[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4473 Placed on Calendar Senate (PCS)]
Calendar No. 358
109th CONGRESS
2d Session
H. R. 4473
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
December 15, 2005
Received
January 27, 2006
Read twice and placed on the calendar
_______________________________________________________________________
AN ACT
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.
This Act may be cited as the ``CFTC Reauthorization Act of 2005''.
TITLE I--GENERAL PROVISIONS
SEC. 101. COMMISSION AUTHORITY OVER AGREEMENTS, CONTRACTS OR
TRANSACTIONS IN FOREIGN CURRENCY.
(a) In General.--Section 2(c)(2) of the Commodity Exchange Act (7
U.S.C. 2(c)(2)) is amended by striking subparagraphs (B) and (C) and
inserting the following:
``(B) Agreements, contracts, and transactions in
retail foreign currency.--
``(i) This Act applies to, and the
Commission shall have jurisdiction over, an
agreement, contract, or transaction in foreign
currency that--
``(I) is a contract of sale of a
commodity for future delivery (or an
option on such a contract) or an option
(other than an option executed or
traded on a national securities
exchange registered pursuant to section
6(a) of the Securities Exchange Act of
1934 (15 U.S.C. 78f(a))); and
``(II) is offered to, or entered
into with, a person that is not an
eligible contract participant, unless
the counterparty, or the person
offering to be the counterparty, of the
person is--
``(aa) a financial
institution;
``(bb)(AA) a broker or
dealer registered under section
15(b) (except paragraph (11)
thereof) or 15C of the
Securities Exchange Act of 1934
(15 U.S.C. 78o(b), 78o-5); or
``(BB) an associated person
of a broker or dealer
registered under section 15(b)
(except paragraph (11) thereof)
or 15C of the Securities
Exchange Act of 1934 (15 U.S.C.
78o(b), 78o-5) concerning the
financial or securities
activities of which the broker
or dealer makes and keeps
records under section 15C(b) or
17(h) of the Securities
Exchange Act of 1934 (15 U.S.C.
78o-5(b), 78q(h));
``(cc) a futures commission
merchant registered under this
Act (that is not also a person
described in item (bb)), or an
affiliated person of such a
futures commission merchant
(that is not also a person
described in item (bb)) if such
futures commission merchant
makes and keeps records under
section 4f(c)(2)(B) of this Act
concerning the futures and
other financial activities of
such affiliated person;
``(dd) an insurance company
described in section
1a(12)(A)(ii) of this Act, or a
regulated subsidiary or
affiliate of such an insurance
company;
``(ee) a financial holding
company (as defined in section
2 of the Bank Holding Company
Act of 1956); or
``(ff) an investment bank
holding company (as defined in
section 17(i) of the Securities
Exchange Act of 1934 (15 U.S.C.
78q(i))).
``(ii) Notwithstanding item (cc) of clause
(i)(II) of this subparagraph, agreements,
contracts, or transactions described in clause
(i) of this subparagraph shall be subject to
subsection (a)(1)(B) of this section and
sections 4(b), 4b, 4c(b), 4o, 6(c) and 6(d)
(except to the extent that sections 6(c) and
6(d) prohibit manipulation of the market price
of any commodity in interstate commerce, or for
future delivery on or subject to the rules of
any market), 6c, 6d, 8(a), 13(a), and 13(b) if
the agreements, contracts, or transactions are
offered, or entered into, by a person that is
registered as a futures commission merchant or
an affiliated person of a futures commission
merchant registered under this Act that is not
also a person described in any of item (aa),
(bb), (dd), (ee), or (ff) of clause (i) of this
subparagraph.
``(iii)(I) Notwithstanding item (cc) of
clause (i)(II), a particular person shall not
participate in the solicitation or
recommendation of any agreement, contract, or
transaction described in clause (i) entered
into with or to be entered into with a person
described in such item, unless the particular
person--
``(aa) is registered in such
capacity as the Commission by rule,
regulation, or order shall determine;
and
``(bb) is a member of a futures
association registered under section
17.
``(II) Subclause (I) shall not apply to--
``(aa) any person described in any
of item (aa), (bb), (dd), (ee), or (ff)
of subparagraph (B)(i)(II); or
``(bb) any such person's associated
persons.
``(C)(i)(I) This subparagraph shall apply to any
agreement, contract, or transaction in foreign currency
that is--
``(aa) offered to, or entered into
with, a person that is not an eligible
contract participant (except that this
subparagraph shall not apply if the
counterparty, or the person offering to
be the counterparty, of the person that
is not an eligible contract participant
is a person described in any of item
(aa), (bb), (dd), (ee), or (ff) of
subparagraph (B)(i)(II)); and
``(bb) offered, or entered into, on
a leveraged or margined basis, or
financed by the offeror, the
counterparty, or a person acting in
concert with the offeror or
counterparty on a similar basis.
``(II) Subclause (I) shall not apply to--
``(aa) a security that is not a security
futures product; or
``(bb) a contract of sale that--
``(AA) results in actual delivery
within 2 days; or
``(BB) creates an enforceable
obligation to deliver between a seller
and buyer that have the ability to
deliver and accept delivery,
respectively, in connection with their
line of business.
``(ii)(I) Agreements, contracts, or transactions
described in clause (i) of this subparagraph shall be
subject to subsection (a)(1)(B) of this section and
sections 4(b), 4b, 4c(b), 4o, 6(c) and 6(d) (except to
the extent that sections 6(c) and 6(d) prohibit
manipulation of the market price of any commodity in
interstate commerce, or for future delivery on or
subject to the rules of any market), 6c, 6d, 8(a),
13(a), and 13(b).
``(II) Subclause (I) of this clause shall not apply
to--
``(aa) any person described in any of item
(aa), (bb), (dd), (ee), or (ff) of subparagraph
(B)(i)(II); or
``(bb) any such person's associated
persons.
``(iii)(I) A person shall not participate in the
solicitation or recommendation of any agreement,
contract, or transaction described in clause (i) of
this subparagraph unless the person is registered in
such capacity as the Commission by rule, regulation or
order shall determine, and is a member of a futures
association registered under section 17.
``(II) Subclause (I) shall not apply to any
person--
``(aa) any person described in any of item
(aa), (bb), (dd), (ee), or (ff) of subparagraph
(B)(i)(II); or
``(bb) any such person's associated
persons.
``(iv) Sections 4(b) and 4b shall apply to any
agreement, contract, or transaction described in clause
(i) of this subparagraph as if the agreement, contract,
or transaction were a contract of sale of a commodity
for future delivery.
``(v) This subparagraph shall not be construed to
limit any jurisdiction that the Commission may
otherwise have under any other provision of this Act
over an agreement, contract, or transaction that is a
contract of sale of a commodity for future delivery.
``(vi) This subparagraph shall not be construed to
limit any jurisdiction that the Commission or the
Securities and Exchange Commission may otherwise have
under any other provision of this Act with respect to
security futures products and persons effecting
transactions in security futures products.''.
(b) Effective Date.--Clause (iii) of section 2(c)(2)(B) and clause
(iii) of section 2(c)(2)(C) of the Commodity Exchange Act, as amended
by subsection (a) of this section, shall be effective 120 days after
the date of the enactment of this Act or such other time as the
Commodity Futures Trading Commission shall determine.
SEC. 102. ANTIFRAUD AUTHORITY.
Section 4b of the Commodity Exchange Act (7 U.S.C. 6b) is amended--
(1) by redesignating subsections (b) and (c) as subsections
(c) and (d), respectively; and
(2) by striking ``SEC. 4b.'' and all that follows through
the end of subsection (a) and inserting the following:
``SEC. 4B. CONTRACTS DESIGNED TO DEFRAUD OR MISLEAD.
``(a) Unlawful Actions.--It shall be unlawful--
``(1) for any person, in or in connection with any order to
make, or the making of, any contract of sale of any commodity
in interstate commerce or for future delivery that is made, or
to be made, on or subject to the rules of a designated contract
market, for or on behalf of any other person; or
``(2) for any person, in or in connection with any order to
make, or the making of, any contract of sale of any commodity
for future delivery, or other agreement, contract, or
transaction subject to paragraphs (1) and (2) of section 5a(g),
that is made, or to be made, for or on behalf of, or with, any
other person, other than on or subject to the rules of a
designated contract market--
``(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 whatsoever in regard to
any order or contract or the disposition or execution
of any order or contract, or in regard to any act of
agency performed, with respect to any order or contract
for or, in the case of paragraph (2), with the other
person; or
``(D)(i) to bucket an order if the order is
represented by the person as an order to be executed,
or is required to be executed, on or subject to the
rules of a designated contract market; or
``(ii) to fill an order by offset against the order
or orders of any other person, or willfully and
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 become the seller in
respect to any buying order of the other person, if the
order is represented by the person as an order to be
executed, or is required to be executed, on or subject
to the rules of a designated contract market unless the
order is executed in accordance with the rules of the
designated contract market.
``(b) Clarification.--Subsection (a)(2) of this section shall not
obligate any person, in or in connection with a transaction in a
contract of sale of a commodity for future delivery, or other
agreement, contract or transaction subject to paragraphs (1) and (2) of
section 5a(g), with another person, to disclose to the other person
nonpublic information that may be material to the market price, rate,
or level of the commodity or transaction, except as necessary to make
any statement made to the other person in or in connection with the
transaction, not misleading in any material respect.''.
SEC. 103. PORTFOLIO MARGINING AND SECURITY INDEX ISSUES.
(a) The agencies represented on the President's Working Group on
Financial Markets shall work to ensure that the Securities and Exchange
Commission (SEC), the Commodity Futures Trading Commission (CFTC), or
both, as appropriate, have taken the actions required under subsection
(b).
(b) The SEC, the CFTC, or both, as appropriate, shall take action
under their existing authorities to permit--
(1) by September 30, 2006, risk-based portfolio margining
for security options and security futures products; and
(2) by June 30, 2006, the trading of futures on certain
security indexes by resolving issues related to debt security
indexes and foreign security indexes.
SEC. 104. AUTHORIZATION OF APPROPRIATIONS.
Section 12(d) of the Commodity Exchange Act (7 U.S.C. 16(d)) is
amended to read as follows:
``(d) There are authorized to be appropriated such sums as are
necessary to carry out this Act for each of the fiscal years 2006
through 2010.''
SEC. 105. TECHNICAL AND CONFORMING AMENDMENTS.
(a) Section 4a(e) of the Commodity Exchange Act (7 U.S.C 6a(e)) is
amended in the last proviso by striking ``section 9(c)'' and inserting
``section 9(a)(5)''.
(b) Section 4f(c)(4)(B)(i) of such Act (7 U.S.C. 6f(c)(4)(B)(i)) is
amended by striking ``compiled'' and inserting ``complied''.
(c) Section 4k of such Act (7 U.S.C. 6k) is amended by
redesignating the second paragraph (5) as paragraph (6).
(d) The Commodity Exchange Act is amended--
(1) by redesignating the first section 4p (7 U.S.C. 6o-1),
as added by section 121 of the Commodity Futures Modernization
Act of 2000, as section 4q; and
(2) by moving such section to after the second section 4p,
as added by section 206 of Public Law 93-446.
(e) Subsections (a)(1) and (d)(1) of section 5c of such Act (7
U.S.C. 7a-2(a)(1), (d)(1)) are each amended by striking ``5b(d)(2)''
and inserting ``5b(c)(2)''.
(f) Sections 5c(f) and 17(r) of such Act (7 U.S.C. 7a-2(f), 21(r))
are each amended by striking ``4d(3)'' and inserting ``4d(c)''.
(g) Section 8(a)(1) of such Act (7 U.S.C. 12(a)(1)) is amended in
the matter following subparagraph (B)--
(1) by striking ``commenced'' the 2nd place it appears; and
(2) by inserting ``commenced'' after ``in a judicial
proceeding''.
(h) Section 22(a)(2) of such Act (7 U.S.C. 25(a)(2)) is amended by
striking ``5b(b)(1)(E)'' and inserting ``5b(c)(2)(H)''.
TITLE II--NATURAL GAS PRICE TRANSPARENCY
SEC. 201. MARKET SURVEILLANCE.
(a) In General.--The Commodity Futures Trading Commission (in this
section referred to as the ``Commission'') shall detect and deter
manipulation and attempted manipulation and increase the transparency
of the pricing of natural gas by conducting surveillance of trading in
contracts for natural gas.
(b) Certain Events Required to Be Reviewed.--
(1) Requirement.--In the event of a significant and highly
unusual change in the settlement price of any physically
delivered natural gas futures contract traded on a contract
market (within the meaning of section 5 of the Commodity
Exchange Act) or derivatives transaction execution facility
(within the meaning of section 5a of such Act), the Commission
shall conduct a review of the factors that caused the price
movement in order to determine if manipulation or attempted
manipulation in violation of such Act has occurred.
(2) Certain factors required to be considered.--The
Commission shall consider in its review, among other things and
as appropriate to the circumstances, the following:
(A) Prices and price relationships in the futures
and cash markets.
(B) Market information, and cash market supply and
demand factors which may be relevant to the price
event.
(C) Large futures and options market positions and
large futures and options market transactions on the
contract market or derivatives transaction execution
facility.
(D) Any related contract, agreement or transaction
in natural gas.
SEC. 202. REPORTING OF LARGE POSITIONS INVOLVING NATURAL GAS.
(a) In General.--Section 4a of the Commodity Exchange Act (7 U.S.C.
6a) is amended--
(1) in subsection (e), by striking the last sentence; and
(2) by adding at the end the following:
``(f) Reporting of Large Positions Involving Natural Gas.--
``(1) In general.--The Commission, by rule, shall require
any person holding, maintaining, or controlling any position in
a contract of sale of natural gas for future delivery, or
option thereon, on or subject to the rules of any contract
market or derivatives transaction execution facility, at or in
excess of such limits as the Commission may specify as
reportable, to maintain for a period of 5 years and provide on
request to the Commission, records of the person regarding the
position and any related contract, agreement, or transaction in
natural gas to which the person is a party.
``(2) No duplicate reports.--Except as otherwise provided
in this paragraph, the rules prescribed under paragraph (1)
shall not apply to any position that otherwise is required to
be reported to any agency of the United States if the report
would otherwise satisfy the requirements under this subsection
and the report of the position is available to the Commission
at the request of the Commission. Notwithstanding the preceding
sentence, any report of any such position to any agency of the
United States shall constitute a statement, report, or document
required for the purposes of section 9.
``(3) Criteria for rules.--
``(A) In general.--In prescribing rules required by
paragraph (1), the Commission shall consider--
``(i) the purposes for monitoring large
positions in any contract for future delivery
of natural gas;
``(ii) the effect of the reporting
requirements on the efficiency and liquidity of
the market for any agreement, contract, or
transaction made in connection with any
contract for the future delivery of natural
gas; and
``(iii) the costs and burden on the persons
that would be required to file the reports.
``(B) Frequency.--The Commission shall require the
provision of records under paragraph (1) only in
circumstances where manipulation is suspected, except
that the Commission may prescribe rules requiring
regular or continuous reporting if the Commission finds
that such reporting would help to deter or to detect
manipulation in any market for any agreement, contract,
or transaction made in connection with any contract for
the future delivery of natural gas.
``(C) Filing requirements.--Records required to be
provided under paragraph (1) shall be required to be
filed with the Commission in accordance with such
requirements regarding the form, timing, and manner of
filing such reports, as the Commission may prescribe by
rule.
``(5) Other rules not affected.--This subsection shall not
be interpreted to prohibit or impair the adoption by any board
of trade licensed, designated, or registered by the Commission
of any bylaw, rule, regulation, or resolution requiring reports
of positions in any agreement, contract, or transaction made in
connection with a contract of sale for future delivery of
natural gas (including such a contract of sale), including any
bylaw, rule, regulation, or resolution pertaining to filing or
recordkeeping, which may be held by any person subject to the
rules of the board of trade, except that any bylaw, rule,
regulation, or resolution established by the board of trade
shall not be inconsistent with any requirement prescribed by
the Commission under this subsection.''.
SEC. 203. CRIMINAL AND CIVIL PENALTIES.
(a) Enforcement Powers of the Commission.--Section 6(c) of the
Commodity Exchange Act (7 U.S.C. 9, 15) is amended in clause (3) of the
10th sentence--
(1) by inserting ``(A)'' after ``assess such person''; and
(2) by inserting after ``each such violation'' the
following: ``or (B) in any case of manipulation of, or attempt
to manipulate under section 9(a)(2), a civil penalty of not
more than the greater of $1,000,000 or triple the monetary gain
to such person for each such violation,''.
(b) Nonenforcement of Rules of Government or Other Violations.--
Section 6b of such Act (7 U.S.C. 13a) is amended--
(1) in the 1st sentence, by inserting ``, or, in any case
of manipulation of, or an attempt to manipulate, the price of
any commodity, a civil penalty of not more than $1,000,000 for
each such violation'' before the period; and
(2) in the 2nd sentence, by inserting ``, except that if
the failure or refusal to obey or comply with the order
involved any offense under section 9(a)(2), the registered
entity, director, officer, agent, or employee shall be guilty
of a felony and, on conviction, shall be subject to penalties
under section 9(f)'' before the period.
(c) Action to Enjoin or Restrain Violations.--Section 6c(d) of such
Act (7 U.S.C. 13a-1(d)) is amended by striking ``(d)'' and all that
follows through the end of the paragraph (1) and inserting the
following:
``(d) Civil Penalties.--(1) In any action brought under this
section, the Commission may seek and the court shall have jurisdiction
to impose, on a proper showing, on any person found in the action to
have committed any violation--
``(A) a civil penalty in the amount of not more
than the greater of $100,000 or triple the monetary
gain to the person for each violation; or
``(B) in any case of manipulation of, or an attempt
to manipulate, the price of any commodity, a civil
penalty in the amount of not more than the greater of
$1,000,000 or triple the monetary gain to the person
for each violation.''.
(d) Violations Generally.--Section 9(a) of such Act (7 U.S.C.
13(a)) is amended--
(1) by striking ``(or $500,000 in the case of a person who
is an individual)''; and
(2) by striking ``five years'' and inserting ``10 years''.
Passed the House of Representatives December 14, 2005.
Attest:
KAREN L. HAAS,
Clerk.
Calendar No. 358
109th CONGRESS
2d Session
H. R. 4473
_______________________________________________________________________
AN ACT
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.
_______________________________________________________________________
January 27, 2006
Read twice and placed on the calendar