[Congressional Record Volume 155, Number 30 (Friday, February 13, 2009)]
[Senate]
[Pages S2336-S2340]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. LEVIN:
  S. 447. A bill to amend the Commodity Exchange Act to prevent 
excessive price speculation with respect to energy and agricultural 
commodities, and for other purposes; to the Committee on Agriculture, 
Nutrition, and Forestry.
  Mr. LEVIN. Mr. President, over the past couple of years energy prices 
have taken the American people on an unpredictable, expensive, and 
damaging roller coaster ride. In early 2007, a barrel of crude oil cost 
about $50. Over the course of the year, the price rose steeply, nearly 
doubling by the end of the year to almost $100 per barrel. Oil prices 
continued to soar through the first half of 2008, peaking at nearly 
$150 per barrel in July. Then, over the next few months, oil prices 
crashed back down to $35 per barrel, a drop of over $110 per barrel.
  These huge price swings can't be explained by simple changes in 
supply and demand. Even taking into account the recession now plaguing 
our country and the world economy, many market analysts believe that it 
was a stampede of speculators into the crude oil futures market that 
first drove prices far higher than justified by global supply and 
demand, and now an exodus of those same speculators has driven prices 
much lower than justified by supply and demand.
  Like crude oil, the natural gas, gasoline, and heating oil markets 
have also seen large price changes. The prices are way up, they're way 
down, they're unpredictable--making it impossible for many businesses 
and consumers to plan for and afford energy costs and related goods and 
services.
  Unpredictable energy prices continue to take a tremendous toll on 
millions of American consumers and businesses. Unless we act to protect 
our energy markets from excessive speculation and price manipulation, 
the American economy will continue to be vulnerable to wild price 
swings affecting the prices of transportation, food, manufacturing and 
everything in between, endangering the economic security of our people, 
our businesses, and our nation.
  Congress should act now to help tame rampant speculation and 
reinvigorate supply and demand as market forces.
  That is why I am re-introducing legislation today that is nearly 
identical to the legislation I and others introduced near the end of 
the last Congress that provides strong and workable measures to prevent 
excessive speculation and price manipulation in U.S. energy and 
agricultural markets. It will close the loopholes in our commodities 
laws that now impede the policing of U.S. energy trades on foreign 
exchanges and in the unregulated over-the-counter market. It will 
ensure that large commodity traders cannot use these markets to hide 
from CFTC oversight or avoid limits on speculation. It will strengthen 
disclosure, oversight, and enforcement in U.S. energy markets, 
restoring the financial oversight that is crucial to protect American 
consumers, American businesses, and the U.S. economy from further 
energy shocks.
  This legislation, which addresses commodity markets, is one important 
piece of the broader reform effort needed to repair our financial 
regulatory system, stop abusive practices, and put the cop back on the 
beat in all of our markets.
  Specifically, this particular legislation would make four sets of 
changes.
  First, it would require the CFTC to set limits on the holdings of 
traders in all of the energy futures contracts traded on regulated 
exchanges to prevent traders from engaging in excessive speculation or 
price manipulation. Since we closed the Enron loophole last year all 
futures contracts must be traded in regulated markets.
  Second, it would close the ``London loophole'' by giving the CFTC the 
same authority to police traders in the United States who trade U.S. 
futures contracts on a foreign exchange and by requiring foreign 
exchanges that want to install trading terminals in the United States 
to impose comparable limits on speculative trading as the CFTC imposes 
on domestic exchanges to prevent excessive speculation and price 
manipulation.
  Third, it would close the ``swaps loophole'' by requiring traders in 
the over-the-counter energy markets to report large trades to the CFTC, 
and it would authorize the CFTC to set limits on trading in the 
presently unregulated over-the-counter markets to prevent excessive 
speculation and price manipulation.
  Finally, it would require the CFTC to revise the standards that allow 
traders who use futures markets to hedge their holdings to exceed the 
speculation limits that apply to everyone else.
  My Permanent Subcommittee on Investigations has shown that one key 
factor in price spikes of energy is increased speculation in the energy 
markets. Traders are now trading millions of contracts for future 
delivery of oil, creating a demand for paper contracts that gets 
translated into increases in prices and increasing price volatility.
  Much of this increase in trading of futures has been due to 
speculators who are not in the oil business but who are buying and 
selling oil futures contracts in the hope of making a profit from 
changing prices. According to the CFTC's data, the number of futures 
and options contracts held by speculators grew from around 100,000 
contracts in 2001, which was 20 percent of the total number of 
outstanding contracts, to almost 1.2 million contracts last fall, 
representing almost 40 percent of the outstanding futures and options 
contracts in oil on NYMEX. Even these statistics understate the 
increase in speculation, since the CFTC data classifies futures trading 
involving index funds as commercial trading rather than speculation, 
and the CFTC classifies all traders in commercial firms as commercial 
traders, regardless of whether any particular trader in that firm may, 
in fact, be speculating.
  Basic economic theory tells us that the greater the demand there is 
to buy futures contracts for the delivery of a commodity, the higher 
the price will be for those futures contracts.
  Not surprisingly, therefore, massive speculation that the price of 
oil will increase, together with massive purchases of futures contracts 
in pursuit of that belief, have, in fact, helped increase the price of 
oil to a level far above the price justified by the traditional forces 
of supply and demand.
  In June 2006, I released a Subcommittee report, The Role of Market 
Speculation in Rising Oil and Gas Prices: A Need to Put a Cop on the 
Beat. This report found that the traditional forces of supply and 
demand didn't account for sustained price increases and price 
volatility in the oil and gasoline markets. The report concluded that, 
in 2006, a growing number of trades of contracts for future delivery of 
oil occurred without regulatory oversight and that market speculation 
had contributed to rising oil and gasoline prices, perhaps accounting 
for $20 out of a then-priced $70 barrel of oil.
  Oil industry executives and experts arrived at similar conclusions. 
As oil prices neared $100 in late 2007, the President and CEO of 
Marathon Oil said, ``$100 oil isn't justified by the physical demand in 
the market. It has to be speculation on the futures market that is 
fueling this.'' At about the same time, Mr. Fadel Gheit, oil analyst 
for Oppenheimer and Company described the oil market as ``a farce.'' 
``The speculators have seized control and it's basically a free-for-
all, a global gambling hall, and it won't shut down unless and until 
responsible governments step in.'' In January of 2008, when oil first 
hit $100 per barrel, Mr. Tim Evans, oil analyst for Citigroup, wrote: 
``[T]he larger supply and demand fundamentals do not support a further 
rise and are, in fact, more consistent with lower price levels.'' At a 
joint hearing on the effects of speculation my Subcommittee held in 
late 2007, Dr. Edward Krapels, a financial market analyst, testified: 
``Of course financial trading, speculation affects the price of oil 
because it affects the price of everything we trade. . . . It would be 
amazing if oil somehow escaped this effect.'' Dr. Krapels added that as 
a result of this speculation ``there is a bubble in oil prices.''


[[Page S2337]]



  Last summer, the Presidents and CEOs of major U.S. airlines described 
the disastrous effects of rampant speculation on the airline industry. 
The CEOs stated: ``normal market forces are being dangerously amplified 
by poorly regulated market speculation.'' The CEOs wrote: ``For 
airlines, ultra-expensive fuel means thousands of lost jobs and severe 
reductions in air service to both large and small communities.''
  To rein in this rampant speculation, the first step to take is to put 
a cop back on the beat in all our energy markets to prevent excessive 
speculation, price manipulation, and trading abuses.
  With respect to the commodity futures markets, the legislation we are 
introducing today requires the CFTC to establish limits on the amount 
of futures contracts any trader can hold. Currently, the CFTC allows 
the futures exchanges themselves to set these limits. This bill would 
require the CFTC to set those limits to prevent excessive speculation 
and price manipulation. It would preserve, however, the exchanges' 
obligation and ability to police their traders to ensure they remain 
below these limits.
  This legislation would also require the CFTC to conduct a rulemaking 
to review and revise the criteria for allowing traders who are using 
the futures market to hedge their risks in a commodity to acquire 
holdings in excess of the limits on holdings for speculators.
  Another step is to give the CFTC authority to prevent excessive 
speculation in the over-the-counter markets. In 2007, my Subcommittee 
issued a report on the effects of speculation in the energy markets 
entitled, Excessive Speculation in the Natural Gas Market. This 
investigation showed that speculation by a single hedge fund named 
Amaranth distorted natural gas prices during the summer of 2006 and 
drove up prices for average consumers. The report demonstrated how 
Amaranth had shifted its speculative activity to unregulated markets, 
under the ``Enron loophole,'' to avoid the restrictions and oversight 
in the regulated markets, and how Amaranth's trading in the unregulated 
markets contributed to price increases.
  Following this investigation, I introduced a bill, S. 2058, to close 
the Enron loophole and regulate the un-regulated electronic energy 
markets. Working with Senators Feinstein and Snowe, and with the 
members of the Agriculture Committee in a bipartisan effort, we 
included an amendment to close the Enron loophole in the farm bill, 
which Congress passed last year.
  The legislation to close the Enron loophole placed over-the-counter, 
OTC, electronic exchanges under CFTC regulation. However, this 
legislation did not address the separate issue of trading in the rest 
of the OTC market, which includes bilateral trades through voice 
brokers, swap dealers, and direct party-to-party negotiations. In order 
to ensure there is a cop on the beat in all of the energy commodity 
markets, we need to address the rest of the OTC market as well.
  A large portion of this OTC market consists of the trading of swaps 
relating to the price of a commodity. Generally, commodity swaps are 
contracts between two parties where one party pays a fixed price to 
another party in return for some type of payment at a future time 
depending on the price of a commodity. Because some of these swap 
instruments look very much like futures contracts--except that they do 
not call for the actual delivery of the commodity--there is concern 
that the price of these swaps that are traded in the unregulated OTC 
market could affect the price of the very similar futures contracts 
traded on the regulated futures markets. We don't yet know for sure 
that this is the case, or that it is not, because we don't have any 
access to comprehensive data or reporting on the trading of these swaps 
in the OTC market.
  The legislation introduced today includes provisions to give the CFTC 
oversight authority to stop excessive speculation in the over-the-
counter market. These provisions represent a practical, workable 
approach that will enable the CFTC to obtain key information about the 
OTC market to enable it to prevent excessive speculation and price 
manipulation.
  Under these provisions, the CFTC will have the authority to ensure 
that traders cannot avoid the CFTC reporting requirements by trading 
swaps in the unregulated OTC market instead of regulated exchanges. It 
will enable the CFTC to act, such as by requiring reductions in 
holdings of futures contracts or swaps, against traders with large 
positions in order to prevent excessive speculation or price 
manipulation regardless of whether the trader's position is on an 
exchange or in the OTC market.
  This bill also gives the CFTC the authority to establish position 
limits in the over-the-counter market for energy and agricultural 
commodities in order to prevent excessive speculation and price 
manipulation. The CFTC needs this authority to ensure that large 
traders are not using the over-the-counter markets to evade the 
position limits in the futures markets.
  The ``London loophole'' allowed crude oil traders in the U.S. to 
avoid the position limits that apply to trading on U.S. futures 
exchanges by directing their trades onto the ICE Futures Exchange in 
London.
  In the last Congress, after I and others introduced legislation to 
close the London loophole that is similar to the legislation we are now 
introducing, the CFTC imposed more stringent requirements upon the ICE 
Futures Exchange's operations in the United States--for the first time 
requiring the London exchange to impose and enforce comparable position 
limits in order to be allowed to keep its trading terminals in the 
United States. This is the very action our legislation called for. 
However, the current CFTC position limits apply only to the nearest 
futures contract. Our legislation will ensure that foreign exchanges 
with trading terminals in the U.S. will apply position limits to other 
futures contracts once the CFTC establishes those limits for U.S. 
exchanges.
  Although the CFTC has taken these important steps that will go a long 
way towards closing the London loophole, Congress should still pass 
this legislation to make sure the London loophole stays closed. The 
legislation would put the conditions the CFTC has imposed upon the 
London exchange into statute, and ensure that the CFTC has clear 
authority to take action against any U.S. trader who is manipulating 
the price of a commodity or excessively speculating through the London 
exchange, including requiring that trader to reduce positions.
  The legislation also provides authorization for the CFTC to hire an 
additional 100 employees to oversee the commodity markets it regulates. 
The CFTC has been understaffed and underfunded for years. This 
authorization is a necessary first step to reinvigorate the agency's 
oversight and enforcement capabilities.
  In summary, the legislation I am introducing today will give the CFTC 
ability to police all of our energy commodity markets to prevent 
excessive speculation and price manipulation. This legislation is 
necessary to close the loopholes in current law that permit speculators 
in commodity markets to avoid trading limits designed to prevent the 
type of excessive speculation that has been contributing to high energy 
and other commodity prices. I hope my colleagues will support this 
legislation.
  Mr. President, I ask unanimous consent that the text of the bill and 
support material be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                 S. 447

       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.

[[Page S2338]]

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;
       ``(B) to the maximum extent practicable, in its 
     discretion--

[[Page S2339]]

       ``(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--

[[Page S2340]]

       ``(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.''.
                                  ____


                Levin Prevent Excessive Speculation Act

                              Bill Summary

       The Prevent Excessive Speculation Act would:
       Authorize Speculation Limits for all Energy and 
     Agricultural Commodities. Direct CFTC to impose position 
     limits on energy and agricultural futures contracts to 
     prevent excessive speculation and manipulation and to ensure 
     sufficient market liquidity.
       Authorize CFTC to permit exchanges to impose and enforce 
     accountability levels that are lower than CFTC-established 
     speculation limits.
       Close London Loophole by Regulating Offshore Traders and 
     Increasing Transparency of Offshore Trades. Prohibit a 
     foreign exchange from operating in the United States unless 
     it imposes comparable speculation limits and reporting 
     requirements as apply to U.S. exchanges.
       Provide CFTC with same enforcement authority over U.S. 
     traders on foreign exchanges as it has over traders on U.S. 
     exchanges, including authority to require traders to reduce 
     their holdings to prevent excessive speculation or 
     manipulation.
       Require CFTC to invite non-U.S. regulators to form an 
     international working group to develop uniform regulatory and 
     reporting requirements to protect futures markets from 
     excessive speculation and manipulation.
       Close the Swaps Loophole and Regulate Over-the-Counter 
     Transactions. Authorize CFTC to impose speculation limits on 
     OTC transactions to protect the integrity of prices in the 
     futures markets and cash markets.
       Require large OTC trades that affect futures prices to be 
     reported to CFTC. Allow one party to a transaction to 
     authorize the other party to file the report. Require CFTC 
     periodic review of reporting requirements to ensure key 
     trades are covered.
       Direct CFTC to revise bona fide hedge exemption to ensure 
     regulation of all speculators, and strengthen data analysis 
     and transparency of swap dealer and index trading.
       Clarify definition of OTC transactions to exclude spot 
     market transactions.
       Protect Both Energy and Agriculture Commodities. Cover 
     trades in crude oil, natural gas, gasoline, heating oil, 
     coal, propane, electricity, other petroleum products and 
     sources of energy from fossil fuels, as well as ethanol, 
     biofuels, emission allowances for greenhouse gases, 
     SO2, NOx, and other air emissions.
       Cover trades in agricultural commodities listed in the 
     Commodity Exchange Act.
       Strengthen CFTC Oversight. Authorize CFTC to hire 100 new 
     personnel to oversee markets.
       Direct CFTC to issue proposed rules within 90 days and 
     final rules within 180 days.
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