[House Report 114-311]
[From the U.S. Government Publishing Office]


114th Congress    }                                  {   Rept. 114-311
                        HOUSE OF REPRESENTATIVES
 1st Session      }                                  {          Part 2

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

 
AMENDING THE COMMODITY EXCHANGE ACT AND THE SECURITIES EXCHANGE ACT OF 
 1934 TO SPECIFY HOW CLEARING REQUIREMENTS APPLY TO CERTAIN AFFILIATE 
                  TRANSACTIONS, AND FOR OTHER PURPOSES

                                _______
                                

 November 16, 2015.--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

                        [To accompany H.R. 1317]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 1317) to amend the Commodity Exchange Act and 
the Securities Exchange Act of 1934 to specify how clearing 
requirements apply to certain affiliate transactions, and for 
other purposes, having considered the same, report favorably 
thereon with an amendment and recommend that the bill as 
amended do pass.
    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. TREATMENT OF AFFILIATE TRANSACTIONS.

  (a) 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 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 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.''.
  (b) Securities Exchange Act of 1934 Amendment.--Section 3C(g)(4) of 
the Securities Exchange Act of 1934 (15 U.S.C. 78c-3(g)(4)) is amended 
to read as follows:
          (1) by redesignating subparagraph (C) as subparagraph (E);
          (2) by striking subparagraphs (A) and (B) and inserting the 
        following:
                  ``(A) In general.--An affiliate of a person that 
                qualifies for an exception under this subsection 
                (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--
                          ``(i) 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, and the commercial risk 
                        that the affiliate is hedging or mitigating has 
                        been transferred to the affiliate;
                          ``(ii) is directly and wholly-owned by 
                        another affiliate qualified for the exception 
                        under this paragraph or an entity that is not a 
                        financial entity;
                          ``(iii) is not indirectly majority-owned by a 
                        financial entity;
                          ``(iv) is not ultimately owned by a parent 
                        company that is a financial entity; and
                          ``(v) does not provide any services, 
                        financial or otherwise, to any affiliate that 
                        is a nonbank financial company supervised by 
                        the Board of Governors (as defined under 
                        section 102 of the Financial Stability Act of 
                        2010).
                  ``(B) Limitation on qualifying affiliates.--The 
                exception in subparagraph (A) shall not apply if the 
                affiliate is--
                          ``(i) a swap dealer;
                          ``(ii) a security-based swap dealer;
                          ``(iii) a major swap participant;
                          ``(iv) a major security-based swap 
                        participant;
                          ``(v) a commodity pool;
                          ``(vi) a bank holding company;
                          ``(vii) a private fund, as defined in section 
                        202(a) of the Investment Advisers Act of 1940 
                        (15 U.S.C. 80-b-2(a));
                          ``(viii) an employee benefit plan or 
                        government plan, as defined in paragraphs (3) 
                        and (32) of section 3 of the Employee 
                        Retirement Income Security Act of 1974 (29 
                        U.S.C. 1002);
                          ``(ix) an insured depository institution;
                          ``(x) a farm credit system institution;
                          ``(xi) a credit union;
                          ``(xii) a nonbank financial company 
                        supervised by the Board of Governors (as 
                        defined under section 102 of the Financial 
                        Stability Act of 2010); or
                          ``(xiii) an entity engaged in the business of 
                        insurance and subject to capital requirements 
                        established by an insurance governmental 
                        authority of a State, a territory of the United 
                        States, the District of Columbia, a country 
                        other than the United States, or a political 
                        subdivision of a country other than the United 
                        States that is engaged in the supervision of 
                        insurance companies under insurance law.
                  ``(C) Limitation on affiliates' affiliates.--Unless 
                the Commission determines, by order, rule, or 
                regulation, that it is in the public interest, the 
                exception in subparagraph (A) shall not apply with 
                respect to an affiliate if such affiliate is itself 
                affiliated with--
                          ``(i) a major security-based swap 
                        participant;
                          ``(ii) a security-based swap dealer;
                          ``(iii) a major swap participant; or
                          ``(iv) a swap dealer.
                  ``(D) Conditions on transactions.--With respect to an 
                affiliate that qualifies for the exception in 
                subparagraph (A)--
                          ``(i) such affiliate may not enter into any 
                        security-based swap other than for the purpose 
                        of hedging or mitigating commercial risk; and
                          ``(ii) neither such affiliate nor any person 
                        affiliated with such affiliate that is not a 
                        financial entity may enter into a security-
                        based swap with or on behalf of any affiliate 
                        that is a financial entity or otherwise assume, 
                        net, combine, or consolidate the risk of 
                        security-based swaps entered into by any such 
                        financial entity, except one that is an 
                        affiliate that qualifies for the exception 
                        under subparagraph (A).''; and
          (3) by adding at the end the following:
                  ``(F) Risk management program.--Any security-based 
                swap entered into by an affiliate that qualifies for 
                the exception in subparagraph (A) shall be subject to a 
                centralized risk management program of the affiliate, 
                which is reasonably designed both to monitor and manage 
                the risks associated with the security-based swap and 
                to identify each of the affiliates on whose behalf a 
                security-based swap was entered into.''.

                          Purpose and Summary

    Introduced by Representative Moore, H.R. 1317, to amend the 
Commodity Exchange Act and the Securities Exchange Act of 1934 
to specify how clearing requirements apply to certain affiliate 
transactions, and for other purposes, exempts certain swap and 
securities-based swap transactions from certain requirements 
when such transactions are between parties that prepare their 
financial statements in combination with a parent company or an 
affiliate.

                  Background and Need for Legislation

    H.R. 1317 exempts inter-affiliate swaps and security-based 
swap trades executed by the central treasury units of 
commercial end-users and their affiliates from many of the 
regulations prescribed by Title VII of the Dodd-Frank Wall 
Street Reform and Consumer Protection Act. The bill excludes 
financial companies from this exemption. Much of Title VII is 
designed to mitigate risks associated with so-called ``market-
facing'' trades, in which a corporation executes a derivatives 
transaction with an investment bank or other entity, which may 
be either a swap dealer or security-based swap dealer. Inter-
affiliate swaps are swaps and security-based swaps executed 
between entities under common corporate ownership.
    H.R. 1317 requires that inter-affiliate swap trades be 
reported to a swap data repository and to the appropriate 
regulators. While H.R. 1317 does not exempt security-based swap 
trades of commercial end-users from all of Title VII's 
requirements, the bill does exempt such transactions from the 
margin, capital, clearing and execution, and real-time 
reporting requirements of Title VII. H.R. 1317 also prohibits 
affiliate transactions from being used as a factor in defining 
a security-based swap dealer or major security-based swap 
participant.
    Inter-affiliate swaps allow companies with multiple 
subsidiaries and affiliates to better manage risk by 
transferring the risk of their affiliates to a single affiliate 
and then executing swaps through that affiliate. Inter-
affiliate swaps do not pose a systemic risk to the financial 
system because they do not create additional counterparty 
exposures or increase the interconnectedness between parties 
outside the corporate group. Currently, companies use inter-
affiliate swaps to combine positions and centrally hedge risk 
by executing most or all of their external swaps or security-
based swaps through a single or limited number of affiliates.
    Despite the significant differences between inter-affiliate 
swaps and swaps between unrelated parties, the Dodd-Frank Act 
treats these swaps the same, which increases the cost of 
hedging risk for end-users. Without relief, American companies 
face the prospect of having to post double margin on swap 
trades: once between swap trades with themselves, and then 
again when the trades are combined and traded with an outside 
counterparty. Posting double margins on these transactions 
would unnecessarily tie up working capital that could otherwise 
be used to grow businesses and create jobs. In June 2011, the 
Office of the Comptroller of the Currency estimated that margin 
requirements under proposed margin rules could cost over $2 
trillion, a cost that could increase substantially if 
regulators force affiliates to post margin on trades between 
themselves.
    At an April 29, 2015, Capital Markets and Government 
Sponsored Enterprises Subcommittee hearing, Mr. Thomas Deas, 
Vice President and Treasurer of FMC Corporation, testified in 
support of H.R. 1317, noting that:

          Treasurers of non-financial end-users who operate 
        CTUs [Central Treasury Units] that serve the risk-
        mitigating function of aggregating exposures on the 
        books of a special-purpose subsidiary within their 
        corporate group, netting the inter-affiliate exposures, 
        and then entering into smaller derivatives with a bank 
        or other swap dealer for the net amounts, could have to 
        wind down those efficient units or meet burdensome new 
        regulatory requirements that will be hard to justify. 
        The alternative would be to retain more risk.

    At the same hearing, Mr. Tom Quaadman, Vice President of 
the U.S. Chamber of Commerce's Center for Capital Markets 
Competitiveness, testified that ``without this critical 
bipartisan language, end-users and consumers would face 
increased costs and companies may be forced to abandon proven 
and efficient methods for managing their risks through CTUs. 
This language would not assist financial companies and would 
not apply to speculative trades.''

                                Hearings

    The Committee on Financial Services' Subcommittee on 
Capital Markets and Government Sponsored Enterprises held a 
hearing examining matters relating to H.R. 1317 on April 29, 
2015.

                        Committee Consideration

    The Committee on Financial Services met in open session on 
July 28, 2015 and July 29, 2015, and ordered H.R. 1317 to be 
reported favorably to the House as amended by a recorded vote 
of 57 yeas to 0 nays (recorded vote no. FC-57), a quorum being 
present. An amended offered by Ms. Moore was agreed to by voice 
vote.

                            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. The 
sole record vote in Committee was a motion by Chairman 
Hensarling to report the bill favorably to the House as 
amended. The motion was agreed to by a recorded vote of 57 yeas 
to 0 nays (Record vote no. FC-57), a quorum being present.



[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the findings and recommendations of 
the committee based on oversight activities under clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
are incorporated in the descriptive portions of 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. 1317 
will facilitate the execution of swaps between entities under 
common corporate ownership by limiting the application of 
certain requirements of Title VII of the Dodd-Frank Act.

   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:

                                     U.S. Congress,
                               Congressional Budget Office,
                                Washington, DC, September 11, 2015.
Hon. Jeb Hensarling,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1317, a bill to 
amend the Commodity Exchange Act and the Securities Exchange 
Act of 1934 to specify how clearing requirements apply to 
certain affiliate transactions, and for other purposes.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Susan Willie.
            Sincerely,
                                                        Keith Hall.
    Enclosure.

H.R. 1317--A bill to amend the Commodity Exchange Act and the 
        Securities Exchange Act of 1934 to specify how clearing 
        requirements apply to certain affiliate transactions, and for 
        other purposes

    H.R. 1317 would exempt certain swap and securities-based 
swap transactions from various requirements when those 
transactions are between parties that prepare their financial 
statements in combination with a parent company or with an 
affiliate. (A swap is a contract that calls for an exchange of 
cash between two participants, based on an underlying rate or 
index or the performance of an asset.) The bill would broaden 
requirements that affiliate transactions must meet in order to 
be eligible for exemptions, and expand the types of entities 
that would not be eligible for such exemptions.
    The Commodity Futures Trading Commission (CFTC) and the 
Securities and Exchange Commission (SEC)--the agencies 
principally authorized to regulate swaps--have finalized some 
but not all of the regulations related to swap transactions, 
that would be affected by H.R. 1317. Based on information from 
the two agencies, CBO estimates that incorporating the 
provisions of the bill at this point in the regulatory process 
would have a net discretionary cost of about $1 million, 
assuming appropriation of the necessary amounts, to amend the 
regulations that have already been finalized and to make 
appropriate changes in rules that are not yet final.
    The net discretionary cost of the bill would largely be 
attributable to the activities of the CFTC. CBO estimates that 
any change in discretionary spending for the SEC to implement 
the legislation would be insignificant. Further, 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.
    Enacting H.R. 1317 also would affect direct spending and 
revenues; therefore, pay-as-you-go procedures apply. However, 
CBO estimates that those effects would not be significant. CBO 
expects that enacting H.R. 1317 would affect the workloads of 
the financial regulators (the Federal Reserve System, the 
Federal Deposit Insurance Corporation, and the Office of the 
Comptroller of the Currency) because affiliate regulations 
being developed by those agencies have not been finalized; 
however, we expect those effects to be small.
    H.R. 1317 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would not affect the budgets of state, local, or tribal 
governments.
    The CBO staff contact for this estimate is Susan Willie. 
The estimate was approved by H. Samuel Papenfuss, 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. 1317 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(g) of H. Res. 5, 114th Cong. (2015), 
the Committee states that no provision of H.R. 1317 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, 114th Cong. (2015), 
the Committee states that H.R. 1317 contains no directed 
rulemaking.

             Section-by-Section Analysis of the Legislation


Section 1. Treatment of affiliate transactions

    This Section amends the Commodity Exchange Act and the 
Securities Exchange Act of 1934 to specify when a person is 
excepted from complying with certain requirements otherwise 
applicable to swaps transactions.

         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 (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, and existing law in which no 
change is proposed is shown in roman):

                         COMMODITY EXCHANGE ACT




           *       *       *       *       *       *       *
SEC. 2. JURISDICTION OF COMMISSION; LIABILITY OF PRINCIPAL FOR ACT OF 
                    AGENT; COMMODITY FUTURES TRADING COMMISSION; 
                    TRANSACTION IN INTERSTATE COMMERCE.

  (a) Jurisdiction of Commission; Commodity Futures Trading 
Commission.--
          (1) Jurisdiction of commission.--
                  (A) In general.--The Commission shall have 
                exclusive jurisdiction, except to the extent 
                otherwise provided in the Wall Street 
                Transparency and Accountability Act of 2010 
                (including an amendment made by that Act) and 
                subparagraphs (C), (D), and (I) of this 
                paragraph and subsections (c) and (f), with 
                respect to accounts, agreements (including any 
                transaction which is of the character of, or is 
                commonly known to the trade as, an ``option'', 
                ``privilege'', ``indemnity'', ``bid'', 
                ``offer'', ``put'', ``call'', ``advance 
                guaranty'', or ``decline guaranty''), and 
                transactions involving swaps or contracts of 
                sale of a commodity for future delivery 
                (including significant price discovery 
                contracts), traded or executed on a contract 
                market designated pursuant to section 5 or a 
                swap execution facility pursuant to section 5h 
                or any other board of trade, exchange, or 
                market, and transactions subject to regulation 
                by the Commission pursuant to section 19 of 
                this Act. Except as hereinabove provided, 
                nothing contained in this section shall (I) 
                supersede or limit the jurisdiction at any time 
                conferred on the Securities and Exchange 
                Commission or other regulatory authorities 
                under the laws of the United States or of any 
                State, or (II) restrict the Securities and 
                Exchange Commission and such other authorities 
                from carrying out their duties and 
                responsibilities in accordance with such laws. 
                Nothing in this section shall supersede or 
                limit the jurisdiction conferred on courts of 
                the United States or any State.
                  (B) Liability of principal for act of 
                agent.--The act, omission, or failure of any 
                official, agent, or other person acting for any 
                individual, association, partnership, 
                corporation, or trust within the scope of his 
                employment or office shall be deemed the act, 
                omission, or failure of such individual, 
                association, partnership, corporation, or 
                trust, as well as of such official, agent, or 
                other person.
  (C) Notwithstanding any other provision of law--
          (i)(I) Except as provided in subclause (II), this Act 
        shall not apply to and the Commission shall have no 
        jurisdiction to designate a board of trade as a 
        contract market for any transaction whereby any party 
        to such transaction acquires any put, call, or other 
        option on one or more securities (as defined in section 
        2(1) of the Securities Act of 1933 or section 3(a)(10) 
        of the Securities Exchange Act of 1934 on the date of 
        enactment of the Futures Trading Act of 1982), 
        including any group or index of such securities, or any 
        interest therein or based on the value thereof.
                  (II) This Act shall apply to and the 
                Commission shall have jurisdiction with respect 
                to accounts, agreements, and transactions 
                involving, and may permit the listing for 
                trading pursuant to section 5c(c) of, a put, 
                call, or other option on 1 or more securities 
                (as defined in section 2(a)(1) of the 
                Securities Act of 1933 or section 3(a)(10) of 
                the Securities Exchange Act of 1934 on the date 
                of enactment of the Futures Trading Act of 
                1982), including any group or index of such 
                securities, or any interest therein or based on 
                the value thereof, that is exempted by the 
                Securities and Exchange Commission pursuant to 
                section 36(a)(1) of the Securities Exchange Act 
                of 1934 with the condition that the Commission 
                exercise concurrent jurisdiction over such put, 
                call, or other option; provided, however, that 
                nothing in this paragraph shall be construed to 
                affect the jurisdiction and authority of the 
                Securities and Exchange Commission over such 
                put, call, or other option.
          (ii) This Act shall apply to and the Commission shall 
        have exclusive jurisdiction with respect to accounts, 
        agreements (including any transaction which is of the 
        character of, or is commonly known to the trade as, an 
        ``option'', ``privilege'', ``indemnity'', ``bid'', 
        ``offer'', ``put'', ``call'', ``advance guaranty'', or 
        ``decline guaranty'') and transactions involving, and 
        may designate a board of trade as a contract market in, 
        or register a derivatives transaction execution 
        facility that trades or executes, contracts of sale (or 
        options on such contracts) for future delivery of a 
        group or index of securities (or any interest therein 
        or based upon the value thereof): Provided, however, 
        That no board of trade shall be designated as a 
        contract market with respect to any such contracts of 
        sale (or options on such contracts) for future 
        delivery, and no derivatives transaction execution 
        facility shall trade or execute such contracts of sale 
        (or options on such contracts) for future delivery, 
        unless the board of trade or the derivatives 
        transaction execution facility, and the applicable 
        contract, meet the following minimum requirements:
                  (I) Settlement of or delivery on such 
                contract (or option on such contract) shall be 
                effected in cash or by means other than the 
                transfer or receipt of any security, except an 
                exempted security under section 3 of the 
                Securities Act of 1933 or section 3(a)(12) of 
                the Securities Exchange Act of 1934 as in 
                effect on the date of enactment of the Futures 
                Trading Act of 1982 (other than any municipal 
                security, as defined in section 3(a)(29) of the 
                Securities Exchange Act of 1934 on the date of 
                enactment of the Futures Trading Act of 1982);
                  (II) Trading in such contract (or option on 
                such contract) shall not be readily susceptible 
                to manipulation of the price of such contract 
                (or option on such contract), nor to causing or 
                being used in the manipulation of the price of 
                any underlying security, option on such 
                security or option on a group or index 
                including such securities; and
                  (III) Such group or index of securities shall 
                not constitute a narrow-based security index.
          (iii) If, in its discretion, the Commission 
        determines that a stock index futures contract, 
        notwithstanding its conformance with the requirements 
        in clause (ii) of this subparagraph, can reasonably be 
        used as a surrogate for trading a security (including a 
        security futures product), it may, by order, require 
        such contract and any option thereon be traded and 
        regulated as security futures products as defined in 
        section 3(a)(56) of the Securities Exchange Act of 1934 
        and section 1a of this Act subject to all rules and 
        regulations applicable to security futures products 
        under this Act and the securities laws as defined in 
        section 3(a)(47) of the Securities Exchange Act of 
        1934.
          (iv) No person shall offer to enter into, enter into, 
        or confirm the execution of any contract of sale (or 
        option on such contract) for future delivery of any 
        security, or interest therein or based on the value 
        thereof, except an exempted security under or section 
        3(a)(12) of the Securities Exchange Act of 1934 as in 
        effect on the date of enactment of the Futures Trading 
        Act of 1982 (other than any municipal security as 
        defined in section 3(a)(29) of the Securities Exchange 
        Act of 1934 on the date of enactment of the Futures 
        Trading Act of 1982), or except as provided in clause 
        (ii) of this subparagraph or subparagraph (D), any 
        group or index of such securities or any interest 
        therein or based on the value thereof.
          (v)(I) Notwithstanding any other provision of this 
        Act, any contract market in a stock index futures 
        contract (or option thereon) other than a security 
        futures product, or any derivatives transaction 
        execution facility on which such contract or option is 
        traded, shall file with the Board of Governors of the 
        Federal Reserve System any rule establishing or 
        changing the levels of margin (initial and maintenance) 
        for such stock index futures contract (or option 
        thereon) other than security futures products.
          (II) The Board may at any time request any contract 
        market or derivatives transaction execution facility to 
        set the margin for any stock index futures contract (or 
        option thereon), other than for any security futures 
        product, at such levels as the Board in its judgment 
        determines are appropriate to preserve the financial 
        integrity of the contract market or derivatives 
        transaction execution facility, or its clearing system, 
        or to prevent systemic risk. If the contract market or 
        derivatives transaction execution facility fails to do 
        so within the time specified by the Board in its 
        request, the Board may direct the contract market or 
        derivatives transaction execution facility to alter or 
        supplement the rules of the contract market or 
        derivatives transaction execution facility as specified 
        in the request.
          (III) Subject to such conditions as the Board may 
        determine, the Board may delegate any or all of its 
        authority, relating to margin for any stock index 
        futures contract (or option thereon), other than 
        security futures products, under this clause to the 
        Commission.
          (IV) It shall be unlawful for any futures commission 
        merchant to, directly or indirectly, extend or maintain 
        credit to or for, or collect margin from any customer 
        on any security futures product unless such activities 
        comply with the regulations prescribed pursuant to 
        section 7(c)(2)(B) of the Securities Exchange Act of 
        1934.
          (V) Nothing in this clause shall supersede or limit 
        the authority granted to the Commission in section 
        8a(9) to direct a contract market or registered 
        derivatives transaction execution facility, on finding 
        an emergency to exist, to raise temporary margin levels 
        on any futures contract, or option on the contract 
        covered by this clause, or on any security futures 
        product.
          (VI) Any action taken by the Board, or by the 
        Commission acting under the delegation of authority 
        under subclause III, under this clause directing a 
        contract market to alter or supplement a contract 
        market rule shall be subject to review only in the 
        Court of Appeals where the party seeking review resides 
        or has its principal place of business, or in the 
        United States Court of Appeals for the District of 
        Columbia Circuit. The review shall be based on the 
        examination of all information before the Board or the 
        Commission, as the case may be, at the time the 
        determination was made. The court reviewing the action 
        of the Board or the Commission shall not enter a stay 
        or order of mandamus unless the court has determined, 
        after notice and a hearing before a panel of the court, 
        that the agency action complained of was arbitrary, 
        capricious, an abuse of discretion, or otherwise not in 
        accordance with law.
  (D)(i) Notwithstanding any other provision of this Act, the 
Securities and Exchange Commission shall have jurisdiction and 
authority over security futures as defined in section 3(a)(55) 
of the Securities Exchange Act of 1934, section 2(a)(16) of the 
Securities Act of 1933, section 2(a)(52) of the Investment 
Company Act of 1940, and section 202(a)(27) of the Investment 
Advisers Act of 1940, options on security futures, and persons 
effecting transactions in security futures and options thereon, 
and this Act shall apply to and the Commission shall have 
jurisdiction with respect to accounts, agreements (including 
any transaction which is of the character of, or is commonly 
known to the trade as, an ``option'', ``privilege'', 
``indemnity'', ``bid'', ``offer'', ``put'', ``call'', ``advance 
guaranty'', or ``decline guaranty''), contracts, and 
transactions involving, and may designate a board of trade as a 
contract market in, or register a derivatives transaction 
execution facility that trades or executes, a security futures 
product as defined in section 1a of this Act: Provided, 
however, That, except as provided in clause (vi) of this 
subparagraph, no board of trade shall be designated as a 
contract market with respect to, or registered as a derivatives 
transaction execution facility for, any such contracts of sale 
for future delivery unless the board of trade and the 
applicable contract meet the following criteria:
          (I) Except as otherwise provided in a rule, 
        regulation, or order issued pursuant to clause (v) of 
        this subparagraph, any security underlying the security 
        future, including each component security of a narrow-
        based security index, is registered pursuant to section 
        12 of the Securities Exchange Act of 1934.
          (II) If the security futures product is not cash 
        settled, the board of trade on which the security 
        futures product is traded has arrangements in place 
        with a clearing agency registered pursuant to section 
        17A of the Securities Exchange Act of 1934 for the 
        payment and delivery of the securities underlying the 
        security futures product.
          (III) Except as otherwise provided in a rule, 
        regulation, or order issued pursuant to clause (v) of 
        this subparagraph, the security future is based upon 
        common stock and such other equity securities as the 
        Commission and the Securities and Exchange Commission 
        jointly determine appropriate.
          (IV) The security futures product is cleared by a 
        clearing agency that has in place provisions for linked 
        and coordinated clearing with other clearing agencies 
        that clear security futures products, which permits the 
        security futures product to be purchased on a 
        designated contract market, registered derivatives 
        transaction execution facility, national securities 
        exchange registered under section 6(a) of the 
        Securities Exchange Act of 1934, or national securities 
        association registered pursuant to section 15A(a) of 
        the Securities Exchange Act of 1934 and offset on 
        another designated contract market, registered 
        derivatives transaction execution facility, national 
        securities exchange registered under section 6(a) of 
        the Securities Exchange Act of 1934, or national 
        securities association registered pursuant to section 
        15A(a) of the Securities Exchange Act of 1934.
          (V) Only futures commission merchants, introducing 
        brokers, commodity trading advisors, commodity pool 
        operators or associated persons subject to suitability 
        rules comparable to those of a national securities 
        association registered pursuant to section 15A(a) of 
        the Securities Exchange Act of 1934 solicit, accept any 
        order for, or otherwise deal in any transaction in or 
        in connection with the security futures product.
          (VI) The security futures product is subject to a 
        prohibition against dual trading in section 4j of this 
        Act and the rules and regulations thereunder or the 
        provisions of section 11(a) of the Securities Exchange 
        Act of 1934 and the rules and regulations thereunder, 
        except to the extent otherwise permitted under the 
        Securities Exchange Act of 1934 and the rules and 
        regulations thereunder.
          (VII) Trading in the security futures product is not 
        readily susceptible to manipulation of the price of 
        such security futures product, nor to causing or being 
        used in the manipulation of the price of any underlying 
        security, option on such security, or option on a group 
        or index including such securities;
          (VIII) The board of trade on which the security 
        futures product is traded has procedures in place for 
        coordinated surveillance among such board of trade, any 
        market on which any security underlying the security 
        futures product is traded, and other markets on which 
        any related security is traded to detect manipulation 
        and insider trading, except that, if the board of trade 
        is an alternative trading system, a national securities 
        association registered pursuant to section 15A(a) of 
        the Securities Exchange Act of 1934 or national 
        securities exchange registered pursuant to section 6(a) 
        of the Securities Exchange Act of 1934 of which such 
        alternative trading system is a member has in place 
        such procedures.
          (IX) The board of trade on which the security futures 
        product is traded has in place audit trails necessary 
        or appropriate to facilitate the coordinated 
        surveillance required in subclause (VIII), except that, 
        if the board of trade is an alternative trading system, 
        a national securities association registered pursuant 
        to section 15A(a) of the Securities Exchange Act of 
        1934 or national securities exchange registered 
        pursuant to section 6(a) of the Securities Exchange Act 
        of 1934 of which such alternative trading system is a 
        member has rules to require such audit trails.
          (X) The board of trade on which the security futures 
        product is traded has in place procedures to coordinate 
        trading halts between such board of trade and markets 
        on which any security underlying the security futures 
        product is traded and other markets on which any 
        related security is traded, except that, if the board 
        of trade is an alternative trading system, a national 
        securities association registered pursuant to section 
        15A(a) of the Securities Exchange Act of 1934 or 
        national securities exchange registered pursuant to 
        section 6(a) of the Securities Exchange Act of 1934 of 
        which such alternative trading system is a member has 
        rules to require such coordinated trading halts.
          (XI) The margin requirements for a security futures 
        product comply with the regulations prescribed pursuant 
        to section 7(c)(2)(B) of the Securities Exchange Act of 
        1934, except that nothing in this subclause shall be 
        construed to prevent a board of trade from requiring 
        higher margin levels for a security futures product 
        when it deems such action to be necessary or 
        appropriate.
  (ii) It shall be unlawful for any person to offer, to enter 
into, to execute, to confirm the execution of, or to conduct 
any office or business anywhere in the United States, its 
territories or possessions, for the purpose of soliciting, or 
accepting any order for, or otherwise dealing in, any 
transaction in, or in connection with, a security futures 
product unless--
          (I) the transaction is conducted on or subject to the 
        rules of a board of trade that--
                  (aa) has been designated by the Commission as 
                a contract market in such security futures 
                product; or
                  (bb) is a registered derivatives transaction 
                execution facility for the security futures 
                product that has provided a certification with 
                respect to the security futures product 
                pursuant to clause (vii);
          (II) the contract is executed or consummated by, 
        through, or with a member of the contract market or 
        registered derivatives transaction execution facility; 
        and
          (III) the security futures product is evidenced by a 
        record in writing which shows the date, the parties to 
        such security futures product and their addresses, the 
        property covered, and its price, and each contract 
        market member or registered derivatives transaction 
        execution facility member shall keep the record for a 
        period of 3 years from the date of the transaction, or 
        for a longer period if the Commission so directs, which 
        record shall at all times be open to the inspection of 
        any duly authorized representative of the Commission.
  (iii)(I) Except as provided in subclause (II) but 
notwithstanding any other provision of this Act, no person 
shall offer to enter into, enter into, or confirm the execution 
of any option on a security future.
  (II) After 3 years after the date of the enactment of the 
Commodity Futures Modernization Act of 2000, the Commission and 
the Securities and Exchange Commission may by order jointly 
determine to permit trading of options on any security future 
authorized to be traded under the provisions of this Act and 
the Securities Exchange Act of 1934.
  (iv)(I) All relevant records of a futures commission merchant 
or introducing broker registered pursuant to section 4f(a)(2), 
floor broker or floor trader exempt from registration pursuant 
to section 4f(a)(3), associated person exempt from registration 
pursuant to section 4k(6), or board of trade designated as a 
contract market in a security futures product pursuant to 
section 5f shall be subject to such reasonable periodic or 
special examinations by representatives of the Commission as 
the Commission deems necessary or appropriate in the public 
interest, for the protection of investors, or otherwise in 
furtherance of the purposes of this Act, and the Commission, 
before conducting any such examination, shall give notice to 
the Securities and Exchange Commission of the proposed 
examination and consult with the Securities and Exchange 
Commission concerning the feasibility and desirability of 
coordinating the examination with examinations conducted by the 
Securities and Exchange Commission in order to avoid 
unnecessary regulatory duplication or undue regulatory burdens 
for the registrant or board of trade.
  (II) The Commission shall notify the Securities and Exchange 
Commission of any examination conducted of any futures 
commission merchant or introducing broker registered pursuant 
to section 4f(a)(2), floor broker or floor trader exempt from 
registration pursuant to section 4f(a)(3), associated person 
exempt from registration pursuant to section 4k(6), or board of 
trade designated as a contract market in a security futures 
product pursuant to section 5f, and, upon request, furnish to 
the Securities and Exchange Commission any examination report 
and data supplied to or prepared by the Commission in 
connection with the examination.
  (III) Before conducting an examination under subclause (I), 
the Commission shall use the reports of examinations, unless 
the information sought is unavailable in the reports, of any 
futures commission merchant or introducing broker registered 
pursuant to section 4f(a)(2), floor broker or floor trader 
exempt from registration pursuant to section 4f(a)(3), 
associated person exempt from registration pursuant to section 
4k(6), or board of trade designated as a contract market in a 
security futures product pursuant to section 5f that is made by 
the Securities and Exchange Commission, a national securities 
association registered pursuant to section 15A(a) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78o-3(a)), or a 
national securities exchange registered pursuant to section 
6(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78f(a)).
  (IV) Any records required under this subsection for a futures 
commission merchant or introducing broker registered pursuant 
to section 4f(a)(2), floor broker or floor trader exempt from 
registration pursuant to section 4f(a)(3), associated person 
exempt from registration pursuant to section 4k(6), or board of 
trade designated as a contract market in a security futures 
product pursuant to section 5f, shall be limited to records 
with respect to accounts, agreements, contracts, and 
transactions involving security futures products.
  (v)(I) The Commission and the Securities and Exchange 
Commission, by rule, regulation, or order, may jointly modify 
the criteria specified in subclause (I) or (III) of clause (i), 
including the trading of security futures based on securities 
other than equity securities, to the extent such modification 
fosters the development of fair and orderly markets in security 
futures products, is necessary or appropriate in the public 
interest, and is consistent with the protection of investors.
  (II) The Commission and the Securities and Exchange 
Commission, by order, may jointly exempt any person from 
compliance with the criterion specified in clause (i)(IV) to 
the extent such exemption fosters the development of fair and 
orderly markets in security futures products, is necessary or 
appropriate in the public interest, and is consistent with the 
protection of investors.
  (vi)(I) Notwithstanding clauses (i) and (vii), until the 
compliance date, a board of trade shall not be required to meet 
the criterion specified in clause (i)(IV).
  (II) The Commission and the Securities and Exchange 
Commission shall jointly publish in the Federal Register a 
notice of the compliance date no later than 165 days before the 
compliance date.
  (III) For purposes of this clause, the term ``compliance 
date'' means the later of--
          (aa) 180 days after the end of the first full 
        calendar month period in which the average aggregate 
        comparable share volume for all security futures 
        products based on single equity securities traded on 
        all designated contract markets and registered 
        derivatives transaction execution facilities equals or 
        exceeds 10 percent of the average aggregate comparable 
        share volume of options on single equity securities 
        traded on all national securities exchanges registered 
        pursuant to section 6(a) of the Securities Exchange Act 
        of 1934 and any national securities associations 
        registered pursuant to section 15A(a) of such Act; or
          (bb) 2 years after the date on which trading in any 
        security futures product commences under this Act.
  (vii) It shall be unlawful for a board of trade to trade or 
execute a security futures product unless the board of trade 
has provided the Commission with a certification that the 
specific security futures product and the board of trade, as 
applicable, meet the criteria specified in subclauses (I) 
through (XI) of clause (i), except as otherwise provided in 
clause (vi).
  (E)(i) To the extent necessary or appropriate in the public 
interest, to promote fair competition, and consistent with 
promotion of market efficiency, innovation, and expansion of 
investment opportunities, the protection of investors, and the 
maintenance of fair and orderly markets, the Commission and the 
Securities and Exchange Commission shall jointly issue such 
rules, regulations, or orders as are necessary and appropriate 
to permit the offer and sale of a security futures product 
traded on or subject to the rules of a foreign board of trade 
to United States persons.
  (ii) The rules, regulations, or orders adopted under clause 
(i) shall take into account, as appropriate, the nature and 
size of the markets that the securities underlying the security 
futures product reflects.
  (F)(i) Nothing in this Act is intended to prohibit a futures 
commission merchant from carrying security futures products 
traded on or subject to the rules of a foreign board of trade 
in the accounts of persons located outside of the United 
States.
  (ii) Nothing in this Act is intended to prohibit any eligible 
contract participant located in the United States from 
purchasing or carrying securities futures products traded on or 
subject to the rules of a foreign board of trade, exchange, or 
market to the same extent such person may be authorized to 
purchase or carry other securities traded on a foreign board of 
trade, exchange, or market so long as any underlying security 
for such security futures products is traded principally on, 
by, or through any exchange or market located outside the 
United States.
                  (G)(i) Nothing in this paragraph shall limit 
                the jurisdiction conferred on the Securities 
                and Exchange Commission by the Wall Street 
                Transparency and Accountability Act of 2010 
                with regard to security-based swap agreements 
                as defined pursuant to section 3(a)(78) of the 
                Securities Exchange Act of 1934, and security-
                based swaps.
                  (ii) In addition to the authority of the 
                Securities and Exchange Commission described in 
                clause (i), nothing in this subparagraph shall 
                limit or affect any statutory authority of the 
                Commission with respect to an agreement, 
                contract, or transaction described in clause 
                (i).
                  (H) Notwithstanding any other provision of 
                law, the Wall Street Transparency and 
                Accountability Act of 2010 shall not apply to, 
                and the Commodity Futures Trading Commission 
                shall have no jurisdiction under such Act (or 
                any amendments to the Commodity Exchange Act 
                made by such Act) with respect to, any security 
                other than a security-based swap.
                  (I)(i) Nothing in this Act shall limit or 
                affect any statutory authority of the Federal 
                Energy Regulatory Commission or a State 
                regulatory authority (as defined in section 
                3(21) of the Federal Power Act (16 U.S.C. 
                796(21)) with respect to an agreement, 
                contract, or transaction that is entered into 
                pursuant to a tariff or rate schedule approved 
                by the Federal Energy Regulatory Commission or 
                a State regulatory authority and is--
                          (I) not executed, traded, or cleared 
                        on a registered entity or trading 
                        facility; or
                          (II) executed, traded, or cleared on 
                        a registered entity or trading facility 
                        owned or operated by a regional 
                        transmission organization or 
                        independent system operator.
                  (ii) In addition to the authority of the 
                Federal Energy Regulatory Commission or a State 
                regulatory authority described in clause (i), 
                nothing in this subparagraph shall limit or 
                affect--
                          (I) any statutory authority of the 
                        Commission with respect to an 
                        agreement, contract, or transaction 
                        described in clause (i); or
                          (II) the jurisdiction of the 
                        Commission under subparagraph (A) with 
                        respect to an agreement, contract, or 
                        transaction that is executed, traded, 
                        or cleared on a registered entity or 
                        trading facility that is not owned or 
                        operated by a regional transmission 
                        organization or independent system 
                        operator (as defined by sections 3(27) 
                        and (28) of the Federal Power Act (16 
                        U.S.C. 796(27), 796(28)).
          (2)(A) There is hereby established, as an independent 
        agency of the United States Government, a Commodity 
        Futures Trading Commission. The Commission shall be 
        composed of five Commissioners who shall be appointed 
        by the President, by and with the advice and consent of 
        the Senate. In nominating persons for appointment, the 
        President shall--
                  (i) select persons who shall each have 
                demonstrated knowledge in futures trading or 
                its regulation, or the production, 
                merchandising, processing or distribution of 
                one or more of the commodities or other goods 
                and articles, services, rights, and interests 
                covered by this Act; and
                  (ii) seek to ensure that the demonstrated 
                knowledge of the Commissioners is balanced with 
                respect to such areas.
        Not more than three of the members of the Commission 
        shall be members of the same political party. Each 
        Commissioner shall hold office for a term of five years 
        and until his successor is appointed and has qualified, 
        except that he shall not so continue to serve beyond 
        the expiration of the next session of Congress 
        subsequent to the expiration of said fixed term of 
        office, and except (i) any Commissioner appointed to 
        fill a vacancy occurring prior to the expiration of the 
        term for which his predecessor was appointed shall be 
        appointed for the remainder of such term, and (ii) the 
        terms of office of the Commissioners first taking 
        office after the enactment of this paragraph shall 
        expire as designated by the President at the time of 
        nomination, one at the end of one year, one at the end 
        of two years, one at the end of three years, one at the 
        end of four years, and one at the end of five years.
          (B) The President shall appoint, by and with the 
        advice and consent of the Senate, a member of the 
        Commission as Chairman, who shall serve as Chairman at 
        the pleasure of the President. An individual may be 
        appointed as Chairman at the same time that person is 
        appointed as a Commissioner. The Chairman shall be the 
        chief administrative officer of the Commission and 
        shall preside at hearings before the Commission. At any 
        time, the President may appoint, by and with the advice 
        and consent of the Senate, a different Chairman, and 
        the Commissioner previously appointed as Chairman may 
        complete that Commissioner's term as a Commissioner.
          (3) A vacancy in the Commission shall not impair the 
        right of the remaining Commissioners to exercise all 
        the powers of the Commission.
          (4) The Commission shall have a General Counsel, who 
        shall be appointed by the Commission and serve at the 
        pleasure of the Commission. The General Counsel shall 
        report directly to the Commission and serve as its 
        legal advisor. The Commission shall appoint such other 
        attorneys as may be necessary, in the opinion of the 
        Commission, to assist the General Counsel, represent 
        the Commission in all disciplinary proceedings pending 
        before it, represent the Commission in courts of law 
        whenever appropriate, assist the Department of Justice 
        in handling litigation concerning the Commission in 
        courts of law, and perform such other legal duties and 
        functions as the Commission may direct.
          (5) The Commission shall have an Executive Director, 
        who shall be appointed by the Commission and serve at 
        the pleasure of the Commission. The Executive Director 
        shall report directly to the Commission and perform 
        such functions and duties as the Commission may 
        prescribe.
          (6)(A) Except as otherwise provided in this paragraph 
        and in paragraphs (4) and (5) of this subsection, the 
        executive and administrative functions of the 
        Commission, including functions of the Commission with 
        respect to the appointment and supervision of personnel 
        employed under the Commission, the distribution of 
        business among such personnel and among administrative 
        units of the Commission, and the use and expenditure of 
        funds, according to budget categories, plans, programs, 
        and priorities established and approved by the 
        Commission, shall be exercised solely by the Chairman.
          (B) In carrying out any of his functions under the 
        provisions of this paragraph, the Chairman shall be 
        governed by general policies, plans, priorities, and 
        budgets approved by the Commission and by such 
        regulatory decisions, findings, and determinations as 
        the Commission may by law be authorized to make.
          (C) The appointment by the Chairman of the heads of 
        major administrative units under the Commission shall 
        be subject to the approval of the Commission.
          (D) Personnel employed regularly and full time in the 
        immediate offices of Commissioners other than the 
        Chairman shall not be affected by the provisions of 
        this paragraph.
          (E) There are hereby reserved to the Commission its 
        functions with respect to revising budget estimates and 
        with respect to determining the distribution of 
        appropriated funds according to major programs and 
        purposes.
          (F) The Chairman may from time to time make such 
        provisions as he shall deem appropriate authorizing the 
        performance by any officer, employee, or administrative 
        unit under his jurisdiction of any functions of the 
        Chairman under this paragraph.
          (7) Appointment and compensation.--
                  (A) In general.--The Commission may appoint 
                and fix the compensation of such officers, 
                attorneys, economists, examiners, and other 
                employees as may be necessary for carrying out 
                the functions of the Commission under this Act.
                  (B) Rates of pay.--Rates of basic pay for all 
                employees of the Commission may be set and 
                adjusted by the Commission without regard to 
                chapter 51 or subchapter III of chapter 53 of 
                title 5, United States Code.
                  (C) Comparability.--
                          (i) In general.--The Commission may 
                        provide additional compensation and 
                        benefits to employees of the Commission 
                        if the same type of compensation or 
                        benefits are provided by any agency 
                        referred to in section 1206(a) of the 
                        Financial Institutions Reform, 
                        Recovery, and Enforcement Act of 1989 
                        (12 U.S.C. 1833b(a)) or could be 
                        provided by such an agency under 
                        applicable provisions of law (including 
                        rules and regulations).
                          (ii) Consultation.--In setting and 
                        adjusting the total amount of 
                        compensation and benefits for 
                        employees, the Commission shall consult 
                        with, and seek to maintain 
                        comparability with, the agencies 
                        referred to in section 1206(a) of the 
                        Financial Institutions Reform, 
                        Recovery, and Enforcement Act of 1989 
                        (12 U.S.C. 1833b(a)).
          (8) No Commissioner or employee of the Commission 
        shall accept employment or compensation from any 
        person, exchange, or clearinghouse subject to 
        regulation by the Commission under this Act during his 
        term of office, nor shall he participate, directly or 
        indirectly, in any registered entity operations or 
        transactions of a character subject to regulation by 
        the Commission.
          (9)(A) The Commission shall, in cooperation with the 
        Secretary of Agriculture, maintain a liaison between 
        the Commission and the Department of Agriculture. The 
        Secretary shall take such steps as may be necessary to 
        enable the Commission to obtain information and utilize 
        such services and facilities of the Department of 
        Agriculture as may be necessary in order to maintain 
        effectively such liaison. In addition, the Secretary 
        shall appoint a liaison officer, who shall be an 
        employee of the Office of the Secretary, for the 
        purpose of maintaining a liaison between the Department 
        of Agriculture and the Commission. The Commission shall 
        furnish such liaison officer appropriate office space 
        within the offices of the Commission and shall allow 
        such liaison officer to attend and observe all 
        deliberations and proceedings of the Commission.
          (B)(i) The Commission shall maintain communications 
        with the Department of the Treasury, the Board of 
        Governors of the Federal Reserve System, and the 
        Securities and Exchange Commission for the purpose of 
        keeping such agencies fully informed of Commission 
        activities that relate to the responsibilities of those 
        agencies, for the purpose of seeking the views of those 
        agencies on such activities, and for considering the 
        relationships between the volume and nature of 
        investment and trading in contracts of sale of a 
        commodity for future delivery and in securities and 
        financial instruments under the jurisdiction of such 
        agencies.
          (ii) When a board of trade applies for designation or 
        registration as a contract market or derivatives 
        transaction execution facility involving transactions 
        for future delivery of any security issued or 
        guaranteed by the United States or any agency thereof, 
        the Commission shall promptly deliver a copy of such 
        application to the Department of the Treasury and the 
        Board of Governors of the Federal Reserve System. The 
        Commission may not designate or register a board of 
        trade as a contract market or derivatives transaction 
        execution facility based on such application until 
        forty-five days after the date the Commission delivers 
        the application to such agencies or until the 
        Commission receives comments from each of such agencies 
        on the application, whichever period is shorter. Any 
        comments received by the Commission from such agencies 
        shall be included as part of the public record of the 
        Commission's designation proceeding. In designating, 
        registering, or refusing, suspending, or revoking the 
        designation or registration of, a board of trade as a 
        contract market or derivatives transaction execution 
        facility involving transactions for future delivery 
        referred to in this clause or in considering any 
        possible action under this Act (including without 
        limitation emergency action under section 8a(9)) with 
        respect to such transactions, the Commission shall take 
        into consideration all comments it receives from the 
        Department of the Treasury and the Board of Governors 
        of the Federal Reserve System and shall consider the 
        effect that any such designation, registration, 
        suspension, revocation, or action may have on the debt 
        financing requirements of the United States Government 
        and the continued efficiency and integrity of the 
        underlying market for government securities.
          (iii) The provisions of this subparagraph shall not 
        create any rights, liabilities, or obligations upon 
        which actions may be brought against the Commission.
          (10)(A) Whenever the Commission submits any budget 
        estimate or request to the President or the Office of 
        Management and Budget, it shall concurrently transmit 
        copies of that estimate or request to the House and 
        Senate Appropriations Committees and the House 
        Committee on Agriculture and the Senate Committee on 
        Agriculture, Nutrition, and Forestry.
          (B) Whenever the Commission transmits any legislative 
        recommendations, or testimony, or comments on 
        legislation to the President or the Office of 
        Management and Budget, it shall concurrently transmit 
        copies thereof to the House Committee on Agriculture 
        and the Senate Committee on Agriculture, Nutrition, and 
        Forestry. No officer or agency of the United States 
        shall have any authority to require the Commission to 
        submit its legislative recommendations, or testimony, 
        or comments on legislation to any officer or agency of 
        the United States for approval, comments, or review, 
        prior to the submission of such recommendations, 
        testimony, or comments to the Congress. In instances in 
        which the Commission voluntarily seeks to obtain the 
        comments or review of any officer or agency of the 
        United States, the Commission shall include a 
        description of such actions in its legislative 
        recommendations, testimony, or comments on legislation 
        which it transmits to the Congress.
          (C) Whenever the Commission issues for official 
        publication any opinion, release, rule, order, 
        interpretation, or other determination on a matter, the 
        Commission shall provide that any dissenting, 
        concurring, or separate opinion by any Commissioner on 
        the matter be published in full along with the 
        Commission opinion, release, rule, order, 
        interpretation, or determination.
  (11) The Commission shall have an official seal, which shall 
be judicially noticed.
  (12) The Commission is authorized to promulgate such rules 
and regulations as it deems necessary to govern the operating 
procedures and conduct of the business of the Commission.
          (13) Public availability of swap transaction data.--
                  (A) Definition of real-time public 
                reporting.--In this paragraph, the term ``real-
                time public reporting'' means to report data 
                relating to a swap transaction, including price 
                and volume, as soon as technologically 
                practicable after the time at which the swap 
                transaction has been executed.
                  (B) Purpose.--The purpose of this section is 
                to authorize the Commission to make swap 
                transaction and pricing data available to the 
                public in such form and at such times as the 
                Commission determines appropriate to enhance 
                price discovery.
                  (C) General rule.--The Commission is 
                authorized and required to provide by rule for 
                the public availability of swap transaction and 
                pricing data as follows:
                          (i) With respect to those swaps that 
                        are subject to the mandatory clearing 
                        requirement described in subsection 
                        (h)(1) (including those swaps that are 
                        excepted from the requirement pursuant 
                        to subsection (h)(7)), the Commission 
                        shall require real-time public 
                        reporting for such transactions.
                          (ii) With respect to those swaps that 
                        are not subject to the mandatory 
                        clearing requirement described in 
                        subsection (h)(1), but are cleared at a 
                        registered derivatives clearing 
                        organization, the Commission shall 
                        require real-time public reporting for 
                        such transactions.
                          (iii) With respect to swaps that are 
                        not cleared at a registered derivatives 
                        clearing organization and which are 
                        reported to a swap data repository or 
                        the Commission under subsection (h)(6), 
                        the Commission shall require real-time 
                        public reporting for such transactions, 
                        in a manner that does not disclose the 
                        business transactions and market 
                        positions of any person.
                          (iv) With respect to swaps that are 
                        determined to be required to be cleared 
                        under subsection (h)(2) but are not 
                        cleared, the Commission shall require 
                        real-time public reporting for such 
                        transactions.
                  (D) Registered entities and public 
                reporting.--The Commission may require 
                registered entities to publicly disseminate the 
                swap transaction and pricing data required to 
                be reported under this paragraph.
                  (E) Rulemaking required.--With respect to the 
                rule providing for the public availability of 
                transaction and pricing data for swaps 
                described in clauses (i) and (ii) of 
                subparagraph (C), the rule promulgated by the 
                Commission shall contain provisions--
                          (i) to ensure such information does 
                        not identify the participants;
                          (ii) to specify the criteria for 
                        determining what constitutes a large 
                        notional swap transaction (block trade) 
                        for particular markets and contracts;
                          (iii) to specify the appropriate time 
                        delay for reporting large notional swap 
                        transactions (block trades) to the 
                        public; and
                          (iv) that take into account whether 
                        the public disclosure will materially 
                        reduce market liquidity.
                  (F) Timeliness of reporting.--Parties to a 
                swap (including agents of the parties to a 
                swap) shall be responsible for reporting swap 
                transaction information to the appropriate 
                registered entity in a timely manner as may be 
                prescribed by the Commission.
                  (G) Reporting of swaps to registered swap 
                data repositories.--Each swap (whether cleared 
                or uncleared) shall be reported to a registered 
                swap data repository.
          (14) Semiannual and annual public reporting of 
        aggregate swap data.--
                  (A) In general.--In accordance with 
                subparagraph (B), the Commission shall issue a 
                written report on a semiannual and annual basis 
                to make available to the public information 
                relating to--
                          (i) the trading and clearing in the 
                        major swap categories; and
                          (ii) the market participants and 
                        developments in new products.
                  (B) Use; consultation.--In preparing a report 
                under subparagraph (A), the Commission shall--
                          (i) use information from swap data 
                        repositories and derivatives clearing 
                        organizations; and
                          (ii) consult with the Office of the 
                        Comptroller of the Currency, the Bank 
                        for International Settlements, and such 
                        other regulatory bodies as may be 
                        necessary.
                  (C) Authority of the commission.--The 
                Commission may, by rule, regulation, or order, 
                delegate the public reporting responsibilities 
                of the Commission under this paragraph in 
                accordance with such terms and conditions as 
                the Commission determines to be appropriate and 
                in the public interest.
          (15) Energy and environmental markets advisory 
        committee.--
                  (A) Establishment.--
                          (i) In general.--An Energy and 
                        Environmental Markets Advisory 
                        Committee is hereby established.
                          (ii) Membership.--The Committee shall 
                        have 9 members.
                          (iii) Activities.--The Committee's 
                        objectives and scope of activities 
                        shall be--
                                  (I) to conduct public 
                                meetings;
                                  (II) to submit reports and 
                                recommendations to the 
                                Commission (including 
                                dissenting or minority views, 
                                if any); and
                                  (III) otherwise to serve as a 
                                vehicle for discussion and 
                                communication on matters of 
                                concern to exchanges, firms, 
                                end users, and regulators 
                                regarding energy and 
                                environmental markets and their 
                                regulation by the Commission.
                  (B) Requirements.--
                          (i) In general.--The Committee shall 
                        hold public meetings at such intervals 
                        as are necessary to carry out the 
                        functions of the Committee, but not 
                        less frequently than 2 times per year.
                          (ii) Members.--Members shall be 
                        appointed to 3-year terms, but may be 
                        removed for cause by vote of the 
                        Commission.
                  (C) Appointment.--The Commission shall 
                appoint members with a wide diversity of 
                opinion and who represent a broad spectrum of 
                interests, including hedgers and consumers.
                  (D) Reimbursement.--Members shall be entitled 
                to per diem and travel expense reimbursement by 
                the Commission.
                  (E) FACA.--The Committee shall not be subject 
                to the Federal Advisory Committee Act (5 U.S.C. 
                App.).
  (b) For the purposes of this Act (but not in any wise 
limiting the foregoing definition of interstate commerce) a 
transaction in respect to any article shall be considered to be 
in interstate commerce if such article is part of that current 
of commerce usual in the commodity trade whereby commodities 
and commodity products and by-products thereof are sent from 
one State with the expectation that they will end their 
transit, after purchase, in another, including, in addition to 
cases within the above general description, all cases where 
purchase or sale is either for shipment to another State, or 
for manufacture within the State and the shipment outside the 
State of the products resulting from such manufacture. Articles 
normally in such current of commerce shall not be considered 
out of such commerce through resort being had to any means or 
device intended to remove transactions in respect thereto from 
the provisions of this Act. For the purpose of this paragraph 
the word ``State'' includes Territory, the District of 
Columbia, possession of the United States, and foreign nation.
  (c) Agreements, Contracts, and Transactions in Foreign 
Currency, Government Securities, and Certain Other 
Commodities.--
          (1) In general.--Except as provided in paragraph (2), 
        nothing in this Act (other than section, 5b, or 
        12(e)(2)(B)) governs or applies to an agreement, 
        contract, or transaction in--
                  (A) foreign currency;
                  (B) government securities;
                  (C) security warrants;
                  (D) security rights;
                  (E) resales of installment loan contracts;
                  (F) repurchase transactions in an excluded 
                commodity; or
                  (G) mortgages or mortgage purchase 
                commitments.
          (2) Commission jurisdiction.--
                  (A) Agreements, contracts, and transactions 
                traded on an organized exchange.--This Act 
                applies to, and the Commission shall have 
                jurisdiction over, an agreement, contract, or 
                transaction described in paragraph (1) that 
                is--
                          (i) a contract of sale of a commodity 
                        for future delivery (or an option on 
                        such a contract), or an option on a 
                        commodity (other than foreign currency 
                        or a security or a group or index of 
                        securities), that is executed or traded 
                        on an organized exchange;
                          (ii) a swap; or
                          (iii) an option on foreign currency 
                        executed or traded on an organized 
                        exchange that is not a national 
                        securities exchange registered pursuant 
                        to section 6(a) of the Securities 
                        Exchange Act of 1934.
                  (B) Agreements, contracts, and transactions 
                in retail foreign currency.--
                          (i) This Act applies to, and the 
                        Commission shall have jurisdiction 
                        over, an agreement, contract, or 
                        transaction in foreign currency that--
                                  (I) is a contract of sale of 
                                a commodity for future delivery 
                                (or an option on such a 
                                contract) or an option (other 
                                than an option executed or 
                                traded on a national securities 
                                exchange registered pursuant to 
                                section 6(a) of the Securities 
                                Exchange Act of 1934 (15 U.S.C. 
                                78f(a))); and
                                  (II) is offered to, or 
                                entered into with, a person 
                                that is not an eligible 
                                contract participant, unless 
                                the counterparty, or the person 
                                offering to be the 
                                counterparty, of the person 
                                is--
                                          (aa) a United States 
                                        financial institution;
                                          (bb)(AA) a broker or 
                                        dealer registered under 
                                        section 15(b) (except 
                                        paragraph (11) thereof) 
                                        or 15C of the 
                                        Securities Exchange Act 
                                        of 1934 (15 U.S.C. 
                                        78o(b), 78o-5); or
                                          (BB) an associated 
                                        person of a broker or 
                                        dealer registered under 
                                        section 15(b) (except 
                                        paragraph (11) thereof) 
                                        or 15C of the 
                                        Securities Exchange Act 
                                        of 1934 (15 U.S.C. 
                                        78o(b), 78o-5) 
                                        concerning the 
                                        financial or securities 
                                        activities of which the 
                                        broker or dealer makes 
                                        and keeps records under 
                                        section 15C(b) or 17(h) 
                                        of the Securities 
                                        Exchange Act of 1934 
                                        (15 U.S.C. 78o-5(b), 
                                        78q(h));
                                          (cc)(AA) a futures 
                                        commission merchant 
                                        that is primarily or 
                                        substantially engaged 
                                        in the business 
                                        activities described in 
                                        section 1a of this Act, 
                                        is registered under 
                                        this Act, is not a 
                                        person described in 
                                        item (bb) of this 
                                        subclause, and 
                                        maintains adjusted net 
                                        capital equal to or in 
                                        excess of the dollar 
                                        amount that applies for 
                                        purposes of clause (ii) 
                                        of this subparagraph; 
                                        or
                                          (BB) an affiliated 
                                        person of a futures 
                                        commission merchant 
                                        that is primarily or 
                                        substantially engaged 
                                        in the business 
                                        activities described in 
                                        section 1a of this Act, 
                                        is registered under 
                                        this Act, and is not a 
                                        person described in 
                                        item (bb) of this 
                                        subclause, if the 
                                        affiliated person 
                                        maintains adjusted net 
                                        capital equal to or in 
                                        excess of the dollar 
                                        amount that applies for 
                                        purposes of clause (ii) 
                                        of this subparagraph 
                                        and is not a person 
                                        described in such item 
                                        (bb), and the futures 
                                        commission merchant 
                                        makes and keeps records 
                                        under section 
                                        4f(c)(2)(B) of this Act 
                                        concerning the futures 
                                        and other financial 
                                        activities of the 
                                        affiliated person;
                                          (dd) a financial 
                                        holding company (as 
                                        defined in section 2 of 
                                        the Bank Holding 
                                        Company Act of 1956); 
                                        or
                                          (ff) a retail foreign 
                                        exchange dealer that 
                                        maintains adjusted net 
                                        capital equal to or in 
                                        excess of the dollar 
                                        amount that applies for 
                                        purposes of clause (ii) 
                                        of this subparagraph 
                                        and is registered in 
                                        such capacity with the 
                                        Commission, subject to 
                                        such terms and 
                                        conditions as the 
                                        Commission shall 
                                        prescribe, and is a 
                                        member of a futures 
                                        association registered 
                                        under section 17.
                          (ii) The dollar amount that applies 
                        for purposes of this clause is--
                                  (I) $10,000,000, beginning 
                                120 days after the date of the 
                                enactment of this clause;
                                  (II) $15,000,000, beginning 
                                240 days after such date of 
                                enactment; and
                                  (III) $20,000,000, beginning 
                                360 days after such date of 
                                enactment.
                          (iii) Notwithstanding items (cc) and 
                        (gg) of clause (i)(II) of this 
                        subparagraph, agreements, contracts, or 
                        transactions described in clause (i) of 
                        this subparagraph, and accounts or 
                        pooled investment vehicles described in 
                        clause (vi), shall be subject to 
                        subsection (a)(1)(B) of this section 
                        and sections 4(b), 4b, 4c(b), 4o, 6(c) 
                        and 6(d) (except to the extent that 
                        sections 6(c) and 6(d) prohibit 
                        manipulation of the market price of any 
                        commodity in interstate commerce, or 
                        for future delivery on or subject to 
                        the rules of any market), 6c, 6d, 8(a), 
                        13(a), and 13(b) if the agreements, 
                        contracts, or transactions are offered, 
                        or entered into, by a person that is 
                        registered as a futures commission 
                        merchant or retail foreign exchange 
                        dealer, or an affiliated person of a 
                        futures commission merchant registered 
                        under this Act that is not also a 
                        person described in any of item (aa), 
                        (bb), (ee), or (ff) of clause (i)(II) 
                        of this subparagraph.
                          (iv)(I) Notwithstanding items (cc) 
                        and (gg) of clause (i)(II), a person, 
                        unless registered in such capacity as 
                        the Commission by rule, regulation, or 
                        order shall determine and a member of a 
                        futures association registered under 
                        section 17, shall not--
                                  (aa) solicit or accept orders 
                                from any person that is not an 
                                eligible contract participant 
                                in connection with agreements, 
                                contracts, or transactions 
                                described in clause (i) entered 
                                into with or to be entered into 
                                with a person who is not 
                                described in item (aa), (bb), 
                                (ee), or (ff) of clause 
                                (i)(II);
                                  (bb) exercise discretionary 
                                trading authority or obtain 
                                written authorization to 
                                exercise discretionary trading 
                                authority over any account for 
                                or on behalf of any person that 
                                is not an eligible contract 
                                participant in connection with 
                                agreements, contracts, or 
                                transactions described in 
                                clause (i) entered into with or 
                                to be entered into with a 
                                person who is not described in 
                                item (aa), (bb), (ee), or (ff) 
                                of clause (i)(II); or
                                  (cc) operate or solicit 
                                funds, securities, or property 
                                for any pooled investment 
                                vehicle that is not an eligible 
                                contract participant in 
                                connection with agreements, 
                                contracts, or transactions 
                                described in clause (i) entered 
                                into with or to be entered into 
                                with a person who is not 
                                described in item (aa), (bb), 
                                (ee), or (ff) of clause 
                                (i)(II).
                          (II) Subclause (I) of this clause 
                        shall not apply to--
                                  (aa) any person described in 
                                any of item (aa), (bb), (ee), 
                                or (ff) of clause (i)(II);
                                  (bb) any such person's 
                                associated persons; or
                                  (cc) any person who would be 
                                exempt from registration if 
                                engaging in the same activities 
                                in connection with transactions 
                                conducted on or subject to the 
                                rules of a contract market or a 
                                derivatives transaction 
                                execution facility.
                          (III) Notwithstanding items (cc) and 
                        (gg) of clause (i)(II), the Commission 
                        may make, promulgate, and enforce such 
                        rules and regulations as, in the 
                        judgment of the Commission, are 
                        reasonably necessary to effectuate any 
                        of the provisions of, or to accomplish 
                        any of the purposes of, this Act in 
                        connection with the activities of 
                        persons subject to subclause (I).
                          (IV) Subclause (III) of this clause 
                        shall not apply to--
                                  (aa) any person described in 
                                any of item (aa) through (ff) 
                                of clause (i)(II);
                                  (bb) any such person's 
                                associated persons; or
                                  (cc) any person who would be 
                                exempt from registration if 
                                engaging in the same activities 
                                in connection with transactions 
                                conducted on or subject to the 
                                rules of a contract market or a 
                                derivatives transaction 
                                execution facility.
                          (v) Notwithstanding items (cc) and 
                        (gg) of clause (i)(II), the Commission 
                        may make, promulgate, and enforce such 
                        rules and regulations as, in the 
                        judgment of the Commission, are 
                        reasonably necessary to effectuate any 
                        of the provisions of, or to accomplish 
                        any of the purposes of, this Act in 
                        connection with agreements, contracts, 
                        or transactions described in clause (i) 
                        which are offered, or entered into, by 
                        a person described in item (cc) or (gg) 
                        of clause (i)(II).
                          (vi) This Act applies to, and the 
                        Commission shall have jurisdiction 
                        over, an account or pooled investment 
                        vehicle that is offered for the purpose 
                        of trading, or that trades, any 
                        agreement, contract, or transaction in 
                        foreign currency described in clause 
                        (i).
                  (C)(i)(I) This subparagraph shall apply to 
                any agreement, contract, or transaction in 
                foreign currency that is--
                                  (aa) offered to, or entered 
                                into with, a person that is not 
                                an eligible contract 
                                participant (except that this 
                                subparagraph shall not apply if 
                                the counterparty, or the person 
                                offering to be the 
                                counterparty, of the person 
                                that is not an eligible 
                                contract participant is a 
                                person described in any of item 
                                (aa), (bb), (ee), or (ff) of 
                                subparagraph (B)(i)(II)); and
                                  (bb) offered, or entered 
                                into, on a leveraged or 
                                margined basis, or financed by 
                                the offeror, the counterparty, 
                                or a person acting in concert 
                                with the offeror or 
                                counterparty on a similar 
                                basis.
                  (II) Subclause (I) of this clause shall not 
                apply to--
                          (aa) a security that is not a 
                        security futures product; or
                          (bb) a contract of sale that--
                                  (AA) results in actual 
                                delivery within 2 days; or
                                  (BB) creates an enforceable 
                                obligation to deliver between a 
                                seller and buyer that have the 
                                ability to deliver and accept 
                                delivery, respectively, in 
                                connection with their line of 
                                business.
                  (ii)(I) Agreements, contracts, or 
                transactions described in clause (i) of this 
                subparagraph, and accounts or pooled investment 
                vehicles described in clause (vii), shall be 
                subject to subsection (a)(1)(B) of this section 
                and sections 4(b), 4b, 4c(b), 4o, 6(c) and 6(d) 
                (except to the extent that sections 6(c) and 
                6(d) prohibit manipulation of the market price 
                of any commodity in interstate commerce, or for 
                future delivery on or subject to the rules of 
                any market), 6c, 6d, 8(a), 13(a), and 13(b).
                  (II) Subclause (I) of this clause shall not 
                apply to--
                          (aa) any person described in any of 
                        item (aa), (bb), (ee), or (ff) of 
                        subparagraph (B)(i)(II); or
                          (bb) any such person's associated 
                        persons.
                  (III) The Commission may make, promulgate, 
                and enforce such rules and regulations as, in 
                the judgment of the Commission, are reasonably 
                necessary to effectuate any of the provisions 
                of or to accomplish any of the purposes of this 
                Act in connection with agreements, contracts, 
                or transactions described in clause (i) of this 
                subparagraph if the agreements, contracts, or 
                transactions are offered, or entered into, by a 
                person that is not described in item (aa) 
                through (ff) of subparagraph (B)(i)(II).
                  (iii)(I) A person, unless registered in such 
                capacity as the Commission by rule, regulation, 
                or order shall determine and a member of a 
                futures association registered under section 
                17, shall not--
                          (aa) solicit or accept orders from 
                        any person that is not an eligible 
                        contract participant in connection with 
                        agreements, contracts, or transactions 
                        described in clause (i) of this 
                        subparagraph entered into with or to be 
                        entered into with a person who is not 
                        described in item (aa), (bb), (ee), or 
                        (ff) of subparagraph (B)(i)(II);
                          (bb) exercise discretionary trading 
                        authority or obtain written 
                        authorization to exercise written 
                        trading authority over any account for 
                        or on behalf of any person that is not 
                        an eligible contract participant in 
                        connection with agreements, contracts, 
                        or transactions described in clause (i) 
                        of this subparagraph entered into with 
                        or to be entered into with a person who 
                        is not described in item (aa), (bb), 
                        (ee), or (ff) of subparagraph 
                        (B)(i)(II); or
                          (cc) operate or solicit funds, 
                        securities, or property for any pooled 
                        investment vehicle that is not an 
                        eligible contract participant in 
                        connection with agreements, contracts, 
                        or transactions described in clause (i) 
                        of this subparagraph entered into with 
                        or to be entered into with a person who 
                        is not described in item (aa), (bb), 
                        (ee), or (ff) of subparagraph 
                        (B)(i)(II).
                  (II) Subclause (I) of this clause shall not 
                apply to--
                          (aa) any person described in item 
                        (aa), (bb), (ee), or (ff) of 
                        subparagraph (B)(i)(II);
                          (bb) any such person's associated 
                        persons; or
                          (cc) any person who would be exempt 
                        from registration if engaging in the 
                        same activities in connection with 
                        transactions conducted on or subject to 
                        the rules of a contract market or a 
                        derivatives transaction execution 
                        facility.
                  (III) The Commission may make, promulgate, 
                and enforce such rules and regulations as, in 
                the judgment of the Commission, are reasonably 
                necessary to effectuate any of the provisions 
                of, or to accomplish any of the purposes of, 
                this Act in connection with the activities of 
                persons subject to subclause (I).
                  (IV) Subclause (III) of this clause shall not 
                apply to--
                          (aa) any person described in item 
                        (aa) through (ff) of subparagraph 
                        (B)(i)(II);
                          (bb) any such person's associated 
                        persons; or
                          (cc) any person who would be exempt 
                        from registration if engaging in the 
                        same activities in connection with 
                        transactions conducted on or subject to 
                        the rules of a contract market or a 
                        derivatives transaction execution 
                        facility.
                  (iv) Sections 4(b) and 4b shall apply to any 
                agreement, contract, or transaction described 
                in clause (i) of this subparagraph as if the 
                agreement, contract, or transaction were a 
                contract of sale of a commodity for future 
                delivery.
                  (v) This subparagraph shall not be construed 
                to limit any jurisdiction that the Commission 
                may otherwise have under any other provision of 
                this Act over an agreement, contract, or 
                transaction that is a contract of sale of a 
                commodity for future delivery.
                  (vi) This subparagraph shall not be construed 
                to limit any jurisdiction that the Commission 
                or the Securities and Exchange Commission may 
                otherwise have under any other provision of 
                this Act with respect to security futures 
                products and persons effecting transactions in 
                security futures products.
                          (vii) This Act applies to, and the 
                        Commission shall have jurisdiction 
                        over, an account or pooled investment 
                        vehicle that is offered for the purpose 
                        of trading, or that trades, any 
                        agreement, contract, or transaction in 
                        foreign currency described in clause 
                        (i).
                  (D) Retail commodity transactions.--
                          (i) Applicability.--Except as 
                        provided in clause (ii), this 
                        subparagraph shall apply to any 
                        agreement, contract, or transaction in 
                        any commodity that is--
                                  (I) entered into with, or 
                                offered to (even if not entered 
                                into with), a person that is 
                                not an eligible contract 
                                participant or eligible 
                                commercial entity; and
                                  (II) entered into, or offered 
                                (even if not entered into), on 
                                a leveraged or margined basis, 
                                or financed by the offeror, the 
                                counterparty, or a person 
                                acting in concert with the 
                                offeror or counterparty on a 
                                similar basis.
                          (ii) Exceptions.--This subparagraph 
                        shall not apply to--
                                  (I) an agreement, contract, 
                                or transaction described in 
                                paragraph (1) or subparagraphs 
                                (A), (B), or (C), including any 
                                agreement, contract, or 
                                transaction specifically 
                                excluded from subparagraph (A), 
                                (B), or (C);
                                  (II) any security;
                                  (III) a contract of sale 
                                that--
                                          (aa) results in 
                                        actual delivery within 
                                        28 days or such other 
                                        longer period as the 
                                        Commission may 
                                        determine by rule or 
                                        regulation based upon 
                                        the typical commercial 
                                        practice in cash or 
                                        spot markets for the 
                                        commodity involved; or
                                          (bb) creates an 
                                        enforceable obligation 
                                        to deliver between a 
                                        seller and a buyer that 
                                        have the ability to 
                                        deliver and accept 
                                        delivery, respectively, 
                                        in connection with the 
                                        line of business of the 
                                        seller and buyer; or
                                  (IV) an agreement, contract, 
                                or transaction that is listed 
                                on a national securities 
                                exchange registered under 
                                section 6(a) of the Securities 
                                Exchange Act of 1934 (15 U.S.C. 
                                78f(a)); or
                                  (V) an identified banking 
                                product, as defined in section 
                                402(b) of the Legal Certainty 
                                for Bank Products Act of 2000 
                                (7 U.S.C.27(b)).
                          (iii) Enforcement.--Sections 4(a), 
                        4(b), and 4b apply to any agreement, 
                        contract, or transaction described in 
                        clause (i), as if the agreement, 
                        contract, or transaction was a contract 
                        of sale of a commodity for future 
                        delivery.
                          (iv) Eligible commercial entity.--For 
                        purposes of this subparagraph, an 
                        agricultural producer, packer, or 
                        handler shall be considered to be an 
                        eligible commercial entity for any 
                        agreement, contract, or transaction for 
                        a commodity in connection with the line 
                        of business of the agricultural 
                        producer, packer, or handler.
                  (E) Prohibition.--
                          (i) Definition of federal regulatory 
                        agency.--In this subparagraph, the term 
                        ``Federal regulatory agency'' means--
                                  (I) the Commission;
                                  (II) the Securities and 
                                Exchange Commission;
                                  (III) an appropriate Federal 
                                banking agency;
                                  (IV) the National Credit 
                                Union Association; and
                                  (V) the Farm Credit 
                                Administration.
                          (ii) Prohibition.--
                                  (I) In general.--Except as 
                                provided in subclause (II), a 
                                person described in 
                                subparagraph (B)(i)(II) for 
                                which there is a Federal 
                                regulatory agency shall not 
                                offer to, or enter into with, a 
                                person that is not an eligible 
                                contract participant, any 
                                agreement, contract, or 
                                transaction in foreign currency 
                                described in subparagraph 
                                (B)(i)(I) except pursuant to a 
                                rule or regulation of a Federal 
                                regulatory agency allowing the 
                                agreement, contract, or 
                                transaction under such terms 
                                and conditions as the Federal 
                                regulatory agency shall 
                                prescribe.
                                  (II) Effective date.--With 
                                regard to persons described in 
                                subparagraph (B)(i)(II) for 
                                which a Federal regulatory 
                                agency has issued a proposed 
                                rule concerning agreements, 
                                contracts, or transactions in 
                                foreign currency described in 
                                subparagraph (B)(i)(I) prior to 
                                the date of enactment of this 
                                subclause, subclause (I) shall 
                                take effect 90 days after the 
                                date of enactment of this 
                                subclause.
                          (iii) Requirements of rules and 
                        regulations.--
                                  (I) In general.--The rules 
                                and regulations described in 
                                clause (ii) shall prescribe 
                                appropriate requirements with 
                                respect to--
                                          (aa) disclosure;
                                          (bb) recordkeeping;
                                          (cc) capital and 
                                        margin;
                                          (dd) reporting;
                                          (ee) business 
                                        conduct;
                                          (ff) documentation; 
                                        and
                                          (gg) such other 
                                        standards or 
                                        requirements as the 
                                        Federal regulatory 
                                        agency shall determine 
                                        to be necessary.
                                  (II) Treatment.--The rules or 
                                regulations described in clause 
                                (ii) shall treat all 
                                agreements, contracts, and 
                                transactions in foreign 
                                currency described in 
                                subparagraph (B)(i)(I), and all 
                                agreements, contracts, and 
                                transactions in foreign 
                                currency that are functionally 
                                or economically similar to 
                                agreements, contracts, or 
                                transactions described in 
                                subparagraph (B)(i)(I), 
                                similarly.
  (d) Swaps.--Nothing in this Act (other than subparagraphs 
(A), (B), (C), (D), (G), and (H) of subsection (a)(1), 
subsections (f) and (g), sections 1a, 2(a)(13), 2(c)(2)(A)(ii), 
2(e), 2(h), 4(c), 4a, 4b, and 4b-1, subsections (a), (b), and 
(g) of section 4c, sections 4d, 4e, 4f, 4g, 4h, 4i, 4j, 4k, 4l, 
4m, 4n, 4o, 4p, 4r, 4s, 4t, 5, 5b, 5c, 5e, and 5h, subsections 
(c) and (d) of section 6, sections 6c, 6d, 8, 8a, and 9, 
subsections (e)(2), (f), and (h) of section 12, subsections (a) 
and (b) of section 13, sections 17, 20, 21, and 22(a)(4), and 
any other provision of this Act that is applicable to 
registered entities or Commission registrants) governs or 
applies to a swap.
  (e) Limitation on Participation.--It shall be unlawful for 
any person, other than an eligible contract participant, to 
enter into a swap unless the swap is entered into on, or 
subject to the rules of, a board of trade designated as a 
contract market under section 5.
  (f) Exclusion for Qualifying Hybrid Instruments.--
          (1) In general.--Nothing in this Act (other than 
        section 12(e)(2)(B)) governs or is applicable to a 
        hybrid instrument that is predominantly a security.
          (2) Predominance.--A hybrid instrument shall be 
        considered to be predominantly a security if--
                  (A) the issuer of the hybrid instrument 
                receives payment in full of the purchase price 
                of the hybrid instrument, substantially 
                contemporaneously with delivery of the hybrid 
                instrument;
                  (B) the purchaser or holder of the hybrid 
                instrument is not required to make any payment 
                to the issuer in addition to the purchase price 
                paid under subparagraph (A), whether as margin, 
                settlement payment, or otherwise, during the 
                life of the hybrid instrument or at maturity;
                  (C) the issuer of the hybrid instrument is 
                not subject by the terms of the instrument to 
                mark-to-market margining requirements; and
                  (D) the hybrid instrument is not marketed as 
                a contract of sale of a commodity for future 
                delivery (or option on such a contract) subject 
                to this Act.
          (3) Mark-to-market margining requirements.--For the 
        purposes of paragraph (2)(C), mark-to-market margining 
        requirements do not include the obligation of an issuer 
        of a secured debt instrument to increase the amount of 
        collateral held in pledge for the benefit of the 
        purchaser of the secured debt instrument to secure the 
        repayment obligations of the issuer under the secured 
        debt instrument.
  (g) Application of Commodity Futures Laws.--
          (1) No provision of this Act shall be construed as 
        implying or creating any presumption that--
                  (A) any agreement, contract, or transaction 
                that is excluded from this Act under section 
                2(c), 2(d), 2(e), 2(f), or 2(g) of this Act or 
                title IV of the Commodity Futures Modernization 
                Act of 2000, or exempted under section 2(h) or 
                4(c) of this Act; or
                  (B) any agreement, contract, or transaction, 
                not otherwise subject to this Act, that is not 
                so excluded or exempted,
        is or would otherwise be subject to this Act.
          (2) No provision of, or amendment made by, the 
        Commodity Futures Modernization Act of 2000 shall be 
        construed as conferring jurisdiction on the Commission 
        with respect to any such agreement, contract, or 
        transaction, except as expressly provided in section 5b 
        of this Act.
  (h) Clearing Requirement.--
          (1) In general.--
                  (A) Standard for clearing.--It shall be 
                unlawful for any person to engage in a swap 
                unless that person submits such swap for 
                clearing to a derivatives clearing organization 
                that is registered under this Act or a 
                derivatives clearing organization that is 
                exempt from registration under this Act if the 
                swap is required to be cleared.
                  (B) Open access.--The rules of a derivatives 
                clearing organization described in subparagraph 
                (A) shall--
                          (i) prescribe that all swaps (but not 
                        contracts of sale of a commodity for 
                        future delivery or options on such 
                        contracts) submitted to the derivatives 
                        clearing organization with the same 
                        terms and conditions are economically 
                        equivalent within the derivatives 
                        clearing organization and may be offset 
                        with each other within the derivatives 
                        clearing organization; and
                          (ii) provide for non-discriminatory 
                        clearing of a swap (but not a contract 
                        of sale of a commodity for future 
                        delivery or option on such contract) 
                        executed bilaterally or on or through 
                        the rules of an unaffiliated designated 
                        contract market or swap execution 
                        facility.
          (2) Commission review.--
                  (A) Commission-initiated review.--
                          (i) The Commission on an ongoing 
                        basis shall review each swap, or any 
                        group, category, type, or class of 
                        swaps to make a determination as to 
                        whether the swap or group, category, 
                        type, or class of swaps should be 
                        required to be cleared.
                          (ii) The Commission shall provide at 
                        least a 30-day public comment period 
                        regarding any determination made under 
                        clause (i).
                  (B) Swap submissions.--
                          (i) A derivatives clearing 
                        organization shall submit to the 
                        Commission each swap, or any group, 
                        category, type, or class of swaps that 
                        it plans to accept for clearing, and 
                        provide notice to its members (in a 
                        manner to be determined by the 
                        Commission) of the submission.
                          (ii) Any swap or group, category, 
                        type, or class of swaps listed for 
                        clearing by a derivative clearing 
                        organization as of the date of 
                        enactment of this subsection shall be 
                        considered submitted to the Commission.
                          (iii) The Commission shall--
                                  (I) make available to the 
                                public submissions received 
                                under clauses (i) and (ii);
                                  (II) review each submission 
                                made under clauses (i) and 
                                (ii), and determine whether the 
                                swap, or group, category, type, 
                                or class of swaps described in 
                                the submission is required to 
                                be cleared; and
                                  (III) provide at least a 30-
                                day public comment period 
                                regarding its determination as 
                                to whether the clearing 
                                requirement under paragraph 
                                (1)(A) shall apply to the 
                                submission.
                  (C) Deadline.--The Commission shall make its 
                determination under subparagraph (B)(iii) not 
                later than 90 days after receiving a submission 
                made under subparagraphs (B)(i) and (B)(ii), 
                unless the submitting derivatives clearing 
                organization agrees to an extension for the 
                time limitation established under this 
                subparagraph.
                  (D) Determination.--
                          (i) In reviewing a submission made 
                        under subparagraph (B), the Commission 
                        shall review whether the submission is 
                        consistent with section 5b(c)(2).
                          (ii) In reviewing a swap, group of 
                        swaps, or class of swaps pursuant to 
                        subparagraph (A) or a submission made 
                        under subparagraph (B), the Commission 
                        shall take into account the following 
                        factors:
                                  (I) The existence of 
                                significant outstanding 
                                notional exposures, trading 
                                liquidity, and adequate pricing 
                                data.
                                  (II) The availability of rule 
                                framework, capacity, 
                                operational expertise and 
                                resources, and credit support 
                                infrastructure to clear the 
                                contract on terms that are 
                                consistent with the material 
                                terms and trading conventions 
                                on which the contract is then 
                                traded.
                                  (III) The effect on the 
                                mitigation of systemic risk, 
                                taking into account the size of 
                                the market for such contract 
                                and the resources of the 
                                derivatives clearing 
                                organization available to clear 
                                the contract.
                                  (IV) The effect on 
                                competition, including 
                                appropriate fees and charges 
                                applied to clearing.
                                  (V) The existence of 
                                reasonable legal certainty in 
                                the event of the insolvency of 
                                the relevant derivatives 
                                clearing organization or 1 or 
                                more of its clearing members 
                                with regard to the treatment of 
                                customer and swap counterparty 
                                positions, funds, and property.
                          (iii) In making a determination under 
                        subparagraph (A) or (B)(iii) that the 
                        clearing requirement shall apply, the 
                        Commission may require such terms and 
                        conditions to the requirement as the 
                        Commission determines to be 
                        appropriate.
                  (E) Rules.--Not later than 1 year after the 
                date of the enactment of this subsection, the 
                Commission shall adopt rules for a derivatives 
                clearing organization's submission for review, 
                pursuant to this paragraph, of a swap, or a 
                group, category, type, or class of swaps, that 
                it seeks to accept for clearing. Nothing in 
                this subparagraph limits the Commission from 
                making a determination under subparagraph 
                (B)(iii) for swaps described in subparagraph 
                (B)(ii).
          (3) Stay of clearing requirement.--
                  (A) In general.--After making a determination 
                pursuant to paragraph (2)(B), the Commission, 
                on application of a counterparty to a swap or 
                on its own initiative, may stay the clearing 
                requirement of paragraph (1) until the 
                Commission completes a review of the terms of 
                the swap (or the group, category, type, or 
                class of swaps) and the clearing arrangement.
                  (B) Deadline.--The Commission shall complete 
                a review undertaken pursuant to subparagraph 
                (A) not later than 90 days after issuance of 
                the stay, unless the derivatives clearing 
                organization that clears the swap, or group, 
                category, type, or class of swaps agrees to an 
                extension of the time limitation established 
                under this subparagraph.
                  (C) Determination.--Upon completion of the 
                review undertaken pursuant to subparagraph (A), 
                the Commission may--
                          (i) determine, unconditionally or 
                        subject to such terms and conditions as 
                        the Commission determines to be 
                        appropriate, that the swap, or group, 
                        category, type, or class of swaps must 
                        be cleared pursuant to this subsection 
                        if it finds that such clearing is 
                        consistent with paragraph (2)(D); or
                          (ii) determine that the clearing 
                        requirement of paragraph (1) shall not 
                        apply to the swap, or group, category, 
                        type, or class of swaps.
                  (D) Rules.--Not later than 1 year after the 
                date of the enactment of the Wall Street 
                Transparency and Accountability Act of 2010, 
                the Commission shall adopt rules for reviewing, 
                pursuant to this paragraph, a derivatives 
                clearing organization's clearing of a swap, or 
                a group, category, type, or class of swaps, 
                that it has accepted for clearing.
          (4) Prevention of evasion.--
                  (A) In general.--The Commission shall 
                prescribe rules under this subsection (and 
                issue interpretations of rules prescribed under 
                this subsection) as determined by the 
                Commission to be necessary to prevent evasions 
                of the mandatory clearing requirements under 
                this Act.
                  (B) Duty of commission to investigate and 
                take certain actions.--To the extent the 
                Commission finds that a particular swap, group, 
                category, type, or class of swaps would 
                otherwise be subject to mandatory clearing but 
                no derivatives clearing organization has listed 
                the swap, group, category, type, or class of 
                swaps for clearing, the Commission shall--
                          (i) investigate the relevant facts 
                        and circumstances;
                          (ii) within 30 days issue a public 
                        report containing the results of the 
                        investigation; and
                          (iii) take such actions as the 
                        Commission determines to be necessary 
                        and in the public interest, which may 
                        include requiring the retaining of 
                        adequate margin or capital by parties 
                        to the swap, group, category, type, or 
                        class of swaps.
                  (C) Effect on authority.--Nothing in this 
                paragraph--
                          (i) authorizes the Commission to 
                        adopt rules requiring a derivatives 
                        clearing organization to list for 
                        clearing a swap, group, category, type, 
                        or class of swaps if the clearing of 
                        the swap, group, category, type, or 
                        class of swaps would threaten the 
                        financial integrity of the derivatives 
                        clearing organization; and
                          (ii) affects the authority of the 
                        Commission to enforce the open access 
                        provisions of paragraph (1)(B) with 
                        respect to a swap, group, category, 
                        type, or class of swaps that is listed 
                        for clearing by a derivatives clearing 
                        organization.
          (5) Reporting transition rules.--Rules adopted by the 
        Commission under this section shall provide for the 
        reporting of data, as follows:
                  (A) Swaps entered into before the date of the 
                enactment of this subsection shall be reported 
                to a registered swap data repository or the 
                Commission no later than 180 days after the 
                effective date of this subsection.
                  (B) Swaps entered into on or after such date 
                of enactment shall be reported to a registered 
                swap data repository or the Commission no later 
                than the later of--
                          (i) 90 days after such effective 
                        date; or
                          (ii) such other time after entering 
                        into the swap as the Commission may 
                        prescribe by rule or regulation.
          (6) Clearing transition rules.--
                  (A) Swaps entered into before the date of the 
                enactment of this subsection are exempt from 
                the clearing requirements of this subsection if 
                reported pursuant to paragraph (5)(A).
                  (B) Swaps entered into before application of 
                the clearing requirement pursuant to this 
                subsection are exempt from the clearing 
                requirements of this subsection if reported 
                pursuant to paragraph (5)(B).
          (7) Exceptions.--
                  (A) In general.--The requirements of 
                paragraph (1)(A) shall not apply to a swap if 1 
                of the counterparties to the swap--
                          (i) is not a financial entity;
                          (ii) is using swaps to hedge or 
                        mitigate commercial risk; and
                          (iii) notifies the Commission, in a 
                        manner set forth by the Commission, how 
                        it generally meets its financial 
                        obligations associated with entering 
                        into non-cleared swaps.
                  (B) Option to clear.--The application of the 
                clearing exception in subparagraph (A) is 
                solely at the discretion of the counterparty to 
                the swap that meets the conditions of clauses 
                (i) through (iii) of subparagraph (A).
                  (C) Financial entity definition.--
                          (i) In general.--For the purposes of 
                        this paragraph, the term ``financial 
                        entity'' means--
                                  (I) a swap dealer;
                                  (II) a security-based swap 
                                dealer;
                                  (III) a major swap 
                                participant;
                                  (IV) a major security-based 
                                swap participant;
                                  (V) a commodity pool;
                                  (VI) a private fund as 
                                defined in section 202(a) of 
                                the Investment Advisers Act of 
                                1940 (15 U.S.C. 80-b-2(a));
                                  (VII) an employee benefit 
                                plan as defined in paragraphs 
                                (3) and (32) of section 3 of 
                                the Employee Retirement Income 
                                Security Act of 1974 (29 U.S.C. 
                                1002);
                                  (VIII) a person predominantly 
                                engaged in activities that are 
                                in the business of banking, or 
                                in activities that are 
                                financial in nature, as defined 
                                in section 4(k) of the Bank 
                                Holding Company Act of 1956.
                          (ii) Exclusion.--The Commission shall 
                        consider whether to exempt small banks, 
                        savings associations, farm credit 
                        system institutions, and credit unions, 
                        including--
                                  (I) depository institutions 
                                with total assets of 
                                $10,000,000,000 or less;
                                  (II) farm credit system 
                                institutions with total assets 
                                of $10,000,000,000 or less; or
                                  (III) credit unions with 
                                total assets of $10,000,000,000 
                                or less.
                          (iii) Limitation.--Such definition 
                        shall not include an entity whose 
                        primary business is providing 
                        financing, and 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.
                  (D) Treatment of affiliates.--
                          [(i) In general.--An affiliate of a 
                        person that qualifies for an exception 
                        under subparagraph (A) (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, acting on behalf of the 
                        person and as an agent, uses the swap 
                        to hedge or mitigate the commercial 
                        risk of the person or other affiliate 
                        of the person that is not a financial 
                        entity.]
                          (i) In general.--An affiliate of a 
                        person that qualifies for an exception 
                        under subparagraph (A) (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 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.
                          (ii) Prohibition relating to certain 
                        affiliates.--The exception in clause 
                        (i) shall not apply if the affiliate 
                        is--
                                  (I) a swap dealer;
                                  (II) a security-based swap 
                                dealer;
                                  (III) a major swap 
                                participant;
                                  (IV) a major security-based 
                                swap participant;
                                  (V) an issuer that would be 
                                an investment company, as 
                                defined in section 3 of the 
                                Investment Company Act of 1940 
                                (15 U.S.C. 80a-3), but for 
                                paragraph (1) or (7) of 
                                subsection (c) of that Act (15 
                                U.S.C. 80a-3(c));
                                  (VI) a commodity pool; or
                                  (VII) a bank holding company 
                                with over $50,000,000,000 in 
                                consolidated assets.
                          (iii) Transition rule for 
                        affiliates.--An affiliate, subsidiary, 
                        or a wholly owned entity of a person 
                        that qualifies for an exception under 
                        subparagraph (A) and is predominantly 
                        engaged in providing financing for the 
                        purchase or lease of merchandise or 
                        manufactured goods of the person shall 
                        be exempt from the margin requirement 
                        described in section 4s(e) and the 
                        clearing requirement described in 
                        paragraph (1) with regard to swaps 
                        entered into to mitigate the risk of 
                        the financing activities for not less 
                        than a 2-year period beginning on the 
                        date of enactment of this clause.
                  (E) Election of counterparty.--
                          (i) Swaps required to be cleared.--
                        With respect to any swap that is 
                        subject to the mandatory clearing 
                        requirement under this subsection and 
                        entered into by a swap dealer or a 
                        major swap participant with a 
                        counterparty that is not a swap dealer, 
                        major swap participant, security-based 
                        swap dealer, or major security-based 
                        swap participant, the counterparty 
                        shall have the sole right to select the 
                        derivatives clearing organization at 
                        which the swap will be cleared.
                          (ii) Swaps not required to be 
                        cleared.--With respect to any swap that 
                        is not subject to the mandatory 
                        clearing requirement under this 
                        subsection and entered into by a swap 
                        dealer or a major swap participant with 
                        a counterparty that is not a swap 
                        dealer, major swap participant, 
                        security-based swap dealer, or major 
                        security-based swap participant, the 
                        counterparty--
                                  (I) may elect to require 
                                clearing of the swap; and
                                  (II) shall have the sole 
                                right to select the derivatives 
                                clearing organization at which 
                                the swap will be cleared.
                  (F) Abuse of exception.--The Commission may 
                prescribe such rules or issue interpretations 
                of the rules as the Commission determines to be 
                necessary to prevent abuse of the exceptions 
                described in this paragraph. The Commission may 
                also request information from those persons 
                claiming the clearing exception as necessary to 
                prevent abuse of the exceptions described in 
                this paragraph.
          (8) Trade execution.--
                  (A) In general.--With respect to transactions 
                involving swaps subject to the clearing 
                requirement of paragraph (1), counterparties 
                shall--
                          (i) execute the transaction on a 
                        board of trade designated as a contract 
                        market under section 5; or
                          (ii) execute the transaction on a 
                        swap execution facility registered 
                        under 5h or a swap execution facility 
                        that is exempt from registration under 
                        section 5h(f) of this Act.
                  (B) Exception.--The requirements of clauses 
                (i) and (ii) of subparagraph (A) shall not 
                apply if no board of trade or swap execution 
                facility makes the swap available to trade or 
                for swap transactions subject to the clearing 
                exception under paragraph (7).
  (i) Applicability.--The provisions of this Act relating to 
swaps that were enacted by the Wall Street Transparency and 
Accountability Act of 2010 (including any rule prescribed or 
regulation promulgated under that Act), shall not apply to 
activities outside the United States unless those activities--
          (1) have a direct and significant connection with 
        activities in, or effect on, commerce of the United 
        States; or
          (2) contravene such rules or regulations as the 
        Commission may prescribe or promulgate as are necessary 
        or appropriate to prevent the evasion of any provision 
        of this Act that was enacted by the Wall Street 
        Transparency and Accountability Act of 2010.
  (j) Committee Approval by Board.--Exemptions from the 
requirements of subsection (h)(1) to clear a swap and 
subsection (h)(8) to execute a swap through a board of trade or 
swap execution facility shall be available to a counterparty 
that is an issuer of securities that are registered under 
section 12 of the Securities Exchange Act of 1934 (15 U.S.C. 
78l) or that is required to file reports pursuant to section 
15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78o) 
only if an appropriate committee of the issuer's board or 
governing body has reviewed and approved its decision to enter 
into swaps that are subject to such exemptions.

           *       *       *       *       *       *       *

                              ----------                              


                    SECURITIES EXCHANGE ACT OF 1934

TITLE I--REGULATION OF SECURITIES EXCHANGES

           *       *       *       *       *       *       *


SEC. 3C. CLEARING FOR SECURITY-BASED SWAPS.

  (a) In General.--
          (1) Standard for clearing.--It shall be unlawful for 
        any person to engage in a security-based swap unless 
        that person submits such security-based swap for 
        clearing to a clearing agency that is registered under 
        this Act or a clearing agency that is exempt from 
        registration under this Act if the security-based swap 
        is required to be cleared.
          (2) Open access.--The rules of a clearing agency 
        described in paragraph (1) shall--
                  (A) prescribe that all security-based swaps 
                submitted to the clearing agency with the same 
                terms and conditions are economically 
                equivalent within the clearing agency and may 
                be offset with each other within the clearing 
                agency; and
                  (B) provide for non-discriminatory clearing 
                of a security-based swap executed bilaterally 
                or on or through the rules of an unaffiliated 
                national securities exchange or security-based 
                swap execution facility.
  (b) Commission Review.--
          (1) Commission-initiated review.--
                  (A) The Commission on an ongoing basis shall 
                review each security-based swap, or any group, 
                category, type, or class of security-based 
                swaps to make a determination that such 
                security-based swap, or group, category, type, 
                or class of security-based swaps should be 
                required to be cleared.
                  (B) The Commission shall provide at least a 
                30-day public comment period regarding any 
                determination under subparagraph (A).
          (2) Swap submissions.--
                  (A) A clearing agency shall submit to the 
                Commission each security-based swap, or any 
                group, category, type, or class of security-
                based swaps that it plans to accept for 
                clearing and provide notice to its members (in 
                a manner to be determined by the Commission) of 
                such submission.
                  (B) Any security-based swap or group, 
                category, type, or class of security-based 
                swaps listed for clearing by a clearing agency 
                as of the date of enactment of this subsection 
                shall be considered submitted to the 
                Commission.
                  (C) The Commission shall--
                          (i) make available to the public any 
                        submission received under subparagraphs 
                        (A) and (B);
                          (ii) review each submission made 
                        under subparagraphs (A) and (B), and 
                        determine whether the security-based 
                        swap, or group, category, type, or 
                        class of security-based swaps, 
                        described in the submission is required 
                        to be cleared; and
                          (iii) provide at least a 30-day 
                        public comment period regarding its 
                        determination whether the clearing 
                        requirement under subsection (a)(1) 
                        shall apply to the submission.
          (3) Deadline.--The Commission shall make its 
        determination under paragraph (2)(C) not later than 90 
        days after receiving a submission made under paragraphs 
        (2)(A) and (2)(B), unless the submitting clearing 
        agency agrees to an extension for the time limitation 
        established under this paragraph.
          (4) Determination.--
                  (A) In reviewing a submission made under 
                paragraph (2), the Commission shall review 
                whether the submission is consistent with 
                section 17A.
                  (B) In reviewing a security-based swap, group 
                of security-based swaps or class of security-
                based swaps pursuant to paragraph (1) or a 
                submission made under paragraph (2), the 
                Commission shall take into account the 
                following factors:
                          (i) The existence of significant 
                        outstanding notional exposures, trading 
                        liquidity and adequate pricing data.
                          (ii) The availability of rule 
                        framework, capacity, operational 
                        expertise and resources, and credit 
                        support infrastructure to clear the 
                        contract on terms that are consistent 
                        with the material terms and trading 
                        conventions on which the contract is 
                        then traded.
                          (iii) The effect on the mitigation of 
                        systemic risk, taking into account the 
                        size of the market for such contract 
                        and the resources of the clearing 
                        agency available to clear the contract.
                          (iv) The effect on competition, 
                        including appropriate fees and charges 
                        applied to clearing.
                          (v) The existence of reasonable legal 
                        certainty in the event of the 
                        insolvency of the relevant clearing 
                        agency or 1 or more of its clearing 
                        members with regard to the treatment of 
                        customer and security-based swap 
                        counterparty positions, funds, and 
                        property.
                  (C) In making a determination under 
                subsection (b)(1) or paragraph (2)(C) that the 
                clearing requirement shall apply, the 
                Commission may require such terms and 
                conditions to the requirement as the Commission 
                determines to be appropriate.
          (5) Rules.--Not later than 1 year after the date of 
        the enactment of this section, the Commission shall 
        adopt rules for a clearing agency's submission for 
        review, pursuant to this subsection, of a security-
        based swap, or a group, category, type, or class of 
        security-based swaps, that it seeks to accept for 
        clearing. Nothing in this paragraph limits the 
        Commission from making a determination under paragraph 
        (2)(C) for security-based swaps described in paragraph 
        (2)(B).
  (c) Stay of Clearing Requirement.--
          (1) In general.--After making a determination 
        pursuant to subsection (b)(2), the Commission, on 
        application of a counterparty to a security-based swap 
        or on its own initiative, may stay the clearing 
        requirement of subsection (a)(1) until the Commission 
        completes a review of the terms of the security-based 
        swap (or the group, category, type, or class of 
        security-based swaps) and the clearing arrangement.
          (2) Deadline.--The Commission shall complete a review 
        undertaken pursuant to paragraph (1) not later than 90 
        days after issuance of the stay, unless the clearing 
        agency that clears the security-based swap, or group, 
        category, type, or class of security-based swaps, 
        agrees to an extension of the time limitation 
        established under this paragraph.
          (3) Determination.--Upon completion of the review 
        undertaken pursuant to paragraph (1), the Commission 
        may--
                  (A) determine, unconditionally or subject to 
                such terms and conditions as the Commission 
                determines to be appropriate, that the 
                security-based swap, or group, category, type, 
                or class of security-based swaps, must be 
                cleared pursuant to this subsection if it finds 
                that such clearing is consistent with 
                subsection (b)(4); or
                  (B) determine that the clearing requirement 
                of subsection (a)(1) shall not apply to the 
                security-based swap, or group, category, type, 
                or class of security-based swaps.
          (4) Rules.--Not later than 1 year after the date of 
        the enactment of this section, the Commission shall 
        adopt rules for reviewing, pursuant to this subsection, 
        a clearing agency's clearing of a security-based swap, 
        or a group, category, type, or class of security-based 
        swaps, that it has accepted for clearing.
  (d) Prevention of Evasion.--
          (1) In general.--The Commission shall prescribe rules 
        under this section (and issue interpretations of rules 
        prescribed under this section), as determined by the 
        Commission to be necessary to prevent evasions of the 
        mandatory clearing requirements under this Act.
          (2) Duty of commission to investigate and take 
        certain actions.--To the extent the Commission finds 
        that a particular security-based swap or any group, 
        category, type, or class of security-based swaps that 
        would otherwise be subject to mandatory clearing but no 
        clearing agency has listed the security-based swap or 
        the group, category, type, or class of security-based 
        swaps for clearing, the Commission shall--
                  (A) investigate the relevant facts and 
                circumstances;
                  (B) within 30 days issue a public report 
                containing the results of the investigation; 
                and
                  (C) take such actions as the Commission 
                determines to be necessary and in the public 
                interest, which may include requiring the 
                retaining of adequate margin or capital by 
                parties to the security-based swap or the 
                group, category, type, or class of security-
                based swaps.
          (3) Effect on authority.--Nothing in this 
        subsection--
                  (A) authorizes the Commission to adopt rules 
                requiring a clearing agency to list for 
                clearing a security-based swap or any group, 
                category, type, or class of security-based 
                swaps if the clearing of the security-based 
                swap or the group, category, type, or class of 
                security-based swaps would threaten the 
                financial integrity of the clearing agency; and
                  (B) affects the authority of the Commission 
                to enforce the open access provisions of 
                subsection (a)(2) with respect to a security-
                based swap or the group, category, type, or 
                class of security-based swaps that is listed 
                for clearing by a clearing agency.
  (e) Reporting Transition Rules.--Rules adopted by the 
Commission under this section shall provide for the reporting 
of data, as follows:
          (1) Security-based swaps entered into before the date 
        of the enactment of this section shall be reported to a 
        registered security-based swap data repository or the 
        Commission no later than 180 days after the effective 
        date of this section.
          (2) Security-based swaps entered into on or after 
        such date of enactment shall be reported to a 
        registered security-based swap data repository or the 
        Commission no later than the later of--
                  (A) 90 days after such effective date; or
                  (B) such other time after entering into the 
                security-based swap as the Commission may 
                prescribe by rule or regulation.
  (f) Clearing Transition Rules.--
          (1) Security-based swaps entered into before the date 
        of the enactment of this section are exempt from the 
        clearing requirements of this subsection if reported 
        pursuant to subsection (e)(1).
          (2) Security-based swaps entered into before 
        application of the clearing requirement pursuant to 
        this section are exempt from the clearing requirements 
        of this section if reported pursuant to subsection 
        (e)(2).
  (g) Exceptions.--
          (1) In general.--The requirements of subsection 
        (a)(1) shall not apply to a security-based swap if 1 of 
        the counterparties to the security-based swap--
                  (A) is not a financial entity;
                  (B) is using security-based swaps to hedge or 
                mitigate commercial risk; and
                  (C) notifies the Commission, in a manner set 
                forth by the Commission, how it generally meets 
                its financial obligations associated with 
                entering into non-cleared security-based swaps.
          (2) Option to clear.--The application of the clearing 
        exception in paragraph (1) is solely at the discretion 
        of the counterparty to the security-based swap that 
        meets the conditions of subparagraphs (A) through (C) 
        of paragraph (1).
          (3) Financial entity definition.--
                  (A) In general.--For the purposes of this 
                subsection, the term ``financial entity'' 
                means--
                          (i) a swap dealer;
                          (ii) a security-based swap dealer;
                          (iii) a major swap participant;
                          (iv) a major security-based swap 
                        participant;
                          (v) a commodity pool as defined in 
                        section 1a(10) of the Commodity 
                        Exchange Act;
                          (vi) a private fund as defined in 
                        section 202(a) of the Investment 
                        Advisers Act of 1940 (15 U.S.C. 80-b-
                        2(a));
                          (vii) an employee benefit plan as 
                        defined in paragraphs (3) and (32) of 
                        section 3 of the Employee Retirement 
                        Income Security Act of 1974 (29 U.S.C. 
                        1002);
                          (viii) a person predominantly engaged 
                        in activities that are in the business 
                        of banking or financial in nature, as 
                        defined in section 4(k) of the Bank 
                        Holding Company Act of 1956.
                  (B) Exclusion.--The Commission shall consider 
                whether to exempt small banks, savings 
                associations, farm credit system institutions, 
                and credit unions, including--
                          (i) depository institutions with 
                        total assets of $10,000,000,000 or 
                        less;
                          (ii) farm credit system institutions 
                        with total assets of $10,000,000,000 or 
                        less; or
                          (iii) credit unions with total assets 
                        of $10,000,000,000 or less.
          (4) Treatment of affiliates.--
                  [(A) In general.--An affiliate of a person 
                that qualifies for an exception under this 
                subsection (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, acting 
                on behalf of the person and as an agent, uses 
                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.
                  [(B) Prohibition relating to certain 
                affiliates.--The exception in subparagraph (A) 
                shall not apply if the affiliate is--
                          [(i) a swap dealer;
                          [(ii) a security-based swap dealer;
                          [(iii) a major swap participant;
                          [(iv) a major security-based swap 
                        participant;
                          [(v) an issuer that would be an 
                        investment company, as defined in 
                        section 3 of the Investment Company Act 
                        of 1940 (15 U.S.C. 80a-3), but for 
                        paragraph (1) or (7) of subsection (c) 
                        of that Act (15 U.S.C. 80a-3(c));
                          [(vi) a commodity pool; or
                          [(vii) a bank holding company with 
                        over $50,000,000,000 in consolidated 
                        assets.]
                  (A) In general.--An affiliate of a person 
                that qualifies for an exception under this 
                subsection (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--
                          (i) 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, and the commercial 
                        risk that the affiliate is hedging or 
                        mitigating has been transferred to the 
                        affiliate;
                          (ii) is directly and wholly-owned by 
                        another affiliate qualified for the 
                        exception under this paragraph or an 
                        entity that is not a financial entity;
                          (iii) is not indirectly majority-
                        owned by a financial entity;
                          (iv) is not ultimately owned by a 
                        parent company that is a financial 
                        entity; and
                          (v) does not provide any services, 
                        financial or otherwise, to any 
                        affiliate that is a nonbank financial 
                        company supervised by the Board of 
                        Governors (as defined under section 102 
                        of the Financial Stability Act of 
                        2010).
                  (B) Limitation on qualifying affiliates.--The 
                exception in subparagraph (A) shall not apply 
                if the affiliate is--
                          (i) a swap dealer;
                          (ii) a security-based swap dealer;
                          (iii) a major swap participant;
                          (iv) a major security-based swap 
                        participant;
                          (v) a commodity pool;
                          (vi) a bank holding company;
                          (vii) a private fund, as defined in 
                        section 202(a) of the Investment 
                        Advisers Act of 1940 (15 U.S.C. 80-b-
                        2(a));
                          (viii) an employee benefit plan or 
                        government plan, as defined in 
                        paragraphs (3) and (32) of section 3 of 
                        the Employee Retirement Income Security 
                        Act of 1974 (29 U.S.C. 1002);
                          (ix) an insured depository 
                        institution;
                          (x) a farm credit system institution;
                          (xi) a credit union;
                          (xii) a nonbank financial company 
                        supervised by the Board of Governors 
                        (as defined under section 102 of the 
                        Financial Stability Act of 2010); or
                          (xiii) an entity engaged in the 
                        business of insurance and subject to 
                        capital requirements established by an 
                        insurance governmental authority of a 
                        State, a territory of the United 
                        States, the District of Columbia, a 
                        country other than the United States, 
                        or a political subdivision of a country 
                        other than the United States that is 
                        engaged in the supervision of insurance 
                        companies under insurance law.
                  (C) Limitation on affiliates' affiliates.--
                Unless the Commission determines, by order, 
                rule, or regulation, that it is in the public 
                interest, the exception in subparagraph (A) 
                shall not apply with respect to an affiliate if 
                such affiliate is itself affiliated with--
                          (i) a major security-based swap 
                        participant;
                          (ii) a security-based swap dealer;
                          (iii) a major swap participant; or
                          (iv) a swap dealer.
                  (D) Conditions on transactions.--With respect 
                to an affiliate that qualifies for the 
                exception in subparagraph (A)--
                          (i) such affiliate may not enter into 
                        any security-based swap other than for 
                        the purpose of hedging or mitigating 
                        commercial risk; and
                          (ii) neither such affiliate nor any 
                        person affiliated with such affiliate 
                        that is not a financial entity may 
                        enter into a security-based swap with 
                        or on behalf of any affiliate that is a 
                        financial entity or otherwise assume, 
                        net, combine, or consolidate the risk 
                        of security-based swaps entered into by 
                        any such financial entity, except one 
                        that is an affiliate that qualifies for 
                        the exception under subparagraph (A).
                  [(C)] (E) Transition rule for affiliates.--An 
                affiliate, subsidiary, or a wholly owned entity 
                of a person that qualifies for an exception 
                under subparagraph (A) and is predominantly 
                engaged in providing financing for the purchase 
                or lease of merchandise or manufactured goods 
                of the person shall be exempt from the margin 
                requirement described in section 15F(e) and the 
                clearing requirement described in subsection 
                (a) with regard to security-based swaps entered 
                into to mitigate the risk of the financing 
                activities for not less than a 2-year period 
                beginning on the date of enactment of this 
                subparagraph.
                  (F) Risk management program.--Any security-
                based swap entered into by an affiliate that 
                qualifies for the exception in subparagraph (A) 
                shall be subject to a centralized risk 
                management program of the affiliate, which is 
                reasonably designed both to monitor and manage 
                the risks associated with the security-based 
                swap and to identify each of the affiliates on 
                whose behalf a security-based swap was entered 
                into.
          (5) Election of counterparty.--
                  (A) Security-based swaps required to be 
                cleared.--With respect to any security-based 
                swap that is subject to the mandatory clearing 
                requirement under subsection (a) and entered 
                into by a security-based swap dealer or a major 
                security-based swap participant with a 
                counterparty that is not a swap dealer, major 
                swap participant, security-based swap dealer, 
                or major security-based swap participant, the 
                counterparty shall have the sole right to 
                select the clearing agency at which the 
                security-based swap will be cleared.
                  (B) Security-based swaps not required to be 
                cleared.--With respect to any security-based 
                swap that is not subject to the mandatory 
                clearing requirement under subsection (a) and 
                entered into by a security-based swap dealer or 
                a major security-based swap participant with a 
                counterparty that is not a swap dealer, major 
                swap participant, security-based swap dealer, 
                or major security-based swap participant, the 
                counterparty--
                          (i) may elect to require clearing of 
                        the security-based swap; and
                          (ii) shall have the sole right to 
                        select the clearing agency at which the 
                        security-based swap will be cleared.
          (6) Abuse of exception.--The Commission may prescribe 
        such rules or issue interpretations of the rules as the 
        Commission determines to be necessary to prevent abuse 
        of the exceptions described in this subsection. The 
        Commission may also request information from those 
        persons claiming the clearing exception as necessary to 
        prevent abuse of the exceptions described in this 
        subsection.
  (h) Trade Execution.--
          (1) In general.--With respect to transactions 
        involving security-based swaps subject to the clearing 
        requirement of subsection (a)(1), counterparties 
        shall--
                  (A) execute the transaction on an exchange; 
                or
                  (B) execute the transaction on a security-
                based swap execution facility registered under 
                section 3D or a security-based swap execution 
                facility that is exempt from registration under 
                section 3D(e).
          (2) Exception.--The requirements of subparagraphs (A) 
        and (B) of paragraph (1) shall not apply if no exchange 
        or security-based swap execution facility makes the 
        security-based swap available to trade or for security-
        based swap transactions subject to the clearing 
        exception under subsection (g).
  (i) Board Approval.--Exemptions from the requirements of this 
section to clear a security-based swap or execute a security-
based swap through a national securities exchange or security-
based swap execution facility shall be available to a 
counterparty that is an issuer of securities that are 
registered under section 12 or that is required to file reports 
pursuant to section 15(d), only if an appropriate committee of 
the issuer's board or governing body has reviewed and approved 
the issuer's decision to enter into security-based swaps that 
are subject to such exemptions.
  (j) Designation of Chief Compliance Officer.--
          (1) In general.--Each registered clearing agency 
        shall designate an individual to serve as a chief 
        compliance officer.
          (2) Duties.--The chief compliance officer shall--
                  (A) report directly to the board or to the 
                senior officer of the clearing agency;
                  (B) in consultation with its board, a body 
                performing a function similar thereto, or the 
                senior officer of the registered clearing 
                agency, resolve any conflicts of interest that 
                may arise;
                  (C) be responsible for administering each 
                policy and procedure that is required to be 
                established pursuant to this section;
                  (D) ensure compliance with this title 
                (including regulations issued under this title) 
                relating to agreements, contracts, or 
                transactions, including each rule prescribed by 
                the Commission under this section;
                  (E) establish procedures for the remediation 
                of noncompliance issues identified by the 
                compliance officer through any--
                          (i) compliance office review;
                          (ii) look-back;
                          (iii) internal or external audit 
                        finding;
                          (iv) self-reported error; or
                          (v) validated complaint; and
                  (F) establish and follow appropriate 
                procedures for the handling, management 
                response, remediation, retesting, and closing 
                of noncompliance issues.
          (3) Annual reports.--
                  (A) In general.--In accordance with rules 
                prescribed by the Commission, the chief 
                compliance officer shall annually prepare and 
                sign a report that contains a description of--
                          (i) the compliance of the registered 
                        clearing agency or security-based swap 
                        execution facility of the compliance 
                        officer with respect to this title 
                        (including regulations under this 
                        title); and
                          (ii) each policy and procedure of the 
                        registered clearing agency of the 
                        compliance officer (including the code 
                        of ethics and conflict of interest 
                        policies of the registered clearing 
                        agency).
                  (B) Requirements.--A compliance report under 
                subparagraph (A) shall--
                          (i) accompany each appropriate 
                        financial report of the registered 
                        clearing agency that is required to be 
                        furnished to the Commission pursuant to 
                        this section; and
                          (ii) include a certification that, 
                        under penalty of law, the compliance 
                        report is accurate and complete.

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