To provide regulatory oversight over energy trading markets, and for other purposes.

To provide regulatory oversight over energy trading markets, 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. JURISDICTION OF THE COMMODITY FUTURES TRADING COMMISSION OVER ENERGY TRADING MARKETS.

(a) REPEAL OF DEFINITION OF EXEMPT COMMODITY- Section 1a of the Commodity Exchange Act (7 U.S.C. 1a) is amended by striking paragraph (14) and inserting the following:

`(14) [Struck out->][ Repealed. ][<-Struck out] '.

(b) FERC LIAISON- Section 2(a)(8) of the Commodity Exchange Act (7 U.S.C. 2(a)(8)) is amended by adding at the end the following:

`(C) FERC LIAISON- The Commission shall, in cooperation with the Federal Energy Regulatory Commission, maintain a liaison between the Commission and the Federal Energy Regulatory Commission.'.

(c) EXEMPT TRANSACTIONS- Section 2 of the Commodity Exchange Act (7 U.S.C. 2) is amended by striking subsection (g) and inserting the following:

`(g) EXEMPT TRANSACTIONS-

`(1) APPLICABILITY-

`(A) IN GENERAL- Except as provided in subparagraph (B), this Act shall not apply to any agreement, contract, or transaction in a commodity other than an agricultural commodity if the agreement, contract, or transaction--

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

`(ii) is subject to individual negotiation by the parties to the agreement, contract, or transaction; and

`(iii) is not executed or traded on a trading facility.

`(B) EXCEPTIONS- An agreement, contract, or transaction described in subparagraph (A) shall be subject to--

`(i) sections 4b, 4c(b), 4o, and 5b;

`(ii) subsections (c) and (d) of section 6, 6c, 6d, and 8a, to the extent that those provisions--

`(I) provide for the enforcement of the requirements specified in this paragraph and paragraphs (2), (3), and (4); and

`(II) prohibit the manipulation of the market price of any commodity in interstate commerce or for future delivery on or subject to the rules of any contract market;

`(iii) sections 6c, 6d, 8a, and 9(a)(2), to the extent that those provisions prohibit the manipulation of the market price of any commodity in interstate commerce or for future delivery on or subject to the rules of any contract market;

`(iv) section 12(e)(2); and

`(v) section 22(a)(4).

`(2) ELIGIBLE TRADING FACILITIES AND SYSTEMS-

`(A) IN GENERAL- A person or group of persons that constitutes, maintains, administers, or provides a physical or electronic facility or system in which a person has the ability to offer, execute, trade, or confirm the execution of an agreement, contract, or transaction by making or accepting the bids and offers of all other participants on the facility or system (including facilities or systems described in clauses (i) and (iii) of section 1a(33)(B)), may offer to enter into, enter into, or confirm the execution of any agreement, contract, or transaction under paragraph (1) if the person or group of persons meets the requirement of subparagraph (B).

`(B) REQUIREMENT- The requirement of this subparagraph is that a person or group of persons described in subparagraph (A) shall--

`(i) register with the Commission in any capacity that the Commission requires by rule, regulation, or order;

`(ii) file with the Commission any reports (including large trader position reports) that the Commission requires by rule, regulation, or order;

`(iii) maintain sufficient net capital, as determined by the Commission; and

`(iv)(I) maintain books and records consistent with section 4i; and

`(II) make those books and records available to representatives of the Commission and the Department of Justice for inspection at all times.

`(3) REPORTING REQUIREMENTS- An eligible contract participant that enters into an agreement, contract, or transaction exempt under paragraph (1) shall--

`(A) file with the Commission any reports that the Commission may require by rule, regulation, or order; and

`(B)(i) maintain books and records consistent with section 4i; and

`(ii) make those books and records available to representatives of the Commission and the Department of Justice for inspection at all times.

`(4) TRANSACTIONS EXEMPTED BY COMMISSION ACTION- Any agreement, contract, or transaction under paragraph (1) that would otherwise be exempted by the Commission under section 4(c) shall be subject to--

`(A) sections 4b, 4c(b), and 4o; and

`(B) subsections (c) and (d) of section 6, 6c, 6d, 8a, and 9(a)(2), to the extent that those provisions prohibit the manipulation of the market price of any commodity in interstate commerce or for future delivery on or subject to the rules of any contract market.

`(5) EFFECT- This subsection does not affect the power of the Federal Energy Regulatory Commission to regulate transactions described in paragraph (1) under the Federal Power Act (16 U.S.C. 791a et seq.).'.

(d) REPEAL OF GUIDELINES FOR TRANSACTIONS IN EXEMPT COMMODITIES- Section 2 of the Commodity Exchange Act (7 U.S.C. 2) is amended--

(1) by striking subsection (h); and

(2) by redesignating subsection (i) as subsection (i).

(e) CONTRACTS DESIGNED TO DEFRAUD OR MISLEAD- Section 4b of the Commodity Exchange Act (7 U.S.C. 6b) is amended by striking subsection (a) and inserting the following:

`(a) PROHIBITION- It shall be unlawful--

`(1) for any member of a contract market, or for any correspondent, agent, or employee of any member, in or in connection with any order to make, or the making of, any contract of sale commodity in interstate commerce, made, or to be made on or subject to the rules of any contract market; or

`(2) for any person, in or in connection with any order to make, or the making of, any agreement, transaction, or contract in a commodity subject to the provisions of this Act--

`(A) to cheat or defraud or attempt to cheat or defraud the other person;

`(B) willfully to make or cause to be made to the other person any false report or statement, or willfully to enter or cause to be entered for the other person any false record;

`(C) willfully to deceive or attempt to deceive the other person by any means in regard to any order or contract or the disposition or execution of the order or contract, or in regard to any act of agency performed with respect to the order or contract for the other person; or

`(D) to bucket the order, or to fill the order by offset against the order of any other person, or willfully, knowingly, and without the prior consent of the other person to become the buyer in respect to any selling order of the other person, or to become the seller in respect to any buying order of the other person.'.

(f) CONFORMING AMENDMENTS- The Commodity Exchange Act is amended--

(1) in section 2(e) (7 U.S.C. 2(e))--

(A) in paragraph (1), by striking `, 2(g), or 2(h)(3)';

(B) in paragraph (2), by striking `, or operating as an exempt board of trade';

(C) by striking paragraph (3); and

(D) by redesignating paragraph (4) as paragraph (3);

(2) in section 2(h) (7 U.S.C. 2(h)) (as redesignated by subsection (d)), by striking `2(h) or';

(3) in section 4i (7 U.S.C. 6i)--

(A) by striking `any contract market or' and inserting `any contract market,'; and

(B) by inserting `, or pursuant to an exemption under section 4(c)' after `transaction execution facility';

(4) in section 5a(g)(1) (7 U.S.C. 7a(g)(1)), by striking `, or exempt under section 2(h) of this Act';

(5) in section 5b (7 U.S.C. 7a-1)--

(A) in subsection (a)(1), by striking `2(h) or'; and

(B) in subsection (b), by striking `2(h) or'; and

(6) in section 12(e)(2)(B) (7 U.S.C. 16(e)(2)(B)), by striking `2(h) or'.

SEC. 2. RECRUITMENT AND RETENTION OF QUALIFIED PERSONNEL AT THE FEDERAL ENERGY REGULATORY COMMISSION.

Section 401(c) of the Department of Energy Organization Act (42 U.S.C. 7171(c)) is amended--

(1) by striking paragraph (2);

(2) by redesignating paragraphs (1), (3), (4), and (5) as subparagraphs (A), (B), (C), and (D), respectively;

(3) by striking `(c) The Chairman' and inserting the following:

`(c) ADMINISTRATION-

`(1) IN GENERAL- The Chairman'; and

(4) by adding at the end the following:

`(2) PERSONNEL MATTERS-

`(A) IN GENERAL- The Chairman may--

`(i) appoint, prescribe the duties, and fix the salaries of an executive director, a secretary, a chief engineer, a general counsel, a solicitor, and a chief accountant; and

`(ii) subject to the civil service laws--

`(I) appoint any other officers and employees that are necessary in the execution of the duties of the Commission; and

`(II) fix the salaries of any officer or employee appointed under subclause (I).

`(B) COMPENSATION-

`(i) IN GENERAL- Rates of basic pay for all employees of the Commission may be set and adjusted by the Chairman without regard to the provisions of chapter 51

`(ii) ADDITIONAL COMPENSATION- The Chairman may provide additional compensation and benefits to employees of the Commission if the same type and amounts of compensation or benefits are or are authorized to be provided by any other Federal agency under applicable provisions of law (including regulations).

`(iii) COMPARABILITY- In setting and adjusting the total amount of compensation and benefits for employees under this paragraph, the Chairman shall consult with, and seek to maintain comparability with, other Federal agencies.

`(C) EARLY RETIREMENT- The Chairman may offer early out retirement and voluntary separation incentive payments, as appropriate.

`(D) RECRUITMENT- The Chairman may use modified hiring delegation authorities to recruit for positions at all grade levels that are difficult to fill, including economists, engineers, accountants, auditors, and energy, market, and financial analysts.

`(E) MERIT SYSTEM PRINCIPLES- This paragraph shall be administered consistent with merit system principles.

`(F) CONSULTATION WITH OPM- In carrying out this paragraph, the Chairman shall consult with the Director of the Office of Personnel Management.'.

SEC. 3. JURISDICTION OF THE FEDERAL ENERGY REGULATORY COMMISSION OVER ENERGY TRADING MARKETS.

Section 402 of the Department of Energy Organization Act (42 U.S.C. 7172) is amended by adding at the end the following:

`(i) JURISDICTION OVER DERIVATIVES TRANSACTIONS-

`(1) DEFINITIONS- In this subsection:

`(A) DERIVATIVES TRANSACTION-

`(i) IN GENERAL- The term `derivatives transaction' means a transaction based on, or reflecting prices of or for, electric energy or natural gas.

`(ii) INCLUSIONS- The term `derivatives transaction' includes--

`(I) futures;

`(II) options;

`(III) forwards; and

`(IV) swaps.

`(iii) EXCLUSIONS- The term `derivatives transaction' does not include a derivatives transaction that is--

`(I) under the exclusive jurisdiction of the Commodity Futures Trading Commission; or

`(II) concerns a retail sale of electric energy or natural gas and is under the exclusive jurisdiction of a State.

`(B) PERSON- The term `person' has the meaning given the term in section 1a of the Commodity Exchange Act (7 U.S.C. 1a).

`(2) JURISDICTION- The Commission shall have jurisdiction over--

`(A) derivatives transactions;

`(B) any person that makes a derivatives transaction; and

`(C) any entity that operates an electronic forum in which persons make derivatives transactions.

`(3) AUTHORITIES AND DUTIES-

`(A) IN GENERAL- The authorities and duties of the Commission under this subsection with respect to derivatives transactions shall be the same as the authorities and duties of the Commission under--

`(i) sections 205 and 206 and part III of the Federal Power Act (16 U.S.C. 824d, 824e, 825 et seq.); and

`(ii) sections 4 and 5 of the Natural Gas Act (15 U.S.C. 717c, 717d).

`(B) MEETINGS- The Commission shall meet quarterly with the Commodity Futures Trading Commission, the Securities Exchange Commission, the Federal Trade Commission, and the Federal Reserve Board to discuss--

`(i) conditions and events in energy trading markets; and

`(ii) any changes in Federal law (including regulations) that may be appropriate to regulate energy trading markets.

`(C) REPORT- Not later than the date that is 1 year after the date of enactment of this subsection and annually thereafter, the Commission shall submit to Congress a report that describes the activities of the Commission relating to the regulation of derivatives under this subsection during the preceding year.

`(4) RIGHTS AND OBLIGATIONS- Persons and entities regulated under this subsection shall have the same rights and obligations as persons regulated by the Commission under sections 205 and 206 and part III of the Federal Power Act (16 U.S.C. 824d, 824e, 825 et seq.).

`(5) LIAISON- The Commission shall, in cooperation with the Commodity Futures Trading Commission, maintain a liaison between the Commission and the Commodity Futures Trading Commission.

`(6) RATES- It shall be unlawful to make, demand, or receive rates and charges for or in connection with derivatives transactions that are unjust, unreasonable, discriminatory, or preferential.'.