II
110th CONGRESS
2d Session
S. 3248
IN THE SENATE OF THE UNITED STATES
July 10 (legislative day, July 9), 2008
Mr. Lieberman (for himself, Ms. Collins, and Ms. Cantwell) introduced the following bill; which was read twice and referred to the Committee on Agriculture, Nutrition, and Forestry
A BILL
To amend the Commodity Exchange Act to clarify the treatment of purchases of certain commodity futures contracts and financial instruments with respect to limits established by the Commodity Futures Trading Commission relating to excessive speculation, and for other purposes.
Short title
This Act may be cited as the
Commodity Speculation Reform Act of
2008
.
Authority of Commodity Futures Trading Commission to issue no action letters
Section 2(a)(1) of the Commodity Exchange Act (7 U.S.C. 2(a)(1)) is amended by adding at the end the following:
Authority to issue no action letters to foreign boards of trade
In general
Except as provided in clause (ii), the Commission may not issue a no action letter to any foreign board of trade that lists a contract the price of which settles on the price of a contract traded on an exchange regulated by the Commission.
Exception
The Commission may issue a no action letter to a foreign board of trade described in clause (i) if the foreign board of trade provides to the Commission information and data accessibility the scope of which is comparable to the information and data accessibility provided to the Commission by entities under the jurisdiction of the Commission.
.
Additional employees
Section 2(a)(7) of the Commodity Exchange Act (7 U.S.C. 2(a)(7)) is amended by adding at the end the following:
Additional employees
As soon as practicable after the date of enactment of this subparagraph, the Commission shall appoint at least 100 full-time employees (in addition to the employees employed by the Commission as of the date of enactment of this subparagraph) to assist in carrying out section 4a(a)(2).
.
Treatment of purchases of certain commodity futures contracts and financial instruments
In general
Section 4a of the Commodity Exchange Act (7 U.S.C. 6a) is amended—
by striking Sec. 4a. (a)
Excessive speculation
and inserting the following:
Excessive speculation
Burden on interstate commerce; trading or position limits
In general
Excessive speculation and
; and
in subsection (a) (as amended by paragraph (1)), by adding at the end the following:
Treatment of purchases of certain commodity futures contracts and financial instruments
Definitions
In this paragraph:
Bona fide hedging transaction
In general
The term bona fide hedging transaction means a transaction that—
represents a substitute for a transaction to be made or a position to be taken at a later time in a physical marketing channel;
is economically appropriate for the reduction of risks in the conduct and management of a commercial enterprise; and
arises from the potential change in the value of—
assets that a person owns, produces, manufactures, possesses, or merchandises (or anticipates owning, producing, manufacturing, possessing, or merchandising);
liabilities that a person incurs or anticipates incurring; or
services that a person provides or purchases (or anticipates providing or purchasing).
Exclusion
The term bona fide hedging transaction does not include a transaction entered into on a designated contract market for the purpose of offsetting a financial risk arising from an over-the-counter commodity derivative.
Over-the-counter commodity derivative
The term over-the-counter commodity derivative means any agreement, contract, or transaction that—
is traded or executed in the United States; or
is held by a person located in the United States;
is not traded on a designated contract market or derivatives transaction execution facility; and
is a put, call, cap, floor, collar, or similar option of any kind for the purchase or sale of, or substantially based on the value of, 1 or more qualifying commodities or an economic or financial index or measure of economic or financial risk primarily associated with 1 or more qualifying commodities;
provides on an executory basis for the applicable transaction, on a fixed or contingent basis, of 1 or more payments substantially based on the value of 1 or more qualifying commodities or an economic or financial index or measure of economic or financial risk primarily associated with 1 or more qualifying commodities, and that transfers between the parties to the transaction, in whole or in part, the economic or financial risk associated with a future change in any such value without also conveying a current or future direct or indirect ownership interest in an asset or liability that incorporates the financial risk that is transferred; or
is any combination or permutation of, or option on, any agreement, contract, or transaction described in item (aa) or (bb).
Over-the-counter commodity derivative dealer
The term over-the-counter commodity derivative dealer means a person that regularly offers to enter into, assume, offset, assign, or otherwise terminate positions in over-the-counter commodity derivatives with customers in the ordinary course of a trade or business of the person.
Qualifying commodity
The term qualifying commodity means—
an agricultural commodity; and
an energy commodity.
Regulations
In general
Not later than 90 days after the date of enactment of this paragraph, in accordance with clauses (ii) and (iii), the Commission shall promulgate regulations to establish and enforce—
speculative position limits for qualifying commodities;
a methodology—
to enable persons to aggregate the positions held or controlled by the persons on designated contract markets, on derivatives transaction execution facilities, and in over-the-counter commodity derivatives; and
to ensure, to the maximum extent practicable, that the determinations made by the Commission with respect to each person examined under subparagraph (C) accurately reflect the net long and net short positions held or controlled by the person in the underlying qualifying commodity; and
information reporting rules to facilitate the monitoring and enforcement by the Commission of the speculative position limits established under subclause (I), including the monitoring of positions held in over-the-counter commodity derivatives.
Applicability
Position limits
The speculative position limits established under clause (i)(I) shall apply to position limits that, with respect to each applicable position limit, expire during—
the spot month;
each separate futures trading month (other than the spot month); or
the sum of each trading month (including the spot month).
Sum of positions
The speculative position limits established under clause (i)(I) shall apply to the sum of the positions held by a person—
on designated contract markets;
on derivatives transaction execution facilities; and
in over-the-counter commodity derivatives.
Maximum level of position limits
In establishing the speculative position limits under clause (i)(I), the Commission shall set the speculative position limits at the minimum level practicable to ensure sufficient market liquidity for the conduct of bona fide hedging activities.
Prohibition relating to certain positions
In general
Notwithstanding any other provision of this Act, no person may hold or control a position, separately or in combination, net long or net short, for the purchase or sale of a commodity for future delivery or, on a futures-equivalent basis, any option, or an over-the-counter commodity derivative that exceeds a speculative position limit established by the Commission under subparagraph (B)(i)(I).
Bona fide hedging transactions
In determining whether the sum of a position held or controlled by a person has exceeded the applicable speculative position limit established by the Commission under subparagraph (B)(i)(I), the Commission shall not consider positions attributable to a bona fide hedging transaction.
Determination of position limits for over-the-counter commodity derivative dealers
To determine the position of an over-the-counter commodity derivative dealer, the sum of the positions held or controlled by the over-the-counter commodity derivative dealer shall be—
calculated on the last day of each month; and
considered, for the monthly period covered by the determination, to be the average daily net position held or controlled by the over-the-counter commodity derivative dealer for the period beginning on the first day of the month and ending on the last day of the month.
.
Reports
Necessary additional funding
Not later than 45 days after the date of enactment of this Act, the Commodity Futures Trading Commission (referred to in this subsection as the Commission) shall submit to the Committee on Appropriations of the House of Representatives and the Committee on Appropriations of the Senate a report providing the recommendations of the Commission for any additional funding that the Commission considers to be necessary to carry out the amendments made by subsection (a), including funding for additional staffing and technological needs.
Speculative activity trends
Study
The Commission shall conduct a study—
to identify trends in speculative activity relating to metals; and
to determine whether the authority of the Commission under section 4a(a)(2) of the Commodity Exchange Act (7 U.S.C. 6a(a)(2)) (as added by subsection (a)(2)) should be extended to cover the trading of metals.
Report
Not later than 180 days after the date of enactment of this Act, the Commission shall submit a report containing the results of the study conducted under subparagraph (A) to—
the Committee on Agriculture of the House of Representatives;
the Committee on Agriculture, Nutrition, and Forestry of the Senate; and
the Committee on Homeland Security and Governmental Affairs of the Senate.
Authorization of appropriations
There are authorized to be appropriated such sums as are necessary to carry out this subsection.