Short title

This Act may be cited as the

Anti-Excessive Speculation Act of 2011

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.

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.

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

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.