[House Report 113-103]
[From the U.S. Government Publishing Office]


113th Congress                                            Rept. 113-103
                        HOUSE OF REPRESENTATIVES
 1st Session                                                     Part 1

======================================================================



 
                    SWAP JURISDICTION CERTAINTY ACT

                                _______
                                

 June 10, 2013.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

Mr. Hensarling, from the Committee on Financial Services, submitted the 
                               following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 1256]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Service, to whom was referred 
the bill (H.R. 1256) to direct the Securities and Exchange 
Commission and the Commodity Futures Trading Commission to 
jointly adopt rules setting forth the application to cross-
border swaps transactions of certain provisions relating to 
swaps that were enacted as part of the Dodd-Frank Wall Street 
Reform and Consumer Protection Act, having considered the same, 
report favorably thereon with amendments and recommend that the 
bill as amended do pass.
    The amendments (stated in terms of the page and line 
numbers to the introduced bill) are as follows:
  Page 2, line 6, strike ``180 days'' and insert ``270 days''.
  Page 2, line 12, insert ``cross-border'' after ``relating 
to''.
  Page 2, line 13, strike ``transacted between'' and insert 
``transactions involving''.
  Page 2, line 14, strike ``and'' and insert ``or''.
  Page 2, beginning on line 15, strike ``Commission shall 
jointly issue the''.
  Page 2, line 16, after ``paragraph (1)'' insert ``shall be 
identical,''.
  Page 2, line 18, strike ``sections 30(c) and 36(c)'' and 
insert ``section 30(c)''.
  Page 2, line 20, strike ``; 78mm(c)''.
  Page 2, line 21, before the period at the end insert ``, 
except to the extent necessary to accommodate differences in 
other underlying statutory requirements under such Acts, and 
the rules thereunder''.
  Page 3, line 1, insert ``major'' before ``security-based''.
  Page 3, beginning on line 19, strike ``G20 Member Nations'' 
and insert ``Countries or Administrative Regions Having Nine 
Largest Markets''.
  Page 3, line 24, strike ``G20 member nation'' and insert 
``country or administrative region that has one of the nine 
largest combined swap and security-based swap markets by 
notional amount in the calendar year preceding issuance of such 
rules''.
  Page 4, line 5, strike ``the G20 member nation'' and insert 
``such country or administrative region''.
  Page 4, line 12, strike ``G20 member nations'' and insert 
``countries or administrative regions described in such 
paragraph''.
  Page 4, line 18, add ``and'' after the semicolon.
  Page 4, strike line 19 and all that follows through page 5, 
line 6, and insert the following:

                  (B) the remaining countries or administrative 
                regions described in such paragraph, and any 
                other foreign jurisdiction as jointly 
                determined by the Commissions, 1 year after the 
                date on which such rules are issued.

  Page 5, line 10, strike ``G20 member nation'' and insert 
``country or administrative region described in paragraph 
(1)''.
  Page 5, line 15, strike ``that G20 member nation'' and insert 
``such country or administrative region''.
  Page 5, beginning on line 17, strike ``G20 member nation'' 
and insert ``country or administrative region described in 
paragraph (1)''.
  Page 5, line 21, strike ``G20 member nation'' and insert 
``country or administrative region''.
  Page 6, line 2, strike ``after''.
  Page 6, beginning on line 4, strike ``G20 member nations'' 
and insert ``countries or administrative regions described in 
paragraph (1)''.
  Page 6, line 7, strike ``paragraph (3)'' and insert ``this 
subsection''.
  Page 6, beginning on line 8, strike ``a G20 member nation'' 
and insert ``such a country or administrative region''.
  Page 6, line 11, insert a period at the end.
  Page 6, beginning on line 14, strike ``the G20 member 
nation'' and insert ``a country or administrative region 
described in such subsection''.
  Page 7, strike lines 4 through 7 (and redesignate subsequent 
provisions accordingly).
  Page 7, strike lines 8 through 14 and insert the following:

          (2) 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 
                        Commissions may further jointly define 
                        to more effectively carry out the 
                        purposes of this Act; 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 and pension 
                plans, and any other similar international 
                organizations and their agencies and pension 
                plans.

                          Purpose and Summary

    H.R. 1256, the Swap Jurisdiction Certainty Act requires the 
Securities and Exchange Commission (SEC) and Commodity Futures 
Tradition Commission (CFTC) (collectively, the ``Commissions'') 
to jointly issue rules relating to swaps transacted between 
U.S. persons and non-U.S. persons. The bill exempts from U.S. 
swaps requirements a non-U.S. person that is in compliance with 
the swaps regulatory requirements of a country or 
administrative region that has one of the nine largest combined 
swap and security-based swap markets by notional amount in the 
calendar year preceding issuance of such rules, or other 
foreign jurisdiction as jointly determined by the Commissions, 
unless the Commissions jointly determine that the regulatory 
requirements of such country or administrative region or other 
foreign jurisdiction are not broadly equivalent to United 
States swaps requirements.

                  Background and Need for Legislation

    Title VII of the Dodd-Frank Act seeks to regulate the over-
the-counter derivatives (OTC) market in much the same way that 
equities and futures exchanges are regulated. Because the OTC 
market is global, Title VII raises questions about the extent 
to which U.S. regulations will apply to swap and security-based 
swap transactions that take place outside the U.S. Title VII's 
plain language makes clear that Congress intended it to apply 
outside the U.S. only in certain limited circumstances. Section 
722 directs that provisions relating to swaps will not apply to 
activities outside the U.S. unless those activities (1) have a 
direct and significant connection with activities in, or effect 
on, commerce of the United States or (2) contravene anti-
evasion rules promulgated by the CFTC.
    The comments and actions of U.S. regulators indicate that 
they are considering regulations that would result in Title VII 
being applied more broadly than Congress intended. Further, the 
Dodd-Frank Act requires both the CFTC and the SEC to issue 
rules on the extraterritorial scope of Title VII, creating the 
possibility of two different, potentially conflicting, 
regulatory regimes. To ensure that one rule is issued to govern 
the extraterritorial application of Title VII of the Dodd-Frank 
Act and to ensure that the CFTC and SEC focus their resources 
and regulatory efforts on jurisdictions that are not broadly 
equivalent with the U.S. swaps regime, Representatives Scott 
Garrett, David Scott, John Carney and Mike Conaway introduced 
H.R. 1256, the Swap Jurisdiction Certainty Act.
    H.R. 1256 harmonizes the cross-border approaches by 
requiring the CFTC and SEC to jointly issue the same rule 
related to the cross-border application of the Dodd-Frank Act 
within 270 days of the bill's enactment. This joint rule would 
have to be promulgated in accordance with the Administrative 
Procedures Act. H.R. 1256 measure ensures that operating 
entities in foreign countries or administrative regions with 
broadly equivalent regimes for swaps will not be subject to 
U.S. rules. Finally, H.R. 1256 requires that the SEC and CFTC 
jointly provide a report to Congress if they determine that a 
foreign regulatory regime is not broadly equivalent to United 
States swap requirements.

                                Hearings

    The Committee on Financial Services's Subcommittee on 
Capital Markets and Government Sponsored Enterprises held a 
hearing on H.R. 1256 on April 11, 2013.

                        Committee Consideration

    The Committee on Financial Services met in open session on 
May 7, 2013, and ordered H.R. 1256 to be reported favorably to 
the House by a recorded vote of 48 yeas to 11 nays (Record vote 
no. FC-16), a quorum being present.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto.
    1. An amendment offered by Ranking Member Waters to strike 
the bill's presumption that the regulatory requirements of a 
foreign nation satisfy the corresponding categories of United 
States swaps requirements unless the SEC and CFTC jointly 
determine they do not, and to insert the reverse presumption, 
as amended, was not agreed to by a recorded vote of 28 yeas to 
32 nays (Record vote no. FC-15).

                                              RECORD VOTE NO. FC-15
----------------------------------------------------------------------------------------------------------------
          Representative             Yea      Nay     Present      Representative      Yea      Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Hensarling...................  .......       X   .........  Ms. Waters.........       X   .......  .........
Mr. Gary G. Miller (CA)..........  .......       X   .........  Mrs. Maloney (NY)..       X   .......  .........
Mr. Bachus.......................  .......       X   .........  Ms. Velazquez......       X   .......  .........
Mr. King (NY)....................  .......       X   .........  Mr. Watt...........       X   .......  .........
Mr. Royce........................  .......       X   .........  Mr. Sherman........       X   .......  .........
Mr. Lucas........................  .......       X   .........  Mr. Meeks..........       X   .......  .........
Mrs. Capito......................  .......       X   .........  Mr. Capuano........       X   .......  .........
Mr. Garrett......................  .......       X   .........  Mr. Hinojosa.......       X   .......  .........
Mr. Neugebauer...................  .......       X   .........  Mr. Clay...........       X   .......  .........
Mr. McHenry......................  .......       X   .........  Mrs. McCarthy (NY).       X   .......  .........
Mr. Campbell.....................  .......       X   .........  Mr. Lynch..........       X   .......  .........
Mrs. Bachmann....................  .......       X   .........  Mr. David Scott           X   .......  .........
                                                                 (GA).
Mr. McCarthy (CA)................  .......       X   .........  Mr. Al Green (TX)..       X   .......  .........
Mr. Pearce.......................  .......       X   .........  Mr. Cleaver........       X   .......  .........
Mr. Posey........................  .......       X   .........  Ms. Moore..........       X   .......  .........
Mr. Fitzpatrick..................  .......       X   .........  Mr. Ellison........       X   .......  .........
Mr. Westmoreland.................  .......  .......  .........  Mr. Perlmutter.....       X   .......  .........
Mr. Luetkemeyer..................  .......       X   .........  Mr. Himes..........       X   .......  .........
Mr. Huizenga (MI)................  .......       X   .........  Mr. Peters (MI)....       X   .......  .........
Mr. Duffy........................  .......       X   .........  Mr. Carney.........       X   .......  .........
Mr. Hurt.........................  .......       X   .........  Ms. Sewell (AL)....       X   .......  .........
Mr. Grimm........................  .......       X   .........  Mr. Foster.........       X   .......  .........
Mr. Stivers......................  .......       X   .........  Mr. Kildee.........       X   .......  .........
Mr. Fincher......................  .......       X   .........  Mr. Murphy (FL)....       X   .......  .........
Mr. Stutzman.....................  .......       X   .........  Mr. Delaney........       X   .......  .........
Mr. Mulvaney.....................  .......       X   .........  Ms. Sinema.........       X   .......  .........
Mr. Hultgren.....................  .......       X   .........  Mrs. Beatty........       X   .......  .........
Mr. Ross.........................  .......       X   .........  Mr. Heck (WA)......       X   .......  .........
Mr. Pittenger....................  .......       X   .........
Mrs. Wagner......................  .......       X   .........
Mr. Barr.........................  .......       X   .........
Mr. Cotton.......................  .......       X   .........
Mr. Rothfus......................  .......       X   .........
----------------------------------------------------------------------------------------------------------------

    2. A motion by Chairman Hensarling to report the bill to 
the House with a favorable recommendation was agreed to by a 
record vote of 48 yeas and 11 nays (Record vote no. FC-16).

                                              RECORD VOTE NO. FC-16
----------------------------------------------------------------------------------------------------------------
          Representative             Yea      Nay     Present      Representative      Yea      Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Hensarling...................       X   .......  .........  Ms. Waters.........  .......       X   .........
Mr. Gary G. Miller (CA)..........       X   .......  .........  Mrs. Maloney (NY)..  .......       X   .........
Mr. Bachus.......................       X   .......  .........  Ms. Velazquez......  .......       X   .........
Mr. King (NY)....................       X   .......  .........  Mr. Watt...........  .......       X   .........
Mr. Royce........................       X   .......  .........  Mr. Sherman........       X   .......  .........
Mr. Lucas........................       X   .......  .........  Mr. Meeks..........       X   .......  .........
Mrs. Capito......................       X   .......  .........  Mr. Capuano........  .......       X   .........
Mr. Garrett......................       X   .......  .........  Mr. Hinojosa.......  .......       X   .........
Mr. Neugebauer...................       X   .......  .........  Mr. Clay...........       X   .......  .........
Mr. McHenry......................       X   .......  .........  Mrs. McCarthy (NY).       X   .......  .........
Mr. Campbell.....................       X   .......  .........  Mr. Lynch..........  .......       X   .........
Mrs. Bachmann....................       X   .......  .........  Mr. David Scott           X   .......  .........
                                                                 (GA).
Mr. McCarthy (CA)................       X   .......  .........  Mr. Al Green (TX)..  .......       X   .........
Mr. Pearce.......................  .......  .......  .........  Mr. Cleaver........  .......       X   .........
Mr. Posey........................       X   .......  .........  Ms. Moore..........       X   .......  .........
Mr. Fitzpatrick..................       X   .......  .........  Mr. Ellison........  .......       X   .........
Mr. Westmoreland.................  .......  .......  .........  Mr. Perlmutter.....       X   .......  .........
Mr. Luetkemeyer..................       X   .......  .........  Mr. Himes..........       X   .......  .........
Mr. Huizenga (MI)................       X   .......  .........  Mr. Peters (MI)....       X   .......  .........
Mr. Duffy........................       X   .......  .........  Mr. Carney.........       X   .......  .........
Mr. Hurt.........................       X   .......  .........  Ms. Sewell (AL)....       X   .......  .........
Mr. Grimm........................       X   .......  .........  Mr. Foster.........       X   .......  .........
Mr. Stivers......................       X   .......  .........  Mr. Kildee.........       X   .......  .........
Mr. Fincher......................       X   .......  .........  Mr. Murphy (FL)....       X   .......  .........
Mr. Stutzman.....................       X   .......  .........  Mr. Delaney........       X   .......  .........
Mr. Mulvaney.....................       X   .......  .........  Ms. Sinema.........       X   .......  .........
Mr. Hultgren.....................       X   .......  .........  Mrs. Beatty........  .......       X   .........
Mr. Ross.........................       X   .......  .........  Mr. Heck (WA)......       X   .......  .........
Mr. Pittenger....................       X   .......  .........
Mrs. Wagner......................       X   .......  .........
Mr. Barr.........................       X   .......  .........
Mr. Cotton.......................       X   .......  .........
Mr. Rothfus......................       X   .......  .........
----------------------------------------------------------------------------------------------------------------

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee has held hearings and 
made findings that are reflected in this report.

                    Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee states that H.R. 1256 
will improve consideration by the SEC of the costs and benefits 
of its regulations and orders.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimate of new budget authority, entitlement 
authority, or tax expenditures or revenues contained in the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to section 402 of the Congressional 
Budget Act of 1974.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                 Congressional Budget Office Estimates

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                                      May 30, 2013.
Hon. Jeb Hensarling,
Chairman, Committee on Financial Services, U.S. House of 
        Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1256, the Swap 
Jurisdiction Certainty Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Susan Willie.
            Sincerely,
                                      Douglas W. Elmendorf,
                                                          Director.
    Enclosure.

H.R. 1256--Swap Jurisdiction Certainty Act

    H.R. 1256 would require the Commodity Futures Trading 
Commission (CFTC) and the Securities and Exchange Commission 
(SEC) to jointly issue rules that define the application of 
United States regulations to swap transactions undertaken 
between a U.S. entity and a foreign entity. (A swap is a 
contract that calls for the exchange of cash between two 
participants based on an underlying rate or index or the 
performance of an asset.) Foreign participants in such 
transactions that are in compliance with the swap requirements 
of a country or region that has one of the nine largest swap 
markets, as determined by the agencies, would be exempt from 
the new requirements under certain conditions.
    Based on information from the agencies, CBO expects that 
implementing H.R. 1256 would require the CFTC and the SEC to 
develop new rules and to review the regulations of large swap 
markets to determine whether exemptions would apply. CBO 
estimates that the costs to both agencies would be roughly 
equal--about $4 million each. Under current law, the SEC is 
authorized to collect fees sufficient to offset the cost of its 
annual appropriation each year. Therefore, we estimate that the 
net cost to the SEC would be negligible, assuming appropriation 
actions consistent with that authority. CBO estimates that 
implementing H.R. 1256 would cost, on net, $4 million for the 
CFTC's portion of the total cost, assuming appropriation of the 
necessary amounts. Enacting the bill would not affect direct 
spending or revenues; therefore, pay-as-you-go procedures do 
not apply.
    Enactment of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (Public Law 111-203) required both the CFTC and 
the SEC to develop numerous regulations that affect 
participants in swap transactions, including margin, clearing, 
and reporting requirements as well as standards of business 
conduct. The law did not, however, direct the agencies to 
develop regulations specifying when those requirements apply to 
swap transactions occurring between a U.S. entity and a foreign 
entity. Both agencies have published proposals to provide 
guidance for swap participants to determine whether U.S. 
regulations would apply to such transactions.
    CBO estimates that implementing H.R. 1256 would increase 
the workload of both agencies to undertake a new rulemaking 
effort and an assessment of the regulations of the large swap 
markets. In addition, CBO expects that the agencies would incur 
costs to translate the regulations and supporting laws and 
reports for the large swap markets where English versions are 
not available.
    H.R. 1256 contains no intergovernmental mandates as defined 
in the Unfunded Mandates Reform Act (UMRA) and would impose no 
costs on state, local, or tribal governments. Assuming that the 
SEC increases fees to offset the costs of implementing the 
additional regulatory activities required by the bill, H.R. 
1256 would increase the cost of an existing mandate on private 
entities required to pay those fees. Based on information from 
the SEC, CBO estimates that the aggregate cost of the mandate 
would fall well below the annual threshold for private-sector 
mandates established in UMRA ($150 million in 2013, adjusted 
annually for inflation).
    On May 3, 2013, CBO published an estimate for H.R. 1256, 
the Swap Jurisdiction Certainty Act, as ordered reported by the 
House Committee on Agriculture on March 20, 2013. The two 
versions of the bill are similar, and the CBO cost estimates 
are the same.
    The CBO staff contacts for this estimate are Susan Willie 
(for federal costs) and Paige Piper/Bach (for the private-
sector impact). The estimate was approved by Theresa Gullo, 
Deputy Assistant Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates reform 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of the section 
102(b)(3) of the Congressional Accountability Act.

                         Earmark Identification

    H.R. 1256 does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

                    Duplication of Federal Programs

    Pursuant to section 3(j) of H. Res. 5, 113th Cong. (2013), 
the Committee states that no provision of H.R. 1256 establishes 
or reauthorizes a program of the Federal Government known to be 
duplicative of another Federal program, a program that was 
included in any report from the Government Accountability 
Office to Congress pursuant to section 21 of Public Law 111-
139, or a program related to a program identified in the most 
recent Catalog of Federal Domestic Assistance.

                   Disclosure of Directed Rulemaking

    Pursuant to section 3(k) of H. Res. 5, 113th Cong. (2013), 
the Committee states that H.R. 1256 requires the Securities and 
Exchange Commission (SEC) and the Commodity Futures Trading 
Commission (CFTC) to jointly issue identical rules pursuant to 
the Administrative Procedure Act setting forth the application 
of United States swaps requirements of the Securities Exchange 
Act of 1934 and the Commodity Exchange Act relating to cross-
border swaps and security-based swaps transactions involving 
U.S. persons or non-U.S. persons, not later than 270 days after 
the date of enactment of this Act.
    This bill requires that SEC and CFTC to jointly issue 
identical rules, notwithstanding any difference in the 
authorities granted the Commissions in section 30(c) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78dd(c)) and section 
2(i) of the Commodity Exchange Act (7 U.S.C. 2(i)), 
respectively, except to the extent necessary to accommodate 
differences in other underlying statutory requirements under 
such Acts, and the rules thereunder.

             Section-by-Section Analysis of the Legislation


Section 1. Short title

    This section states that the Act may be cited as the Swap 
Jurisdiction Certainty Act.

Section 2. Joint rulemaking on cross-border swaps

    This section requires the Securities and Exchange 
Commission (SEC) and the Commodity Futures Trading Commission 
(CFTC) (collectively, the ``Commissions'') to jointly issue 
identical rules pursuant to the Administrative Procedure Act 
setting forth the application of United States swaps 
requirements of the Securities Exchange Act of 1934 and the 
Commodity Exchange Act relating to cross-border swaps and 
security-based swaps transactions involving U.S. persons or 
non-U.S. persons, not later than 270 days after the date of 
enactment of this Act.
    This section requires that SEC and CFTC to jointly issue 
identical rules, notwithstanding any difference in the 
authorities granted the Commissions in section 30(c) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78dd(c)) and section 
2(i) of the Commodity Exchange Act (7 U.S.C. 2(i)), 
respectively, except to the extent necessary to accommodate 
differences in other underlying statutory requirements under 
such Acts, and the rules thereunder.
    The section prohibits the Commissions from issuing 
guidance, memorandum of understanding, or any such other 
agreement to satisfy the requirement to issue a joint rule.
    The section requires the two Commissions shall jointly 
issue rules that address the nature of the connections to the 
United States that require a non-U.S. person to register as a 
swap dealer, major swap participant, security-based swap 
dealer, or major security-based swap participant under each 
Commission's respective Acts and the regulations issued under 
such Acts; which of the United States swaps requirements shall 
apply to the swap and security-based swap activities of non-
U.S. persons, U.S. persons, and their branches, agencies, 
subsidiaries, and affiliates outside of the United States and 
the extent to which such requirements shall apply; and the 
circumstances under which a non-U.S. person in compliance with 
the regulatory requirements of a foreign jurisdiction shall be 
exempt from United States swaps requirements.
    This section requires the Commissions shall provide that a 
non-U.S. person in compliance with the swaps regulatory 
requirements of a country or administrative region that has one 
of the nine largest combined swap and security-based swap 
markets by notional amount in the calendar year preceding 
issuance of such rules, or other foreign jurisdiction as 
jointly determined by the Commissions, shall be exempt from 
United States swaps requirements in accordance unless the 
Commissions jointly determine that the regulatory requirements 
of such country or administrative region or other foreign 
jurisdiction are not broadly equivalent to United States swaps 
requirements.
    This section requires that the exemptions that are to be 
issued by the Commissions shall apply to persons or 
transactions relating to or involving countries or 
administrative regions described, or any other foreign 
jurisdiction as jointly determined by the Commissions, 
accounting for the five largest combined swap and security-
based swap markets by notional amount in the calendar year 
preceding issuance of such rules, on the date on which final 
rules are issued under this section; and the remaining 
countries or administrative regions, and any other foreign 
jurisdiction as jointly determined by the Commissions, 1 year 
after the date on which such rules are issued.
    This section requires that in issuing such rules, the 
Commissions shall jointly establish criteria for determining 
that one or more categories of regulatory requirements of a 
country or administrative region or other foreign jurisdiction 
is not broadly equivalent to United States swaps requirements 
and shall jointly determine the appropriate application of 
certain United States swap requirements to persons or 
transactions relating to or involving such country or 
administrative region or other foreign jurisdiction.
    Such criteria shall include the scope and objectives of the 
regulatory requirements of a country or administrative region 
described or other foreign jurisdiction as well as the 
effectiveness of the supervisory compliance program 
administered, and the enforcement authority exercised, by such 
country or administrative region or other foreign jurisdiction, 
and such other factors as the Commissions, by rule, jointly 
determine to be necessary or appropriate in the public 
interest.
    This section requires the Commissions to jointly assess the 
regulatory requirements of countries or administrative regions 
described, as the Commissions jointly determine appropriate, in 
accordance with the criteria established pursuant to this 
section, to determine if one or more categories of regulatory 
requirements of such a country or administrative region or 
other foreign jurisdiction is not broadly equivalent to United 
States swaps requirements.
    This section requires that if the Commissions make the 
joint determination that the regulatory requirements of a 
country or administrative region described in such subsection 
or other foreign jurisdiction are not broadly equivalent to 
United States swaps requirements, the Commissions shall 
articulate the basis for such a determination in a written 
report to be transmitted to the Committee on Financial Services 
and the Committee on Agriculture of the House of 
Representatives and the Committee on Banking, Housing, and 
Urban Affairs and the Committee on Agriculture, Nutrition, and 
Forestry of the Senate within 30 days of the determination. The 
determination shall not be effective until the transmission of 
such report.
    This section defines the term ``U.S. person'' and the term 
``United States swaps requirements.''
    This section also makes conforming to the Securities 
Exchange Act of 1934 and to the Commodity Exchange Act.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (new matter is 
printed in italic and existing law in which no change is 
proposed is shown in roman):

                    SECURITIES EXCHANGE ACT OF 1934

TITLE I--REGULATION OF SECURITIES EXCHANGES

           *       *       *       *       *       *       *


SEC. 36. GENERAL EXEMPTIVE AUTHORITY.

  (a) * * *

           *       *       *       *       *       *       *

  (c) Derivatives.--Unless the Commission is expressly 
authorized by any provision described in this subsection to 
grant exemptions, or except as necessary to effectuate the 
purposes of the Swap Jurisdiction Certainty Act, the Commission 
shall not grant exemptions, with respect to amendments made by 
subtitle B of the Wall Street Transparency and Accountability 
Act of 2010, with respect to paragraphs (65), (66), (68), (69), 
(70), (71), (72), (73), (74), (75), (76), and (79) of section 
3(a), and sections 10B(a), 10B(b), 10B(c), 13A, 15F, 17A(g), 
17A(h), 17A(i), 17A(j), 17A(k), and 17A(l); provided that the 
Commission shall have exemptive authority under this title with 
respect to security-based swaps as to the same matters that the 
Commodity Futures Trading Commission has under the Wall Street 
Transparency and Accountability Act of 2010 with respect to 
swaps, including under section 4(c) of the Commodity Exchange 
Act.

           *       *       *       *       *       *       *

                              ----------                              


COMMODITY EXCHANGE ACT

           *       *       *       *       *       *       *


  Sec. 4. (a) * * *

           *       *       *       *       *       *       *

  (c)(1) In order to promote responsible economic or financial 
innovation and fair competition, the Commission by rule, 
regulation, or order, after notice and opportunity for hearing, 
may (on its own initiative or on application of any person, 
including any board of trade designated or registered as a 
contract market or derivatives transaction execution facility 
for transactions for future delivery in any commodity under 
section 5 of this Act) exempt any agreement, contract, or 
transaction (or class thereof) that is otherwise subject to 
subsection (a) (including any person or class of persons 
offering, entering into, rendering advice or rendering other 
services with respect to, the agreement, contract, or 
transaction), either unconditionally or on stated terms or 
conditions or for stated periods and either retroactively or 
prospectively, or both, from any of the requirements of 
subsection (a), or from any other provision of this Act (except 
subparagraphs (C)(ii) and (D) of section 2(a)(1), except that--
          (A) unless the Commission is expressly authorized by 
        any provision described in this subparagraph to grant 
        exemptions, or except as necessary to effectuate the 
        purposes of the Swap Jurisdiction Certainty Act, with 
        respect to amendments made by subtitle A of the Wall 
        Street Transparency and Accountability Act of 2010--
                  (i) * * *

           *       *       *       *       *       *       *


                      MINORITY VIEWS ON H.R. 1256

    The Swap Jurisdiction Certainty Act as introduced was an 
improvement over the bill introduced last year with the same 
title, recognizing the importance of providing the regulators 
with discretion to appropriately tailor U.S. swaps rules to fit 
within the $700 trillion global derivatives market. We continue 
to have concerns, however, about the presumption included in 
the bill that transactions involving some jurisdictions will be 
exempt, even if those jurisdictions will lack comparable rules 
for years to come.
    The financial crisis of 2008 was exacerbated by the largely 
unregulated international market for over-the-counter 
derivatives, or swaps. Congress sought to prevent this market 
from ever threatening the U.S. in the future by passing the 
Dodd-Frank Wall Street Reform and Consumer Protection Act. 
While the U.S. was not alone in those concerns, it is years 
ahead of other jurisdictions. The G-20, a group of the 20 
largest national economies, agreed to a broad set of 
international principles to improve regulation of the financial 
sector, including imposing new requirements on swaps. We hope 
that those jurisdictions ultimately will adopt similar rules to 
effectively monitor and oversee swaps transactions, but that is 
far from certain at present. While Europe's framework for 
clearing is nearing completion, for example, its rules on trade 
execution are years away. Other jurisdictions like Singapore 
and Japan are also expected to lag the U.S. by several years. 
As a result, many market observers are concerned that, our 
institutions and economy may be at risk from overseas swaps 
activity.
    For these reasons, our regulators should continue to be 
empowered to appropriately apply U.S. law overseas to protect 
the U.S. economy, including in the interim period while other 
jurisdictions catch up to the U.S. H.R. 1256, however, presumes 
that G-20 countries will have swaps rules at the same time as 
the U.S., and that they will be comparable. This is a mistake.
    At the same time, others have noted that if regulators 
overextend their reach, we may put U.S. institutions at a 
competitive disadvantage without providing additional benefits 
for the U.S. economy. For these reasons, we are supportive of 
the bill's goal to harmonize rules between our two derivatives 
regulators, but we have strong concerns with presuming that 
some jurisdictions are already comparable to the U.S. To make 
this presumption also would ease pressure on other 
jurisdictions to implement robust rules of their own.
    We have made considerable progress towards promoting 
transparency, accountability and stability in the derivatives 
markets. We oppose H.R. 1256 to continue that progress.

                                   Maxine Waters.
                                   Ruben Hinojosa.
                                   Melvin L. Watt.
                                   Keith Ellison.
                                   Emanuel Cleaver.
                                   Stephen F. Lynch.
                                   Carolyn B. Maloney.
                                   Michael E. Capuano.

                                  
