[Congressional Record Volume 161, Number 91 (Tuesday, June 9, 2015)]
[House]
[Pages H3932-H3950]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
COMMODITY END-USER RELIEF ACT
General Leave
Mr. CONAWAY. Mr. Speaker, I ask unanimous consent that all Members
have 5 legislative days within which to revise and extend their remarks
and include extraneous material on the bill, H.R. 2289.
The SPEAKER pro tempore (Mr. LaMalfa). Is there objection to the
request of the gentleman from Texas?
There was no objection.
The SPEAKER pro tempore. Pursuant to House Resolution 288 and rule
XVIII, the Chair declares the House in the Committee of the Whole House
on the state of the Union for the consideration of the bill, H.R. 2289.
The Chair appoints the gentleman from Idaho (Mr. Simpson) to preside
over the Committee of the Whole.
{time} 1526
In the Committee of the Whole
Accordingly, the House resolved itself into the Committee of the
Whole House on the state of the Union for the consideration of the bill
(H.R. 2289) to reauthorize the Commodity Futures Trading Commission, to
better protect futures customers, to provide end-users with market
certainty, to make basic reforms to ensure transparency and
accountability at the Commission, to help farmers, ranchers, and end-
users manage risks, to help keep consumer costs low, and for other
purposes, with Mr. Simpson in the chair.
The Clerk read the title of the bill.
The CHAIR. Pursuant to the rule, the bill is considered read the
first time.
The gentleman from Texas (Mr. Conaway) and the gentleman from
Minnesota (Mr. Peterson) each will control 30 minutes.
The Chair recognizes the gentleman from Texas.
Mr. CONAWAY. Mr. Chairman, I yield myself such time as I may consume.
I rise today in support of H.R. 2289, the Commodity End-User Relief
Act.
I want to start by thanking Chairman Austin Scott and Ranking Member
David Scott of the Commodity Exchanges, Energy, and Credit
Subcommittee. They have done a tremendous job over the past few months
working on these issues. They have held three hearings on
reauthorization, listening to testimony from end users, financial
intermediaries, and even the commissioners themselves. Without their
work, we would not have been able to move this bill today.
H.R. 2289, the Commodity End-User Relief Act, does exactly what the
name suggests: it provides relief from unnecessary red tape for the
businesses that ``make things'' in our country.
End users are the businesses that provide Americans with food,
clothing, transportation, electricity, heat, and much, much more.
Companies that produce, consume, and transport the commodities that
make modern life possible use futures and swaps markets to reduce the
uncertainties that their businesses face. Farmers hedge their crops in
the spring so that they know what price they will get paid in the fall.
Utilities hedge the price of energy so they can charge customers at a
steady rate. Manufacturers hedge the cost of steel, energy, and other
inputs to lock in prices as they work to fill their orders.
The fact is, no end user played any part in the financial crisis of
2008, and no end user poses a systemic risk to U.S. derivatives
markets. Yet, as the Agriculture Committee heard in countless hours of
testimony, it is now more difficult and more expensive for farmers,
ranchers, processors, manufacturers, merchandisers, and other end users
to manage their risks than it was 5 years ago.
To address their concerns, H.R. 2289 makes targeted reforms to the
Commodity Exchange Act that fall into three broad categories: consumer
protections, commission reforms, and end-user relief.
Title I of the bill protects customers and the margin funds they
deposit at their FCMs by codifying critical changes made in the wake of
the collapse and bankruptcy of both MF Global and Peregrine Financial.
Title II makes meaningful reforms to the operations of the Commission
to improve the agency's deliberative process. In doing so, it also
requires the Commission to conduct more robust cost-benefit analysis to
help get future rulemakings right the first time and to avoid the
endless cycle of re-proposing and delaying unworkable rules.
Finally, title III fixes numerous problems faced directly by end
users who rely on derivatives markets. From unnecessary recordkeeping
burdens, to improperly categorizing physical transactions as swaps, to
narrowing the bona fide hedge definition, CFTC rules have discouraged
exactly the kind of prudent risk management activities Congress
intended to protect with the end-users exemptions in the Dodd-Frank
bill.
These regulatory burdens present challenges to American businesses
and will cost them significant capital to comply with, unless Congress
acts to provide the relief.
Title VII of Dodd-Frank sought to require that most swaps, one, be
executed on an electronic exchange to ensure price transparency; two,
be subject to initial and variation margin and central clearing through
the lifetime of the transaction, to ensure performance on the
obligation for counterparties; and, last, to be reported to a central
repository to ensure that regulators have an accurate picture of the
entire marketplace at any one point in time.
{time} 1530
H.R. 2289 does not roll back a single core tenet of title VII. It
does not change the execution, clearing, margining, and reporting
framework set up by the act. In fact, not a single witness who appeared
before the House Committee on Agriculture ever asked us to upend these
principles. But what they did ask for were fixes to portions of the
statute that didn't work as intended, to provide more flexibility in
complying with the rules when they impaired end users' ability to
hedge, and to bring more certainty to the Commission and how it
operates. That is exactly what H.R. 2289 provides.
Similar to the CFTC reauthorization bill passed by the House with
overwhelming bipartisan support last Congress, the Commodity End-User
Relief Act makes narrowly targeted changes to the Commodity Exchange
Act. This legislation offers meaningful improvements for market
participants without undermining the basic tenets of title VII. I am
proud that the committee has again put together a bill that has earned
the bipartisan support of our members because it provides the right
relief to the right people.
Mr. Chairman, I urge support of the Commodity End-User Relief Act.
I reserve the balance of my time.
June 8, 2015.
Dear Member of the House of Representatives: The
undersigned organizations represent a very broad cross-
section of U.S. production agriculture and agribusiness. We
urge you to cast an affirmative vote on H.R. 2289, the
``Commodity End-User Relief Act,'' when it moves to the floor
for consideration.
This legislation contains a number of important provisions
for agricultural and agribusiness hedgers who use futures and
swaps to manage their business and production risks. Some,
but certainly not all, of the bill's important provisions
include:
Sections 101-103--Codify important customer protections to
help prevent another MF Global situation.
[[Page H3933]]
Section 104--Provides a permanent solution to the residual
interest problem that would have put more customer funds at
risk--and potentially driven farmers, ranchers and small
hedgers out of futures markets--by forcing pre-margining of
their hedge accounts.
Section 308--Relief from burdensome and technologically
infeasible recordkeeping requirements in commodity markets.
Section 310--Requires the CFTC to conduct a study and issue
a rule before reducing the de minimis threshold for swap
dealer registration in order to make sure that doing so would
not harm market liquidity and end-user access to markets.
Section 313--Confirms the intent of Dodd-Frank that
anticipatory hedging is considered bona fide hedging
activity.
Thank you in advance for your support of this bill that is
so important to U.S. farmers, ranchers, hedgers and futures
customers.
Sincerely,
Agribusiness Association of Iowa; Agribusiness Council of
Indiana/Indiana Grain and Feed Association; American
Cotton Shippers Association; American Farm Bureau
Federation; American Feed Industry Association;
American Soybean Association; Commodity Markets
Council; Grain and Feed Association of Illinois; Kansas
Grain and Feed Association; Michigan Agri-Business
Association; Michigan Bean Shippers Association;
Minnesota Grain and Feed Association; Missouri
Agribusiness Association; National Cattlemen's Beef
Association; National Corn Growers Association;
National Cotton Council; National Council of Farmer
Cooperatives; National Grain and Feed Association;
National Pork Producers Council; Nebraska Grain and
Feed Association; North American Export Grain
Association; North Dakota Grain Dealers Association;
Northeast Agribusiness and Feed Alliance; Ohio
AgriBusiness Association; Oklahoma Grain and Feed
Association; Pacific Northwest Grain and Feed
Association; Rocky Mountain Agribusiness Association;
Southeast Minnesota Grain and Feed Dealers Association;
South Dakota Grain and Feed Association; Tennessee Feed
and Grain Association; Texas Grain and Feed
Association; USA Rice Federation; Wisconsin Agri-
Business Association.
____
June 5, 2015.
House of Representatives,
Washington, DC.
Dear Representative: The National Association of
Manufacturers (NAM), the largest manufacturing association in
the United States representing manufacturers in every
industrial sector and in all 50 states, supports provisions
in the Commodity End User Relief Act (H.R. 2289), to clarify
that non-financial companies, like manufacturers, that use
derivatives to manage business risk will not be subject to
onerous and harmful regulatory requirements.
Manufacturers use derivatives to manage and mitigate
against fluctuations in commodity prices and currency and
interest rates. The NAM worked to include provisions in the
Dodd-Frank Wall Street Reform and Consumer Protection Act
(P.L.111-203) to protect manufacturers' use of over-the-
counter derivatives. We continue to work to ensure that, as
Dodd-Frank is implemented, end-users do not face undue
burdens. Imposing unnecessary regulation on end-users would
limit their ability to use these important risk management
tools, increasing costs and negatively impacting business
investment, U.S. competitiveness and job growth.
Provisions included in H.R. 2289 would ensure that non-
financial end-users trading through a centralized treasury
unit (``CTU'') are covered by the end-user clearing exemption
provided by the Dodd-Frank Act. Without the clarification on
CTUs, non-financial end-users may be swept into costly
clearing requirements meant for financial entities, simply
because they use a CTU to manage internal and external
trading to mitigate risk within a corporate entity--an
industry ``best practice''.
The CFTC reauthorization also includes an NAM-supported
provision that requires the CFTC to take an affirmative
action before lowering the swap dealer de minimis threshold.
Without this provision, the de minimis level of swap dealing
automatically drops from the $8 billion to $3 billion in the
near future, sweeping some manufacturers into bank-like
regulatory requirements.
Almost five years after the enactment of Dodd-Frank,
implementation of the Act is well underway and deadlines for
compliance with various regulations are looming. End-users
remain extremely concerned about the lack of clarity on the
CTU issue and the automatic drop in the de minimis threshold
for swap dealing among other issues. Thank you in advance for
supporting provisions in H.R. 2289 to ensure that derivatives
regulation is focused on needed areas, and not on imposing
unnecessary regulatory burdens on manufacturers.
Sincerely,
Dorothy Coleman.
____
May 11, 2015.
Hon. Michael Conaway,
Chairman, House Committee on Agriculture, Longworth House
Office Building, Washington, DC.
Hon. Collin C. Peterson,
Ranking Member, House Committee on Agriculture, Longworth
House Office Building, Washington, DC.
Dear Chairman Conaway and Ranking Member Peterson: As the
House prepares to vote on and reauthorize the Commodity
Futures Trading Commission (CFTC) oversight of the futures
and swaps markets, the National Corn Growers Association
(NCGA) and the Natural Gas Supply Association (NGSA) wish to
express support for the end user provisions in the CFTC
reauthorization bill which will help to ensure that corn and
natural gas markets are able to function efficiently.
Specifically, NCGA and NGSA support the provision which
will provide relief for end-users using physical contracts
with volumetric optionality and ensure that non-financial,
physical energy delivery agreements are not regulated as
swaps.
Founded in 1957, NCGA represents more than 40,000 dues-
paying corn farmers nationwide. NCGA and its 48 affiliated
state organizations work together to create and increase
opportunities for their members and their industry.
Established in 1965, NGSA encourages the use of natural gas
within a balanced national energy policy, and promotes the
benefits of competitive markets, thus encouraging increased
supply and the reliable and efficient delivery of natural gas
to U.S. customers.
Because of the potential for the Dodd-Frank Wall Street
Reform and Consumer Protection Act of 2010 (the Dodd-Frank
Act or the Act) to impede what are and have been healthy,
competitive, and resilient corn and natural gas markets, NCGA
and NGSA played an active role in the shaping of the Act
during its passage and have continued this role in ensuring
the Act's successful implementation by the CFTC.
The CEA as amended by the Dodd-Frank Act excludes forward
contracts and includes options in commodities in the
definition of ``swap.'' This raises the practical question of
how to treat forward contracts containing terms that provide
for some form of flexibility in delivered volumes, i.e.,
``embedded optionality.''
Flexibility in the terms of physical commodity forward
contracts is essential in everyday commerce given the
commercial uncertainties that exist in commodity delivery and
receipt. One important form of such flexibility involves the
volumes to be transacted in a forward contract. This
flexibility is necessary because parties cannot always
accurately predict the required or optimal amounts of
physical commodities to meet their business needs and
objectives. The CFTC refers to this flexibility as
``volumetric optionality'' and has formulated rules that
suggest that the CFTC will regulate forward contracts with
such ``optionality'' as swaps.
Volumetric optionality is a contractual tool used in the
physical commodity industry to ``right size'' physical
delivery. The ability to appropriately size a physical
commodity delivery via a contractual tool facilitates market
efficiency because it allows commercial market participants
to adjust delivery volumes seamlessly in response to changes
in supply and demand requirements at the time of delivery.
Volumetric optionality is a delivery tool that mitigates the
uncertainty inherent in any physical commodity contract,
making both parties aware of potential delivery variability
embedded within the intent to deliver. Thus, volumetric
optionality in a physical forward contract allows commercial
uncertainties to be accommodated up front, providing a
process for orderly physical delivery and settlement even in
the absence of precision in the delivery volume. Importantly,
the intent to physically deliver remains despite the
variability in final delivery terms.
In August of 2012, the CFTC issued the final rule further
defining the term ``swap,'' Final Rule, Further Definition of
``Swap,'' et al., 77 Fed. Reg. 48, 208 (August 13, 2012)
(Swap Definition Final Rule or Final Rule). As part of the
definition of swap, the Final Rule provides an interpretation
that an agreement, contract or transaction with embedded
optionality falls within the forward exclusion when seven
criteria are met. The seventh criterion or element requires
that:
7. The exercise or non-exercise of the embedded volumetric
optionality is based primarily on physical factors, or
regulatory requirements, that are outside the control of the
parties and are influencing demand for, or supply of, the
nonfinancial commodity.
In the Final Rule, the Commission specifically requested
comments on whether this seventh element is necessary,
appropriate and sufficiently clear and unambiguous. On
October 12, 2012, NCGA and NGSA submitted written comments to
the CFTC highlighting the market uncertainty that the new
seven-criterion test creates in light of very clear statutory
language stating that contracts with the intent to physically
deliver are physical forward contracts. Specifically, NCGA
and NGSA asked the Commission to affirm that the seven
criteria identified in the Final Rule are simply illustrative
of certain common characteristics in forward contracts with
embedded optionality, and thus, a safe harbor instead of
requirements for satisfaction of the forward contract
exclusion.
NCGA and NGSA recognize the Commission's interest in
retaining the ability to regulate physical contracts with
embedded options as swaps if ``intent to physically deliver''
is not genuine and simply crafted to evade regulation.
However, in this case, the Commission has created so much
ambiguity in the applicability of the forward-contract
[[Page H3934]]
exclusion that market participants may be reluctant to use
volumetric optionality in their forward contracting.
Consequently, the regulatory uncertainty caused by the seven-
criterion test compromises the viability of a physical
commodity market delivery tool that is critical to market
efficiency. The forward-contract exclusion should not be
implemented in a way that limits its usefulness to catching
bad actors at the expense of physical market efficiency.
The definition of swap has far-reaching effects beyond
physical market efficiency. Determining what is and is not a
swap impacts the calculation of notional amount and thus,
which entities are swap dealers. It also impacts the
application of position limits and the appropriate scope of
the bona fide hedge exemption, clearing requirements,
reporting requirements and capital and margin requirements.
In short, the definition of swap is the heart and soul of the
end-user protections.
The October 12, 2012 NCGA and NGSA request for clarity
regarding the Commission's expected application of the seven-
criterion test remains unanswered. In light of the lingering
uncertainty created by the seven-criterion test, clarity
regarding the applicability of the forward-contract exclusion
to volumetric options embedded within a physical contract has
become essential to commodity producers and consumers. Given
the importance of the definition of swap to implementation of
so many other Dodd-Frank-Act-related CFTC regulations,
clarity is crucial to the sound implementation the Dodd-Frank
Act. This regulatory uncertainty has complicated sound
implementation of the Dodd-Frank Act and risks harming
commodity market efficiency. The CFTC is contemplating some
clarifying language on volumetric optionality which would be
welcome news. Regardless of the CFTC's clarification,
however, the implementation uncertainty that has persisted
for the last four years illustrates the need for legislative
changes.
The swap definition is fundamental to implementation of the
CFTC's new Dodd-Frank rules and consequently to the on-going
availability of cost-effective risk management tools.
However, if the definition is too broad, it can bring in
common commercial agreements that have no relationship to the
types of transactions that the Dodd-Frank Act was intended to
regulate. Market participants demonstrating the potential to
exercise physical delivery or a history of physical delivery
must have confidence in the forward-contract exclusion from
the definition of a swap.
NCGA and NGSA are committed to working with you to achieve
a positive outcome that both protects the integrity of
commodity markets and ensures the continued availability of
cost effective hedging tools.
Sincerely,
National Corn Growers Association.
Natural Gas Supply Association.
____
June 2, 2015.
Hon. John Boehner,
Speaker, House of Representatives,
Washington, DC.
Hon. Michael Conaway,
Chairman, House Agriculture Committee, House of
Representatives,Washington, DC.
Hon. Nancy Pelosi,
Minority Leader, House of Representatives,Washington, DC.
Hon. Collin Peterson,
Ranking Member, House Agriculture Committee, House of
Representatives,Washington, DC.
Dear Speaker Boehner, Leader Pelosi, Chairman Conaway, and
Ranking Member Peterson: On behalf of the member companies of
the Edison Electric Institute (EEI), I want to express our
strong support for H.R. 2289, the Commodity End-User Relief
Act. Key provisions in the legislation provide additional
certainty and clarify congressional intent on a number of
issues of significant importance to EEI members.
EEI is the association of U.S. investor-owned utilities,
international affiliates and industry associates worldwide.
Our members provide electricity for 220 million Americans,
directly employ more than a half-million workers, and operate
in all 50 states. With approximately $90 billion in annual
capital expenditures, the electric utility industry is
responsible for providing reliable, affordable, and
increasingly clean electricity that powers the economy and
enhances the lives of all Americans.
EEI members are non-financial entities that participate in
the physical commodity market and rely on swaps and futures
contracts primarily to hedge and mitigate their commercial
risk. The goal of our member companies is to provide their
customers with reliable electric service at affordable and
stable rates, which has a direct and significant impact on
literally every area of the U.S. economy. Since wholesale
electricity and natural gas historically have been two of the
most volatile commodity groups, our member companies place a
strong emphasis on managing the price volatility inherent in
these wholesale commodity markets to the benefit of their
customers. The derivatives market has proven to be an
extremely effective tool in insulating our customers from
this risk and price volatility. In sum, our members are the
quintessential commercial end-users of swaps. As such,
regulations that make effective risk management options more
costly for end-users of swaps will likely result in higher
and more volatile energy prices for retail, commercial, and
industrial customers. H.R. 2289 goes a long way in providing
much needed regulatory relief and even greater clarity to the
compliance landscape facing EEI and the entire end-user
community going forward.
Thank you for your leadership on these important issues. We
look forward to working with you to advance this legislation
through the House.
Sincerely,
Thomas R. Kuhn.
____
May 12, 2015.
Hon. K. Michael Conaway,
Chairman, Committee on Agriculture, House of Representatives,
Longworth House Office Building, Washington, DC.
Dear Chairman Conaway: The American Gas Association
strongly supports the Commodity End User Relief Act, a bill
to reauthorize the Commodity Exchange Act (CEA) that would
improve Commodity Future Trading Commission (CFTC) operations
and provide much-needed marketplace certainty and regulatory
relief for natural gas utilities and the American homes and
businesses to which they deliver natural gas.
The American Gas Association (AGA), founded in 1918,
represents more than 200 local energy companies that deliver
clean natural gas throughout the United States. There are
more than 71 million residential, commercial and industrial
natural gas customers in the U.S., of which 94 percent--over
68 million customers--receive their gas from AGA members. AGA
is an advocate for natural gas utility companies and their
customers and provides a broad range of programs and services
for member natural gas pipelines, marketers, gatherers,
international natural gas companies and industry associates.
Today, natural gas meets more than one-fourth of the United
States' energy needs.
The Commodity End User Relief Act will help the CFTC become
a more responsive and well-equipped regulator. Commercial
market participants currently lack basic procedural
opportunities to hold the CFTC accountable for arbitrary and
capricious actions. The lack of good process is self-evident
in the haphazard pattern of rulemaking and non-rule
``guidance'' issued by the Commissioners or staff. Just
yesterday, the CFTC answered a critical industry question
about whether ``swaps'' (financial derivatives) include non-
financial natural gas delivery contracts through an
``Interpretation'' rather than through formal regulation.
Even this action is five months late: The CFTC asked for
comments on this draft in November 2014 and closed the
comment period in December 2014. The goal was to provide
time-sensitive response to market participants. And yet, it
took five months to finalize.
The Commodity End User Relief Act will help fix several
problems described above--changes that can neither be made by
the CFTC's evolving leadership nor by revisions to internal
rules.
1. Direct Review in Federal Appellate Courts: The bill
would allow the federal appellate courts to directly review
CFTC rules, replacing the protracted and expensive trial
court process currently in effect as the default rule for
judicial review. This change will not increase litigation nor
will it disrupt the CFTC. Rather, it will incentivize the
CFTC to write better rules and avoid challenge altogether.
Also, any inevitable legal challenges will be more swiftly
decided by appellate courts, benefitting the regulator and
the regulated community. All of the key federal rulemaking
agencies are subject to direct appellate review -- including
the Securities Exchange Commission and Federal Energy
Regulatory Commission. There is no logical justification to
treat the CFTC differently.
2. Strict Compliance with the Administrative Procedures Act
(APA): The CFTC's administrative process suffers from vague
and varying levels of compliance with federal procedural
laws. Strict compliance with federal laws requiring due
process and notice should not be contingent on how the
Commission leadership directs staff, shares information among
Commissioners, or chooses between a legal rule, non-binding
guidance, or interpretation for resolving a public concern.
This bill would eliminate subjectivity and require strict
compliance with the APA and Executive Orders that instruct
agencies to ensure public notice-and-comment on rules or
guidance that have legally-binding effects.
3. Give the CFTC Comprehensive Authority to Exempt End-
Users' Physical Contracts from ``Swaps'' and ``Options''
Regulation: The CFTC undertook a tortuous four-year path of
issuing interim final rules, policy guidance, and no-action
letters, to arrive yesterday at yet another
``interpretation'' regarding how much of the physical
marketplace will not be regulated as ``swaps''. In the
interim, gas utilities have seen their physical gas
counterparties (natural gas suppliers) exit the marketplace.
Those that remain, offer less flexible and more costly
contracting terms to avoid any confusion generated by CFTC
policies that suggest these physical transactions are
``swaps''. In the past year alone, many AGA members'
counterparties have abstained from providing the physical
delivery flexibility that is needed to manage customer demand
during hard winters and cold snaps. For AGA's rate-regulated
utilities, cost increases for flexible gas supplies are
passed directly to consumers.
Yesterday's Interpretation does help clarify the morass of
regulatory guidance that
[[Page H3935]]
the CFTC has issued in prior years. However, confusion
remains as at least two Commissioners disagree about what the
CFTC has actually accomplished (see statements from CFTC
Chairman Massad and Commissioner Bowen). Natural gas
utilities cannot afford to wait any longer for policy clarity
because energy consumers are paying the price for the CFTC's
confusion. The Commodity End User Relief Act will
definitively clarify that non-financial energy delivery
agreements, that ensure physical delivery of natural gas to
homes and businesses, will not be treated by the CFTC as
speculative, financial instruments. The bill will help
restore liquidity to the physical energy marketplace, which
gas utilities rely on to mitigate commercial risk on behalf
of consumers.
Congress certainly did not intend to provide the CFTC a
tremendous regulatory mandate without giving it the necessary
guidance and authority to do its job. Furthermore, Congress
did not intend for the CEA to constrain liquidity in the
physical natural gas marketplace, create business-changing
impacts on regulated natural gas utilities, or increase the
costs of reliable service for natural gas consumers. As such,
AGA supports the Commodity End User Relief Act because it
provides the CFTC the tools necessary to be a responsive
regulator and restores the regulatory confidence that natural
gas utilities rely on to procure natural gas supplies at the
lowest reasonable cost for the benefit of America's natural
gas consumers.
Sincerely,
Dave McCurdy,
President and CEO,
American Gas Association.
____
June 8, 2015.
Re End-User Support for Passage of Derivatives End-User
Clarifications in H.R. 2289, the Commodity End-User
Relief Act.
To The Members of the U.S. House of Representatives: The
Coalition for Derivatives End-Users represents the views of
companies that employ derivatives primarily to manage risks
associated with their businesses. Hundreds of companies and
business associations have been active in the Coalition,
seeking strong, effective and fair regulation of derivatives
markets that brings transparency and mitigates the risk of
another systemic collapse while not unduly burdening American
businesses and harming job growth. The Coalition supports
H.R. 2289, the Commodity End-User Relief Act, which
incorporates vital legislation aimed at protecting
derivatives end-users.
In particular, the Coalition strongly supports the bill's
inclusion of the language of H.R. 1317, the Derivatives End-
User Clarification Act, sponsored by Representatives Moore,
Stivers, Fudge and Gibson. H.R. 1317 is a narrowly targeted
bill providing much-needed clarification that certain swap
transactions with centralized treasury units (``CTUs'') of
non-financial end-users are exempt from clearing requirements
and fixes a language glitch in the Dodd-Frank Wall Street
Reform and Consumer Protection Act (the ``Dodd-Frank Act'')
that denies some end-users that employ CTUs the clearing
exception that Congress passed specifically for them.
A Coalition survey of chief financial officers and
corporate treasurers found that nearly half of the
respondents use CTUs to execute over-the-counter derivatives.
The Coalition is encouraged that the House of Representatives
last year passed this CTU language (H.R. 5471/S. 2976) by
voice vote, reflecting the fact that CTUs are a best practice
among corporate treasurers and their use should be
encouraged, not penalized.
While the Commodity Futures Trading Commission has issued
no-action relief allowing some end-users to use the clearing
exception, the relief does not fix the problematic language
in the Dodd-Frank Act. This language, which also is
referenced in regulatory proposals on margin, places
corporate boards in the difficult position of approving
decisions not to clear trades based on a staff letter
indicating that the law will not be enforced against the
company.
It also is important to note that international regulators
often look to U.S. rules--but not no-action letters--when
developing their regulations. Unless we fix the underlying
problem in the Dodd-Frank Act, our denial of clearing relief
to end-users with CTUs may be propagated overseas.
Throughout the legislative and regulatory process
surrounding the Dodd-Frank Act, the Coalition has supported
efforts to increase transparency in the derivatives markets
and enhance financial stability for the U.S. economy through
thoughtful new regulation while avoiding needless costs. We
urge you to support the efforts to move this essential
clarification in H.R. 2289.
Sincerely,
Coalition for Derivatives End-Users.
Mr. PETERSON. Mr. Chairman, I yield myself such time as I may
consume.
Mr. Chairman, I oppose this legislation because it will roll back
important financial regulations and interfere with the CFTC's ability
to do its work. I am very concerned that H.R. 2289 will open the door
to the types of things that created the financial mess that we are just
beginning to get ourselves out of.
So let me be clear. I don't have an issue with many of the provisions
that are relevant to end-user protections. In fact, the Dodd-Frank bill
that I helped write states very clearly that end users were not the
problem, and the CFTC has been very receptive to that fact and taken
that into consideration as they have adopted rules.
One of my biggest concerns in this bill is the new cost-benefit
analysis. This is, in my opinion, all cost and not a lot of benefit
unless you are one of the nine big banks who, as far as I am concerned,
have not learned a thing from the financial crisis. This not only adds
an unneeded layer of government bureaucracy; it opens the doors to
lawsuits from major banks seeking to delay or completely derail CFTC
rulemakings.
I also have serious concerns with the trouble that will be caused by
section 314, the cross-border section of this bill.
Chairman Massad has been negotiating extensively and in good faith
with our European counterparts to harmonize their rules with ours. I
have talked to the Chairman a number of times about this, and he has
assured me and it has been independently verified that they are 85
percent of the way to getting a deal in this area. This provision in my
opinion will cut the negotiators off at the knees. I am worried that
this provision will take us back to where we were and what was
happening prior to the financial crash. The big banks at that time that
have offices both in London and New York were playing us against each
other, getting the United States to water down rules by threatening to
move their business elsewhere and vice versa, and that was verified on
committee trips that we took over to Europe and in discussions with
their regulators.
The cost-benefit requirement, as I said, along with the cross-border
rule, will cost $45 billion over 5 years, according to the CBO. And
again, this is a cost that I believe doesn't have a whole lot of
benefit.
H.R. 2289 has a whole host of other problems. The bill unravels the
transparency provided by Dodd-Frank, slows down CFTC staff ability to
respond to industry concerns, mucks up the Commission's ability to
issue guidance if rules need updating or clarification, and relitigates
a disagreement between former commissioners that has no place in this
bill.
This is a bad bill that can't be fixed. It should be defeated by the
House. I urge my colleagues to oppose H.R. 2289.
Mr. Chairman, I have a statement from the administration where they
have indicated their displeasure with this bill and the fact that they
are going to recommend vetoing it.
I reserve the balance of my time.
Statement of Administration Policy
H.R. 2289--Commodity End-User Relief Act
(Rep. Conaway, R-TX, June 2, 2015)
The Administration is firmly committed to strengthening the
Nation's financial system through the implementation of key
reforms to safeguard derivatives markets and ensure a
stronger and fairer financial system for investors and
consumers. The full benefit to the Nation's citizens and the
economy cannot be realized unless the entities charged with
establishing and enforcing the rules of the road have the
resources to do so.
The Administration strongly opposes the passage of H.R.
2289 because it undermines the efficient functioning of the
Commodity Futures Trading Commission (CFTC) by imposing a
number of organizational and procedural changes and would
undercut efforts taken by the CFTC over the last year to
address end-user concerns. H.R. 2289 also offers no solution
to address the persistent inadequacy of the agency's finding.
The CFTC is one of only two Federal financial regulators
funded through annual discretionary appropriations, and the
funding the Congress has provided for it over the past five
years has failed to keep pace with the increasing complexity
of the Nation's financial markets. The changes proposed in
H.R. 2289 would hinder the ability of the CFTC to operate
effectively, thereby threatening the financial security of
the middle class by encouraging the same kind of risky,
irresponsible behavior that led to the great recession.
Prior to enactment of the Dodd-Frank Wall Street Reform and
Consumer Protection Act, the derivatives markets were largely
unregulated. Losses connected to derivatives rippled through
that hidden network, playing a central role in the financial
crisis. Wall Street Reform resulted in significant expansion
of the CFTC's responsibilities, establishing a framework for
standardized over-the-counter derivatives to be traded on
regulated platforms and centrally cleared, and for data to be
reported to repositories to increase transparency and price
discovery. The changes proposed in H.R. 2289 would hinder the
CFTC's progress in successfully implementing these critical
responsibilities
[[Page H3936]]
and would unnecessarily disrupt the effective management and
operation of the agency without providing the more robust and
reliable funding that the agency needs.
In order to respond quickly to market events and market
participants, the CFTC needs funding commensurate with its
evolving oversight framework. The Administration looks
forward to working with the Congress to authorize fee funding
for the CFTC as proposed in the FY 2016 Budget request, a
shift that would directly reduce the deficit. User fees were
first proposed in the President's Budget by the Reagan
Administration more than 30 years ago and have been supported
by every Democratic and Republican Administration since that
time. Fee funding would shift CFTC costs from the general
taxpayer to the primary beneficiaries of the CFTC's oversight
in a manner that maintains the efficiency, competitiveness,
and financial integrity of the Nation's futures, options, and
swaps markets, and supports market access for smaller market
participants hedging or mitigating commercial or agricultural
risk.
If the President were presented with H.R. 2289, his senior
advisors would recommend that he veto the bill.
Mr. CONAWAY. Mr. Chairman, I yield myself 1 minute.
I remind my colleagues that the cost-benefit analysis provisions that
are in this bill are remarkably similar to the bill last year, which
garnered overwhelming support, including support out of the Agriculture
Committee itself. Cost-benefit analysis is an important tool for any
regulatory agency to have at its disposal to be able to use. This
agency did not use the cost-benefit analysis rule that was in place
because it was so weak and toothless that they just basically gave lip
service to it, according to their own IG.
The cost-benefit analysis in this bill mirrors in most instances
President Obama's executive order from January 2011 that required all
nonindependent agencies to conduct cost-benefit analysis in a
transparent manner to get to better rules in that regard.
Mr. Chairman, I yield 2 minutes to the gentleman from California (Mr.
LaMalfa).
Mr. LaMALFA. Mr. Chairman, I thank my colleague, Chairman Conaway,
for allowing me to speak today.
I rise today in support of H.R. 2289, the Commodity End-User Relief
Act.
End users, such as our ranchers, farmers, manufacturers, and public
utilities, face risks that they have no control over on a daily basis.
For years now, they have used tools available to manage risks like
volatile markets or changing interest rates, such as a farmer who uses
futures contracts to establish a guaranteed price to offset the risk of
a decrease in crop value before harvest or a grain company using
derivatives to hedge commercial risks associated with buying wheat from
a farmer. This is part of day-to-day operations that allow them to do
their jobs and provide products in an affordable and accessible manner.
However, the implementation of Dodd-Frank placed a number of costly
burdens on our end users that limit their ability to use these tools.
It is important that we do all we can to erase this unintended and
excessive red tape. One measure included in this bill today will do
just that, which is my Public Power Risk Management Act, which passed
with the full support of the House last year. Again, it is included in
the bill today.
There are over 2,000 publicly owned utilities across the United
States, including one in my district in the city of Redding, that have
used swaps to manage their risk for years. However, Dodd-Frank put them
at a major disadvantage to private utilities by limiting their ability
to negotiate with swap dealers.
This bill would level the playing field permanently and ensure the 47
million Americans who rely on public power for electricity will not see
their rates increase due to unnecessary regulatory policies. Our
farmers, ranchers, and small businesses who pose no systemic risk to
our financial system and certainly did not cause the financial crisis
should not have to face costly bureaucratic overreach from policies
originally intended to protect them in the first place.
I thank Chairman Conaway for his leadership on this bill. Let's help
our agriculture community by passing this commonsense piece of
legislation.
Mr. PETERSON. Mr. Chairman, I yield 5 minutes to the gentleman from
Georgia (Mr. David Scott).
Mr. DAVID SCOTT of Georgia. Mr. Chairman, as the ranking member of
the subcommittee of jurisdiction over this bill, I would like to
address the three major areas of contention here. We have put a lot of
time, a lot of work in this over the years.
First, we want to deal with, as Mr. Peterson brought up, some of his
concerns and share how we are responding to that. I am a sponsor of
this bill. We have worked on it. It is a similar bill to what we had
before. The first area I want to deal with is cross border, and then I
will go to cost-benefit analysis, and then end users.
What is important for the House and the people of this Nation to
understand is that we operate in a global market, and our United States
financial system is best served with deep financial liquidity. But if
global regulations are not well harmonized, are not well coordinated,
or we have good cross-border access, then these global markets will
fragment into separate regulatory jurisdictions and become far less
liquid, to the detriment of the United States financial system.
We know now that the derivatives swaps market is about an $815
trillion piece of the economy, and we must not--and I am sure we will
not--put our financial system of the United States at a disadvantage on
the world stage. By passing this bill, we will not do that. If we delay
it again, we will be putting our financial system at a disadvantage on
the stage.
Let me deal with the first concern that has been brought up. The
claim that our legislation subverts the CFTC's authority to regulate
foreign derivatives, this is flat-out false because at no point is an
entity of the United States person able to escape U.S. rules that the
CFTC, itself, has deemed equivalent. Let me read section 314 that has
been referred to. In section (b)(2)(A) of 314, it clearly states that
only the CFTC can make sure that foreign entities, regulations are
comparable to the United States. At no point do we yield the power of
the CFTC to any foreign entity unless the CFTC makes sure that that
foreign entity has equivalent rules to our Nation.
Now, let me go to the claim that we are making it harder to challenge
the cross border in 314. We are doing no such thing. It is important
that if there is a country, if there is anybody in the world that wants
to challenge, that wants to have a way of challenging the ruling of the
CFTC, it is in our best interest to make sure that they go through a
petition process, and the petition process is there to give the CFTC
ample time--180 days--to review the challenge and be able to respond
appropriately. And after the Commission makes its decision, we request
them to report to the Congress. Now, how is that making it harder? As a
matter of fact, it is making it easier and more transparent.
Now, the concern about the bill's attempts to rein in the CFTC's
capacity to impose certain rules on Wall Street trades, this concern
refers to what we refer to as U.S. persons and location tests. At no
time, Mr. Chairman, does our bill state that U.S. persons are not
subject to U.S. rules. Individuals and transactions are still allowed
to be carved in definitions and, thus, subject to the same rules, the
same tests, and regulations. And our own Commissioner Bowen, who is a
Democrat serving on the CFTC, stated before my subcommittee, ``risk
should be about risk and not about location.'' Tests should be about
where the risk is, instead of where someone wrote something on a piece
of paper.
Now let me deal with the business that our bill creates a presumption
that each of the eight foreign jurisdictions with the largest swaps
markets automatically have swap rules that are considered to be
comparable to and as comprehensive as the United States requirements.
Yes, they are correct, but that presumption comes only after the CFTC
makes sure that those eight foreign markets have comparable rules to
us. Here is what it says in section 1: ``The Commission shall
determine, by rule or by order, whether the swaps regulatory
requirements of foreign jurisdictions are comparable to and as
comprehensive as United States requirements.''
I rest my case.
But now, Mr. Chairman, I want to turn to what is the most important
cross-border issue, this business with the European Union. The European
Union is discriminating against the United States.
[[Page H3937]]
The CHAIR. The time of the gentleman has expired.
Mr. PETERSON. I yield the gentleman an additional 2 minutes.
Mr. DAVID SCOTT of Georgia. The European Union is denying our country
status in terms of equivalency of rules. Historically, we have always
had that. But what is very interesting is they have already given this
standing to jurisdictions that have the same regime as ours.
Why is that?
Something very strange is going on in the European Union. They are
discriminating against our financial system when they will go ahead and
approve other regimes that are equal to ours but not ours.
Why is this a terrible thing?
Because, Mr. Chairman, our clearinghouses can't do business in Europe
if we are not qualified, if we do not have that equivalency. So by
taking that equivalency away, they are keeping our clearinghouses and
our businesses from being able to be used there because the other
market participants will go elsewhere rather than come and do business
with us.
There are millions of dollars at stake here, so we have got to
certainly deal with that.
{time} 1545
Mr. Chairman, I do want to say something about this cost-benefit
analysis because this is not all truth is being told here. This cost-
benefit analysis is being put on because it has the way of being able
to make us more efficient.
Mr. Peterson brought up the point of litigation; that is a legitimate
concern, but here is what we did: we accepted and approved an amendment
by Democratic Representative DelBene and some Republicans to make sure
that the CFTC's back door is protected. The amendment clearly states
that the court must uphold the decision of the CFTC unless there has
been an abuse of discretion.
In a court of law, abuse is a high threshold to attain.
The CHAIR. The time of the gentleman has again expired.
Mr. CONAWAY. Mr. Chairman, I yield the gentleman an additional 3
minutes.
Mr. DAVID SCOTT of Georgia. This is important, Mr. Chairman. I have
got my name on this bill. I have put the work and time into this bill.
It is important that I give the reasons why I am supporting this bill.
Now, this amendment says, as I said before, that a court must uphold
the decision of the CFTC unless there has been an abuse of discretion.
In a court of law, abuse is a high threshold to attain. If a firm wants
to challenge the CFTC, they know right off that they better have beyond
compelling facts to prove it.
The CFTC's abuse of power is a discretion. We are letting anyone know
who would dare to pursue litigation against the CFTC that they better
think twice.
Now, about the funding, Mr. Chairman, perhaps this cost analysis can
help us build a case to take to the Appropriations Committee to get
more money. The President has appropriately asked for more money for
the CFTC.
Year after year after year, I have been asking for more money, but I
do believe that if we put the cost-benefit analysis in there--and,
again, Mr. Chairman, we have a section in there where this cost-benefit
analysis would be more succinct if it is done with an economist. Cost
benefit is an economic issue, a financial issue; an economist should be
doing that, not a lawyer.
I believe, Mr. Chairman, that if we pass this bill, we will be taking
a great step forward to be able to put our CFTC on the world stage to
be able to negotiate the rules and regulations for the United States of
America from a position of strength, not weakness. This is a very
delicate time for us, and we are losing respect.
Look at the EU; look at how other nations are treating us. Could it
be, Mr. Chairman, that we are losing this respect largely because in a
way by continuing year after year--this is the third year of not
reauthorizing CFTC--by us doing that, we are not respecting ourselves,
Mr. Chairman?
Now, finally, Mr. Chairman, I do want to say this one thing about the
end users. This is a very important piece of this bill. They can't wait
another 3 years. They need this relief right away, and we need to do
and be able to get them out of an identification of being a financial
institution.
Let me tell you why that is. End users are businesses who use a
single entity that allows their company to centralize functions such as
credit and risk; however, when the banking laws come in on finance,
they put them in that category.
The CHAIR. The time of the gentleman has again expired.
Mr. CONAWAY. Mr. Chairman, I yield myself such time as I may consume.
I enter into the Record a statement from the Chamber of Commerce and
would like to read a couple of paragraphs from that.
``This bill also takes a practical approach to address one of the
most problematic areas of regulatory implementation in the global
derivatives market: cross-border harmonization. Many end users operate
internationally and are struggling to meet the changing demands of
multiple, conflicting, and sometimes duplicative regulatory regimes.
H.R. 2289 would require the CFTC to move quickly to make substituted
compliance determinations that would significantly reduce needless
complexity and uncertainty for U.S. businesses, without reducing market
transparency.
The Chamber also supports provisions in this bill intended to promote
transparency and accountability in the CFTC's rulemaking process,
including a requirement to conduct a cost-benefit analysis for new
rules, and the establishment of an Office of the Chief Economist to
support such analysis. Cost-benefit analysis has been a fundamental
tool of effective government for more than three decades, and these
requirements would help protect Main Street businesses, investors, and
consumers from some of the unintended consequences of regulation.''
Chamber of Commerce of the United States of America,
Washington, DC, June 8, 2015.
To The Members of The U.S. House of Representatives: The
U.S. Chamber of Commerce, the world's largest business
federation representing the interests of more than three
million businesses of all sizes, sectors, and regions, as
well as state and local chambers and industry associations,
and dedicated to promoting, protecting, and defending
America's free enterprise system, strongly supports H.R.
2289, the ``Commodity End-User Relief Act,'' a bipartisan
bill that would reauthorize the Commodity Futures Trading
Commission (CFTC). This bill also includes a number of
important reforms designed to promote smart regulation,
enhance accountability at the CFTC, and protect Main Street
businesses from onerous and unintended derivatives
regulation.
The Chamber is particularly supportive of provisions in
H.R. 2289 that would help preserve the ability of commercial
end users to manage their financial risks by using
derivatives. This bill includes a critical fix that would
ensure non-financial companies would be protected from
burdensome and unnecessary regulations, consistent with
Congress's clear intent under the Dodd-Frank Act almost five
years ago. Non-financial companies that use centralized
treasury units to manage their enterprise-wide risk should
not be penalized for adopting this risk reducing structure,
and H.R. 2289 acknowledges and would address this issue.
This bill also takes a practical approach to address one of
the most problematic areas of regulatory implementation in
the global derivatives market: cross-border harmonization.
Many end users operate internationally and are struggling to
meet the changing demands of multiple, conflicting, and
sometimes duplicative regulatory regimes. H.R. 2289 would
require the CFTC to move quickly to make substituted
compliance determinations that would significantly reduce
needless complexity and uncertainty for U.S. businesses,
without reducing market transparency.
The Chamber also supports provisions in this bill intended
to promote transparency and accountability in the CFTC's
rulemaking process, including a requirement to conduct a
cost-benefit analysis for new rules, and the establishment of
an Office of the Chief Economist to support such analysis.
Cost-benefit analysis has been a fundamental tool of
effective government for more than three decades, and these
requirements would help protect Main Street businesses,
investors, and consumers from some of the unintended
consequences of regulation.
Additionally, H.R. 2289 contains a number of sensible
provisions that would promote principles of good governance,
including providing market participants with better
Commission oversight regarding ``no action'' letters issued
by the CFTC staff, and a requirement that the CFTC develop
internal risk control mechanisms in order to protect
sensitive market data. These are common sense measures that
would help make the CFTC a more effective and accountable
regulator, and the Chamber appreciates their inclusion in
this bill.
[[Page H3938]]
The Chamber strongly urges you to support H.R. 2289 and may
consider including votes on, or in relation to, this bill in
our annual How They Voted scorecard.
Sincerely,
R. Bruce Josten.
Mr. CONAWAY. Mr. Chairman, I yield 2 minutes to the gentleman from
Illinois (Mr. Rodney Davis).
Mr. RODNEY DAVIS of Illinois. Mr. Chairman, I thank Chairman Conaway
for his leadership on this issue.
I rise today in support of H.R. 2289, the Commodity End-User Relief
Act.
The use of derivatives is an important tool that farmers,
agribusinesses, and manufacturers in my district use to hedge the risks
that come with doing their business. Because of the risk of price
movements and commodities, such as corn and soybeans, these end users
use derivatives to ensure they and their customers aren't negatively
impacted by sudden changes in prices.
The CFTC has an important role in overseeing these end users, who
responsibly use derivatives to hedge. Unfortunately, following the
passage of Dodd-Frank in 2010, many of these responsible hedgers,
including farmers right in my congressional district in central and
southwestern Illinois, have been impacted by these new regulations that
often treat them as speculators. Mr. Chairman, farmers aren't
speculators. Farmers didn't cause the global financial crisis, and
farmers shouldn't be treated like they did.
This bill includes language that I authored to address regulations
that could directly increase transportation prices for consumers back
home. Additionally, the final bill includes an amendment I offered at
committee that removes unnecessary and duplicative regulations created
by the CFTC that require certain registered investment companies, such
as mutual funds, to be regulated by both the SEC and the CFTC.
This language, which was adopted unanimously in the committee,
removes this duplicative burden in a manner that would not undermine
investor protection because these companies would still be regulated by
the SEC.
This bill is an important and necessary opportunity for Congress to
use the reauthorization process as a means to improve the regulatory
environment and the impact it has on responsible market participants,
as well as exchanges like the CME Group, which is headquartered in my
home State of Illinois.
Mr. Chairman, I am proud of the committee's work on this bill. I want
to express my appreciation for the work of Chairman Conaway and what he
has done to get us here, as well as Chairman Austin Scott and Ranking
Member David Scott of the Commodity Exchanges, Energy, and Credit
Subcommittee.
This is an important bill, and I urge my colleagues to vote ``yes.''
Mr. PETERSON. Mr. Chairman, I yield 2 minutes to the gentlewoman from
Connecticut (Ms. DeLauro).
Ms. DeLAURO. Mr. Chairman, I rise in opposition to this bill; yet
again, this bill deliberately sets out to weaken one of our most
important financial regulators, the Commodity Futures Trading
Commission.
It fails to address the CFTC's biggest challenge, its flawed funding
mechanism. It prioritizes Wall Street special interests over the
economic security of our Nation's families.
This bill is a recipe for another financial disaster like the one
that led to the Great Recession and cost nearly 9 million American
jobs.
Americans are tired of casino banking and speculation. They want big
banks and oil speculators held accountable. They want to increase the
transparency of our markets, prevent market failures, and avoid future
bailouts. That is the CFTC's job.
This bill takes us in the wrong direction. Instead of helping the
CFTC fulfill its mandate in an increasingly complex global financial
sector, the bill throws up roadblock after roadblock.
The CFTC is one of only two Federal financial regulators completely
reliant upon the general fund. The Securities and Exchange Commission,
the Federal Deposit Insurance Corporation, Federal Housing Finance
Agency, and a host of others all collect user fees, so should the CFTC.
This is not a partisan proposition. The first President to propose
user-fee funding for the CFTC was Ronald Reagan. Every President since
then, Republican or Democrat, has done the same.
User fees would directly reduce the deficit while securing CFTC's
funding for the long term. That is even more important now that the
agency's responsibilities have been expanded in response to the bad
behavior that created the financial crisis.
I submitted an amendment that would have dealt with this problem, but
the majority refused to allow it to be heard.
We must avoid at all costs a return to the conditions that allowed
the Great Recession to happen, and I urge my colleagues to vote ``no''
on this bill.
Mr. CONAWAY. Mr. Chairman, I yield myself such time as I may consume.
I would like to remind or at least acknowledge to the committee that
CFTC's funding is up 49 percent since 2010 when the Dodd-Frank bill was
presented, 49 percent increase in funding.
Mr. Chairman, I yield 3 minutes to the gentleman from Virginia (Mr.
Goodlatte), the former chairman of the House Agriculture Committee and
the current chairman of the House Judiciary Committee.
Mr. GOODLATTE. Mr. Chairman, I thank Chairman Conaway for yielding me
this time and thank him for his leadership on this important
legislation.
I rise today to support H.R. 2289, the Commodity End-User Relief Act,
a bill to reauthorize the Commodity Futures Trading Commission.
As we have heard today, the CFTC's mission is to foster a
transparent, balanced, and functional marketplace. However, uncertainty
and delays in the marketplace mean higher prices for families and small
businesses across America. As the committee charged with ensuring the
oversight of our commodity markets, it is our duty to ensure that those
markets are functioning properly.
For the last several years, the Agriculture Committee, through the
strong leadership of former Chairman Frank Lucas and current Chairman
Mike Conaway, has done an excellent job of educating Congress and the
American public about the importance of our commodity markets and the
need for a strong reauthorization of the CFTC.
I was also pleased to work closely with the Subcommittee on Commodity
Exchanges, Energy, and Credit's Chairman Austin Scott on this
legislation. He and his staff have been leading an open and transparent
process that involved all stakeholder groups and took input from across
the country.
In an effort to help the CFTC achieve its mission, I worked with the
committee and the CFTC to craft an amendment which was adopted in
committee to address the issue of manufacturers being able to take
timely delivery of aluminum for production at a fair price. These
manufacturers support a broad set of industries from common drink cans
to airplane parts.
The persistence of long, disruptive market queues for the delivery of
aluminum at warehouses in the United States, licensed overseas, has
attracted considerable concern for end users and the consumers of
products which many Americans utilize on a daily basis.
My provision will prevent the unreasonable delay of delivery of such
commodities stored in warehouses, which can cost end-user companies
increased storage fees, potentially higher prices due to supply and
demand implications from improper exchange contract design, and result
in uneconomic commodity prices.
Specifically, the amendment directs the CFTC to report to Congress
regarding the ongoing review of foreign board of trade applications of
metal exchanges and the status of its negotiations with foreign
regulators regarding aluminum warehousing.
Such status reports shall inform the CFTC in determining foreign
boards of trade status for metals exchange applications, and such
determination shall be made no later than September 30, 2016.
In closing, I would like to again applaud Chairman Conaway and
subcommittee Chairman Scott for their hard work to get this bill to the
floor today. This bipartisan bill takes steps to improve consumer
protections for
[[Page H3939]]
farmers and ranchers, as well as implementing reforms, to ensure a more
balanced regulatory approach that will help our markets thrive.
Mr. PETERSON. Mr. Chairman, I yield myself such time as I may
consume.
With all due respect to my colleagues who have been claiming that the
bill does this and does that, there are a lot of groups that have a
different view.
There are over two-hundred-and-some groups that disagree with how the
impacts of these bills were going to affect the markets, including the
chairman of the Commodity Futures Trading Commission, who are the
people who actually have to administer this law.
{time} 1600
And we have a letter from the chairman that has a completely
different point of view than Mr. Scott has and others in terms of how
this will impact the situation. According to the chairman, you know, he
is opposed to this. He says: ``I believe that many of the provisions in
this bill before the committee are either unnecessary or impose
requirements on the Commission that would make it harder to fulfill
their mission. The bill limits the agency's ability to respond quickly
to both market events and market participants. It will make it more
difficult for us to make adjustments to rules and achieve greater
global harmonization of swaps rules. With respect to the provisions
pertaining to commercial end users' concerns, the agency has sufficient
authority to address the goals outlined in the legislation and in most
cases has already done so.''
He also states: ``I have concerns that title II of the bill includes
language that would complicate the agency's longstanding statutory
requirements to consider costs and benefits in its rulemaking, imposing
additional, unworkable standards and creating confusion that is likely
to lead to more lawsuits instead of policy grounded in data-driven
analysis. Had this language been in effect, it would have been harder
for the agency to positively respond over the past 10 months to market
participants' concerns. Title II also imposes procedural requirements
on the agency that, to my knowledge, are not followed by any other
independent agency. These changes would make it difficult to manage the
agency and to ensure accountability and could weaken the Commission for
administrations to come.''
So there is a disagreement of opinion about how this bill will
actually impact the marketplace and how it will actually work. And if,
as was claimed, it wasn't going to have any effect, I would be here
supporting it.
In my opinion, this is going to have significant impacts on the way
the Commission does its work, and I think it is going to do more harm
than good.
I reserve the balance of my time.
Mr. CONAWAY. Mr. Chairman, may I inquire as to how much time is left
on both sides?
The CHAIR. The gentleman from Texas has 13 minutes remaining. The
gentleman from Minnesota has 15 minutes remaining.
Mr. CONAWAY. I reserve the balance of my time.
Mr. PETERSON. Apparently, I have a speaker coming, but she is not
here yet, so we could wrap up, I guess.
Mr. CONAWAY. I am prepared to close if you are, and I reserve the
balance of my time.
Mr. PETERSON. Mr. Chair, I think I made clear my position. I was
hoping that we could work out a bill here that could have support
across the board, but I just think that there are areas we have gone
into with this bill that are going to cause more harm than good, and I
think it is not a good bill. It is not the kind of bill that we need to
give the Commission the reauthorization that they need to do their job,
so I ask my colleagues to oppose the bill.
I yield back the balance of my time.
Mr. CONAWAY. Mr. Chairman, I yield myself the balance of the time.
It should come as no surprise that those who are being regulated have
a difference of opinion with the folks proposing regulations. In this
instance, the roles are actually reversed.
Tim Massad is a good guy, a good friend of mine, and an individual I
look forward to working with. He doesn't want to change the deal he has
got.
Well, if you look back at all the testimony that has been delivered
throughout all of our hearings, most of the folks on the regulated
side, the end users, the banks, the brokers, the SEFs, everybody else,
they didn't like what the CFTC was doing to them. So the CFTC was able
to power through the objections, and I would like for us to do the same
thing, because what we have asked the CFTC to do is rational,
straightforward stuff with respect to the changes at the operations of
the Committee itself.
Over the past 4 years, the Committee on Agriculture has heard dozens
of witnesses testify about the upheaval end users have been facing
while trying to use derivatives markets in the wake of the postcrisis
financial reforms. While this Congress took affirmative steps in Dodd-
Frank to protect end users from harm, today it is clear there is still
work to be done.
It isn't enough to simply raise these issues and hope that the CFTC
will take care of them for us. For one, sometimes they cannot. There
are numerous small oversights in the statute that have huge
implications for end users that we correct in this legislation.
The CEA prevents many end users from claiming their exemption because
they conduct their hedging activity out of an affiliate specifically
created to manage risks throughout the entire corporate enterprise. The
Commission can't fix this req.
The CEA requires foreign regulators to indemnify the CFTC, even
though that is a legal concept that does not exist in many foreign
legal jurisdictions. The Commission can't fix it.
Currently, the CEA defines some utility companies as financial
entities, stripping them of their status as end users. The Commission
can't fix that.
The core principles of SEFs were lifted almost word for word from the
core principles for future exchanges, even though SEFs and future
exchanges operate completely differently and SEFs cannot perform many
of the functions of a futures exchange. The Commission can't fix this.
Certainly, the Commission can and has tried to paper over these
problems by issuing staff letters explaining how it would deal with
incongruities of the law, but this isn't good enough. We know the
problems, and we should fix them.
Sometimes, though, the problem isn't the statute. There are a number
of end users that we have heard testimony about which the CFTC will not
fix because the Commission simply disagrees with Congress about how to
apply the law. We know these problems, too.
The Commission has promulgated a rule that reduces the transaction
threshold, which triggers the requirement to register as a swap dealer
from $8 billion to $3 billion, a 60 percent decline, while they are
still studying the matter. We require that the CFTC complete the study
and have a public vote on the matter before that automatic decrease
occurs.
The Commission has proposed a new and significantly narrower method
of granting bona fide hedge exemptions, upending longstanding hedging
conventions for market participants. This proposal is also dramatically
more labor intensive for the Commission to implement than the current
process. We should insist that historic hedging practices be protected.
The Commission has dramatically expanded the recordkeeping
requirements, requiring businesses to trade only for themselves and
have no fiduciary obligations to customers to retain any record that
would lead to a trade. This requirement demands that end users retain
emails, texts, phone messages, and other records in which a potential
trade or hedge was simply contemplated or discussed. We should clearly
spell out that end users need only retain written records for actual
transactions.
The challenges facing businesses that hedge their risks in derivative
markets are real, and we have an opportunity today to fix some of those
problems. Every dollar that a business can save by better managing
risks is a dollar available to grow its business, to pay higher wages,
to protect investors, or to lower the costs to consumers.
Over the past week, over 40 organizations representing thousands of
American businesses have voiced their support for the important reforms
of the Commodity End-User Relief Act. Businesses from agriculture
producers, to
[[Page H3940]]
major manufacturers, to public utilities need every tool available to
manage their businesses and reduce the uncertainties they face each and
every day.
I urge my colleagues to support the Commodity End-User Relief Act to
protect these companies and to ensure that they have the tools they
need to compete in a global economy. I urge my colleagues to support
H.R. 2289.
I yield back the balance of my time.
Ms. MAXINE WATERS of California. Mr. Chair, I rise today in strong
opposition to H.R. 2289. The bill would obstruct our cop on the Wall
Street beat, the Commodity Futures Trading Commission, from doing its
job. The CFTC is charged with fostering open, transparent, competitive,
and financially sound markets, mitigates systemic risk, and protects
market participants, consumers, and the public from fraud,
manipulation, and abusive practices related to derivatives. In sum, the
CFTC protects farmers, manufacturers, municipalities, pension funds and
retirees but would be thwarted from doing so if H.R. 2289 is enacted.
In the wake of the worst financial crisis since the Great Depression,
Congress passed Wall Street Reform--and gave our derivatives regulator
the authority necessary to oversee previously unregulated transactions
in which parties agree to exchange--or ``swap''--the risks of one
financial instrument with another. The most notorious of these are
credit-default swaps, made famous by AIG and which fueled the 2008
crisis, bankrupted millions of homeowners and cost taxpayers trillions
of dollars.
Nevertheless, under the guise of reauthorizing the CFTC, Republicans
are proposing a bill that undermines its regulatory authority, imposes
new procedural requirements on an overburdened and underfunded agency,
and ultimately hamstrings the Commission's ability to protect the
American people.
This bill imposes heavy administrative hurdles and new litigation
risks on the CFTC by requiring the agency to conduct a cost-benefit
analysis slanted towards industry--a tactic that has been pushed in the
past by opponents of financial reform to prevent, delay or weaken any
rules implementing the Dodd-Frank Act.
The bill also makes it much more difficult for the CFTC to regulate
and oversee derivatives transactions involving the foreign operations
of megabanks like Citigroup, JP Morgan, and Bank of America. Earlier
this Congress, Republicans overreached when they tried to pass a
provision weakening the Volcker Rule's ban on banks taking bets with
taxpayer dollars. H.R. 2289 is cut from the same cloth--instead
allowing these same institutions to avoid U.S. law by setting up shop
in a foreign jurisdiction, even though the risk may still be borne by
U.S. taxpayers. There is even a provision in this bill that absurdly
directs the CFTC to ignore the physical location of a bank's swap
trader when determining whether the derivative was conducted inside the
United States for purposes of applying U.S. law.
And all of this is done without providing one red cent to pay for
these new burdens. CBO estimates that this bill costs at least $45
million, but the Republicans wouldn't even let the House consider an
amendment to pay for it, offered by Representative DeLauro. The result
is that H.R. 2289 will deplete the CFTC's modest resources currently
spent enforcing against fraud.
But don't take my word for it. The Commission's own Chairman says the
bill makes it harder for the CFTC to fulfill its mission and creates
``unintended loopholes and uncertainties.'' The White House says the
bill ``[threatens] the financial security of the middle class.'' And
public interest groups, such as the Consumer Federation of America, and
some industry groups, have weighed in as well, voicing their strong
opposition to the bill.
While not necessarily surprising, Republicans on the Agricultural
Committee refused to work with Ranking Member Peterson to improve this
bill--despite his deep commitment to making the Commission work better
for farmers, ranchers and manufacturers. Even though several of the
megabanks that directly benefit from H.R. 2289 pled guilty to
manipulating our foreign exchange markets, Republicans also rejected my
amendment, which sought to ensure that these banks' admissions of
violating our laws have real collateral consequences and are not merely
symbolic.
Ultimately, this legislation is part of an ongoing, multifaceted
Republican effort to undercut financial reform laws and regulations
that protect consumers, investors and the economy. That's why it should
come as no surprise that Koch Industries, for instance, spent $2.8
million lobbying to ensure the passage of this bill alone. The playbook
is well-known: create huge loopholes and carve-outs for special
interests, while simultaneously underfunding the cop with the authority
to ensure compliance with the law.
I urge my colleagues to join me in voting ``No'' on this bill.
Mr. VAN HOLLEN. Mr. Chair, just yesterday, I signed a letter with
five other Ranking Members on this side of the aisle in opposition to
this poorly conceived Commodity Futures Trading Commission (CFTC)
Reauthorization bill--which is also opposed by the Obama
Administration, CFTC Chairman Massad, and a whole host of consumer
groups.
For those who aren't familiar with it, the Commodity Futures Trading
Commission (CFTC) has a very important job: it regulates the futures
and options markets in the agricultural sector, including commodity-
related derivatives. While there's no question that the appropriate use
of these financial instruments can help farmers and commercial end
users hedge their commercial risk, recent history clearly demonstrates
that the unregulated abuse of these kinds of products can distort
markets, hurt consumers and put our entire economy at risk. The CFTC's
authority was allowed to expire in 2013, so its reauthorization is long
overdue. Having said that, today's legislation has multiple major
defects. I will briefly describe three.
First, Title II of H.R. 2289 imposes new bureaucratic requirements on
an agency whose activities are already governed by the Commodity
Exchange Act, the Paperwork Reduction Act, the Congressional Review
Act, and the Regulatory Flexibility Act. With all due respect, the
bureaucracy does not need more bureaucracy. In this case, it simply
needs to do its job policing our financial markets. If enacted into
law, Title II of this bill would undermine the CFTC's ability to do its
job and subject the commission to unnecessary and costly litigation
risk.
Second, Title III of H.R. 2289 requires a complex new rulemaking for
our international derivatives markets. While I support the goal of
harmonizing global rules in this area, this provision of the bill
interferes with the CFTC's ongoing negotiations to achieve that
objective and instead substitutes and attempts to predetermine the
majority's preferred outcome for those negotiations. In my judgment,
the CFTC should be allowed to complete its negotiations unfettered by
the dictates of this legislation.
Finally, the non-partisan Congressional Budget Office estimates that
all of the additional requirements placed on the CFTC by this
legislation will require 30 new employees at a cost of $45 million over
the next five years--a cost this bill does not even attempt to pay for.
Moreover, an amendment to permit the CFTC to collect user fees to close
that gap and help pay for the CFTC's operations was not even afforded
the opportunity for an up or down vote on the floor of the House today.
Mr. Chair, the reauthorization of the CFTC is an important subject,
worthy of a far more thoughtful bill than we are being asked to
consider today. I strongly urge a no vote, and I yield back the balance
of my time.
The CHAIR. All time for general debate has expired.
Pursuant to the rule, the bill shall be considered for amendment
under the 5-minute rule.
In lieu of the amendment in the nature of a substitute recommended by
the Committee on Agriculture, printed in the bill, it shall be in order
to consider as an original bill for the purpose of amendment under the
5-minute rule an amendment in the nature of a substitute consisting of
the text of Rules Committee Print 114-18. That amendment in the nature
of a substitute shall be considered as read.
The text of the amendment in the nature of a substitute is as
follows:
H.R. 2289
Be it enacted by the Senate and the House of
Representatives of the United States of America in Congress
assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Commodity End-User Relief
Act''.
SEC. 2. TABLE OF CONTENTS.
The table of contents of this Act is as follows:
Sec. 1. Short title.
Sec. 2. Table of contents.
TITLE I--CUSTOMER PROTECTIONS
Sec. 101. Enhanced protections for futures customers.
Sec. 102. Electronic confirmation of customer funds.
Sec. 103. Notice and certifications providing additional customer
protections.
Sec. 104. Futures commission merchant compliance.
Sec. 105. Certainty for futures customers and market participants.
TITLE II--COMMODITY FUTURES TRADING COMMISSION REFORMS
Sec. 201. Extension of operations.
Sec. 202. Consideration by the Commodity Futures Trading Commission of
the costs and benefits of its regulations and orders.
Sec. 203. Division directors.
Sec. 204. Office of the Chief Economist.
Sec. 205. Procedures governing actions taken by Commission staff.
Sec. 206. Strategic technology plan.
Sec. 207. Internal risk controls.
Sec. 208. Subpoena duration and renewal.
[[Page H3941]]
Sec. 209. Applicability of notice and comment requirements of the
Administrative Procedure Act to guidance voted on by the
Commission.
Sec. 210. Judicial review of Commission rules.
Sec. 211. GAO study on use of Commission resources.
Sec. 212. Disclosure of required data of other registered entities.
Sec. 213. Report on status of any application of metals exchange to
register as a foreign board of trade; deadline for action
on application.
TITLE III--END-USER RELIEF
Sec. 301. Relief for hedgers utilizing centralized risk management
practices.
Sec. 302. Indemnification requirements.
Sec. 303. Transactions with utility special entities.
Sec. 304. Utility special entity defined.
Sec. 305. Utility operations-related swap.
Sec. 306. End-users not treated as financial entities.
Sec. 307. Reporting of illiquid swaps so as to not disadvantage certain
non-financial end-users.
Sec. 308. Relief for grain elevator operators, farmers, agricultural
counterparties, and commercial market participants.
Sec. 309. Relief for end-users who use physical contracts with
volumetric optionality.
Sec. 310. Commission vote required before automatic change of swap
dealer de minimis level.
Sec. 311. Capital requirements for non-bank swap dealers.
Sec. 312. Harmonization with the Jumpstart Our Business Startups Act.
Sec. 313. Bona fide hedge defined to protect end-user risk management
needs.
Sec. 314. Cross-border regulation of derivatives transactions.
Sec. 315. Exemption of qualified charitable organizations from
designation and regulation as commodity pool operators.
Sec. 316. Small bank holding company clearing exemption.
Sec. 317. Core principle certainty.
Sec. 318. Treatment of Federal Home Loan Bank products.
Sec. 319. Treatment of certain funds.
TITLE IV--TECHNICAL CORRECTIONS
Sec. 401. Correction of references.
Sec. 402. Elimination of obsolete references to dealer options.
Sec. 403. Updated trade data publication requirement.
Sec. 404. Flexibility for registered entities.
Sec. 405. Elimination of obsolete references to electronic trading
facilities.
Sec. 406. Elimination of obsolete reference to alternative swap
execution facilities.
Sec. 407. Elimination of redundant references to types of registered
entities.
Sec. 408. Clarification of Commission authority over swaps trading.
Sec. 409. Elimination of obsolete reference to the Commodity Exchange
Commission.
Sec. 410. Elimination of obsolete references to derivative transaction
execution facilities.
Sec. 411. Elimination of obsolete references to exempt boards of trade.
Sec. 412. Elimination of report due in 1986.
Sec. 413. Compliance report flexibility.
Sec. 414. Miscellaneous corrections.
TITLE I--CUSTOMER PROTECTIONS
SEC. 101. ENHANCED PROTECTIONS FOR FUTURES CUSTOMERS.
Section 17 of the Commodity Exchange Act (7 U.S.C. 21) is
amended by adding at the end the following:
``(s) A registered futures association shall--
``(1) require each member of the association that is a
futures commission merchant to maintain written policies and
procedures regarding the maintenance of--
``(A) the residual interest of the member, as described in
section 1.23 of title 17, Code of Federal Regulations, in any
customer segregated funds account of the member, as
identified in section 1.20 of such title, and in any foreign
futures and foreign options customer secured amount funds
account of the member, as identified in section 30.7 of such
title; and
``(B) the residual interest of the member, as described in
section 22.2(e)(4) of such title, in any cleared swaps
customer collateral account of the member, as identified in
section 22.2 of such title; and
``(2) establish rules to govern the withdrawal, transfer or
disbursement by any member of the association, that is a
futures commission merchant, of the member's residual
interest in customer segregated funds as provided in such
section 1.20, in foreign futures and foreign options customer
secured amount funds, identified as provided in such section
30.7, and from a cleared swaps customer collateral,
identified as provided in such section 22.2.''.
SEC. 102. ELECTRONIC CONFIRMATION OF CUSTOMER FUNDS.
Section 17 of the Commodity Exchange Act (7 U.S.C. 21), as
amended by section 101 of this Act, is amended by adding at
the end the following:
``(t) A registered futures association shall require any
member of the association that is a futures commission
merchant to--
``(1) use an electronic system or systems to report
financial and operational information to the association or
another party designated by the registered futures
association, including information related to customer
segregated funds, foreign futures and foreign options
customer secured amount funds accounts, and cleared swaps
customer collateral, in accordance with such terms,
conditions, documentation standards, and regular time
intervals as are established by the registered futures
association;
``(2) instruct each depository, including any bank, trust
company, derivatives clearing organization, or futures
commission merchant, holding customer segregated funds under
section 1.20 of title 17, Code of Federal Regulations,
foreign futures and foreign options customer secured amount
funds under section 30.7 of such title, or cleared swap
customer funds under section 22.2 of such title, to report
balances in the futures commission merchant's section 1.20
customer segregated funds, section 30.7 foreign futures and
foreign options customer secured amount funds, and section
22.2 cleared swap customer funds, to the registered futures
association or another party designated by the registered
futures association, in the form, manner, and interval
prescribed by the registered futures association; and
``(3) hold section 1.20 customer segregated funds, section
30.7 foreign futures and foreign options customer secured
amount funds and section 22.2 cleared swaps customer funds in
a depository that reports the balances in these accounts of
the futures commission merchant held at the depository to the
registered futures association or another party designated by
the registered futures association in the form, manner, and
interval prescribed by the registered futures association.''.
SEC. 103. NOTICE AND CERTIFICATIONS PROVIDING ADDITIONAL
CUSTOMER PROTECTIONS.
Section 17 of the Commodity Exchange Act (7 U.S.C. 21), as
amended by sections 101 and 102 of this Act, is amended by
adding at the end the following:
``(u) A futures commission merchant that has adjusted net
capital in an amount less than the amount required by
regulations established by the Commission or a self-
regulatory organization of which the futures commission
merchant is a member shall immediately notify the Commission
and the self-regulatory organization of this occurrence.
``(v) A futures commission merchant that does not hold a
sufficient amount of funds in segregated accounts for futures
customers under section 1.20 of title 17, Code of Federal
Regulations, in foreign futures and foreign options secured
amount accounts for foreign futures and foreign options
secured amount customers under section 30.7 of such title, or
in segregated accounts for cleared swap customers under
section 22.2 of such title, as required by regulations
established by the Commission or a self-regulatory
organization of which the futures commission merchant is a
member, shall immediately notify the Commission and the self-
regulatory organization of this occurrence.
``(w) Within such time period established by the Commission
after the end of each fiscal year, a futures commission
merchant shall file with the Commission a report from the
chief compliance officer of the futures commission merchant
containing an assessment of the internal compliance programs
of the futures commission merchant.''.
SEC. 104. FUTURES COMMISSION MERCHANT COMPLIANCE.
(a) In General.--Section 4d(a) of the Commodity Exchange
Act (7 U.S.C. 6d(a)) is amended--
(1) by redesignating paragraphs (1) and (2) as
subparagraphs (A) and (B);
(2) by inserting ``(1)'' before ``It shall be unlawful'';
and
(3) by adding at the end the following new paragraph:
``(2) Any rules or regulations requiring a futures
commission merchant to maintain a residual interest in
accounts held for the benefit of customers in amounts at
least sufficient to exceed the sum of all uncollected margin
deficits of such customers shall provide that a futures
commission merchant shall meet its residual interest
requirement as of the end of each business day calculated as
of the close of business on the previous business day.''.
(b) Conforming Amendment.--Section 4d(h) of such Act (7
U.S.C. 6d(h)) is amended by striking ``Notwithstanding
subsection (a)(2)'' and inserting ``Notwithstanding
subsection (a)(1)(B)''.
SEC. 105. CERTAINTY FOR FUTURES CUSTOMERS AND MARKET
PARTICIPANTS.
Section 20(a) of the Commodity Exchange Act (7 U.S.C.
24(a)) is amended--
(1) by striking ``and'' at the end of paragraph (4);
(2) by striking the period at the end of paragraph (5) and
inserting ``; and''; and
(3) by adding at the end the following:
``(6) that cash, securities, or other property of the
estate of a commodity broker, including the trading or
operating accounts of the commodity broker and commodities
held in inventory by the commodity broker, shall be included
in customer property, subject to any otherwise unavoidable
security interest, or otherwise unavoidable contractual
offset or netting rights of creditors (including rights set
forth in a rule or bylaw of a derivatives clearing
organization or a clearing agency) in respect of such
property, but only to the extent that the property that is
otherwise customer property is insufficient to satisfy the
net equity claims of public customers (as such term may be
defined by the Commission by rule or regulation) of the
commodity broker.''.
TITLE II--COMMODITY FUTURES TRADING COMMISSION REFORMS
SEC. 201. EXTENSION OF OPERATIONS.
Section 12(d) of the Commodity Exchange Act (7 U.S.C.
16(d)) is amended by striking ``2013'' and inserting
``2019''.
SEC. 202. CONSIDERATION BY THE COMMODITY FUTURES TRADING
COMMISSION OF THE COSTS AND BENEFITS OF ITS
REGULATIONS AND ORDERS.
Section 15(a) of the Commodity Exchange Act (7 U.S.C.
19(a)) is amended--
[[Page H3942]]
(1) by striking paragraphs (1) and (2) and inserting the
following:
``(1) In general.--Before promulgating a regulation under
this Act or issuing an order (except as provided in paragraph
(3)), the Commission, through the Office of the Chief
Economist, shall assess and publish in the regulation or
order the costs and benefits, both qualitative and
quantitative, of the proposed regulation or order, and the
proposed regulation or order shall state its statutory
justification.
``(2) Considerations.--In making a reasoned determination
of the costs and the benefits, the Commission shall
evaluate--
``(A) considerations of protection of market participants
and the public;
``(B) considerations of the efficiency, competitiveness,
and financial integrity of futures and swaps markets;
``(C) considerations of the impact on market liquidity in
the futures and swaps markets;
``(D) considerations of price discovery;
``(E) considerations of sound risk management practices;
``(F) available alternatives to direct regulation;
``(G) the degree and nature of the risks posed by various
activities within the scope of its jurisdiction;
``(H) the costs of complying with the proposed regulation
or order by all regulated entities, including a methodology
for quantifying the costs (recognizing that some costs are
difficult to quantify);
``(I) whether the proposed regulation or order is
inconsistent, incompatible, or duplicative of other Federal
regulations or orders;
``(J) the cost to the Commission of implementing the
proposed regulation or order by the Commission staff,
including a methodology for quantifying the costs;
``(K) whether, in choosing among alternative regulatory
approaches, those approaches maximize net benefits (including
potential economic and other benefits, distributive impacts,
and equity); and
``(L) other public interest considerations.''; and
(2) by adding at the end the following:
``(4) Judicial review.--Notwithstanding section 24(d), a
court shall affirm a Commission assessment of costs and
benefits under this subsection, unless the court finds the
assessment to be an abuse of discretion.''.
SEC. 203. DIVISION DIRECTORS.
Section 2(a)(6)(C) of the Commodity Exchange Act (7 U.S.C.
2(a)(6)(C)) is amended by inserting ``, and the heads of the
units shall serve at the pleasure of the Commission'' before
the period.
SEC. 204. OFFICE OF THE CHIEF ECONOMIST.
(a) In General.--Section 2(a) of the Commodity Exchange Act
(7 U.S.C. 2(a)) is amended by adding at the end the
following:
``(17) Office of the chief economist.--
``(A) Establishment.--There is established in the
Commission the Office of the Chief Economist.
``(B) Head.--The Office of the Chief Economist shall be
headed by the Chief Economist, who shall be appointed by the
Commission and serve at the pleasure of the Commission.
``(C) Functions.--The Chief Economist shall report directly
to the Commission and perform such functions and duties as
the Commission may prescribe.
``(D) Professional staff.--The Commission shall appoint
such other economists as may be necessary to assist the Chief
Economist in performing such economic analysis, regulatory
cost-benefit analysis, or research any member of the
Commission may request.''.
(b) Conforming Amendment.--Section 2(a)(6)(A) of such Act
(7 U.S.C. 2(a)(6)(A)) is amended by striking ``(4) and (5) of
this subsection'' and inserting ``(4), (5), and (17)''.
SEC. 205. PROCEDURES GOVERNING ACTIONS TAKEN BY COMMISSION
STAFF.
Section 2(a)(12) of the Commodity Exchange Act (7 U.S.C.
2(a)(12)) is amended--
(1) by striking ``(12) The'' and inserting the following:
``(12) Rules and regulations.--
``(A) In general.--Subject to the other provisions of this
paragraph, the''; and
(2) by adding after and below the end the following new
subparagraph:
``(B) Notice to commissioners.--The Commission shall
develop and publish internal procedures governing the
issuance by any division or office of the Commission of any
response to a formal, written request or petition from any
member of the public for an exemptive, a no-action, or an
interpretive letter and such procedures shall provide that
the commissioners be provided with the final version of the
matter to be issued with sufficient notice to review the
matter prior to its issuance.''.
SEC. 206. STRATEGIC TECHNOLOGY PLAN.
Section 2(a) of the Commodity Exchange Act (7 U.S.C. 2(a)),
as amended by section 204(a) of this Act, is amended by
adding at the end the following:
``(18) Strategic technology plan.--
``(A) In general.--Every 5 years, the Commission shall
develop and submit to the Committee on Agriculture of the
House of Representatives and the Committee on Agriculture,
Nutrition, and Forestry of the Senate a detailed plan focused
on the acquisition and use of technology by the Commission.
``(B) Contents.--The plan shall--
``(i) include for each related division or office a
detailed technology strategy focused on market surveillance
and risk detection, market data collection, aggregation,
interpretation, standardization, harmonization,
normalization, validation, streamlining or other data
analytic processes, and internal management and protection of
data collected by the Commission, including a detailed
accounting of how the funds provided for technology will be
used and the priorities that will apply in the use of the
funds; and
``(ii) set forth annual goals to be accomplished and annual
budgets needed to accomplish the goals.''.
SEC. 207. INTERNAL RISK CONTROLS.
Section 2(a)(12) of the Commodity Exchange Act (7 U.S.C.
2(a)(12)), as amended by section 205 of this Act, is amended
by adding at the end the following:
``(C) Internal risk controls.--The Commission, in
consultation with the Chief Economist, shall develop
comprehensive internal risk control mechanisms to safeguard
and govern the storage of all market data by the Commission,
all market data sharing agreements of the Commission, and all
academic research performed at the Commission using market
data.''.
SEC. 208. SUBPOENA DURATION AND RENEWAL.
Section 6(c)(5) of the Commodity Exchange Act (7 U.S.C.
9(5)) is amended--
(1) by striking ``(5) Subpoena.--For'' and inserting the
following:
``(5) Subpoena.--
``(A) In general.--For''; and
(2) by adding after and below the end the following:
``(B) Omnibus orders of investigation.--
``(i) Duration and renewal.--An omnibus order of
investigation shall not be for an indefinite duration and may
be renewed only by Commission action.
``(ii) Definition.--In clause (i), the term `omnibus order
of investigation' means an order of the Commission
authorizing 1 of more members of the Commission or its staff
to issue subpoenas under subparagraph (A) to multiple persons
in relation to a particular subject matter area.''.
SEC. 209. APPLICABILITY OF NOTICE AND COMMENT REQUIREMENTS OF
THE ADMINISTRATIVE PROCEDURE ACT TO GUIDANCE
VOTED ON BY THE COMMISSION.
Section 2(a)(12) of the Commodity Exchange Act (7 U.S.C.
2(a)(12)), as amended by sections 205 and 207 of this Act, is
amended by adding at the end the following:
``(D) Applicability of notice and comment rules to guidance
voted on by the commission.--The notice and comment
requirements of section 553 of title 5, United States Code,
shall also apply with respect to any Commission statement or
guidance, including interpretive rules, general statements of
policy, or rules of Commission organization, procedure, or
practice, that has the effect of implementing, interpreting
or prescribing law or policy and that is voted on by the
Commission.''.
SEC. 210. JUDICIAL REVIEW OF COMMISSION RULES.
The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended
by adding at the end the following:
``SEC. 24. JUDICIAL REVIEW OF COMMISSION RULES.
``(a) A person adversely affected by a rule of the
Commission promulgated under this Act may obtain review of
the rule in the United States Court of Appeals for the
District of Columbia Circuit or the United States Court of
Appeals for the circuit where the party resides or has the
principal place of business, by filing in the court, within
60 days after publication in the Federal Register of the
entry of the rule, a written petition requesting that the
rule be set aside.
``(b) A copy of the petition shall be transmitted forthwith
by the clerk of the court to an officer designated by the
Commission for that purpose. Thereupon the Commission shall
file in the court the record on which the rule complained of
is entered, as provided in section 2112 of title 28, United
States Code, and the Federal Rules of Appellate Procedure.
``(c) On the filing of the petition, the court has
jurisdiction, which becomes exclusive on the filing of the
record, to affirm and enforce or to set aside the rule in
whole or in part.
``(d) The court shall affirm and enforce the rule unless
the Commission's action in promulgating the rule is found to
be arbitrary, capricious, an abuse of discretion, or
otherwise not in accordance with law; contrary to
constitutional right, power, privilege, or immunity; in
excess of statutory jurisdiction, authority, or limitations,
or short of statutory right; or without observance of
procedure required by law.''.
SEC. 211. GAO STUDY ON USE OF COMMISSION RESOURCES.
(a) Study.--The Comptroller General of the United States
shall conduct a study of the resources of the Commodity
Futures Trading Commission that--
(1) assesses whether the resources of the Commission are
sufficient to enable the Commission to effectively carry out
the duties of the Commission;
(2) examines the expenditures of the Commission on
hardware, software, and analytical processes designed to
protect customers in the areas of--
(A) market surveillance and risk detection; and
(B) market data collection, aggregation, interpretation,
standardization, harmonization, and streamlining;
(3) analyzes the additional workload undertaken by the
Commission, and ascertains where self-regulatory
organizations could be more effectively utilized; and
(4) examines existing and emerging post-trade risk
reduction services in the swaps market, the notional amount
of risk reduction transactions provided by the services, and
the effects the services have on financial stability,
including--
(A) market surveillance and risk detection;
(B) market data collection, aggregation, interpretation,
standardization, harmonization, and streamlining; and
(C) oversight and compliance work by market participants
and regulators.
(b) Report.--Not later than 180 days after the date of the
enactment of this Act, the Comptroller General of the United
States shall submit
[[Page H3943]]
to the Committee on Agriculture of the House of
Representatives and the Committee on Agriculture, Nutrition,
and Forestry of the Senate a report that contains the results
of the study required by subsection (a).
SEC. 212. DISCLOSURE OF REQUIRED DATA OF OTHER REGISTERED
ENTITIES.
Section 8 of the Commodity Exchange Act (7 U.S.C. 12) is
amended by adding at the end the following:
``(j) Disclosure of Required Data of Other Registered
Entities.--
``(1) Except as provided in this subsection, the Commission
may not be compelled to disclose any proprietary information
provided to the Commission, except that nothing in this
subsection--
``(A) authorizes the Commission to withhold information
from Congress; or
``(B) prevents the Commission from--
``(i) complying with a request for information from any
other Federal department or agency, any State or political
subdivision thereof, or any foreign government or any
department, agency, or political subdivision thereof
requesting the report or information for purposes within the
scope of its jurisdiction, upon an agreement of
confidentiality to protect the information in a manner
consistent with this paragraph and subsection (e); or
``(ii) making a disclosure made pursuant to a court order
in connection with an administrative or judicial proceeding
brought under this Act, in any receivership proceeding
involving a receiver appointed in a judicial proceeding
brought under this Act, or in any bankruptcy proceeding in
which the Commission has intervened or in which the
Commission has the right to appear and be heard under title
11 of the United States Code.
``(2) Any proprietary information of a commodity trading
advisor or commodity pool operator ascertained by the
Commission in connection with Form CPO-PQR, Form CTA-PR, and
any successor forms thereto, shall be subject to the same
limitations on public disclosure, as any facts ascertained
during an investigation, as provided by subsection (a);
provided, however, that the Commission shall not be precluded
from publishing aggregate information compiled from such
forms, to the extent such aggregate information does not
identify any individual person or firm, or such person's
proprietary information.
``(3) For purposes of section 552 of title 5, United States
Code, this subsection, and the information contemplated
herein, shall be considered a statute described in subsection
(b)(3)(B) of such section 552.
``(4) For purposes of the definition of proprietary
information in paragraph (5), the records and reports of any
client account or commodity pool to which a commodity trading
advisor or commodity pool operator registered under this
title provides services that are filed with the Commission on
Form CPO-PQR, CTA-PR, and any successor forms thereto, shall
be deemed to be the records and reports of the commodity
trading advisor or commodity pool operator, respectively.
``(5) For purposes of this section, proprietary information
of a commodity trading advisor or commodity pool operator
includes sensitive, non-public information regarding--
``(A) the commodity trading advisor, commodity pool
operator or the trading strategies of the commodity trading
advisor or commodity pool operator;
``(B) analytical or research methodologies of a commodity
trading advisor or commodity pool operator;
``(C) trading data of a commodity trading advisor or
commodity pool operator; and
``(D) computer hardware or software containing intellectual
property of a commodity trading advisor or commodity pool
operator;''.
SEC. 213. REPORT ON STATUS OF ANY APPLICATION OF METALS
EXCHANGE TO REGISTER AS A FOREIGN BOARD OF
TRADE; DEADLINE FOR ACTION ON APPLICATION.
(a) Report to Congress.--Within 90 days after the date of
the enactment of this section, the Commodity Futures Trading
Commission shall submit to the Congress a written report on--
(1) the status of the review by the Commission of any
application submitted by a metals exchange to register with
the Commission under section 4(b)(1) of the Commodity
Exchange Act; and
(2) the status of Commission negotiations with foreign
regulators regarding aluminum warehousing.
(b) Deadline for Action.--Not later than September 30,
2016, the Commission shall take action on any such
application submitted to the Commission on or before August
14, 2012.
TITLE III--END-USER RELIEF
SEC. 301. RELIEF FOR HEDGERS UTILIZING CENTRALIZED RISK
MANAGEMENT PRACTICES.
(a) In General.--
(1) Commodity exchange act amendment.--Section
2(h)(7)(D)(i) of the Commodity Exchange Act (7 U.S.C.
2(h)(7)(D)(i)) is amended to read as follows:
``(i) In general.--An affiliate of a person that qualifies
for an exception under subparagraph (A) (including an
affiliate entity predominantly engaged in providing financing
for the purchase of the merchandise or manufactured goods of
the person) may qualify for the exception only if the
affiliate enters into the swap to hedge or mitigate the
commercial risk of the person or other affiliate of the
person that is not a financial entity, provided that if the
hedge or mitigation of such commercial risk is addressed by
entering into a swap with a swap dealer or major swap
participant, an appropriate credit support measure or other
mechanism must be utilized.''.
(2) Securities exchange act of 1934 amendment.--Section
3C(g)(4)(A) of the Securities Exchange Act of 1934 (15 U.S.C.
78c-3(g)(4)(A)) is amended to read as follows:
``(A) In general.--An affiliate of a person that qualifies
for an exception under paragraph (1) (including affiliate
entities predominantly engaged in providing financing for the
purchase of the merchandise or manufactured goods of the
person) may qualify for the exception only if the affiliate
enters into the security-based swap to hedge or mitigate the
commercial risk of the person or other affiliate of the
person that is not a financial entity, provided that if the
hedge or mitigation of such commercial risk is addressed by
entering into a security-based swap with a security-based
swap dealer or major security-based swap participant, an
appropriate credit support measure or other mechanism must be
utilized.''.
(b) Applicability of Credit Support Measure Requirement.--
The requirements in section 2(h)(7)(D)(i) of the Commodity
Exchange Act and section 3C(g)(4)(A) of the Securities
Exchange Act of 1934, as amended by subsection (a), requiring
that a credit support measure or other mechanism be utilized
if the transfer of commercial risk referred to in such
sections is addressed by entering into a swap with a swap
dealer or major swap participant or a security-based swap
with a security-based swap dealer or major security-based
swap participant, as appropriate, shall not apply with
respect to swaps or security-based swaps, as appropriate,
entered into before the date of the enactment of this Act.
SEC. 302. INDEMNIFICATION REQUIREMENTS.
(a) Derivatives Clearing Organizations.--Section 5b(k)(5)
of the Commodity Exchange Act (7 U.S.C. 7a-1(k)(5)) is
amended to read as follows:
``(5) Confidentiality agreement.--Before the Commission may
share information with any entity described in paragraph (4),
the Commission shall receive a written agreement from each
entity stating that the entity shall abide by the
confidentiality requirements described in section 8 relating
to the information on swap transactions that is provided.''.
(b) Swap Data Repositories.--Section 21(d) of such Act (7
U.S.C. 24a(d)) is amended to read as follows:
``(d) Confidentiality Agreement.--Before the swap data
repository may share information with any entity described in
subsection (c)(7), the swap data repository shall receive a
written agreement from each entity stating that the entity
shall abide by the confidentiality requirements described in
section 8 relating to the information on swap transactions
that is provided.''.
(c) Security-based Swap Data Repositories.--Section
13(n)(5)(H) of the Securities Exchange Act of 1934 (15 U.S.C.
78m(n)(5)(H)) is amended to read as follows:
``(H) Confidentiality agreement.--Before the security-based
swap data repository may share information with any entity
described in subparagraph (G), the security-based swap data
repository shall receive a written agreement from each entity
stating that the entity shall abide by the confidentiality
requirements described in section 24 relating to the
information on security-based swap transactions that is
provided.''.
SEC. 303. TRANSACTIONS WITH UTILITY SPECIAL ENTITIES.
Section 1a(49) of the Commodity Exchange Act (7 U.S.C.
1a(49)) is amended by adding at the end the following:
``(E) Certain transactions with a utility special entity.--
``(i) Transactions in utility operations-related swaps
shall be reported pursuant to section 4r.
``(ii) In making a determination to exempt pursuant to
subparagraph (D), the Commission shall treat a utility
operations-related swap entered into with a utility special
entity, as defined in section 4s(h)(2)(D), as if it were
entered into with an entity that is not a special entity, as
defined in section 4s(h)(2)(C).''.
SEC. 304. UTILITY SPECIAL ENTITY DEFINED.
Section 4s(h)(2) of the Commodity Exchange Act (7 U.S.C.
6s(h)(2)) is amended by adding at the end the following:
``(D) Utility special entity.--For purposes of this Act,
the term `utility special entity' means a special entity, or
any instrumentality, department, or corporation of or
established by a State or political subdivision of a State,
that--
``(i) owns or operates, or anticipates owning or operating,
an electric or natural gas facility or an electric or natural
gas operation;
``(ii) supplies, or anticipates supplying, natural gas and
or electric energy to another utility special entity;
``(iii) has, or anticipates having, public service
obligations under Federal, State, or local law or regulation
to deliver electric energy or natural gas service to
customers; or
``(iv) is a Federal power marketing agency, as defined in
section 3 of the Federal Power Act.''.
SEC. 305. UTILITY OPERATIONS-RELATED SWAP.
(a) Swap Further Defined.--Section 1a(47)(A)(iii) of the
Commodity Exchange Act (7 U.S.C. 1a(47)(A)(iii)) is amended--
(1) by striking ``and'' at the end of subclause (XXI);
(2) by adding ``and'' at the end of subclause (XXII); and
(3) by adding at the end the following:
``(XXIII) a utility operations-related swap;''.
(b) Utility Operations-related Swap Defined.--Section 1a of
such Act (7 U.S.C. 1a) is amended by adding at the end the
following:
``(52) Utility operations-related swap.--The term `utility
operations-related swap' means a swap that--
``(A) is entered into by a utility to hedge or mitigate a
commercial risk;
``(B) is not a contract, agreement, or transaction based
on, derived on, or referencing--
[[Page H3944]]
``(i) an interest rate, credit, equity, or currency asset
class; or
``(ii) except as used for fuel for electric energy
generation, a metal, agricultural commodity, or crude oil or
gasoline commodity of any grade; or
``(iii) any other commodity or category of commodities
identified for this purpose in a rule or order adopted by the
Commission in consultation with the appropriate Federal and
State regulatory commissions; and
``(C) is associated with--
``(i) the generation, production, purchase, or sale of
natural gas or electric energy, the supply of natural gas or
electric energy to a utility, or the delivery of natural gas
or electric energy service to utility customers;
``(ii) fuel supply for the facilities or operations of a
utility;
``(iii) compliance with an electric system reliability
obligation;
``(iv) compliance with an energy, energy efficiency,
conservation, or renewable energy or environmental statute,
regulation, or government order applicable to a utility; or
``(v) any other electric energy or natural gas swap to
which a utility is a party.''.
SEC. 306. END-USERS NOT TREATED AS FINANCIAL ENTITIES.
(a) In General.--Section 2(h)(7)(C)(iii) of the Commodity
Exchange Act (7 U.S.C. 2(h)(7)(C)(iii)) is amended to read as
follows:
``(iii) Limitation.--Such definition shall not include an
entity--
``(I) whose primary business is providing financing, and
who uses derivatives for the purpose of hedging underlying
commercial risks related to interest rate and foreign
currency exposures, 90 percent or more of which arise from
financing that facilitates the purchase or lease of products,
90 percent or more of which are manufactured by the parent
company or another subsidiary of the parent company; or
``(II) who is not supervised by a prudential regulator, and
is not described in any of subclauses (I) through (VII) of
clause (i), and--
``(aa) is a commercial market participant; or
``(bb) enters into swaps, contracts for future delivery,
and other derivatives on behalf of, or to hedge or mitigate
the commercial risk of, whether directly or in the aggregate,
affiliates that are not so supervised or described.''.
(b) Commercial Market Participant Defined.--
(1) In general.--Section 1a of such Act (7 U.S.C. 1a), as
amended by section 305(b) of this Act, is amended by
redesignating paragraphs (8) through (52) as paragraphs (9)
through (53), respectively, and by inserting after paragraph
(6) the following:
``(7) Commercial market participant.--The term `commercial
market participant' means any producer, processor, merchant,
or commercial user of an exempt or agricultural commodity, or
the products or byproducts of such a commodity.''.
(2) Conforming amendments.--
(A) Section 1a of such Act (7 U.S.C. 1a) is amended--
(i) in subparagraph (A) of paragraph (18) (as so
redesignated by paragraph (1) of this subsection), in the
matter preceding clause (i), by striking ``(18)(A)'' and
inserting ``(19)(A)''; and
(ii) in subparagraph (A)(vii) of paragraph (19) (as so
redesignated by paragraph (1) of this subsection), in the
matter following subclause (III), by striking ``(17)(A)'' and
inserting ``(18)(A)''.
(B) Section 4(c)(1)(A)(i)(I) of such Act (7 U.S.C.
6(c)(1)(A)(i)(I)) is amended by striking ``(7), paragraph
(18)(A)(vii)(III), paragraphs (23), (24), (31), (32), (38),
(39), (41), (42), (46), (47), (48), and (49)'' and inserting
``(8), paragraph (19)(A)(vii)(III), paragraphs (24), (25),
(32), (33), (39), (40), (42), (43), (47), (48), (49), and
(50)''.
(C) Section 4q(a)(1) of such Act (7 U.S.C. 6o-1(a)(1)) is
amended by striking ``1a(9)'' and inserting ``1a(10)''.
(D) Section 4s(f)(1)(D) of such Act (7 U.S.C. 6s(f)(1)(D))
is amended by striking ``1a(47)(A)(v)'' and inserting
``1a(48)(A)(v)''.
(E) Section 4s(h)(5)(A)(i) of such Act (7 U.S.C.
6s(h)(5)(A)(i)) is amended by striking ``1a(18)'' and
inserting ``1a(19)''.
(F) Section 4t(b)(1)(C) of such Act (7 U.S.C. 6t(b)(1)(C))
is amended by striking ``1a(47)(A)(v)'' and inserting
``1a(48)(A)(v)''.
(G) Section 5(d)(23) of such Act (7 U.S.C. 7(d)(23)) is
amended by striking ``1a(47)(A)(v)'' and inserting
``1a(48)(A)(v)''.
(H) Section 5(e)(1) of such Act (7 U.S.C. 7(e)(1)) is
amended by striking ``1a(9)'' and inserting ``1a(10)''.
(I) Section 5b(k)(3)(A) of such Act (7 U.S.C. 7a-
1(k)(3)(A)) is amended by striking ``1a(47)(A)(v)'' and
inserting ``1a(48)(A)(v)''.
(J) Section 5h(f)(10)(A)(iii) of such Act (7 U.S.C. 7b-
3(f)(10)(A)(iii)) is amended by striking ``1a(47)(A)(v)'' and
inserting ``1a(48)(A)(v)''.
(K) Section 21(f)(4)(C) of such Act (7 U.S.C. 24a(f)(4)(C))
is amended by striking ``1a(48)'' and inserting ``1a(49)''.
SEC. 307. REPORTING OF ILLIQUID SWAPS SO AS TO NOT
DISADVANTAGE CERTAIN NON-FINANCIAL END-USERS.
Section 2(a)(13) of the Commodity Exchange Act (7 U.S.C.
2(a)(13)) is amended--
(1) in subparagraph (C), by striking ``The Commission'' and
inserting ``Except as provided in subparagraph (D), the
Commission''; and
(2) by redesignating subparagraphs (D) through (G) as
subparagraphs (E) through (H), respectively, and inserting
after subparagraph (C) the following:
``(D) Requirements for swap transactions in illiquid
markets.--Notwithstanding subparagraph (C):
``(i) The Commission shall provide by rule for the public
reporting of swap transactions, including price and volume
data, in illiquid markets that are not cleared and entered
into by a non-financial entity that is hedging or mitigating
commercial risk in accordance with subsection (h)(7)(A).
``(ii) The Commission shall ensure that the swap
transaction information referred to in clause (i) of this
subparagraph is available to the public no sooner than 30
days after the swap transaction has been executed or at such
later date as the Commission determines appropriate to
protect the identity of participants and positions in
illiquid markets and to prevent the elimination or reduction
of market liquidity.
``(iii) In this subparagraph, the term `illiquid markets'
means any market in which the volume and frequency of trading
in swaps is at such a level as to allow identification of
individual market participants.''.
SEC. 308. RELIEF FOR GRAIN ELEVATOR OPERATORS, FARMERS,
AGRICULTURAL COUNTERPARTIES, AND COMMERCIAL
MARKET PARTICIPANTS.
The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended
by inserting after section 4t the following:
``SEC. 4U. RECORDKEEPING REQUIREMENTS APPLICABLE TO NON-
REGISTERED MEMBERS OF CERTAIN REGISTERED
ENTITIES.
``Except as provided in section 4(a)(3), a member of a
designated contract market or a swap execution facility that
is not registered with the Commission and not required to be
registered with the Commission in any capacity shall satisfy
the recordkeeping requirements of this Act and any
recordkeeping rule, order, or regulation under this Act by
maintaining a written record of each transaction in a
contract for future delivery, option on a future, swap,
swaption, trade option, or related cash or forward
transaction. The written record shall be sufficient if it
includes the final agreement between the parties and the
material economic terms of the transaction.''.
SEC. 309. RELIEF FOR END-USERS WHO USE PHYSICAL CONTRACTS
WITH VOLUMETRIC OPTIONALITY.
Section 1a(47)(B)(ii) of the Commodity Exchange Act (7
U.S.C. 1a(47)(B)(ii)) is amended to read as follows:
``(ii) any purchase or sale of a nonfinancial commodity or
security for deferred shipment or delivery, so long as the
transaction is intended to be physically settled, including
any stand-alone or embedded option for which exercise results
in a physical delivery obligation;''.
SEC. 310. COMMISSION VOTE REQUIRED BEFORE AUTOMATIC CHANGE OF
SWAP DEALER DE MINIMIS LEVEL.
Section 1a(49)(D) of the Commodity Exchange Act (7 U.S.C.
1a(49)(D)) is amended--
(1) by striking all that precedes ``shall exempt'' and
inserting the following:
``(D) Exception.--
``(i) In general.--The Commission''; and
(2) by adding after and below the end the following new
clause:
``(ii) De minimis quantity.--The de minimis quantity of
swap dealing described in clause (i) shall be set at a
quantity of $8,000,000,000, and may be amended or changed
only through a new affirmative action of the Commission
undertaken by rule or regulation.''.
SEC. 311. CAPITAL REQUIREMENTS FOR NON-BANK SWAP DEALERS.
(a) Commodity Exchange Act.--Section 4s(e) of the Commodity
Exchange Act (7 U.S.C. 6s(e)) is amended--
(1) in paragraph (2)(B), by striking ``shall'' and
inserting the following: ``and the Securities and Exchange
Commission, in consultation with the prudential regulators,
shall jointly''; and
(2) in paragraph (3)(D)--
(A) in clause (ii), by striking ``shall, to the maximum
extent practicable,'' and inserting ``shall''; and
(B) by adding at the end the following:
``(iii) Financial models.--To the extent that swap dealers
and major swap participants that are banks are permitted to
use financial models approved by the prudential regulators or
the Securities and Exchange Commission to calculate minimum
capital requirements and minimum initial and variation margin
requirements, including the use of non-cash collateral, the
Commission shall, in consultation with the prudential
regulators and the Securities and Exchange Commission, permit
the use of comparable financial models by swap dealers and
major swap participants that are not banks.''.
(b) Securities Exchange Act of 1934.--Section 15F(e) of the
Securities Exchange Act of 1934 (15 U.S.C. 78o-10(e)) is
amended--
(1) in paragraph (2)(B), by striking ``shall'' and
inserting the following: ``and the Commodity Futures Trading
Commission, in consultation with the prudential regulators,
shall jointly''; and
(2) in paragraph (3)(D)--
(A) in clause (ii), by striking ``shall, to the maximum
extent practicable,'' and inserting ``shall''; and
(B) by adding at the end the following:
``(iii) Financial models.--To the extent that security-
based swap dealers and major security-based swap participants
that are banks are permitted to use financial models approved
by the prudential regulators or the Commodity Futures Trading
Commission to calculate minimum capital requirements and
minimum initial and variation margin requirements, including
the use of non-cash collateral, the Commission shall, in
consultation with the Commodity Futures Trading Commission,
permit the use of comparable financial models by security-
based swap dealers and major security-based swap participants
that are not banks.''.
SEC. 312. HARMONIZATION WITH THE JUMPSTART OUR BUSINESS
STARTUPS ACT.
Within 90 days after the date of the enactment of this Act,
the Commodity Futures Trading Commission shall--
(1) revise section 4.7(b) of title 17, Code of Federal
Regulations, in the matter preceding paragraph (1), to read
as follows:
``(b) Relief available to commodity pool operators. Upon
filing the notice required by paragraph (d) of this section,
and subject to compliance with the conditions specified in
paragraph
[[Page H3945]]
(d) of this section, any registered commodity pool operator
who sells participations in a pool solely to qualified
eligible persons in an offering which qualifies for exemption
from the registration requirements of the Securities Act
pursuant to section 4(2) of that Act or pursuant to
Regulation S, 17 CFR 230.901 et seq., and any bank registered
as a commodity pool operator in connection with a pool that
is a collective trust fund whose securities are exempt from
registration under the Securities Act pursuant to section
3(a)(2) of that Act and are sold solely to qualified eligible
persons, may claim any or all of the following relief with
respect to such pool:''; and
(2) revise section 4.13(a)(3)(i) of such title to read as
follows:
``(i) Interests in the pool are exempt from registration
under the Securities Act of 1933, and such interests are
offered and sold pursuant to section 4 of the Securities Act
of 1933 and the regulations thereunder;''.
SEC. 313. BONA FIDE HEDGE DEFINED TO PROTECT END-USER RISK
MANAGEMENT NEEDS.
Section 4a(c) of the Commodity Exchange Act (7 U.S.C.
6a(c)) is amended--
(1) in paragraph (1)--
(A) by striking ``may'' and inserting ``shall''; and
(B) by striking ``future for which'' and inserting
``future, to be determined by the Commission, for which
either an appropriate swap is available or'';
(2) in paragraph (2)--
(A) in the matter preceding subparagraph (A), by striking
``subsection (a)(2)'' and all that follows through ``position
as'' and inserting ``paragraphs (2) and (5) of subsection (a)
for swaps, contracts of sale for future delivery, or options
on the contracts or commodities, a bona fide hedging
transaction or position is''; and
(B) in subparagraph (A)(ii), by striking ``of risks'' and
inserting ``or management of current or anticipated risks'';
and
(3) by adding at the end the following:
``(3) The Commission may further define, by rule or
regulation, what constitutes a bona fide hedging transaction,
provided that the rule or regulation is consistent with the
requirements of subparagraphs (A) and (B) of paragraph
(2).''.
SEC. 314. CROSS-BORDER REGULATION OF DERIVATIVES
TRANSACTIONS.
(a) Rulemaking Required.--Within 1 year after the date of
the enactment of this Act, the Commodity Futures Trading
Commission shall issue a rule that addresses--
(1) the nature of the connections to the United States that
require a non-U.S. person to register as a swap dealer or a
major swap participant under the Commodity Exchange Act and
the regulations issued under such Act;
(2) which of the United States swaps requirements apply to
the swap activities of non-U.S. persons and U.S. persons and
their branches, agencies, subsidiaries, and affiliates
outside of the United States, and the extent to which the
requirements apply; and
(3) the circumstances under which a U.S. person or non-U.S.
person in compliance with the swaps regulatory requirements
of a foreign jurisdiction shall be exempt from United States
swaps requirements.
(b) Content of the Rule.--
(1) Criteria.--In the rule, the Commission shall establish
criteria for determining that 1 or more categories of the
swaps regulatory requirements of a foreign jurisdiction are
comparable to and as comprehensive as United States swaps
requirements. The criteria shall include--
(A) the scope and objectives of the swaps regulatory
requirements of the foreign jurisdiction;
(B) the effectiveness of the supervisory compliance program
administered;
(C) the enforcement authority exercised by the foreign
jurisdiction; and
(D) such other factors as the Commission, by rule,
determines to be necessary or appropriate in the public
interest.
(2) Comparability.--In the rule, the Commission shall--
(A) provide that any non-U.S. person or any transaction
between two non-U.S. persons shall be exempt from United
States swaps requirements if the person or transaction is in
compliance with the swaps regulatory requirements of a
foreign jurisdiction which the Commission has determined to
be comparable to and as comprehensive as United States swaps
requirements; and
(B) set forth the circumstances in which a U.S. person or a
transaction between a U.S. person and a non-U.S. person shall
be exempt from United States swaps requirements if the person
or transaction is in compliance with the swaps regulatory
requirements of a foreign jurisdiction which the Commission
has determined to be comparable to and as comprehensive as
United States swaps requirements.
(3) Outcomes-based comparison.--In developing and applying
the criteria, the Commission shall emphasize the results and
outcomes of, rather than the design and construction of,
foreign swaps regulatory requirements.
(4) Risk-based rulemaking.--In the rule, the Commission
shall not take into account, for the purposes of determining
the applicability of United States swaps requirements, the
location of personnel that arrange, negotiate, or execute
swaps.
(5) No part of any rulemaking under this section shall
limit the Commission's antifraud or antimanipulation
authority.
(c) Application of the Rule.--
(1) Assessments of foreign jurisdictions.--Beginning on the
date on which a final rule is issued under this section, the
Commission shall begin to assess the swaps regulatory
requirements of foreign jurisdictions, in the order the
Commission determines appropriate, in accordance with the
criteria established pursuant to subsection (b)(1). Following
each assessment, the Commission shall determine, by rule or
by order, whether the swaps regulatory requirements of the
foreign jurisdiction are comparable to and as comprehensive
as United States swaps requirements.
(2) Substituted compliance for unassessed major markets.--
Beginning 18 months after the date of enactment of this Act--
(A) the swaps regulatory requirements of each of the 8
foreign jurisdictions with the largest swaps markets, as
calculated by notional value during the 12-month period
ending with such date of enactment, except those with respect
to which a determination has been made under paragraph (1),
shall be considered to be comparable to and as comprehensive
as United States swaps requirements; and
(B) a non-U.S. person or a transaction between 2 non-U.S.
persons shall be exempt from United States swaps requirements
if the person or transaction is in compliance with the swaps
regulatory requirements of any of such unexcepted foreign
jurisdictions.
(3) Suspension of substituted compliance.--If the
Commission determines, by rule or by order, that--
(A) the swaps regulatory requirements of a foreign
jurisdiction are not comparable to and as comprehensive as
United States swaps requirements, using the categories and
criteria established under subsection (b)(1);
(B) the foreign jurisdiction does not exempt from its swaps
regulatory requirements U.S. persons who are in compliance
with United States swaps requirements; or
(C) the foreign jurisdiction is not providing equivalent
recognition of, or substituted compliance for, registered
entities (as defined in section 1a(41) of the Commodity
Exchange Act) domiciled in the United States,
the Commission may suspend, in whole or in part, a
determination made under paragraph (1) or a consideration
granted under paragraph (2).
(d) Petition for Review of Foreign Jurisdiction
Practices.--A registered entity, commercial market
participant (as defined in section 1a(7) of the Commodity
Exchange Act), or Commission registrant (within the meaning
of such Act) who petitions the Commission to make or change a
determination under subsection (c)(1) or (c)(3) of this
section shall be entitled to expedited consideration of the
petition. A petition shall include any evidence or other
supporting materials to justify why the petitioner believes
the Commission should make or change the determination.
Petitions under this section shall be considered by the
Commission any time following the enactment of this Act.
Within 180 days after receipt of a petition for a rulemaking
under this section, the Commission shall take final action on
the petition. Within 90 days after receipt of a petition to
issue an order or change an order issued under this section,
the Commission shall take final action on the petition.
(e) Report to Congress.--If the Commission makes a
determination described in this section through an order, the
Commission shall articulate the basis for the determination
in a written report published in the Federal Register and
transmitted to the Committee on Agriculture of the House of
Representatives and Committee on Agriculture, Nutrition, and
Forestry of the Senate within 15 days of the determination.
The determination shall not be effective until 15 days after
the committees receive the report.
(f) Definitions.--As used in this Act and for purposes of
the rules issued pursuant to this Act, the following
definitions apply:
(1) U.S. person.--The term ``U.S. person''--
(A) means--
(i) any natural person resident in the United States;
(ii) any partnership, corporation, trust, or other legal
person organized or incorporated under the laws of the United
States or having its principal place of business in the
United States;
(iii) any account (whether discretionary or non-
discretionary) of a U.S. person; and
(iv) any other person as the Commission may further define
to more effectively carry out the purposes of this section;
and
(B) does not include the International Monetary Fund, the
International Bank for Reconstruction and Development, the
Inter-American Development Bank, the Asian Development Bank,
the African Development Bank, the United Nations, their
agencies or pension plans, or any other similar international
organizations or their agencies or pension plans.
(2) United states swaps requirements.--The term ``United
States swaps requirements'' means the provisions relating to
swaps contained in the Commodity Exchange Act (7 U.S.C. 1a et
seq.) that were added by title VII of the Dodd-Frank Wall
Street Reform and Consumer Protection Act (15 U.S.C. 8301 et
seq.) and any rules or regulations prescribed by the
Commodity Futures Trading Commission pursuant to such
provisions.
(3) Foreign jurisdiction.--The term ``foreign
jurisdiction'' means any national or supranational political
entity with common rules governing swaps transactions.
(4) Swaps regulatory requirements.--The term ``swaps
regulatory requirements'' means any provisions of law, and
any rules or regulations pursuant to the provisions,
governing swaps transactions or the counterparties to swaps
transactions.
(g) Conforming Amendment.--Section 4(c)(1)(A) of the
Commodity Exchange Act (7 U.S.C. 6(c)(1)(A)) is amended by
inserting ``or except as necessary to effectuate the purposes
of the Commodity End-User Relief Act,'' after ``to grant
exemptions,''.
SEC. 315. EXEMPTION OF QUALIFIED CHARITABLE ORGANIZATIONS
FROM DESIGNATION AND REGULATION AS COMMODITY
POOL OPERATORS.
(a) Exclusion From Definition of Commodity Pool.--Section
1a(10) of the Commodity
[[Page H3946]]
Exchange Act (7 U.S.C. 1a(10)) is amended by adding at the
end the following:
``(C) Exclusion.--The term `commodity pool' shall not
include any investment trust, syndicate, or similar form of
enterprise excluded from the definition of `investment
company' pursuant to sections 3(c)(10) or 3(c)(14) of the
Investment Company Act of 1940.''.
(b) Inapplicability of Prohibition on Use of
Instrumentalities of Interstate Commerce by Unregistered
Commodity Trading Advisor.--Section 4m of such Act (7 U.S.C.
6m) is amended--
(1) in paragraph (1), in the 2nd sentence, by inserting ``:
Provided further, That the provisions of this section shall
not apply to any commodity trading advisor that is: (A) a
charitable organization, as defined in section 3(c)(10)(D) of
the Investment Company Act of 1940, or a trustee, director,
officer, employee, or volunteer of such a charitable
organization acting within the scope of the employment or
duties of the person with the organization, whose trading
advice is provided only to, or with respect to, 1 or more of
the following: (i) any such charitable organization, or (ii)
an investment trust, syndicate or similar form of enterprise
excluded from the definition of `investment company' pursuant
to section 3(c)(10) of the Investment Company Act of 1940; or
(B) any plan, company, or account described in section
3(c)(14) of the Investment Company Act of 1940, any person or
entity who establishes or maintains such a plan, company, or
account, or any trustee, director, officer, employee, or
volunteer for any of the foregoing plans, persons, or
entities acting within the scope of the employment or duties
of the person with the organization, whose trading advice is
provided only to, or with respect to, any investment trust,
syndicate, or similar form of enterprise excluded from the
definition of `investment company' pursuant to section
3(c)(14) of the Investment Company Act of 1940'' before the
period; and
(2) by adding at the end the following:
``(4) Disclosure Concerning Excluded Charitable
Organizations.--The operator of or advisor to any investment
trust, syndicate, or similar form of enterprise excluded from
the definition of `commodity pool' by reason of section
1a(10)(C) of this Act pursuant to section 3(c)(10) of the
Investment Company Act of 1940 shall provide disclosure in
accordance with section 7(e) of the Investment Company Act of
1940.''.
SEC. 316. SMALL BANK HOLDING COMPANY CLEARING EXEMPTION.
Section 2(h)(7)(C) of the Commodity Exchange Act (7 U.S.C.
2(h)(7)(C)) is amended by adding at the end the following:
``(iv) Holding companies.--A determination made by the
Commission under clause (ii) shall, with respect to small
banks and savings associations, also apply to their
respective bank holding company (as defined in section 2 of
the Bank Holding Company Act of 1956), or savings and loan
holding company (as defined in section 10 of the Home Owners'
Loan Act of 1933)), if the total consolidated assets of the
holding company are no greater than the asset threshold set
by the Commission in determining small bank and savings
association eligibility under clause (ii).''.
SEC. 317. CORE PRINCIPLE CERTAINTY.
Section 5h(f) of the Commodity Exchange Act (7 U.S.C. 7b-
3(f)) is amended--
(1) in paragraph (1)(B), by inserting ``except as described
in this subsection,'' after ``Commission by rule or
regulation'';
(2) in paragraph (2), by amending subparagraph (D) to read
as follows:
``(D) have reasonable discretion in establishing and
enforcing its rules related to trade practice surveillance,
market surveillance, real-time marketing monitoring, and
audit trail given that a swap execution facility may offer a
trading system or platform to execute or trade swaps through
any means of interstate commerce. A swap execution facility
shall be responsible for monitoring trading in swaps only on
its own facility.'';
(3) in paragraph (4)(B), by adding at the end the
following: ``A swap execution facility shall be responsible
for monitoring trading in swaps only on its own facility.'';
(4) in paragraph (6)(B)--
(A) by striking ``shall--'' and all that follows through
``compliance with the'' and insert ``shall monitor the
trading activity on its facility for compliance with any'';
(B) by striking ``or through''; and
(C) by adding at the end the following: ``A swap execution
facility shall be responsible for monitoring positions only
on its own facility.'';
(5) in paragraph (8), by striking ``to liquidate'' and all
that follows and inserting ``to suspend or curtail trading in
a swap on its own facility.'';
(6) in paragraph (13)(B), by striking ``1-year period, as
calculated on a rolling basis'' and inserting ``90-day
period, as calculated on a rolling basis, or conduct an
orderly wind-down of its operations, whichever is greater'';
and
(7) in paragraph (15)--
(A) in subparagraph (A), by adding at the end the
following: ``The individual may also perform other
responsibilities for the swap execution facility.'';
(B) in subparagraph (B)--
(i) in clause (i), by inserting ``, a committee of the
board,'' after ``directly to the board'';
(ii) by striking clauses (iii) through (v) and inserting
the following:
``(iii) establish and administer policies and procedures
that are reasonably designed to resolve any conflicts of
interest that may arise;
``(iv) establish and administer policies and procedures
that reasonably ensure compliance with this Act and the rules
and regulations issued under this Act, including rules
prescribed by the Commission pursuant to this section; and'';
and
(iii) by redesignating clause (vi) as clause (v);
(C) in subparagraph (C), by striking ``(B)(vi)'' and
inserting ``(B)(v)''; and
(D) in subparagraph (D)--
(i) in clause (i)--
(I) by striking ``In accordance with rules prescribed by
the Commission, the'' and inserting ``The''; and
(II) by striking ``and sign''; and
(ii) in clause (ii)--
(I) in the matter preceding subclause (I), by inserting
``or senior officer'' after ``officer'';
(II) by amending subclause (I) to read as follows:
``(I) submit each report described in clause (i) to the
Commission; and''; and
(III) in subclause (II), by inserting ``materially'' before
``accurate''.
SEC. 318. TREATMENT OF FEDERAL HOME LOAN BANK PRODUCTS.
(a) Section 1a(2) of the Commodity Exchange Act (7 U.S.C.
1a(2)) is amended--
(1) in subparagraph (B), by striking ``and'';
(2) in subparagraph (C), by striking the period and
inserting ``; and''; and
(3) by adding at the end the following:
``(D) is the Federal Housing Finance Agency for any Federal
Home Loan Bank (as defined in section 2 of the Federal Home
Loan Bank Act).''.
(b) Section 402(a) of the Legal Certainty for Bank Products
Act of 2000 (7 U.S.C. 27(a)) is amended--
(1) by striking ``or'' at the end of paragraph (6);
(2) by striking the period at the end of paragraph (7) and
inserting ``; or''; and
(3) by adding at the end the following:
``(8) any Federal Home Loan Bank (as defined in section 2
of the Federal Home Loan Bank Act).''.
SEC. 319. TREATMENT OF CERTAIN FUNDS.
(a) Amendment to the Definition of Commodity Pool
Operator.--Section 1a(11) of the Commodity Exchange Act (7
U.S.C. 1a(11)) is amended by adding at the end the following:
``(C)(i) The term `commodity pool operator' does not
include a person who serves as an investment adviser to an
investment company registered pursuant to section 8 of the
Investment Company Act of 1940 or a subsidiary of such a
company, if the investment company or subsidiary invests,
reinvests, owns, holds, or trades in commodity interests
limited to only financial commodity interests.
``(ii) For purposes of this subparagraph only, the term
`financial commodity interest' means a futures contract, an
option on a futures contract, or a swap, involving a
commodity that is not an exempt commodity or an agricultural
commodity, including any index of financial commodity
interests, whether cash settled or involving physical
delivery.
``(iii) For purposes of this subparagraph only, the term
`commodity' does not include a security issued by a real
estate investment trust, business development company, or
issuer of asset-backed securities, including any index of
such securities.''.
(b) Amendment to the Definition of Commodity Trading
Advisor.--Section 1a(12) of such Act (7 U.S.C. 1a(12)) is
amended by adding at the end the following:
``(E) The term `commodity trading advisor' does not include
a person who serves as an investment adviser to an investment
company registered pursuant to section 8 of the Investment
Company Act of 1940 or a subsidiary of such a company, if the
commodity trading advice relates only to a financial
commodity interest, as defined in paragraph (11)(C)(ii) of
this section. For purposes of this subparagraph only, the
term `commodity' does not include a security issued by a real
estate investment trust, business development company, or
issuer of asset-backed securities, including any index of
such securities.''.
TITLE IV--TECHNICAL CORRECTIONS
SEC. 401. CORRECTION OF REFERENCES.
(a) Section 2(h)(8)(A)(ii) of the Commodity Exchange Act (7
U.S.C. 2(h)(8)(A)(ii)) is amended by striking ``5h(f) of this
Act'' and inserting ``5h(g)''.
(b) Section 5c(c)(5)(C)(i) of such Act (7 U.S.C. 7a-
2(c)(5)(C)(i)) is amended by striking ``1a(2)(i))'' and
inserting ``1a(19)(i))''.
(c) Section 23(f) of such Act (7 U.S.C. 26(f)) is amended
by striking ``section 7064'' and inserting ``section 706''.
SEC. 402. ELIMINATION OF OBSOLETE REFERENCES TO DEALER
OPTIONS.
(a) In General.--Section 4c of the Commodity Exchange Act
(7 U.S.C. 6c) is amended by striking subsections (d) and (e)
and redesignating subsections (f) and (g) as subsections (d)
and (e), respectively.
(b) Conforming Amendments.--
(1) Section 2(d) of such Act (7 U.S.C. 2(d)) is amended by
striking ``(g) of'' and inserting ``(e) of''.
(2) Section 4f(a)(4)(A)(i) of such Act (7 U.S.C.
6f(a)(4)(A)(i)) is amended by striking ``(d), (e), and (g)''
and inserting ``and (e)''.
(3) Section 4k(5)(A) of such Act (7 U.S.C. 6k(5)(A)) is
amended by striking ``(d), (e), and (g)'' and inserting ``and
(e)''.
(4) Section 5f(b)(1)(A) of such Act (7 U.S.C. 7b-
1(b)(1)(A)) is amended by striking ``, (e) and (g)'' and
inserting ``and (e)''.
(5) Section 9(a)(2) of such Act (7 U.S.C. 13(a)(2)) is
amended by striking ``through (e)'' and inserting ``and
(c)''.
SEC. 403. UPDATED TRADE DATA PUBLICATION REQUIREMENT.
Section 4g(e) of the Commodity Exchange Act (7 U.S.C.
6g(e)) is amended by striking ``exchange'' and inserting
``each designated contract market and swap execution
facility''.
SEC. 404. FLEXIBILITY FOR REGISTERED ENTITIES.
Section 5c(b) of the Commodity Exchange Act (7 U.S.C. 7a-
2(b)) is amended by striking ``contract market, derivatives
transaction execution
[[Page H3947]]
facility, or electronic trading facility'' each place it
appears and inserting ``registered entity''.
SEC. 405. ELIMINATION OF OBSOLETE REFERENCES TO ELECTRONIC
TRADING FACILITIES.
(a) Section 1a(18)(A)(x) of the Commodity Exchange Act (7
U.S.C. 1a(18)(A)(x)) is amended by striking ``(other than an
electronic trading facility with respect to a significant
price discovery contract)''.
(b) Section 1a(40) of such Act (7 U.S.C. 1a(40)) is
amended--
(1) by adding ``and'' at the end of subparagraph (D); and
(2) by striking all that follows ``section 21'' and
inserting a period.
(c) Section 4a(e) of such Act (7 U.S.C. 6a(e)) is amended--
(1) in the 1st sentence--
(A) by striking ``or by any electronic trading facility'';
(B) by striking ``or on an electronic trading facility'';
and
(C) by striking ``or electronic trading facility'' each
place it appears; and
(2) in the 2nd sentence, by striking ``or electronic
trading facility with respect to a significant price
discovery contract''.
(d) Section 4g(a) of such Act (7 U.S.C. 6g(a)) is amended
by striking ``any significant price discovery contract traded
or executed on an electronic trading facility or''.
(e) Section 4i(a) of such Act (7 U.S.C. 6i(a)) is amended--
(1) by striking ``, or any significant price discovery
contract traded or executed on an electronic trading facility
or 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
(2) by striking ``or electronic trading facility''
(f) Section 6(b) of such Act (7 U.S.C. 8(b)) is amended by
striking ``or electronic trading facility'' each place it
appears.
(g) Section 12(e)(2) of such Act (7 U.S.C. 16(e)(2)) is
amended by striking ``in the case of--'' and all that follows
and inserting ``in the case of an agreement, contract, or
transaction that is excluded from this Act under section 2(c)
or 2(f) of this Act or title IV of the Commodity Futures
Modernization Act of 2000, or exempted under section 4(c) of
this Act (regardless of whether any such agreement, contract,
or transaction is otherwise subject to this Act).''.
SEC. 406. ELIMINATION OF OBSOLETE REFERENCE TO ALTERNATIVE
SWAP EXECUTION FACILITIES.
Section 5h(h) of the Commodity Exchange Act (7 U.S.C. 7b-
3(h)) is amended by striking ``alternative'' before ``swap''.
SEC. 407. ELIMINATION OF REDUNDANT REFERENCES TO TYPES OF
REGISTERED ENTITIES.
Section 6b of the Commodity Exchange Act (7 U.S.C. 13a) is
amended in the 1st sentence by striking ``as set forth in
sections 5 through 5c''.
SEC. 408. CLARIFICATION OF COMMISSION AUTHORITY OVER SWAPS
TRADING.
Section 8a of the Commodity Exchange Act (7 U.S.C. 12a) is
amended--
(1) in paragraph (7)--
(A) by inserting ``the protection of swaps traders and to
assure fair dealing in swaps, for'' after ``appropriate
for'';
(B) in subparagraph (A), by inserting ``swaps or'' after
``conditions in''; and
(C) in subparagraph (B), by inserting ``or swaps'' after
``future delivery''; and
(2) in paragraph (9)--
(A) by inserting ``swap or'' after ``or liquidation of
any''; and
(B) by inserting ``swap or'' after ``margin levels on
any''.
SEC. 409. ELIMINATION OF OBSOLETE REFERENCE TO THE COMMODITY
EXCHANGE COMMISSION.
Section 13(c) of the Commodity Exchange Act (7 U.S.C.
13c(c)) is amended by striking ``or the Commission''.
SEC. 410. ELIMINATION OF OBSOLETE REFERENCES TO DERIVATIVE
TRANSACTION EXECUTION FACILITIES.
(a) Section 1a(12)(B)(vi) of the Commodity Exchange Act (7
U.S.C. 1a(12)(B)(vi)) is amended by striking ``derivatives
transaction execution facility'' and inserting ``swap
execution facility''.
(b) Section 1a(34) of such Act (7 U.S.C. 1a(34)) is amended
by striking ``or derivatives transaction execution facility''
each place it appears.
(c) Section 1a(35)(B)(iii)(I) of such Act (7 U.S.C.
1a(35)(B)(iii)(I)) is amended by striking ``or registered
derivatives transaction execution facility''.
(d) Section 2(a)(1)(C)(ii) of such Act (7 U.S.C.
2(a)(1)(C)(ii)) is amended--
(1) by striking ``, or register a derivatives transaction
execution facility that trades or executes,'';
(2) by striking ``, and no derivatives transaction
execution facility shall trade or execute such contracts of
sale (or options on such contracts) for future delivery'';
and
(3) by striking ``or the derivatives transaction execution
facility,''.
(e) Section 2(a)(1)(C)(v)(I) of such Act (7 U.S.C.
2(a)(1)(C)(v)(I)) is amended by striking ``, or any
derivatives transaction execution facility on which such
contract or option is traded,''.
(f) Section 2(a)(1)(C)(v)(II) of such Act (7 U.S.C.
2(a)(1)(C)(v)(II)) is amended by striking ``or derivatives
transaction execution facility'' each place it appears.
(g) Section 2(a)(1)(C)(v)(V) of such Act (7 U.S.C.
2(a)(1)(C)(v)(V)) is amended by striking ``or registered
derivatives transaction execution facility''.
(h) Section 2(a)(1)(D)(i) of such Act (7 U.S.C.
2(a)(1)(D)(i)) is amended in the matter preceding subclause
(I)--
(1) by striking ``in, or register a derivatives transaction
execution facility''; and
(2) by striking ``, or registered as a derivatives
transaction execution facility for,''.
(i) Section 2(a)(1)(D)(i)(IV) of such Act (7 U.S.C.
2(a)(1)(D)(i)(IV)) is amended by striking ``registered
derivatives transaction execution facility,'' each place it
appears.
(j) Section 2(a)(1)(D)(ii)(I) of such Act (7 U.S.C.
2(a)(1)(D)(ii)(I)) is amended to read as follows:
``(I) the transaction is conducted on or subject to the
rules of a board of trade that has been designated by the
Commission as a contract market in such security futures
product; or''.
(k) Section 2(a)(1)(D)(ii)(II) of such Act (7 U.S.C.
2(a)(1)(D)(ii)(II)) is amended by striking ``or registered
derivatives transaction execution facility''.
(l) Section 2(a)(1)(D)(ii)(III) of such Act (7 U.S.C.
2(a)(1)(D)(ii)(III)) is amended by striking ``or registered
derivatives transaction execution facility member''.
(m) Section 2(a)(9)(B)(ii) of such Act (7 U.S.C.
2(a)(9)(B)(ii)) is amended--
(1) by striking ``or registration'' each place it appears;
(2) by striking ``or derivatives transaction execution
facility'' each place it appears;
(3) by striking ``or register'';
(4) by striking ``registering,'';
(5) by striking ``or registering,'' each place it appears;
and
(6) by striking ``registration,''.
(n) Section 2(c)(2) of such Act (7 U.S.C. 2(c)(2)) is
amended by striking ``or a derivatives transaction execution
facility'' each place it appears.
(o) Section 4(a)(1) of such Act (7 U.S.C. 6(a)(1)) is
amended by striking ``or derivatives transaction execution
facility'' each place it appears.
(p) Section 4(c)(1) of such Act (7 U.S.C. 6(c)(1)) is
amended--
(1) by striking ``or registered'' after ``designated''; and
(2) by striking ``or derivative transaction execution
facility''.
(q) Section 4a(a)(1) of such Act (7 U.S.C. 6a(a)(1)) is
amended by striking ``or derivatives transaction execution
facilities'' each place it appears.
(r) Section 4a(e) of such Act (7 U.S.C. 6a(e)) is amended--
(1) by striking ``, derivatives transaction execution
facility,'' each place it appears; and
(2) by striking ``or derivatives transaction execution
facility''.
(s) Section 4c(g) of such Act (7 U.S.C. 6c(g)) is amended
by striking ``or derivatives transaction execution facility''
each place it appears.
(t) Section 4d of such Act (7 U.S.C. 6d) is amended by
striking ``or derivatives transaction execution facility''
each place it appears.
(u) Section 4e of such Act (7 U.S.C. 6e) is amended by
striking ``or derivatives transaction execution facility''.
(v) Section 4f(b) of such Act (7 U.S.C. 6f(b)) is amended
by striking ``or derivatives transaction execution facility''
each place it appears.
(w) Section 4i of such Act (7 U.S.C. 6i) is amended by
striking ``or derivatives transaction execution facility''.
(x) Section 4j(a) of such Act (7 U.S.C. 6j(a)) is amended
by striking ``and registered derivatives transaction
execution facility''.
(y) Section 4p(a) of such Act (7 U.S.C. 6p(a)) is amended
by striking ``, or derivatives transaction execution
facilities''.
(z) Section 4p(b) of such Act (7 U.S.C. 6p(b)) is amended
by striking ``derivatives transaction execution facility,''.
(aa) Section 5c(f) of such Act (7 U.S.C. 7a-2(f)) is
amended by striking ``and registered derivatives transaction
execution facility''.
(bb) Section 5c(f)(1) of such Act (7 U.S.C. 7a-2(f)(1)) is
amended by striking ``or registered derivatives transaction
execution facility''.
(cc) Section 6 of such Act (7 U.S.C. 8) is amended--
(1) by striking ``or registered'';
(2) by striking ``or derivatives transaction execution
facility'' each place it appears; and
(3) by striking ``or registration'' each place it appears.
(dd) Section 6a(a) of such Act (7 U.S.C. 10a(a)) is
amended--
(1) by striking ``or registered'';
(2) by striking ``or a derivatives transaction execution
facility''; and
(3) by inserting ``shall'' before ``exclude''.
(ee) Section 6a(b) of such Act (7 U.S.C. 10a(b)) is
amended--
(1) by striking ``or registered''; and
(2) by striking ``or a derivatives transaction execution
facility''.
(ff) Section 6d(1) of such Act (7 U.S.C. 13a-2(1)) is
amended by striking ``derivatives transaction execution
facility,''.
SEC. 411. ELIMINATION OF OBSOLETE REFERENCES TO EXEMPT BOARDS
OF TRADE.
(a) Section 1a(18)(A)(x) of the Commodity Exchange Act (7
U.S.C. 1a(18)(A)(x)) is amended by striking ``or an exempt
board of trade''.
(b) Section 12(e)(1)(B)(i) of such Act (7 U.S.C.
16(e)(1)(B)(i)) is amended by striking ``or exempt board of
trade''.
SEC. 412. ELIMINATION OF REPORT DUE IN 1986.
Section 26 of the Futures Trading Act of 1978 (7 U.S.C.
16a) is amended by striking subsection (b) and redesignating
subsection (c) as subsection (b).
SEC. 413. COMPLIANCE REPORT FLEXIBILITY.
Section 4s(k)(3)(B) of the Commodity Exchange Act (7 U.S.C.
6s(k)(3)(B)) is amended to read as follows:
``(B) Requirements.--A compliance report under subparagraph
(A) shall--
``(i) include a certification that, under penalty of law,
the compliance report is materially accurate and complete;
and
``(ii) be furnished at such time as the Commission
determines by rule, regulation, or order, to be
appropriate.''.
[[Page H3948]]
SEC. 414. MISCELLANEOUS CORRECTIONS.
(a) Section 1a(12)(A)(i)(II) of the Commodity Exchange Act
(7 U.S.C. 1a(12)(A)(i)(II)) is amended by adding at the end a
semicolon.
(b) Section 2(a)(1)(C)(ii)(III) of such Act (7 U.S.C.
2(a)(1)(C)(ii)(III)) is amended by moving the provision 2 ems
to the right.
(c) Section 2(a)(1)(C)(iii) of such Act (7 U.S.C.
2(a)(1)(C)(iii)) is amended by moving the provision 2 ems to
the right.
(d) Section 2(a)(1)(C)(iv) of such Act (7 U.S.C.
2(a)(1)(C)(iv)) is amended by striking ``under or'' and
inserting ``under''.
(e) Section 2(a)(1)(C)(v) of such Act (7 U.S.C.
2(a)(1)(C)(v)) is amended by moving the provision 2 ems to
the right.
(f) Section 2(a)(1)(C)(v)(VI) of such Act (7 U.S.C.
2(a)(1)(C)(v)(VI)) is amended by striking ``III'' and
inserting ``(III)''.
(g) Section 2(c)(1) of such Act (7 U.S.C. 2(c)(1)) is
amended by striking the 2nd comma.
(h) Section 4(c)(3)(H) of such Act (7 U.S.C. 6(c)(3)(H)) is
amended by striking ``state'' and inserting ``State''.
(i) Section 4c(c) of such Act (7 U.S.C. 6c(c)) is amended
to read as follows:
``(c) The Commission shall issue regulations to continue to
permit the trading of options on contract markets under such
terms and conditions that the Commission from time to time
may prescribe.''.
(j) Section 4d(b) of such Act (7 U.S.C. 6d(b)) is amended
by striking ``paragraph (2) of this section'' and inserting
``subsection (a)(2)''.
(k) Section 4f(c)(3)(A) of such Act (7 U.S.C. 6f(c)(3)(A))
is amended by striking the 1st comma.
(l) Section 4f(c)(4)(A) of such Act (7 U.S.C. 6f(c)(4)(A))
is amended by striking ``in developing'' and inserting ``In
developing''.
(m) Section 4f(c)(4)(B) of such Act (7 U.S.C. 6f(c)(4)(B))
is amended by striking ``1817(a)'' and inserting
``1817(a))''.
(n) Section 5 of such Act (7 U.S.C. 7) is amended by
redesignating subsections (c) through (e) as subsections (b)
through (d), respectively.
(o) Section 5b of such Act (7 U.S.C. 7a-1) is amended by
redesignating subsection (k) as subsection (j).
(p) Section 5f(b)(1) of such Act (7 U.S.C. 7b-1(b)(1)) is
amended by striking ``section 5f'' and inserting ``this
section''.
(q) Section 6(a) of such Act (7 U.S.C. 8(a)) is amended by
striking ``the the'' and inserting ``the''.
(r) Section 8a of such Act (7 U.S.C. 12a) is amended in
each of paragraphs (1)(E) and (3)(B) by striking
``Investors'' and inserting ``Investor''.
(s) Section 9(a)(2) of such Act (7 U.S.C. 13(a)(2)) is
amended by striking ``subsection 4c'' and inserting ``section
4c''.
(t) Section 12(b)(4) of such Act (7 U.S.C. 16(b)(4)) is
amended by moving the provision 2 ems to the left.
(u) Section 14(a)(2) of such Act (7 U.S.C. 18(a)(2)) is
amended by moving the provision 2 ems to the left.
(v) Section 17(b)(9)(D) of such Act (7 U.S.C. 21(b)(9)(D))
is amended by striking the semicolon and inserting a period.
(w) Section 17(b)(10)(C)(ii) of such Act (7 U.S.C.
21(b)(10)(C)(ii)) is amended by striking ``and'' at the end.
(x) Section 17(b)(11) of such Act (7 U.S.C. 21(b)(11)) is
amended by striking the period and inserting a semicolon.
(y) Section 17(b)(12) of such Act (7 U.S.C. 21(b)(12)) is
amended--
(1) by striking ``(A)''; and
(2) by striking the period and inserting ``; and''.
(z) Section 17(b)(13) of such Act (7 U.S.C. 21(b)(13)) is
amended by striking ``A'' and inserting ``a''.
(aa) Section 17 of such Act (7 U.S.C. 21) is amended by
redesignating subsection (q), as added by section 233(5) of
Public Law 97-444, and subsection (r) as subsections (r) and
(s), respectively.
(bb) Section 22(b)(3) of such Act (7 U.S.C. 25(b)(3)) is
amended by striking ``of registered'' and inserting ``of a
registered''.
(cc) Section 22(b)(4) of such Act (7 U.S.C. 25(b)(4)) is
amended by inserting a comma after ``entity''.
The CHAIR. No amendment to the amendment in the nature of a
substitute shall be in order except those printed in House Report 114-
136. Each such amendment may be offered only in the order printed in
the report, by a Member designated in the report, shall be considered
read, shall be debatable for the time specified in the report equally
divided and controlled by the proponent and an opponent, shall not be
subject to amendment, and shall not be subject to a demand for division
of the question.
Amendment No. 1 Offered by Mr. Conaway
The CHAIR. It is now in order to consider amendment No. 1 printed in
House Report 114-136.
Mr. CONAWAY. Mr. Chairman, I have an amendment at the desk.
The CHAIR. The Clerk will designate the amendment.
The text of the amendment is as follows:
Page 3, line 7, strike ``(s)'' and insert ``(t)''.
Page 4, line 15, strike ``(t)'' and insert ``(u)''.
Page 6, line 9, strike ``(u)'' and insert ``(v)''.
Page 6, line 16, strike ``(v)'' and insert ``(w)''.
Page 7, line 4, strike ``(w)'' and insert ``(x)''.
Page 12, line 10, strike ``(17)'' and insert ``(16)''.
Page 13, line 6, strike ``(17)'' and insert ``(16)''.
Page 14, line 8, strike ``(18)'' and insert ``(17)''.
Page 30, line 18, strike ``or''.
Page 33, line 12, strike ``(8)'' and insert ``(7)''.
Page 33, line 13, strike ``(9)'' and insert ``(8)''.
Page 38, line 8, strike ``1a(47)(B)(ii)'' and insert
``1a(48)(B)(ii)''.
Page 38, line 9, after the parenthetical phrase, insert ``,
as so redesignated by section 306(b)(1) of this Act,''.
Page 38, line 21, strike ``1a(49)(D)'' and insert
``1a(50)(D)''.
Page 38, line 22, after the parenthetical phrase, insert
``, as so redesignated by section 306(b)(1) of this Act,''.
Page 52, line 15, strike ``1a(10)'' and insert ``1a(11)''.
Page 52, line 16, after the parenthetical phrase, insert
``, as so redesignated by section 306(b)(1) of this Act,''.
Page 55, line 13, strike ``subsection,'' and insert
``subsection''.
Page 56, line 11, insert ``and'' after the semicolon.
Page 56, strike line 12.
Page 56, line 13, strike ``(C)'' and insert ``(B)''.
Page 59, line 16, strike ``1a(11)'' and insert ``1a(12)''.
Page 59, line 17, after the parenthetical phrase, insert
``, as so redesignated by section 306(b)(1) of this Act,''.
Page 60, line 18, strike ``1a(12)'' and insert ``1a(13)''.
Page 60, line 19, after the parenthetical phrase, insert
``, as so redesignated by section 306(b)(1) of this Act,''
after ``(7 U.S.C. 1a(12))''.
Page 61, line 3, strike ``(11)(C)(ii)'' and insert
``(12)(C)(ii)''.
Page 62, line 7, strike ``(d),'' and insert ``, (d),''.
Page 62, line 10, strike ``(d),'' and insert ``, (d),''.
Page 62, line 13, strike ``(e)'' and insert ``(e),''.
Page 63, line 9, strike ``1a(18)(A)(x)'' and insert
``1a(19)(A)(x)''.
Page 63, line 10, after the parenthetical phrase, insert
``, as so redesignated by section 306(b)(1) of this Act,''.
Page 63, line 13, strike ``1a(40)'' and insert ``1a(41)''.
Page 63, line 14, after the parenthetical phrase, insert
``, as so redesignated by section 306(b)(1) of this Act,''.
Page 64, line 10, strike ``4i(a)'' and insert ``4i''.
Page 64, line 10, strike ``6i(a)'' and insert ``6i''.
Page 66, line 18, strike ``1a(12)(B)(vi)'' and insert
``1a(13)(B)(vi)''.
Page 66, line 19, after the parenthetical phrase, insert
``, as so redesignated by section 306(b)(1) of this Act,''.
Page 66, line 22, strike ``1a(34)'' and insert ``1a(35)''.
Page 66, line 22, after the parenthetical phrase, insert
``, as so redesignated by section 306(b)(1) of this Act,''.
Page 67, line 1, strike ``1a(35)(B)(iii)(I)'' and insert
``1a(36)(B)(iii)(I)''.
Page 67, line 2, after the parenthetical phrase, insert ``,
as so redesignated by section 306(b)(1) of this Act,''.
Page 69, strike lines 6 through 9 and insert the following:
(4) by striking ``, registering,''; and
(5) by striking ``registration,''.
Page 69, line 12, strike ``each place it appears''.
Page 69, line 20, strike ``derivative'' and insert
``derivatives''.
Page 69, strike lines 22 through 24 and insert the
following:
(q) Section 4a(a)(1) of such Act (7 U.S.C. 6a(a)(1)) is
amended--
(1) by striking ``or derivatives transaction execution
facilities''; and
(2) by striking ``or derivatives transaction execution
facility''.
Page 70, line 7, strike ``4c(g)'' and insert ``4c(e)''.
Page 70, line 7, after the parenthetical phrase, insert ``,
as so redesignated by section 402(a) of this Act,''.
Page 71, line 21, strike ``before `exclude'.'' and insert
``before `exclude' the first place it appears.''.
Page 72, line 8, strike ``1a(18)(A)(x)'' and insert
``1a(19)(A)(x)''.
Page 72, line 9, after the parenthetical phrase, insert ``,
as so redesignated by section 306(b)(1) of this Act,''.
Page 73, line 5, strike ``1a(12)(A)(i)(II)'' and insert
``1a(13)(A)(i)(II)''.
Page 73, line 6, after the parenthetical phrase, insert ``,
as so redesignated by section 306(b)(1) of this Act,''.
Page 75, line 7, strike ``(1)(E)'' and insert ``(2)(E)''.
Page 76, line 6, after the parenthetical phrase, insert ``,
as amended by sections 101 through 103 of this Act,''.
Page 76, beginning on line 8, strike ``subsection (r) as
subsections (r) and (s)'' and insert ``subsections (s)
through (w) as subsections (r) through (x)''.
The CHAIR. Pursuant to House Resolution 288, the gentleman from Texas
(Mr. Conaway) and a Member opposed each will control 5 minutes.
The Chair recognizes the gentleman from Texas.
Mr. CONAWAY. Mr. Chairman, this amendment corrects the technical
errors found by legislative counsel in the
[[Page H3949]]
process of preparing the Ramseyer for the reported bill, including
section, subsection, and paragraph references, punctuation, and
pluralization. I urge my colleagues to support this amendment.
I yield back the balance of my time.
The CHAIR. The question is on the amendment offered by the gentleman
from Texas (Mr. Conaway).
The amendment was agreed to.
The CHAIR. It is now in order to consider amendment No. 2 printed in
House Report 114-136.
It is now in order to consider amendment No. 3 printed in House
Report 114-136.
{time} 1615
Amendment No. 4 Offered by Ms. Moore
The CHAIR. It is now in order to consider amendment No. 4 printed in
House Report 114-136.
Ms. MOORE. Mr. Chair, I have an amendment at the desk.
The CHAIR. The Clerk will designate the amendment.
The text of the amendment is as follows:
Page 27, strike line 4 and all that follows through page
28, line 2, and insert the following:
(b) Swap Data Repositories.--Section 21 of such Act (7
U.S.C. 24a) is amended--
(1) in subsection (c)(7)--
(A) in the matter preceding subparagraph (A), by striking
``all'' and inserting ``swap''; and
(B) in subparagraph (E)--
(i) in clause (ii), by striking ``and'' at the end; and
(ii) by adding at the end the following:
``(iv) other foreign authorities; and''; and
(2) by striking subsection (d) and inserting the following:
``(d) Confidentiality Agreement.--Before the swap data
repository may share information with any entity described in
subsection (c)(7), the swap data repository shall receive a
written agreement from each entity stating that the entity
shall abide by the confidentiality requirements described in
section 8 relating to the information on swap transactions
that is provided.''.
(c) Security-based Swap Data Repositories.--Section
13(n)(5) of the Securities Exchange Act of 1934 25 (15 U.S.C.
78m(n)(5)) is amended--
(1) in subparagraph (G)--
(A) in the matter preceding clause (i), by striking ``all''
and inserting ``security-based swap''; and
(B) in subclause (v)--
(i) in subclause (II), by striking ``; and'' and inserting
a semicolon;
(ii) in subclause (III), by striking the period at the end
and inserting ``; and''; and
(iii) by adding at the end the following:
``(IV) other foreign authorities.''; and
(2) by striking subparagraph (H) and inserting the
following:
``(H) Confidentiality agreement.--Before the security-based
swap data repository may share information with any entity
described in subparagraph (G), the security-based swap data
repository shall receive a written agreement from each entity
stating that the entity shall abide by the confidentiality
requirements described in section 24 relating to the
information on security-based swap transactions that is
provided.''.
(d) Effective Date.--The amendments made by this section
shall take effect as if enacted on July 21, 2010.
The CHAIR. Pursuant to House Resolution 288, the gentlewoman from
Wisconsin (Ms. Moore) and a Member opposed each will control 5 minutes.
The Chair recognizes the gentlewoman from Wisconsin.
Ms. MOORE. Mr. Chair, my amendment is simple. It really seeks to
harmonize the regulatory regime for both the security- and commodity-
based swaps. I am so pleased to be joined on a bipartisan basis with
Representatives Rick Crawford, Bill Huizenga, and Sean Patrick Maloney
in offering this amendment.
As we all know, Mr. Chairman, the regulation of the swaps market is
under the jurisdiction of both the Securities and Exchange Commission
and the Commodity Futures Trading Commission. As such, legislation that
amends the swap regulation must be addressed in both the securities law
and the Commodity Exchange Act.
Mr. Chairman, I have worked with Chairman Hensarling, Ranking Member
Waters, and the Committee on Financial Services, and we have offered
the same language to amend the securities law section of a bill. This
amendment in committee, Mr. Chairman, was adopted by a voice vote.
This amendment makes the same minor change to the Commodity Exchange
Act section so that the regulatory regime is the same for both
security- and commodity-based swaps.
This section of H.R. 2289 mirrors legislation, H.R. 1847, sponsored
by Representative Crawford and has enjoyed broad bipartisan support and
passed both the Committee on Financial Services and Committee on
Agriculture without controversy and with the support and blessing of
the SEC.
So why the amendment? Foreign regulators and some industry
participants reached out to the SEC seeking to tighten the language to
narrow the requirement to share data to clarify that swap data
repositories are only required to share data related to the swap trade.
The amendment will in no way weaken swap regulation or inhibit the
aggregation of swap data; rather, the amendment will make a narrow
modification to protect market participant information. This change is
supported by both industry and the SEC.
This bill has global impact on swap participants and regulators, so I
think it is important to get it right. I applaud the SEC for working
with industry to refine the bill, and I want to thank the chairman and
ranking members of both the Committee on Financial Services and the
Committee on Agriculture for working with me on this amendment and to
the sponsor and cosponsors of this legislation for also working with me
for their support on this amendment.
I do have some concerns about the underlying bill. The cost-benefit
analysis, I think, will hamper the regulatory ability of the CFTC, but
I do urge the adoption of this amendment.
I reserve the balance of my time.
Mr. CRAWFORD. Mr. Chairman, I claim time in opposition, although I do
not oppose the amendment.
The CHAIR. Without objection, the gentleman from Arkansas is
recognized for 5 minutes.
There was no objection.
Mr. CRAWFORD. Mr. Chair, I would like to thank the cosponsors of this
amendment. I would like to thank the gentlewoman from Wisconsin for
introducing the amendment and the cosponsors--Ms. Moore, Mr. Huizenga,
Mr. Maloney--for joining me in efforts to help bring transparency to
the global swap markets.
While I may not agree with every position in the Dodd-Frank law,
today, I believe we are working towards its bipartisan goal of giving
regulators the tools they need to improve systemic risk mitigation in
global financial markets.
I think everyone agrees that the lack of transparency into the over-
the-counter derivatives market escalated the financial crisis of 2008.
In order to provide market transparency, the Dodd-Frank law requires
posttrade reporting to swap data repositories, or SDRs, so that
regulators and market participants have access to real-time market data
that will help identify systemic risk in the financial system.
So far, we have made great strides in reaching this goal, but
unfortunately, a provision in the law threatens to undermine our
progress unless we fix it.
Currently, Dodd-Frank includes a provision requiring a foreign
regulator to indemnify a U.S.-based SDR for any expenses arising from
litigation relating to a request for market data. Although well
intentioned, the effect has been a reluctance of foreign regulators to
comply, which threatens to fragment global data on swap markets and
making it harder for regulators to see a complete picture of the
marketplace.
Without effective coordination between international regulators and
SDRs, monitoring and mitigating global systemic risk is severely
limited. H.R. 2289 includes a bipartisan provision that removes the
indemnification provisions in Dodd-Frank.
This provision received broad bipartisan support when it came to the
floor as a stand-alone last year, passing the House by a vote of 420-2.
Additionally, both the CFTC and the SEC support the fix.
This amendment makes a small technical change to make clear that only
swap data can be shared with foreign regulators. It will ensure that
regulators will have access to a global set of swap market data, which
is essential to maintaining the highest degree of market transparency
and systemic risk mitigation.
Again, I thank the gentlewoman for introducing the amendment.
I reserve the balance of my time.
Ms. MOORE. Mr. Chair, how much time do I have remaining?
The CHAIR. The gentlewoman from Wisconsin has 2 minutes remaining.
[[Page H3950]]
Ms. MOORE. Mr. Chair, I yield the balance of my time to the
gentlewoman from Minnesota (Ms. McCollum).
Ms. McCOLLUM. Mr. Chair, I thank the gentlewoman from Wisconsin (Ms.
Moore), and I rise in full support of her amendment, but I join Ranking
Member Peterson in his opposition of the bill before us.
Although reauthorization of the Commodity Exchange Act is an
important endeavor, this legislation rolls back critical Dodd-Frank
reforms and places unnecessary restrictions on the Commodity Futures
Trading Commission. The changes proposed in this underlying bill would
stifle the Commission's capacities to respond to a rapidly changing
market and would add unneeded layers of government bureaucracy.
The underlying bill, H.R. 2289, threatens the financial stability of
hard-working Americans by encouraging the same type of risky behavior
that led to the recession just 7 years ago.
I urge my colleagues to join me in supporting the Moore amendment.
However, I urge my colleagues to use great caution and join me in
voting against the underlying bill.
Ms. MOORE. Mr. Chair, I yield back the balance of my time.
Mr. CRAWFORD. I yield 1 minute to the gentleman from Texas (Mr.
Conaway), the distinguished chairman of the full committee.
Mr. CONAWAY. Mr. Chair, I don't oppose the amendment. It does improve
the bill. We appreciate that. I am looking forward to supporting the
amendment. I would also expect support on the underlying bill itself.
We have had a good discussion on why this bill is the right answer,
bringing the right relief to the right people at the right time and
does not do the things that have been spoken of in terms of rolling
back Dodd-Frank.
This is a very light touch on Dodd-Frank, and it improves a bill that
I don't think anybody would argue is perfect, but maybe they do argue
that Dodd-Frank is perfect. I don't think it is perfect, and it does
need these light touches.
Mr. CRAWFORD. Mr. Chair, I thank the chairman. I would urge adoption
of the amendment, as well as support of the underlying bill.
I yield back the balance of my time.
The CHAIR. The question is on the amendment offered by the
gentlewoman from Wisconsin (Ms. Moore).
The amendment was agreed to.
Amendment No. 5 Offered by Mrs. Walorski
The CHAIR. It is now in order to consider amendment No. 5 printed in
House Report 114-136.
Mrs. WALORSKI. Mr. Chairman, I have an amendment made in order by the
rule.
The CHAIR. The Clerk will designate the amendment.
The text of the amendment is as follows:
Page 24, line 2, strike ``and''.
Page 24, line 4, strike the period and insert ``; and''.
Page 24, after line 4, insert the following:
(3) the status of consultations with all United States
market participants including major producers and consumers.
The CHAIR. Pursuant to House Resolution 288, the gentlewoman from
Indiana (Mrs. Walorski) and a Member opposed each will control 5
minutes.
The Chair recognizes the gentlewoman from Indiana.
Mrs. WALORSKI. Mr. Chairman, I would like to thank Congressman
Goodlatte and Chairman Conaway for their continued leadership in
support of my amendment.
My amendment today would encourage the CFTC to keep both U.S.
producers and users of aluminum firmly in mind as they proceed in their
work. We might take it for granted, but aluminum is part of our
everyday life. It is used in everything from food packaging to
commercial buildings and homes to automotive and air transportation.
In my home State of Indiana, aluminum is home to 10,000 industry jobs
that account for over $5 billion in economic activity every year. About
1,800 of those workers are employed at an integrated facility in
southern Indiana that boasts the largest operating smelter in the
United States and is one of eight still in use in the country.
My amendment would require the CFTC provide this body with an update
of the status of its consultations with U.S. producers and consumers of
aluminum. To better protect the thousands of workers in my district and
businesses and consumers across the country, we must ensure the CFTC is
operating in a transparent manner where the rules are designed to help
fair and open price discovery.
It is imperative that everyone who participates in the physical
aluminum market have confidence in the system, and my amendment will
ensure the protection of our workers, businesses, and consumers.
I ask my colleagues to join me in support of my amendment.
I reserve the balance of my time.
The CHAIR. Does any Member claim time in opposition? If not, the
gentlewoman from Indiana is recognized.
Mrs. WALORSKI. Mr. Chair, may I inquire how much time I have
remaining?
The CHAIR. The gentlewoman from Indiana has 3\1/2\ minutes remaining.
Mrs. WALORSKI. Mr. Chair, I yield 2 minutes to the gentleman from
Virginia (Mr. Goodlatte).
Mr. GOODLATTE. Mr. Chair, I thank the gentlewoman for yielding me the
time.
As someone who has worked very hard to ensure that this CFTC
reauthorization process is transparent for commodity purchasers, users,
and the markets that facility these transactions, I was pleased to work
with Mrs. Walorski on her amendment to bring further transparency and
openness to the issue of aluminum warehousing.
Her amendment would clarify that the bill's required report on the
status of any application of metal exchange to register as a foreign
board of trade should also include the status of consultations with all
U.S. market participants, including major producers and consumers.
I applaud her for offering this targeted amendment to improve the
underlying legislation and help everyone in the aluminum market have
the best information possible to strengthen aluminum supplies and bring
the best cost for consumers, helping to create jobs and grow our
economy.
I support her amendment.
Mrs. WALORSKI. Mr. Chair, I yield back the balance of my time.
The CHAIR. The question is on the amendment offered by the
gentlewoman from Indiana (Mrs. Walorski).
The amendment was agreed to.
Mr. CONAWAY. Mr. Chair, I move that the Committee do now rise.
The motion was agreed to.
Accordingly, the Committee rose; and the Speaker pro tempore (Mr.
LaMalfa) having assumed the chair, Mr. Simpson, Chair of the Committee
of the Whole House on the state of the Union, reported that that
Committee, having had under consideration the bill (H.R. 2289) to
reauthorize the Commodity Futures Trading Commission, to better protect
futures customers, to provide end-users with market certainty, to make
basic reforms to ensure transparency and accountability at the
Commission, to help farmers, ranchers, and end-users manage risks, to
help keep consumer costs low, and for other purposes, had come to no
resolution thereon.
____________________