[Congressional Record Volume 155, Number 99 (Monday, July 6, 2009)]
[Senate]
[Pages S7143-S7149]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mrs. FEINSTEIN (for herself and Ms. Snowe):
  S. 1399. A bill to amend the Commodity Exchange Act to establish a 
market for the trading of greenhouse gases, and for other purposes; to 
the Committee on Agriculture, Nutrition, and Forestry.
  Mrs. FEINSTEIN. Mr. President, I rise today to introduce The Carbon 
Market Oversight Act, which is cosponsored by Senator Snowe.
  I believe this bill is necessary to ensure that future markets 
created by proposed climate change legislation are transparent and free 
from manipulation.
  Our legislation would establish a comprehensive framework to regulate 
both primary and derivative carbon markets at the Commodity Futures 
Trading Commission, CFTC.
  Trading would be transparent and electronically monitored.
  Manipulation, fraud, and excessive speculation would be prohibited, 
and violations would be severely punished.
  All carbon permits and standardized carbon derivatives would have to 
be traded through facilities that monitor trading, establish fair 
trading rules, and follow established regulatory principles.
  All standardized contracts would have to be cleared through a 
centralized counterparty clearinghouse, to reduce systemic risk.
  CFTC would maintain a centralized position accounting system to 
monitor all large traders across multiple markets.
  Traders, dealers, and brokers would have to be educated, would have 
to pass an exam to demonstrate competence, and would need to maintain 
certification.
  Bottom line: the legislation would use lessons learned in other 
markets to establish the most comprehensive and efficient market 
oversight structure in the U.S.
  This legislation is necessary because cap and trade legislation would 
create, in an unprecedented manner, an extremely large new financial 
market.
  Without regulation, this market would likely emerge quickly into one 
of the largest over-the-counter derivatives markets in the world.
  Resources for the Future Economist Dallas Burtraw recently testified 
in Congress that putting a price on carbon dioxide emissions through 
``a cap and trade program would constitute the greatest creation of 
government-enforced property rights since the 19th century.''
  Depending on the stringency of the cap, the breadth of the program, 
and the cost containment measures employed, the annual value of the 
pollution permits alone is estimated to range from $100 billion to $370 
billion. Secondary markets for futures, options, and over-the-counter 
derivatives are expected to be considerably larger than that market.
  If we fail to establish a framework for oversight, the greenhouse gas 
market could turn into a wild west.
  The market would invite the worst kind of manipulation, fraud, and 
abuse.
  The resulting volatility would affect consumer energy costs and harm 
the environmental goals of the system.
  My concerns regarding the emergence of new over-the-counter 
derivatives markets are based on real experience, not hypothetical 
situations.
  In 2000 and 2001, newly created California energy markets lacked the 
basic protections proposed in this legislation.
  Specifically, there was no federal oversight to assure transparency, 
no limits on speculation, no prohibition on manipulation, no 
requirements to prevent systemic risk, no monitoring of trading to 
address price spikes and irregularities, and no professional 
requirements to ensure that energy traders and dealers knew the law and 
followed a professional code of conduct.
  In short, the electricity and related natural gas markets emerged 
before the law caught up, and much of the manipulation that resulted, 
shock-
ingly, was legal.
  The market that looked more like the wild west than an efficient 
price discovery tool.
  Enron, for instance, ran a market where only it knew the prices. It 
was able to manipulate natural gas and electricity prices beyond the 
view of any third party, and it swindled the people of California to 
the tune of billions of dollars.
  Not until enactment of the Energy Policy Act of 2005, years after the 
crisis, were we able to amend the Natural Gas Act and the Federal Power 
Act to clarify that this manipulation was unlawful.
  Not until the Farm Bill in 2008 were we able to close the infamous 
``Enron Loophole'' that had allowed Enron to operate an unregulated 
electronic energy trading exchange in which prices were not public, 
speculation was unlimited, and there was no audit trail.
  More recently, our government failed to establish a regulatory 
framework for over-the-counter, OTC, credit default swap and energy 
derivative markets.
  First, energy swaps markets wreaked havoc on oil and other energy 
commodity prices during the speculative energy bubble of 2008.
  Then, credit default swaps emerged from the shadows to bring our 
entire financial system to the brink of collapse.
  According to the Treasury Department's recent report titled Financial 
Regulatory Reform: A New Foundation, a ``lax regulatory regime for OTC 
derivatives'' can be blamed for creating a situation in which 
``regulators were unable to identify or mitigate the enormous systemic 
threat that had developed.''
  The Obama administration has called for Congress to rectify this 
failure by giving regulators tools to provide transparency, limit 
excessive speculation, require margins, and require clearing and other 
systemic risk mitigation measures.
  First in California, then in energy derivatives markets, and finally 
in financial swaps markets, we have learned the same three lessons.
  First, unregulated and non-transparent markets do not perform the 
price discovery function effectively. They are more volatile than 
supply and demand can explain.
  Second, transparency leads to informed buyers and sellers, improving 
market functionality and price discovery. Economics stands on a basic 
tenet: perfect markets require perfect information. The more 
transparent the market, the more likely it is functioning efficiently.
  Third, totally unregulated markets are prone to increased risk taking 
and manipulative schemes that can bring about market failure, posing a 
risk to our financial system.
  In each of the cases I have described, we in government have learned 
these lessons the hard way.
  A systemic or near-systemic collapse in each market reminded us that 
regulation plays an essential role in market functionality.
  Scientists tell us that we need to reduce greenhouse gas emissions by 
approximately 80 percent by 2050, and

[[Page S7144]]

economists believe that a cap and trade system with a greenhouse gas 
emissions allowance market would be the most cost-efficient way to 
guarantee specified levels of emissions reductions.
  The economists also tell us that markets are most efficient when: 
buyers and sellers have complete information, no market participant can 
cheat another, and prices result from supply and demand, not 
manipulation.
  That is why we need to prevent manipulation, fraud, and a lack of 
transparency.
  Senator Snowe and I introduce this legislation today so that we will 
not have to learn the lessons taught by recent unregulated over-the-
counter derivatives markets one more time.
  We propose to establish mature and effective regulation for this 
market before it booms, busts, and threatens our economic wellbeing.
  Our legislation would establish a transparent carbon market governed 
by proven regulatory principles and practices to maintain stable prices 
that reflect supply and demand, including: transparency. We know that 
transparency can be provided by requiring reporting, record keeping, 
and publication of trading information.
  Position Limits. We know that speculation can be limited by imposing 
comprehensive, aggregate position limits across multiple markets.
  Monitoring. We know that fraud and manipulation can be prevented and 
identified by active, electronic monitoring of trading.
  Clearing. We know that systemic risk can be mitigated by requiring 
margins and central counterparty clearing through a CFTC regulated 
clearing house.
  Professional Standards. We know that trader and dealer abusive 
behavior can be controlled and punished if traders and dealers are 
governed by a code of conduct.
  Bottom line: this legislation is vital to protecting the market 
integrity of greenhouse gas emissions markets, and it should be 
included as part of any cap and trade legislation approved by Congress.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 1399

       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 ``Carbon Market Oversight Act 
     of 2009''.

     SEC. 2. REGULATION OF CARBON MARKETS.

       (a) In General.--The Commodity Exchange Act (7 U.S.C. 1 et 
     seq.) is amended by adding at the end the following:

                ``TITLE II--REGULATION OF CARBON MARKETS

     ``SEC. 201. PURPOSES.

       ``The purposes of this title are--
       ``(1) to ensure that the greenhouse gas market established 
     by this title--
       ``(A) is formed in a manner consistent with the public 
     interest and
       ``(B) is formed in a manner consistent with the goal of 
     reducing greenhouse gas emissions in the United States;
       ``(C) is designed to prevent fraud and manipulation, which 
     could potentially arise from many sources, including--
       ``(i) the concentration of market power within the control 
     of a limited number of individuals or entities;
       ``(ii) the abuse of material, nonpublic information; and
       ``(iii) the unique nature of the allowance markets in which 
     supply is known and declining over time, but demand is 
     unknown, which can create an inherent potential for scarcity;
       ``(D)(i) is appropriately transparent, with real-time 
     reporting of quotes and trades;
       ``(ii) makes information on price, volume, and supply, and 
     other important statistical information, available to the 
     public on fair, reasonable, and nondiscriminatory terms;
       ``(iii) is subject to appropriate recordkeeping and 
     reporting requirements regarding transactions; and
       ``(iv) has the confidence of investors;
       ``(E) functions smoothly and efficiently, generating prices 
     that accurately reflect supply and demand for emission 
     allowances;
       ``(F) promotes just and equitable principles of trade; and
       ``(G) establishes an equitable system for the best 
     execution of customer orders;
       ``(2) to minimize transaction costs for regulated entities 
     so that the cost of abatement is reduced for those entities 
     and customers of those entities;
       ``(3) to establish a cost-effective capability for real-
     time monitoring of the market in order to avoid manipulation 
     and market failure;
       ``(4) to minimize the volatility induced by the structure 
     of the marketplace itself in the interest of providing an 
     accurate price signal for regulated entities; and
       ``(5) to ensure that the markets will function in a stable 
     and efficient manner to promote the environmental and 
     economic objectives of the United States.

     ``SEC. 202. DEFINITIONS.

       ``In this title:
       ``(1) Carbon clearing organization.--The term `Carbon 
     Clearing Organization' means the entity established under 
     section 206(a).
       ``(2) Carbon dioxide equivalent.--The term `carbon dioxide 
     equivalent' means for each greenhouse gas, the quantity of 
     the greenhouse gas that the Administrator of the 
     Environmental Protection Agency determines makes the same 
     contribution to global warming as 1 metric ton of carbon 
     dioxide.
       ``(3) Dealer.--The term `dealer' means an individual, 
     association, partnership, corporation, or trust that--
       ``(A) is engaged in soliciting or in accepting orders for 
     the purchase or sale of a regulated instrument on or subject 
     to the rules of a registered carbon trading facility; and
       ``(B) in or in connection with the solicitation or 
     acceptance of such an order, accepts money, securities, or 
     property (or extends credit in lieu of such an acceptance) to 
     margin, guarantee, or secure any trade or contract that 
     results or may result from such an acceptance.
       ``(4) Director.--The term `Director' means the Director of 
     the Office.
       ``(5) Electronic market trader.--The term `electronic 
     market trader' means a person who executes a trade on an 
     electronic trading facility.
       ``(6) Electronic trading facility.--The term `electronic 
     trading facility' means a trading facility that--
       ``(A) operates by means of an electronic or 
     telecommunications network; and
       ``(B) maintains an automated audit trail of bids, offers, 
     and the matching of orders or the execution of transactions 
     on the facility.
       ``(7) Emission allowance.--The term `emission allowance' 
     means a Government-issued or Government-accredited 
     authorization to emit 1 carbon dioxide equivalent of 
     greenhouse gas.
       ``(8) Greenhouse gas.--The term `greenhouse gas' means any 
     of--
       ``(A) carbon dioxide;
       ``(B) methane;
       ``(C) nitrous oxide;
       ``(D) sulfur hexafluoride;
       ``(E) a perfluorocarbon; or
       ``(F) a hydrofluorocarbon.
       ``(9) Introducing broker.--
       ``(A) In general.--The term `introducing broker' means any 
     person engaged in soliciting or in accepting orders for the 
     purchase or sale of a regulated instrument on or subject to 
     the rules of a registered carbon trading facility, who does 
     not accept money, securities, or property (or extend credit 
     in lieu of such an acceptance) to margin, guarantee, or 
     secure any trade or contract that results or may result from 
     such a solicitation or acceptance.
       ``(B) Exclusion.--The term `introducing broker' does not 
     include an individual who elects to be and is registered as 
     an associated person of a dealer.
       ``(10) Member.--The term `member' means, with respect to a 
     trading facility, an individual, association, partnership, 
     corporation, or trust owning or holding membership in, 
     admitted to membership representation on, or having trading 
     privileges on the trading facility.
       ``(11) Office.--The term `Office' means the Office of 
     Carbon Market Oversight established by section 203(a)(1).
       ``(12) Private bilateral contract.--The term `private 
     bilateral contract' means a nonstandard contract that lacks 
     each of the following characteristics:
       ``(A) The applicable transaction or class of transactions 
     settles against any price (including the daily or final 
     settlement price) of 1 or more contracts listed for trading 
     on a registered trading facility.
       ``(B) The price of the applicable transaction or class of 
     transactions is reported to a third party, published, or 
     otherwise disseminated.
       ``(C) The price of the applicable transaction or class of 
     transactions is referenced in another transaction.
       ``(D) There is a significant volume of the applicable 
     transaction or class of transactions.
       ``(E) The value of the applicable transaction is 
     significant in comparison to the value of the underlying 
     carbon derivative market.
       ``(F) The contract or applicable transactions meets other 
     criteria that the Commission determines to be appropriate.
       ``(13) Registered carbon trader.--The term `registered 
     carbon trader' means a member, in good standing, of a 
     registered carbon trading facility who has registered with 
     the Commission under section 205(b).
       ``(14) Registered carbon trading facility.--The term 
     `registered carbon trading facility' means a facility that 
     meets standards established by the Commission under section 
     203(d)(1).
       ``(15) Regulated allowance.--The term `regulated allowance' 
     means--
       ``(A) an emission allowance; or
       ``(B) a Government-issued unit of reduction in the quantity 
     of emissions, or an increase in sequestration, equal to 1 
     carbon dioxide equivalent.

[[Page S7145]]

       ``(16) Regulated allowance derivative.--The term `regulated 
     allowance derivative' means an instrument that is or 
     includes--
       ``(A) any instrument, contract, or other obligation (or 
     guaranty or indemnity of such an obligation), the value of 
     which, in whole or in part, is linked to the price of a 
     regulated allowance or another regulated allowance 
     derivative;
       ``(B) any contract for future delivery (including an 
     option, a swap agreement, or a futures contract) of--
       ``(i) a regulated allowance; or
       ``(ii) any obligation described in subparagraph (A); or
       ``(C) any other contract--
       ``(i) the value of which is derived from the existence of a 
     market for regulated allowances; and
       ``(ii) that the Commission has not determined to be a 
     private bilateral contract.
       ``(17) Regulated instrument.--The term `regulated 
     instrument' means--
       ``(A) a regulated allowance; or
       ``(B) a regulated allowance derivative.
       ``(18) Short sale.--The term `short sale' means--
       ``(A) any sale of a regulated allowance that the seller 
     does not own; and
       ``(B) any sale that is consummated by the delivery of a 
     regulated allowance borrowed by, or for the account of, the 
     seller.
       ``(19) Trading facility.--
       ``(A) In general.--The term `trading facility' means 1 or 
     more individuals or entities that constitute, maintain, or 
     provide a physical or electronic facility or system in which 
     multiple participants have the ability to execute or trade 
     agreements, contracts, or transactions involving a regulated 
     instrument by accepting bids and offers made by other 
     participants that are open to multiple participants in the 
     facility or system.
       ``(B) Inclusion.--The term `trading facility' includes a 
     telephone voice brokerage that executes multiple, largely 
     offsetting, bilateral transactions.
       ``(20) United states.--The term `United States' includes 
     the territories and possessions of the United States.

     ``SEC. 203. OFFICE OF CARBON MARKET OVERSIGHT; JURISDICTION.

       ``(a) Establishment of Office of Carbon Market Oversight.--
       ``(1) In general.--There is established within the 
     Commission an Office of Carbon Market Oversight.
       ``(2) Director.--
       ``(A) In general.--The Office shall be headed by a Director 
     for Carbon Market Oversight.
       ``(B) Additional nature of position.--The position of 
     Director for Carbon Market Oversight shall be in addition to 
     the directors of other offices of the Commission.
       ``(C) Appointment; qualifications.--The Director shall be--
       ``(i) appointed by the Commission; and
       ``(ii) an individual who is, by reason of background and 
     experience in the regulation of commodities, securities, or 
     other financial markets, especially qualified to direct a 
     program of oversight of the market in regulated instruments.
       ``(b) Administration of This Title.--The Commission, acting 
     through the Director, shall administer this title.
       ``(c) Duty of Commission.--The Commission shall regulate 
     all contracts of sale involving regulated instruments under 
     the jurisdiction of the Commission.
       ``(d) Regulations.--The Commission shall, not later than 1 
     year after the date of enactment of this title, promulgate 
     regulations governing the implementation of this title, and 
     periodically thereafter, revise the regulations as necessary, 
     including regulations that relate to--
       ``(1) specific initial and ongoing standards for 
     qualification as a registered carbon trading facility;
       ``(2) position limits for individual market participants, 
     adjusted as necessary based on market conditions;
       ``(3) margin requirements for the instruments traded by 
     registered carbon trading facilities;
       ``(4) suitability standards for the solicitation by members 
     of carbon instruments to retail investors;
       ``(5) a best execution standard for regulated allowance 
     trading, such as the standard used in the national securities 
     markets;
       ``(6) approval of--
       ``(A) specific protocols of the central limit order books 
     of carbon trading facilities; and
       ``(B) the connection of those facilities to--
       ``(i) Carbon Clearing Organizations established under 
     section 206; and
       ``(ii) the automated quotation system established under 
     section 207;
       ``(7) the establishment of baseline initial and ongoing 
     membership standards for registered carbon trading 
     facilities;
       ``(8) subject to section 204(a)(4), specific standards for 
     short sale transactions involving regulated instruments;
       ``(9) such other matters as are necessary for the carbon 
     market to operate with the highest standards of fairness and 
     efficiency; and
       ``(10) the establishment and operation of a carbon clearing 
     organization.
       ``(e) Memorandum of Understanding.--
       ``(1) In general.--Not later than 180 days after the date 
     of enactment of this title, the Commission shall enter into a 
     memorandum of understanding with the Federal Energy 
     Regulatory Commission, the Environmental Protection Agency, 
     and any State or regional organization operating a market-
     based greenhouse gas emissions control program relating to 
     information-sharing and coordination of oversight roles 
     regarding--
       ``(A) trading facilities;
       ``(B) registered carbon traders;
       ``(C) carbon clearing organizations; and
       ``(D) derivative clearing organizations.
       ``(2) Inclusions.--The memorandum of understanding shall 
     include, at a minimum, provisions--
       ``(A) ensuring that information requests to markets within 
     the respective jurisdictions of each agency are properly 
     coordinated to minimize duplicative information requests; and
       ``(B) regarding the treatment of proprietary trading 
     information.
       ``(f) Coordination for Foreign Regulators.--Not later than 
     180 days after the date of enactment of this title, the 
     Commission shall, to the maximum extent practicable, enter 
     into agreements with foreign regulatory bodies to ensure that 
     foreign boards of trade do not offer for sale allowance 
     derivatives beyond the jurisdiction of the Commission that 
     would undermine the authority of the carbon market regulators 
     in the United States or reduce the effectiveness of 
     Commission oversight.
       ``(g) Regulations.--The regulations issued to carry out 
     this section shall take into account impacts on liquidity, 
     flexibility, and robust participation in carbon markets, in 
     order to maximize cost-effective and efficient reductions in 
     carbon emissions.

     ``SEC. 204. REGULATION OF CARBON TRADING.

       ``(a) Limitation of Certain Activities to Registered 
     Entities.--
       ``(1) Carbon allowance trading facility activities.--It 
     shall be unlawful for a person to offer to enter into, 
     execute, confirm the execution of, or conduct an office or a 
     business for the purpose of soliciting, accepting an order 
     for, or otherwise dealing in, an agreement, contract, or 
     transaction involving a contract for the purchase or sale of 
     a regulated allowance, unless--
       ``(A) the transaction is conducted through the carbon 
     allowance trading facility established under section 205(a);
       ``(B) the contract for the purchase or sale is evidenced by 
     a record in writing (or other form acceptable to the 
     Commission) that includes--
       ``(i) the date;
       ``(ii) the names of the parties to the contract (including 
     the addresses of those parties);
       ``(iii) a description of the property covered by the 
     contract (including the price of the property);
       ``(iv) the terms of delivery; and
       ``(v) all other nonstandardized terms and conditions; and
       ``(C) the contract is cleared through the Carbon Clearing 
     Organization.
       ``(2) Carbon derivative trading facility activities.--It 
     shall be unlawful for a person to offer to enter into, 
     execute, confirm the execution of, or conduct an office or a 
     business for the purpose of soliciting, accepting an order 
     for, or otherwise dealing in, an agreement, contract, or 
     transaction involving a contract for the purchase or sale of 
     a regulated allowance derivative, unless--
       ``(A) the Commission has determined that the contract is a 
     private bilateral contract that has been reported to the 
     Commission and included as part of the total market risk 
     exposure of a participant; or
       ``(B)(i) the transaction is conducted through a trading 
     facility designated as a registered carbon derivative trading 
     facility under section 205(a);
       ``(ii) the contract for the purchase or sale is evidenced 
     by a record in writing (or other form acceptable to the 
     Commission) that includes--
       ``(I) the date;
       ``(II) the names of the parties to the contract (including 
     the addresses of those parties);
       ``(III) a description of the property covered by the 
     contract (including the price of the property);
       ``(IV) the terms of delivery; and
       ``(V) all other nonstandardized terms and conditions; and
       ``(iii) the contract is cleared through a derivatives 
     clearing organization registered with the Commission pursuant 
     to section 5b.
       ``(3) Broker or dealer activities.--It shall be unlawful 
     for a person to act in the capacity of an introducing broker, 
     dealer, floor broker, electronic market trader, or floor 
     trader in connection with the purchase or sale of a regulated 
     instrument, unless--
       ``(A) the person is a registered carbon trader; and
       ``(B) the registration of the person is not suspended, 
     revoked, or expired.
       ``(4) Short sale transactions.--A short sale transaction 
     involving a regulated instrument that occurs without the 
     borrowing of a regulated allowance shall be unlawful unless 
     the Commission determines that the transaction is in the best 
     interest of regulated entities and the public.
       ``(b) Prohibition on Price or Market Manipulation, Fraud, 
     and False or Misleading Statements or Reports.--It shall be 
     unlawful for a person, directly or indirectly--
       ``(1) to use or employ, or attempt to use or employ, in 
     connection with a transaction involving the purchase or sale 
     of a regulated instrument or private bilateral contract, in 
     violation of such rules and regulations as the Commission may 
     promulgate to protect the public interest or consumers, 
     including--

[[Page S7146]]

       ``(A) any manipulative or deceptive device or contrivance 
     (within the meaning of section 10(b) of the Securities 
     Exchange Act of 1934 (15 U.S.C. 78j(b)));
       ``(B) any corner; or
       ``(C) any device or contrivance that cheats or defrauds any 
     other person;
       ``(2) for the purpose of creating a false or misleading 
     appearance of active trading in a regulated instrument or 
     private bilateral contract, or a false or misleading 
     appearance with respect to the market for such an 
     instrument--
       ``(A) to effect any transaction in the instrument that 
     involves no change in the beneficial ownership of the 
     instrument;
       ``(B) to enter an order for the purchase of the instrument, 
     with the knowledge that 1 or more orders of substantially the 
     same size, at substantially the same time, and at 
     substantially the same price, for the sale of any such 
     instrument, has been or will be entered by or for the same or 
     different parties; or
       ``(C) to enter an order for the sale of the instrument with 
     the knowledge that 1 or more orders of substantially the same 
     size, at substantially the same time, and at substantially 
     the same price, for the purchase of the instrument, has been 
     or will be entered by or for the same or different parties;
       ``(3) to deliver or cause to be delivered a knowingly 
     false, misleading, or inaccurate report concerning 
     information or conditions that affect or tend to affect the 
     price of a regulated instrument;
       ``(4)(A) to make, or cause to be made, in an application, 
     report, or document required to be filed under this title or 
     any regulation promulgated under this title, a statement that 
     is false or misleading with respect to a material fact; or
       ``(B) to omit any material fact that is required to be 
     stated in such an application, report, or document, or that 
     is necessary to make the statements in such an application, 
     report, or document not misleading; or
       ``(5) to falsify, conceal, or cover up by any trick, 
     scheme, or artifice a material fact, make any false, 
     fictitious, or fraudulent statements or representations, or 
     make or use any false writing or document that contains a 
     false, fictitious, or fraudulent statement or entry, to an 
     entity registered under this title acting in furtherance of 
     the official duties of the entity under this title.
       ``(c) Prevention of Excessive Speculation.--
       ``(1) In general.--To prevent, decrease, or eliminate 
     burdens associated with excessive speculation relating to 
     regulated instruments (which may be more severe in markets in 
     which supply is known and declining and demand is unknown), 
     the Commission shall promulgate regulations establishing such 
     position or transaction limitations, in the aggregate, as the 
     Commission determines to be necessary to prevent potential 
     upward bias in price with respect to any regulated 
     instrument.
       ``(2) Aggregate positions.--In carrying out paragraph (1), 
     the Commission shall, to the maximum extent practicable, 
     aggregate carbon dioxide equivalent positions in natural gas, 
     electricity, and regulated instruments.
       ``(3) Inapplicability to bona fide hedging transactions and 
     positions.--The limitations and requirements established 
     under paragraph (1) shall not apply to a position or 
     transaction that is a bona fide hedging position or 
     transaction, as defined by the Commission in accordance with 
     the purposes of this title.
       ``(d) Recordkeeping; Reporting; Access to Books and 
     Records.--
       ``(1) Members of registered entities.--Each member of an 
     entity registered under this title shall--
       ``(A) keep books and records, and make such reports as are 
     required by the Commission, regarding the transactions and 
     positions of the member, and the transactions and positions 
     of the customer involved, in regulated instruments and 
     private bilateral contracts, in such form and manner, and for 
     such period, as may be required by the Commission; and
       ``(B) make the books and records available for inspection 
     by any representative of the Commission or the Department of 
     Justice.
       ``(2) Registered entities.--Each entity registered under 
     this title shall--
       ``(A) maintain daily trading records (including a time-
     stamped audit trail), that include such information, in such 
     form, and for such period as the Commission may require by 
     regulation;
       ``(B) before the beginning of trading each day, insofar as 
     is practicable and under terms and conditions specified by 
     the Commission, make public the volume of trading on each 
     type of contract for the previous day and such other 
     information as the Commission considers necessary in the 
     public interest and prescribes by rule, order, or regulation; 
     and
       ``(C) make such reports from the records, at such times and 
     places, and in such form, as the Commission may require by 
     regulation to protect the public interest and the interest of 
     persons trading in regulated instruments.
       ``(e) Foreign Transactions.--
       ``(1) In general.--Any United States person or corporation 
     shall be subject to this section for all contracts executed 
     by the United States person or corporation, including 
     contracts executed outside of the United States.
       ``(2) Foreign persons and corporations.--A foreign person 
     or corporation shall be subject to this section for all 
     contracts executed by the foreign person or corporation 
     within the United States.

     ``SEC. 205. ESTABLISHMENT AND REGISTRATION OF A CARBON 
                   TRADING FACILITIES; REGISTRATION OF TRADERS, 
                   BROKERS, AND DEALERS.

       ``(a) Carbon Trading Facilities.--
       ``(1) Establishment of a carbon allowance trading 
     facility.--The Commission may establish a carbon allowance 
     trading facility in accordance with this section to process 
     trades of regulated allowances.
       ``(2) Registration of carbon trading facilities.--
       ``(A) In general.--A trading facility may apply to the 
     Commission for designation as a registered carbon allowance 
     trading facility or a registered carbon allowance derivative 
     trading facility by submitting to the Commission an 
     application that contains such information and commitments as 
     the Commission may require.
       ``(B) Review.--A designation under this paragraph shall be 
     reviewed by the Commission from time to time, but not less 
     frequently than once every 3 years.
       ``(3) Operation of the carbon trading facilities.--
       ``(A) In general.--To obtain or maintain designation and 
     continue operating as a registered carbon allowance trading 
     facility or a registered carbon allowance derivative trading 
     facility under this title, a carbon allowance trading 
     facility established by the Commission or registered with the 
     Commission under this section shall comply with the 
     requirements and principles described in this paragraph.
       ``(B) Prevention of market manipulation.--The trading 
     facility shall demonstrate capability to prevent market 
     manipulation through market surveillance, compliance, and 
     enforcement practices and procedures, including methods for 
     conducting real-time monitoring of trading and comprehensive 
     and accurate trade reconstructions.
       ``(C) Electronic monitoring of trading.--The trading 
     facility shall demonstrate--
       ``(i) that the trading facility monitors trading on or 
     through the facility to prevent manipulation, price 
     distortion, and disruptions of the delivery or cash-
     settlement process; and
       ``(ii) in addition to traditional methods, a capability to 
     monitor market activities electronically on a real-time basis 
     and, if appropriate, by algorithm and other such means as are 
     determined to be appropriate by the Commission.
       ``(D) Fair and equitable trading.--The trading facility 
     shall establish and enforce rules to ensure--
       ``(i) fair and equitable trading through the trading 
     facility;
       ``(ii) the capacity to detect, investigate, and discipline 
     any person that violates the rules;
       ``(iii) the operation of any electronic matching platform;
       ``(iv) the terms and conditions of any contracts to be 
     traded on or through the trading facility;
       ``(v) any limitations on access to the trading facility;
       ``(vi) the financial integrity of transactions and 
     contracts entered into by or through the trading facility, 
     including the clearance and settlement of the transactions;
       ``(vii) the financial integrity of brokers, dealers, and 
     traders doing business on or through the trading facility;
       ``(viii) the protection of customer funds;
       ``(ix) that the trading facility is able to discipline, 
     suspend, or expel members or market participants that violate 
     the rules of the trading facility, or similar methods for 
     performing the same functions, including delegation of the 
     functions to third parties; and
       ``(x) that market participants are protected from abusive 
     practices committed by any party acting as an agent for the 
     participants.
       ``(E) Aggregate position limitations or accountability.--
     The trading facility shall--
       ``(i) adopt and enforce aggregate position limitations or 
     position accountability for speculators, as necessary and 
     appropriate, to reduce the potential threat of market 
     manipulation and excessive speculation in a marketplace in 
     which supply is fixed by government policy and demand is set 
     by market prices;
       ``(ii) facilitate netting of members' positions across all 
     of the instruments through the trading facility, in order to 
     minimize the cost of trading while ensuring adequate risk 
     management; and
       ``(iii) monitor and enforce any limitations on leverage or 
     position size that might be imposed by the Commission.
       ``(F) Emergency authority.--The trading facility shall 
     adopt and enforce rules to provide for the exercise of 
     emergency authority, in consultation or cooperation with the 
     Commission, as necessary and appropriate, including the 
     authority--
       ``(i) to liquidate or transfer open positions in any 
     contract;
       ``(ii) to suspend or curtail trading in any regulated 
     instrument; and
       ``(iii) in the case of a regulated derivative, to require 
     market participants to meet special margin requirements.
       ``(G) Availability of general information.--The trading 
     facility shall make available to market authorities, market 
     participants, and the public information concerning--

[[Page S7147]]

       ``(i) the terms, conditions, and specifications of the 
     contracts traded on or through the trading facility;
       ``(ii) the mechanisms for executing transactions on or 
     through the trading facility; and
       ``(iii) the rules and regulations of the trading facility
       ``(H) Publication of trading information.--
       ``(i) In general.--The trading facility shall, in real 
     time, to the maximum extent practicable, provide the public 
     with information on bids, offers, settlement prices, volume, 
     open interest, and opening and closing ranges for all 
     regulated instruments traded on the trading facility.
       ``(ii) Centralized entity.--The Commission may by 
     regulation permit compliance with this subparagraph through 
     the provision of pricing information described in clause (i) 
     to a centralized entity that will simultaneously post that 
     information to the public.
       ``(I) Execution of transactions.--The trading facility 
     shall provide a competitive, open, and efficient market and 
     mechanism for executing transactions on or through the 
     trading facility.
       ``(J) Security of trade information.--The trading facility 
     shall maintain rules and procedures to provide for the 
     recording and safe storage of all identifying trade 
     information in a manner that enables the trading facility to 
     use the information--
       ``(i) to assist the prevention of customer and market 
     abuses; and
       ``(ii) provide evidence of violations of the rules of the 
     trading facility.
       ``(K) Dispute resolution.--The trading facility shall 
     establish and enforce rules regarding and provide facilities 
     for alternative dispute resolution as appropriate for market 
     participants and any market intermediaries.
       ``(L) Governance fitness standards.--The trading facility 
     shall establish and enforce appropriate fitness standards for 
     directors, members of any disciplinary committee, members of 
     the trading facility, and any other person with direct access 
     to the trading facility (including any parties affiliated 
     with any of the persons described in this subparagraph).
       ``(M) Conflicts of interest.--The trading facility shall--
       ``(i) establish and enforce rules to minimize conflicts of 
     interest in the decisionmaking process of the trading 
     facility; and
       ``(ii) establish a process for resolving any such conflict 
     of interest.
       ``(N) Composition of boards of mutually owned trading 
     facilities.--In the case of a mutually owned trading 
     facility, the trading facility shall ensure that the 
     composition of the governing board reflects market 
     participants.
       ``(O) Recordkeeping.--The trading facility shall maintain 
     records of all activities relating to the business of the 
     trading facility in a form and manner acceptable to the 
     Commission for a period of at least 5 years.
       ``(P) Antitrust considerations.--Unless necessary or 
     appropriate to achieve the purposes of this title, the 
     trading facility shall endeavor to avoid--
       ``(i) adopting any rules or taking any actions that result 
     in any unreasonable restraint of trade; or
       ``(ii) imposing any material anticompetitive burden on 
     trading on or through the trading facility.
       ``(Q) Trading fees.--The trading facility shall establish 
     and enforce rules requiring the payment of fees for the 
     purpose of funding Commission oversight, as established under 
     section 208(h).
       ``(R) Central limit order book.--The trading facility shall 
     operate an electronic central limit order book as the trading 
     mechanism for regulated derivatives and regulated allocations 
     and share sufficient information, in a timely manner, with 
     the automated quotation system to allow implementation of 
     section 207.
       ``(S) National market system.--The trading facility shall 
     participate, along with the Commission, in the formation and 
     operation of a national market system that allows for best 
     execution in the trading of regulated instruments among 
     registered carbon trading facilities.
       ``(T) Screening.--The trading facility shall establish and 
     enforce rules to screen members based on capital, systems, 
     and standards of compliance, and other such membership 
     standards as the Commission determines to be appropriate.
       ``(U) Use of clearing.--The trading facility shall 
     facilitate the clearing of all trades of regulated allowances 
     through the Carbon Clearing Organization and the clearing of 
     all trades of regulated allowance derivatives through a 
     Derivatives Clearing Organization registered with the 
     Commission.
       ``(V) Enforcement.--The trading facility shall establish 
     and enforce rules that allow the trading facility to obtain 
     any necessary information to perform any of the functions 
     described in this paragraph, including the capacity to carry 
     out such international information-sharing agreements as the 
     Commission may require.
       ``(b) Brokers, Dealers, Traders, and Their Associates.--The 
     Commission shall promulgate regulations governing--
       ``(1) the eligibility of a person to act in the capacity of 
     an introducing broker, a dealer, a floor broker, an 
     electronic market trader, or a floor trader of regulated 
     instruments in the United States;
       ``(2) the registration of introducing brokers, dealers, 
     floor brokers, electronic market traders, and floor traders 
     as registered carbon traders with the Commission;
       ``(3) the conduct of a person registered pursuant to 
     regulations promulgated under paragraph (2), and of a 
     partner, officer, employee, or agent of the registered 
     person, in connection with transactions involving a regulated 
     instrument; and
       ``(4) minimum standards for eligibility of a person to 
     register as a registered carbon trader, including the 
     requirements that an applicant for such a position--
       ``(A) has never had an applicable license or registration 
     revoked in any governmental jurisdiction;
       ``(B) has never been convicted of, or pled guilty or nolo 
     contendere to, a felony in a domestic, foreign, or military 
     court;
       ``(C) has demonstrated such financial responsibility, 
     character, and general fitness as to command the confidence 
     of the community and to warrant a determination that the 
     applicant will operate honestly, fairly, and efficiently 
     within the purposes of this title;
       ``(D) has completed the preregistration education 
     requirement described in paragraph (5); and
       ``(E) has passed a written test that meets the test 
     requirement described in paragraph (6).
       ``(5) Preregistration education of a carbon trader.--
       ``(A) Minimum educational requirements.--In order to meet 
     the preregistration education requirement referred to in 
     paragraph (4)(D), a person shall complete at least 20 hours 
     of education approved in accordance with subparagraph (B), 
     which shall include at least--
       ``(i) 6 hours of instruction on applicable Federal law 
     (including regulations);
       ``(ii) 10 hours of instruction in ethics, which shall 
     include instruction on fraud, manipulation, excessive 
     speculation, and consumer protection; and
       ``(iii) 2 hours of training relating to reporting 
     requirements under this title.
       ``(B) Approved educational courses.--
       ``(i) In general.--For the purpose of subparagraph (A), 
     preregistration educational courses shall be reviewed and 
     approved by the Commission.
       ``(ii) Prohibition.--To maintain the independence of the 
     approval process, the Commission shall not directly or 
     indirectly offer preregistration educational courses for loan 
     originators.
       ``(C) Standards.--In approving courses under this 
     paragraph, the Commission shall apply reasonable standards in 
     the review and approval of courses.
       ``(6) Testing of a carbon trader.--
       ``(A) In general.--In order to meet the written test 
     requirement referred to in paragraph (4)(E), an individual 
     shall pass, in accordance with the standards established 
     under this paragraph, a qualified written test developed by 
     the Commission and administered by an approved test provider.
       ``(B) Qualified test.--A written test shall not be treated 
     as a qualified written test for purposes of subparagraph (A) 
     unless--
       ``(i) the test consists of a minimum of 100 questions; and
       ``(ii) the test adequately measures the knowledge and 
     comprehension of the individual taking the test in 
     appropriate subject areas, including--

       ``(I) ethics;
       ``(II) Federal law (including regulations) pertaining to 
     trading regulated instruments; and
       ``(III) Federal law (including regulations) on fraud, 
     manipulation, excessive speculation, and reporting.

       ``(C) Minimum competence.--
       ``(i) Passing score.--An individual shall not be considered 
     to have passed a qualified written test under this paragraph 
     unless the individual achieves a test score of not less than 
     75 percent correct answers to questions on the test.
       ``(ii) Initial retests.--An individual may retake a test 3 
     consecutive times, with each consecutive taking occurring not 
     later than 14 days after the preceding test.
       ``(iii) Subsequent retests.--After 3 consecutive tests, an 
     individual shall be required to wait at least 14 days before 
     retaking the test.
       ``(iv) Retest after lapse of registration.--A registered 
     carbon trader who fails to maintain a valid registration for 
     a period of 5 years or longer shall retake the test.
       ``(7) Background checks.--An applicant for registration 
     shall, at a minimum, provide to the Commission--
       ``(A) fingerprints for submission to the Federal Bureau of 
     Investigation for a State and national criminal history 
     background check;
       ``(B) a description of personal history and experience, 
     including an independent credit report obtained from a 
     consumer reporting agency described in section 603(p) of the 
     Fair Credit Reporting Act (15 U.S.C. 1681a(p)); and
       ``(C) information relating to any administrative, civil, or 
     criminal findings by any governmental jurisdiction.

     ``SEC. 206. CARBON CLEARING ORGANIZATION.

       ``(a) Establishment.--
       ``(1) In general.--The Commission shall establish an entity 
     to be known as the `Carbon Clearing Organization' for the 
     purpose of creating a common clearing platform for regulated 
     allowances.
       ``(2) Application by derivatives clearing organization.--A 
     derivatives clearing organization registered with the 
     Commission pursuant to section 5b may apply to the

[[Page S7148]]

     Commission for designation as the Carbon Clearing 
     Organization by submitting to the Commission an application 
     that contains such information and commitments as the 
     Commission may require.
       ``(b) Operation.--
       ``(1) Requirements.--
       ``(A) In general.--The Carbon Clearing Organization shall 
     comply with the requirements described in this paragraph.
       ``(B) Financial resources.--The Carbon Clearing 
     Organization shall demonstrate adequate financial, 
     operational, and managerial resources to discharge the 
     responsibilities of a clearing organization.
       ``(C) Participant and product eligibility.--The Carbon 
     Clearing Organization shall establish--
       ``(i) appropriate admission and continuing eligibility 
     standards (including appropriate minimum financial 
     requirements) for members of and participants in the Carbon 
     Clearing Organization; and
       ``(ii) appropriate standards for determining eligibility of 
     agreements, contracts, or transactions submitted to the 
     Carbon Clearing Organization.
       ``(D) Risk management.--The Carbon Clearing Organization 
     shall manage the risks associated with discharging the 
     responsibilities of a clearing organization through the use 
     of appropriate tools and procedures.
       ``(E) Settlement procedures.--The Carbon Clearing 
     Organization shall--
       ``(i) complete settlements on a timely basis under varying 
     circumstances; and
       ``(ii) maintain an adequate record of the flow of funds 
     associated with each transaction that the Carbon Clearing 
     Organization clears.
       ``(F) Treatment of funds.--The Carbon Clearing Organization 
     shall have standards and procedures designed to protect and 
     ensure the safety of member and participant funds.
       ``(G) Default rules and procedures.--The Carbon Clearing 
     Organization shall have rules and procedures designed to 
     allow for efficient, fair, and safe management of events if 
     members or participants become insolvent or otherwise default 
     on obligations to the Carbon Clearing Organization.
       ``(H) Rule enforcement.--The Carbon Clearing Organization 
     shall--
       ``(i) maintain adequate arrangements and resources for the 
     effective monitoring and enforcement of compliance with rules 
     of Carbon Clearing Organization and for resolution of 
     disputes; and
       ``(ii) have the authority and ability to discipline, limit, 
     suspend, or terminate the activities of a member or 
     participant for violations of rules of the Carbon Clearing 
     Organization.
       ``(I) System safeguards.--The Carbon Clearing Organization 
     shall--
       ``(i) establish and maintain a program of oversight and 
     risk analysis to ensure that the automated systems of the 
     Carbon Clearing Organization function properly and have 
     adequate capacity and security; and
       ``(ii) establish and maintain emergency procedures and a 
     plan for disaster recovery, and will periodically test backup 
     facilities sufficient to ensure daily processing, clearing, 
     and settlement of transactions.
       ``(J) Public information.--The Carbon Clearing Organization 
     shall make information concerning the rules and operating 
     procedures governing the clearing and settlement systems 
     (including default procedures) available to market 
     participants.
       ``(K) Information-sharing.--The Carbon Clearing 
     Organization shall--
       ``(i) enter into and abide by the terms of all appropriate 
     and applicable domestic and international information-sharing 
     agreements; and
       ``(ii) use relevant information obtained from the 
     agreements in carrying out the risk management program of the 
     Carbon Clearing Organization.

     ``SEC. 207. AUTOMATED QUOTATION SYSTEMS.

       ``(a) In General.--The Commission shall facilitate the 
     widespread dissemination of reliable and accurate last-sale 
     and quotation information with respect to regulated 
     instruments, short sales, and private bilateral contracts the 
     value of which, in whole or in part, is linked to the price 
     of a regulated instrument by establishing an automated 
     quotation system that will collect and disseminate 
     information regarding all regulated instruments.
       ``(b) Characteristics of System.--The automated quotation 
     system shall--
       ``(1) collect and disseminate quotation and transaction 
     information;
       ``(2) provide bid and ask quotations of participating 
     brokers or dealers; and
       ``(3) provide for the reporting of information on bids, 
     offers, settlement prices, volume, open interest, and opening 
     and closing ranges for all regulated instrument transactions, 
     including last-sale reporting.
       ``(c) Electronic Linkage.--The carbon allowance trading 
     facility and all registered carbon derivative trading 
     facilities shall be linked electronically with the automated 
     quotation system.
       ``(d) Missing.--All registered carbon trading facilities 
     shall share sufficient information with the automated 
     quotation system to allow the implementation of this section.

     ``SEC. 208. ADMINISTRATIVE ENFORCEMENT.

       ``(a) Investigations.--The Commission may conduct such 
     investigations as the Commission determines to be necessary 
     to carry out this title, in accordance with this Act.
       ``(b) Review of Adverse Action by Registered Carbon Trading 
     Facility.--
       ``(1) In general.--
       ``(A) Disciplinary actions.--The Commission may, in 
     accordance with such standards and procedures as the 
     Commission determines to be appropriate, review a decision by 
     a registered carbon trading facility--
       ``(i) to suspend, expel, or otherwise discipline a member 
     of the trading facility; or
       ``(ii) to deny access to the trading facility.
       ``(B) Other actions.--On application of any person who is 
     adversely affected by any decision by a registered carbon 
     trading facility described in subparagraph (A), the 
     Commission may--
       ``(i) review the decision; and
       ``(ii) issue such order with respect to the decision as the 
     Commission determines to be appropriate to protect the public 
     interest.
       ``(2) Scope of authority.--The Commission may affirm, 
     modify, set aside, or remand a trading facility decision 
     reviewed under paragraph (1), after a determination on the 
     record as to whether the decision was made in accordance with 
     the rules of the trading facility.
       ``(c) Complaints.--The Commission shall enforce this title 
     in accordance with this Act.
       ``(d) Authority to Suspend or Revoke Registered Carbon 
     Trading Facility Designation.--The Commission may suspend for 
     a period of not more than 180 days, or revoke, the 
     designation of a trading facility as a registered carbon 
     trading facility if, after notice and opportunity for a 
     hearing on the record, the Commission finds that--
       ``(1) the trading facility or the entity, as the case may 
     be, has not complied with a requirement of subsection (a)(3) 
     or (c) of section 205, as the case may be; or
       ``(2) a director, officer, employee, or agent of the 
     trading facility or entity, as the case may be, has violated 
     this title or a regulation or order promulgated or issued 
     under this title.
       ``(e) Injunctive Relief.--If the Commission finds that a 
     person has violated this title or a regulation or order 
     promulgated or issued under this title, the Commission may 
     seek injunctive relief in accordance with this Act.
       ``(f) Trading Suspensions; Emergency Authority.--
       ``(1) Definition of emergency.--In this subsection, the 
     term `emergency' means--
       ``(A) a major market disturbance characterized by or 
     constituting--
       ``(i) sudden and excessive fluctuations of prices of 
     regulated instruments generally (or a substantial threat of 
     such sudden and excessive fluctuations) that threaten fair 
     and orderly markets; or
       ``(ii) a substantial disruption of the safe or efficient 
     operation of the national system for clearance and settlement 
     of transactions in regulated instruments (or a substantial 
     threat of such a disruption); or
       ``(B) a major disturbance that substantially disrupts, or 
     threatens to substantially disrupt--
       ``(i) the functioning of markets in regulated instruments, 
     or any significant portion or segment of the markets; or
       ``(ii) the transmission or processing of transactions in 
     regulated instruments.
       ``(2) Trading suspensions.--
       ``(A) In general.--Subject to subparagraph (B), if the 
     Commission determines that the public interest so requires, 
     the Commission may, by order, summarily suspend all trading 
     of regulated instruments on any trading facility or 
     otherwise, for a period not exceeding 90 calendar days.
       ``(B) Notification of decision.--An order issued by the 
     Commission under subparagraph (A) shall not take effect 
     unless--
       ``(i) the Commission notifies the President of the decision 
     of the Commission; and
       ``(ii) the President notifies the Commission that the 
     President does not disapprove of the decision.
       ``(3) Emergency orders.--
       ``(A) In general.--The Commission, in an emergency, may by 
     order summarily take such action to alter, supplement, 
     suspend, or impose requirements or restrictions with respect 
     to any matter or action subject to regulation by the 
     Commission or an entity registered under this title, as the 
     Commission determines is necessary in the public interest--
       ``(i) to maintain or restore fair and orderly markets in 
     regulated instruments; or
       ``(ii) to ensure prompt, accurate, and safe clearance and 
     settlement of transactions in regulated instruments.
       ``(B) Effective period.--An order of the Commission under 
     this paragraph--
       ``(i) shall continue in effect for the period specified by 
     the Commission;
       ``(ii) may be extended in accordance with subparagraph (C); 
     and
       ``(iii) except as provided in subparagraph (C), may not 
     continue in effect for more than 10 business days, including 
     extensions.
       ``(C) Extension.--An order of the Commission under this 
     paragraph may be extended to continue in effect for more than 
     10 business days, but in no event may continue in effect for 
     more than 30 calendar days, if, at the time of the extension, 
     the Commission determines that--
       ``(i) the emergency situation still exists; and
       ``(ii) the continuation of the order beyond 10 business 
     days is necessary in the public interest and for the 
     protection of investors to attain an objective described in 
     clause (i) or (ii) of subparagraph (A).
       ``(D) Exemption.--In exercising the authority provided by 
     this paragraph, the Commission shall not be required to 
     comply with section 553 of title 5, United States Code.

[[Page S7149]]

       ``(4) Termination of emergency actions by president.--The 
     President may direct that action taken by the Commission 
     under paragraph (3) shall not continue in effect.
       ``(5) Compliance with orders.--A member of a trading 
     facility, introducing broker, dealer, floor broker, or floor 
     trader shall not effect any transaction in, or induce the 
     purchase or sale of, any regulated instrument in 
     contravention of an order of the Commission under this 
     subsection, unless the order--
       ``(A) has been stayed, modified, or set aside as provided 
     in paragraph (6); or
       ``(B) has ceased to be effective on direction of the 
     President as provided in paragraph (4).
       ``(6) Limitations on review of orders.--
       ``(A) In general.--An order of the Commission pursuant to 
     this subsection shall be subject to review by the United 
     States Court of Appeals for the District of Columbia Circuit.
       ``(B) Basis.--A review of an order under subparagraph (A) 
     shall be based on an examination of all the information 
     before the Commission at the time the order was issued.
       ``(C) Standard for findings.--The reviewing court shall not 
     enter a stay, writ of mandamus, or similar relief unless the 
     court finds, after notice and hearing before a panel of the 
     court, that the action of the Commission is arbitrary, 
     capricious, an abuse of discretion, or otherwise not in 
     accordance with law.
       ``(g) Other Authority to Issue Orders.--The Commission may 
     issue such other orders as are necessary to ensure compliance 
     with this title (including regulations promulgated under this 
     title).
       ``(h) Trading Fees to Support Commission Activities.--
       ``(1) In general.--To support oversight by the Commission 
     of markets under this title, each registered trading facility 
     shall charge a trading fee, per transaction, to be 
     established by the Commission at a level not to exceed \1/2\ 
     of 1 percent of the value of the contract being executed.
       ``(2) Remittance of fees.--Each registered trading facility 
     shall submit fees charged under this subsection to the 
     Commission on such schedule as the Commission shall 
     designate.

     ``SEC. 209. CIVIL JUDICIAL ENFORCEMENT.

       ``(a) In General.--If it appears to the Commission that a 
     person has engaged, is engaging, or is about to engage in any 
     act or practice constituting a violation of this title 
     (including a regulation promulgated or order issued under 
     this title), the Commission may bring a civil action in the 
     appropriate United States district court or United States 
     court of any territory or other place subject to the 
     jurisdiction of the United States--
       ``(1) to enjoin the act or practice; or
       ``(2) to enforce compliance with this title (or a 
     regulation or order promulgated or issued under this title).
       ``(b) Forms of Relief.--
       ``(1) Injunctive relief; restraining order.--On a proper 
     showing, a court described in subsection (a) shall grant a 
     permanent or temporary injunction or issue a restraining 
     order, without bond.
       ``(2) Civil money penalty.--
       ``(A) In general.--The Commission may seek and the court, 
     on a proper showing, shall have jurisdiction to impose on any 
     person found in the civil action brought under this section 
     to have committed a violation, a civil penalty in an amount 
     that is not more than the greater of--
       ``(i) $100,000; or
       ``(ii) triple the monetary gain to the person for the 
     violation.
       ``(B) Enforcement of penalty by the attorney general.--If a 
     person on whom such a penalty is imposed fails to pay the 
     penalty within the time prescribed in the order of the court, 
     the Commission may refer the matter to the Attorney General, 
     who shall recover the penalty by action in the appropriate 
     United States district court.

     ``SEC. 210. CRIMINAL ENFORCEMENT.

       ``(a) Violations Generally.--A person that knowingly 
     violates section 204 (or any regulation promulgated under 
     section 204), or willfully violates any other provision of 
     this title (or a regulation promulgated under this title) the 
     violation of which is made unlawful or the observance of 
     which is required by or under this title, shall--
       ``(1) be fined not more than $1,000,000 (or not more than 
     $500,000, if the violator is an individual), imprisoned not 
     more than 5 years, or both; and
       ``(2) shall pay the costs of prosecution.
       ``(b) Failure to Comply With Cease and Desist Order.--
       ``(1) In general.--If, after the period allowed for appeal 
     of an order issued under section 206(e) or after the 
     affirmance of such an order, a person subject to the order 
     fails or refuses to comply with the order, the person shall 
     be--
       ``(A) fined not more than the greater of $100,000 or triple 
     the monetary gain to the person, imprisoned not less than 180 
     days nor more than 1 year, or both; or
       ``(B) if the failure or refusal to comply involves a 
     violation referred to in subsection (a), subject to the 
     penalties provided in that subsection for the violation.
       ``(2) Special rule.--Each day during which a failure or 
     refusal to comply with such an order continues shall be 
     considered to be a separate offense for purposes of paragraph 
     (1).

     ``SEC. 211. MARKET REPORTS.

       ``(a) Collection and Analysis of Information.--The 
     Commission shall, on a continuous basis, collect and analyze 
     the following information on the functioning of the markets 
     for regulated instruments established under this title:
       ``(1) The status of, and trends in, the markets, including 
     prices, trading volumes, transaction types, and trading 
     channels and mechanisms.
       ``(2) Spikes, collapses, and volatility in prices of 
     regulated instruments, and the causes of the spikes, 
     collapses, and volatility.
       ``(3) The relationship between the market for emission 
     allowances, offset credits, and allowance derivatives, and 
     the spot and futures markets for energy commodities, 
     including electricity.
       ``(4) Evidence of fraud or manipulation in any such market, 
     the effects on any such market of any such fraud or 
     manipulation (or threat of fraud or manipulation) that the 
     Commission has identified, and the effectiveness of 
     corrective measures undertaken by the Commission to address 
     the fraud or manipulation, or threat.
       ``(5) The economic effects of the markets, including to the 
     macro- and micro-economic effects of unexpected significant 
     increases and decreases in the price of regulated 
     instruments.
       ``(6) Any changes in the roles, activities, or strategies 
     of various market participants.
       ``(7) Regional, industrial, and consumer responses to the 
     market, and energy investment responses to the markets.
       ``(8) Any other issue relating to the markets that the 
     Commission determines to be appropriate.
       ``(b) Quarterly Reports to Congress.--Not later than 30 
     days after the end of each calendar quarter, the Commission 
     shall submit to the President, the Committee on Energy and 
     Commerce of the House of Representatives, the Committee on 
     Energy and Natural Resources of the Senate, and the Committee 
     on Environment and Public Works of the Senate, and make 
     available to the public, a report on the matters described in 
     subsection (a) with respect to the quarter, including 
     recommendations for any administrative or statutory measures 
     the Commission considers necessary to address any threats to 
     the transparency, fairness, or integrity of the markets in 
     regulated instruments.

     ``SEC. 212. AUTHORIZATION OF APPROPRIATIONS.

       ``In addition to any fees collected by the Commission under 
     this Act, there are authorized to be appropriated such sums 
     as are necessary to carry out this title.''.
       (b) Conforming Amendment.--The Commodity Exchange Act (7 
     U.S.C. 1 et seq.) is amended by inserting after section 1a (7 
     U.S.C. 1a) the following:

``TITLE I--REGULATION OF COMMODITY EXCHANGES''.

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