[Congressional Record Volume 155, Number 134 (Tuesday, September 22, 2009)]
[Senate]
[Pages S9655-S9681]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Mr. REED:
  S. 1691. A bill to comprehensively regulate derivatives markets to 
increase transparency and reduce risks in the financial system; to the 
Committee on Banking, Housing, and Urban Affairs.
  Mr. REED. Mr. President, today I introduce the Comprehensive 
Derivatives Regulation Act of 2009, or the CDRA, which establishes for 
the first time a comprehensive regulatory framework to prevent 
derivatives trading activities from ever again contributing to 
catastrophic failures in our financial system. One year ago this month 
our nation found itself on the verge of a total financial meltdown with 
decades-old financial institutions collapsing overnight and credit 
markets freezing up in large part because companies like AIG took huge 
and risky bets selling totally unregulated credit default swaps, bets 
that backfired when the housing bubble burst.
  Derivatives are financial contracts that investors use to manage 
their risks or grow their portfolios. They are called derivatives 
because they derive their value from other things such as the price of 
corn at a future date, or whether a company fails to make good on its 
debts. While most derivatives offer companies the ability to better 
manage their risks, some irresponsible financial firms took huge risks 
in recent years using new, untested, and unregulated derivatives 
products. When these firms faltered, it sent shockwaves through our 
financial system and landed us in a recession. As a result, today 
families in Rhode Island and throughout the country struggle to keep 
their jobs and stay in their homes.
  I have been working over the past year with my Senate colleagues to 
develop a series of critical reforms to the financial sector to ensure 
that we never face such a perilous situation again. As the Chairman of 
the Securities, Insurance, and Investment Subcommittee of the Senate 
Banking Committee, I have introduced bills to greatly strengthen 
oversight of credit rating agencies and hedge funds, which until now 
have been subject to relatively little regulation.
  Introducing the CDRA is another key step in filling the huge 
regulatory gaps in our financial system. This bill would put in place a 
truly comprehensive framework for regulating all such products. 
Derivatives have been overseen by two market regulators, the Securities 
and Exchange Commission, SEC, which has broad responsibility for 
protecting investors and ensuring the integrity of securities markets, 
and the Commodity Futures Trading Commission, CFTC, which regulates 
commodity futures and the exchanges on which those products are traded.
  In part because of this shared jurisdiction, large segments of the 
derivatives markets, such as credit default swaps, have gone entirely 
unsupervised by either agency. This bill will fill these regulatory 
gaps.
  First, the bill would require standardized credit default swaps and 
other unregulated derivatives to be traded through a clearinghouse. 
This would protect the companies and the financial system from the 
risks posed by these instruments. Importantly, the bill also grants 
regulators the ability to oversee any new derivative product in the 
future, so dealers can no longer create products that fall into holes 
in the law.
  Second, the bill establishes robust capital and margin requirements 
for derivatives dealers and other major market participants, and 
subjects them to higher standards for products that are not traded on 
clearinghouses.
  Third, the bill subjects firms to new conduct requirements to protect 
investors from abusive practices in the market. It also includes new 
recordkeeping and reporting requirements to ensure that regulators and 
investors have broad information about derivatives transactions and 
positions throughout the financial sector.
  Fourth, the bill combats fraud and manipulation in derivatives 
markets by giving regulators new authority to set position limits and 
oversee the marketing of products to certain investors. The bill 
strengthens thresholds in place to ensure only sophisticated investors 
are engaging in certain types of trading.
  Finally, the bill rationalizes the sharing of jurisdiction between 
the SEC and CFTC, and establishes a process for quickly assigning 
responsibility for new products so they do not fall through the cracks. 
Specifically, the bill provides the SEC with jurisdiction over all 
derivatives that are securities or can be used as synthetic substitutes 
for securities, because without such authority over products that can 
affect securities markets, the SEC cannot accomplish its mission to 
protect investors and ensure the integrity and fairness of markets. The 
bill provides the CFTC with jurisdiction over all other derivatives. 
The bill also provides a fast and efficient process for the U.S. Court 
of Appeals for the District of Columbia Circuit to resolve any 
differences in views between the agencies that might arise.
  I hope my colleagues will join me in improving the oversight of 
credit default swaps and other derivatives products by cosponsoring 
this legislation and supporting its passage.
  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. 1691

       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 
     ``Comprehensive Derivatives Regulation Act of 2009''.
       (b) Table of Contents.--The table of contents for this Act 
     is as follows:

Sec. 1. Short title; table of contents.
Sec. 2. Findings.

[[Page S9656]]

           TITLE I--REGULATION OF SECURITY-BASED DERIVATIVES

Sec. 101. Definitions.
Sec. 102. Rationalization of financial product oversight.
Sec. 103. Required clearing of standardized derivative through central 
              counterparties and the use of trade repositories.
Sec. 104. Prudential supervision and regulation of significant 
              security-based derivatives market participants and 
              incentives for trading on regulated exchanges.
Sec. 105. Recordkeeping and reporting requirements for derivatives 
              market participants.
Sec. 106. Prohibition of market manipulation, fraud, and other market 
              abuses.
Sec. 107. Protections for marketing security-based swaps to certain 
              persons.
Sec. 108. Enforcement.
Sec. 109. Enforceability of security-based swaps.
Sec. 110. Transfer and rights of certain CFTC employees.

          TITLE II--REGULATION OF COMMODITY-BASED DERIVATIVES

Sec. 201. Definitions.
Sec. 202. Rationalization of financial product oversight.
Sec. 203. Required clearing of standardized derivatives through central 
              counterparties and use of trade repositories.
Sec. 204. Prudential supervision and regulation of significant 
              commodity-based derivatives market participants and 
              incentives for trading on regulated exchanges.
Sec. 205. Recordkeeping and reporting requirements for derivatives 
              market participants.
Sec. 206. Prohibition of market manipulation, fraud, and other market 
              abuses.
Sec. 207. Protections for marketing commodity-based swaps to certain 
              persons.
Sec. 208. Commodity-based swap execution facilities.
Sec. 209. Enforcement.
Sec. 210. Enforceability of commodity-based swaps.

                      TITLE III--OTHER PROVISIONS

Sec. 301. Margining and other risk management standards for central 
              counterparties.
Sec. 302. Determining the status of swaps.
Sec. 303. Study and report on implementation.
Sec. 304. Rulemaking.
Sec. 305. Effective date.

     SEC. 2. FINDINGS.

       Congress finds that--
       (1) in recent years, the over-the-counter derivatives 
     market has grown rapidly, but regulators have lacked key 
     information and adequate authority to address systemic and 
     other risks posed by unregulated derivatives trading;
       (2) excessive risk taking among market participants, 
     combined with limited regulatory oversight of such products, 
     was a significant cause of the recent financial crisis;
       (3) lack of transparency in the markets has contributed to 
     market instability and uncertainty, and has resulted in a 
     less efficient marketplace;
       (4) customized derivative products provide key benefits to 
     certain market participants and should be permitted under 
     comprehensive regulation, but all derivatives activities 
     should be accompanied by appropriate risk management and 
     prudential standards; and
       (5) the trading of derivatives on regulated exchanges 
     should be encouraged because of the significant associated 
     market efficiencies.

           TITLE I--REGULATION OF SECURITY-BASED DERIVATIVES

     SEC. 101. DEFINITIONS.

       (a) Definitions Under the Securities Exchange Act of 
     1934.--Section 3(a) of the Securities Exchange Act of 1934 
     (15 U.S.C. 78c(a)) is amended--
       (1) in paragraph (10), by inserting ``security-based 
     swap,'' after ``security future,'';
       (2) in paragraph (13), by adding at the end the following: 
     ``For any security-based swap, such terms include the 
     execution, termination (prior to its scheduled maturity 
     date), assignment, exchange, or similar transfer or 
     conveyance of, or extinguishing of rights or obligations 
     under, a security-based swap, as the context may require.'';
       (3) in paragraph (14), by adding at the end the following: 
     ``For any security-based swap, such terms include the 
     execution, termination (prior to its scheduled maturity 
     date), assignment, exchange, or similar transfer or 
     conveyance of, or extinguishing of rights or obligations 
     under, a security-based swap, as the context may require.''; 
     and
       (4) by adding at the end the following:
       ``(65) Derivative.--The term `derivative' means--
       ``(A) any future, forward, swap, warrant, put, call, 
     straddle, option, or privilege on or related to--
       ``(i) any security, or group or index of securities 
     (including any interest therein or based on the value 
     thereof); or
       ``(ii) any issuer of securities or group or index of 
     issuers of securities (including any interest therein or 
     based on the value thereof); and
       ``(B) any contract of sale for future delivery of any 
     commodity (or option on such contract).
       ``(66) Swap.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the term `swap' means any agreement, contract, or transaction 
     that--
       ``(i) is a put, call, cap, floor, collar, or similar option 
     of any kind for the purchase or sale of, or based on the 
     value of, 1 or more interest or other rates, currencies, 
     commodities, indices, quantitative measures, or other 
     financial or economic interests or property of any kind;
       ``(ii) provides for any purchase, sale, payment, or 
     delivery (other than a dividend on an equity security) that 
     is dependent on the occurrence, nonoccurrence, or the extent 
     of the occurrence of an event or contingency associated with 
     a potential financial, economic, or commercial consequence;
       ``(iii) provides on an executory basis for the exchange, on 
     a fixed or contingent basis, of 1 or more payments based on 
     the value or level of 1 or more interest or other rates, 
     currencies, commodities, securities, instruments of 
     indebtedness, indices, quantitative measures, or other 
     financial or economic interests or property of any kind, or 
     any interest therein or based on the value thereof, and that 
     transfers, as between the parties to the transaction, in 
     whole or in part, the financial risk associated with a future 
     change in any such value or level without also conveying a 
     current or future direct or indirect ownership interest in an 
     asset (including any enterprise or investment pool) or 
     liability that incorporates the financial risk so 
     transferred, any such agreement, contract, or transaction 
     commonly known as an interest rate swap, including a rate 
     floor, rate cap, rate collar, cross-currency rate swap, basis 
     swap, currency swap, equity index swap, equity swap, debt 
     index swap, debt swap, credit spread, credit default swap, 
     credit swap, weather swap, energy swap, metal swap, 
     agricultural swap, emissions swap, or commodity swap;
       ``(iv) is an agreement, contract, or transaction that is, 
     or in the future becomes, commonly known to the trade as a 
     swap; or
       ``(v) is any combination or permutation of, or option on, 
     any agreement, contract, or transaction described in any of 
     clauses (i) through (iv).
       ``(B) Exclusions.--The term `swap' does not include--
       ``(i) any contract of sale for future delivery traded on or 
     subject to the rules of any board of trade designated as a 
     contract market under section 5 of the Commodity Exchange Act 
     (7 U.S.C. 7)--

       ``(I) on a commodity other than a security; or
       ``(II) that is not based on or subject to the occurrence of 
     a bona fide contingency that might reasonably be expected to 
     affect or be affected by the creditworthiness of a party 
     other than a party to such contract;

       ``(ii) any sale of any cash commodity or security for 
     deferred or delayed shipment or delivery;
       ``(iii) any put, call, straddle, option, or privilege on 
     any security, certificate of deposit, or group or index of 
     securities, including any interest therein or based, in whole 
     or in part, on the value thereof, whether physically or cash 
     settled;
       ``(iv) any put, call, straddle, option, or privilege 
     entered into on a national securities exchange registered 
     pursuant to section 6(a) relating to foreign currency;
       ``(v) any agreement, contract, or transaction providing for 
     the purchase or sale of 1 or more securities on a fixed 
     basis, whether physically or cash settled;
       ``(vi) any agreement, contract, or transaction providing 
     for the purchase or sale of 1 or more securities on a 
     contingent basis, unless such agreement, contract, or 
     transaction predicates such purchase or sale on the 
     occurrence of a bona fide contingency that might reasonably 
     be expected to affect or be affected by the creditworthiness 
     of a party other than a party to the agreement, contract, or 
     transaction;
       ``(vii) any note, bond, or evidence of indebtedness that is 
     a security (as defined in section 2(a)(1) of the Securities 
     Act of 1933 (15 U.S.C. 77b(a)(1)) or paragraph (10) of this 
     subsection);
       ``(viii) any agreement, contract, or transaction that is--

       ``(I) based on, or references, a security; and
       ``(II) entered into directly or through an underwriter (as 
     defined in section 2(a)(11) of the Securities Act of 1933 (15 
     U.S.C. 77b(a)(11))) by the issuer of such security;

       ``(ix) any security future product (as defined in paragraph 
     (56));
       ``(x) any hybrid instrument that is predominantly a banking 
     product, as provided in section 405 of the Commodity Futures 
     Modernization Act of 2000 (Public Law 106-554; 114 Stat. 
     2763A-455), or any hybrid instrument that is predominantly a 
     security, as provided in section 2(f) of the Commodity 
     Exchange Act (as in effect on the day before the date of 
     enactment of the Comprehensive Derivatives Regulation Act of 
     2009);
       ``(xi) any agreement, contract, or transaction that is an 
     insurance or endowment policy or annuity contract or optional 
     annuity contract issued by a corporation that is subject to 
     the supervision of the insurance commissioner, bank 
     commissioner, or any agency or officer performing like 
     functions, of any State; or
       ``(xii) any identified banking product specified in 
     paragraphs (1) through (5) of section 206(a) of the Gramm-
     Leach-Bliley Act (15

[[Page S9657]]

     U.S.C. 78c note), mortgage or mortgage purchase commitment, 
     or any sale of installment loan contracts or receivables, if 
     any such product or instrument is not marketed or sold as an 
     alternative to a swap.
       ``(67) Eligible contract participant.--The term `eligible 
     contract participant' means--
       ``(A) acting for its own account--
       ``(i) a financial institution (as defined in section 1a(15) 
     of the Commodity Exchange Act (7 U.S.C. 1(a)(15)), as in 
     effect on the day before the date of enactment of the 
     Comprehensive Derivatives Regulation Act of 2009);
       ``(ii) an insurance company that is regulated by a State, 
     or that is regulated by a foreign government and is subject 
     to comparable regulation, as determined by the Commission, 
     including a regulated subsidiary or affiliate of such an 
     insurance company;
       ``(iii) an investment company that is subject to regulation 
     under the Investment Company Act of 1940 (15 U.S.C. 80a-1 et 
     seq.) or a foreign person performing a similar role or 
     function subject as such to foreign regulation (regardless of 
     whether each investor in the investment company or the 
     foreign person is itself an eligible contract participant);
       ``(iv) a commodity pool that--

       ``(I) has total net assets exceeding $5,000,000; and
       ``(II) is formed and operated by a person that is subject 
     to regulation under the Commodity Exchange Act (7 U.S.C. 1 et 
     seq.) or a foreign person performing a similar role or 
     function subject as such to foreign regulation (regardless of 
     whether each investor in the commodity pool or the foreign 
     person is itself an eligible contract participant);

       ``(v) a corporation, partnership, proprietorship, 
     organization, trust, or other entity--

       ``(I) that has total net assets exceeding $10,000,000; or
       ``(II) that--

       ``(aa) has total net assets exceeding $5,000,000; and
       ``(bb) enters into an agreement, contract, or transaction 
     in connection with the conduct of the business of the entity 
     or to manage the risk associated with an asset or liability 
     owned or incurred or reasonably likely to be owned or 
     incurred by the entity in the conduct of the business of the 
     entity;
       ``(vi) an employee benefit plan that is subject to the 
     Employee Retirement Income Security Act of 1974 (29 U.S.C. 
     1001 et seq.), a governmental employee benefit plan, or a 
     foreign person performing a similar role or function that is 
     subject as such to foreign regulation--

       ``(I) that has total assets exceeding $5,000,000; or
       ``(II) the investment decisions of which are made by--

       ``(aa) an investment adviser or commodity trading advisor 
     that is subject to regulation under the Investment Advisers 
     Act of 1940 (15 U.S.C. 80b-1 et seq.) or the Commodity 
     Exchange Act (7 U.S.C. 1 et seq.);
       ``(bb) a foreign person performing a similar role or 
     function that is subject as such to foreign regulation;
       ``(cc) a financial institution (as defined in section 
     1a(15) of the Commodity Exchange Act (7 U.S.C. 1(a)(15)), as 
     in effect on the day before the date of enactment of the 
     Comprehensive Derivatives Regulation Act of 2009); or
       ``(dd) an insurance company described in clause (ii), or a 
     regulated subsidiary or affiliate of such an insurance 
     company;
       ``(vii)(I) a governmental entity (including the United 
     States, a State, or a foreign government) or political 
     subdivision of a governmental entity;
       ``(II) a multinational or supranational government entity; 
     or
       ``(III) an instrumentality, agency, or department of an 
     entity described in subclause (I) or (II),

     except that such term does not include an entity, political 
     subdivision, instrumentality, agency, or department referred 
     to in subclause (I) or (III), unless the entity, political 
     subdivision, instrumentality, agency, or department owns and 
     invests on a discretionary basis $50,000,000 or more in 
     investments, provided that, with respect to any State or 
     entity, political subdivision, agency, or department of a 
     State, such amount is exclusive of any proceeds from any 
     offering of municipal securities;
       ``(viii)(I) a broker or dealer that is subject to 
     regulation under this title or a foreign person performing a 
     similar role or function that is subject as such to foreign 
     regulation, except that, if the broker or dealer or foreign 
     person is a natural person or proprietorship, the broker or 
     dealer or foreign person shall not be considered to be an 
     eligible contract participant, unless the broker or dealer or 
     foreign person also meets the requirements of clause (v) or 
     (xi);
       ``(II) an associated person of a registered broker or 
     dealer concerning the financial or securities activities, of 
     which, the registered person makes and keeps records under 
     section 15C(b) or 17(h); and
       ``(III) an investment bank holding company (as defined in 
     section 17(i));
       ``(ix) a futures commission merchant that is subject to 
     regulation under the Commodity Exchange Act or a foreign 
     person performing a similar role or function that is subject 
     as such to foreign regulation, except that, if the futures 
     commission merchant or foreign person is a natural person or 
     proprietorship, the futures commission merchant or foreign 
     person shall not be considered to be an eligible contract 
     participant, unless the futures commission merchant or 
     foreign person also meets the requirements of clause (v) or 
     (xi);
       ``(x) a floor broker or floor trader that is subject to 
     regulation under the Commodity Exchange Act in connection 
     with any transaction that takes place on or through the 
     facilities of a registered entity (as defined in section 
     1a(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29)), as 
     in effect on the day before the date of enactment of the 
     Comprehensive Derivatives Regulation Act of 2009, other than 
     an electronic trading facility with respect to a significant 
     price discovery contract), or an exempt board of trade 
     operating under section 5d of the Commodity Exchange Act (7 
     U.S.C. 7a-3), or any affiliate thereof, on which such person 
     regularly trades; or
       ``(xi) a natural person who--

       ``(I) owns and invests on a discretionary basis not less 
     than $10,000,000;
       ``(II) owns and invests on a discretionary basis not less 
     than $5,000,000 and who enters into the agreement, contract, 
     or transaction in order to manage the risk associated with an 
     asset owned or liability incurred, or reasonably likely to be 
     owned or incurred, by the individual; or
       ``(III) is an officer or director of an entity (or a person 
     performing similar functions) and who enters into the 
     agreement, contract, or transaction in order to manage the 
     risk associated with the securities of such entity owned by 
     the individual at the time of entering into the agreement, 
     contract, or transaction;

       ``(B)(i) a person described in clause (i), (ii), (iv), (v), 
     (viii), (ix), or (x) of subparagraph (A) or in subparagraph 
     (C), acting as broker or performing an equivalent agency 
     function on behalf of another person described in 
     subparagraph (A) or (C); or
       ``(ii) an investment adviser that is subject to regulation 
     under the Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et 
     seq.), a commodity trading advisor that is subject to 
     regulation under the Commodity Exchange Act (7 U.S.C. 1 et 
     seq.), a foreign person performing a similar role or function 
     that is subject as such to foreign regulation, or a person 
     described in clause (i), (ii), (iv), (v), (viii), (ix), or 
     (x) of subparagraph (A) or in subparagraph (C), in any such 
     case acting as investment manager or fiduciary (but excluding 
     a person acting as broker or performing an equivalent agency 
     function) for another person described in subparagraph (A) or 
     (C) and who is authorized by such person to commit such 
     person to the transaction; or
       ``(C) any other person that the Commission determines by 
     rule, jointly with the Commodity Futures Trading Commission, 
     to be an eligible contract participant, in light of the 
     financial or other qualifications of the person.
       ``(68) Person associated with a significant security-based 
     derivatives market participant.--
       ``(A) In general.--The term `person associated with a 
     significant security-based derivatives market participant' or 
     `associated person of a significant security-based 
     derivatives market participant' means--
       ``(i) any partner, officer, director, or branch manager of 
     a significant security-based derivatives market participant 
     (including any individual who holds a similar status or 
     performs a similar function with respect to any partner, 
     officer, director, or branch manager of a significant 
     security-based derivatives market participant);
       ``(ii) any person that directly or indirectly controls, is 
     controlled by, or is under common control with a significant 
     security-based derivatives market participant; and
       ``(iii) any employee of a significant security-based 
     derivatives market participant.
       ``(B) Exclusion.--Other than for purposes of section 
     15F(e)(2), the term `person associated with a significant 
     commodity-based derivatives market participant' or 
     `associated person of a significant security-based 
     derivatives market participant' does not include any person 
     associated with a significant security-based derivatives 
     market participant, the functions of which are solely 
     clerical or ministerial.
       ``(69) Security derivative.--The term `security derivative' 
     means--
       ``(A) any derivative, other than a derivative instrument 
     swap, on or related to--
       ``(i) any security, or group or index of securities 
     (including any interest therein or based on the value 
     thereof); or
       ``(ii) any issuer of securities or group or index of 
     issuers of securities (including any interest therein or 
     based on the value thereof); and
       ``(B) any security that the Commission by rule, regulation, 
     or order determines is a security derivative.
       ``(70) Security-based swap.--The term `security-based swap' 
     means a swap, of which a material term--
       ``(A) is based on the price, yield, value, or volatility of 
     any security or any group or index of securities, or any 
     interest therein, other than interest rate or currency;
       ``(B) is dependent on the occurrence, nonoccurrence, or the 
     extent of the occurrence of an event or contingency 
     associated with a potential financial, economic, or 
     commercial consequence that is related to or based on a 
     security, an interest in a security, an issuer of a security, 
     or group or index of securities, or interests in securities 
     or issuers of securities, or based on the value of any of the 
     foregoing;
       ``(C) provides for the purchase or sale of 1 or more 
     securities on a contingent basis, whether physically or cash 
     settled, if such

[[Page S9658]]

     agreement, contract, or transaction predicates such purchase 
     or sale on the occurrence of a bona fide contingency that 
     might reasonably be expected to affect or be affected by the 
     creditworthiness of a party other than a party to the 
     agreement, contract, or transaction; or
       ``(D) allows for settlement of the swap by delivery of, or 
     by reference to, any security.
       ``(71) Significant security-based derivatives market 
     participant.--The term `significant security-based 
     derivatives market participant' means--
       ``(A) any person (other than an investment company 
     registered under the Investment Company Act of 1940) that is 
     engaged in the business of purchasing or selling one or more 
     security-based swaps (or security derivatives, as the 
     Commission determines by rule, regulation, or order) for such 
     person's own account or for others, or making a market in 
     security-based swaps (or security derivatives, as the 
     Commission determines by rule, regulation, or order), the 
     purchases or sales of which are not solely for the purpose of 
     managing the risk associated with--
       ``(i) an asset that is or is anticipated to be owned, 
     produced, manufactured, processed, or merchandised;
       ``(ii) potential changes in the value of services to be 
     purchased or provided, or anticipated to be purchased or 
     provided; or
       ``(iii) a liability incurred or anticipated to be incurred 
     by such person that is not, or is not related to, a security-
     based swap; or
       ``(B) any other person designated by the Commission, by 
     rule, regulation, or order, after consultation with the 
     Commodity Futures Trading Commission, as necessary or 
     appropriate in the public interest, the protection of 
     investors, or in furtherance of the purposes of this title.
       ``(72) Trade repository.--The term `trade repository' means 
     any person that collects, calculates, processes, or prepares 
     information with respect to transactions or positions in 
     security-based swaps or security derivatives by the 
     Commission under section 17C(d)(1)(A)(ii).''.
       (b) Definitions Under the Securities Act of 1933.--Section 
     2(a) of the Securities Act of 1933 (15 U.S.C. 77b(a)) is 
     amended--
       (1) in paragraph (1), by inserting ``security-based swap,'' 
     after ``security future,'';
       (2) in paragraph (3), by adding at the end the following: 
     ``Any offer or sale of a security-based swap (or other 
     security derivative as the Commission determines by rule or 
     regulation) by or on behalf of the issuer of the securities 
     upon which such security-based swap or security derivative is 
     based or is referenced, an affiliate of the issuer, or an 
     underwriter, shall constitute a contract for sale of, sale 
     of, offer for sale, or offer to sell such securities.''; and
       (3) by adding at the end the following:
       ``(17) The terms `derivative', `swap', `security 
     derivative' and `security-based swap' have the same meanings 
     as in paragraphs (65), (66), (69), and (70), respectively, of 
     section 3(a) of the Securities Exchange Act of 1934.
       ``(18) The terms `purchase' or `sale' of a security-based 
     swap, shall be deemed to mean the execution, termination 
     (prior to its scheduled maturity date), assignment, exchange, 
     or similar transfer or conveyance of, or extinguishing of 
     rights or obligations under, a security-based swap, as the 
     context may require.''.

     SEC. 102. RATIONALIZATION OF FINANCIAL PRODUCT OVERSIGHT.

       (a) Repeal of Swap Agreement Exclusion.--
       (1) Repeal of laws.--The following provisions of law are 
     repealed:
       (A) Sections 206A, 206B, and 206C of the Gramm-Leach-Bliley 
     Act (15 U.S.C. 78c note).
       (B) Section 2A of the Securities Act of 1933 (15 U.S.C. 
     77b-1).
       (C) Section 17(d) of the Securities Act of 1933 (15 U.S.C. 
     77q(d)).
       (D) Section 3A of the Securities Exchange Act of 1934 (15 
     U.S.C. 78c-1).
       (E) Section 9(i) of the Securities Exchange Act of 1934 (15 
     U.S.C. 78i(i)).
       (F) Section 15(i) of the Securities Exchange Act of 1934 
     (15 U.S.C. 78o(i)), as added by section 303(f) of the 
     Commodity Futures Modernization Act of 2000 (Public Law 106-
     554; 114 Stat. 2763A-455).
       (G) Section 16(g) of the Securities Exchange Act of 1934 
     (15 U.S.C. 78p(g)).
       (H) Section 20(f) of the Securities Exchange Act of 1934 
     (15 U.S.C. 78t(f)).
       (I) Section 21A(g) of the Securities Exchange Act of 1934 
     (15 U.S.C. 78u-1(g)).
       (2) Conforming amendment to the securities act of 1933.--
     Section 17(a) of the Securities Act of 1933 (15 U.S.C. 
     77q(a)) is amended by striking ``or any security-based swap 
     agreement (as defined in section 206B of the Gramm-Leach-
     Bliley Act)''.
       (3) Conforming amendments to the securities exchange act of 
     1934.--The Securities Exchange Act of 1934 (15 U.S.C. 78a et 
     seq.) is amended--
       (A) in section 9(a) (15 U.S.C. 78i(a))--
       (i) in paragraph (1)--

       (I) by striking ``For the'' and inserting ``for the''; and
       (II) by striking the period at the end an inserting a 
     semicolon; and

       (ii) by striking paragraphs (2) through (5) and inserting 
     the following:
       ``(2) to effect, alone or with 1 or more other persons, a 
     series of transactions in any security registered on a 
     national securities exchange or in connection with any 
     security-based swap (or security derivative, as the 
     Commission determines by rule, regulation, or order) with 
     respect to such security creating actual or apparent active 
     trading in such security, or raising or depressing the price 
     of such security, for the purpose of inducing the purchase or 
     sale of such security by others;
       ``(3) if a broker or dealer, or other person selling or 
     offering for sale or purchasing or offering to purchase the 
     security to induce the purchase or sale of any security 
     registered on a national securities exchange or any security-
     based swap (or security derivative, as the Commission 
     determines by rule, regulation, or order) with respect to 
     such security by the circulation or dissemination in the 
     ordinary course of business of information to the effect that 
     the price of any such security will or is likely to rise or 
     fall because of market operations of any 1 or more persons 
     conducted for the purpose of raising or depressing the price 
     of such security;
       ``(4) if a broker or dealer, or the person selling or 
     offering for sale or purchasing or offering to purchase the 
     security, to make, regarding any security registered on a 
     national securities exchange or any security-based swap (or 
     security derivative, as the Commission determines by rule, 
     regulation, or order) with respect to such security, for the 
     purpose of inducing the purchase or sale of such security or 
     such security-based swap (or security derivative, as the 
     Commission determines by rule, regulation, or order), any 
     statement which was, at the time and in the light of the 
     circumstances under which it was made, false or misleading 
     with respect to any material fact, and which the broker, 
     dealer, or such person knew or had reasonable grounds to 
     believe was false or misleading;
       ``(5) for a consideration, received directly or indirectly 
     from a broker or dealer, or other person selling or offering 
     for sale or purchasing or offering to purchase the security, 
     to induce the purchase of any security registered on a 
     national securities exchange or any security-based swap (or 
     security derivative, as the Commission determines by rule, 
     regulation, or order) with respect to such security by the 
     circulation or dissemination of information to the effect 
     that the price of any such security will or is likely to rise 
     or fall because of the market operations of any one or more 
     persons conducted for the purpose of raising or depressing 
     the price of such security; or'';
       (B) in section 10(b) (15 U.S.C. 78j(b))--
       (i) by striking ``or any securities-based swap agreement 
     (as defined in section 206B of the Gramm-Leach-Bliley 
     Act),''; and
       (ii) by striking ``Rules promulgated under subsection (b)'' 
     and all that follows through ``as they apply to securities'';
       (C) in section 15(c)(1) (15 U.S.C. 78o(c)(1))--
       (i) in subparagraph (A) by striking ``, or any security-
     based swap agreement (as defined in section 206B of the 
     Gramm-Leach-Bliley Act),''; and
       (ii) in each of subparagraphs (B) and (C), by striking 
     ``swap agreement (as defined in section 206B of the Gramm-
     Leach-Bliley Act)'' each place that term appears and 
     inserting ``swap'';
       (D) in section 16(a)(2)(C) (15 U.S.C. 78p(a)(2)(C)), by 
     striking ``swap agreement (as defined in section 206(b) of 
     the Gramm-Leach-Bliley Act)'' and inserting ``swap (or 
     security derivative, as the Commission determines by rule, 
     regulation, or order)'';
       (E) in section 16(a)(3)(B) (15 U.S.C. 78p(a)(3)(B)), by 
     striking ``security-based swap agreement'' and inserting 
     ``swap (or security derivative, as the Commission determines 
     by rule, regulation, or order)'';
       (F) in section 16(b) (15 U.S.C. 78p(b))--
       (i) by striking ``(as defined in section 206B of the Gramm-
     Leach-Bliley Act)'' each place that term appears and 
     inserting ``; (or security derivative, as the Commission 
     determines by rule, regulation, or order)''; and
       (ii) by striking ``swap agreement'' each place that term 
     appears and inserting ``swap (or security derivative, as the 
     Commission determines by rule, regulation, or order)'';
       (G) in section 20(d) (15 U.S.C. 78t(d)), by striking ``or 
     security-based swap agreement (as defined in section 206B of 
     the Gramm-Leach-Bliley Act) with respect to such security'' 
     and inserting ``, security futures product or swap''; and
       (H) in section 21A(a)(1) (15 U.S.C. 78u-1(a)(1)), by 
     striking ``or security-based swap agreement (as defined in 
     section 206B of the Gramm-Leach-Bliley Act)''.
       (b) Rationalization of Security Futures Oversight.--
       (1) Amendments to the securities exchange act of 1934.--The 
     Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is 
     amended--
       (A) in section 3(a) of (15 U.S.C. 78c(a)), by striking 
     paragraph (55) and inserting the following:
       ``(55) The term `security future'--
       ``(A) means a contract of sale for future delivery of a 
     security or an index of securities, including any interest 
     therein or based on the value thereof, or based on any 
     financial, economic, or commercial occurrence, extent of an 
     occurrence, contingency, or consequence that is related to or 
     based on a security, an interest in a security, an issuer of 
     a security, or group or index of securities, or interests in 
     securities or issuers of securities, or based on the value of 
     any of the foregoing, other than an exempted security under 
     paragraph (12), as in effect on the date of enactment of the 
     Futures Trading Act of 1982 (other than a municipal security, 
     under paragraph (29), as in effect on the date of enactment 
     of the Futures Trading Act of 1982); and

[[Page S9659]]

       ``(B) does not include any security-based swap.'';
       (B) in section 6 (15 U.S.C. 78f)--
       (i) by striking subsections (g), (i), and (k);
       (ii) by redesignating subsections (h) and (j) as 
     subsections (g) and (h), respectively; and
       (iii) in subsection (g), as so redesignated--

       (I) in paragraph (2)--

       (aa) by striking ``(A)''; and
       (bb) by striking ``and (B) meet the criteria specified in 
     section 2(a)(1)(D)(i) of the Commodity Exchange Act'';

       (II) in paragraph (3)(A), by striking ``security of a 
     narrow-based security'' and inserting ``of an'';
       (III) in paragraph (3)(D), by striking ``and the Commodity 
     Futures Trading Commission jointly determine'' and inserting 
     ``determines'';
       (IV) in paragraph (3)(G), by striking ``the prohibition 
     against dual trading in section 4j of the Commodity Exchange 
     Act (7 U.S.C. 6j) and the rules and regulations thereunder 
     or'';
       (V) in paragraph (4)(A), by striking ``and the Commodity 
     Futures Trading Commission, by rule, regulation, or order, 
     may jointly'' and inserting ``may, by rule, regulation, or 
     order,'';
       (VI) in paragraph (4)(B), by striking ``and the Commodity 
     Futures Trading Commission, by order, may jointly'' and 
     inserting ``may, by order,'';
       (VII) in paragraph (6)--

       (aa) by striking ``and the Commodity Futures Trading 
     Commission'';
       (bb) by striking ``jointly''; and
       (cc) by striking ``and the Commodity Exchange Act''; and

       (VIII) in paragraph (7)--

       (aa) by striking subparagraph (A) and inserting the 
     following:
       ``(A) Notwithstanding paragraph (2), until the compliance 
     date, a national securities exchange or national securities 
     association that is registered pursuant to section 15A(a) may 
     trade a security futures product that does not conform with 
     any listing standard promulgated to meet the requirement 
     specified in subparagraph (E) of paragraph (3).''; and
       (bb) in subparagraph (B), by striking ``and the Commodity 
     Futures Trading Commission shall jointly'' and inserting 
     ``shall'';
       (C) in section 7 (15 U.S.C. 78g)--
       (i) in subsection (c)(2)(A)(ii), by striking ``and the 
     Commodity Futures Trading Commission shall jointly'' and 
     inserting ``shall'';
       (ii) in subsection (c)(2)(A), by striking ``and the 
     Commodity Futures Trading Commission have not jointly'' and 
     inserting ``has not''; and
       (iii) in subsection (c)(2)(B)--

       (I) by striking ``and the Commodity Futures Trading 
     Commission shall jointly'' and inserting ``shall''; and
       (II) by striking ``and the Commodity Futures Trading 
     Commission jointly deem'' and inserting ``deems'';

       (D) in section 11A (15 U.S.C. 78k-1), by striking 
     subsection (e);
       (E) in section 12(k) (15 U.S.C. 78l(k))--
       (i) in paragraph (1), by striking ``If the actions 
     described in subparagraph (A) or (B) involve a security 
     futures product, the Commission shall consult with and 
     consider the views of the Commodity Futures Trading 
     Commission.''; and
       (ii) in paragraph (2)(B), by striking ``If the actions 
     described in subparagraph (A) involve a security futures 
     product, the Commission shall consult with and consider the 
     views of the Commodity Futures Trading Commission.'';
       (F) in section 15 (15 U.S.C. 78o)--
       (i) in subsection (b), by striking paragraphs (11) and 
     (12); and
       (ii) in subsection (c)(3)--

       (I) by striking ``(A) No'' and inserting ``No''; and
       (II) by striking subparagraph (B);

       (G) in section 15A (15 U.S.C. 78o-3), by striking 
     subsections (k), (l), and (m);
       (H) in section 17(b) (15 U.S.C. 78q(b))--
       (i) in paragraph (1)--

       (I) by striking ``(1)'' and all that follows through ``All 
     records'' and inserting ``All records'';
       (II) by striking ``of a--'' and all that follows through 
     ``(A) registered'' and inserting ``of a registered''; and
       (III) by striking ``; or'' and all that follows through the 
     end of subparagraph (B) and inserting a period; and

       (ii) by striking paragraphs (2) through (4);
       (I) in section 17A(b) (15 U.S.C. 78q-1(b))--
       (i) by striking paragraph (7); and
       (ii) by redesignating paragraph (8) as paragraph (7);
       (J) in section 19 (15 U.S.C. 78s)--
       (i) in subsection (b)--

       (I) by striking paragraphs (7) and (9); and
       (II) by redesignating paragraph (8) as paragraph (7); and

       (ii) in subsection (d), by striking paragraph (3);
       (K) in section 21 (15 U.S.C. 78u), by striking subsection 
     (i); and
       (L) in section 28(e) (15 U.S.C. 78bb(e)), by striking 
     paragraph (4).
       (2) Conforming amendments to the securities act of 1933.--
     The Securities Act of 1933 (15 U.S.C. 77 et seq.) is 
     amended--
       (A) in section 2(a) (15 U.S.C. 77b(a)), by striking 
     paragraph (16) and inserting the following:
       ``(16) The terms `security future' and `security futures 
     product' have the same meanings as in sections 3(a)(55) and 
     3(a)(56), respectively, of the Securities Exchange Act of 
     1934.''; and
       (B) in section 3(a)(14)(A) (15 U.S.C. 77c(a)(14)(A)), by 
     striking ``or exempt from registration under subsection 
     (b)(7) of such section 17A''.
       (3) Conforming amendment to the investment company act of 
     1940.--Section 2(a)(52) of the Investment Company Act of 1940 
     (15 U.S.C. 80a-2(a)(52)) is amended to read as follows:
       ``(52) The term `security future' has the same meaning as 
     in section 3(a)(55) of the Securities Exchange Act of 
     1934.''.
       (4) Conforming amendment to the investment advisers act of 
     1940.--Section 202(a)(27) of the Investment Advisers Act of 
     1940 (15 U.S.C. 80b-2(a)(27)) is amended to read as follows:
       ``(27) The term `security future' has the same meaning as 
     in section 3(a)(55) of the Securities Exchange Act of 
     1934.''.
       (5) Conforming amendments to the securities investor 
     protection act of 1970.--The Securities Investor Protection 
     Act of 1970 (15 U.S.C. 78aaa et seq.) is amended--
       (A) in section 3(a)(2)(A) (15 U.S.C. 78ccc(a)(2)(A))--
       (i) in clause (i), by inserting ``and'' after the semicolon 
     at the end;
       (ii) in clause (ii), by striking ``; and'' and inserting a 
     period; and
       (iii) by striking clause (iii); and
       (B) in section 16(14) (15 U.S.C. 78lll(14)), by striking 
     ``section 3(a)(55)(A)'' and inserting ``section 3(a)(55)''.
       (c) Clarification of the Status of Event Contracts.--
       (1) Amendments to the securities exchange act of 1934.--
     Section (3)(a)(10) of the Securities Exchange Act of 1934 (15 
     U.S.C. 78c(a)(10) is amended--
       (A) by striking ``term `security' means any note'' and 
     inserting the following: ``term `security'--
       ``(A) means--
       ``(i) any note'';
       (B) by striking ``or any certificate'' and inserting the 
     following: ``; or
       ``(ii) any certificate''; and
       (C) by striking ``any of the foregoing, but shall not'' and 
     inserting the following: ``any security described in clause 
     (i); or
       ``(iii) any agreement, contract, or transaction that is 
     associated with a financial, economic, or commercial 
     occurrence, extent of an occurrence, contingency, or 
     consequence that is related to or based on a security, an 
     interest in a security, an issuer of a security, or group or 
     index of securities, or interests in securities or issuers of 
     securities, or based on the value of any of the foregoing or 
     any security described in clause (i) or (ii); and
       ``(B) does not''.
       (2) Amendments to the securities act of 1933.--Section 
     (2)(a)(1) of the Securities Act of 1933 (15 U.S.C. 77b(a)(1)) 
     is amended--
       (A) by striking ``means any note'' and inserting the 
     following: ``means--
       ``(A) any note'';
       (B) by striking ``, or any certificate'' and inserting the 
     following: ``; or
       ``(B) any certificate''; and
       (C) by striking ``any of the foregoing.'' and inserting the 
     following: ``any security described in subparagraph (A); or
       ``(C) any agreement, contract, or transaction that is 
     associated with a financial, economic, or commercial 
     occurrence, extent of an occurrence, contingency, or 
     consequence that is related to or based on a security, an 
     interest in a security, an issuer of a security, or group or 
     index of securities, or interests in securities or issuers of 
     securities, or based on the value of any of the foregoing or 
     any security described in subparagraph (A) or (B).''.

     SEC. 103. REQUIRED CLEARING OF STANDARDIZED DERIVATIVES 
                   THROUGH CENTRAL COUNTERPARTIES AND THE USE OF 
                   TRADE REPOSITORIES.

       The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) 
     is amended by inserting after section 17B (15 U.S.C. 78q-2) 
     the following new section:

     ``SEC. 17C. USE OF CLEARING AGENCIES AND TRADE REPOSITORIES 
                   FOR DERIVATIVES TRANSACTIONS.

       ``(a) Findings.--Congress finds that--
       ``(1) the proliferation of over-the-counter security-based 
     swaps poses unacceptable risks to the financial system;
       ``(2) clearing standardized security-based swaps through 
     well-regulated central counterparties would reduce systemic 
     risk in the financial system;
       ``(3) the markets for standardized security-based swaps 
     suffer from a lack of reliable and accurate transaction 
     information that is available to the public, investors, and 
     regulators; and
       ``(4) weaknesses in the regulation of markets for 
     standardized security-based swaps have detracted from the 
     efficiency and transparency of trading in such markets and 
     hampered the surveillance and oversight of such markets.
       ``(b) Purposes.--The purposes of this section are--
       ``(1) to establish well-regulated markets for standardized 
     security-based swaps to promote efficiency and transparency 
     of trading and enhance the surveillance and oversight of such 
     markets; and
       ``(2) to promote the public interest, the protection of 
     investors, and the maintenance of fair and orderly markets to 
     assure--
       ``(A) the prompt and accurate clearance and settlement of 
     transactions in standardized security-based swaps;
       ``(B) the prompt and accurate reporting of transactions in 
     security-based swaps to a trade repository or a registered 
     clearing agency;

[[Page S9660]]

       ``(C) the establishment of linked or coordinated facilities 
     for clearance and settlement of transactions in securities, 
     securities options, contracts of sale for future delivery and 
     options thereon, commodity options, and derivatives;
       ``(D) availability to the public, investors, and regulators 
     of reliable and accurate quotation and transaction 
     information in security-based swaps;
       ``(E) economically efficient execution of transactions in 
     security-based swaps; and
       ``(F) fair competition among markets in the trading of 
     security-based swaps.
       ``(c) Use of Derivatives Clearing Agencies.--
       ``(1) In general.--Any person that is a party to a 
     security-based swap (or security derivative, as the 
     Commission determines by rule, regulation, or order) that the 
     Commission determines is `standardized' shall submit such 
     instrument for clearing to a registered clearing agency 
     within the period specified by rule of the Commission.
       ``(2) Definition of `standardized'.--
       ``(A) In general.--The Commission shall, by rule, define 
     the term `standardized' for purposes of this section.
       ``(B) Factors.--In defining the term `standardized', the 
     Commission shall--
       ``(i) be consistent with the public interest, the 
     protection of investors, the safeguarding of securities and 
     funds, the maintenance of fair competition among market 
     participants and among clearing agencies, and the purposes of 
     this section;
       ``(ii)(I) consult with, and consider the views of, the 
     Commodity Futures Trading Commission and the Board of 
     Governors of the Federal Reserve System; and
       ``(II) seek to maintain comparability, to the maximum 
     extent practicable, with the definition of the Commodity 
     Futures Trading Commission of the term `standardized' for 
     purposes of section 4r of the Commodity Exchange Act; and
       ``(iii) to the extent applicable to a particular security-
     based swap or security derivative or class of security-based 
     swaps or security derivatives, consider--

       ``(I) whether a clearing agency is prepared to clear the 
     security-based swap or security derivative, and such clearing 
     agency has in place effective risk management systems;
       ``(II) the availability or ability to facilitate standard 
     documentation of terms of the security-based swap or security 
     derivative;
       ``(III) the liquidity of the security-based swap or 
     security derivative and its underlying security, security of 
     a reference entity, or group or index thereof;
       ``(IV) the ability to value the security-based swap or 
     security derivative, underlying security, or security of a 
     reference entity, or group or index thereof consistently with 
     an accepted pricing methodology, including the availability 
     of intraday prices; and
       ``(V) such other factors as are consistent with the 
     purposes of this section.

       ``(3) Exemption authority.--
       ``(A) In general.--The Commission by rule or order, as the 
     Commission deems necessary or appropriate in the public 
     interest or for the protection of investors, may 
     conditionally or unconditionally exempt from the requirements 
     of this subsection and the rules issued under this 
     subsection, any person, transaction, or security.
       ``(B) Prior consultation with the commodity futures trading 
     commission and the board of governors of the federal reserve 
     system.--
       ``(i) Consultation.--Before acting by rule or order to 
     exempt any person, transaction, or security from the 
     requirements of this subsection or the rules issued under 
     this subsection, the Commission shall consult with, and 
     consider the views of, the Commodity Futures Trading 
     Commission and the Board of Governors of the Federal Reserve 
     System concerning whether such exemption is necessary and 
     appropriate for the reduction of risk and in the public 
     interest.
       ``(ii) Prohibition on issuance.--Not later than 45 days 
     prior to issuing any exemption under this subparagraph, the 
     Commission shall send a notice to the Commodity Futures 
     Trading Commission and the Board of Governors describing such 
     exemption. If either the Commodity Futures Trading Commission 
     or the Board of Governors issues a finding under clause (i) 
     that such an exemption does not meet the standard described 
     in clause (i), the Commission may not issue such exemption.
       ``(iii) Deadline.--Any finding by the Commodity Futures 
     Trading Commission or the Board of Governors of the Federal 
     Reserve System shall be made and provided in writing to the 
     Commission not later than 30 days after the date of receipt 
     of notice of a proposed exemption by the Commission.
       ``(iv) Nondelegation.--Action by the Commodity Futures 
     Trading Commission or the Board of Governors under this 
     subparagraph may not be delegated.
       ``(d) Trade Repositories.--
       ``(1) Use of trade repositories.--
       ``(A) In general.--Any person that enters into or effects a 
     transaction in a security-based swap (or security derivative, 
     as the Commission determines by rule, regulation, or order) 
     shall submit such transaction for clearing to a registered 
     clearing agency or report such transaction to a trade 
     repository registered in accordance with this subsection 
     within the period specified by rule of the Commission.
       ``(B) Required reporting authorized.--The Commission may, 
     by rule, require any person to report to any registered 
     clearing agency and registered trade repository such 
     transaction information as the Commission deems necessary or 
     appropriate, to permit such clearing agency or trade 
     repository to meet the purposes of this section.
       ``(C) Exemption authority.--The Commission by rule, 
     regulation, or order, as the Commission deems consistent with 
     the public interest or the protection of investors, may 
     conditionally or unconditionally exempt from the requirements 
     of this paragraph and the rules issued under this paragraph 
     any person, transaction, or security that enters into or 
     effects a transaction in a security or class of securities.
       ``(2) Registration.--A trade repository may register for 
     purposes of this subsection by filing with the Commission an 
     application in such form as the Commission, by rule, may 
     prescribe, containing the rules of the trade repository and 
     such other information and documentation as the Commission, 
     by rule, may prescribe as necessary or appropriate in the 
     public interest, for the protection of investors, or for the 
     prompt and accurate collection, calculation, processing, and 
     preparation of information regarding security-based swaps or 
     security derivatives.
       ``(3) Commission procedures for applications.--
       ``(A) Notice.--On the filing of an application for 
     registration pursuant to paragraph (2), the Commission shall 
     publish notice of the filing and afford interested persons an 
     opportunity to submit written data, views, and arguments 
     concerning such application.
       ``(B) Actions.--Not later than 90 days after the date of 
     publication of a notice under subparagraph (A) (or within 
     such longer period as to which the applicant consents), the 
     Commission shall--
       ``(i) by order, grant such registration; or
       ``(ii) institute proceedings to determine whether 
     registration should be denied.
       ``(C) Procedure for denials.--
       ``(i) In general.--Proceedings instituted under 
     subparagraph (B)(ii) shall--

       ``(I) include notice of the grounds for denial under 
     consideration and provide an opportunity for a hearing; and
       ``(II) be concluded not later than 180 days after the date 
     of publication of notice of the filing of the application for 
     registration under subparagraph (A).

       ``(ii) Actions.--At the conclusion of such proceedings, the 
     Commission, by order, shall grant or deny the subject 
     registration.
       ``(iii) Extensions.--The Commission may extend the time for 
     conclusion of the proceedings under subparagraph (C) for--

       ``(I) not longer than an additional 60 days, if the 
     Commission finds good cause for such extension and publishes 
     its reasons for so finding; or
       ``(II) for such longer period as to which the applicant 
     consents.

       ``(D) Standards for granting registration.--The Commission 
     shall grant the registration of a trade repository for 
     purposes of this section if the Commission finds that the 
     trade repository is so organized, and has the capacity to be 
     able--
       ``(i) to assure the prompt, accurate, and reliable 
     performance of its functions as a trade repository;
       ``(ii) to comply with the provisions of this title 
     (including rules and regulations issued under this title); 
     and
       ``(iii) to carry out the functions of a trade repository in 
     a manner consistent with the purposes of this section.
       ``(E) Standards for denial.--The Commission shall deny the 
     registration of a trade repository if the Commission does not 
     make the findings described in subparagraph (D).
       ``(4) Withdrawal of registration.--
       ``(A) In general.--A registered trade repository may, upon 
     such terms and conditions as the Commission deems necessary 
     or appropriate in the public interest or for the protection 
     of investors, withdraw from registration under this section 
     by filing a written notice of withdrawal with the Commission.
       ``(B) Cancellation.--If the Commission finds that any trade 
     repository is no longer in existence or has ceased to do 
     business in the capacity specified in its application for 
     registration under this section, the Commission, by order, 
     shall cancel the registration.
       ``(5) Access to trade repository services.--
       ``(A) Notice of prohibition or limitation.--
       ``(i) In general.--If any registered trade repository 
     prohibits or limits any person in respect of access to 
     services offered, directly or indirectly, by the trade 
     repository, the registered trade repository shall promptly 
     file notice of the prohibition with the Commission, in such 
     form and containing such information as the Commission, by 
     rule, may prescribe as necessary or appropriate in the public 
     interest or for the protection of investors.
       ``(ii) Review by commission.--Any prohibition or limitation 
     on access to services with respect to which a registered 
     trade repository is required by this subparagraph to file 
     notice shall be subject to review by the Commission, on its 
     own motion or upon application by any person aggrieved 
     thereby, filed not later than 30 days after such notice has 
     been filed with the Commission and received by such aggrieved 
     person, or within such longer period as the Commission may 
     determine.
       ``(iii) Stays.--Application to the Commission for review, 
     or the institution of review by the Commission on its own 
     motion, shall not operate as a stay of a prohibition or 
     limitation described in clause (i), unless the

[[Page S9661]]

     Commission otherwise orders, summarily or after notice and 
     opportunity for hearing on the question of a stay (which 
     hearing may consist solely of the submission of affidavits or 
     presentation of oral arguments).
       ``(iv) Expedited procedure.--The Commission shall establish 
     for appropriate cases an expedited procedure for 
     consideration and determination of the question of a stay.
       ``(B) Standards of review.--In any proceeding to review the 
     prohibition or limitation of any person in respect of access 
     to services offered by a registered trade repository--
       ``(i) if the Commission finds after notice and opportunity 
     for hearing, that such prohibition or limitation is 
     consistent with the provisions of this title and the rules 
     and regulations thereunder, and that such person has not been 
     discriminated against unfairly, the Commission, by order, 
     shall dismiss the proceeding; and
       ``(ii) if the Commission does not make any such finding, or 
     if it finds that such prohibition or limitation imposes any 
     burden on competition that is not necessary or appropriate in 
     furtherance of the purposes of this title, the Commission, by 
     order, shall set aside the prohibition or limitation and 
     require the registered trade repository to permit such person 
     access to the services offered by the registered trade 
     repository to which the prohibition or limitation applied.
       ``(6) Administrative proceeding authority.--If the 
     Commission finds, on the record after notice and opportunity 
     for hearing, that such action is necessary or appropriate in 
     the public interest, for the protection of investors, or 
     otherwise in furtherance of the purposes of this title and 
     that a registered trade repository has violated or is unable 
     to comply with any provision of this title or the rules or 
     regulations thereunder, the Commission, by order, may--
       ``(A) censure or place limitations upon the activities, 
     functions, or operations of any registered trade repository; 
     or
       ``(B) suspend for a period of not longer than 12 months or 
     revoke the registration of any such trade repository.
       ``(7) Rulemaking authority.--No registered trade repository 
     shall, directly or indirectly, engage in any activity as a 
     trade repository in contravention of such rules and 
     regulations as the Commission may prescribe as appropriate in 
     the public interest, for the protection of investors, or 
     otherwise in furtherance of the purposes of this title, 
     including to assure that all persons may obtain on terms that 
     are fair and reasonable and not unreasonably discriminatory 
     such transaction and position information for security-based 
     swaps and security derivatives as is disseminated by any 
     clearing agency or trade repository.
       ``(8) Consultation.--
       ``(A) In general.--Prior to adopting any rules applicable 
     to trade repositories pursuant to section 17(a), the 
     Commission shall consult with, and shall consider the views 
     of, the Commodity Futures Trading Commission.
       ``(B) Comparability.--The Commission and the Commodity 
     Futures Trading Commission shall seek to maintain 
     comparability, to the maximum extent practicable, of their 
     respective recordkeeping and reporting requirements for trade 
     repositories.
       ``(e) Timing.--The Commission may, by rule, specify the 
     date by which persons are required--
       ``(1) to submit transactions in standardized security-based 
     swaps and security derivatives for clearing to a clearing 
     agency pursuant to subsection (c); and
       ``(2) to submit transactions in security-based swaps and 
     security derivatives for clearing to a clearing agency or 
     report transactions in such instruments to a registered trade 
     repository pursuant to subsection (d).
       ``(f) Collection, Consolidation, and Dissemination of 
     Information on Transactions and Positions in Security-Based 
     Swaps and Security Derivatives.--
       ``(1) Commission action required.--The Commission shall, 
     consistent with the public interest, the protection of 
     investors, the maintenance of fair and orderly markets, and 
     the purposes of this section, use the authority of the 
     Commission under this title to facilitate--
       ``(A) the collection, consolidation, and dissemination of 
     information on transactions and positions in security-based 
     swaps and security derivatives; and
       ``(B) the establishment of coordinated facilities for the 
     consolidation of information on transactions and positions in 
     security-based swaps and security derivatives.
       ``(2) Actions required of registered entities.--The 
     Commission, by rule, regulation, or order is authorized to 
     require each clearing agency that clears or proposes to clear 
     transactions in security-based swaps and security 
     derivatives, and each trade repository registered or applying 
     to become registered under this section, in such form and 
     frequency as the Commission shall prescribe as necessary or 
     appropriate in the public interest, for the protection of 
     investors, or otherwise in furtherance of the purposes of 
     this title--
       ``(A) to disseminate certain transaction or position 
     information in security-based swaps and security derivatives; 
     and
       ``(B) to assure the prompt, accurate, reliable, and fair 
     collection, processing, distribution, and publication of 
     information with respect to transactions and positions, as 
     appropriate, cleared by such clearing agency or reported to 
     such registered trade repository.''.

     SEC. 104. PRUDENTIAL SUPERVISION AND REGULATION OF 
                   SIGNIFICANT SECURITY-BASED DERIVATIVES MARKET 
                   PARTICIPANTS AND INCENTIVES FOR TRADING ON 
                   REGULATED EXCHANGES.

       (a) Regulation of Significant Security-Based Derivatives 
     Market Participants.--The Securities Exchange Act of 1934 (15 
     U.S.C. 78a et seq.) is amended by inserting after section 15E 
     (15 U.S.C. 78o-7) the following:

     ``SEC. 15F. REGULATION OF SIGNIFICANT SECURITY-BASED 
                   DERIVATIVES MARKET PARTICIPANTS.

       ``(a) Registration by Significant Security-Based 
     Derivatives Market Participants.--It shall be unlawful for 
     any significant security-based derivatives market participant 
     to make use of the mails or any means or instrumentality of 
     interstate commerce to effect any transactions in, or to 
     induce or attempt to induce the purchase or sale of, any 
     security-based swap (or security derivative, as the 
     Commission determines by rule, regulation, or order), unless 
     such significant security-based derivatives market 
     participant has registered in accordance with subsection (b).
       ``(b) Manner of Registration of Significant Security-Based 
     Derivatives Market Participants.--
       ``(1) In general.--A significant security-based derivatives 
     market participant may register for purposes of this section 
     by filing with the Commission an application for 
     registration, in such form and containing such information 
     and documentation concerning such significant security-based 
     derivatives market participant and any persons associated 
     with such significant security-based derivatives market 
     participant as the Commission, by rule, regulation, or order 
     may prescribe as necessary or appropriate in the public 
     interest or for the protection of investors.
       ``(2) Commission action.--
       ``(A) Timing.--Not later than 45 days after the date of 
     filing of an application under paragraph (1) (or within such 
     longer period as to which the applicant consents), the 
     Commission shall--
       ``(i) by order, grant registration; or
       ``(ii) institute proceedings to determine whether 
     registration should be denied.
       ``(B) Commission proceedings.--Proceedings described in 
     subparagraph (A)(ii) shall--
       ``(i) include notice of the grounds for denial under 
     consideration and opportunity for hearing; and
       ``(ii) be concluded within 120 days of the date of the 
     filing of the application for registration.
       ``(C) Grant or denial.--At the conclusion of proceedings 
     under this paragraph, the Commission, by order, shall grant 
     or deny any application for registration.
       ``(D) Extension authorized.--The Commission may extend the 
     time for the conclusion of proceedings under this paragraph 
     for not longer than an additional 90 days if the Commission 
     finds good cause for such extension and publishes its reasons 
     for so finding, or for such longer period as to which the 
     applicant consents.
       ``(E) Conditions of grant or denial of applications.--The 
     Commission shall--
       ``(i) grant an application for registration of a 
     significant security-based derivatives market participant, if 
     the Commission finds that the requirements of this section 
     are satisfied; and
       ``(ii) deny such registration, if the Commission does not 
     make a finding described in clause (i), or finds that if the 
     applicant were so registered, its registration would be 
     subject to suspension or revocation under subsection (e).
       ``(3) Withdrawal authorized.--Any person that has filed an 
     application pursuant to paragraph (1) may, upon such terms 
     and conditions as the Commission deems necessary or 
     appropriate in the public interest, for the protection of 
     investors, or otherwise in furtherance of the purposes of 
     this title, withdraw such application by filing a written 
     withdrawal with the Commission.
       ``(c) Business Conduct Requirements.--
       ``(1) Prohibition.--It shall be unlawful for any 
     significant security-based derivatives market participant and 
     such other persons as the Commission may determine, by rule, 
     regulation, or order, to make use of the mails or any means 
     or instrumentality of interstate commerce to effect any 
     transaction in, or to induce or attempt to induce the 
     purchase or sale of, any security-based swap (or security 
     derivative, as the Commission determines by rule, regulation, 
     or order), unless such person complies with such business 
     conduct requirements as the Commission and the Commodity 
     Futures Trading Commission, in consultation with the 
     appropriate regulatory authorities, may jointly prescribe, by 
     rule, regulation, or order, as necessary or appropriate in 
     the public interest, for the protection of investors, and 
     otherwise in furtherance of the purposes of this title.
       ``(2) Content.--Business conduct requirements under 
     paragraph (1) shall--
       ``(A) establish the standard of care required for a 
     significant security-based derivatives market participant and 
     such other persons to verify that any counterparty meets the 
     eligibility standards for an eligible contract participant or 
     qualified institutional buyer;

[[Page S9662]]

       ``(B) require disclosure by the significant security-based 
     derivatives market participant and such other persons to any 
     counterparty to the transaction of--
       ``(i) material product-specific information about the risks 
     and characteristics of the security-based swap (or security 
     derivative, as the Commission determines by rule, regulation, 
     or order);
       ``(ii) the source and amount of any fees or other material 
     remuneration that the significant security-based derivatives 
     market participant and such other persons would directly or 
     indirectly expect to receive in connection with the security-
     based swap (or security derivative, as the Commission 
     determines by rule, regulation, or order); and
       ``(iii) any other material incentives or conflicts of 
     interest that the significant security-based derivatives 
     market participant and such other persons may have in 
     connection with the security-based swap (or security 
     derivative, as the Commission determines by rule, regulation, 
     or order);
       ``(C) establish a minimum standard of conduct for a 
     significant security-based derivatives market participant and 
     such other persons with respect to any counterparty, other 
     than a qualified institutional buyer, for--
       ``(i) providing disclosure of the general risks and 
     characteristics of any security-based swap (or security 
     derivative, as the Commission determines by rule, regulation, 
     or order);
       ``(ii) communicating in a fair and balanced manner based on 
     principles of fair dealing and good faith;
       ``(iii) assessing the appropriateness of any security-based 
     swap (or security derivative, as the Commission determines by 
     rule, regulation, or order) for the counterparty, except 
     that, if the counterparty is an eligible contract 
     participant, the significant security-based derivatives 
     market participant may rely on a representation described in 
     clause (iv)(VI) that the transaction is appropriate for such 
     counterparty; and
       ``(iv) with respect to a counterparty that is an eligible 
     contract participant within the meaning of subclause (I) or 
     (II) of section 3(a)(67)(A)(vii), having a reasonable basis 
     to believe that the counterparty has an independent 
     representative that--

       ``(I) has sufficient knowledge to evaluate the transaction 
     and risks;
       ``(II) is not subject to a statutory disqualification;
       ``(III) is independent of the significant security-based 
     derivatives market participant;
       ``(IV) undertakes a duty to act in the best interests of 
     the counterparty it represents;
       ``(V) makes appropriate disclosures; and
       ``(VI) will provide written representations to the eligible 
     contract participant regarding fair pricing and the 
     appropriateness of the transaction;

       ``(D) require the availability of information about any 
     security or the issuer of any security referenced in a 
     security-based swap (or security derivative, as the 
     Commission determines by rule, regulation, or order), or upon 
     which such security-based swap (or security derivative, as 
     the Commission determines by rule, regulation, or order) is 
     based; and
       ``(E) establish such other standards and requirements as 
     the Commission, acting jointly with the Commodity Futures 
     Trading Commission and in consultation with the appropriate 
     regulatory authorities, may determine are necessary or 
     appropriate in the public interest, for the protection of 
     investors, or otherwise in furtherance of the purposes of 
     this title.
       ``(d) Statutory Disqualification.--Except to the extent 
     otherwise specifically provided by rule, regulation, or order 
     of the Commission, it shall be unlawful for a significant 
     derivatives market participant to permit any associated 
     person of such significant derivatives market participant who 
     is subject to a statutory disqualification to effect or be 
     involved in effecting transactions in security-based swaps 
     (or security derivatives, as the Commission determines by 
     rule, regulation, or order) on behalf of such significant 
     derivatives market participant, if such significant 
     derivatives market participant knew, or in the exercise of 
     reasonable care should have known, of such statutory 
     disqualification.
       ``(e) Administrative Proceeding Authority.--
       ``(1) In general.--The Commission, by order, shall censure, 
     place limitations on the activities, functions, or operations 
     of, or reject the filing of any significant security-based 
     derivatives market participant that has registered with the 
     Commission pursuant to subsection (b) if it finds, on the 
     record after notice and opportunity for hearing, that such 
     action is in the public interest and that such significant 
     security-based derivatives market participant, or any person 
     associated with such significant security-based derivatives 
     market participant effecting or involved in effecting 
     transactions in security-based swaps (or security 
     derivatives, as the Commission determines by rule, 
     regulation, or order) on behalf of such significant security-
     based derivatives market participant, whether prior or 
     subsequent to becoming so associated--
       ``(A) has committed or omitted any act, or is subject to an 
     order or finding, enumerated in subparagraph (A), (D), or (E) 
     of section 15(b)(4);
       ``(B) has been convicted of any offense specified in 
     subparagraph (B) of section 15(b)(4) during the 10-year 
     period preceding the date of commencement of the proceedings 
     under this paragraph;
       ``(C) is enjoined from any action, conduct, or practice 
     specified in section 15(b)(4)(C);
       ``(D) is subject to an order or a final order specified in 
     subparagraph (F) or (H), respectively, of section 15(b)(4); 
     or
       ``(E) has been found by a foreign financial regulatory 
     authority to have committed or omitted any act, or violated 
     any foreign statute or regulation, enumerated in section 
     15(b)(4)(G).
       ``(2) Associated persons.--With respect to any person who 
     is associated, who is seeking to become associated, or at the 
     time of the alleged misconduct, who was associated or was 
     seeking to become associated, with a significant security-
     based derivatives market participant for the purpose of 
     effecting or being involved in effecting any security-based 
     swaps (or security derivatives, as the Commission determines 
     by rule, regulation, or order) on behalf of such significant 
     security-based derivatives market participant, the 
     Commission, by order, shall censure, place limitations on the 
     activities or functions of such person, or suspend for a 
     period of not longer than 12 months, or bar such person from 
     being associated with a significant security-based 
     derivatives market participant, if the Commission finds, on 
     the record after notice and opportunity for a hearing, that 
     such action is in the public interest, and that such person--
       ``(A) has committed or omitted any act, or is subject to an 
     order or finding, enumerated in subparagraph (A), (D), or (E) 
     of section 15(b)(4);
       ``(B) has been convicted of any offense specified in 
     section 15(b)(4)(B) during the 10-year period preceding the 
     date of commencement of the proceedings under this paragraph;
       ``(C) is enjoined from any action, conduct, or practice 
     specified in section 15(b)(4)(C);
       ``(D) is subject to an order or a final order specified in 
     subparagraph (F) or (H), respectively, of section 15(b)(4); 
     or
       ``(E) has been found by a foreign financial regulatory 
     authority to have committed or omitted any act, or violated 
     any foreign statute or regulation, enumerated in section 
     15(b)(4)(G).
       ``(3) Additional prohibitions.--It shall be unlawful--
       ``(A) for any person as to whom an order under paragraph 
     (2) is in effect, without the consent of the Commission, 
     willfully to become, or to be, associated with a significant 
     security-based derivatives market participant in 
     contravention of such order; or
       ``(B) for any significant security-based derivatives market 
     participant to permit such a person, without the consent of 
     the Commission, to become or remain, a person associated with 
     the significant security-based derivatives market participant 
     in contravention of an order under paragraph (2), if such 
     significant security-based derivatives market participant 
     knew, or in the exercise of reasonable care should have 
     known, of the order.
       ``(f) Capital and Margin Requirements.--
       ``(1) In general.--It shall be unlawful for any person to 
     conduct business as a significant security-based derivatives 
     market participant, unless such person meets at all times 
     such minimum capital and margin requirements as the 
     appropriate regulatory authorities shall jointly prescribe, 
     by rule or regulation, as necessary or appropriate in the 
     public interest or for the protection of investors and 
     consistent with the purposes of this title to provide 
     safeguards with respect to the financial responsibility and 
     related practices of the significant security-based 
     derivatives market participant.
       ``(2) Capital considerations.--In setting capital 
     requirements for significant security-based derivatives 
     market participants, the appropriate regulatory authorities 
     shall consider, among other things--
       ``(A) the liquidity of each security-based swap (or 
     security derivative, as the Commission determines by rule, 
     regulation, or order), including whether such instrument is 
     traded on a liquid market, and whether it is centrally 
     cleared; and
       ``(B) whether the security-based swap (or security 
     derivative, as the Commission determines by rule, regulation, 
     or order) is used to offset or hedge another instrument or 
     asset owned by such significant security-based derivative 
     market participant.
       ``(3) Margin requirements.--The appropriate regulatory 
     authorities shall jointly prescribe margin requirements, 
     which may permit the use of non-cash collateral, that apply 
     to security-based swaps (or security derivatives, as the 
     Commission determines by rule, regulation, or order) entered 
     into by a significant security-based derivatives market 
     participant, as the appropriate regulatory authorities 
     jointly deem necessary or appropriate for the purpose of, 
     among other things--
       ``(A) preserving the financial integrity of markets trading 
     security-based swaps (or security derivatives); and
       ``(B) preventing systemic risk.
       ``(4) Commission rules.--Nothing in this section prevents 
     the Commission from prescribing capital and margin 
     requirements that are higher or more restrictive than the 
     joint rules adopted under this subsection for significant 
     security-based derivatives market participants for which it 
     is the appropriate regulatory authority.
       ``(g) Appropriate Regulatory Authority Defined.--For 
     purposes of this section, the term `appropriate regulatory 
     authority' means--

[[Page S9663]]

       ``(1) the appropriate Federal banking agency (as defined in 
     section 3 of the Federal Deposit Insurance Act (12 U.S.C. 
     1813)) with respect to a significant security-based 
     derivatives market participant that is an insured depository 
     institution (as defined in section 3 of the Federal Deposit 
     Insurance Act (12 U.S.C. 1813)), other than an affiliate of 
     an insured depository institution;
       ``(2) the Federal Housing Finance Agency, with respect to a 
     significant security-based derivatives market participant 
     that is a regulated entity (as defined in section 1301 of the 
     Federal Housing Enterprises Financial Safety and Soundness 
     Act of 1992 (12 U.S.C. 4502));
       ``(3) the Commodity Futures Trading Commission, with 
     respect to a significant security-based derivatives market 
     participant that is--
       ``(A) a futures commission merchant or an introducing 
     broker (as defined in paragraphs (20) and (23) of section 1a 
     of the Commodity Exchange Act, respectively), other than a 
     broker or dealer registered pursuant to section 15(b) of this 
     title (other than paragraph (11) thereof) or an affiliate of 
     an insured depository institution; or
       ``(B) a commodity pool operator or commodity trading 
     advisor (as defined in paragraphs (5) and (6) of section 1a 
     of the Commodity Exchange Act, respectively), other than an 
     affiliate of an insured depository institution; and
       ``(4) the Commission, with respect to any other significant 
     security-based derivatives market participant for which there 
     is not another appropriate regulatory authority otherwise 
     specified in this subsection.
       ``(h) Enforcement Authority.--Each appropriate regulatory 
     authority shall have sole authority to enforce compliance 
     with the rules adopted under subsection (f) in the case of 
     each significant security-based derivatives market 
     participant for which it is the appropriate regulatory 
     authority, as defined in subsection (g).''.
       (b) Exemption From Broker or Dealer Registration.--Section 
     15(b) of the Securities Exchange Act of 1934 (15 U.S.C. 
     78o(b)) is amended by adding at the end the following:
       ``(13) Exemption for significant security-based derivatives 
     market participants.--A person shall be exempt from the 
     registration requirements of this section, to the extent that 
     such person engages in transactions in security-based swaps, 
     if such person would otherwise be required to register under 
     this section only because such person effects transactions in 
     security-based swaps with eligible contract participants and 
     is a significant security-based derivatives market 
     participant that has registered in accordance with section 
     15F(b).''.

     SEC. 105. RECORDKEEPING AND REPORTING REQUIREMENTS FOR 
                   DERIVATIVES MARKET PARTICIPANTS.

       (a) Recordkeeping and Examination Requirements for 
     Security-Based Derivative Market Participants.--Section 17 of 
     the Securities Exchange Act of 1934 (15 U.S.C. 78q) is 
     amended by adding at the end the following:
       ``(l) Recordkeeping by Market Participants in Security-
     Based Swaps or Security Derivatives; Examinations.--
       ``(1) Recordkeeping.--
       ``(A) In general.--Effective not later than 180 days after 
     the date of enactment of this subsection, the Commission 
     shall, by rule, regulation, or order, require each 
     significant security-based derivatives market participant, 
     and such other persons as the Commission, by rule, 
     regulation, or order, determines, to create, keep current, 
     and maintain for prescribed periods such records, furnish 
     such copies thereof (and make and disseminate such reports) 
     relating to security-based swaps (or security derivatives, as 
     the Commission determines by rule, regulation, or order) to 
     the Commission, as necessary or appropriate in the public 
     interest, for the protection of investors, or otherwise in 
     furtherance of the purposes of this title.
       ``(B) Minimum requirements.--At a minimum, the actions of 
     the Commission under subparagraph (A) shall require, as 
     applicable, the creation and maintenance of client 
     information records, agreements, client ledger information, 
     trade blotters, memoranda of agreements to enter into 
     confirmations, position records, and communications relating 
     to transactions in security-based swaps (or security 
     derivatives, as the Commission determines by rule, 
     regulation, or order) and the reporting of transactions and 
     position data.
       ``(2) Examinations.--All records of significant security-
     based derivatives market participants and such other persons 
     described in paragraph (1) are subject at any time, or from 
     time to time, to such reasonable periodic, special, or other 
     examinations by representatives of the Commission, as the 
     Commission deems necessary or appropriate in the public 
     interest, for the protection of investors, or otherwise in 
     furtherance of the purposes of this title.''.
       (b) Reporting by Significant Security-Based Derivatives 
     Market Participants.--Section 13 of the Securities Exchange 
     Act of 1934 (15 U.S.C. 78m) is amended by adding at the end 
     the following new subsection:
       ``(m) Reporting by Significant Security-Based Derivatives 
     Market Participants.--
       ``(1) In general.--For the purpose of monitoring the impact 
     of transactions in security-based swaps and, as appropriate, 
     security derivatives, and for the purpose of otherwise 
     assisting the Commission in the enforcement of this title, 
     any significant security-based derivatives market participant 
     that purchases or sells security-based swaps (or security 
     derivatives, as the Commission determines by rule, 
     regulation, or order) shall report such information as the 
     Commission may, by rule, regulation, or order, prescribe as 
     necessary or appropriate in the public interest, for the 
     protection of investors, or otherwise in furtherance of the 
     purposes of this title.
       ``(2) Considerations.--In exercising its authority under 
     this subsection, the Commission shall take into account--
       ``(A) existing reporting systems;
       ``(B) the costs associated with reporting such information; 
     and
       ``(C) the relationship between the United States and 
     international securities and derivatives markets.
       ``(3) Limitation on disclosure.--
       ``(A) In general.--Notwithstanding any other provision of 
     law, the Commission may not be compelled to disclose any 
     information required by Commission rule, regulation, or order 
     to be reported to the Commission under this subsection.
       ``(B) Exception.--Nothing in this subsection shall--
       ``(i) authorize the Commission to withhold information from 
     Congress; or
       ``(ii) prevent the Commission from complying with--

       ``(I) a request for information from any other Federal 
     department or agency requesting information for purposes 
     within the scope of its jurisdiction; or
       ``(II) an order of a court of the United States in an 
     action brought by the United States or the Commission.

       ``(C) Treatment for title 5 purposes.--For purposes of 
     section 552 of title 5, United States Code, this subsection 
     shall be considered a statute described in subsection 
     (b)(3)(B) of such section 552.''.
       (c) Beneficial Ownership Reporting.--Section 13 of the 
     Securities Exchange Act of 1934 (15 U.S.C. 78m) is amended--
       (1) in subsection (d)(1), by inserting after ``Alaska 
     Native Claims Settlement Act,'' the following: ``or otherwise 
     becomes or is deemed to become a beneficial owner of any of 
     the foregoing, upon the purchase or sale of a security-based 
     swap or security derivative that the Commission may define, 
     by rule, and'';
       (2) in subsection (g)(1), by inserting after ``subsection 
     (d)(1) of this section'' the following: ``or otherwise 
     becomes or is deemed to become a beneficial owner of any 
     security of a class described in subsection (d)(1) upon the 
     purchase or sale of a security-based swap or security 
     derivative that the Commission may define, by rule''; and
       (3) in subsection (f)(1), by inserting after ``section 
     (13)(d)(1) of this title'' the following: ``, or otherwise 
     becomes or is deemed to become a beneficial owner of any 
     security of a class described in subsection (d)(1) upon the 
     purchase or sale of a security-based swap or security 
     derivative that the Commission may define, by rule,''.
       (d) Institutional Investment Manager Reporting.--Section 13 
     of the Securities Exchange Act of 1934 (15 U.S.C. 78m) is 
     amended--
       (1) in subsection (f)(1), by inserting before ``shall file 
     reports'' the following: ``or security-based swaps or 
     security derivatives that the Commission may define by rule, 
     having such values as the Commission may determine, by 
     rule''; and
       (2) in subsection (f)(3), by inserting before ``updated 
     as'' the following: ``and security-based swaps or security 
     derivatives that the Commission may define, by rule''.
       (e) Reporting by Corporate Insiders.--Section 16(f) of the 
     Securities Exchange Act of 1934 (15 U.S.C. 78p(f)) is amended 
     by inserting ``or security-based swaps'' after ``security 
     futures products''.
       (f) Recordkeeping by Trade Repositories.--Section 17(a)(1) 
     of the Securities Exchange Act of 1934 (15 U.S.C. 78q(a)(1)) 
     is amended by inserting ``registered trade repository,'' 
     after ``registered securities information processor,''.

     SEC. 106. PROHIBITION OF MARKET MANIPULATION, FRAUD, AND 
                   OTHER MARKET ABUSES.

       (a) Rulemaking Authority To Prevent Fraud, Manipulation, 
     and Deceptive Conduct in Security-Based Swaps and Security 
     Derivatives.--Section 9 of the Securities Exchange Act of 
     1934 (15 U.S.C. 78i), as amended by this Act, is amended by 
     adding at the end the following:
       ``(j) Deceptive Conduct in Security-Based Swaps and 
     Security Derivatives.--
       ``(1) In general.--It shall be unlawful for any person, 
     directly or indirectly, by the use of any means or 
     instrumentality of interstate commerce or of the mails, or of 
     any facility of any national securities exchange, to effect 
     any transaction in, or to induce or attempt to induce the 
     purchase or sale of, any security-based swap or security 
     derivative, in connection with which such person engages in 
     any fraudulent, deceptive, or manipulative act or practice, 
     makes any fictitious quotation, or engages in any 
     transaction, practice, or course of business which operates 
     as a fraud or deceit upon any person.
       ``(2) Rulemaking required.--The Commission shall, for 
     purposes of this subsection, by rule, regulation, or order, 
     define and prescribe means reasonably designed to prevent 
     transactions, acts, practices, and courses of business that 
     are fraudulent, deceptive, or manipulative, and fictitious 
     quotations.
       ``(3) Consultation.--In adopting rules under this 
     subsection, the Commission shall

[[Page S9664]]

     consult with the Commodity Futures Trading Commission and 
     seek to maintain comparability of such rules with similar 
     rules of the Commodity Futures Trading Commission.''.
       (b) Additions of Security-Based Swaps to Certain 
     Antimanipulation Provisions.--Section 9(b) of the Securities 
     Exchange Act of 1934 (15 U.S.C. 78i(b)) is amended by 
     striking paragraphs (1) through (3) and inserting the 
     following:
       ``(1) any transaction in connection with any security 
     whereby any party to such transaction acquires--
       ``(A) any put, call, straddle, or other option or privilege 
     of buying the security from or selling the security to 
     another without being bound to do so;
       ``(B) any security futures product on or related to the 
     security; or
       ``(C) any security-based swap involving the security or the 
     issuer of the security;
       ``(2) any transaction in connection with any security with 
     relation to which that person has, directly or indirectly, 
     any interest in any--
       ``(A) put, call, straddle, option, or privilege described 
     in paragraph (1);
       ``(B) security futures product described in paragraph (1); 
     or
       ``(C) security-based swap described in paragraph (1); or
       ``(3) any transaction in any security for the account of 
     any person who that person has reason to believe has, and who 
     actually has, directly or indirectly, any interest in any--
       ``(A) put, call, straddle, option, or privilege described 
     in paragraph (1);
       ``(B) security futures product with relation to such 
     security described in paragraph (1); or
       ``(C) any security-based swap involving such security or 
     the issuer of such security.''.
       (c) Position Limits and Position Accountability for 
     Security-Based Swaps or Security Derivatives.--The Securities 
     Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended by 
     inserting after section 10A the following new section:

     ``SEC. 10B. POSITION LIMITS AND POSITION ACCOUNTABILITY FOR 
                   SECURITY-BASED SWAPS OR SECURITY DERIVATIVES.

       ``(a) Rulemaking Authority.--
       ``(1) In general.--As a means reasonably designed to 
     prevent fraud or manipulation, the Commission, by rule, 
     regulation, or order, as necessary or appropriate in the 
     public interest, for the protection of investors, or 
     otherwise in furtherance of the purposes of this title, may--
       ``(A) prescribe requirements regarding the size of 
     positions that may be held by or on behalf of any person or 
     persons in any security-based swap (or security derivative, 
     as the Commission determines by rule, regulation, or order) 
     and any security on which such security-based swap (or 
     security derivative) is based or referenced, or as to which 
     the issuer of such security is referenced; and
       ``(B) require any person that effects transactions for his 
     own account or the account of others in any security-based 
     swap (or security derivative, as the Commission determines by 
     rule, regulation, or order) and any security on which such 
     security-based swap (or security derivative) is based or 
     referenced, or the issuer of such security is referenced, to 
     report such information as the Commission may prescribe 
     regarding any position or positions in security-based swaps 
     (or security derivatives) and any security on which such 
     security-based swap (or security derivative) is based or 
     referenced, or as to which the issuer of such security is 
     referenced.
       ``(2) Exemptions authorized.--The Commission, by rule, 
     regulation, or order, may conditionally or unconditionally 
     exempt any person or class of persons, any security-based 
     swap (or security derivative) or class of security-based 
     swaps (or security derivatives), or any transaction or class 
     of transactions from any requirement that the Commission may 
     establish under this subsection.
       ``(b) Self-Regulatory Organizations.--As a means reasonably 
     designed to prevent fraud or manipulation, the Commission, by 
     rule, regulation, or order, as necessary or appropriate in 
     the public interest, for the protection of investors, or 
     otherwise in furtherance of the purposes of this title, may 
     direct a self-regulatory organization--
       ``(1) to adopt rules regarding the size of positions in any 
     security-based swap (or security derivative) and any security 
     on which such security-based swap (or security derivative) is 
     based or referenced, or as to which the issuer of such 
     security is referenced that may be held by--
       ``(A) any member of such self-regulatory organization; or
       ``(B) any person for whom a member of such self-regulatory 
     organization effects transactions in such security-based 
     swap, security derivative, or other security; and
       ``(2) to adopt rules reasonably designed to assure 
     compliance with requirements prescribed by the Commission 
     under subsection (a).''.
       (d) State Gaming and Bucket Shop Laws.--Section 28(a) of 
     the Securities Exchange Act of 1934 (15 U.S.C. 78bb(a)) is 
     amended to read as follows:
       ``(a) State Gaming and Bucket Shop Laws.--
       ``(1) In general.--Except as provided in subsection (f), 
     the rights and remedies provided by this title shall be in 
     addition to any and all other rights and remedies that may 
     exist at law or in equity, but no person permitted to 
     maintain a suit for damages under the provisions of this 
     title shall recover, through satisfaction of judgment in 1 or 
     more actions, a total amount in excess of the actual damages 
     of that person due to the act that is the subject of the 
     action.
       ``(2) Rule of construction.--Except as otherwise 
     specifically provided in this title, nothing in this title 
     shall affect the jurisdiction of the securities commission 
     (or any agency or officer performing like functions) of any 
     State over any security or any person, to the extent that the 
     exercise thereof does not conflict with the provisions of 
     this title or the rules and regulations thereunder.
       ``(3) Gaming laws.--No provision of State law which 
     prohibits or regulates the making or promoting of wagering or 
     gaming contracts, or the operation of `bucket shops' or other 
     similar or related activities, shall invalidate--
       ``(A) any put, call, straddle, option, privilege, or other 
     security that is subject to regulation under this title 
     (except a security-based swap and any security that has a 
     pari-mutual payout or otherwise is determined by the 
     Commission, acting by rule, regulation, or order, to be 
     appropriately subject to such laws), or apply to any activity 
     which is incidental or related to the offer, purchase, sale, 
     exercise, settlement, or closeout of any such security;
       ``(B) any security-based swap between eligible contract 
     participants; or
       ``(C) any security-based swap effected on a national 
     securities exchange that is registered pursuant to section 
     6(b).
       ``(4) Security futures product.--No provision of State law 
     regarding the offer, sale, or distribution of securities 
     shall apply to any transaction in a security futures product, 
     except that this paragraph may not be construed as limiting 
     any State antifraud law of general applicability.''.

     SEC. 107. PROTECTIONS FOR MARKETING SECURITY-BASED SWAPS TO 
                   CERTAIN PERSONS.

       (a) Trading in Security-Based Swaps.--Section 6 of the 
     Securities Exchange Act of 1934 (15 U.S.C. 78f), as amended 
     by this Act, is amended by adding at the end the following:
       ``(i) Eligible Contract Participants.--It shall be unlawful 
     for any person to effect a transaction in a security-based 
     swap with or for a person that is not an eligible contract 
     participant, unless such transaction is effected on a 
     national securities exchange registered pursuant to 
     subsection (b).''.
       (b) Registration of Security-Based Swaps.--Section 5 of the 
     Securities Act of 1933 (15 U.S.C. 77e) is amended by adding 
     at the end the following:
       ``(d) Registration of Security-Based Swaps.--
     Notwithstanding the provisions of section 3 or 4, unless a 
     registration statement meeting the requirements of section 
     10(a) is in effect with respect to a security-based swap, it 
     shall be unlawful for any person, directly or indirectly, to 
     make use of any means or instruments of transportation or 
     communication in interstate commerce or of the mails to offer 
     to sell, offer to buy, or purchase, sell, or buy a security-
     based swap to any person who is not an eligible contract 
     participant, as defined in section 3(a)(66) of the Securities 
     Exchange Act of 1934.''.

     SEC. 108. ENFORCEMENT.

       Section 21 of the Securities Exchange Act of 1934 (15 
     U.S.C. 78u) is amended by adding at the end the following:
       ``(j) Enforcement of Provisions Applicable to Derivatives 
     Market Participants.--
       ``(1) In general.--In addition to enforcement by the 
     Commission under the securities laws of compliance with 
     sections 6(l), 13(m), 15F(a), 15F(c), 15F(d), 17(l), 
     17C(b)(1), and 17C(c)(1), compliance with such sections shall 
     be enforced under--
       ``(A) section 8 of the Federal Deposit Insurance Act (12 
     U.S.C. 1818), by the appropriate Federal banking agency, in 
     the case of an insured depository institution, as those terms 
     are defined in section 3 of that Act (12 U.S.C. 1813), other 
     than an affiliate of an insured depository institution, as 
     defined in section 3 of that Act (12 U.S.C. 1813);
       ``(B) the Commodity Exchange Act (7 U.S.C. 1 et seq.), by 
     the Commodity Futures Trading Commission, in the case of a 
     futures commission merchant, introducing broker, commodity 
     pool operator, or commodity trading advisor, as those terms 
     are defined in sections 1a of the Commodity Exchange Act, 
     other than an affiliate of an insured depository institution, 
     as defined in section 3 of the Federal Deposit Insurance Act 
     (12 U.S.C. 1813); and
       ``(C) the Federal Housing Enterprises Financial Safety and 
     Soundness Act of 1992 (12 U.S.C. 4501 et seq.), by the 
     Federal Housing Finance Agency, in the case of a regulated 
     entity, as defined in section 1303 of the Federal Housing 
     Enterprises Financial Safety and Soundness Act of 1992 (12 
     U.S.C. 4502).
       ``(2) Violations treated as violations of other laws.--For 
     purposes of the exercise by any agency referred to in 
     paragraph (1), a violation of sections 6(l), 13(m), 15F(a), 
     15F(c), 15F(d), 17(l), 17C(b)(1), and 17C(c)(1) of this title 
     shall be deemed to be a violation of a requirement imposed 
     under that provision of law. In addition to its powers under 
     any provision of law specifically referred to in paragraph 
     (1), each of the agencies referred to in that paragraph may 
     exercise, for the purpose of enforcing compliance with 
     sections 6(l), 13(m), 15F(a), 15F(c), 15F(d), 17(l), 
     17C(b)(1), and 17C(c)(1) of this title, any other authority 
     conferred on such agency by law.''.

[[Page S9665]]

     SEC. 109. ENFORCEABILITY OF SECURITY-BASED SWAPS.

       Section 29(b)(2) of the Securities Exchange Act of 1934 (15 
     U.S.C. 78cc(b)(2)) is amended by striking ``and (B)'' and 
     inserting the following: ``, (B) that no agreement, contract, 
     or transaction that is a security-based swap shall be void, 
     voidable, or unenforceable by either party to such security-
     based swap, and no party thereto shall be entitled to 
     rescind, or recover any payment made with respect to, such 
     security-based swap under this section or any other provision 
     of securities laws based solely on the failure of either 
     party to the agreement, contract, or transaction to satisfy 
     its respective obligations under sections 6(l), 10B, 13, 
     15(b), 15F, 17, and 17C of this title with respect to such 
     security-based swap, and (C)''.

     SEC. 110. TRANSFER AND RIGHTS OF CERTAIN CFTC EMPLOYEES.

       (a) Transfer.--Each employee of the Commodity Futures 
     Trading Commission (in this section referred to as the 
     ``CFTC'') whose position and responsibilities would be more 
     effectively utilized at the Securities and Exchange 
     Commission (in this section referred to as the ``SEC''), 
     based on this Act and the amendments made by this Act, as 
     determined by the Secretary of the Treasury, shall be 
     transferred to the SEC for employment, not later than 60 days 
     after the date of enactment of this Act. Such transfer shall 
     be deemed a transfer of function for purposes of section 3503 
     of title 5, United States Code.
       (b) Guaranteed Positions.--
       (1) In general.--Each employee transferred under subsection 
     (a) shall be guaranteed a position with equivalent status, 
     tenure, pay and benefits as that held on the day immediately 
     preceding the transfer, subject to paragraph (2).
       (2) No involuntary separation or reduction.--An employee 
     transferred under subsection (a) holding a permanent position 
     on the day immediately preceding the transfer may not be 
     involuntarily separated or reduced in grade or compensation 
     during the 12-month period beginning on the date of transfer, 
     except for cause, or, in the case of a temporary employee, 
     separated in accordance with the terms of the appointment of 
     the employee.
       (c) Appointment Authority for Excepted and Senior Executive 
     Service Employees.--
       (1) In general.--In the case of an employee of the CFTC 
     occupying a position in the excepted service or the Senior 
     Executive Service, such employee shall, on and after the date 
     of transfer to the SEC, be deemed to be appointed under the 
     appointment authority of the SEC for filling an equivalent 
     position at the SEC, subject to paragraph (2).
       (2) Declining application of equivalent appointment 
     authority.--The Chairman of the SEC may decline the 
     application of the equivalent appointment authority of the 
     SEC to an employee of the CFTC occupying a position in the 
     excepted service or the Senior Executive Service under 
     paragraph (1) to the extent that the authority by which the 
     employee was appointed by the CFTC relates to--
       (A) a position excepted from the competitive service 
     because of its confidential, policymaking, policy-
     determining, or policy-advocating character; or
       (B) a noncareer position in the Senior Executive Service 
     (within the meaning of section 3132(a)(7) of title 5, United 
     States Code).
       (d) Reorganization.--If the Chairman of the SEC determines, 
     after the end of the 1-year period beginning on the date of 
     enactment of this Act, that a reorganization of the combined 
     workforce is required, that reorganization shall be deemed a 
     major reorganization for purposes of affording affected 
     employee retirement under section 8336(d)(2) or 8414(b)(1)(B) 
     of title 5, United States Code.

          TITLE II--REGULATION OF COMMODITY-BASED DERIVATIVES

     SEC. 201. DEFINITIONS.

       Section 1a of the Commodity Exchange Act (7 U.S.C. 1a) is 
     amended--
       (1) by striking paragraphs (1), (25), (31), and (32);
       (2) by redesignating paragraphs (2) through (4), (5) 
     through (8), (9) through (24), (26) through (28), (29), (30), 
     (33), and (34) as paragraphs (1) through (3), (7) through 
     (10), (12) through (27), (28) through (30), (32), (33), (35), 
     and (37), respectively;
       (3) by inserting after paragraph (3) (as redesignated by 
     paragraph (2) of this section) the following:
       ``(4) Commodity-based swap.--The term `commodity-based 
     swap' means a swap that is not a security-based swap, as 
     defined in section 3(a) of the Securities Exchange Act of 
     1934 (15 U.S.C. 78c(a)).
       ``(5) Commodity-based swap execution facility.--The term 
     `commodity-based swap execution facility' means a trading 
     facility registered under section 5h.
       ``(6) Commodity derivative.--The term `commodity 
     derivative' means any derivative that is a contract of sale 
     for future delivery of any commodity (or option on a contract 
     of sale for future delivery of any commodity) subject to the 
     exclusive jurisdiction of the Commission under this Act, 
     other than a swap.'';
       (4) by inserting after paragraph (10) (as redesignated by 
     paragraph (2) of this section) the following:
       ``(11) Derivative.--The term `derivative' has the meaning 
     given the term in section 3(a) of the Securities Exchange Act 
     of 1934 (15 U.S.C. 78c(a)).'';
       (5) by inserting after paragraph (30) (as redesignated by 
     paragraph (2) of this section) the following:
       ``(31) Person associated with a significant commodity-based 
     derivatives market participant.--
       ``(A) In general.--The term `person associated with a 
     significant commodity-based derivatives market participant' 
     means--
       ``(i) any partner, officer, director, or branch manager of 
     a significant commodity-based derivatives market participant 
     (including any individual who holds a similar status or 
     performs a similar function with respect to any partner, 
     officer, director, or branch manager of a significant 
     commodity-based derivatives market participant);
       ``(ii) any person that directly or indirectly controls, is 
     controlled by, or is under common control with a significant 
     commodity-based derivatives market participant; and
       ``(iii) any employee of a significant commodity-based 
     derivatives market participant.
       ``(B) Exclusion.--Other than for purposes of section 4s, 
     the term `person associated with a significant commodity-
     based derivatives market participant' does not include any 
     person associated with a significant commodity-based 
     derivatives market participant the functions of which are 
     solely clerical or ministerial.'';
       (6) in paragraph (32) (as redesignated by paragraph (2) of 
     this section)--
       (A) by striking subparagraph (D) and inserting the 
     following:
       ``(D) a commodity-based swap execution facility registered 
     under section 5h;'';
       (B) in subparagraph (E), by striking the period and 
     inserting a semicolon; and
       (C) by adding at the end the following:
       ``(F) a significant commodity-based derivatives market 
     participant; and
       ``(G) a trade repository under section 4r.'';
       (7) by inserting after paragraph (33) (as redesignated by 
     paragraph (2) of this section) the following:
       ``(34) Significant commodity-based derivatives market 
     participant.--
       ``(A) In general.--The term `significant commodity-based 
     derivatives market participant' means--
       ``(i) any person that is engaged in the business of 
     purchasing or selling 1 or more commodity-based swaps for the 
     account of the person or for any other individual or entity, 
     or making a market in commodity-based swaps, and the 1 or 
     more purchases or sales of which are not solely for the 
     purpose of managing the risk associated with--

       ``(I) an asset that is, or is anticipated to be, owned, 
     produced, manufactured, processed, or merchandised;
       ``(II) potential changes in the value of services to be 
     purchased or provided, or anticipated to be purchased or 
     provided; or
       ``(III) a liability incurred or anticipated to be incurred 
     by a person that is not, or is not related to, a commodity-
     based swap; or

       ``(ii) any other person designated by the Commission, after 
     consultation with the Securities and Exchange Commission, by 
     rule, regulation, or order as is appropriate to further--

       ``(I) the interests of the public;
       ``(II) the protection of market participants; or
       ``(III) the purposes of this Act.

       ``(B) Exclusion.--The term `significant commodity-based 
     derivatives market participant' does not include an 
     investment company registered under the Investment Company 
     Act of 1940 (15 U.S.C. 80a-1 et seq.).'';
       (8) by inserting after paragraph (35) (as redesignated by 
     paragraph (2) of this section) the following:
       ``(36) Swap.--The term `swap' has the meaning given the 
     term in section 3(a) of the Securities Exchange Act of 1934 
     (15 U.S.C. 78c(a)).''; and
       (9) by adding at the end the following:
       ``(38) Trade repository.--The term `trade repository' means 
     any person that collects, calculates, processes, or prepares 
     information with respect to 1 or more transactions or 
     positions in 1 or more commodity-based swaps.''.

     SEC. 202. RATIONALIZATION OF FINANCIAL PRODUCT OVERSIGHT.

       (a) CFTC Authority Over Commodity-Based Swaps.--
       (1) Amendments to commodity futures modernization act of 
     2000.--
       (A) Definitions.--Section 402 of the Commodity Futures 
     Modernization Act of 2000 (7 U.S.C. 27) is amended by 
     striking subsection (d).
       (B) Exclusion of covered swap agreements.--Section 407 of 
     the Commodity Futures Modernization Act of 2000 (7 U.S.C. 
     27e) is repealed.
       (C) Contract enforcement.--Section 408 of the Commodity 
     Futures Modernization Act of 2000 (7 U.S.C. 27f) is amended 
     by striking subsections (b) and (c) and inserting the 
     following:
       ``(b) Preemption.--This title shall supersede and preempt 
     the application of any State or local law that prohibits or 
     regulates gaming or the operation of bucket shops (other than 
     antifraud provisions of general applicability) in the case of 
     a hybrid instrument that is predominantly a banking 
     product.''.
       (2) Amendments to commodity exchange act.--
       (A) In general.--Section 2 of the Commodity Exchange Act (7 
     U.S.C. 2) is amended--
       (i) in subsection (a)(1)--

       (I) in the first sentence of subparagraph (A), by striking 
     ``subparagraphs (C) and (D)

[[Page S9666]]

     of this paragraph and subsections (c) through (i) of this 
     section'' and inserting ``subparagraph (C) and subsections 
     (c) through (e)'';
       (II) in subparagraph (C), by striking clauses (ii) through 
     (v) and inserting the following:

       ``(ii) Contracts of sale for future delivery.--This Act 
     shall not apply to, and the Commission shall have no 
     jurisdiction to designate a board of trade as a contract 
     market for any contract of sale (or option on such contract) 
     for future delivery--

       ``(I) of any security, or interest in a security or based 
     on the value of a security (other than an exempted security 
     under section 3(a) of the Securities Exchange Act of 1934 (15 
     U.S.C. 78c(a)), as in effect on the date of enactment of the 
     Futures Trading Act of 1982 (other than any municipal 
     security, as defined in that section 3(a), as in effect on 
     the date of enactment of the Futures Trading Act of 1982), or 
     any group or index of such securities or any interest in a 
     security or based on the value of a security; or
       ``(II) based on any financial, economic, or commercial 
     occurrence, extent of an occurrence, contingency, or 
     consequence that is related to or based on a security, an 
     interest in a security, or an issuer of a security, or based 
     on the value of any of the foregoing (other than an exempted 
     security under section 3(a) of the Securities Exchange Act of 
     1934 (15 U.S.C. 78c(a)), as in effect on the date of 
     enactment of the Futures Trading Act of 1982 (other than any 
     municipal security, as defined in that section 3(a), as in 
     effect on the date of enactment of the Futures Trading Act of 
     1982), or any group or index of such securities, or interests 
     in such securities or issuers of such securities, or based on 
     the value of any of the foregoing.''; and
       (III) by striking subparagraphs (D), (E), and (F);

       (ii) by striking subsections (d), (e), (g), (h), and (i);
       (iii) by inserting after subsection (c) the following:
       ``(d) Commodity-Based Swaps.--Nothing in this Act (other 
     than subsections (a)(1)(B), (a)(1)(C), (e) and (f), sections 
     4a, 4b, 4b-1, 4c(a), 4c(b), 4o, 4r, 4s, 4t, 5b, 5c, 5h, 6(c), 
     6(d), 6c, 6d, 8, 8a, 9, 12(e)(2), 12(f), 13(a), 13(b), 21, 
     and 22(a)(4) and such other provisions of this Act as are 
     applicable by the terms of the provisions to registered 
     entities and Commission registrants) governs or applies to a 
     commodity-based swap.''; and
       (iv) by redesignating subsection (f) as subsection (e).
       (B) Conforming amendments.--
       (i) Section 1a of the Commodity Exchange Act (7 U.S.C. 1a) 
     (as amended by section 201(2)) is amended in paragraph (35) 
     by inserting before the period at the end the following: 
     ``(as in effect on the day before the date of enactment of 
     the Comprehensive Derivatives Regulation Act of 2009)''.
       (ii) Section 5c(a)(1) of the Commodity Exchange Act (7 
     U.S.C. 7a-2(a)(1)) is amended by striking ``, and section 
     2(h)(7) with respect to significant price discovery 
     contracts,''.
       (iii) Section 5d(a) of the Commodity Exchange Act (7 U.S.C. 
     7a-3(a)) is amended in the second sentence by striking 
     ``subparagraphs (C) and (D) of section 2(a)(1)'' and 
     inserting ``section 2(a)(1)(C)''.
       (iv) Section 5e of the Commodity Exchange Act (7 U.S.C. 7b) 
     is amended by striking ``, or revocation of the right'' and 
     all that follows through ``significant price discovery 
     contract,''.
       (v) Section 6(b) of the Commodity Exchange Act (7 U.S.C. 
     8(b)) is amended in the first sentence by striking ``, or to 
     revoke the right'' and all that follows through ``significant 
     price discovery contract,''.
       (vi) Section 22(b)(1)(A) of the Commodity Exchange Act (7 
     U.S.C. 25(b)(1)(A)) is amended by striking ``section 2(h)(7) 
     or''.
       (vii) Section 408(2)(C) of the Federal Deposit Insurance 
     Corporation Improvement Act of 1991 (12 U.S.C. 4421(2)(C)) is 
     amended--

       (I) by striking ``, 2(d), 2(f), or 2(g)''; and
       (II) by striking ``2(h) or''.

       (3) Amendments to the gramm-leach-bliley act.--Section 206 
     of the Gramm-Leach-Bliley Act (15 U.S.C. 78c note) is 
     amended--
       (A) in subsection (a)--
       (i) in paragraph (4), by inserting ``or'' after the 
     semicolon at the end;
       (ii) in paragraph (5) by striking ``; or'' at the end and 
     inserting a period; and
       (iii) by striking paragraph (6);
       (B) by striking subsection (b); and
       (C) by redesignating subsections (c) and (d) as subsections 
     (b) and (c), respectively.
       (b) Rationalization of Security Futures Oversight.--
       (1) In general.--
       (A) Rulemaking authority to address duplicative regulations 
     of dual registrants.--Section 4d of the Commodity Exchange 
     Act (7 U.S.C. 6d) is amended by striking subsection (c).
       (B) Registration of futures commission merchants, 
     introducing brokers, and floor brokers.--Section 4f(a) of the 
     Commodity Exchange Act (7 U.S.C. 6f(a)) is amended--
       (i) in paragraph (1), by striking ``(1)''; and
       (ii) by striking paragraphs (2) through (4).
       (C) Dual trading.--Section 4j of the Commodity Exchange Act 
     (7 U.S.C. 6j) is repealed.
       (D) Exemptions for associated persons or securities broker-
     dealers.--Section 4k of the Commodity Exchange Act (7 U.S.C. 
     6k) is amended by striking paragraph (5) (as added by section 
     252(d) of the Commodity Futures Modernization Act of 2000 
     (114 Stat. 2763A-448)).
       (E) Election to trade excluded and exempt commodities.--
     Section 5a of the Commodity Exchange Act (7 U.S.C. 7a) is 
     amended by striking subsection (g).
       (F) Obligation to address duplicative regulation of dual 
     registrants.--Section 5c of the Commodity Exchange Act (7 
     U.S.C. 7a-2) is amended by striking subsection (f).
       (G) Designation of securities exchanges and associations as 
     contract markets.--Section 5f of the Commodity Exchange Act 
     (7 U.S.C. 7b-1) is repealed.
       (H) Notification of investigations and enforcement 
     actions.--Section 6 of the Commodity Exchange Act is amended 
     by striking subsection (g) (7 U.S.C. 9c).
       (I) Action to enjoin or restrain violations.--Section 6c of 
     the Commodity Exchange Act (7 U.S.C. 13a-1) is amended by 
     striking subsection (h).
       (J) Public disclosure.--Section 8(a) of the Commodity 
     Exchange Act (7 U.S.C. 12(a)) is amended by striking 
     paragraph (3).
       (K) Market reports.--Section 16 of the Commodity Exchange 
     Act (7 U.S.C. 20) is amended by striking subsection (e).
       (L) Obligation to address duplicative regulation of dual 
     registrants.--Section 17 of the Commodity Exchange Act (7 
     U.S.C. 21) is amended--
       (i) by striking subsection (r); and
       (ii) by redesignating subsection (q) (as added by section 
     233(5) of Public Law 97-444 (96 Stat. 2320)) as subsection 
     (r).
       (2) Conforming amendments to the commodity exchange act.--
       (A) Section 1a of the Commodity Exchange Act (7 U.S.C. 1a) 
     (as amended by section 201(2)) is amended in paragraph (28), 
     by striking the second sentence.
       (B) Section 4(c)(1) of the Commodity Exchange Act (7 U.S.C. 
     6(c)(1)) is amended by striking ``(except subparagraphs 
     (C)(ii) and (D) of section 2(a)(1), except that the 
     Commission and the Securities and Exchange Commission may by 
     rule, regulation, or order jointly exclude any agreement, 
     contract, or transaction from section 2(a)(1)(D))''.
       (C) Section 5a of the Commodity Exchange Act (7 U.S.C. 7a) 
     is amended--
       (i) in subsection (b)--

       (I) in paragraph (2)--

       (aa) by striking subparagraph (D); and
       (bb) by redesignating subparagraphs (E) and (F) as 
     subparagraphs (D) and (E), respectively; and

       (II) in paragraph (3)(B)(ii), by striking ``or, if the 
     person trades only security futures products on the facility, 
     a national securities association registered under section 
     15A(a) of the Securities Exchange Act of 1934''; and

       (ii) in subsection (e)(1), by striking ``With respect to 
     transactions other than transactions in security futures 
     products, a'' and inserting ``A''.
       (D) Section 6(b) of the Commodity Exchange Act (7 U.S.C. 
     8(b)) is amended in the first sentence by striking ``or 
     section 5f''.
       (E) Section 12(e)(2) of the Commodity Exchange Act (7 
     U.S.C. 16(e)(2)) is amended--
       (i) in subparagraph (A), by striking ``an electronic 
     trading facility excluded under section 2(e) of this Act'' 
     and inserting ``a commodity-based swap execution facility'';
       (ii) in subparagraph (B)--

       (I) by striking ``, 2(d), 2(f), or 2(g)'' and inserting 
     ``or 2(e)'';
       (II) by striking ``2(h) or''; and
       (III) by striking the period at the end and inserting ``; 
     and''; and

       (iii) by inserting after subparagraph (B) the following:
       ``(C) a commodity-based swap.''.

     SEC. 203. REQUIRED CLEARING OF STANDARDIZED DERIVATIVES 
                   THROUGH CENTRAL COUNTERPARTIES AND USE OF TRADE 
                   REPOSITORIES.

       (a) In General.--The Commodity Exchange Act is amended by 
     inserting after section 4q (7 U.S.C. 6o-1) the following:

     ``SEC. 4R. REQUIRED CLEARING OF STANDARDIZED DERIVATIVES 
                   THROUGH CENTRAL COUNTERPARTIES AND USE OF TRADE 
                   REPOSITORIES.

       ``(a) Findings.--Congress finds that--
       ``(1) the proliferation of over-the-counter commodity-based 
     swaps poses unacceptable risks to the financial system;
       ``(2) clearing standardized commodity-based swaps through 
     well-regulated central counterparties would reduce systemic 
     risk in the financial system;
       ``(3) the markets for standardized commodity-based swaps 
     suffer from a lack of reliable and accurate transaction 
     information that is available to the public, market 
     participants, producers, and regulators; and
       ``(4) weaknesses in the regulation of markets for 
     standardized commodity-based swaps have detracted from the 
     efficiency and transparency of trading in the markets and 
     hampered the surveillance and oversight of the markets.
       ``(b) Purposes.--The purposes of this section are--
       ``(1) to establish well-regulated markets for standardized 
     commodity-based swaps that promote efficiency and 
     transparency of trading and enhance the surveillance and 
     oversight of the markets; and
       ``(2) to promote the public interest, the protection of 
     market participants, and the maintenance of fair and orderly 
     markets by ensuring--
       ``(A) the prompt and accurate clearance and settlement of 
     transactions in standardized commodity-based swaps;
       ``(B) the prompt and accurate reporting of transactions in 
     commodity-based derivative

[[Page S9667]]

     instruments to a trade repository or a derivatives clearing 
     organization;
       ``(C) the establishment of linked or coordinated facilities 
     for clearance and settlement of transactions in securities, 
     securities options, contracts of sale for future delivery and 
     options on the contracts, commodity options, and derivatives;
       ``(D) the availability to the public, market participants, 
     producers, and regulators of reliable and accurate quotation 
     and transaction information in commodity-based swaps;
       ``(E) economically efficient execution of transactions in 
     commodity-based swaps; and
       ``(F) fair competition among markets in the trading of 
     commodity-based swaps.
       ``(c) Use of Derivatives Clearing Organizations.--
       ``(1) In general.--Any person that is a party to a 
     commodity-based swap that the Commission determines is 
     `standardized' shall submit such instrument for clearing to a 
     derivatives clearing organization within the period specified 
     by the rules of the Commission.
       ``(2) Definition of `standardized'.--
       ``(A) In general.--The Commission shall by rule, define the 
     term `standardized' for purposes of this section.
       ``(B) Factors.--In defining the term `standardized', the 
     Commission shall--
       ``(i) be consistent with--

       ``(I) the public interest;
       ``(II) the protection of market participants;
       ``(III) the safeguarding of commodity-based swap 
     transactions and funds;
       ``(IV) the maintenance of fair competition among market 
     participants and among derivatives clearing organizations; 
     and
       ``(V) the purposes of this section;

       ``(ii)(I) consult with, and consider the views of, the 
     Securities and Exchange Commission and the Board of Governors 
     of the Federal Reserve System; and
       ``(II) seek to maintain comparability, to the maximum 
     extent practicable, with the Securities and Exchange 
     Commission definition of `standardized' for purposes of 
     section 17C of the Securities Exchange Act of 1934; and
       ``(iii) to the extent it is applicable to a particular 
     commodity-based swap or class of commodity-based derivative 
     swaps, consider--

       ``(I) whether a derivatives clearing organization is 
     prepared to clear the commodity-based swap and the 
     derivatives clearing organization has effective risk 
     management systems;
       ``(II) the availability or ability to facilitate standard 
     documentation of the terms of the commodity-based swap;
       ``(III) the liquidity of the commodity-based swap and the 
     underlying commodity or group or index of the commodity-based 
     swap;
       ``(IV) the ability to value the commodity-based swap, or 
     underlying commodity, consistently with an accepted pricing 
     methodology, including the availability of intraday prices; 
     and
       ``(V) such other factors as are consistent with the 
     purposes of this section.

       ``(3) Exemptions.--
       ``(A) In general.--The Commission, by rule or order, as the 
     Commission considers appropriate in the public interest or 
     the protection of market participants, may conditionally or 
     unconditionally exempt from the requirements of this 
     subsection and the rules issued under this subsection any 
     person, transaction, or standardized commodity-based swap.
       ``(B) Prior consultation with securities and exchange 
     commission and board of governors of the federal reserve 
     system.--
       ``(i) Consultation.--Before acting by rule or order to 
     exempt any person, transaction, or standardized commodity-
     based swap from this subsection, the Commission shall consult 
     with, and consider the views of, the Securities and Exchange 
     Commission and the Board of Governors of the Federal Reserve 
     System concerning whether the exemption is appropriate for 
     the reduction of risk and in the public interest.
       ``(ii) Notice required.--Forty-five days prior to issuing 
     any exemption, the Commission shall send a notice to the 
     Securities and Exchange Commission and the Board of Governors 
     of the Federal Reserve System describing such exemption.
       ``(iii) Prohibition on issuance.--If either the Securities 
     and Exchange Commission or the Board of Governors of the 
     Federal Reserve System issues a finding that such an 
     exemption does not meet the standard in clause (i), the 
     Commission shall not grant the exemption.
       ``(iv) Deadline.--Any finding by the Securities and 
     Exchange Commission or the Board of Governors of the Federal 
     Reserve System shall be made and received in writing by the 
     Commission not later than 30 days after the date of receipt 
     of a notice of a proposed exemption by the Commission.
       ``(v) Nondelegation.--Action by the Securities and Exchange 
     Commission or the Board of Governors under this subparagraph 
     may not be delegated.
       ``(d) Trade Repositories.--
       ``(1) Use of trade repositories.--
       ``(A) In general.--Any person that enters into or effects a 
     transaction in a commodity-based swap shall submit the 
     transaction for clearing to a derivatives clearing 
     organization or report the transaction to a trade repository 
     registered in accordance with this subsection within the 
     period specified by any rule adopted under subsection (e).
       ``(B) Information.--The Commission may, by rule, require 
     any person to report to derivatives clearing organizations 
     and registered trade repositories such transaction 
     information as the Commission considers appropriate to permit 
     the derivatives clearing organizations and trade repositories 
     to meet the purposes of this section.
       ``(2) Registration.--A trade repository may register for 
     purposes of this subsection by filing with the Commission an 
     application in such form as the Commission, by rule, may 
     prescribe containing the rules of the trade repository and 
     such other information and documents as the Commission, by 
     rule, may prescribe as appropriate in the public interest, 
     for the protection of market participants, or for the prompt 
     and accurate collection, calculation, processing, and 
     preparation of information regarding transactions and 
     positions in commodity-based swap.
       ``(3) Commission procedures for applications.--
       ``(A) In general.--On the filing of an application for 
     registration pursuant to paragraph (2), the Commission shall 
     publish notice of the filing and afford interested persons an 
     opportunity to submit written data, views, and arguments 
     concerning the application.
       ``(B) Actions.--Not later than 90 days after the date of 
     the publication of the notice (or, with the consent of the 
     applicant, a longer period), the Commission shall--
       ``(i) by order grant the registration; or
       ``(ii) institute proceedings to determine whether the 
     registration should be denied.
       ``(C) Procedure for denials.--
       ``(i) In general.--The proceedings described in 
     subparagraph (B)(ii) shall--

       ``(I) include notice of the grounds for denial under 
     consideration and an opportunity for a hearing; and
       ``(II) be concluded not later than 180 days after the date 
     of publication of notice of the filing of the application for 
     registration.

       ``(ii) Actions.--At the conclusion of the proceedings the 
     Commission, by order, shall grant or deny the registration.
       ``(iii) Extensions.--The Commission may extend the time for 
     the conclusion of the proceedings for--

       ``(I) not more than 60 days if the Commission--

       ``(aa) finds good cause for the extension; and
       ``(bb) publishes a description of the reasons of the 
     Commission for the finding; or

       ``(II) with the consent of the applicant, a longer period.

       ``(D) Standards for granting registration.--The Commission 
     shall grant the registration of a trade repository for 
     purposes of this section if the Commission finds that the 
     trade repository is so organized, and has the capacity--
       ``(i) to assure the prompt, accurate, and reliable 
     performance of the functions of a trade repository;
       ``(ii) to comply with this Act (including rules and 
     regulations issued under this Act); and
       ``(iii) to carry out the functions of a trade repository in 
     a manner consistent with the purposes of this section.
       ``(E) Standard for denial of registration.--The Commission 
     shall deny the registration of a trade repository if the 
     Commission does not make a finding described in subparagraph 
     (D).
       ``(4) Withdrawal of registration.--
       ``(A) In general.--A registered trade repository may, on 
     such terms and conditions as the Commission considers 
     appropriate in the public interest or for the protection of 
     market participants, withdraw from registration by filing a 
     written notice of withdrawal with the Commission.
       ``(B) Cancellation.--If the Commission finds that any trade 
     repository is no longer in existence or has ceased to do 
     business in the capacity specified in the application of the 
     trade repository for registration, the Commission, by order, 
     shall cancel the registration.
       ``(5) Access to trade repository services.--
       ``(A) Notice of prohibition or limitation on access.--
       ``(i) In general.--If any registered trade repository 
     prohibits or limits any person access to services offered, 
     directly or indirectly, by the trade repository, the 
     registered trade repository shall promptly file notice of the 
     prohibition or limitation with the Commission.
       ``(ii) Content.--A notice under clause (i) shall be in such 
     form and contain such information as the Commission, by rule, 
     may prescribe as appropriate in the public interest or for 
     the protection of investors.
       ``(B) Review by commission.--Any prohibition or limitation 
     on access to services with respect to which a registered 
     trade repository is required by subparagraph (A) to file 
     notice shall be subject to review by the Commission on--
       ``(i) the motion of the Commission; or
       ``(ii) application by any person aggrieved by the 
     prohibition or limitation filed--

       ``(I) not later than 30 days after the date on which the 
     notice described in subparagraph (A) has been filed with the 
     Commission and received by the aggrieved person; or
       ``(II) within such longer period as the Commission may 
     determine.

       ``(C) Stays.--
       ``(i) In general.--Application to the Commission for 
     review, or the institution of review by the Commission on the 
     motion of the Commission, shall not operate as a stay

[[Page S9668]]

     of the prohibition or limitation, unless the Commission 
     otherwise orders, summarily or after notice and opportunity 
     for hearing on the question of a stay.
       ``(ii) Hearing.--A hearing under clause (i) may consist 
     solely of the submission of affidavits or presentation of 
     oral arguments.
       ``(iii) Expedited procedure.--The Commission shall 
     establish for appropriate cases an expedited procedure for 
     consideration and determination of the question of a stay.
       ``(D) Standards of review.--
       ``(i) Dismissal of proceedings.--In any proceeding to 
     review the prohibition or limitation of any person to access 
     to services offered by a registered trade repository, the 
     Commission, by order, shall dismiss the proceeding if the 
     Commission finds, after notice and opportunity for hearing, 
     that--

       ``(I) the prohibition or limitation is consistent with this 
     Act (including rules and regulations); and
       ``(II) the person has not been discriminated against 
     unfairly.

       ``(ii) Access to services.--If the Commission does not make 
     a finding described in clause (i) or the Commission finds 
     that the prohibition or limitation imposes any burden on 
     competition that is not appropriate in furtherance of the 
     purposes of this Act, the Commission, by order, shall--

       ``(I) set aside the prohibition or limitation; and
       ``(II) require the registered trade repository to permit 
     the person access to the services offered by the registered 
     trade repository to which the prohibition or limitation 
     applied.

       ``(6) Administrative proceeding authority.--The Commission, 
     by order, may censure or place limitations on the activities, 
     functions, or operations of any registered trade repository 
     or suspend for a period not exceeding 12 months or revoke the 
     registration of any trade repository, if the Commission 
     finds, on the record after notice and opportunity for 
     hearing, that--
       ``(A) the censure, placing of limitations, suspension, or 
     revocation is appropriate in the public interest, for the 
     protection of market participants, or otherwise in 
     furtherance of the purposes of this Act; and
       ``(B) the trade repository has violated or is unable to 
     comply with any provision of this Act (including rules or 
     regulations).
       ``(7) Rulemaking authority.--No registered trade repository 
     shall, directly or indirectly, engage in any activity as a 
     trade repository in contravention of such rules and 
     regulations as the Commission may prescribe--
       ``(A) as appropriate in the public interest;
       ``(B) for the protection of market participants; or
       ``(C) otherwise in furtherance of the purposes of this Act, 
     including to ensure that all persons may obtain on terms that 
     are fair and reasonable and not unreasonably discriminatory 
     such transaction and position information for commodity-based 
     swaps as is disseminated by any derivatives clearing 
     organization or trade repository.
       ``(8) Consultation.--
       ``(A) In general.--Prior to adopting any rules applicable 
     to trade repositories pursuant to subsection (g), the 
     Commission shall consult with and consider the views of the 
     Securities and Exchange Commission.
       ``(B) Comparability.--The Commission and the Securities and 
     Exchange Commission shall seek to maintain comparability, to 
     the maximum extent practicable, of applicable respective 
     recordkeeping and reporting requirements for trade 
     repositories.
       ``(e) Timing.--The Commission may by rule specify the date 
     by which persons are required--
       ``(1) to submit transactions in standardized commodity-
     based swaps for clearing to a derivatives clearing 
     organization pursuant to subsection (c); and
       ``(2)(A) to submit transactions in commodity-based swaps 
     for clearing to a derivatives clearing organization; or
       ``(B) to report transactions in the commodity-based 
     derivative instruments to a registered trade repository 
     pursuant to subsection (d).
       ``(f) Collection, Consolidation, and Dissemination of 
     Information on Transactions and Positions in Commodity-Based 
     Swaps.--
       ``(1) Commission action required.--The Commission shall, 
     consistent with the public interest, the protection of market 
     participants, the maintenance of fair and orderly markets, 
     and the purposes of this section, use the authority of the 
     Commission under this Act to facilitate--
       ``(A) the collection, consolidation, and dissemination of 
     information on transactions and positions in commodity-based 
     swaps; and
       ``(B) the establishment of coordinated facilities for the 
     consolidation of information on transactions and positions in 
     commodity-based swaps.
       ``(2) Actions required by registered entities.--The 
     Commission, by rule, regulation, or order, may require each 
     derivatives clearing organization that clears transactions in 
     commodity-based swaps, and each registered trade repository 
     registered or applying to become registered, in such form and 
     frequency as the Commission shall prescribe as appropriate in 
     the public interest, for the protection of market 
     participants, or otherwise in furtherance of the purposes of 
     this Act--
       ``(A) to disseminate certain transaction or position 
     information concerning commodity-based swaps; and
       ``(B) to ensure the prompt, accurate, reliable, and fair 
     collection, processing, distribution, and publication of 
     information with respect to transactions and positions, as 
     appropriate, cleared by or reported to the derivatives 
     clearing organization or the registered trade repository.
       ``(g) Records, Reports, and Examinations.--
       ``(1) In general.--Each registered trade repository shall 
     make and keep for prescribed periods such records, furnish 
     such copies of the records, and make and disseminate such 
     reports as the Commission, by rule, prescribes as appropriate 
     in the public interest, or otherwise in furtherance of the 
     purposes of this Act.
       ``(2) Examinations.--All records with regard to commodity-
     based swaps of a registered trade repository shall be subject 
     at any time to such reasonable periodic, special, or other 
     examinations by representatives of the Commission as the 
     Commission considers appropriate in the public interest, for 
     the protection of market participants, or otherwise in 
     furtherance of the purposes of this Act.''.
       (b) Derivatives Clearing Organizations.--Section 5b of the 
     Commodity Exchange Act (7 U.S.C. 7a-1) is amended--
       (1) by striking subsections (a) and (b) and inserting the 
     following:
       ``(a) Registration Requirement.--It shall be unlawful for a 
     derivatives clearing organization, unless registered with the 
     Commission, directly or indirectly to make use of the mails 
     or any means or instrumentality of interstate commerce to 
     perform the functions of a derivatives clearing organization 
     with respect to a contract of sale of a commodity for future 
     delivery (or option on such a contract) or option on a 
     commodity, or a commodity-based swap, in each case unless the 
     contract, option, or commodity-based swap is not required to 
     be cleared under this Act.
       ``(b) Voluntary Registration.--A derivatives clearing 
     organization that clears agreements, contracts, or 
     transactions that are not required to be cleared under this 
     Act may register with the Commission as a derivatives 
     clearing organization.''.
       (2) in subsection (c)--
       (A) by striking paragraph (1) and inserting the following:
       ``(1) Application.--A person desiring to register as a 
     derivatives clearing organization shall submit to the 
     Commission an application in such form and containing the 
     rules of the derivatives clearing organization and such other 
     information and documents as the Commission, by rule, may 
     prescribe as appropriate in the public interest or for the 
     purpose of making the determinations required for approval 
     under this section.'';
       (B) in paragraph (2)--
       (i) by striking subparagraph (B) and inserting the 
     following:
       ``(B) Financial resources.--The applicant shall demonstrate 
     that the applicant has adequate financial, operational, and 
     managerial resources to discharge the responsibilities of a 
     derivatives clearing organization and to manage all 
     associated risks.''; and
       (ii) by adding at the end the following:
       ``(O) Market participant access.--The applicant shall 
     establish appropriate standards to ensure open and fair 
     access to all persons that meet the ongoing and continuing 
     participant eligibility standards of the organization with 
     respect to commodity-based swaps and to accept for clearing 
     from the participants all commodity-based swaps that meet the 
     product eligibility standards of the organization, regardless 
     of where the transactions are executed.''; and
       (C) by adding at the end the following:
       ``(4) Commission procedures for granting registration to 
     derivatives clearing organizations for clearing commodity-
     based swaps.--
       ``(A) In general.--The Commission shall, on the filing of 
     an application for registration pursuant to paragraph (2) for 
     purposes of clearing commodity-based swaps, publish notice of 
     the filing and afford interested persons an opportunity to 
     submit written data, views, and arguments concerning the 
     application.
       ``(B) Actions.--Not later than 90 days after the date of 
     the publication of the notice (or, with the consent of the 
     applicant, a longer period), the Commission shall--
       ``(i) by order grant the registration; or
       ``(ii) institute proceedings to determine whether 
     registration should be denied.
       ``(C) Proceedings.--
       ``(i) In general.--The proceedings described in 
     subparagraph (B)(ii) shall--

       ``(I) include notice of the grounds for denial under 
     consideration and opportunity for hearing; and
       ``(II) be concluded not later than 180 days after the date 
     of publication of notice of the filing of the application for 
     registration.

       ``(ii) Actions.--At the conclusion of the proceedings the 
     Commission, by order, shall grant or deny the registration.
       ``(iii) Extensions.--The Commission may extend the time for 
     the conclusion of the proceedings for--

       ``(I) not more than 60 days if the Commission--

       ``(aa) finds good cause for the extension; and
       ``(bb) publishes the reasons of the Commission for the 
     finding; or

       ``(II) with the consent of the applicant, a longer period.

       ``(iv) Standard for registration.--

[[Page S9669]]

       ``(I) In general.--The Commission shall grant the 
     registration of a derivatives clearing organization if the 
     Commission finds that the derivatives clearing organization 
     is so organized, and has the capacity, to be able--

       ``(aa) to ensure the prompt, accurate, and reliable 
     performance of the functions of a derivatives clearing 
     organization;
       ``(bb) to comply with this Act (including rules and 
     regulations); and
       ``(cc) to carry out the functions of a derivatives clearing 
     organization in a manner consistent with the purposes and 
     core principles of this section.

       ``(II) Denial.--The Commission shall deny the registration 
     of a derivatives clearing organization if the Commission does 
     not make a finding described in subclause (I).

       ``(5) Withdrawal of registration.--For purposes of clearing 
     commodity-based swaps, a derivatives clearing organization 
     may, on such terms and conditions as the Commission considers 
     appropriate in the public interest or for the protection of 
     market participants, withdraw from registration by filing a 
     written notice of withdrawal with the Commission.
       ``(6) Access to derivatives clearing organization to clear 
     commodity-based swaps.--
       ``(A) Notice of prohibition or limitation.--
       ``(i) In general.--For purposes of clearing commodity-based 
     swaps, if any derivatives clearing organization prohibits or 
     limits any person access to services offered, directly or 
     indirectly, by the derivatives clearing organization, the 
     derivatives clearing organization shall promptly file notice 
     of the prohibition or denial with the Commission.
       ``(ii) Contents.--The notice shall be in such form and 
     contain such information as the Commission, by rule, may 
     prescribe as appropriate in the public interest.
       ``(B) Review by commission.--Any prohibition or limitation 
     on access to services with respect to which a derivatives 
     clearing organization is required by subparagraph (A) to file 
     notice shall be subject to review by the Commission on--
       ``(i) the motion of the Commission; or
       ``(ii) application by any person aggrieved by the 
     prohibition or limitation filed--

       ``(I) not later than 30 days after the date the notice 
     described in subparagraph (A) has been filed with the 
     Commission and received by the aggrieved person; or
       ``(II) within such longer period as the Commission may 
     determine.

       ``(C) Stays.--
       ``(i) In general.--Application to the Commission for 
     review, or the institution of review by the Commission on the 
     motion of the Commission, shall not operate as a stay of the 
     prohibition or limitation, unless the Commission otherwise 
     orders, summarily or after notice and opportunity for hearing 
     on the question of a stay.
       ``(ii) Hearing.--A hearing under clause (i) may consist 
     solely of the submission of affidavits or presentation of 
     oral arguments.
       ``(iii) Expedited procedure.--The Commission shall 
     establish for appropriate cases an expedited procedure for 
     consideration and determination of the question of a stay.
       ``(D) Actions.--
       ``(i) Dismissal of proceedings.--For purposes of clearing 
     commodity-based swaps, in any proceeding to review the 
     prohibition or limitation of any person in respect of access 
     to services offered by a derivatives clearing organization, 
     the Commission, by order, shall dismiss the proceeding if the 
     Commission finds, after notice and opportunity for hearing, 
     that--

       ``(I) the prohibition or limitation is consistent with this 
     Act (including rules and regulations); and
       ``(II) the person has not been discriminated against 
     unfairly.

       ``(ii) Access to services.--If the Commission does not make 
     a finding described in clause (i), or if the Commission finds 
     that the prohibition or limitation imposes any burden on 
     competition not appropriate in furtherance of the purposes of 
     this Act, the Commission, by order, shall--

       ``(I) set aside the prohibition or limitation; and
       ``(II) require the registered trade repository to permit 
     the person access to the services offered by the derivatives 
     clearing organization to which the prohibition or limitation 
     applied.

       ``(7) Administrative proceeding authority.--The Commission, 
     by order, may censure or place limitations on the activities, 
     functions, or operations of any derivatives clearing 
     organization that is clearing commodity-based swaps, or 
     suspend for a period not exceeding 12 months or revoke the 
     registration of any derivatives clearing organization, if the 
     Commission finds, on the record after notice and opportunity 
     for hearing, that--
       ``(A) the censure, placing of limitations, suspension, or 
     revocation is appropriate in the public interest and for the 
     protection of market participants or otherwise in furtherance 
     of the purposes of this Act; and
       ``(B) the derivatives clearing organization has violated or 
     is unable to comply with any provision of this Act (including 
     rules or regulations).
       ``(8) Rulemaking authorization.--For purposes of clearing 
     commodity-based swaps, no derivatives clearing organization 
     shall, directly or indirectly, engage in any activity as a 
     derivatives clearing organization in contravention of such 
     rules and regulations as the Commission may prescribe--
       ``(A) as appropriate in the public interest;
       ``(B) for the protection of market participants; or
       ``(C) otherwise in furtherance of the purposes of this Act.
       ``(9) Records, reports, and examinations.--
       ``(A) In general.--Each derivatives clearing organization 
     shall, for purposes of clearing commodity-based swaps, make 
     and keep for prescribed periods such records, furnish such 
     copies of the records, and make and disseminate such reports 
     as the Commission, by rule, prescribes as appropriate in the 
     public interest, or otherwise in furtherance of the purposes 
     of this Act.
       ``(B) Examinations.--For purposes of clearing commodity-
     based derivative instruments, all records of a derivatives 
     clearing organization shall be subject at any time to such 
     reasonable periodic, special, or other examinations by 
     representatives of the Commission as the Commission considers 
     appropriate in the public interest, for the protection of 
     market participants, or otherwise in furtherance of the 
     purposes of this Act.''.

     SEC. 204. PRUDENTIAL SUPERVISION AND REGULATION OF 
                   SIGNIFICANT COMMODITY-BASED DERIVATIVES MARKET 
                   PARTICIPANTS AND INCENTIVES FOR TRADING ON 
                   REGULATED EXCHANGES.

       The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended 
     by inserting after section 4r (as added by section 203(a)) 
     the following:

     ``SEC. 4S. REGULATION OF SIGNIFICANT COMMODITY-BASED 
                   DERIVATIVES MARKET PARTICIPANTS.

       ``(a) Definition of Appropriate Regulatory Authority.--In 
     this section, the term `appropriate regulatory authority' 
     means--
       ``(1) the appropriate Federal banking agency (as defined in 
     section 1813(q) of title 12, United States Code), with 
     respect to a significant commodity-based derivatives market 
     participant that is an insured depository institution (as 
     defined in section 1813(c) of title 12, United States Code), 
     but not an affiliate of an insured depository institution;
       ``(2) the Federal Housing Finance Agency, with respect to a 
     significant commodity-based derivatives market participant 
     that is a regulated entity (as defined in section 4502 of 
     title 12, United States Code);
       ``(3) the Commission, with respect to a significant 
     commodity-based derivatives market participant that is--
       ``(A) a futures commission merchant or an introducing 
     broker, other than a futures commission merchant or an 
     introducing broker registered pursuant to section 4f(a) or an 
     affiliate of an insured depository institution; or
       ``(B) a commodity pool operator or commodity trading 
     advisor, other than an affiliate of an insured depository 
     institution; and
       ``(4) the Securities and Exchange Commission, with respect 
     to a significant commodity-based derivatives market 
     participant--
       ``(A) that is a broker or dealer, as those terms are 
     defined in section 3(a) of the Securities Exchange Act of 
     1934 (15 U.S.C. 78c(a)) (other than a broker or dealer 
     registered under section 15(b)(11) of that Act (15 U.S.C. 
     78o(b)(11)) that is not an affiliate of an insured depository 
     institution); or
       ``(B) for which there is not another appropriate regulatory 
     authority otherwise specified in this subsection.
       ``(b) Registration by Significant Commodity-Based 
     Derivatives Market Participants.--It shall be unlawful for 
     any significant commodity-based derivatives market 
     participant to make use of the mails or any means or 
     instrumentality of interstate commerce to effect any 
     transactions in, or to induce or attempt to induce a 
     transaction in, any commodity-based swap unless the 
     significant commodity-based derivatives market participant 
     has registered in accordance with subsection (c).
       ``(c) Manner of Registration of Significant Commodity-Based 
     Derivatives Market Participants.--
       ``(1) In general.--A significant commodity-based 
     derivatives market participant subject to the registration 
     requirement of subsection (b) may register by filing with the 
     Commission an application for registration in such form and 
     containing such information and documents concerning the 
     significant commodity-based derivatives market participant 
     and any persons associated with the significant commodity-
     based derivatives market participant as the Commission, by 
     rule, regulation, or order, may prescribe as appropriate in 
     the public interest or for the protection of market 
     participants.
       ``(2) Action by the commission.--
       ``(A) In general.--Not later than 45 days after the date of 
     filing of an application under paragraph (1) (or, with the 
     consent of the applicant, a longer period), the Commission 
     shall--
       ``(i) by order grant registration; or
       ``(ii) institute proceedings in accordance with 
     subparagraph (B) to determine whether the registration should 
     be denied.
       ``(B) Proceedings.--
       ``(i) In general.--Proceedings initiated under subparagraph 
     (B)(ii) shall include notice of the grounds for denial under 
     consideration and opportunity for hearing.
       ``(ii) Conclusion.--Not later than 120 days after the date 
     of the filing of the application for registration, the 
     Commission shall conclude the proceedings and, by order, 
     grant or deny the registration.

[[Page S9670]]

       ``(iii) Extension.--The Commission may extend the time for 
     the conclusion of a proceedings for up to 90 days (or, with 
     the consent of the applicant, a longer period) if the 
     Commission finds good cause for the extension and publishes 
     the reasons for the extension.
       ``(C) Basis for determination.--
       ``(i) In general.--The Commission shall grant the 
     registration of a significant commodity-based derivatives 
     market participant if the Commission finds that the 
     requirements of this section are satisfied.
       ``(ii) Denial.--The Commission shall deny the registration 
     if the Commission does not make a finding under clause (i) or 
     if the Commission finds that if the applicant were 
     registered, the registration of the applicant would be 
     subject to suspension or revocation under subsection (f).
       ``(3) Withdrawal.--Any person that has filed an application 
     pursuant to paragraph (1) may, on such terms and conditions 
     as the Commission determines appropriate in the public 
     interest, for the protection of market participants, or 
     otherwise in furtherance of the purposes of this Act, 
     withdraw the application by filing a written withdrawal with 
     the Commission.
       ``(d) Business Conduct Requirements.--
       ``(1) Definition of regulated person.--In this subsection, 
     the term `regulated person' means--
       ``(A) a significant commodity-based derivatives market 
     participant; and
       ``(B) any other class of persons that the Commission may 
     determine by rule, regulation, or order to be subject to this 
     subsection.
       ``(2) Prohibition.--It shall be unlawful for any regulated 
     person to make use of the mails or any means or 
     instrumentality of interstate commerce to effect any 
     transaction in, or to induce or attempt to induce a 
     transaction in, any commodity-based swap, unless the 
     regulated person complies with such business conduct 
     requirements as the Commission and the Securities and 
     Exchange Commission, in consultation with the appropriate 
     regulatory authorities, may jointly prescribe by rule, 
     regulation, or order, as appropriate in the public interest, 
     for the protection of market participants, and otherwise in 
     furtherance of the purposes of this Act.
       ``(3) Requirements.--Business conduct requirements 
     prescribed under this subsection shall--
       ``(A) establish the standard of care required for a 
     regulated person to verify that any counterparty meets the 
     eligibility standards for an eligible contract participant or 
     qualified institutional buyer (as defined in section 3(a) of 
     the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)));
       ``(B) require disclosure by the regulated person to any 
     counterparty to the transaction of--
       ``(i) material product-specific information about the risks 
     and characteristics of the commodity-based swap;
       ``(ii) the source and amount of any fees or other material 
     remuneration that the regulated person would directly or 
     indirectly expect to receive in connection with the 
     commodity-based swap; and
       ``(iii) any other material incentives or conflicts of 
     interest that the regulated person may have in connection 
     with the commodity-based swap;
       ``(C) establish a minimum standard of conduct for a 
     regulated person with respect to any counterparty, other than 
     a qualified institutional buyer (as defined in section 3(a) 
     of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a))), 
     for--
       ``(i) providing disclosure of the general risks and 
     characteristics of any commodity-based swap;
       ``(ii) communicating in a fair and balanced manner based on 
     principles of fair dealing and good faith;
       ``(iii) assessing the appropriateness of any commodity-
     based swap for the counterparty, except that in the case of a 
     counterparty that is an eligible contract participant 
     specified in clause (iv), the regulated person may rely on 
     the representations described in clause (iv)(VI) that the 
     transaction is appropriate for the counterparty; and
       ``(iv) with respect to a counterparty that is an eligible 
     contract participant (within the meaning of subclause (I) or 
     (II) of section 1a(15)(A)(vii)), having a reasonable basis to 
     believe that the counterparty has an independent 
     representative that--

       ``(I) has sufficient knowledge to evaluate the transaction 
     and risks;
       ``(II) is not subject to a statutory disqualification;
       ``(III) is independent of the regulated person;
       ``(IV) undertakes a duty to act in the best interests of 
     the counterparty that the independent representative 
     represents;
       ``(V) makes appropriate disclosures; and
       ``(VI) will provide written representations to the eligible 
     contract participant regarding fair pricing and the 
     appropriateness of the transaction;

       ``(D) require the availability of information about any 
     commodity referenced in a commodity-based swap or on which 
     the commodity-based swap is based; and
       ``(E) establish such other standards and requirements as 
     the Commission, acting jointly with the Securities and 
     Exchange Commission and in consultation with the appropriate 
     regulatory authorities, may determine are appropriate in the 
     public interest, for the protection of market participants, 
     or otherwise in furtherance of the purposes of this Act.
       ``(e) Statutory Disqualification.--Except to the extent 
     otherwise specifically provided by rule, regulation, or order 
     of the Commission, it shall be unlawful for a significant 
     commodity-based derivatives market participant to permit any 
     associated person of the significant commodity-based 
     derivatives market participant who is subject to a statutory 
     disqualification to effect or be involved in effecting 
     transactions in commodity-based swaps on behalf of the 
     significant commodity-based derivatives market participant, 
     if the significant commodity-based derivatives market 
     participant knew, or in the exercise of reasonable care 
     should have known, of the statutory disqualification.
       ``(f) Administrative Proceeding Authority.--
       ``(1) In general.--The Commission, by order, shall censure, 
     place limitations on the activities, functions, or operations 
     of, or reject the filing of any significant commodity-based 
     derivatives market participant that has registered with the 
     Commission pursuant to subsection (d) if the Commission 
     finds, on the record after notice and opportunity for 
     hearing, that--
       ``(A) the censure, placing of limitations, or rejection is 
     in the public interest; and
       ``(B) the significant commodity-based derivatives market 
     participant, or any person associated with the significant 
     commodity-based derivatives market participant effecting or 
     involved in effecting transactions in commodity-based swaps 
     on behalf of the significant commodity-based derivatives 
     market participant, whether prior or subsequent to becoming 
     so associated, has committed or omitted any act, or is 
     subject to an order or finding, described in paragraphs (2) 
     and (3) of section 8a.
       ``(2) Associated persons.--With respect to any person who 
     is associated, who is seeking to become associated, or who, 
     at the time of the alleged misconduct, was associated or was 
     seeking to become associated with a significant commodity-
     based derivatives market participant for the purpose of 
     effecting or being involved in effecting commodity-based 
     swaps on behalf of the significant commodity-based 
     derivatives market participant, the Commission, by order, 
     shall censure, place limitations on the activities or 
     functions of the person, or suspend for a period not 
     exceeding 12 months, or bar the person from being associated 
     with a significant commodity-based derivatives market 
     participant, if the Commission finds, on the record after 
     notice and opportunity for a hearing, that--
       ``(A) the censure, placing of limitations, suspension, or 
     bar is in the public interest; and
       ``(B) the person has committed or omitted any act, or is 
     subject to an order or finding, described in paragraphs (2) 
     and (3) of section 8a.
       ``(3) Prohibition.--It shall be unlawful--
       ``(A) for any person with respect to whom an order under 
     paragraph (2) is in effect, without the consent of the 
     Commission, willfully to become, or to be, associated with a 
     significant commodity-based derivatives market participant in 
     contravention of the order; or
       ``(B) for any significant commodity-based derivatives 
     market participant to permit a person described in 
     subparagraph (A), without the consent of the Commission, to 
     become or remain, a person associated with the significant 
     commodity-based derivatives market participant in 
     contravention of an order under paragraph (2), if the 
     significant commodity-based derivatives market participant 
     knew, or in the exercise of reasonable care should have 
     known, of the order.
       ``(g) Capital and Margin Requirements.--
       ``(1) In general.--It shall be unlawful for any person to 
     conduct business as a significant commodity-based derivatives 
     market participant unless the person meets at all times such 
     minimum capital and margin requirements as the appropriate 
     regulatory authorities shall jointly prescribe, not later 
     than 180 days after the enactment of this section, by rule or 
     regulation as appropriate in the public interest or for the 
     maintenance of fair and orderly markets and consistent with 
     the purposes of this Act to provide safeguards with respect 
     to the financial responsibility and related practices of the 
     significant commodity-based derivatives market participant.
       ``(2) Capital requirements.--In setting capital 
     requirements for significant commodity-based derivatives 
     market participants, the appropriate regulatory authorities 
     shall consider among other things--
       ``(A) the liquidity of each commodity-based swap, including 
     whether the commodity-based swap--
       ``(i) is traded on a liquid market; and
       ``(ii) is centrally cleared; and
       ``(B) whether the commodity-based swap is used to offset or 
     hedge another instrument or asset owned by such significant 
     commodity-based derivatives market participant.
       ``(3) Margin requirements.--The appropriate regulatory 
     authorities shall jointly prescribe margin requirements, 
     which may permit the use of noncash collateral, that apply to 
     commodity-based swaps entered into by a significant 
     commodity-based derivatives market participant, as the 
     appropriate regulatory authorities jointly determine to be 
     appropriate for the purpose of, at a minimum--

[[Page S9671]]

       ``(A) preserving the financial integrity of markets trading 
     commodity-based swaps; and
       ``(B) preventing systemic risk.
       ``(4) Commission rules.--Nothing in this Act prevents the 
     Commission from prescribing capital and margin requirements 
     that are higher or more restrictive than the joint rules 
     adopted under this subsection for significant commodity-based 
     derivatives market participants for which the Commission is 
     the appropriate regulatory authority.
       ``(h) Enforcement Authority.--Each appropriate regulatory 
     authority shall have sole authority to enforce compliance 
     with the rules adopted under subsection (g) in the case of 
     each significant derivatives market participant for which the 
     regulatory authority is the appropriate regulatory authority, 
     as defined in subsection (a).''.

     SEC. 205. RECORDKEEPING AND REPORTING REQUIREMENTS FOR 
                   DERIVATIVES MARKET PARTICIPANTS.

       (a) In General.--Section 4g of the Commodity Exchange Act 
     (7 U.S.C. 6g) is amended by striking ``sec. 4g.'' and all 
     that follows through the end of subsection (a) and inserting 
     the following:

     ``SEC. 4G. RECORDKEEPING AND REPORTING REQUIREMENTS FOR 
                   COMMODITY-BASED DERIVATIVES MARKET 
                   PARTICIPANTS.

       ``(a) In General.--Each person registered under this Act as 
     a futures commission merchant, introducing broker, floor 
     broker, floor trader, or significant commodity-based 
     derivatives market participant (or any other person that 
     engages in transactions in commodity-based swaps as the 
     Commission, by rule, regulation or order, designates) shall--
       ``(1) make such reports as are required by the Commission 
     regarding the transactions and positions of the person, and 
     the transactions and positions of the customers of the 
     person, in commodities for future delivery on any board of 
     trade in the United States or elsewhere, in any significant 
     price discovery contract traded or executed on an electronic 
     trading facility, in any agreement, contract, or transaction 
     that is treated by a derivatives clearing organization, 
     whether registered or not registered, as fungible with a 
     significant price discovery contract, and in any commodity-
     based swap;
       ``(2) keep books and records pertaining to those 
     transactions and positions in such form and manner and for 
     such period as may be required by the Commission; and
       ``(3) make those books and records available for inspection 
     by any representative of the Commission or the Department of 
     Justice.''.
       (b) Daily Trading Record.--Section 4g of the Commodity 
     Exchange Act (7 U.S.C. 6g) is amended--
       (1) by striking subsections (c) and (d) and inserting the 
     following:
       ``(c) Daily Trading Records.--
       ``(1) In general.--Each floor broker, introducing broker, 
     futures commission merchant, significant commodity-based 
     derivatives market participant, and any other person 
     designated by the Commission pursuant to subsection (a) shall 
     maintain daily trading records for each customer in such 
     manner and form as to be identifiable with the trades 
     referred to in subsection (b).
       ``(2) Form and reports.--
       ``(A) In general.--Daily trading records shall be 
     maintained in a form suitable to the Commission for such 
     period as may be required by the Commission.
       ``(B) Reports.--Reports shall be made from the records 
     maintained at such time, in such manner, and at such places 
     as the Commission may prescribe by rule, order, or regulation 
     in order to protect the public interest and the interest of 
     persons trading in commodity futures or commodity-based 
     swaps.''; and
       (2) by redesignating subsections (e) and (f) as subsections 
     (d) and (e), respectively.

     SEC. 206. PROHIBITION OF MARKET MANIPULATION, FRAUD, AND 
                   OTHER MARKET ABUSES.

       (a) Position Limits.--
       (1) In general.--Section 4a(a) of the Commodity Exchange 
     Act (7 U.S.C. 6a(a)) is amended--
       (A) by striking ``sec. 4a. (a) Excessive'' and inserting 
     the following:

     ``SEC. 4A. EXCESSIVE SPECULATION AS BURDEN ON INTERSTATE 
                   COMMERCE.

       ``(a) Excessive Speculation.--
       ``(1) In general.--Excessive'';
       (B) by designating the first through sixth sentences as 
     paragraphs (1) through (6), respectively;
       (C) in paragraph (1) (as so designated), by striking ``on 
     electronic trading facilities with respect to a significant 
     price discovery contract'' and inserting ``commodity-based 
     swaps that perform or affect a significant price discovery 
     function'';
       (D) in paragraph (2) (as so designated)--
       (i) by inserting ``, including any group or class of 
     traders,'' after ``held by any person''; and
       (ii) by striking ``on an electronic trading facility with 
     respect to a significant price discovery contract,'' and 
     inserting ``commodity-based swaps that perform or affect a 
     significant price discovery function,''; and
       (E) by adding at the end the following:
       ``(7) Aggregate position limits and position reporting for 
     commodity-based swaps.--The Commission may, by rule or 
     regulation, establish limits (including related hedge 
     exemption provisions) on, or otherwise prescribe requirements 
     regarding, the aggregate number of positions in commodity-
     based swaps based on the same underlying commodity that may 
     be held by any person, including any group or class of 
     traders, for each month across--
       ``(A) contracts listed by designated contract markets;
       ``(B) contracts traded on a foreign board of trade; and
       ``(C) commodity-based swaps that perform or affect a 
     significant price discovery function.
       ``(8) Considerations.--In making a determination whether a 
     commodity-based swap performs or affects a significant price 
     discovery function, the Commission shall consider the extent 
     to which the commodity-based swap has a significant price 
     linkage, price discovery relationship, or other significant 
     price relationship with 1 or more contracts listed by 
     designated contract markets.
       ``(9) Reports.--The Commission may, by rule or regulation, 
     require any person that effects transactions for the account 
     of the person or the account of others in any commodity-based 
     swap to report such information as the Commission may 
     prescribe regarding any position or positions in the 
     commodity-based swaps.
       ``(10) Exemptions.--The Commission, by rule or regulation, 
     may conditionally or unconditionally exempt any person or 
     class of persons, any commodity-based swap or class of 
     commodity-based swaps, or any transaction or class of 
     transactions from any requirement the Commission establishes 
     under this section with respect to position limits for 
     commodity-based swaps.''.
       (2) Conforming amendments.--Section 4a(b) of the Commodity 
     Exchange Act (7 U.S.C. 6a(b)) is amended--
       (A) in paragraph (1), by striking ``or electronic trading 
     facility'' and inserting ``or 1 or more regulated electronic 
     transparent trade execution systems''; and
       (B) in paragraph (2), by striking ``or electronic trading 
     facility'' and inserting ``or regulated electronic 
     transparent trade execution system''.
       (b) Prohibitions.--Section 4b of the Commodity Exchange Act 
     (7 U.S.C. 6b) is amended--
       (1) in subsection (a)--
       (A) in paragraph (1), by striking ``or'' after the 
     semicolon at the end;
       (B) in paragraph (2)(D)(ii), by striking the period at the 
     end and inserting ``; or''; and
       (C) by adding at the end the following:
       ``(3) for any person, directly or indirectly, by the use of 
     any means or instrumentality of interstate commerce or of the 
     mails, to effect any transaction in, or to induce or attempt 
     to induce a transaction in, any commodity-based swap, in 
     connection with which the person--
       ``(A) engages in any fraudulent, deceptive, or manipulative 
     act or practice;
       ``(B) makes any fictitious quotation; or
       ``(C) engages in any transaction, practice, or course of 
     business that operates as a fraud or deceit on any person.''; 
     and
       (2) in subsection (b)--
       (A) by striking ``Subsection (a)(2) of this section'' and 
     inserting the following:
       ``(1) In general.--Subsection (a)(2)''; and
       (B) by adding at the end the following:
       ``(2) Commodity-based swaps.--
       ``(A) In general.--For the purposes of subsection (a)(3), 
     the Commission shall, by rule, regulation, or order, define 
     and prescribe means reasonably designed to prevent--
       ``(i) such transactions, acts, practices, and courses of 
     business as are fraudulent, deceptive, or manipulative; and
       ``(ii) such quotations as are fictitious.
       ``(B) Requirements.--In adopting rules, regulations, or 
     orders under subparagraph (A), the Commission shall--
       ``(i) consult with the Securities and Exchange Commission; 
     and
       ``(ii) seek to maintain comparability of the rules, 
     regulations, or orders with similar rules of the Securities 
     and Exchange Commission.''.

     SEC. 207. PROTECTIONS FOR MARKETING COMMODITY-BASED SWAPS TO 
                   CERTAIN PERSONS.

       (a) Definition of Eligible Contract Participant.--Paragraph 
     (15) of section 1a of the Commodity Exchange Act (7 U.S.C. 
     1a) (as redesignated by section 201(2)) is amended--
       (1) in subparagraph (A)--
       (A) in clause (i), by inserting ``(as defined in paragraph 
     (18) as in effect on the date of enactment of the 
     Comprehensive Derivatives Regulation Act of 2009)'' after 
     ``financial institution'';
       (B) in clause (iv)(I), by striking ``total assets'' and 
     inserting ``total net assets'';
       (C) in clause (v)--
       (i) in subclause (I), by striking ``total assets exceeding 
     $10,000,000'' and inserting ``total net assets exceeding 
     $10,000,000; or'';
       (ii) by striking subclause (II);
       (iii) by redesignating subclause (III) as subclause (II); 
     and
       (iv) in item (aa) of subclause (II) (as so designated), by 
     striking ``a net worth exceeding $1,000,000'' and inserting 
     ``total net assets exceeding $5,000,000'';
       (D) in clause (vii), by striking subclause (III) and the 
     undesignated matter following that subclause and inserting 
     the following:

       ``(III) an instrumentality, agency, or department of an 
     entity described in subclause (I) or (II);

     except that the term does not include an entity, political 
     subdivision, instrumentality, agency, or department described 
     in subclause (I) or (III) unless the entity, political

[[Page S9672]]

     subdivision, instrumentality, agency, or department owns and 
     invests on a discretionary basis $50,000,000 or more in 
     investments, except that, with respect to any State or 
     entity, political subdivision, agency or department of a 
     State, that amount is exclusive of any proceeds from any 
     offering of municipal securities;''; and

       (E) by striking clause (xi) and inserting the following:
       ``(xi) an individual who--

       ``(I) owns and invests on a discretionary basis not less 
     than $10,000,000;
       ``(II) owns and invests on a discretionary basis not less 
     than $5,000,000 and who enters into the agreement, contract, 
     or transaction in order to manage the risk associated with an 
     asset owned or liability incurred, or reasonably likely to be 
     owned or incurred, by the individual; or
       ``(III) is an officer or director of an entity (or a person 
     performing similar functions) and who enters into the 
     agreement, contract, or transaction in order to manage the 
     risk associated with the securities of the entity owned by 
     the individual at the time of entering into the agreement, 
     contract, or transaction;''; and

       (2) in subparagraph (C), by inserting ``by rule, jointly 
     with the Securities and Exchange Commission,'' after 
     ``determines''.
       (b) Limitation on Participation in Commodity-Based Swaps.--
     Section 2 of the Commodity Exchange Act (7 U.S.C. 2) (as 
     amended by section 202(a)(2)(A)) is amended by adding at the 
     end the following:
       ``(f) Limitation on Participation in Commodity-Based 
     Swaps.--It shall be unlawful for any person, other than an 
     eligible contract participant, to enter into a commodity-
     based swap.''.

     SEC. 208. COMMODITY-BASED SWAP EXECUTION FACILITIES.

       The Commodity Exchange Act is amended by inserting after 
     section 5g (7 U.S.C. 7b-2) the following:

     ``SEC. 5H. COMMODITY-BASED SWAP EXECUTION FACILITIES.

       ``(a) Registration.--No person may operate a trading 
     facility for commodity-based swaps, unless the trading 
     facility is registered as a commodity-based swap execution 
     facility under this section.
       ``(b) Criteria for Registration.--
       ``(1) In general.--To be registered as a commodity-based 
     swap execution facility, a facility shall demonstrate to the 
     Commission that the facility meets the criteria specified in 
     this section.
       ``(2) Trading and participation rules.--The commodity-based 
     swap execution facility shall--
       ``(A) establish and enforce trading and participation rules 
     that will deter abuses; and
       ``(B) have the capacity to detect, investigate, and enforce 
     the rules, including the capacity--
       ``(i) to obtain information necessary to perform the 
     functions required under this section;
       ``(ii) to provide market participants with impartial access 
     to the market; and
       ``(iii) to obtain information that may be used in 
     establishing whether rule violations have occurred.
       ``(3) Trading procedures.--The commodity-based swap 
     execution facility shall establish and enforce rules or terms 
     and conditions defining, or specifications detailing, trading 
     procedures to be used in entering and executing orders for 
     commodity-based swaps on the facilities of the commodity-
     based swap execution facility.
       ``(4) Financial integrity.--The commodity-based swap 
     execution facility shall establish and enforce rules and 
     procedures to ensure the financial integrity of commodity-
     based swaps entered on or through the facilities of the 
     commodity-based swap execution facility, including the 
     clearance and settlement of commodity-based swaps pursuant to 
     section 2(f).
       ``(c) Principles for Commodity-Based Swap Execution 
     Facilities.--
       ``(1) Compliance.--
       ``(A) In general.--To maintain registration as a commodity-
     based swap execution facility, the facility shall comply with 
     the principles specified in this subsection.
       ``(B) Discretion.--Except in cases in which the Commission 
     adopts rules or regulations pursuant to section 8a(5), the 
     commodity-based swap execution facility shall have reasonable 
     discretion in establishing the manner in which the facility 
     complies with this subsection.
       ``(2) Rules.--The commodity-based swap execution facility 
     shall monitor and enforce compliance with any of the rules of 
     the facility, including--
       ``(A) the terms and conditions of the commodity-based swaps 
     traded on or through the facility; and
       ``(B) any limitations on access to the facility.
       ``(3) Prevention of manipulation.--
       ``(A) In general.--The commodity-based swap execution 
     facility shall permit trading only in commodity-based swaps 
     that are not readily susceptible to manipulation.
       ``(B) Monitoring.--The commodity-based swap execution 
     facility shall monitor trading in commodity-based swaps to 
     prevent price manipulation, price distortion through 
     surveillance, compliance, and disciplinary practices and 
     procedures, including methods for conducting real-time 
     monitoring of trading and comprehensive and accurate trade 
     reconstructions.
       ``(4) Position limitations and accountability.--
       ``(A) In general.--To reduce the potential threat of market 
     manipulation or congestion, and to eliminate or prevent 
     excessive speculation (as described in section 4a(a)), the 
     commodity-based swap execution facility shall adopt for each 
     of the contracts of the facility, as appropriate, position 
     limitations or position accountability for speculators.
       ``(B) Limitation level.--For any contract that is subject 
     to a position limitation established by the Commission 
     pursuant to section 4a(a), the commodity-based derivative 
     execution facility shall set the position limitations of the 
     facility at a level that is not higher than the Commission 
     limitation.
       ``(5) Information sharing.--The commodity-based swap 
     execution facility shall--
       ``(A) establish and enforce rules that will allow the 
     facility to obtain any necessary information to perform any 
     of the functions described in this subsection;
       ``(B) provide the information to the Commission on request; 
     and
       ``(C) have the capacity to carry out such international 
     information-sharing agreements as the Commission may require.
       ``(6) Accessibility.--The commodity-based swap trade 
     execution facility shall make public timely information on 
     price, trading volume, and other trading data to the extent 
     appropriate for commodity-based swaps.
       ``(7) Maintenance of records.--The commodity-based 
     derivative instrument execution facility shall--
       ``(A) maintain records of all activities related to the 
     business of the facility, including a complete audit trail, 
     in a form and manner acceptable to the Commission for a 
     period of at least 5 years; and
       ``(B) submit to the Commission such reports as the 
     Committee may require, at such time, in such manner, and 
     containing such information as is determined by the 
     Commission to be necessary for the Commission to perform the 
     responsibilities of the Commission.
       ``(8) Emergency authority.--The commodity-based swap 
     execution facility shall adopt rules to provide for the 
     exercise of emergency authority, in consultation or 
     cooperation with the Commission, as appropriate, including 
     the authority to suspend or curtail trading in a commodity-
     based swap.
       ``(9) Conflicts of interest.--The commodity-based 
     derivative instrument execution facility shall--
       ``(A) establish and enforce rules to minimize conflicts of 
     interest in the decision-making process of the facility; and
       ``(B) establish a process for resolving the conflicts of 
     interest.
       ``(d) Trading by Contract Markets.--A board of trade that 
     operates a contract market shall, to the extent that the 
     board of trade also operates a commodity-based swap execution 
     facility and uses the same electronic trade execution system 
     for trading on the contract market and the commodity-based 
     swap execution facility, identify whether the electronic 
     trading is taking place on the contract market or the 
     commodity-based swap execution facility.''.

     SEC. 209. ENFORCEMENT.

       Section 6c of the Commodity Exchange Act (7 U.S.C. 13a-1) 
     (as amended by section 202(b)(1)(I)) is amended by adding at 
     the end the following:
       ``(h) Enforcement of Provisions Applicable to Derivatives 
     Market Participants.--
       ``(1) Definition of applicable provision.--In this 
     subsection, the term `applicable provision' means any of 
     section 4a(a), subsections (a), (c), and (d) of section 4g, 
     sections 4r and 4s, and subsections (a) through (c)(1), (2), 
     and (4) of section 5b.
       ``(2) Enforcement by other agencies.--In addition to 
     enforcement by the Commission under this Act of compliance 
     with applicable provisions, to the extent applicable to 
     commodity-based swaps, such compliance shall be enforced 
     under--
       ``(A) section 8 of the Federal Deposit Insurance Act (12 
     U.S.C. 1818), by the appropriate Federal banking agency, in 
     the case of an insured depository institution, as those terms 
     are defined in section 3 of that Act (12 U.S.C. 1813), but 
     not an affiliate of such an insured depository institution;
       ``(B) the securities laws, as defined in section 3(a) of 
     the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)), by 
     the Securities and Exchange Commission, in the case of--
       ``(i) a broker or dealer, as defined in section 3(a) of the 
     Securities Exchange Act of 1934 (15 U.S.C. 78c(a)) (other 
     than a broker or dealer registered under section 15(b)(11) of 
     that Act (15 U.S.C. 78o(b)(11)) that is not an affiliate of 
     an insured depository institution, as defined in section 3 of 
     the Federal Deposit Insurance Act (12 U.S.C. 1813));
       ``(ii) an investment adviser, as defined in section 202(a) 
     of the Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a));
       ``(iii) an investment company, as defined in section 3 of 
     the Investment Company Act of 1940 (15 U.S.C. 80a-3);
       ``(iv) any other entity for which the Securities and 
     Exchange Commission is a primary regulator;
       ``(v) any affiliate of an insured depository institution; 
     or
       ``(vi) any other person that is not--

       ``(I) a futures commission merchant or an introducing 
     broker (except a futures commission merchant or an 
     introducing broker registered pursuant to section 4f(a) of 
     this Act or an affiliate of an insured depository 
     institution);
       ``(II) a commodity pool operator or commodity trading 
     advisor (except an affiliate of an insured depository 
     institution); or

[[Page S9673]]

       ``(III) a person specified in subparagraph (A) or (C); and

       ``(C) the Federal Housing Enterprises Financial Safety and 
     Soundness Act of 1992 (12 U.S.C. 4501 et seq.), by the 
     Federal Housing Finance Agency, in the case of a regulated 
     entity, as defined in section 1303 of the Federal Housing 
     Enterprises Financial Safety and Soundness Act of 1992 (12 
     U.S.C. 4502).
       ``(3) Violations treated as violations of other laws.--
       ``(A) In general.--For purposes of the exercise by any 
     agency referred to in paragraph (2) of the powers of the 
     agency under any provision of law referred to in that 
     paragraph, a violation of any applicable provision, as the 
     provision applies to commodity-based swaps, shall be 
     considered to be a violation of a requirement imposed under 
     that provision of law.
       ``(B) Additional authority.--In addition to its powers 
     under any provision of law specifically referred to in 
     paragraph (2), each of the agencies referred to in that 
     paragraph may exercise, for the purpose of enforcing 
     compliance with applicable provisions, as the applicable 
     provisions apply to commodity-based swaps, any other 
     authority conferred on the agency by law.''.

     SEC. 210. ENFORCEABILITY OF COMMODITY-BASED SWAPS.

       Section 22(a) of the Commodity Exchange Act (7 U.S.C. 
     25(a)) is amended by striking paragraph (4) and inserting the 
     following:
       ``(4) Contract enforcement between eligible 
     counterparties.--No agreement, contract, or transaction that 
     is a commodity-based swap shall be void, voidable, or 
     unenforceable by either party to the commodity-based swap, 
     and no party to the commodity-based swap shall be entitled to 
     rescind, or recover any payment made with respect to, the 
     commodity-based swap under this section or any other 
     provision of this Act based solely on the failure of either 
     party to the agreement, contract, or transaction to satisfy 
     its respective obligations under section 4a(a), subsections 
     (a), (c), and (d) of section 4g, sections 4r and 4s, and 
     subsections (a) through (c)(1), (2), and (4) of section 5b 
     with respect to the commodity-based swap.''.

                      TITLE III--OTHER PROVISIONS

     SEC. 301. MARGINING AND OTHER RISK MANAGEMENT STANDARDS FOR 
                   CENTRAL COUNTERPARTIES.

       (a) Agency Actions.--The Securities and Exchange Commission 
     and the Commodity Futures Trading Commission shall each 
     promulgate rules requiring each clearing agency (as defined 
     in section 3(a)(23) of the Securities Exchange Act of 1934 
     (15 U.S.C. 78c(a)(23))) and derivatives clearing organization 
     (as defined in section 1a(13) of the Commodity Exchange Act 
     (7 U.S.C. 1a(13))) to have robust risk management controls, 
     including risk margin collateral requirements, to assure the 
     ability to meet their settlement obligations.
       (b) Consultation Required.--To assure regulation of risk 
     management controls, the Securities and Exchange Commission 
     and the Commodity Futures Trading Commission shall consult 
     with each other and the Board of Governors of the Federal 
     Reserve System, shall seek to maintain comparability of such 
     rules, and shall give consideration to the recommendations of 
     the Board of Governors of the Federal Reserve System before 
     adopting rules under this section.

     SEC. 302. DETERMINING THE STATUS OF SWAPS.

       (a) Process for Determining the Status of a Swap.--
       (1) Rulemaking.--The Securities and Exchange Commission and 
     the Commodity Futures Trading Commission shall jointly issue 
     rules establishing a process for resolving any disagreement 
     between the agencies regarding the status of a derivative as 
     a security-based swap, a commodity-based swap, a security 
     derivative, or a commodity derivative.
       (2) Content.--The rules adopted under this section shall--
       (A) include a method for determining the status of a 
     derivative as a security-based swap, a commodity-based swap, 
     a security derivative, or a commodity derivative within 90 
     days after the date of the commencement of the determination 
     process; and
       (B) require the agencies to consider, in making such 
     determination, the nature of the derivative, the extent to 
     which the derivative is economically similar to instruments 
     that are subject to regulation by the Securities and Exchange 
     Commission or the Commodity Futures Trading Commission, the 
     appropriateness of regulation of the derivative under either 
     the securities laws or the Commodity Exchange Act, and such 
     other factors as the Securities and Exchange Commission and 
     the Commodity Futures Trading Commission may prescribe.
       (b) Judicial Resolution.--
       (1) In general.--If the Securities and Exchange Commission 
     and the Commodity Futures Trading Commission are unable to 
     determine the status of a derivative as a security-based 
     swap, a commodity-based swap, a security derivative, or a 
     commodity derivative pursuant to the process established in 
     subsection (a), either agency may petition the United States 
     Court of Appeals for the District of Columbia Circuit for a 
     determination of the status of the derivative as a security-
     based swap, a commodity-based swap, a security derivative, or 
     a commodity derivative.
       (2) Expedited review.--The United States Court of Appeals 
     for the District of Columbia Circuit shall complete all 
     action on a petition filed in accordance with paragraph (1), 
     including rendering a final determination of the status of 
     the derivative as a security-based swap, a commodity-based 
     swap, a security derivative, or a commodity derivative before 
     the end of the 60-day period beginning on the date on which 
     such petition is filed, unless all parties to such proceeding 
     agree to any extension of such period.
       (3) Standard of review.--The court shall determine the 
     status of a new derivative instrument as either a security-
     based derivative, a security-based swap, a commodity-based 
     swap, a security derivative, or a commodity derivative, based 
     upon the factors described in subsection (a)(2), giving 
     deference neither to the views of the Securities and Exchange 
     Commission nor the Commodity Futures Trading Commission.
       (4) Supreme court review.--Any request for certiorari to 
     the Supreme Court of the United States of any determination 
     of the United States Court of Appeals for the District of 
     Columbia Circuit with respect to a petition for review under 
     this subsection shall be filed with the Supreme Court of the 
     United States as soon as practicable after such determination 
     is made.
       (5) Judicial stay.--The filing of a petition pursuant to 
     paragraph (1) shall operate as a judicial stay of the 
     identification of a derivative as a security-based swap, a 
     commodity-based swap, a security derivative, or a commodity 
     derivative until the date on which the determination of the 
     court is final, including any appeal of such determination.

     SEC. 303. STUDY AND REPORT ON IMPLEMENTATION.

       (a) Study Required.--The Comptroller General of the United 
     States shall conduct a study of--
       (1) how the Commodity Futures Trading Commission and the 
     Securities and Exchange Commission have implemented this Act 
     and the amendments made by this Act;
       (2) the extent to which jurisdictional disputes have 
     created challenges in the process of implementing this Act 
     and the amendments made by this Act; and
       (3) the benefits and drawbacks of harmonizing laws 
     implemented by the Commodity Futures Trading Commission and 
     the Securities and Exchange Commission, and merging those 
     agencies.
       (b) Report Required.--Not later than 1 year after the date 
     on which all rules are issued under section 304, the 
     Comptroller General shall submit a report on the results of 
     the study required by this section to Congress, the Commodity 
     Futures Trading Commission, and the Securities and Exchange 
     Commission.

     SEC. 304. RULEMAKING.

       The Securities and Exchange Commission, the Commodity 
     Futures Trading Commission, and the appropriate regulatory 
     authorities (as that term is defined in section 15F(g) of the 
     Securities Exchange Act of 1934, as added by this Act, or 
     section 4s(a) of the Commodity Exchange Act, as added by this 
     Act), as applicable, shall issue rules under sections 15F(b), 
     15F(c), 15F(f), 17(l), 17C(c)(2), and 17C(d)(2) of the 
     Securities Exchange Act of 1934 (as added by this Act), 
     sections 4r(c)(2), 4r(d)(2), 4s(c), 4s(d), and 4s(g) of the 
     Commodity Exchange Act (as added by this Act), and sections 
     301 and 302 of this Act, not later than 180 days after the 
     date of enactment of this Act.

     SEC. 305. EFFECTIVE DATE.

       (a) In General.--Except as provided in subsection (b) or as 
     specifically provided in the amendments made by this Act, 
     this Act and the amendments made by this Act, shall become 
     effective on the date of enactment of this Act.
       (b) Other Effective Dates.--The amendments made by sections 
     102(b) and 202(b) of this Act and the provisions of section 
     15F(a) of the Securities Exchange Act of 1934 (as added by 
     this Act) and section 4s(b) of the Commodity Exchange Act (as 
     added by this Act) shall become effective 6 months after the 
     date of enactment of this Act.
                                 ______
                                 
      By Mr. LEAHY (for himself, Mr. Cardin, and Mr. Kaufman):
  S. 1692. A bill to extend the sunset of certain provisions of the USA 
PATRIOT Act and the authority to issue national security letters, and 
for other purposes; to the Committee on the Judiciary.
  Mr. LEAHY. Mr. President, security and liberty are both essential in 
our free society. Benjamin Franklin wrote: ``Those who can give up 
essential liberty to obtain a little temporary safety, deserve neither 
liberty nor safety.'' I have been mindful of this since the devastating 
attacks of September 11, and each time we have considered the USA 
PATRIOT Act. The American people of today and those of tomorrow--our 
children and grandchildren--depend on us to do our best to ensure both 
security and the preservation of our essential liberties.
  After September 11, the Government's power to gather information 
about those suspected of, or connected to, potential terrorists 
increased. Because such surveillance may, sometimes by mistake, sweep 
in U.S. citizens, we must vigilantly monitor these laws to ensure that 
they are implemented appropriately. This calls for public, judicial and 
congressional oversight to make sure we maintain the proper respect for 
security and liberty.

[[Page S9674]]

  After September 11, I introduced the USA PATRIOT Act, Patriot Act, to 
give the Government the tools needed to defend this country and 
aggressively pursue those who would do us harm. Even in those dark 
days, I insisted on oversight. Working with the then House Majority 
Leader, Republican Dick Armey, we included sunsets for some of the 
provisions of the bill that had the greatest potential to directly 
affect Americans.
  We debated the reauthorization of the Patriot Act for several months 
in 2005 and 2006. I again fought to protect the civil liberties and 
constitutional rights of Americans. Unfortunately, after a series of 
short extensions, the reauthorization of 2006 lacked sufficient 
constitutional protections over the vast authorities it granted to the 
Government. I had worked to secure increased oversight and to include 
new sunsets in the bill.
  With those sunsets expiring on December 31, 2009, we must once again 
consider the Patriot Act. Three provisions of the Patriot Act are 
slated to expire at the end of this year, including the authorization 
for roving wiretaps, the ``lone wolf'' measure, and orders for tangible 
things, commonly referred to as the ``library'' provision.
  In March, I sent Attorney General Holder a letter requesting the 
administration's views on these expiring provisions. I reiterated that 
request at a Senate Judiciary Committee oversight hearing in June. I 
have recently received a letter from the Attorney General urging us to 
extend the expiring authorities. I appreciate the President and the 
Attorney General's emphasis on accountability and checks and balances, 
and their willingness to consider additional ideas.
  Today I am introducing a bill with Senators Cardin and Kaufman that 
does just that. It will extend the authorization of the three expiring 
provisions. The bill also updates checks and balances by increasing 
judicial review of the use of Government powers that capture 
information on U.S. citizens, and augments congressional oversight. We 
propose increasing Government accountability through more transparent 
public reporting of the use of surveillance, and by requiring audits of 
how these vast authorities have been used since they were last 
reauthorized. In addition, we propose that, given their extensive use 
abuse and intrusiveness, we include a sunset for National Security 
Letters, NSLs. I introduced a bill in 2006, after the most recent 
Patriot Act reauthorization, to impose a sunset on NSLs. This sunset 
provision, combined with a comprehensive audit by the Inspector 
General, will help to hold the Federal Bureau of Investigation, FBI, 
accountable in its use of this authority.
  In developing this bill, I worked closely with Senators Feingold and 
Durbin to protect the rights and privacy of Americans, and to expand 
oversight. Senators Feingold and Durbin have worked tirelessly over the 
years to protect the civil liberties of Americans, from the first 
debate over the Patriot Act in 2001, to the reauthorization in 2006, to 
the FISA Amendments Act enacted last year. I am pleased that Senators 
Cardin, Kaufman and I have adopted some of the concepts they proposed 
in the SAFE Act of 2005, and that were included in the broader Patriot 
Act reauthorization bill they introduced last week, the JUSTICE Act.
  I have long been concerned over the issuance and oversight of NSLs. 
National Security Letters are, in effect, a form of administrative 
subpoena. They do not require approval by a court, grand jury, or 
prosecutor. They are issued in secret, with recipients silenced, under 
penalty of law. Yet NSLs allow the Government to collect sensitive 
information, such as personal financial records. As Congress expanded 
the NSL authority in recent years, I raised concerns about how the FBI 
handles the information it collects on Americans. I noted that, with no 
real limits imposed by Congress, the FBI could store this information 
electronically and use it for large-scale, data-mining operations. We 
now know that the NSL authority was significantly misused. In 2008 the 
Department of Justice Inspector General issued a report on the FBI's 
use of NSLs revealing serious over-collection of information and abuse 
of the NSL authority.
  We should reconsider the breadth of the NSL authority. This bill 
would also impose more judicial oversight and higher standards on the 
issuance of NSLs. It would require the FBI to include a statement of 
facts articulating why the information it is seeking is relevant to an 
authorized investigation.
  The bill also addresses the constitutional deficiency recently 
identified by the Second Circuit Court of appeals in Doe v. Musasey. 
The Second Circuit found that the nondisclosure, or ``gag orders,'' 
issued under NSLs are a constitutional infringement. I have long 
maintained that position. The bill establishes a procedure whereby the 
recipient of an NSL has 21 days to notify the Government that it wishes 
to challenge the nondisclosure requirement. The Government then has 21 
additional days to apply for a court order to compel compliance with 
the nondisclosure requirement. This scheme corrects the constitutional 
defects found by the Second Circuit. The bill would shift the burden of 
defending the need for a gag order to the Government. This bill also 
eliminates the NSL nondisclosure provision that allows the Government 
to ensure itself of victory by certifying that, in its view, disclosure 
``may'' endanger national security or ``may'' interfere with diplomatic 
relations. The bill further strengthens judicial review of 
nondisclosure or ``gag orders'' associated with NSLs by imposing a one-
year limitation on such orders. To protect on-going law enforcement 
investigations, it permits renewals of the nondisclosure orders in 
appropriate cases.
  The power of the government to collect records for tangible things 
under Section 215 of the original Patriot Act, commonly referred to as 
the ``library records'' provision, is another authority that I worked 
to reform during the last reauthorization. It is time to redefine the 
way we describe this authority to accurately reflect the broad scope of 
information it allows the government to collect. Section 215 allows the 
FISA court to secretly require any entity to produce any document or 
other tangible thing with a minimal standard of relevance and a 
presumption in favor of the Government's showing of relevance. This 
bill correctly identifies Section 215 orders as orders for ``tangible 
things'' as opposed to only for ``business records'' as it is in 
current law.
  This bill adopts the reasonable constitutional standard that I 
supported in 2006 for 215 orders. First, it would eliminate the 
presumption in favor of the government's assertion that the records it 
is seeking are relevant to its investigation. This bill would require 
the Government to make a connection between the records or other things 
it seeks and a suspected terrorist or spy before it is able to obtain 
confidential records such as library, medical and telephone records. 
Section 215 orders for tangible things permit the Government to collect 
an even broader scope of information than NSLs. For that reason, it is 
critical that the Government show that the records it seeks are both 
relevant to an investigation and connected to at least a suspected 
terrorist or spy.
  This bill would also establish more meaningful judicial review of 
Section 215 orders. First, it repeals the requirement in current law 
that requires a recipient of a Section 215 nondisclosure order to wait 
for a full year before challenging that gag order. There is no 
justification for this mandatory waiting period for judicial review, 
and this bill eliminates it. It also repeals a provision added to the 
law in 2006 stating that a conclusive presumption in favor of the 
Government shall apply where a high level official certifies that 
disclosure of the order for tangible things would endanger national 
security or interfere with diplomatic relations. These restraints on 
meaningful judicial review are unfair, unjustified, and completely 
unacceptable. I fought hard to keep these two provisions out of the 
2006 reauthorization, but the Republican majority at that time insisted 
they be included.
  This bill will strengthen court oversight of Section 215 orders by 
requiring court oversight of minimization procedures when information 
concerning a U.S. person is acquired, retained, or disseminated. 
Requiring FISA Court approval of minimization procedures would simply 
bring Section 215 orders in line with other FISA authorities--such as 
wiretaps, physical searches,

[[Page S9675]]

and pen register and trap and trace devices--that already require FISA 
court approval of minimization procedures. This is another common sense 
modification to the law that was drafted in consultation with Senators 
Feingold and Durbin. If we are to allow personal information to be 
collected in secret, the court must be more involved in making sure the 
authorities are used responsibly and that Americans' information and 
personal privacy are protected.
  Finally, this bill addresses concerns over the use of pen register or 
trap and trace devices ``pen/trap''. The bill raises the standard for 
pen/trap in the same manner as it raises the standard for Section 215 
orders. The Government would be required to show that the information 
it seeks is both relevant to an investigation and connected to a 
suspected terrorist or spy. This section also requires court review of 
minimization procedures, which are not required under current law, and 
adds an Inspector General audit of the use of pen/trap that is modeled 
on the the audits of Section 215 orders and NSLs.
  I look forward to working with the members of the Judiciary 
Committee, the Senate, the House and with the administration as this 
bill moves forward, and I welcome the views of others.
  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. 1692

       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 ``USA PATRIOT Act Sunset 
     Extension Act of 2009''.

     SEC. 2. SUNSETS.

       (a) Sections 206 and 215 Sunset.--
       (1) In general.--Section 102(b)(1) of the USA PATRIOT 
     Improvement and Reauthorization Act of 2005 (Public Law 109-
     177; 50 U.S.C. 1805 note, 50 U.S.C. 1861 note, and 50 U.S.C. 
     1862 note) is amended by striking ``2009'' and inserting 
     ``2013''.
       (2) Conforming amendments.--
       (A) In general.--Section 601(a)(1)(D) of the Foreign 
     Intelligence Surveillance Act of 1978 (50 U.S.C. 
     1871(a)(1)(D)) is amended by striking ``section 501;'' and 
     inserting ``section 502 or under section 501 pursuant to 
     section 102(b)(2) the USA PATRIOT Improvement and 
     Reauthorization Act of 2005 (Public Law 109-177; 50 U.S.C. 
     1861 note);''.
       (B) Application under section 404 of the fisa amendments 
     act of 2008.--Section 404(b)(4)(A) of the FISA Amendments Act 
     of 2008 (Public Law 110-261; 122 Stat. 2477) is amended by 
     striking the period at the end and inserting ``, except that 
     paragraph (1)(D) of such section 601(a) shall be applied as 
     if it read as follows:
       `(D) access to records under section 502 or under section 
     501 pursuant to section 102(b)(2) the USA PATRIOT Improvement 
     and Reauthorization Act of 2005 (Public Law 109-177; 50 
     U.S.C. 1861 note);'.''.
       (C) Effective date.--The amendments made by this paragraph 
     shall take effect on December 31, 2013.
       (b) Extension of Sunset Relating to Individual Terrorists 
     as Agents of Foreign Powers.--
       (1) In general.--Section 6001(b) of the Intelligence Reform 
     and Terrorism Prevention Act of 2004 (Public Law 108-458; 50 
     U.S.C. 1801 note) is amended to read as follows:
       ``(b) Sunset.--
       ``(1) Repeal.--Subparagraph (C) of section 101(b)(1) of the 
     Foreign Intelligence Surveillance Act of 1978 (50 U.S.C. 
     1801(b)(1)), as added by subsection (a), is repealed 
     effective December 31, 2013.
       ``(2) Transition provision.--Notwithstanding paragraph (1), 
     subparagraph (C) of section 101(b)(1) of the Foreign 
     Intelligence Surveillance Act of 1978 (50 U.S.C. 1801(b)(1)) 
     shall continue to apply after December 31, 2013 with respect 
     to any particular foreign intelligence investigation or with 
     respect to any particular offense or potential offense that 
     began or occurred before December 31, 2013.''.
       (2) Conforming amendment.--
       (A) In general.--Section 601(a)(2) of the Foreign 
     Intelligence Surveillance Act of 1978 (50 U.S.C. 1871(a)(2)) 
     is amended by striking the semicolon at the end and inserting 
     ``pursuant to subsection (b)(2) of section 6001 of the 
     Intelligence Reform and Terrorism Prevention Act of 2004 
     (Public Law 108-458; 50 U.S.C. 1801 note);''.
       (B) Effective date.--The amendment made by subparagraph (A) 
     shall take effect on December 31, 2013.
       (c) National Security Letters.--
       (1) In general.--Effective on December 31, 2013, the 
     following provisions of law are repealed:
       (A) Section 2709 of title 18, United States Code.
       (B) Section 1114(a)(5) of the Right to Financial Privacy 
     Act of 1978 (12 U.S.C. 3414(a)(5)).
       (C) Subsections (a) and (b) of section 626 of the Fair 
     Credit Reporting Act (15 U.S.C. 1681u).
       (D) Section 627 of the Fair Credit Reporting Act (15 U.S.C. 
     1681v).
       (E) Section 802 of the National Security Act of 1947 (50 
     U.S.C. 436).
       (2) Transition provision.--Notwithstanding paragraph (1), 
     the provisions of law referred to in paragraph (1) shall 
     continue to apply after December 31, 2013 with respect to any 
     particular foreign intelligence investigation or with respect 
     to any particular offense or potential offense that began or 
     occurred before December 31, 2013.
       (3) Technical and conforming amendments.--
       (A) Title 18.--Title 18, United States Code, is amended--
       (i) in the table of sections for chapter 121, by striking 
     the item relating to section 2709;
       (ii) by striking section 3511; and
       (iii) in the table of sections for chapter 223, by striking 
     the item relating to section 3511.
       (B) Fair credit reporting act.--The Fair Credit Reporting 
     Act (15 U.S.C. 1681) is amended--
       (i) in section 626 (15 U.S.C. 1681u)--

       (I) in subsection (d)(1), by striking ``the identity of 
     financial institutions or a consumer report respecting any 
     consumer under subsection (a), (b), or (c)'' and inserting 
     ``a consumer report respecting any consumer under subsection 
     (c)'';
       (II) in subsection (h)(1), by striking ``subsections (a), 
     (b), and (c)'' and inserting ``subsection (c)''; and

       (ii) in the table of sections, by striking the item 
     relating to section 627.
       (C) National security act of 1947.--The National Security 
     Act of 1947 (50 U.S.C. 401 et seq.) is amended--
       (i) in section 507(b) (50 U.S.C. 415b(b))--

       (I) by striking paragraph (5); and
       (II) by redesignating paragraph (6) as paragraph (5); and

       (ii) in the table of contents, by striking the item 
     relating to section 802.
       (D) Effective date.--The amendments made by this paragraph 
     shall take effect on December 31, 2013.

     SEC. 3. FACTUAL BASIS FOR AND ISSUANCE OF ORDERS FOR ACCESS 
                   TO TANGIBLE THINGS.

       (a) In General.--Section 501 of the Foreign Intelligence 
     Surveillance Act of 1978 (50 U.S.C. 1861) is amended--
       (1) in the section heading, by striking ``certain business 
     records'' and inserting ``tangible things'';
       (2) in subsection (b)(2), by striking subparagraphs (A) and 
     (B) and inserting the following:
       ``(A) a statement of facts showing that there are 
     reasonable grounds to believe that the records or other 
     things sought--
       ``(i) are relevant to an authorized investigation (other 
     than a threat assessment) conducted in accordance with 
     subsection (a)(2) to obtain foreign intelligence information 
     not concerning a United States person or to protect against 
     international terrorism or clandestine intelligence 
     activities; and
       ``(ii)(I) pertain to a foreign power or an agent of a 
     foreign power;
       ``(II) are relevant to the activities of a suspected agent 
     of a foreign power who is the subject of such authorized 
     investigation; or
       ``(III) pertain to an individual in contact with, or known 
     to, a suspected agent of a foreign power; and
       ``(B) a statement of proposed minimization procedures.''; 
     and
       (3) in subsection (c)--
       (A) in paragraph (1)--
       (i) by inserting ``and that the proposed minimization 
     procedures meet the definition of minimization procedures 
     under subsection (g)'' after ``subsections (a) and (b)''; and
       (ii) by striking the second sentence; and
       (B) in paragraph (2)--
       (i) in subparagraph (D), by striking ``and'' at the end;
       (ii) in subparagraph (E), by striking the period at the end 
     and inserting ``; and''; and
       (iii) by adding at the end the following:
       ``(F) shall direct that the minimization procedures be 
     followed.''.
       (b) Technical and Conforming Amendments.--
       (1) Title heading.--Title V of the Foreign Intelligence 
     Surveillance Act of 1978 (50 U.S.C. 1861 et seq.) is amended 
     in the title heading by striking ``CERTAIN BUSINESS RECORDS'' 
     and inserting ``TANGIBLE THINGS''.
       (2) Table of contents.--The table of contents in the first 
     section of the Foreign Intelligence Surveillance Act of 1978 
     (50 U.S.C. 1801 et seq.) is amended by striking the items 
     relating to title V and section 501 and inserting the 
     following:

 ``TITLE V--ACCESS TO TANGIBLE THINGS FOR FOREIGN INTELLIGENCE PURPOSES

``Sec. 501. Access to tangible things for foreign intelligence purposes 
              and international terrorism investigations.''.

     SEC. 4. FACTUAL BASIS FOR AND ISSUANCE OF ORDERS FOR PEN 
                   REGISTERS AND TRAP AND TRACE DEVICES FOR 
                   FOREIGN INTELLIGENCE PURPOSES.

       (a) In General.--
       (1) Application.--Section 402(c) of the Foreign 
     Intelligence Surveillance Act of 1978 (50 U.S.C. 1842(c)) is 
     amended--
       (A) in paragraph (1), by striking ``and'' at the end; and
       (B) by striking paragraph (2) and inserting the following:

[[Page S9676]]

       ``(2) a statement of facts showing that there are 
     reasonable grounds to believe that the information likely to 
     be obtained--
       ``(A) is relevant to an authorized investigation (other 
     than a threat assessment) conducted in accordance with 
     subsection (a)(1) to obtain foreign intelligence information 
     not concerning a United States person or to protect against 
     international terrorism or clandestine intelligence 
     activities; and
       ``(B)(i) pertains to a foreign power or an agent of a 
     foreign power;
       ``(ii) is relevant to the activities of a suspected agent 
     of a foreign power who is the subject of such authorized 
     investigation; or
       ``(iii) pertains to an individual in contact with, or known 
     to, a suspected agent of a foreign power; and
       ``(3) a statement of proposed minimization procedures.''.
       (2) Minimization.--
       (A) Definition.--Section 401 of the Foreign Intelligence 
     Surveillance Act of 1978 (50 U.S.C. 1841) is amended by 
     adding at the end the following:
       ``(4) The term `minimization procedures' means--
       ``(A) specific procedures that are reasonably designed in 
     light of the purpose and technique of an order for the 
     installation and use of a pen register or trap and trace 
     device, to minimize the acquisition and retention, and 
     prohibit the dissemination, of nonpublicly available 
     information concerning unconsenting United States persons 
     consistent with the need of the United States to obtain, 
     produce, and disseminate foreign intelligence information;
       ``(B) procedures that require that nonpublicly available 
     information, which is not foreign intelligence information, 
     as defined in section 101(e)(1), shall not be disseminated in 
     a manner that identifies any United States person, without 
     such person's consent, unless such person's identity is 
     necessary to understand foreign intelligence information or 
     assess its importance; and
       ``(C) notwithstanding subparagraphs (A) and (B), procedures 
     that allow for the retention and dissemination of information 
     that is evidence of a crime which has been, is being, or is 
     about to be committed and that is to be retained or 
     disseminated for law enforcement purposes.''.
       (B) Pen registers and trap and trace devices.--Section 402 
     of the Foreign Intelligence Surveillance Act of 1978 (50 
     U.S.C. 1842) is amended--
       (i) in subsection (d)--

       (I) in paragraph (1), by inserting ``, and that the 
     proposed minimization procedures meet the definition of 
     minimization procedures under this title'' before the period 
     at the end; and
       (II) in paragraph (2)(B)--

       (aa) in clause (ii)(II), by striking ``and'' after the 
     semicolon; and
       (bb) by adding at the end the following:
       ``(iv) the minimization procedures be followed; and''; and
       (ii) by adding at the end the following:
       ``(h) At or before the end of the period of time for which 
     the installation and use of a pen register or trap and trace 
     device is approved under an order or an extension under this 
     section, the judge may assess compliance with the 
     minimization procedures by reviewing the circumstances under 
     which information concerning United States persons was 
     acquired, retained, or disseminated.''.
       (C) Emergencies.--Section 403 of the Foreign Intelligence 
     Surveillance Act of 1978 (50 U.S.C. 1843) is amended--
       (i) by redesignating subsection (c) as (d); and
       (ii) by inserting after subsection (b) the following:
       ``(c) If the Attorney General authorizes the emergency 
     installation and use of a pen register or trap and trace 
     device under this section, the Attorney General shall require 
     that the minimization procedures required by this title for 
     the issuance of a judicial order be followed.''.
       (D) Use of information.--Section 405(a) of the Foreign 
     Intelligence Surveillance Act of 1978 (50 U.S.C. 1845(a)) is 
     amended by striking ``provisions of'' and inserting 
     ``minimization procedures required under''.

     SEC. 5. LIMITATIONS ON DISCLOSURE OF NATIONAL SECURITY 
                   LETTERS.

       (a) In General.--Section 2709 of title 18, United States 
     Code, is amended by striking subsection (c) and inserting the 
     following:
       ``(c) Prohibition of Certain Disclosure.--
       ``(1) Prohibition.--
       ``(A) In general.--If a certification is issued under 
     subparagraph (B) and notice of the right to judicial review 
     under paragraph (4) is provided, no wire or electronic 
     communication service provider, or officer, employee, or 
     agent thereof, that receives a request under subsection (a), 
     shall disclose to any person the particular information 
     specified in the certification during the time period to 
     which the certification applies, which may be not longer than 
     1 year.
       ``(B) Certification.--The requirements of subparagraph (A) 
     shall apply if the Director of the Federal Bureau of 
     Investigation, or a designee of the Director whose rank shall 
     be no lower than Deputy Assistant Director at Bureau 
     headquarters or a Special Agent in Charge of a Bureau field 
     office, certifies that, absent a prohibition of disclosure 
     under this subsection, there may result--
       ``(i) a danger to the national security of the United 
     States;
       ``(ii) interference with a criminal, counterterrorism, or 
     counterintelligence investigation;
       ``(iii) interference with diplomatic relations; or
       ``(iv) danger to the life or physical safety of any person.
       ``(2) Exception.--
       ``(A) In general.--A wire or electronic communication 
     service provider, or officer, employee, or agent thereof, 
     that receives a request under subsection (a) may disclose 
     information otherwise subject to any applicable nondisclosure 
     requirement to--
       ``(i) those persons to whom disclosure is necessary in 
     order to comply with the request;
       ``(ii) an attorney in order to obtain legal advice or 
     assistance regarding the request; or
       ``(iii) other persons as permitted by the Director of the 
     Federal Bureau of Investigation or the designee of the 
     Director.
       ``(B) Nondisclosure requirement.--A person to whom 
     disclosure is made under subparagraph (A) shall be subject to 
     the nondisclosure requirements applicable to a person to whom 
     a request is issued under subsection (a) in the same manner 
     as the person to whom the request is issued.
       ``(C) Notice.--Any recipient that discloses to a person 
     described in subparagraph (A) information otherwise subject 
     to a nondisclosure requirement shall inform the person of the 
     applicable nondisclosure requirement.
       ``(3) Extension.--The Director of the Federal Bureau of 
     Investigation, or a designee of the Director whose rank shall 
     be no lower than Deputy Assistant Director at Bureau 
     headquarters or a Special Agent in Charge in a Bureau field 
     office, may extend a nondisclosure requirement for additional 
     periods of not longer than 1 year if, at the time of each 
     extension, a new certification is made under paragraph (1)(B) 
     and notice is provided to the recipient of the applicable 
     request that the nondisclosure requirement has been extended 
     and the recipient has the right to judicial review of the 
     nondisclosure requirement.
       ``(4) Right to judicial review.--
       ``(A) In general.--A wire or electronic communications 
     service provider that receives a request under subsection (a) 
     shall have the right to judicial review of any applicable 
     nondisclosure requirement and any extension thereof.
       ``(B) Timing.--
       ``(i) In general.--A request under subsection (a) shall 
     state that if the recipient wishes to have a court review a 
     nondisclosure requirement, the recipient shall notify the 
     Government not later than 21 days after the date of receipt 
     of the request.
       ``(ii) Extension.--A notice that the applicable 
     nondisclosure requirement has been extended under paragraph 
     (3) shall state that if the recipient wishes to have a court 
     review the nondisclosure requirement, the recipient shall 
     notify the Government not later than 21 days after the date 
     of receipt of the notice.
       ``(C) Initiation of proceedings.--If a recipient of a 
     request under subsection (a) makes a notification under 
     subparagraph (B), the Government shall initiate judicial 
     review under the procedures established in section 3511 of 
     this title.
       ``(5) Termination.--If the facts supporting a nondisclosure 
     requirement cease to exist prior to the applicable time 
     period of the nondisclosure requirement, an appropriate 
     official of the Federal Bureau of Investigation shall 
     promptly notify the wire or electronic service provider, or 
     officer, employee, or agent thereof, subject to the 
     nondisclosure requirement that the nondisclosure requirement 
     is no longer in effect.''.
       (b) Identity of Financial Institutions and Credit 
     Reports.--Section 626 of the Fair Credit Reporting Act (15 
     U.S.C. 1681u) is amended by striking subsection (d) and 
     inserting the following:
       ``(d) Prohibition of Certain Disclosure.--
       ``(1) Prohibition.--
       ``(A) In general.--If a certification is issued under 
     subparagraph (B) and notice of the right to judicial review 
     under paragraph (4) is provided, no consumer reporting 
     agency, or officer, employee, or agent thereof, that receives 
     a request or order under subsection (a), (b), or (c), shall 
     disclose to any person the particular information specified 
     in the certification during the time period to which the 
     certification applies, which may be not longer than 1 year.
       ``(B) Certification.--The requirements of subparagraph (A) 
     shall apply if the Director of the Federal Bureau of 
     Investigation, or a designee of the Director whose rank shall 
     be no lower than Deputy Assistant Director at Bureau 
     headquarters or a Special Agent in Charge of a Bureau field 
     office, certifies that, absent a prohibition of disclosure 
     under this subsection, there may result--
       ``(i) a danger to the national security of the United 
     States;
       ``(ii) interference with a criminal, counterterrorism, or 
     counterintelligence investigation;
       ``(iii) interference with diplomatic relations; or
       ``(iv) danger to the life or physical safety of any person.
       ``(2) Exception.--
       ``(A) In general.--A consumer reporting agency, or officer, 
     employee, or agent thereof, that receives a request or order 
     under subsection (a), (b), or (c) may disclose information 
     otherwise subject to any applicable nondisclosure requirement 
     to--
       ``(i) those persons to whom disclosure is necessary in 
     order to comply with the request or order;

[[Page S9677]]

       ``(ii) an attorney in order to obtain legal advice or 
     assistance regarding the request or order; or
       ``(iii) other persons as permitted by the Director of the 
     Federal Bureau of Investigation or the designee of the 
     Director.
       ``(B) Nondisclosure requirement.--A person to whom 
     disclosure is made under subparagraph (A) shall be subject to 
     the nondisclosure requirements applicable to a person to whom 
     a request or order is issued under subsection (a), (b), or 
     (c) in the same manner as the person to whom the request or 
     order is issued.
       ``(C) Notice.--Any recipient that discloses to a person 
     described in subparagraph (A) information otherwise subject 
     to a nondisclosure requirement shall inform the person of the 
     applicable nondisclosure requirement.
       ``(3) Extension.--The Director of the Federal Bureau of 
     Investigation, or a designee of the Director whose rank shall 
     be no lower than Deputy Assistant Director at Bureau 
     headquarters or a Special Agent in Charge in a Bureau field 
     office, may extend a nondisclosure requirement for additional 
     periods of not longer than 1 year if, at the time of each 
     extension, a new certification is made under paragraph (1)(B) 
     and notice is provided to the recipient of the applicable 
     request or order that the nondisclosure requirement has been 
     extended and the recipient has the right to judicial review 
     of the nondisclosure requirement.
       ``(4) Right to judicial review.--
       ``(A) In general.--A consumer reporting agency that 
     receives a request or order under subsection (a), (b), or (c) 
     shall have the right to judicial review of any applicable 
     nondisclosure requirement and any extension thereof.
       ``(B) Timing.--
       ``(i) In general.--A request or order under subsection (a), 
     (b), or (c) shall state that if the recipient wishes to have 
     a court review a nondisclosure requirement, the recipient 
     shall notify the Government not later than 21 days after the 
     date of receipt of the request or order.
       ``(ii) Extension.--A notice that the applicable 
     nondisclosure requirement has been extended under paragraph 
     (3) shall state that if the recipient wishes to have a court 
     review the nondisclosure requirement, the recipient shall 
     notify the Government not later than 21 days after the date 
     of receipt of the notice.
       ``(C) Initiation of proceedings.--If a recipient of a 
     request or order under subsection (a), (b), or (c) makes a 
     notification under subparagraph (B), the Government shall 
     initiate judicial review under the procedures established in 
     section 3511 of title 18, United States Code.
       ``(5) Termination.--If the facts supporting a nondisclosure 
     requirement cease to exist prior to the applicable time 
     period of the nondisclosure requirement, an appropriate 
     official of the Federal Bureau of Investigation shall 
     promptly notify the consumer reporting agency, or officer, 
     employee, or agent thereof, subject to the nondisclosure 
     requirement that the nondisclosure requirement is no longer 
     in effect.''.
       (c) Disclosures to Governmental Agencies for 
     Counterterrorism Purposes.--Section 627 of the Fair Credit 
     Reporting Act (15 U.S.C. 1681v) is amended by striking 
     subsection (c) and inserting the following:
       ``(c) Prohibition of Certain Disclosure.--
       ``(1) Prohibition.--
       ``(A) In general.--If a certification is issued under 
     subparagraph (B) and notice of the right to judicial review 
     under paragraph (4) is provided, no consumer reporting 
     agency, or officer, employee, or agent thereof, that receives 
     a request under subsection (a), shall disclose to any person 
     the particular information specified in the certification 
     during the time period to which the certification applies, 
     which may be not longer than 1 year.
       ``(B) Certification.--The requirements of subparagraph (A) 
     shall apply if the head of a government agency authorized to 
     conduct investigations of intelligence or counterintelligence 
     activities or analysis related to international terrorism, or 
     a designee, certifies that, absent a prohibition of 
     disclosure under this subsection, there may result--
       ``(i) a danger to the national security of the United 
     States;
       ``(ii) interference with a criminal, counterterrorism, or 
     counterintelligence investigation;
       ``(iii) interference with diplomatic relations; or
       ``(iv) danger to the life or physical safety of any person.
       ``(2) Exception.--
       ``(A) In general.--A consumer reporting agency, or officer, 
     employee, or agent thereof, that receives a request under 
     subsection (a) may disclose information otherwise subject to 
     any applicable nondisclosure requirement to--
       ``(i) those persons to whom disclosure is necessary in 
     order to comply with the request;
       ``(ii) an attorney in order to obtain legal advice or 
     assistance regarding the request; or
       ``(iii) other persons as permitted by the head of the 
     government agency authorized to conduct investigations of 
     intelligence or counterintelligence activities or analysis 
     related to international terrorism, or a designee.
       ``(B) Nondisclosure requirement.--A person to whom 
     disclosure is made under subparagraph (A) shall be subject to 
     the nondisclosure requirements applicable to a person to whom 
     a request is issued under subsection (a) in the same manner 
     as the person to whom the request is issued.
       ``(C) Notice.--Any recipient that discloses to a person 
     described in subparagraph (A) information otherwise subject 
     to a nondisclosure requirement shall inform the person of the 
     applicable nondisclosure requirement.
       ``(3) Extension.--The head of a government agency 
     authorized to conduct investigations of intelligence or 
     counterintelligence activities or analysis related to 
     international terrorism, or a designee, may extend a 
     nondisclosure requirement for additional periods of not 
     longer than 1 year if, at the time of each extension, a new 
     certification is made under paragraph (1)(B) and notice is 
     provided to the recipient of the applicable request that the 
     nondisclosure requirement has been extended and the recipient 
     has the right to judicial review of the nondisclosure 
     requirement.
       ``(4) Right to judicial review.--
       ``(A) In general.--A consumer reporting agency that 
     receives a request under subsection (a) shall have the right 
     to judicial review of any applicable nondisclosure 
     requirement and any extension thereof.
       ``(B) Timing.--
       ``(i) In general.--A request under subsection (a) shall 
     state that if the recipient wishes to have a court review a 
     nondisclosure requirement, the recipient shall notify the 
     Government not later than 21 days after the date of receipt 
     of the request.
       ``(ii) Extension.--A notice that the applicable 
     nondisclosure requirement has been extended under paragraph 
     (3) shall state that if the recipient wishes to have a court 
     review the nondisclosure requirement, the recipient shall 
     notify the Government not later than 21 days after the date 
     of receipt of the notice.
       ``(C) Initiation of proceedings.--If a recipient of a 
     request under subsection (a) makes a notification under 
     subparagraph (B), the Government shall initiate judicial 
     review under the procedures established in section 3511 of 
     title 18, United States Code.
       ``(5) Termination.--If the facts supporting a nondisclosure 
     requirement cease to exist prior to the applicable time 
     period of the nondisclosure requirement, an appropriate 
     official of the government agency authorized to conduct 
     investigations of intelligence or counterintelligence 
     activities or analysis related to international terrorism 
     shall promptly notify the consumer reporting agency, or 
     officer, employee, or agent thereof, subject to the 
     nondisclosure requirement that the nondisclosure requirement 
     is no longer in effect.''.
       (d) Financial Records.--Section 1114(a)(5) of the Right to 
     Financial Privacy Act (12 U.S.C. 3414(a)(5)) is amended by 
     striking subparagraph (D) and inserting the following:
       ``(D) Prohibition of certain disclosure.--
       ``(i) Prohibition.--

       ``(I) In general.--If a certification is issued under 
     subclause (II) and notice of the right to judicial review 
     under clause (iv) is provided, no financial institution, or 
     officer, employee, or agent thereof, that receives a request 
     under subparagraph (A), shall disclose to any person the 
     particular information specified in the certification during 
     the time period to which the certification applies, which may 
     be not longer than 1 year.
       ``(II) Certification.--The requirements of subclause (I) 
     shall apply if the Director of the Federal Bureau of 
     Investigation, or a designee of the Director whose rank shall 
     be no lower than Deputy Assistant Director at Bureau 
     headquarters or a Special Agent in Charge of a Bureau field 
     office, certifies that, absent a prohibition of disclosure 
     under this subparagraph, there may result--

       ``(aa) a danger to the national security of the United 
     States;
       ``(bb) interference with a criminal, counterterrorism, or 
     counterintelligence investigation;
       ``(cc) interference with diplomatic relations; or
       ``(dd) danger to the life or physical safety of any person.
       ``(ii) Exception.--

       ``(I) In general.--A financial institution, or officer, 
     employee, or agent thereof, that receives a request under 
     subparagraph (A) may disclose information otherwise subject 
     to any applicable nondisclosure requirement to--

       ``(aa) those persons to whom disclosure is necessary in 
     order to comply with the request;
       ``(bb) an attorney in order to obtain legal advice or 
     assistance regarding the request; or
       ``(cc) other persons as permitted by the Director of the 
     Federal Bureau of Investigation or the designee of the 
     Director.

       ``(II) Nondisclosure requirement.--A person to whom 
     disclosure is made under subclause (I) shall be subject to 
     the nondisclosure requirements applicable to a person to whom 
     a request is issued under subparagraph (A) in the same manner 
     as the person to whom the request is issued.
       ``(III) Notice.--Any recipient that discloses to a person 
     described in subclause (I) information otherwise subject to a 
     nondisclosure requirement shall inform the person of the 
     applicable nondisclosure requirement.

       ``(iii) Extension.--The Director of the Federal Bureau of 
     Investigation, or a designee of the Director whose rank shall 
     be no lower than Deputy Assistant Director at Bureau 
     headquarters or a Special Agent in Charge in a Bureau field 
     office, may extend a nondisclosure requirement for additional 
     periods

[[Page S9678]]

     of not longer than 1 year if, at the time of each extension, 
     a new certification is made under clause (i)(II) and notice 
     is provided to the recipient of the applicable request that 
     the nondisclosure requirement has been extended and the 
     recipient has the right to judicial review of the 
     nondisclosure requirement.
       ``(iv) Right to judicial review.--

       ``(I) In general.--A financial institution that receives a 
     request under subparagraph (A) shall have the right to 
     judicial review of any applicable nondisclosure requirement 
     and any extension thereof.
       ``(II) Timing.--

       ``(aa) In general.--A request under subparagraph (A) shall 
     state that if the recipient wishes to have a court review a 
     nondisclosure requirement, the recipient shall notify the 
     Government not later than 21 days after the date of receipt 
     of the request.
       ``(bb) Extension.--A notice that the applicable 
     nondisclosure requirement has been extended under clause 
     (iii) shall state that if the recipient wishes to have a 
     court review the nondisclosure requirement, the recipient 
     shall notify the Government not later than 21 days after the 
     date of receipt of the notice.

       ``(III) Initiation of proceedings.--If a recipient of a 
     request under subparagraph (A) makes a notification under 
     subclause (II), the Government shall initiate judicial review 
     under the procedures established in section 3511 of title 18, 
     United States Code.

       ``(v) Termination.--If the facts supporting a nondisclosure 
     requirement cease to exist prior to the applicable time 
     period of the nondisclosure requirement, an appropriate 
     official of the Federal Bureau of Investigation shall 
     promptly notify the financial institution, or officer, 
     employee, or agent thereof, subject to the nondisclosure 
     requirement that the nondisclosure requirement is no longer 
     in effect.''.
       (e) Requests by Authorized Investigative Agencies.--Section 
     802 of the National Security Act of 1947 (50 U.S.C. 436), is 
     amended by striking subsection (b) and inserting the 
     following:
       ``(b) Prohibition of Certain Disclosure.--
       ``(1) Prohibition.--
       ``(A) In general.--If a certification is issued under 
     subparagraph (B) and notice of the right to judicial review 
     under paragraph (4) is provided, no governmental or private 
     entity, or officer, employee, or agent thereof, that receives 
     a request under subsection (a), shall disclose to any person 
     the particular information specified in the certification 
     during the time period to which the certification applies, 
     which may be not longer than 1 year.
       ``(B) Certification.--The requirements of subparagraph (A) 
     shall apply if the head of an authorized investigative agency 
     described in subsection (a), or a designee, certifies that, 
     absent a prohibition of disclosure under this subsection, 
     there may result--
       ``(i) a danger to the national security of the United 
     States;
       ``(ii) interference with a criminal, counterterrorism, or 
     counterintelligence investigation;
       ``(iii) interference with diplomatic relations; or
       ``(iv) danger to the life or physical safety of any person.
       ``(2) Exception.--
       ``(A) In general.--A governmental or private entity, or 
     officer, employee, or agent thereof, that receives a request 
     under subsection (a) may disclose information otherwise 
     subject to any applicable nondisclosure requirement to--
       ``(i) those persons to whom disclosure is necessary in 
     order to comply with the request;
       ``(ii) an attorney in order to obtain legal advice or 
     assistance regarding the request; or
       ``(iii) other persons as permitted by the head of the 
     authorized investigative agency described in subsection (a).
       ``(B) Nondisclosure requirement.--A person to whom 
     disclosure is made under subparagraph (A) shall be subject to 
     the nondisclosure requirements applicable to a person to whom 
     a request is issued under subsection (a) in the same manner 
     as the person to whom the request is issued.
       ``(C) Notice.--Any recipient that discloses to a person 
     described in subparagraph (A) information otherwise subject 
     to a nondisclosure requirement shall inform the person of the 
     applicable nondisclosure requirement.
       ``(3) Extension.--The head of an authorized investigative 
     agency described in subsection (a), or a designee, may extend 
     a nondisclosure requirement for additional periods of not 
     longer than 1 year if, at the time of each extension, a new 
     certification is made under paragraph (1)(B) and notice is 
     provided to the recipient of the applicable request that the 
     nondisclosure requirement has been extended and the recipient 
     has the right to judicial review of the nondisclosure 
     requirement.
       ``(4) Right to judicial review.--
       ``(A) In general.--A governmental or private entity that 
     receives a request under subsection (a) shall have the right 
     to judicial review of any applicable nondisclosure 
     requirement and any extension thereof.
       ``(B) Timing.--
       ``(i) In general.--A request under subsection (a) shall 
     state that if the recipient wishes to have a court review a 
     nondisclosure requirement, the recipient shall notify the 
     Government not later than 21 days after the date of receipt 
     of the request.
       ``(ii) Extension.--A notice that the applicable 
     nondisclosure requirement has been extended under paragraph 
     (3) shall state that if the recipient wishes to have a court 
     review the nondisclosure requirement, the recipient shall 
     notify the Government not later than 21 days after the date 
     of receipt of the notice.
       ``(C) Initiation of proceedings.--If a recipient of a 
     request under subsection (a) makes a notification under 
     subparagraph (B), the Government shall initiate judicial 
     review under the procedures established in section 3511 of 
     title 18, United States Code.
       ``(5) Termination.--If the facts supporting a nondisclosure 
     requirement cease to exist prior to the applicable time 
     period of the nondisclosure requirement, an appropriate 
     official of the authorized investigative agency described in 
     subsection (a) shall promptly notify the governmental or 
     private entity, or officer, employee, or agent thereof, 
     subject to the nondisclosure requirement that the 
     nondisclosure requirement is no longer in effect.''.

     SEC. 6. JUDICIAL REVIEW OF FISA ORDERS AND NATIONAL SECURITY 
                   LETTERS.

       (a) FISA.--Section 501(f)(2) of the Foreign Intelligence 
     Surveillance Act of 1978 (50 U.S.C. 1861(f)(2)) is amended--
       (1) in subparagraph (A)--
       (A) in clause (i)--
       (i) by striking ``a production order'' and inserting ``a 
     production order or nondisclosure order''; and
       (ii) by striking ``Not less than 1 year'' and all that 
     follows;
       (B) in clause (ii), by striking ``production order or 
     nondisclosure''; and
       (2) in subparagraph (C)--
       (A) by striking clause (ii); and
       (B) by redesignating clause (iii) as clause (ii).
       (b) Judicial Review of National Security Letters.--Section 
     3511(b) of title 18, United States Code, is amended to read 
     as follows:
       ``(b) Nondisclosure.--
       ``(1) In general.--
       ``(A) Notice.--If a recipient of a request or order for a 
     report, records, or other information under section 2709 of 
     this title, section 626 or 627 of the Fair Credit Reporting 
     Act (15 U.S.C. 1681u and 1681v), section 1114 of the Right to 
     Financial Privacy Act (12 U.S.C. 3414), or section 802 of the 
     National Security Act of 1947 (50 U.S.C. 436), wishes to have 
     a court review a nondisclosure requirement imposed in 
     connection with the request, the recipient shall notify the 
     Government not later than 21 days after the date of receipt 
     of the request or of notice that an applicable nondisclosure 
     requirement has been extended.
       ``(B) Application.--Not later than 21 days after the date 
     of receipt of a notification under subparagraph (A), the 
     Government shall apply for an order prohibiting the 
     disclosure of particular information about the existence or 
     contents of the relevant request or order. An application 
     under this subparagraph may be filed in the district court of 
     the United States for any district within which the 
     authorized investigation that is the basis for the request or 
     order is being conducted. The applicable nondisclosure 
     requirement shall remain in effect during the pendency of 
     proceedings relating to the requirement.
       ``(C) Consideration.--A district court of the United States 
     that receives an application under subparagraph (B) should 
     rule expeditiously, and may issue a nondisclosure order for a 
     period of not longer than 1 year, unless the facts justify a 
     longer period of nondisclosure.
       ``(D) Denial.--If a district court of the United States 
     rejects an application for a nondisclosure order or extension 
     thereof, the nondisclosure requirement shall no longer be in 
     effect.
       ``(2) Application contents.--An application for a 
     nondisclosure order or extension thereof under this 
     subsection shall include--
       ``(A) a statement of the facts indicating that, absent a 
     prohibition of disclosure under this subsection, there may 
     result--
       ``(i) a danger to the national security of the United 
     States;
       ``(ii) interference with a criminal, counterterrorism, or 
     counterintelligence investigation;
       ``(iii) interference with diplomatic relations; or
       ``(iv) danger to the life or physical safety of any person; 
     and
       ``(B) the time period during which the Government believes 
     the nondisclosure requirement should apply.
       ``(3) Standard.--A district court of the United States may 
     issue a nondisclosure requirement order or extension thereof 
     under this subsection if the court determines that there is 
     reason to believe that disclosure of the information subject 
     to the nondisclosure requirement during the applicable time 
     period will result in--
       ``(A) a danger to the national security of the United 
     States;
       ``(B) interference with a criminal, counterterrorism, or 
     counterintelligence investigation;
       ``(C) interference with diplomatic relations; or
       ``(D) danger to the life or physical safety of any person.
       ``(4) Renewal.--A nondisclosure order under this subsection 
     may be renewed for additional periods of not longer than 1 
     year, unless the facts of the case justify a longer period of 
     nondisclosure, upon submission of an application meeting the 
     requirements of

[[Page S9679]]

     paragraph (2), and a determination by the court that the 
     circumstances described in paragraph (3) continue to 
     exist.''.
       (c) Minimization.--Section 501(g) of the Foreign 
     Intelligence Surveillance Act of 1978 (50 U.S.C. 1861(g)) is 
     amended--
       (1) in paragraph (1), by striking ``Not later than'' and 
     all that follows and inserting ``At or before the end of the 
     period of time for the production of tangible things under an 
     order approved under this section or at any time after the 
     production of tangible things under an order approved under 
     this section, a judge may assess compliance with the 
     minimization procedures by reviewing the circumstances under 
     which information concerning United States persons was 
     acquired, retained, or disseminated.''; and
       (2) in paragraph (2)(A), by inserting ``acquisition and'' 
     after ``to minimize the''.

     SEC. 7. CERTIFICATION FOR ACCESS TO TELEPHONE TOLL AND 
                   TRANSACTIONAL RECORDS.

       (a) In General.--Section 2709(b)(1) of title 18, United 
     States Code, is amended--
       (1) by striking ``certifies in writing'' and inserting 
     ``provides a written certification by the Director (or a 
     designee)''; and
       (2) by inserting ``that includes a statement of facts 
     showing that there are reasonable grounds to believe'' before 
     ``that the name,''.
       (b) Identity of Financial Institutions and Credit 
     Reports.--Section 626 of the Fair Credit Reporting Act (15 
     U.S.C. 1681u) is amended--
       (1) in subsection (a), by striking ``has determined in 
     writing, that such information is sought for'' and inserting 
     ``provides to the consumer reporting agency a written 
     determination that includes a statement of facts showing that 
     there are reasonable grounds to believe that such information 
     is relevant to''; and
       (2) in subsection (b), by striking ``has determined in 
     writing that such information is sought for'' and inserting 
     ``provides to the consumer reporting agency a written 
     determination that includes a statement of facts showing that 
     there are reasonable grounds to believe that such information 
     is relevant to''.
       (c) Disclosures to Governmental Agencies for 
     Counterterrorism Purposes.--Section 627(a) of the Fair Credit 
     Reporting Act (15 U.S.C. 1681v(a)) is amended by inserting 
     ``that includes a statement of facts showing that there are 
     reasonable grounds to believe'' before ``that such 
     information is necessary for''.
       (d) Financial Records.--Section 1114(a)(5)(A) of the Right 
     to Financial Privacy Act (12 U.S.C. 3414(a)(5)(A)) is 
     amended--
       (1) by striking ``certifies in writing'' and inserting 
     ``provides a written certification by the Director (or a 
     designee)''; and
       (2) by striking ``that such records are sought for foreign 
     counter intelligence purposes'' and inserting ``that includes 
     a statement of facts showing that there are reasonable 
     grounds to believe that such records are relevant to a 
     foreign counterintelligence investigation''.
       (e) Requests by Authorized Investigative Agencies.--Section 
     802(a)(3) of the National Security Act of 1947 (50 U.S.C. 
     436(a)(3)), is amended--
       (1) by redesignating subparagraphs (B), (C), and (D) as 
     subparagraphs (C), (D), and (E), respectively; and
       (2) by inserting after subparagraph (A) the following:
       ``(B) shall include a statement of facts showing that there 
     are reasonable grounds to believe, based on credible 
     information, that the person is, or may be, disclosing 
     classified information in an unauthorized manner to a foreign 
     power or agent of a foreign power;''.

     SEC. 8. PUBLIC REPORTING ON NATIONAL SECURITY LETTERS.

       Section 118(c) of the USA PATRIOT Improvement and 
     Reauthorization Act of 2005 (18 U.S.C. 3511 note) is 
     amended--
       (1) in paragraph (1)--
       (A) in the matter preceding subparagraph (A), by striking 
     ``concerning different United States persons''; and
       (B) in subparagraph (A), by striking ``, excluding the 
     number of requests for subscriber information'';
       (2) by redesignating paragraph (2) as paragraph (3); and
       (3) by inserting after paragraph (1) the following:
       ``(2) Content.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     each report required under this subsection shall include the 
     total number of requests described in paragraph (1) requiring 
     disclosure of information concerning--
       ``(i) United States persons;
       ``(ii) persons who are not United States persons;
       ``(iii) persons who are the subjects of authorized national 
     security investigations; or
       ``(iv) persons who are not the subjects of authorized 
     national security investigations.
       ``(B) Exception.--With respect to the number of requests 
     for subscriber information under section 2709 of title 18, 
     United States Code, a report required under this subsection 
     need not provide information separated into each of the 
     categories described in subparagraph (A).''.

     SEC. 9. PUBLIC REPORTING ON THE FOREIGN INTELLIGENCE 
                   SURVEILLANCE ACT.

       Section 601 of the Foreign Intelligence Surveillance Act of 
     1978 (50 U.S.C. 1871) is amended--
       (1) by redesignating subsections (b) through (e) as 
     subsections (c) through (f), respectively;
       (2) by inserting after subsection (a) the following:
       ``(b) Public Report.--The Attorney General shall make 
     publicly available the portion of each report under 
     subsection (a) relating to paragraphs (1) and (2) of 
     subsection (a).''; and
       (3) in subsection (e), as so redesignated, by striking 
     ``subsection (c)'' and inserting ``subsection (d)''.

     SEC. 10. AUDITS.

       (a) Tangible Things.--Section 106A of the USA PATRIOT 
     Improvement and Reauthorization Act of 2005 (Public Law 109-
     177; 120 Stat. 200) is amended--
       (1) in subsection (b)--
       (A) in paragraph (1), by striking ``2006'' and inserting 
     ``2012''; and
       (B) in paragraph (5)(C), by striking ``calendar year 2006'' 
     and inserting ``each of calendar years 2006 through 2012'';
       (2) in subsection (c), by adding at the end the following:
       ``(3) Calendar years 2007 and 2008.--Not later than 
     December 31, 2010, the Inspector General of the Department of 
     Justice shall submit to the Committee on the Judiciary and 
     the Permanent Select Committee on Intelligence of the House 
     of Representatives and the Committee on the Judiciary and the 
     Select Committee on Intelligence of the Senate a report 
     containing the results of the audit conducted under this 
     section for calendar years 2007 and 2008.
       ``(4) Calendar years 2009 through 2012.--Not later than 
     December 31, 2011, and every year thereafter through 2013, 
     the Inspector General of the Department of Justice shall 
     submit to the Committee on the Judiciary and the Permanent 
     Select Committee on Intelligence of the House of 
     Representatives and the Committee on the Judiciary and the 
     Select Committee on Intelligence of the Senate a report 
     containing the results of the audit conducted under this 
     section for the previous calendar year.'';
       (3) in subsection (d)--
       (A) in paragraph (1), by striking ``or (c)(2)'' and 
     inserting ``(c)(2), (c)(3), or (c)(4)''; and
       (B) in paragraph (2), by striking ``and (c)(2)'' and 
     inserting ``(c)(2), (c)(3), or (c)(4)''; and
       (4) in subsection (e), by striking ``and (c)(2)'' and 
     inserting ``(c)(2), (c)(3), or (c)(4)''.
       (b) National Security Letters.--Section 119 of the USA 
     PATRIOT Improvement and Reauthorization Act of 2005 (Public 
     Law 109-177; 120 Stat. 219) is amended--
       (1) in subsection (b)(1), by striking ``2006'' and 
     inserting ``2012'';
       (2) in subsection (c), by adding at the end the following:
       ``(3) Calendar years 2007 and 2008.--Not later than 
     December 31, 2010, the Inspector General of the Department of 
     Justice shall submit to the Committee on the Judiciary and 
     the Permanent Select Committee on Intelligence of the House 
     of Representatives and the Committee on the Judiciary and the 
     Select Committee on Intelligence of the Senate a report 
     containing the results of the audit conducted under this 
     section for calendar years 2007 and 2008.
       ``(4) Calendar years 2009 through 2012.--Not later than 
     December 31, 2011, and every year thereafter through 2013, 
     the Inspector General of the Department of Justice shall 
     submit to the Committee on the Judiciary and the Permanent 
     Select Committee on Intelligence of the House of 
     Representatives and the Committee on the Judiciary and the 
     Select Committee on Intelligence of the Senate a report 
     containing the results of the audit conducted under this 
     section for the previous calendar year.'';
       (3) in subsection (d)--
       (A) in paragraph (1), by striking ``or (c)(2)'' and 
     inserting ``(c)(2), (c)(3), or (c)(4)''; and
       (B) in paragraph (2), by striking ``or (c)(2)'' and 
     inserting ``(c)(2), (c)(3), or (c)(4)''; and
       (4) in subsection (e), by striking ``or (c)(2)'' and 
     inserting ``(c)(2), (c)(3), or (c)(4)''.
       (c) Pen Registers and Trap and Trace Devices.--
       (1) Audits.--The Inspector General of the Department of 
     Justice shall perform comprehensive audits of the 
     effectiveness and use, including any improper or illegal use, 
     of pen registers and trap and trace devices under title IV of 
     the Foreign Intelligence Surveillance Act of 1978 (50 U.S.C. 
     1841 et seq.) during the period beginning on January 1, 2007 
     and ending on December 31, 2012.
       (2) Requirements.--The audits required under paragraph (1) 
     shall include--
       (A) an examination of each instance in which the Attorney 
     General or any other attorney for the Government submitted an 
     application for an order or extension of an order under title 
     IV of the Foreign Intelligence Surveillance Act of 1978, 
     including whether the court granted, modified, or denied the 
     application (including an examination of the basis for any 
     modification or denial);
       (B) an examination of each instance in which the Attorney 
     General authorized the installation and use of a pen register 
     or trap and trace device on an emergency basis under section 
     403 of the Foreign Intelligence Surveillance Act of 1978 (50 
     U.S.C. 1843);
       (C) whether the Federal Bureau of Investigation requested 
     that the Department of Justice submit an application for an 
     order or extension of an order under title IV of the Foreign 
     Intelligence Surveillance Act of 1978 and the request was not 
     submitted to the court (including an examination of the basis 
     for not submitting the application);

[[Page S9680]]

       (D) whether bureaucratic or procedural impediments to the 
     use of pen registers and trap and trace devices under title 
     IV of the Foreign Intelligence Surveillance Act of 1978 
     prevent the Federal Bureau of Investigation from taking full 
     advantage of the authorities provided under that title;
       (E) any noteworthy facts or circumstances relating to the 
     use of a pen register or trap and trace device under title IV 
     of the Foreign Intelligence Surveillance Act of 1978, 
     including any improper or illegal use of the authority 
     provided under that title; and
       (F) an examination of the effectiveness of the authority 
     under title IV of the Foreign Intelligence Surveillance Act 
     of 1978 as an investigative tool, including--
       (i) the importance of the information acquired to the 
     intelligence activities of the Federal Bureau of 
     Investigation or any other department or agency of the 
     Federal Government;
       (ii) the manner in which the information is collected, 
     retained, analyzed, and disseminated by the Federal Bureau of 
     Investigation, including any direct access to the information 
     provided to any other department, agency, or instrumentality 
     of Federal, State, local, or tribal governments or any 
     private sector entity;
       (iii) with respect to calendar years 2010 through 2012, an 
     examination of the minimization procedures used in relation 
     to pen registers and trap and trace devices under title IV of 
     the Foreign Intelligence Surveillance Act of 1978 and whether 
     the minimization procedures protect the constitutional rights 
     of United States persons;
       (iv) whether, and how often, the Federal Bureau of 
     Investigation used information acquired under a pen register 
     or trap and trace device under title IV of the Foreign 
     Intelligence Surveillance Act of 1978 to produce an 
     analytical intelligence product for distribution within the 
     Federal Bureau of Investigation, to the intelligence 
     community (as defined in section 3(4) of the National 
     Security Act of 1947 (50 U.S.C. 401a(4))), or to other 
     Federal, State, local, or tribal government departments, 
     agencies, or instrumentalities; and
       (v) whether, and how often, the Federal Bureau of 
     Investigation provided information acquired under a pen 
     register or trap and trace device under title IV of the 
     Foreign Intelligence Surveillance Act of 1978 to law 
     enforcement authorities for use in criminal proceedings.
       (3) Submission dates.--
       (A) Prior years.--Not later than December 31, 2010, the 
     Inspector General of the Department of Justice shall submit 
     to the Committee on the Judiciary and the Select Committee on 
     Intelligence of the Senate and the Committee on the Judiciary 
     and the Permanent Select Committee on Intelligence of the 
     House of Representatives a report containing the results of 
     the audit conducted under this section for calendar years 
     2007 thorough 2009.
       (B) Calendar years 2010 through 2012.--Not later than 
     December 31, 2011, and every year thereafter through 2013, 
     the Inspector General of the Department of Justice shall 
     submit to the Committee on the Judiciary and the Select 
     Committee on Intelligence of the Senate and the Committee on 
     the Judiciary and the Permanent Select Committee on 
     Intelligence of the House of Representatives a report 
     containing the results of the audit conducted under this 
     section for the previous calendar year.
       (4) Prior notice to attorney general and director of 
     national intelligence; comments.--
       (A) Notice.--Not less than 30 days before the submission of 
     a report under subparagraph (A) or (B) of paragraph (3), the 
     Inspector General of the Department of Justice shall provide 
     the report to the Attorney General and the Director of 
     National Intelligence.
       (B) Comments.--The Attorney General or the Director of 
     National Intelligence may provide such comments to be 
     included in a report submitted under subparagraph (A) or (B) 
     of paragraph (3) as the Attorney General or the Director of 
     National Intelligence may consider necessary.
       (5) Unclassified form.--A report submitted under 
     subparagraph (A) or (B) of paragraph (3) and any comments 
     included under paragraph (4)(B) shall be in unclassified 
     form, but may include a classified annex.
                                 ______
                                 
      By Mr. ROCKEFELLER (for himself and Mrs. Hutchison):
  S. 1694. A bill to allow the funding for the interoperable emergency 
communications grant program established under the Digital Television 
Transition and Public Safety Act of 2005 to remain available until 
expended through fiscal year 2012, and for other purposes; to the 
Committee on Commerce, Science, and Transportation.
  Mr. ROCKEFELLER. Mr. President, I rise today to introduce legislation 
that will help improve public safety communications.
  September is a month when we remember. We remember that 8 years ago 
we witnessed the impossible horror of September 11th. We remember that 
4 years ago we watched the watery devastation of Hurricane Katrina. We 
remember because even with the passage of time, these are wounds that 
do not heal and losses we will never forget.
  These events also demonstrated the tremendous bravery of our public 
safety officials. Their courage awes and inspires. So when tragedy 
strikes, we want to make sure that those who wear the shield have the 
communications systems they need to do the job. We know now that public 
safety communications can mean the difference between security and 
harm.
  Yet when it comes to public safety communications, we still have a 
lot of work to do. Four years ago, Congress took an important first 
step. In the Digital Television and Public Safety Act of 2005, Congress 
authorized the National Telecommunications and Information 
Administration, in consultation with the Department of Homeland 
Security, to implement the Public Safety Interoperable Communications 
Grant Program. This program provided a one-time, formula-based, 
matching grant opportunity for public safety agencies to improve 
interoperable communications systems.
  Governors across the country lined up to designate State agencies to 
apply for and administer these funds. Under the program, funds were 
originally available for the purchase and deployment of communications 
equipment and training for system users. Later, in the Implementing 
Recommendations of the 9/11 Commission Act of 2007, Congress expanded 
the program to include planning and coordination activities.
  But now millions of these dollars are at risk. The September 30, 
2010, deadline for expending funds that is a holdover from the original 
legislation could inadvertently jeopardize the effectiveness of public 
safety communications projects in States across the country. Many 
grantees spent the first year of the grant period developing required 
plans and justifications and then awaiting approvals from the 
Department of Homeland Security and the National Telecommunications and 
Information Administration. As a result, many grantees did not have the 
full 3-year award period to acquire and deploy interoperable 
communications equipment. They face the real possibility of reaching 
the September 30, 2010, deadline with communications projects 
incomplete. In short, it is no longer sensible to bind the States to 
this original deadline in 2010.
  There is no need to take my word for it. The Inspector General at the 
Department of Commerce reached exactly the same conclusion. In a report 
published in March 2009, the Inspector General found that grantees were 
unlikely to finish their communications projects within the statutory 
time frames. The Inspector General even recommended that the National 
Telecommunications and Information Administration work with Congress to 
extend the deadline for grantees to expend their communications funds 
from this program. Now the National Governors Association and the 
Association of Public Safety Communications Officials also have chimed 
in to support an extension.
  I rise today so we can do something about it. By extending the 
September 30, 2010, deadline by one year and on a case-by-case basis 
two years, we can make sure that the funds are used exactly as Congress 
intended. We can make sure that public safety projects are not stranded 
due to arbitrary deadlines. We can make sure that our first responders 
have the first class communications systems they desperately need and 
deserve. For this reason, I urge my colleagues to join me and Senator 
Hutchison and support this legislation.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed into the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 1694

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. PUBLIC SAFETY INTEROPERABLE COMMUNICATIONS GRANTS.

       (a) Notwithstanding section 3006(a)(2) of the Digital 
     Television Transition and Public Safety Act of 2005 (47U.S.C. 
     309 note), sums made available to administer the Public 
     Safety Interoperable Communications Grant Program under 
     section 309(j)(8)(E) of the Communications Act of 1934 (47 
     U.S.C. 309(j)(8)(E)) shall remain available until expended, 
     but not beyond September 30, 2012.
       (b) The period for performance of any investment approved 
     under the Program as of the date of enactment of this Act 
     shall be extended by one year, but not later than September 
     30, 2011, except that the Assistant

[[Page S9681]]

     Secretary of Commerce for Communications and Information may 
     extend, on a case-by-case basis, the period of performance 
     for any investment approved under the Program as of that date 
     for a period of not more than 2 years, but not later than 
     September 30, 2012. In making a determination as to whether 
     an extension beyond September 30, 2011, is warranted, the 
     Assistant Secretary should consider the circumstances that 
     gave rise to the need for the extension, the likelihood of 
     completion of performance within the deadline for completion, 
     and such other factors as the Assistant Secretary deems 
     necessary to make the determination.

                          ____________________