II 112th CONGRESS 1st Session S. 947 IN THE SENATE OF THE UNITED STATES May 11, 2011 Mr. Johanns (for himself, Mr. Toomey, Mr. Crapo, Mr. Hoeven, Mr. Wicker, Mr. Moran, and Mr. Cochran) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs A BILL To provide end user exemptions from certain provisions of the Commodity Exchange Act and the Securities Exchange Act of 1934, and for other purposes.

1.

Margin rules

(a)

Capital and margin requirements

Section 4s(e) of the Commodity Exchange Act (7 U.S.C. 6s(e)) is amended by adding at the end the following: (4)

Applicability with respect to counterparties

The margin requirements of this subsection shall not apply to swaps in which 1 of the counterparties is not— (A)a swap dealer or major swap participant; (B)an investment fund that— (i)has issued securities (other than debt securities) to more than 5 unaffiliated persons; (ii)would be an investment company (as defined in section 3 of the Investment Company Act of 1940 (15 U.S.C. 80a–3)) but for paragraph (1) or (7) of subsection (c) of that section; and (iii)is not primarily invested in physical assets (including commercial real estate) directly or through an interest in an affiliate that owns the physical assets; (C)a regulated entity, as defined in section 1303 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4502); or (D)a commodity pool. (5)

Margin transition rules

Swaps entered into before the date on which final rules are required to be promulgated under section 712(e) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (15 U.S.C. 8302(e)) shall be exempt from the margin requirements under this subsection. . (b)

Major swap participant

Section 1a(33)(A) of the Commodity Exchange Act (7 U.S.C. 1a(33)(A)) is amended by striking clause (ii) and inserting the following: (ii)whose outstanding swaps create substantial net counterparty exposure that could have serious adverse effects on the financial stability of the United States banking system or financial markets; or .

2.

Securities laws amendments

(a)

Margin requirements

Section 15F(e) of the Securities Exchange Act of 1934 (15 U.S.C. 780–10(e)), as added by section 764 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, is amended by adding at the end the following: (4)

Applicability with respect to counterparties

The margin requirements of this subsection shall not apply to security-based swaps in which 1 of the counterparties is not— (A)a security-based swap dealer or major security-based swap participant; (B)an investment fund that would be an investment company (as defined in section 3 of the Investment Company Act of 1940 (15 U.S.C. 80a–3)), but for paragraph (1) or (7) of section 3(c) of that Act (15 U.S.C. 80a–3(c)), that is not primarily invested in physical assets (including commercial real estate) directly or through interest in its affiliates that own such assets; (C)a regulated entity, as defined in section 1303 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4502); or (D)a commodity pool. (5)

Margin transition rules

Security-based swaps entered into before the date on which final rules are required to be published under section 712(a)(5) of the Wall Street Transparency and Accountability Act of 2010 (15 U.S.C. 8302(a)(5)) are exempt from the margin requirements of this subsection. . (b)

Definitions

Section 3(a)(67)(A)(ii)(II) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(67)(A)(ii)(II)), as amended to read as follows: (II)whose outstanding security-based swaps create substantial net counterparty exposure that could have serious adverse effects on the financial stability of the United States banking system or financial markets; .

3.

Effective date

The amendments made by this Act shall have the same effective date as provided in section 774 of the Wall Street Transparency and Accountability Act of 2010 (15 U.S.C. 77b note).