[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[S. 1598 Introduced in Senate (IS)]

112th CONGRESS
  1st Session
                                S. 1598

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 SENATE OF THE UNITED STATES

                           September 21, 2011

 Mr. Nelson of Florida (for himself, Mr. Sanders, Mr. Blumenthal, and 
 Mr. Rockefeller) 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 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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