[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3006 Introduced in House (IH)]
112th CONGRESS
1st Session
H. R. 3006
To amend the Commodity Exchange Act to prevent excessive speculation in
commodity markets and excessive speculative position limits on energy
contracts, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
September 21, 2011
Mr. Welch (for himself and Ms. DeLauro) introduced the following bill;
which was referred to the Committee on Agriculture
_______________________________________________________________________
A BILL
To amend the Commodity Exchange Act to prevent excessive speculation in
commodity markets and excessive speculative position limits on energy
contracts, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Anti-Excessive Speculation Act of
2011''.
SEC. 2. FINDINGS.
Congress finds that--
(1) as scores of recent academic and governmental studies,
reports, and analyses have shown, unlimited and excessive
speculation in commodity markets causes harm to consumers and
commodity-dependent businesses of the United States by
contributing to unnecessary volatility and unwarranted
increases in food and energy prices;
(2) for the purpose of diminishing, eliminating, or
preventing the burdens imposed on interstate commerce by
excessive speculation in commodities, section 4a(a)(1) of the
Commodity Exchange Act (7 U.S.C. 6a(a)(1)) directs the
Commodity Futures Trading Commission to proclaim and fix
speculative position limits, as necessary, on the amount of
commodity trading by any person, including any group or class
of traders other than bona fide hedgers;
(3) pursuant to the standards set forth in section 4a(a)(1)
of the Commodity Exchange Act (7 U.S.C. 6a(a)(1)), section
4a(a)(2) of that Act directs the Commodity Futures Trading
Commission to establish limits on the positions that may be
held by commodity traders, other than bona fide hedge
positions, and establishes a specific timetable for
implementation of those limits;
(4) the rulemaking authority of section 4a of the Commodity
Exchange Act (7 U.S.C. 6a) provides the Commodity Futures
Trading Commission with ample authority to impose meaningful
speculative position limits on commodity trading by individual
speculators, as well as position limits on the overall level of
speculative trading in the marketplace;
(5) in recent years, the interpretation of the Commodity
Futures Trading Commission of the term ``excessive
speculation'' has focused on the threat that singular,
concentrated positions pose to the liquidity and efficient
management of commodity trading;
(6) the historically narrow emphasis of the Commodity
Futures Trading Commission on the burden created by
concentrated speculative positions has deterred the Commission
from adopting additional measures to ensure that the aggregate
level of speculation in the market does not contribute to
unwarranted increases in commodity price levels;
(7) this Act clarifies that--
(A) one of the fundamental objectives of the
Commodity Exchange Act (7 U.S.C. 1 et seq.) is to
ensure that the commodity markets accurately reflect
the fundamental supply and demand for commodities; and
(B) the deterrence and prevention of excessive
speculation is an express purpose of that Act;
(8) in order to end decades of legal uncertainty and
regulatory ambiguity that has undermined enforcement efforts,
this Act defines the term ``excessive speculation'' and creates
legal presumptions that give rise to a determination that
excessive speculation is present in a commodity market; and
(9) the individual and aggregate position limits set forth
in this Act and applicable to energy contracts seek to
strengthen, and not replace, any limits established by the
Commodity Futures Trading Commission under the rulemaking
processes of the Commission.
SEC. 3. FINDINGS AND PURPOSE.
Section 3 of the Commodity Exchange Act (7 U.S.C. 5) is amended--
(1) in subsection (a), by striking ``, or'' and inserting
``that accurately reflect the fundamental supply and demand for
commodities, and''; and
(2) in subsection (b), in the second sentence, by inserting
``and excessive speculation'' after ``prevent price
manipulation''.
SEC. 4. FOREIGN BOARDS OF TRADE.
Section 4(b)(1)(A)(i) of the Commodity Exchange Act (7 U.S.C.
6(b)(1)(A)(i)) is amended by striking ``subject to comparable,
comprehensive'' and inserting the following: ``subject to--
``(I) rules and restrictions
prohibiting excessive speculation by
governmental authorities that are
comparable to the law, regulations, and
orders applicable to boards of trade in
the United States; and
``(II) comparable, comprehensive''.
SEC. 5. EXCESSIVE SPECULATION.
Section 4a of the Commodity Exchange Act (7 U.S.C. 6a) is amended--
(1) in subsection (a)--
(A) in paragraph (1)--
(i) in the first sentence, by striking
``Excessive speculation'' and inserting the
following:
``(A) Excessive speculation.--
``(i) In general.--Excessive speculation'';
(ii) by inserting after the first sentence
the following:
``(ii) Factors.--Excessive speculation in a
commodity market exists if speculative traders
have a substantial impact on price discovery.
``(iii) Presumption of excessive
speculation.--For purposes of this Act,
speculative traders shall be presumed to have a
substantial impact on price discovery if the
Commission determines that--
``(I) gross positions, long or
short, attributable to speculative
trading in a contract for future
delivery, an option on such a contract,
a swaps contract listed for trading on
a designated contract market, or a
swaps contract listed for trading on a
swaps execution facility exceed the
gross positions, long or short,
attributable to bona fide hedging
transactions traded in such a contract
or option; or
``(II) the average percentage of
open interest, long or short, held by
persons primarily engaged in
speculative trading during the most
recent 12-month period for which data
are available exceeds by more than 10
percent the average annual percentage
of open interest, long or short, held
by persons primarily engaged in
speculative trading during--
``(aa) the preceding 25-
year period; or
``(bb) if the interest is
held by the persons for less
than the 25-year period, the
period during which the
contract has been traded on a
designated contract market.'';
(iii) in the second sentence, by striking
``For the purpose of diminishing, eliminating,
or preventing such burden'' and inserting the
following:
``(B) Position limits.--
``(i) In general.--For the purpose of
diminishing, eliminating, or preventing the
burden on interstate commerce described in
subparagraph (A)(i)''; and
(iv) by designating the third, fourth,
fifth, and sixth sentences (as those sentences
existed before the amendments made by clauses
(i) through (iii)) as clauses (ii), (iii),
(iv), and (v), respectively, of subparagraph
(B) (as added by clause (iii));
(B) by redesignating paragraph (7) as paragraph
(8);
(C) by inserting after paragraph (6) the following:
``(7) Speculative position limits on energy contracts.--
``(A) Definitions.--In this paragraph:
``(i) Energy contract.--The term `energy
contract' means--
``(I) a contract referencing the
price of crude oil, gasoline, diesel
fuel, jet fuel, heating oil, or natural
gas and traded on a registered entity;
``(II) with respect to an
agreement, contract, or transaction
that settles against any price
(including the daily or final
settlement price) of one or more
contracts referencing the price of
crude oil, gasoline, diesel fuel, jet
fuel, heating oil, or natural gas and
listed for trading on a registered
entity, a contract traded on a foreign
board of trade that provides members or
other participants located in the
United States with direct access to the
electronic trading and order matching
system of the foreign board of trade;
and
``(III) swap contracts referencing
the price of crude oil, gasoline,
diesel fuel, jet fuel, heating oil, or
natural gas that perform or affect a
significant price discovery function
with respect to regulated entities.
``(ii) Excessive speculative position.--The
term `excessive speculative position' means a
position that affects--
``(I) in the spot month, more than
5 percent of the estimated deliverable
supply of the same commodity; and
``(II) in a single month or all
months combined, more than 5 percent of
the open interest in a contract.
``(B) Individual position limits on energy
contracts.--No person may hold or control an excessive
speculative position, long or short, in an energy
contract in any single market described in subclause
(I), (II), or (III) of subparagraph (A)(i) and
aggregated across all markets described in those
subclauses in the spot month, a single month, or all-
months combined.
``(C) Aggregate speculative position limits on
energy contracts.--
``(i) In general.--Not later than 45 days
after the date of enactment of the Anti-
Excessive Speculation Act of 2011, the
Commission shall issue an order that
establishes aggregate speculative position
limits for long energy contracts held by
speculators as a class of traders in any single
market described in subclause (I), (II), or
(III) of subparagraph (A)(i) and in all markets
described in those subclauses.
``(ii) Requirements.--The aggregate
speculative position limits shall be
established at levels that are not greater than
the average annual percentage of long open
interest held by speculators in any single
market described in subclause (I), (II), or
(III) of subparagraph (A)(i) and in all markets
described in those subclauses during--
``(I) the preceding 25-year period;
or
``(II) if the interest is held by
speculators for less than the 25-year
period, the period during which the
contract has been traded.
``(iii) Procedures.--To the extent
necessary, the order shall include transition
rules to ensure an orderly and gradual
reduction in aggregate speculative positions in
a manner that does not mandate or require the
unwinding of contracts and agreements existing
on the date of enactment of the Anti-Excessive
Speculation Act of 2011.
``(D) Exemption for bona fide energy hedging
transactions.--
``(i) Definition of bona fide energy
hedging.--
``(I) In general.--In this
subparagraph, the term `bona fide
energy hedging' means a transaction or
position that is proportionate and
economically appropriate for the
reduction of risks in the conduct and
management of a trade or business that
produces, processes, merchandises,
manufactures, or consumes an energy
commodity.
``(II) Exclusion.--For purposes of
this paragraph, the management of
financial risk associated with swaps or
other similar contracts, by itself,
shall not constitute bona fide energy
hedging.
``(ii) Exclusion.--For purposes of this
paragraph, bona fide energy hedging shall be
excluded when computing the positions held or
controlled by a person.
``(E) Anti-abuse regulatory authority.--The
Commission shall issue such rules, regulations, or
orders as are necessary--
``(i) to prevent persons from circumventing
or evading the speculative position limits
established under this paragraph; or
``(ii) to carry out the purpose of limiting
excessive speculation in energy markets.''; and
(D) in paragraph (8) (as redesignated by
subparagraph (B)), by striking ``The Commission'' and
inserting ``Except as provided in paragraph (7), the
Commission''.
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