HR 4541 IH

To reauthorize and amend the Commodity Exchange Act to promote legal certainty, enhance competition, and reduce systemic risk in markets for futures and over-the-counter derivatives, and for other purposes.

To reauthorize and amend the Commodity Exchange Act to promote legal certainty, enhance competition, and reduce systemic risk in markets for futures and over-the-counter derivatives, and for other purposes.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

(a) SHORT TITLE- This Act may be cited as the `Commodity Futures Modernization Act of 2000'.

(b) TABLE OF CONTENTS- The table of contents of this Act is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. Purposes.

Sec. 3. Definitions.

Sec. 4. Agreements, contracts, and transactions in foreign currency, government securities, and certain other commodities.

Sec. 5. Legal certainty for excluded derivative transactions.

Sec. 6. Excluded electronic trading facilities.

Sec. 7. Hybrid instruments.

Sec. 8. Futures on securities.

Sec. 9. Transactions in exempt commodities.

Sec. 10. Protection of the public interest.

Sec. 11. Prohibited transactions.

Sec. 12. Designation of boards of trade as contract markets.

Sec. 13. Derivatives transaction execution facilities.

Sec. 14. Derivatives clearing organizations.

Sec. 15. Common provisions applicable to registered entities.

Sec. 16. Exempt boards of trade.

Sec. 17. Suspension or revocation of designation as contract market.

Sec. 18. Authorization of appropriations.

Sec. 19. Preemption.

Sec. 20. Predispute resolution agreements for institutional customers.

Sec. 21. Consideration of costs and benefits and antitrust laws.

Sec. 22. Contract enforcement between eligible counterparties.

Sec. 23. Rule of construction.

Sec. 24. Technical and conforming amendments.

Sec. 25. Effective date.

SEC. 2. PURPOSES.

The purposes of this Act are--

(1) to reauthorize the Commodity Exchange Act (7 U.S.C. 1 et seq.);

(2) to streamline and eliminate unnecessary regulation for the commodity futures exchanges and other entities regulated under the Commodity Exchange Act;

(3) to transform the role of the Commodity Futures Trading Commission in its oversight of the futures markets;

(4) to provide a legislative and regulatory framework for allowing the trading of futures on securities;

(5) to provide the Commission jurisdiction over the retail foreign exchange market and bucket shops that are not otherwise regulated;

(6) to promote innovation for futures and derivatives and to reduce systemic risk by enhancing legal certainty in the markets for certain futures and derivatives transactions;

(7) to reduce systemic risk and provide greater stability to markets during times of market disorder by allowing the clearing of transactions in over-the-counter derivatives through appropriately regulated clearing organizations; and

(8) to enhance the competitive position of United States financial institutions and financial markets.

SEC. 3. DEFINITIONS.

Section 1a of the Commodity Exchange Act (7 U.S.C. 1a) is amended--

(1) by redesignating paragraphs (8) through (12), (13) through (15), and (16) as paragraphs (16) through (20), (22) through (24), and (29), respectively;

(2) by inserting after paragraph (7) the following:

`(8) DERIVATIVES CLEARING ORGANIZATION-

`(A) IN GENERAL- The term `derivatives clearing organization' means a clearinghouse, clearing association, clearing corporation, or similar entity, facility, system, or organization that, with respect to a derivative agreement, contract, or transaction (other than a security)--

`(i) enables each party to the derivative agreement, contract, or transaction to substitute, through novation or otherwise, the credit of the derivatives clearing organization for the credit of the parties;

`(ii) arranges or provides, on a multilateral basis, for the settlement or netting of obligations resulting from such agreements, contracts, or transactions executed by parties in the derivatives clearing organization; or

`(iii) otherwise provides clearing services or arrangements that mutualize or transfer among parties in the derivatives clearing organization the credit risk arising from such agreements, contracts, or transactions executed by the parties.

`(B) EXCLUSIONS- The term `derivatives clearing organization' does not include an entity, facility, system, or organization solely because it arranges or provides for--

`(i) settlement, netting, or novation of obligations resulting from agreements, contracts, or transactions, on a bilateral basis and without a centralized counterparty;

`(ii) settlement or netting of cash payments through an interbank payment system; or

`(iii) settlement, netting, or novation of obligations resulting from a sale of a commodity in a transaction in the spot market for the commodity.

`(9) ELECTRONIC TRADING FACILITY- The term `electronic trading facility' means a trading facility that--

`(A) operates by means of an electronic network; and

`(B) maintains a real-time audit trail of bids, offers, and the matching of orders or the execution of transactions.

`(10) ELIGIBLE CONTRACT PARTICIPANT- The term `eligible contract participant' means--

`(A) acting for its own account--

`(i) a financial institution;

`(ii) an insurance company regulated by a State (including a subsidiary or affiliate of such an insurance company);

`(iii) an investment company subject to regulation under the Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.) or a foreign person performing a similar role or function subject as such to foreign regulation (regardless of whether each investor in the investment company or the foreign person is itself an eligible contract participant);

`(iv) a commodity pool that--

`(I) has total assets exceeding $5,000,000; and

`(II) is formed and operated by a person subject to regulation under this Act or a foreign person performing a similar role or function subject as such to foreign regulation (regardless of whether each investor in the commodity pool or the foreign person is itself an eligible contract participant);

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

`(I) that has total assets exceeding $10,000,000;

`(II) the obligations of which under an agreement, contract, or transaction are guaranteed or otherwise supported by a letter of credit or keepwell, support, or other agreement by an entity described in subclause (I), in clause (i), (ii), (iii), (iv), or (vii), or in subparagraph (C); or

`(III) that--

`(bb) enters into an agreement, contract, or transaction in connection with the conduct of the entity's business or to manage the risk associated with an asset or liability owned or incurred or reasonably likely to be owned or incurred by the entity in the conduct of the entity's business;

`(vi) an employee benefit plan subject to the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1001 et seq.) or a foreign person performing a similar role or function subject as such to foreign regulation--

`(I) that has total assets exceeding $5,000,000; or

`(II) the investment decisions of which are made by--

`(bb) a foreign person performing a similar role or function subject as such to foreign regulation;

`(cc) a financial institution; or

`(dd) an insurance company regulated by a State (including a subsidiary or affiliate of such an insurance company);

`(vii)(I) a governmental entity (including the United States, a State, or a foreign government) or political subdivision of a governmental entity;

`(II) a multinational or supranational government entity; or

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

`(viii) a broker or dealer subject to regulation under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) or a foreign person performing a similar role or function subject as such to foreign regulation, except that, if the broker or dealer or foreign person is a natural person or proprietorship, the broker or dealer or foreign person shall not be considered to be an eligible contract participant unless the broker or dealer or foreign person also meets the requirements of clause (v) or (xi);

`(ix) a futures commission merchant subject to regulation under this Act or a foreign person performing a similar role or function subject as such to foreign regulation, except that, if the futures commission merchant or foreign person is a natural person or proprietorship, the futures commission merchant or foreign person shall not be considered to be an eligible contract participant unless the futures commission merchant or foreign person also meets the requirements of clause (v) or (xi);

`(x) a floor broker or floor trader subject to regulation under this Act in connection with any transaction that takes place on or through the facilities of a registered entity or an exempt board of trade, or any affiliate thereof, on which such person regularly trades; or

`(xi) a natural person with total assets exceeding $10,000,000;

`(B)(i) a person described in any of clauses (i) through (x) of subparagraph (A) or

`(ii) an investment adviser subject to regulation under the Investment Advisors Act of 1940, a commodity trading advisor subject to regulation under this Act, a foreign person performing a similar role or function subject as such to foreign regulation, or a person described in any of clauses (i) through (x) of subparagraph (A) or in subparagraph (C), in any such case acting as investment manager or fiduciary (but excluding a person acting as broker or performing an equivalent agency function) for another person described in subparagraph (A) or (C) and who is authorized by such person to commit such person to the transaction;

`(C) any other person that the Commission determines to be eligible in light of the financial or other qualifications of the person.

`(11) ENERGY COMMODITY- The term `energy commodity' means coal, condensates, crude oil, electricity, natural gas, or natural gas liquids.

`(12) EXCLUDED COMMODITY- The term `excluded commodity' means any commodity other than an agricultural commodity enumerated in paragraph (3) or an exempt commodity.

`(13) EXEMPT COMMODITY- The term `exempt commodity' means an energy commodity or a metal commodity.

`(14) FINANCIAL COMMODITY- The term `financial commodity' means--

`(A) an interest rate, exchange rate, currency, security, security index, credit risk, debt or equity instrument, or widely published index or measure of inflation; or

`(B) any other rate, differential, index, or measure of economic risk, return, or value (excluding any rate, differential, index, or measure based on a commodity not described in subparagraph (A) that has a finite supply).

`(15) FINANCIAL INSTITUTION- The term `financial institution' means--

`(A) a corporation operating under the fifth undesignated paragraph of section 25 of the Federal Reserve Act (12 U.S.C. 603), commonly known as `an agreement corporation';

`(B) a corporation organized under section 25A of the Federal Reserve Act (12 U.S.C. 611 et seq.), commonly known as an `Edge Act corporation';

`(C) an institution that is regulated by the Farm Credit Administration;

`(D) a Federal credit union or State credit union (as defined in section 101 of the Federal Credit Union Act (12 U.S.C. 1752));

`(E) a depository institution (as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813));

`(F) a foreign bank or a branch or agency of a foreign bank (each as defined in section 1(b) of the International Banking Act of 1978 (12 U.S.C. 3101(b)));

`(G) a trust company; or

`(H) a similarly regulated subsidiary or affiliate of an entity described in any of subparagraphs (A) through (F).';

(3) by inserting after paragraph (20) (as redesignated by paragraph (1)) the following:

`(21) HYBRID INSTRUMENT- The term `hybrid instrument' means a deposit (as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813)) offered by a financial institution, or a security, having 1 or more payments indexed to the value, level, or rate of 1 or more commodities.';

(4) by inserting after paragraph (24) (as redesignated by paragraph (1)) the following:

`(25) METAL COMMODITY- The term `metal commodity' means aluminum, copper, gold, palladium, platinum, or silver.

`(26) NONEXEMPT SECURITY- The term `nonexempt security' means a security that is not an exempted security under section 3 of the Securities Act of 1933 or section 3(a)(12) of the Securities Exchange Act of 1934 (other than any municipal security, as defined in section 3(a)(29) of the Securities Exchange Act of 1934).

`(27) OPTION- The term `option' means an agreement, contract, or transaction that 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.'

`(28) ORGANIZED EXCHANGE- The term `organized exchange' means a trading facility that--

`(A) permits trading--

`(i) by or on behalf of a person that is not an eligible contract participant; or

`(ii) by persons other than on a bona fide principal-to-principal basis; or

`(B) has adopted (directly or through another nongovernmental entity) rules that--

`(i) govern the conduct of participants, other than rules that govern the submission of orders or execution of transactions on the trading system; or

`(ii) include disciplinary sanctions other than the exclusion of participants from trading.'; and

(5) by adding at the end the following:

`(30) REGISTERED ENTITY- The term `registered entity' means--

`(A) a board of trade designated as a contract market under section 5;

`(B) a derivatives transaction execution facility registered under section 5a; or

`(C) a derivatives clearing organization registered under section 5b.

`(31) SECURITY- The term `security' has the meaning given the term in section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)).

`(32) TRADING FACILITY-

`(A) IN GENERAL- The term `trading facility' means a person or group of persons that constitutes, maintains, or provides a physical or electronic facility or system in which multiple participants have the ability to execute or trade agreements, contracts, or transactions by accepting bids and offers made by other participants that are open to multiple participants in the facility or system.

`(B) EXCLUSIONS- The term `trading facility' does not include--

`(i) a person or group of persons solely because the person or group of persons constitutes, maintains, or provides an electronic facility or system that enables participants to negotiate the terms of and enter into bilateral transactions as a result of communications exchanged by the parties and not from interaction of multiple orders within a predetermined, nondiscretionary automated trade matching algorithm;

`(ii) a government securities dealer or government securities broker, to the extent that the dealer or broker executes or trades agreements, contracts, or transactions in government securities, or assists persons in communicating about, negotiating, entering into, executing, or trading an agreement, contract, or transaction in government securities (as the terms `government securities dealer', `government securities broker', and `government securities' are defined in section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a))); or

`(iii) facilities on which bids and offers, and acceptances of bids and offers effected on the facility, are not binding.'.

SEC. 4. AGREEMENTS, CONTRACTS, AND TRANSACTIONS IN FOREIGN CURRENCY, GOVERNMENT SECURITIES, AND CERTAIN OTHER COMMODITIES.

Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a) is amended by adding at the end the following:

`(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 a financial commodity; or

`(G) mortgages or mortgage purchase commitments.

`(2) COMMISSION JURISDICTION-

`(A) AGREEMENTS, CONTRACTS, AND TRANSACTIONS THAT ARE FUTURES 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 thereon), or an option on a commodity (other than foreign currency or a security), that is executed or traded on an organized exchange; or

`(ii) an option on foreign currency and is executed or traded on an organized exchange that is not a national securities exchange.

`(B) AGREEMENTS, CONTRACTS, AND TRANSACTIONS IN RETAIL FOREIGN CURRENCY- 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 for future delivery (or an option on such a contract); 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--

`(I) a financial institution;

`(II) a broker or dealer registered under section 15(b) or 15C of the Securities Exchange Act of 1934 (15 U.S.C. 78o(b), 78o-5);

`(III) an associated person of a broker or dealer registered under section 15(b) 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 registered person 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)) or section 4f(c)(2)(B) of this Act;

`(IV) an insurance company that is subject to State regulation (including a subsidiary or affiliate of such an insurance company);

`(V) a financial holding company (as defined in section 2 of the Bank Holding Company Act of 1956); or

`(VI) an investment bank holding company (as defined in section 17(i) of the Securities Exchange Act of 1934).'.

SEC. 5. LEGAL CERTAINTY FOR EXCLUDED DERIVATIVE TRANSACTIONS.

Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a) (as amended by section 4) is amended by adding at the end the following:

`(d) EXCLUDED DERIVATIVE TRANSACTIONS-

`(1) IN GENERAL- Nothing in this Act (other than section 5b or 12(e)(2)(B)) governs or applies to an agreement, contract, or transaction in an excluded commodity if--

`(A) the agreement, contract, or transaction is entered into only between persons that are eligible contract participants at the time at which the persons enter into the agreement, contract, or transaction; and

`(B) the agreement, contract, or transaction is not executed or traded on a trading facility.

`(2) ELECTRONIC TRADING FACILITY EXCLUSION- Nothing in this Act (other than section 5b or 12(e)(2)(B)) governs or applies to an agreement, contract, or transaction in an excluded commodity if--

`(A) the agreement, contract, or transaction is entered into on a bona fide principal-to-principal basis between parties trading for their own accounts or as described in section 1a(10)(B)(ii) of this Act;

`(B) the agreement, contract, or transaction is entered into only between persons that are eligible contract participants (as defined in sections 1a(10)(A), (B)(ii), and (C)) at the time at which the persons enter into the agreement, contract, or transaction; and

`(C) the agreement, contract, or transaction is executed or traded on an electronic trading facility.'.

SEC. 6. EXCLUDED ELECTRONIC TRADING FACILITIES.

Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a) (as amended by section 5) is amended by adding at the end the following:

`(e) EXCLUDED ELECTRONIC TRADING FACILITIES-

`(1) IN GENERAL- Nothing in this Act (other than section 12(e)(2)(B)) governs or is applicable to an electronic trading facility that limits transactions authorized to be conducted on its facilities to those satisfying the requirements of sections 2(d)(2) and 2(h)(1)(B) of this Act.

`(2) EFFECT ON AUTHORITY TO ESTABLISH AND OPERATE- Nothing in this Act shall prohibit a board of trade designated by the Commission as a contract market or derivatives transaction execution facility, or an exempt board of trade, from establishing and operating an excluded electronic trading facility excluded under this Act pursuant to paragraph (1).'.

SEC. 7. HYBRID INSTRUMENTS.

Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a) (as amended by section 6) is amended by adding at the end the following:

`(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 or depository instrument.

`(2) PREDOMINANCE- A hybrid instrument shall be considered to be predominantly a security or depository instrument 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 for future delivery of a commodity (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.'.

SEC. 8. FUTURES ON SECURITIES.

Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a) (as amended by section 7) is amended by adding at the end the following:

`(g) Notwithstanding any other provision of law:

`(1) 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 the transaction acquires 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 securities and any interest in or based on the value of securities.

`(2) Nothing in this subsection governs or applies to--

`(A) an agreement, contract, or transaction in a commodity that is excluded under subsection (c) or (d); or

`(B) a hybrid instrument that is covered by an exclusion under subsection (f) or an exemption granted by the Commission under section 4(c) (whether or not the hybrid instrument is otherwise subject to this Act).

`(3) Except as provided in paragraph (4) of this subsection, or unless excluded by paragraph (2) of this subsection, a person shall not offer to enter into, enter into, or confirm the execution of any contract of sale (or option on the contract) for future delivery of any security or interest in or based on the value of a nonexempt security.

`(4)(A) Except as excluded by paragraph (2) of this subsection, 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 under section 5 or register the board of trade as a derivatives transaction execution facility under section 5a in, contracts of sale (or options on the contracts) for future delivery of 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), including any group or index of securities and any interest in or based on the value of securities.

`(B) The Commission shall not designate a board of trade as a contract market under section 5 or register a board of trade as a derivatives transaction execution facility under section 5a with respect to any such contracts of sale (or options on the contracts) for future delivery unless the board of trade demonstrates and the Commission expressly finds that the specific contract (or option on the contract) with respect to which the application for the designation or recognition has been made meets the following requirements:

`(i) Settlement of or delivery on the contract (or option on the contract) shall be effected in cash or by means other than the transfer or receipt of a nonexempt security.

`(ii) SUSCEPTIBILITY TO PRICE MANIPULATION- Trading in a contract (or option on such a contract) described in subparagraph (A) shall not be readily susceptible to--

`(I) manipulation of the price of the contract (or option on such a contract); or

`(II) causing or being used in the manipulation of the price of any underlying security, option on a security, or option on a group or index that includes a security.

`(iii) If the contract is based on a single nonexempt security, an option on the security underlying the contract would meet all Securities and Exchange Commission requirements for listing on a national securities exchange.

`(iv) If the contract is based on any group or index of nonexempt securities comprised of fewer than 5 securities, or on an index in which a single nonexempt security predominates, an option on each security comprising the group or index would meet all requirements for listing on a national securities exchange.

`(v) The contract will be traded on a board of trade that establishes the level of margin for futures contracts (or options on the contracts) based on a single nonexempt security, an index of fewer than 5 nonexempt securities, or an index in which a single nonexempt security predominates, that are no less than the level of margin on comparable option contracts listed on any national securities exchange.

`(vi) The contract will be traded on a board of trade that prohibits a person who acts as a floor broker for any contract of sale (or options on the contract) for future delivery of a nonexempt security, an index based on fewer than 5 nonexempt securities, or an index in which a single nonexempt security predominates, from trading that contract for the broker's own account during the same trading session.

`(vii) The contract will be traded on a board of trade that collects, maintains, and promptly provides to the Securities and Exchange Commission such information as the Commission and the Securities and Exchange Commission jointly consider necessary to perform the enforcement responsibilities described in paragraph (6).

`(5) The Commission shall consult with the Securities and Exchange Commission with respect to any application submitted by a board of trade for designation as a contract market or derivatives transaction execution facility with respect to any contract of sale (or option on the contract) for future delivery of a nonexempt security or a group or

`(6) Notwithstanding any other provision of this Act, the Securities and Exchange Commission may enforce against a person that purchases or sells any contract of sale (or option on the contract) for future delivery of any nonexempt security, any index comprised of fewer than 5 nonexempt securities, or any index in which a single nonexempt security predominates to the same extent as if the person had purchased or sold an option on the security or index under the following provisions of the securities laws and regulations with respect to the following categories of conduct:

`(A) Section 10(b) and 21A of the Securities Exchange Act of 1934 (15 U.S.C. 78j(b), 78u-1) with respect to insider trading.

`(B) Section 16(b) of such Act (15 U.S.C. 78p(b)) with respect to unfair use of information in short swing trading by a corporate insider.

`(C) Section 9 of such Act (15 U.S.C. 78i) with respect to manipulation of securities prices.

`(D) Section 10(b) of such Act (15 U.S.C. 78J(b)) and section 204A of the Investment Adviser's Act of 1940 (15 U.S.C. 80b-4a) with respect to frontrunning.

`(E) Section 14 of the Securities Exchange Act of 1934 (15 U.S.C. 78n) with respect to the pricing and integrity of tender offers.

`(F) Rule 144 of the rules of the Securities and Exchange Commission (17 C.F.R. 230.144) with respect to trading in restricted securities.

`(7)(A) Notwithstanding any other provision of this Act, any contract market or derivatives transaction execution facility in a stock or stock index futures contract (or option thereon) 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 the nonexempt stock or stock index futures contract (or option on the contract).

`(B) The Board may at any time request any contract market or derivatives transaction execution facility to set the level of margin for any stock or stock index futures contract (or option on the contract) 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.

`(C) Subject to such conditions as the Board may determine, the Board may delegate any or all of its authority under this paragraph to the Commission or an intermarket margin board as provided in subparagraph (D).

`(D) INTERMARKET MARGIN BOARD-

`(i) ESTABLISHMENT- With the concurrence of the Securities and Exchange Commission and the Commission, the Board may establish an intermarket margin board, consisting of representatives of any or all of the three agencies.

`(ii) DUTIES- The intermarket margin board may set and maintain margin levels and rules pertaining to margin for futures on a single nonexempt security, an index of fewer than 5 nonexempt securities, or an index in which a single nonexempt security predominates, listed on a contract market or derivatives transaction execution facility.

`(E) This paragraph shall not be construed to supersede or limit the authority granted to the Commission in section 8a(9) to direct a contract market or derivatives transaction execution facility, on finding an emergency to exist, to raise temporary emergency margin levels on any futures contract or option on the contract covered by this paragraph.

`(F) Any action taken by the Board under this paragraph, or by the Commission acting under the delegation of authority under subparagraph (C), directing a contract market or derivatives transaction execution facility to alter or supplement a contract market or derivatives transaction execution facility rule shall be subject to review only in the United

`(8) This subsection shall not be construed to prohibit--

`(A) an agreement, contract, or transaction excluded from this Act by paragraph (2); or

`(B) any hybrid instrument that is covered by the terms of any exemption granted by the Commission under section 4(c) (whether or not any such hybrid instrument is otherwise subject to this Act).

`(9)(A) No futures commission merchant or introducing broker shall recommend to any customer the purchase or sale of any contract of sale for future delivery of a single nonexempt security, an index of fewer than 5 nonexempt securities, or an index in which a single nonexempt security predominates, unless the futures commission merchant or introducing broker complies with the rules described in subparagraph (B) of a registered futures association of which such person is a member.

`(B) Within 9 months of the date of enactment of the Commodity Futures Modernization Act of 2000 a registered futures association shall adopt rules requiring a futures commission merchant or an introducing broker which recommends to any customer the purchase or sale of any contract of sale for future delivery of a single nonexempt security, an index of fewer than 5 nonexempt securities, or an index in which a single nonexempt security predominates to ascertain through reasonable due diligence that the recommendation is suitable for that customer in light of the customer's financial position and trading goals. The registered futures association shall consult with the Commission and the Securities and Exchange Commission prior to the adoption of any such rule, and shall submit any such rule to the Commission for approval in the manner and according to the procedures described in section 17(j) of this Act, provided, that in such case the rule shall become effective if the Commission fails to disapprove such rule within 90 days of submission.'.

SEC. 9. TRANSACTIONS IN EXEMPT COMMODITIES.

Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 3, 4, 4a) (as amended by section 8) is amended by adding at the end the following.

`(h) LEGAL CERTAINTY FOR CERTAIN TRANSACTIONS IN EXEMPT COMMODITIES-

`(1) Except as provided in paragraph (2) of this subsection, nothing in this Act shall apply to a contract, agreement or transaction in an exempt commodity which--

`(A)(i) is entered into between persons that are eligible contract participants at the time they enter into the agreement, contract, or transaction; and

`(ii) is not entered into on a trading facility; or

`(B)(i) is entered into on a bona fide principal-to-principal basis between parties trading for their own accounts (or as described in section 1a(10)(B)(ii) of this Act);

`(ii) is entered into between persons that are eligible contract participants (as defined in sections 1a(10)(A), (B)(ii) or (C) of this Act) at the time at which the persons enter into the agreement, contract, or transaction; and

`(iii) is executed or traded on an electronic trading facility.

`(2) An agreement, contract, or transaction described in paragraph (1) of this subsection shall be subject to--

`(A) sections 5b and 12(e)(2)(B) of this Act;

`(B) sections 4b and 4n of this Act and the regulations of the Commission pursuant to section 4c(b) of this Act proscribing fraud in connection with commodity option transactions;

`(C) sections 6(c) and 9(a)(2) of this Act to the extent these provisions prohibit manipulation of the market price of any commodity in interstate commerce; and

`(D) such rules and regulations as the Commission may prescribe in the case of any agreement, contract, or transaction described in paragraph (1)(B) of this subsection, if necessary to ensure timely dissemination by the electronic trading facility of price, trading volume, and other trading data to the extent appropriate to the exempt commodity and electronic trading facility, if the Commission determines the electronic trading facility performs a significant price discovery function for related transactions in the exempt commodity underlying the agreement, contract, or transaction.'.

SEC. 10. PROTECTION OF THE PUBLIC INTEREST.

The Commodity Exchange Act is amended by striking section 3 (7 U.S.C. 5) and inserting the following:

`SEC. 3. FINDINGS AND PURPOSE.

`(a) FINDINGS- The futures contracts and options contracts that are subject to this Act are entered into regularly in interstate and international commerce and are affected with a national public interest by providing a means for managing and assuming price risks, discovering prices, and disseminating pricing information through trading in liquid, fair and financially secure trading facilities.

`(b) PURPOSE- It is the purpose of this Act to serve the public interests described in subsection (a) through a system of effective self-regulation of trading facilities,

SEC. 11. PROHIBITED TRANSACTIONS.

Section 4c of the Commodity Exchange Act (7 U.S.C. 6c) is amended by striking `SEC. 4c.' and all that follows through subsection (a) and inserting the following:

`SEC. 4c. PROHIBITED TRANSACTIONS.

`(a) IN GENERAL-

`(1) PROHIBITION- It shall be unlawful for any person to offer to enter into, enter into, or confirm the execution of a transaction described in paragraph (2) involving any commodity if the transaction is used or may be used to--

`(A) hedge any transaction in interstate commerce in the commodity or the product or byproduct of the commodity;

`(B) determine the price basis of any such transaction in interstate commerce in the commodity; or

`(C) deliver any such commodity sold, shipped, or received in interstate commerce for the execution of the transaction.

`(2) TRANSACTION- A transaction referred to in paragraph (1) is a transaction that--

`(A)(i) is, is of the character of, or is commonly known to the trade as, a `wash sale', `cross trade', or `accommodation trade'; or

`(ii) is a fictitious sale; or

`(B) is used to cause any price to be reported, registered, or recorded that is not a true and bona fide price.

`(3) EFFECT OF SUBSECTION- Nothing in this subsection--

`(A) makes unlawful an exchange of--

`(i) futures in connection with a cash commodity transaction;

`(ii) futures for cash commodities;

`(iii) transfer trades or office trades; or

`(iv) futures for swaps;

if the exchange is made in accordance with rules of the contract market or derivatives transaction execution facility that apply to such transactions, and those rules have been approved by the Commission; or

`(B) makes it unlawful for a futures commission merchant, acting as principal or agent, to enter into, execute, or confirm the execution of a contract for the purchase or sale of a commodity for future delivery if the contract is entered into, executed, reported, recorded, and cleared in accordance with the rules of a contract market or derivatives transaction execution facility.'.

SEC. 12. DESIGNATION OF BOARDS OF TRADE AS CONTRACT MARKETS.

The Commodity Exchange Act is amended--

(1) by redesignating section 5b (7 U.S.C. 7b) as section 5e; and

(2) by striking sections 5 and 5a (7 U.S.C. 7, 7a) and inserting the following:

`SEC. 5. DESIGNATION OF BOARDS OF TRADE AS CONTRACT MARKETS.

`(a) APPLICATIONS- A board of trade applying to the Commission for designation as a contract market shall submit an application to the Commission that includes any relevant materials and records the Commission may require consistent with this Act.

`(b) CRITERIA FOR DESIGNATION-

`(1) IN GENERAL- To be designated as a contract market, the board of trade shall demonstrate to the Commission that the board of trade meets the criteria specified in this subsection.

`(2) PREVENTION OF MARKET MANIPULATION- The board of trade shall have the capacity to prevent market manipulation through market surveillance, compliance, and enforcement practices and procedures, including methods for conducting real-time monitoring of trading and comprehensive and accurate trade reconstructions.

`(3) FAIR AND EQUITABLE TRADING- The board of trade shall establish and enforce trading rules to ensure fair and equitable trading through the facilities of the contract market, and the capacity to detect, investigate, and discipline any person that violates the rules.

`(4) TRADE EXECUTION FACILITY- The board of trade shall--

`(A) establish and enforce rules defining, or specifications detailing, the manner of operation of the trade execution facility maintained by the board of trade, including rules or specifications describing the operation of any electronic matching platform; and

`(B) demonstrate that the trading facility operates in accordance with the rules or specifications.

`(5) FINANCIAL INTEGRITY OF TRANSACTIONS- The board of trade shall establish and enforce rules and procedures for ensuring the financial integrity of transactions entered into by or through the facilities of the contract market.

`(6) DISCIPLINARY PROCEDURES- The board of trade shall establish and enforce disciplinary procedures that authorize the board of trade to discipline, suspend, or expel members or market participants that violate the rules of the board of trade, or similar methods for performing the same functions, including delegation of the functions to third parties.

`(7) PUBLIC ACCESS- The board of trade shall provide the public with access to the rules, regulations, and contract specifications of the board of trade.

`(8) ABILITY TO OBTAIN INFORMATION- The board of trade shall establish and enforce rules that will allow the board of trade to obtain any necessary information to perform any of the functions described in this subsection, including the capacity to carry out such international information-sharing agreement as the Commission may require.

`(c) EXISTING CONTRACT MARKETS- A board of trade that is designated as a contract market on the effective date of the Commodity Futures Modernization Act of 2000 shall be considered to be a designated contract market under this section.

`(d) CORE PRINCIPLES FOR CONTRACT MARKETS-

`(1) IN GENERAL- To maintain the designation of a board of trade as a contract market, a board of trade shall comply with the core principles specified in this subsection.

`(2) COMPLIANCE WITH RULES- The board of trade shall monitor and enforce compliance with the rules of the contract market, including the terms and conditions of any contracts to be traded and any limitations on access to the contract market.

`(3) CONTRACTS NOT READILY SUBJECT TO MANIPULATION- The board of trade shall list on the contract market only contracts that are not readily susceptible to manipulation.

`(4) MONITORING OF TRADING- The board of trade shall monitor trading to prevent manipulation, price distortion, and disruptions of the delivery or cash-settlement process.

`(5) POSITION LIMITATIONS OR ACCOUNTABILITY- To reduce the potential threat of market manipulation or congestion, especially during trading in the delivery month, the board of trade shall adopt position limitations or position accountability for speculators, where necessary and appropriate.

`(6) EMERGENCY AUTHORITY- The board of trade shall adopt rules to provide for the exercise of emergency authority, in consultation or cooperation with the Commission, where necessary and appropriate, including the authority to--

`(A) liquidate or transfer open positions in any contract;

`(B) suspend or curtail trading in any contract; and

`(C) require market participants in any contract to meet special margin requirements.

`(7) AVAILABILITY OF GENERAL INFORMATION- The board of trade shall make available to market authorities, market participants, and the public information concerning--

`(A) the terms and conditions of the contracts of the contract market; and

`(B) the mechanisms for executing transactions on or through the facilities of the contract market.

`(8) DAILY PUBLICATION OF TRADING INFORMATION- The board of trade shall make public daily information on settlement prices, volume, open interest, and opening and closing ranges for actively traded contracts on the contract market.

`(9) EXECUTION OF TRANSACTIONS- The board of trade shall provide a competitive, open, and efficient market and mechanism for executing transactions.

`(10) TRADE INFORMATION- The board of trade shall maintain rules and procedures to provide for the recording and safe storage of all identifying trade information in a manner that enables the contract market to use the information for purposes of assisting in the prevention of customer and market abuses and providing evidence of any violations of the rules of the contract market.

`(11) FINANCIAL INTEGRITY OF CONTRACTS- The board of trade shall establish and enforce rules providing for the financial integrity of any contracts traded on the contract market, including rules to ensure the financial integrity of any futures commission merchants and introducing brokers and the protection of customer funds.

`(12) PROTECTION OF MARKET PARTICIPANTS- The board of trade shall establish and enforce rules to protect market participants from any abusive practices committed by any party acting as an agent for the participants.

`(13) DISPUTE RESOLUTION- The board of trade shall establish and enforce rules regarding and provide facilities for alternative dispute resolution as appropriate for market participants and any market intermediaries.

`(14) GOVERNANCE FITNESS STANDARDS- The board of trade shall establish and enforce appropriate fitness standards for directors, members of any disciplinary committee, members of the contract market, and any other persons with direct access to the facility (including any parties affiliated with any of the persons described in this paragraph).

`(15) CONFLICTS OF INTEREST- The board of trade shall establish and enforce rules to minimize conflicts of interest in the decisionmaking process of the contract market and establish a process for resolving such conflicts of interest.

`(16) COMPOSITION OF BOARDS OF MUTUALLY OWNED CONTRACT MARKETS- In the case of a mutually owned contract market, the board of trade shall ensure that the composition of the governing board reflects market participants.

`(17) RECORDKEEPING- The board of trade shall--

`(A) maintain full records of all activities related to the business of the contract market in a form and manner acceptable to the Commission for a period of at least 5 years;

`(B) make the records readily available during at least the first 2 years of the 5-year period and provide the records to the Commission at the expense of the person required to maintain the records; and

`(C) keep the records open to inspection by any representative of the Commission or the Department of Justice.

`(18) ANTITRUST CONSIDERATIONS- Unless necessary or appropriate to achieve the purposes of this Act, the board of trade shall endeavor to avoid--

`(A) adopting any rules or taking any actions that result in any unreasonable restraints of trade; or

`(B) imposing any material anticompetitive burden on trading on the contract market.'.

SEC. 13. DERIVATIVES TRANSACTION EXECUTION FACILITIES.

The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by inserting after section 5 (as amended by section 12(2)) the following:

`SEC. 5a. DERIVATIVES TRANSACTION EXECUTION FACILITIES.

`(a) IN GENERAL- In lieu of compliance with the contract market designation requirements of section 5, a board of trade may elect to operate as a registered derivatives transaction execution facility if the facility is--

`(1) designated as a contract market and meets the requirements of this section; or

`(2) registered as a derivatives transaction execution facility under subsection (c).

`(b) REQUIREMENTS FOR TRADING FUTURES CONTRACTS OR OTHER DERIVATIVES TRANSACTIONS-

`(1) IN GENERAL- A registered derivatives transaction execution facility under subsection (a) may trade any futures contract (or option on such a contract) on a security on or through the facility only by satisfying the requirements of this section.

`(2) REQUIREMENTS FOR UNDERLYING COMMODITIES- A registered derivatives transaction execution facility may trade any futures contract only if--

`(A) the underlying commodity has a nearly inexhaustible deliverable supply;

`(B) the underlying commodity has a deliverable supply that is sufficiently large that the contract is highly unlikely to be susceptible to the threat of manipulation;

`(C) the underlying commodity has no cash market; or

`(D) the Commission determines, based on the market characteristics, surveillance history, self-regulatory record, and capacity of the facility that trading in the futures contract is highly unlikely to be susceptible to the threat of manipulation.

`(3) ELIGIBLE TRADERS- To trade on a registered derivatives transaction execution facility, a person shall--

`(A) be authorized by the board of trade to trade on the facility; and

`(B)(i) be an eligible contract participant; or

`(ii) be a person trading through a futures commission merchant that--

`(I) is registered with the Commission;

`(II) is a member of a futures self-regulatory organization;

`(III) is a clearing member of a derivatives clearing organization; and

`(IV) has net capital of at least $20,000,000.

`(4) TRADING BY CONTRACT MARKETS- A board of trade that is designated as a contract market shall, to the extent that the contract market also operates a registered derivatives transaction execution facility--

`(A) provide a physical location for the contract market trading of the board of trade that is separate from trading on the derivatives transaction execution facility of the board of trade; or

`(B) if the board of trade uses the same electronic trading system for trading on the contract market and derivatives transaction execution facility of the board of trade, identify whether the electronic trading is taking place on the contract market or the derivatives transaction execution facility.

`(c) CRITERIA FOR REGISTRATION-

`(1) IN GENERAL- To be registered as a registered derivatives transaction execution facility, the board of trade shall demonstrate to the Commission that the board of trade meets the criteria specified in this paragraph.

`(2) DETERRENCE OF ABUSES- The board of trade shall establish and enforce trading rules that will deter abuses and has the capacity to detect, investigate, and enforce those rules, including means to--

`(A) obtain information necessary to perform the functions required under this section; or

`(B) use technological means to--

`(i) provide market participants with impartial access to the market; and

`(ii) capture information that may be used in establishing whether rule violations have occurred.

`(3) TRADING PROCEDURES- The board of trade shall establish and enforce rules or terms and conditions defining, or specifications detailing, trading procedures to be used in entering and executing orders traded on the facilities of the board of trade.

`(4) FINANCIAL INTEGRITY OF TRANSACTIONS- The board of trade shall establish and enforce rules or terms and conditions providing for the financial integrity of transactions entered on or through the facilities of the board of trade, including rules or terms and conditions to ensure the financial integrity of any futures commission merchants and introducing brokers and the protection of customer funds.

`(d) CORE PRINCIPLES FOR REGISTERED DERIVATIVES TRANSACTION EXECUTION FACILITIES-

`(1) IN GENERAL- To maintain the registration of a board of trade as a derivatives transaction execution facility, a board of trade shall comply with the core principles specified in this subsection.

`(2) COMPLIANCE WITH RULES- The board of trade shall monitor and enforce the rules of the facility, including any terms and conditions of any contracts traded on or through the facility and any limitations on access to the facility.

`(3) MONITORING OF TRADING- The board of trade shall monitor trading in the contracts of the facility to ensure orderly trading in the contract and to maintain an orderly market while providing any necessary trading information to the Commission to allow the Commission to discharge the responsibilities of the Commission under the Act.

`(4) DISCLOSURE OF GENERAL INFORMATION- The board of trade shall disclose publicly and to the Commission information concerning--

`(A) contract terms and conditions;

`(B) trading conventions, mechanisms, and practices;

`(C) financial integrity protections; and

`(D) other information relevant to participation in trading on the facility.

`(5) PROVISION OF TRADING INFORMATION- The board of trade shall provide to market participants on a fair, equitable, and timely basis--

`(A) information regarding prices, bids, and offers; and

`(B) for actively traded contracts, daily information on settlement prices, volume, open interest, and opening and closing ranges.

`(6) FITNESS STANDARDS- The board of trade shall establish and enforce appropriate fitness standards for directors, members of any disciplinary committee, members, and any other persons with direct access to the facility, including any parties affiliated with any of the persons described in this paragraph.

`(7) CONFLICTS OF INTEREST- The board of trade shall establish and enforce rules to minimize conflicts of interest in the decisionmaking process of the derivatives transaction execution facility and establish a process for resolving such conflicts of interest.

`(8) RECORDKEEPING- The board of trade shall--

`(A) maintain full records of all activities related to the business of the derivatives transaction execution facility in a form and manner acceptable to the Commission for a period of at least 5 years;

`(B) make the records readily available during at least the first 2 years of the 5-year period and provide the records to the Commission at the expense of the person required to maintain the records; and

`(C) keep the records open to inspection by any representatives of the Commission or the Department of Justice.

`(9) ANTITRUST CONSIDERATIONS- Unless necessary or appropriate to achieve the purposes of this Act, the board of trade shall endeavor to avoid--

`(A) adopting any rules or taking any actions that result in any unreasonable restraint of trade; or

`(B) imposing any material anticompetitive burden on trading on the derivatives transaction execution facility.

`(e) USE OF BROKER-DEALERS AND DEPOSITORY INSTITUTIONS AS INTERMEDIARIES-

`(1) IN GENERAL- A registered derivatives transaction execution facility may by rule allow a broker-dealer or depository institution that meets the requirements of paragraph (2) to--

`(A) act as an intermediary in transactions executed on the facility on behalf of customers of the broker-dealer or depository institution; and

`(B) receive funds of customers to serve as margin or security for such transactions.

`(2) REQUIREMENTS- The requirements referred to in paragraph (1) are that--

`(A) a broker-dealer be in good standing with the Securities and Exchange Commission and a depository institution be in good standing with Federal bank regulatory agencies (including the Farm Credit Administration), as applicable; and

`(B) if a broker-dealer or depository institution carries or holds customer accounts or funds for transactions on the derivatives transaction execution facility for more than 1 business day, the broker-dealer or depository institution is registered as a futures commission merchant and is a member of a registered futures association.

`(3) IMPLEMENTATION- The Commission shall cooperate and coordinate with the Securities and Exchange Commission and Federal banking regulatory

`(f) SEGREGATION OF CUSTOMER FUNDS- Not later than 180 days after the effective date of the Commodity Futures Modernization Act of 2000, consistent with regulations adopted by the Commission, a registered derivatives transaction execution facility may authorize a futures commission merchant to offer any customer of the futures commission merchant that is an eligible contract participant the right to not segregate the customer funds of the futures commission merchant for purposes of trading on or through the facilities of the registered derivatives transaction execution facility.

`(g) ELECTION TO TRADE EXCLUDED COMMODITIES-

`(1) IN GENERAL- A board of trade that is a registered derivatives transaction execution facility may trade on the facility any agreements, contracts, or transactions involving excluded commodities that are otherwise excluded from this Act under section 2(c) or 2(d).

`(2) EXCLUSIVE JURISDICTION OF THE COMMISSION- The Commission shall have exclusive jurisdiction over agreements, contracts, or transactions described in paragraph (1) to the extent that the agreements, contracts, or transactions are traded on a derivatives transaction execution facility.'.

SEC. 14. DERIVATIVES CLEARING ORGANIZATIONS.

The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by inserting after section 5a (as added by section 13) the following:

`SEC. 5b. DERIVATIVES CLEARING ORGANIZATIONS.

`(a) APPLICATION- A derivatives clearing organization for a board of trade that is designated as a contract market under section 5 or is registered as a derivatives transaction execution facility under section 5b, or for an exempt board of trade, or a derivatives clearing organization for transactions excluded by subsection (c), (d) or (h) of section 2, desiring to be registered with the Commission as a registered derivatives clearing organization may submit to the Commission an application for such registration which shall be in such form and in accordance with such procedures as the Commission may prescribe by regulation, and which shall contain the rules of the derivatives clearing organization and such other information and documents as the Commission may prescribe by regulation. An applicant may withdraw an application submitted under this subsection by filing with the Commission a written notice of withdrawal.

`(b) QUALIFICATIONS- The Commission shall not approve an application submitted under subsection (a), unless the Commission determines that--

`(1) the rules of the applicant are in accordance with such rules as the Commission may adopt with respect to--

`(A) standards of financial responsibility, operational capability, experience, competence, and conduct applicable to participants in derivatives clearing organizations;

`(B) governance of derivatives clearing organizations;

`(C) qualifications of management of derivatives clearing organization;

`(D) dues, fees, and other charges imposed by derivatives clearing organizations; and

`(E) procedures for resolving disputes and redressing grievances;

`(2) the applicant--

`(A) has sufficient financial resources, standards for participant eligibility, and adequate risk management policies and procedures

`(B) has adequate operational systems and settlement and default procedures designed to ensure orderly settlement of contracts;

`(C) has procedures and mechanisms to ensure the performance of obligations in the event of participant default;

`(D) has such other resources and mechanisms as are necessary to ensure compliance with this Act; and

`(E) meets such other requirements as the Commission may prescribe by rule or order; and

`(3) the operation of the applicant would not be inconsistent with the public interest protected by the antitrust laws.

`(c) PUBLICATION OF NOTICE OF APPLICATION- On the filing of an application under subsection (a), the Commission shall publish notice of the filing and afford interested persons an opportunity to submit written data, views, and arguments concerning the application.

`(d) DISPOSITION OF APPLICATION-

`(1) IN GENERAL- Within 90 days after the publication of a notice under subsection (c) (or within such longer period as the applicant may agree to), the Commission shall--

`(A) by order, approve the application; or

`(B) institute proceedings to determine whether to disapprove the application.

`(2) RULES APPLICABLE TO ADMINISTRATIVE DISPOSITION PROCEEDINGS-

`(A) The proceedings referred to in paragraph (1)(B) shall include notice of the grounds for disapproval under consideration and shall provide an opportunity for a hearing, and shall be concluded within 180 days after the filing of the application for registration.

`(B) At the conclusion of the proceedings, the Commission, by order, shall approve or disapprove the application.

`(C) The Commission shall approve the application unless the Commission determines that the applicant does not meet the qualifications set forth in subsection (b).

`(3) JUDICIAL REVIEW OF APPLICATION DISAPPROVAL- An applicant whose application submitted under subsection (a) is disapproved may appeal the disapproval to the United States Court of Appeals for the judicial circuit in which the applicant has its principal place of business, in accordance with the procedural requirements set forth in section 6(b).

`(e) REVOCATION OF REGISTRATION-

`(1) NOTICE- If the Commission makes a preliminary determination that finds that a registered derivatives clearing organization has ceased to exist or is operating in violation of this Act, the Commission shall notify the registered derivatives clearing organization in writing of the reasons for the preliminary determination, including any data, materials, and specific findings the Commission has relied on in reaching the preliminary determination. The Commission shall allow the registered derivatives clearing organization not fewer than 21 days to respond in writing to such a notice. The Commission may, in its discretion, extend the period of time for filing such a response.

`(2) DISCUSSIONS- After the Commission receives the response, the Commission shall promptly initiate discussions with the registered derivatives clearing organization to attempt to remedy the alleged violation in a mutually acceptable manner.

`(3) REVOCATION AUTHORITY- If, after a reasonable period of time, no mutually acceptable resolution is reached, the Commission may make a final determination to revoke the registration of the registered derivatives clearing organization under this section.

`(4) JUDICIAL REVIEW- A derivatives clearing organization may appeal a final determination to revoke its registration under this section to the United States Court of Appeals for the judicial circuit in which the derivatives clearing organization has its principal place of business, in accordance with the procedural requirements set forth in section 6(b).

`(f) RECORDKEEPING AND EXAMINATION- A registered derivatives clearing organization shall make and keep for prescribed periods such records, furnish such copies of the records, and make and disseminate such reports as the Commission prescribes by regulation or order.

`(g) AUTHORITY TO CLEAR OVER-THE-COUNTER TRANSACTIONS- A derivatives clearing organization described in subsection (a) of this section may clear an agreement, contract, or transaction excluded from this Act by subsection (c), (d) or (h) of section 2.

`(h) EXCLUSIVE JURISDICTION OF THE COMMISSION- The Commission shall have exclusive jurisdiction with respect to any registered derivatives clearing organization.

`(i) REGISTERED DERIVATIVES CLEARING ORGANIZATION- In this section, the term `registered derivatives clearing organization' means a derivatives clearing organization registered under this section.'.

SEC. 15. COMMON PROVISIONS APPLICABLE TO REGISTERED ENTITIES.

The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by inserting after section 5b (as added by section 14) the following:

`SEC. 5c. COMMON PROVISIONS APPLICABLE TO REGISTERED ENTITIES.

`(a) ACCEPTABLE BUSINESS PRACTICES UNDER CORE PRINCIPLES-

`(1) IN GENERAL- Consistent with the purposes of this Act, the Commission may issue interpretations, or approve interpretations submitted to the Commission, of sections 5(d), 5a(d), and 5b(b) to describe what would constitute an acceptable business practice under such sections.

`(2) EFFECT OF INTERPRETATION- An interpretation issued under paragraph (1) shall not provide the exclusive means for complying with such sections.

`(b) DELEGATION OF FUNCTIONS UNDER CORE PRINCIPLES-

`(1) IN GENERAL- A contract market or derivatives transaction execution facility may comply with any applicable core principle through delegation of any relevant function to a registered futures association or another registered entity.

`(2) RESPONSIBILITY- A contract market or derivatives transaction execution facility that delegates a function under paragraph (1) shall remain responsible for carrying out the function.

`(c) NEW CONTRACTS, NEW RULES, AND RULE AMENDMENTS-

`(1) IN GENERAL- Subject to paragraph (2), a registered entity may elect to list for trading any new contract or other instrument, or may elect to approve and implement any new rule or rule amendment, by providing to the Commission a written certification that the new contract, new rule, or rule amendment complies with this Act (including regulations under this Act).

`(2) PRIOR APPROVAL-

`(A) IN GENERAL- A registered entity may request that the Commission grant prior approval to any new contract or other instrument, new rule, or rule amendment.

`(B) PRIOR APPROVAL REQUIRED- Notwithstanding any other provision of this section, for three years from the effective date of the Commodity Futures Trading Modernization Act of 2000, a designated contract market shall submit to the Commission for prior approval each rule amendment that materially changes the terms and conditions in any contract of sale for future delivery of a commodity specifically enumerated in section 1a(3) of this Act (or any option thereon) traded through its facilities if such rule amendment applies to contracts and delivery months which have already been listed for trading and have substantial open interest.

`(C) DEADLINE- If prior approval is requested under subparagraph (A), the Commission shall take final action on the request not later than 90 days after submission of the request, unless the person submitting the request agrees to an extension of the time limitation established under this subparagraph.

`(3) APPROVAL- The Commission shall approve any such new contract or instrument, new rule, or rule amendment unless the Commission finds that the new contract or instrument, new rule, or rule amendment would violate this Act.

`(d) VIOLATION OF CORE PRINCIPLES-

`(1) IN GENERAL- If the Commission has reason to believe that a registered entity is violating any applicable provision specified in section 5(d), 5a(d), or 5b(b), the Commission shall notify the registered entity in writing of the reasons for the preliminary determination by the Commission of a violation, including any data, materials, and facts the Commission relied on in making the preliminary determination.

`(2) INJUNCTIVE OR ADMINISTRATIVE ACTION- The Commission may initiate an action for an injunction under section 6c or an administrative proceeding, to demonstrate, by the preponderance of the evidence, that--

`(A) the registered entity is violating any applicable provision specified in section 5(f), 5a(d), or 5b(b); and

`(B) the Commission has recommended an appropriate remedial action to remove the deficiency based on an analysis of the costs and benefits of the Commission recommendation.

`(3) BURDEN OF PROOF- In making a determination any that a registered entity is violating any applicable provision specified in section 5(d), 5a(d), or 5b(b), the Commission shall have the burden of proving that the registered entity is violating the applicable core principle.

`(e) RESERVATION OF EMERGENCY AUTHORITY- Nothing in this section shall limit or in any way affect the emergency powers of the Commission provided in section 8a(9) of this Act.'.

SEC. 16. EXEMPT BOARDS OF TRADE.

The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by inserting after section 5c (as added by section 15) the following:

`SEC. 5d. EXEMPT BOARDS OF TRADE.

`(a) IN GENERAL- Except as otherwise provided in this section, a contract of sale (or option on such a contract) of a commodity for future delivery traded on or through the facilities of an exempt board of trade shall be exempt from all provisions of this Act, other than section 2(g).

`(b) CRITERIA FOR EXEMPTION- To qualify for an exemption under subsection (a), a board of trade shall limit trading on or through the facilities of the board of trade to contracts of sale of a commodity for future delivery (or options on such contracts)--

`(1) that have--

`(A) a nearly inexhaustible deliverable supply;

`(B) a deliverable supply that is sufficiently large, and a cash market sufficiently liquid, to render any contract traded on the commodity highly unlikely to be susceptible to the threat of manipulation; or

`(C) no cash market; and

`(2) that are entered into only between persons that--

`(A) are eligible contract participants at the time at which the persons enter into the contract; or

`(B) enter into the contract or option for the benefit only of eligible contract participants.

`(c) ANTIMANIPULATION REQUIREMENTS- A party to a futures contract or related option that is traded on an exempt board of trade shall be subject to sections 4b, 4n, 6(c), and 9(a)(2), and the Commission shall enforce those provisions with respect to any such trading.

`(d) PRICE DISCOVERY- If the Commission finds that an exempt board of trade is a significant source of

`(e) JURISDICTION- The Commission shall have exclusive jurisdiction over any account, agreement, or transaction involving a contract of sale of a commodity for future delivery, or related option, to the extent that such account, agreement, or transaction is traded on an exempt board of trade.

`(f) SUBSIDIARIES- A board of trade that is designated as a contract market or registered as a derivatives transaction execution facility may operate an exempt board of trade by establishing a separate subsidiary or other legal entity and otherwise satisfying the requirements of this section.'.

SEC. 17. SUSPENSION OR REVOCATION OF DESIGNATION AS CONTRACT MARKET.

Section 5e of the Commodity Exchange Act (7 U.S.C. 7b) (as redesignated by section 12(1)) is amended to read as follows:

`SEC. 5e. SUSPENSION OR REVOCATION OF DESIGNATION AS REGISTERED ENTITY.

`The failure of a registered entity to comply with any provision of this Act, or any regulation or order of the Commission under this Act, shall be cause for the suspension of the registered entity for a period not to exceed 180 days, or revocation of designation as a registered entity in accordance with the procedures and subject to the judicial review provided in section 6(b).'.

SEC. 18. AUTHORIZATION OF APPROPRIATIONS.

Section 12(d) of the Commodity Exchange Act (7 U.S.C. 16(d)) is amended by striking `2000' and inserting `2005'.

SEC. 19. PREEMPTION.

Section 12(e) of the Commodity Exchange Act (7 U.S.C. 16(e)) is amended by striking paragraph (2) and inserting the following:

`(2) the application of any Federal or State law (including any regulation) to an agreement, contract, or transaction in or involving any commodity, product, right, service, or interest, except that this Act shall supersede and preempt--

`(A) in the case of any such agreement, contract, or transaction--

`(i) that is conducted on or subject to the rules of a registered entity or exempt board of trade;

`(ii) that is conducted on or subject to the rules of any board of trade, exchange, or market located outside the United States, or any territory or possession of the United States (in accordance with any terms or conditions specified by the Commission by regulation); and

`(iii) that is subject to regulation by the Commission under section 4c or 19; and

`(B) any State or local law that prohibits or regulates gaming or the operation of bucket shops (other than antifraud provisions of general applicability) in the case of--

`(i) an electronic trading facility under section 2(e); or

`(ii) an agreement, contract, or transaction that is excluded or exempt under section 2(c), 2(d), 2(f), or 2(h) or is covered by the terms of an exemption granted by the Commission under section 4(c) (regardless of whether any such agreement, contract, or transaction is otherwise subject to this Act); or'.

SEC. 20. PREDISPUTE RESOLUTION AGREEMENTS FOR INSTITUTIONAL CUSTOMERS.

Section 14 of the Commodity Exchange Act (7 U.S.C. 18) is amended by striking subsection (g) and inserting the following:

`(g) PREDISPUTE RESOLUTION AGREEMENTS FOR INSTITUTIONAL CUSTOMERS- Nothing in this section prohibits a registered futures commission merchant from requiring a customer that is an eligible contract participant, as a condition to the commission merchant's conducting a transaction for the customer, to enter into an agreement waiving the right to file a claim under this section.'.

SEC. 21. CONSIDERATION OF COSTS AND BENEFITS AND ANTITRUST LAWS.

Section 15 of the Commodity Exchange Act (7 U.S.C. 19) is amended by striking `SEC. 15. The Commission' and inserting the following:

`SEC. 15. CONSIDERATION OF COSTS AND BENEFITS AND ANTITRUST LAWS.

`(a) COSTS AND BENEFITS-

`(1) IN GENERAL- Before promulgating a regulation under this Act or issuing an order (except as provided in paragraph (3)), the Commission shall consider the costs and benefits of the action of the Commission.

`(2) CONSIDERATIONS- The costs and benefits of the proposed Commission action shall be evaluated in light of--

`(A) considerations of protection of market participants and the public;

`(B) considerations of the efficiency, competitiveness, and financial integrity of futures markets;

`(C) considerations of price discovery;

`(D) considerations of sound risk management practices; and

`(E) other public interest considerations.

`(3) APPLICABILITY- This subsection does not apply to the following actions of the Commission:

`(A) An order that initiates, is part of, or is the result of an adjudicatory or investigative process of the Commission.

`(B) An emergency action.

`(C) A finding of fact regarding compliance with a requirement of the Commission.

`(b) ANTITRUST LAWS- The Commission'.

SEC. 22. CONTRACT ENFORCEMENT BETWEEN ELIGIBLE COUNTERPARTIES.

Section 22(a) of the Commodity Exchange Act (7 U.S.C. 25(a)) is amended by adding at the end the following:

`(4) CONTRACT ENFORCEMENT BETWEEN ELIGIBLE COUNTERPARTIES- No agreement, contract, or transaction between eligible contract participants shall be void, voidable, or unenforceable, and no such eligible contract participant shall be entitled to rescind, or recover any payment made with respect to, such an agreement, contract, or transaction, under this section based solely on the failure of the agreement, contract, or transaction to comply with the terms or conditions of an exemption or exclusion from any provision of this Act or regulations of the Commission.'.

SEC. 23. RULE OF CONSTRUCTION.

Except as expressly provided in this Act or an amendment made by this Act, nothing in this Act or an amendment made by the Act supersedes, affects, or otherwise limits or expands the scope and applicability of laws governing the Securities and Exchange Commission.

SEC. 24. TECHNICAL AND CONFORMING AMENDMENTS.

(a) COMMODITY EXCHANGE ACT-

(1) Section 1a of the Commodity Exchange Act (7 U.S.C. 1a) is amended--

(A) in paragraphs (4), (5), (8), (9), (12), and (14), by inserting `or derivatives transaction execution facility' after `contract market' each place it appears; and

(B) in paragraph (15)--

(i) in the paragraph heading, by striking `CONTRACT MARKET' and inserting `REGISTERED ENTITY'; and

(ii) by striking `contract market' each place it appears and inserting `registered entity'.

(2) Section 2 of the Commodity Exchange Act (7 U.S.C. 2, 2a, 4, 4a, 3) is amended--

(A) by striking `SEC. 2. (a)(1)(A)(i) The' and inserting the following:

`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'; and

(B) in subsection (a)--

(i) in paragraph (1) (as amended by subparagraph (A))--

(I) by striking subparagraph (B);

(II) by striking `subparagraph (B) of this subparagraph' and inserting `subsection (g)';

(III) by striking `contract market designated pursuant to section 5 of this Act' and inserting `contract market designated or derivatives transaction execution facility registered pursuant to section 5 or 5a';

(IV) by striking clause (ii); and

(V) in clause (iii), by striking `(iii) The' and inserting the following:

`(B) LIABILITY OF PRINCIPAL FOR ACT OF AGENT- The';

(ii) in paragraph (7), by striking `contract market' and inserting `registered entity'; and

(iii) in paragraph (8)(B)(ii)--

(I) in the first sentence, by striking `designation as a contract market' and inserting `designation or registration as a contract market or derivatives transaction execution facility';

(II) in the second sentence, by striking `designate a board of trade as a contract market' and inserting `designate or register a board of trade as a contract market or derivatives transaction execution facility'; and

(III) in the fourth sentence, by striking `designating, or refusing, suspending, or revoking the designation of, a board of trade as a contract market' and inserting `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'.

(3) Section 4 of the Commodity Exchange Act (7 U.S.C. 6) is amended--

(A) in subsection (a)--

(i) in paragraph (1), by striking `designated by the Commission as a `contract market' for' and inserting `designated or registered by the Commission as a contract market or derivatives transaction execution facility for';

(ii) in paragraph (2), by striking `member of such'; and

(iii) in paragraph (3), by inserting `or derivatives transaction execution facility' after `contract market'; and

(B) in subsection (c)--

(i) in paragraph (1)--

(I) by striking `designated as a contract market' and inserting `designated or registered as a contract market or derivatives transaction execution facility'; and

(II) by striking `section 2(a)(1)(B)' and inserting `section 2(g)'; and

(ii) in paragraph (2)(B)(ii), by inserting `or derivatives transaction execution facility' after `contract market'.

(4) Section 4a of the Commodity Exchange Act (7 U.S.C. 6a) is amended--

(A) in subsection (a)--

(i) in the first sentence, by inserting `or derivatives transaction execution facilities' after `contract markets'; and

(ii) in the second sentence, by inserting `or derivatives transaction execution facility' after `contract market';

(B) in subsection (b), by inserting `or derivatives transaction execution facility' after `contract market' each place it appears; and

(C) in subsection (e)--

(i) by striking `contract market or' each place it appears and inserting `contract market, derivatives transaction execution facility, or';

(ii) by striking `licensed or designated' each place it appears and inserting `licensed, designated, or registered'; and

(iii) by striking `contract market, or' and inserting `contract market or derivatives transaction execution facility, or'.

(5) Section 4b(a) of the Commodity Exchange Act (7 U.S.C. 6b(a)) is amended by striking `contract market' each place it appears and inserting `registered entity'.

(6) Sections 4c(g), 4d, 4e, and 4f of the Commodity Exchange Act (7 U.S.C. 6c(g), 6d, 6e, 6f) are amended by inserting `or derivatives transaction execution facility' after `contract market' each place it appears.

(7) Section 4g of the Commodity Exchange Act (7 U.S.C. 6g) is amended--

(A) in subsection (b), by striking `clearinghouse and contract market' and inserting `registered entity'; and

(B) in subsection (f), by striking `clearinghouses, contract markets, and exchanges' and inserting `registered entities'.

(8) Section 4h of the Commodity Exchange Act (7 U.S.C. 6h) is amended by striking `contract market' each place it appears and inserting `registered entity'.

(9) Section 4i of the Commodity Exchange Act (7 U.S.C. 6i) is amended in the first sentence by inserting `or derivatives transaction execution facility' after `contract market'.

(10) Section 4j of the Commodity Exchange Act (7 U.S.C. 6j) is repealed.

(11) Section 4l of the Commodity Exchange Act (7 U.S.C. 6l) is amended by inserting `or derivatives transaction execution facilities' after `contract markets' each place it appears.

(12) Section 4p of the Commodity Exchange Act (7 U.S.C. 6p) is amended--

(A) in the third sentence of subsection (a), by striking `Act or contract markets' and inserting `Act, contract markets, or derivatives transaction execution facilities'; and

(B) in subsection (b), by inserting `derivatives transaction execution facility,' after `contract market,'.

(13) The Commodity Exchange Act (as amended by paragraphs (10), (11), and (12)) is amended by redesignating section 4k through 4p (7 U.S.C. 6k through 6p) as sections 4j through 4o, respectively.

(14) Section 6 of the Commodity Exchange Act (7 U.S.C. 8, 9, 9a, 9b, 13b, 15) is amended--

(A) in subsection (a)--

(i) in the first sentence--

(I) by striking `board of trade desiring to be designated a `contract market' shall make application to the Commission for such designation' and inserting `person desiring to be designated or registered as a contract market or derivatives transaction execution facility shall make application to the Commission for such designation or registration';

(II) by striking `above conditions' and inserting `conditions set forth in this Act'; and

(III) by striking `above requirements' and inserting `the requirements of this Act';

(ii) in the second sentence, by striking `designation as a contract market within one year' and inserting `designation or registration as a contract market or derivatives transaction execution facility within 180 days';

(iii) in the third sentence--

(I) by striking `board of trade' and inserting `person'; and

(II) by striking `one-year period' and inserting `180-day period'; and

(iv) in the last sentence, by striking `designate as a `contract market' any board of trade that has made application therefor, such board of trade' and inserting `designate or register as a contract market or derivatives transaction execution facility any person that has made application therefor, such person';

(B) in subsection (b)--

(i) in the first sentence--

(I) by striking `designation of any board of trade as a `contract market' upon' and inserting `designation or registration of any contract market or derivatives transaction execution facility on';

(II) by striking `board of trade' each place it appears and inserting `contract market or derivatives transaction execution facility'; and

(III) by striking `designation as set forth in section 5 of this Act' and inserting `designation or registration as set forth in sections 5 through 5b';

(ii) in the second sentence--

(I) by striking `board of trade' the first place it appears and inserting `contract market or derivatives transaction execution facility'; and

(II) by striking `board of trade' the second and third places it appears and inserting `person'; and

(iii) in the last sentence, by striking `board of trade' each place it appears and inserting `person';

(C) in subsection (c)--

(i) by striking `contract market' each place it appears and inserting `registered entity';

(ii) by striking `contract markets' each place it appears and inserting `registered entities'; and

(iii) by striking `trading privileges' each place it appears and inserting `privileges';

(D) in subsection (d), by striking `contract market' each place it appears and inserting `registered entity'; and

(E) in subsection (e), by striking `trading on all contract markets' each place it appears and inserting `the privileges of all registered entities'.

(15) Section 6a of the Commodity Exchange Act (7 U.S.C. 10a) is amended--

(A) in the first sentence of subsection (a), by striking `designated as a `contract market' shall' and inserting `designated or registered as a contract market or a derivatives transaction execution facility'; and

(B) in subsection (b), by striking `designated as a contract market' and inserting `designated or registered as a contract market or a derivatives transaction execution facility'.

(16) Section 6b of the Commodity Exchange Act (7 U.S.C. 13a) is amended--

(A) by striking `contract market' each place it appears and inserting `registered entity';

(B) in the first sentence, by striking `designation as set forth in section 5 of this Act' and inserting `designation or registration as set forth in sections 5 through 5c'; and

(C) in the last sentence, by striking `the contract market's ability' and inserting `the ability of the registered entity'.

(17) Section 6c(a) of the Commodity Exchange Act (7 U.S.C. 13a-1(a)) by striking `contract market' and inserting `registered entity'.

(18) Section 6d(1) of the Commodity Exchange Act (7 U.S.C. 13a-2(1)) is amended by inserting `derivatives transaction execution facility,' after `contract market,'.

(19) Section 7 of the Commodity Exchange Act (7 U.S.C. 11) is amended--

(A) in the first sentence--

(i) by striking `board of trade' and inserting `person';

(ii) by inserting `or registered' after `designated';

(iii) by inserting `or registration' after `designation' each place it appears; and

(iv) by striking `contract market' each place it appears and inserting `registered entity';

(B) in the second sentence--

(i) by striking `designation of such board of trade as a contract market' and inserting `designation or registration of the registered entity'; and

(ii) by striking `contract markets' and inserting `registered entities'; and

(C) in the last sentence--

(i) by striking `board of trade' and inserting `person'; and

(ii) by striking `designated again a contract market' and inserting `designated or registered again a registered entity'.

(20) Section 8(c) of the Commodity Exchange Act (7 U.S.C. 12(c)) is amended in the first sentence by striking `board of trade' and inserting `registered entity'.

(21) Section 8a of the Commodity Exchange Act (7 U.S.C. 12a) is amended--

(A) by striking `contract market' each place it appears and inserting `registered entity'; and

(B) in paragraph (2)(F), by striking `trading privileges' and inserting `privileges'.

(22) Sections 8b and 8c(e) of the Commodity Exchange Act (7 U.S.C. 12b, 12c(e)) are amended by striking `contract market' each place it appears and inserting `registered entity'.

(23) Section 8e of the Commodity Exchange Act (7 U.S.C. 12e) is amended--

(A) by striking `contract market' each place it appears and inserting `registered entity';

(B) in subsection (a), by striking `section 5a(b)' and inserting `sections 5 through 5c';

(C) in subsection (b)--

(i) in paragraph (1), by striking `a contract market's trade monitoring system implemented pursuant to section 5a(b)' and inserting `the trade monitoring system of a registered entity implemented pursuant to sections 5 through 5c';

(ii) by striking paragraph (3) and inserting the following:

`(3) REMEDIES- On becoming final, the Commission deficiency order may require the registered entity to--

`(A) institute appropriate improvements in its trade monitoring system necessary to correct the deficiencies in the order;

`(B) satisfy stated objective performance criteria to correct the deficiencies;

`(C) upgrade or reconfigure existing systems for collecting or processing relevant data on trading and trader or broker activity, including, where appropriate, the commitment of additional resources.'; and

(iii) in paragraph (5)--

(I) in the paragraph heading, by striking `DESIGNATION AS CONTRACT MARKET' and inserting `DESIGNATION OR REGISTRATION AS REGISTERED ENTITY';

(II) by inserting `or registration' after `designation'; and

(III) by striking `board of trade' and inserting `person';

(D) in subsection (d)(2), by striking `section 5b' and inserting `section 5e'; and

(E) in the paragraph heading of subsection (e)(2), by striking `CONTRACT MARKETS' and inserting `REGISTERED ENTITIES'.

(24) Section 9 of the Commodity Exchange Act (7 U.S.C. 13) is amended--

(A) by striking `contract market' each place it appears and inserting `registered entity'; and

(B) in subsection (a)(2), by striking `section 4o(1),' and inserting `section 4n(1),'.

(25) Section 14 of the Commodity Exchange Act (7 U.S.C. 18) is amended--

(A) in subsection (a)(1)(B), by striking `contract market' and inserting `registered entity'; and

(B) in subsection (f), by striking `contract markets' and inserting `registered entities'.

(26) Section 17 of the Commodity Exchange Act (7 U.S.C. 21) is amended by striking `contract market' each place it appears and inserting `registered entity'.

(27) Section 22 of the Commodity Exchange Act (7 U.S.C. 25) is amended--

(A) in subsection (a)--

(i) in paragraph (1)--

(I) by striking `contract market, clearing organization of a contract market, licensed board of trade,' and inserting `registered entity'; and

(II) in subparagraph (C)(i), by striking `contract market' and inserting `registered entity';

(ii) in paragraph (2), by striking `sections 5a(11),' and inserting `sections 5(d)(13), 5b(b)(1)(E),'; and

(iii) in paragraph (3), by striking `contract market' and inserting `registered entity'; and

(B) in subsection (b)--

(i) in paragraph (1)--

(I) by striking `contract market or clearing organization of a contract market' and inserting `registered entity';

(II) by striking `section 5a(8) and section 5a(9) of this Act' and inserting `sections 5 through 5c';

(III) by striking `contract market, clearing organization of a contract market, or licensed board of trade' and inserting `registered entity'; and

(IV) by striking `contract market or licensed board of trade' and inserting `registered entity';

(ii) in paragraph (3)--

(I) by striking `a contract market, clearing organization, licensed board of trade,' and inserting `registered entity'; and

(II) by striking `contract market, licensed board of trade' and inserting `registered entity';

(iii) in paragraph (4), by striking `contract market, licensed board of trade, clearing organization,' and inserting `registered entity'; and

(iv) in paragraph (5), by striking `contract market, licensed board of trade, clearing organization,' and inserting `registered entity'.

(b) FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991- Section 402(2) of the Federal Deposit Insurance Corporation Improvement Act of 1991 (12 U.S.C. 4402(2)) is amended by striking subparagraph (B) and inserting the following:

`(B) that is registered as a derivatives clearing organization under section 5b of the Commodity Exchange Act.'.

SEC. 25. EFFECTIVE DATE.

(a) IN GENERAL- Except as provided in subsection (b), this Act takes effect on the date of enactment of this Act.

(b) JURISDICTION OF COMMISSION- Section 8, and the amendments made by that section, take effect 1 year after the date of enactment of this Act.