodity markets effectively perform their risk 
                management and price discovery functions.''.

SEC. 8. INDEX TRADERS AND SWAP DEALERS.

    Section 4 of the Commodity Exchange Act (7 U.S.C. 6) (as amended by 
section 3) is amended by adding at the end the following:
    ``(f) Index Traders and Swap Dealers.--Not later than 60 days after 
the date of enactment of this subsection, the Commission shall--
            ``(1) routinely require detailed reporting from index 
        traders and swap dealers in markets under the jurisdiction of 
        the Commission;
            ``(2) reclassify the types of traders for regulatory and 
        reporting purposes to distinguish between index traders and 
        swaps dealers; and
            ``(3) review the trading practices for index traders in 
        markets under the jurisdiction of the Commission--
                    ``(A) to ensure that index trading is not adversely 
                impacting the price discovery process; and
                    ``(B) to determine whether different practices or 
                regulations should be implemented.''.

SEC. 9. DISAGGREGATION OF INDEX FUNDS AND OTHER DATA IN ENERGY AND 
              AGRICULTURAL MARKETS.

    Section 4 of the Commodity Exchange Act (7 U.S.C. 6) (as amended by 
section 8) is amended by adding at the end the following:
    ``(g) Disaggregation of Index Funds and Other Data in Energy and 
Agricultural Markets.--The Commission shall disaggregate and make 
public monthly--
            ``(1) the number of positions and total value of index 
        funds and other passive, long-only positions in energy and 
        agricultural markets; and
            ``(2) data on speculative positions relative to bona fide 
        physical hedgers in those markets.''.

SEC. 10. ADDITIONAL COMMODITY FUTURES TRADING COMMISSION EMPLOYEES FOR 
              IMPROVED ENFORCEMENT.

    Section 2(a)(7) of the Commodity Exchange Act (7 U.S.C. 2(a)(7)) is 
amended by adding at the end the following:
                    ``(D) Additional employees.--As soon as practicable 
                after the date of enactment of this subparagraph, the 
                Commission shall appoint at least 100 full-time 
                employees (in addition to the employees employed by the 
                Commission as of the date of enactment of this 
                subparagraph)--
                            ``(i) to increase the public transparency 
                        of operations in energy futures markets;
                            ``(ii) to improve the enforcement of this 
                        Act in those markets; and
                            ``(iii) to carry out such other duties as 
                        are prescribed by the Commission.''.
                                 <all>