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U.S. CODE
TITLE 7
AGRICULTURE

Version 2011-01-07

Last update 2011-11-10


  • COMMODITY EXCHANGES
  • COTTON STANDARDS
  • GRAIN STANDARDS
  • NAVAL STORES
  • IMPORTATION OF ADULTERATED SEEDS
  • INSECTICIDES AND ENVIRONMENTAL PESTICIDE CONTROL
    • INSECTICIDES
    • ENVIRONMENTAL PESTICIDE CONTROL
  • NATIONAL LABORATORY ACCREDITATION
  • INSECT PESTS GENERALLY
  • GOLDEN NEMATODE
  • PLANT PESTS
  • NURSERY STOCK AND OTHER PLANTS AND PLANT PRODUCTS
  • RUBBER AND OTHER CRITICAL AGRICULTURAL MATERIALS
    • GENERAL PROVISIONS
    • CRITICAL AGRICULTURAL MATERIALS
  • PACKERS AND STOCKYARDS
    • GENERAL DEFINITIONS
    • PACKERS GENERALLY
      • General Provisions
      • Swine Packer Marketing Contracts
    • STOCKYARDS AND STOCKYARD DEALERS
    • LIVE POULTRY DEALERS AND HANDLERS
    • GENERAL PROVISIONS
    • CHARGE FOR INSPECTION
  • WAREHOUSES
  • HONEYBEES
  • ASSOCIATIONS OF AGRICULTURAL PRODUCTS PRODUCERS
  • AGRICULTURAL AND MECHANICAL COLLEGES
    • COLLEGE-AID LAND APPROPRIATION
    • COLLEGE-AID ANNUAL APPROPRIATION
    • RETIREMENT OF EMPLOYEES
    • AGRICULTURAL EXTENSION WORK APPROPRIATION
  • AGRICULTURAL EXPERIMENT STATIONS
    • GENERAL PROVISIONS
    • EXPERIMENT STATIONS FOR PROPAGATION OF TREES, SHRUBS, VINES, AND VEGETABLES
    • RESEARCH FACILITIES
  • BUREAU OF ANIMAL INDUSTRY
  • BUREAU OF DAIRY INDUSTRY
  • MISCELLANEOUS MATTERS
  • COOPERATIVE MARKETING
  • COTTON STATISTICS AND ESTIMATES
  • DUMPING OR DESTRUCTION OF INTERSTATE PRODUCE
  • PERISHABLE AGRICULTURAL COMMODITIES
  • TOBACCO STATISTICS
  • TOBACCO INSPECTION
  • TOBACCO CONTROL
  • TOBACCO REFORM
    • TRANSITIONAL PAYMENTS TO TOBACCO QUOTA HOLDERS AND PRODUCERS OF TOBACCO
    • IMPLEMENTATION AND TRANSITION
  • AGRICULTURAL MARKETING
  • FOREIGN AGRICULTURAL SERVICE
  • PERISHABLE AGRICULTURAL COMMODITIES
  • EXPORT STANDARDS FOR APPLES
  • EXPORT STANDARDS FOR GRAPES AND PLUMS
  • AGRICULTURAL ADJUSTMENT
    • DECLARATION OF CONDITIONS AND POLICY
    • COTTON OPTION CONTRACTS
    • COMMODITY BENEFITS
    • REFUNDS
  • AGRICULTURAL MARKETING AGREEMENTS
  • COTTON MARKETING
  • TOBACCO INDUSTRY
  • POTATO ACT OF 1935
  • ANTI-HOG-CHOLERA SERUM AND HOG-CHOLERA VIRUS
  • RURAL ELECTRIFICATION AND TELEPHONE SERVICE
    • RURAL ELECTRIFICATION
    • RURAL TELEPHONE SERVICE
    • RURAL ELECTRIC AND TELEPHONE DIRECT LOAN PROGRAMS
    • RURAL TELEPHONE BANK
    • RURAL ECONOMIC DEVELOPMENT
    • RURAL BROADBAND ACCESS
  • TELEMEDICINE AND DISTANCE LEARNING SERVICES IN RURAL AREAS
  • PEANUT STATISTICS
  • FARM TENANCY
    • TENANT PURCHASE LOANS AND MORTGAGE INSURANCE
    • OPERATING LOANS
    • LAND CONSERVATION AND LAND UTILIZATION
    • GENERAL PROVISIONS
  • SUGAR PRODUCTION AND CONTROL
    • DEFINITIONS
    • QUOTA PROVISIONS
    • CONDITIONAL-PAYMENT PROVISIONS
    • ADMINISTRATIVE PROVISIONS
    • GENERAL PROVISIONS
  • AGRICULTURAL ADJUSTMENT ACT OF 1938
    • GENERAL PROVISIONS
    • ADJUSTMENT IN FREIGHT RATES, NEW USES AND MARKETS, AND DISPOSITION OF SURPLUSES
    • LOANS, PARITY PAYMENTS, CONSUMER SAFEGUARDS, MARKETING QUOTAS, AND MARKETING CERTIFICATES
      • Definitions, Loans, Parity Payments, and Consumer Safeguards
      • Marketing Quotas
        • marketing quotastobacco
        • acreage allotmentscorn
        • marketing quotaswheat
        • marketing quotascotton
        • marketing quotasrice
        • marketing quotaspeanuts
        • flexible marketing allotments for sugar
      • Administrative Provisions
        • publication and review of quotas
        • adjustment of quotas and enforcement
      • Wheat Marketing Allocation
      • Rice Certificates
      • Miscellaneous Provisions and Appropriations
        • miscellaneous
        • appropriations and administrative expenses
    • COTTON POOL PARTICIPATION TRUST CERTIFICATES
  • PRICE SUPPORT OF AGRICULTURAL COMMODITIES
    • GENERAL PROVISIONS
    • BASIC AGRICULTURAL COMMODITIES
    • NONBASIC AGRICULTURAL COMMODITIES
    • ACREAGE BASE AND YIELD SYSTEM
    • EMERGENCY LIVESTOCK FEED ASSISTANCE ACT OF 1988
  • CROP INSURANCE
    • FEDERAL CROP INSURANCE
    • SUPPLEMENTAL AGRICULTURAL DISASTER ASSISTANCE
  • SEEDS
    • DEFINITIONS
    • INTERSTATE COMMERCE
    • FOREIGN COMMERCE
    • GENERAL PROVISIONS
    • SALE OF UNCERTIFIED SEED OF PROTECTED VARIETY
  • DISTRIBUTION AND MARKETING OF AGRICULTURAL PRODUCTS
    • GENERAL PROVISIONS
    • LIVESTOCK MANDATORY REPORTING
      • Purpose; Definitions
      • Cattle Reporting
      • Swine Reporting
      • Lamb Reporting
      • Administration
    • DAIRY PRODUCT MANDATORY REPORTING
    • COUNTRY OF ORIGIN LABELING
  • STABILIZATION OF INTERNATIONAL WHEAT MARKET
  • HALOGETON GLOMERATUS CONTROL
  • FOOD FOR PEACE
    • BARTER
    • ECONOMIC ASSISTANCE AND FOOD SECURITY
    • EMERGENCY AND PRIVATE ASSISTANCE PROGRAMS
    • FOOD FOR DEVELOPMENT
    • EMERGENCY FOOD ASSISTANCE
    • GENERAL AUTHORITIES AND REQUIREMENTS
    • FARMER-TO-FARMER PROGRAM
    • ENTERPRISE FOR THE AMERICAS INITIATIVE
  • AGRICULTURAL COMMODITY SET-ASIDE
  • FOREIGN MARKET DEVELOPMENT
    • GENERAL PROVISIONS; AGRICULTURAL COUNSELORS AND AGRICULTURAL ATTACHES
    • UNITED STATES AGRICULTURAL TRADE OFFICES
    • REPRESENTATION ALLOWANCES, REGULATIONS, GENERAL PROVISIONS, AND AUTHORIZATION FOR APPROPRIATIONS
  • WOOL PROGRAM
  • SOIL BANK PROGRAM
    • GENERAL PROVISIONS
    • ACREAGE RESERVE PROGRAM
    • CONSERVATION RESERVE PROGRAM
    • CROPLAND ADJUSTMENTS
  • SURPLUS DISPOSAL OF AGRICULTURAL COMMODITIES
  • INTERCHANGE OF DEPARTMENT OF AGRICULTURE AND STATE EMPLOYEES
  • HUMANE METHODS OF LIVESTOCK SLAUGHTER
  • CONSULTATION ON AGRICULTURAL PROGRAMS
  • AGRICULTURAL CREDIT
    • REAL ESTATE LOANS
    • OPERATING LOANS
    • EMERGENCY LOANS
    • ADMINISTRATIVE PROVISIONS
    • RURAL COMMUNITY ADVANCEMENT PROGRAM
    • DELTA REGIONAL AUTHORITY
    • NORTHERN GREAT PLAINS REGIONAL AUTHORITY
    • RURAL BUSINESS INVESTMENT PROGRAM
    • RURAL COLLABORATIVE INVESTMENT PROGRAM
    • SEARCH GRANTS FOR SMALL COMMUNITIES
  • SUPPLEMENTAL NUTRITION ASSISTANCE PROGRAM
  • FARM LABOR CONTRACTOR REGISTRATION
  • COTTON RESEARCH AND PROMOTION
  • TRANSPORTATION, SALE, AND HANDLING OF CERTAIN ANIMALS
  • DEPARTMENT OF AGRICULTURE
  • DEPARTMENT OF AGRICULTURE ADVISORY COMMITTEES
  • UNFAIR TRADE PRACTICES AFFECTING PRODUCERS OF AGRICULTURAL PRODUCTS
  • PLANT VARIETY PROTECTION
    • PLANT VARIETY PROTECTION OFFICE
      • Organization and Publications
      • Legal Provisions as to the Plant Variety Protection Office
      • Plant Variety Protection Fees
    • PROTECTABILITY OF PLANT VARIETIES AND CERTIFICATES OF PROTECTION
      • Protectability of Plant Varieties
      • Applications; Form; Who May File; Relating Back; Confidentiality
      • Examinations; Response Time; Initial Appeals
      • Appeals to Courts and Other Review
      • Certificates of Plant Variety Protection
      • Reexamination After Issue, and Contested Proceedings
    • PLANT VARIETY PROTECTION AND RIGHTS
      • Ownership and Assignment
      • Infringement of Plant Variety Protection
      • Remedies for Infringement of Plant Variety Protection, and Other Actions
      • Intent and Severability
  • POTATO RESEARCH AND PROMOTION
  • RURAL FIRE PROTECTION, DEVELOPMENT, AND SMALL FARM RESEARCH AND EDUCATION
    • RURAL COMMUNITY FIRE PROTECTION
    • RURAL DEVELOPMENT AND SMALL FARM RESEARCH AND EDUCATION
  • EGG RESEARCH AND CONSUMER INFORMATION
  • NOXIOUS WEEDS
  • BEEF RESEARCH AND INFORMATION
  • FARMER-TO-CONSUMER DIRECT MARKETING
  • AGRICULTURAL RESEARCH, EXTENSION, AND TEACHING
    • FINDINGS, PURPOSES, AND DEFINITIONS
    • COORDINATION AND PLANNING OF AGRICULTURAL RESEARCH, EXTENSION, AND TEACHING
    • AGRICULTURAL RESEARCH AND EDUCATION GRANTS AND FELLOWSHIPS
    • NATIONAL FOOD AND HUMAN NUTRITION RESEARCH AND EXTENSION PROGRAM
    • ANIMAL HEALTH AND DISEASE RESEARCH
    • 1890 LAND-GRANT COLLEGE FUNDING
    • PROGRAMS FOR HISPANIC, ALASKA NATIVE, AND NATIVE HAWAIIAN SERVING INSTITUTIONS
    • INTERNATIONAL RESEARCH, EXTENSION, AND TEACHING
    • STUDIES
    • FUNDING AND MISCELLANEOUS PROVISIONS
    • AQUACULTURE
    • RANGELAND RESEARCH
    • BIOSECURITY
    • INSTITUTIONS OF HIGHER EDUCATION IN INSULAR AREAS
  • WHEAT AND WHEAT FOODS RESEARCH AND NUTRITION EDUCATION
  • AGRICULTURAL FOREIGN INVESTMENT DISCLOSURE
  • IMPLEMENTATION OF INTERNATIONAL SUGAR AGREEMENT, 1977
  • AGRICULTURAL SUBTERMINAL FACILITIES
  • SWINE HEALTH PROTECTION
  • ANIMAL CANCER RESEARCH
  • AGRICULTURAL TRADE SUSPENSION ADJUSTMENT
  • NATIONAL AGRICULTURAL COST OF PRODUCTION STANDARDS REVIEW BOARD
  • FARMLAND PROTECTION POLICY
  • FLORAL RESEARCH AND CONSUMER INFORMATION
  • INTERNATIONAL CARRIAGE OF PERISHABLE FOODSTUFFS
  • DAIRY RESEARCH AND PROMOTION
    • DAIRY PROMOTION PROGRAM
    • DAIRY RESEARCH PROGRAM
  • HONEY RESEARCH, PROMOTION, AND CONSUMER INFORMATION
  • AGRICULTURAL PRODUCTIVITY RESEARCH
  • PORK PROMOTION, RESEARCH, AND CONSUMER INFORMATION
  • WATERMELON RESEARCH AND PROMOTION
  • NATIONAL COMMISSION ON AGRICULTURE AND RURAL DEVELOPMENT POLICY
  • STATE AGRICULTURAL LOAN MEDIATION PROGRAMS
  • AGRICULTURAL COMPETITIVENESS AND TRADE
    • FINDINGS, POLICY, AND PURPOSE
    • AGRICULTURAL TRADE INITIATIVES
      • General Provisions
      • Foreign Agricultural Service
  • NATIONAL NUTRITION MONITORING AND RELATED RESEARCH
    • NUTRITION MONITORING AND RELATED RESEARCH
    • NATIONAL NUTRITION MONITORING ADVISORY COUNCIL
    • DIETARY GUIDANCE
  • ADMINISTRATION OF ENVIRONMENTAL PROGRAMS
  • WATER QUALITY RESEARCH, EDUCATION, AND COORDINATION
  • EXPORT PROMOTION
    • GENERAL PROVISIONS
    • AGRICULTURAL EXPORT PROGRAMS
      • Programs
      • Implementation
    • BARRIERS TO EXPORTS
    • GENERAL PROVISIONS
      • Program Controls
      • Miscellaneous Provisions
    • FOREIGN AGRICULTURAL SERVICE
    • REPORTS
    • FOREIGN MARKET DEVELOPMENT COOPERATOR PROGRAM
  • RESEARCH
    • SUSTAINABLE AGRICULTURE RESEARCH AND EDUCATION
      • Best Utilization of Biological Applications
      • Integrated Management Systems
      • Sustainable Agriculture Technology Development and Transfer Program
    • NATIONAL GENETIC RESOURCES PROGRAM
    • NATIONAL AGRICULTURAL WEATHER INFORMATION SYSTEM
    • RESEARCH REGARDING PRODUCTION, PREPARATION, PROCESSING, HANDLING, AND STORAGE OF AGRICULTURAL PRODUCTS
    • PLANT AND ANIMAL PEST AND DISEASE CONTROL PROGRAM
    • ALTERNATIVE AGRICULTURAL RESEARCH AND COMMERCIALIZATION
    • MISCELLANEOUS RESEARCH PROVISIONS
  • PECAN PROMOTION AND RESEARCH
  • MUSHROOM PROMOTION, RESEARCH, AND CONSUMER INFORMATION
  • LIME PROMOTION, RESEARCH, AND CONSUMER INFORMATION
  • SOYBEAN PROMOTION, RESEARCH, AND CONSUMER INFORMATION
  • PROCESSOR-FUNDED MILK PROMOTION PROGRAM
  • ORGANIC CERTIFICATION
  • RURAL REVITALIZATION THROUGH FORESTRY
    • FORESTRY RURAL REVITALIZATION
    • NATIONAL FOREST-DEPENDENT RURAL COMMUNITIES
  • GLOBAL CLIMATE CHANGE
  • FRESH CUT FLOWERS AND FRESH CUT GREENS PROMOTION AND INFORMATION
  • DEPARTMENT OF AGRICULTURE REORGANIZATION
    • GENERAL REORGANIZATION AUTHORITIES
    • FARM AND FOREIGN AGRICULTURAL SERVICES
    • RURAL ECONOMIC AND COMMUNITY DEVELOPMENT
    • FOOD, NUTRITION, AND CONSUMER SERVICES
    • NATURAL RESOURCES AND ENVIRONMENT
    • RESEARCH, EDUCATION, AND ECONOMICS
    • FOOD SAFETY
    • NATIONAL APPEALS DIVISION
    • MARKETING AND REGULATORY PROGRAMS
    • MISCELLANEOUS REORGANIZATION PROVISIONS
    • FREEDOM TO E-FILE
  • SHEEP PROMOTION, RESEARCH, AND INFORMATION
  • AGRICULTURAL MARKET TRANSITION
    • SHORT TITLE, PURPOSE, AND DEFINITIONS
    • PRODUCTION FLEXIBILITY CONTRACTS
    • NONRECOURSE MARKETING ASSISTANCE LOANS AND LOAN DEFICIENCY PAYMENTS
    • OTHER COMMODITIES
      • Dairy
      • Sugar
    • ADMINISTRATION
    • PERMANENT PRICE SUPPORT AUTHORITY
    • COMMISSION ON 21st CENTURY PRODUCTION AGRICULTURE
    • MISCELLANEOUS COMMODITY PROVISIONS
  • AGRICULTURAL PROMOTION
    • COMMODITY PROMOTION AND EVALUATION
    • ISSUANCE OF ORDERS FOR PROMOTION, RESEARCH, AND INFORMATION ACTIVITIES REGARDING AGRICULTURAL COMMODITIES
    • CANOLA AND RAPESEED
    • KIWIFRUIT
    • POPCORN
  • EMERGENCY FOOD ASSISTANCE
  • AGRICULTURAL RESEARCH, EXTENSION, AND EDUCATION REFORM
    • PRIORITIES, SCOPE, REVIEW, AND COORDINATION OF AGRICULTURAL RESEARCH, EXTENSION, AND EDUCATION
    • NEW AGRICULTURAL RESEARCH, EXTENSION, AND EDUCATION INITIATIVES
    • MISCELLANEOUS PROVISIONS
      • Miscellaneous
      • General
      • Studies
  • PLANT PROTECTION
    • PLANT PROTECTION
    • INSPECTION AND ENFORCEMENT
    • MISCELLANEOUS PROVISIONS
    • AUTHORIZATION OF APPROPRIATIONS
    • NOXIOUS WEED CONTROL AND ERADICATION
  • HASS AVOCADO PROMOTION, RESEARCH, AND INFORMATION
  • COMMODITY PROGRAMS
    • DIRECT PAYMENTS AND COUNTER-CYCLICAL PAYMENTS
    • MARKETING ASSISTANCE LOANS AND LOAN DEFICIENCY PAYMENTS
    • PEANUTS
    • SUGAR
    • DAIRY
    • ADMINISTRATION
  • RENEWABLE ENERGY RESEARCH AND DEVELOPMENT
  • TREE ASSISTANCE PROGRAM
  • ANIMAL HEALTH PROTECTION
  • ENHANCING CONTROLS ON DANGEROUS BIOLOGICAL AGENTS AND TOXINS
    • DEPARTMENT OF AGRICULTURE
    • INTERAGENCY COORDINATION REGARDING OVERLAP AGENTS AND TOXINS
  • BROWN TREE SNAKE CONTROL AND ERADICATION
  • BIOMASS RESEARCH AND DEVELOPMENT
  • AGRICULTURAL COMMODITY SUPPORT PROGRAMS
    • DIRECT PAYMENTS AND COUNTER-CYCLICAL PAYMENTS
    • MARKETING ASSISTANCE LOANS AND LOAN DEFICIENCY PAYMENTS
    • PEANUTS
    • DAIRY
    • ADMINISTRATION
  • AGRICULTURAL SECURITY
    • AGRICULTURAL SECURITY
    • OTHER PROVISIONS

CHAPTER 1

COMMODITY EXCHANGES

Short title

This chapter may be cited as the "Commodity Exchange Act."



Definitions

As used in this chapter:

(1) Alternative trading system The term "alternative trading system" means an organization, association, or group of persons that—

  • (A) is registered as a broker or dealer pursuant to section 15(b) of the Securities Exchange Act of 1934 [15 U.S.C. 78o (b)] (except paragraph (11) thereof);

  • (B) performs the functions commonly performed by an exchange (as defined in section 3(a)(1) of the Securities Exchange Act of 1934 [15 U.S.C. 78c (a)(1)]);

  • (C) does not—
    • (i) set rules governing the conduct of subscribers other than the conduct of such subscribers' trading on the alternative trading system; or

    • (ii) discipline subscribers other than by exclusion from trading; and

  • (D) is exempt from the definition of the term "exchange" under such section 3 (a)(1) [15 U.S.C. 78c (a)(1)] by rule or regulation of the Securities and Exchange Commission on terms that require compliance with regulations of its trading functions.

(2) Board of trade The term "board of trade" means any organized exchange or other trading facility.

(3) Commission The term "Commission" means the Commodity Futures Trading Commission established under section 2 (a)(2) of this title.

(4) Commodity The term "commodity" means wheat, cotton, rice, corn, oats, barley, rye, flaxseed, grain sorghums, mill feeds, butter, eggs, Solanum tuberosum (Irish potatoes), wool, wool tops, fats and oils (including lard, tallow, cottonseed oil, peanut oil, soybean oil, and all other fats and oils), cottonseed meal, cottonseed, peanuts, soybeans, soybean meal, livestock, livestock products, and frozen concentrated orange juice, and all other goods and articles, except onions (as provided by section 13-1 of this title) and motion picture box office receipts (or any index, measure, value, or data related to such receipts), and all services, rights, and interests (except motion picture box office receipts, or any index, measure, value or data related to such receipts) in which contracts for future delivery are presently or in the future dealt in.

(5) Commodity pool operator The term "commodity pool operator" means any person engaged in a business that is of the nature of an investment trust, syndicate, or similar form of enterprise, and who, in connection therewith, solicits, accepts, or receives from others, funds, securities, or property, either directly or through capital contributions, the sale of stock or other forms of securities, or otherwise, for the purpose of trading in any commodity for future delivery on or subject to the rules of any contract market or derivatives transaction execution facility, except that the term does not include such persons not within the intent of the definition of the term as the Commission may specify by rule, regulation, or order.

(6) Commodity trading advisor
  • (A) In general Except as otherwise provided in this paragraph, the term "commodity trading advisor" means any person who—

    • (i) for compensation or profit, engages in the business of advising others, either directly or through publications, writings, or electronic media, as to the value of or the advisability of trading in—
      • (I) any contract of sale of a commodity for future delivery made or to be made on or subject to the rules of a contract market or derivatives transaction execution facility;

      • (II) any commodity option authorized under section 6c of this title; or

      • (III) any leverage transaction authorized under section 23 of this title; or

    • (ii) for compensation or profit, and as part of a regular business, issues or promulgates analyses or reports concerning any of the activities referred to in clause (i).

  • (B) Exclusions Subject to subparagraph (C), the term "commodity trading advisor" does not include—

    • (i) any bank or trust company or any person acting as an employee thereof;

    • (ii) any news reporter, news columnist, or news editor of the print or electronic media, or any lawyer, accountant, or teacher;

    • (iii) any floor broker or futures commission merchant;

    • (iv) the publisher or producer of any print or electronic data of general and regular dissemination, including its employees;

    • (v) the fiduciary of any defined benefit plan that is subject to the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1001 et seq.);

    • (vi) any contract market or derivatives transaction execution facility; and

    • (vii) such other persons not within the intent of this paragraph as the Commission may specify by rule, regulation, or order.

  • (C) Incidental services Subparagraph (B) shall apply only if the furnishing of such services by persons referred to in subparagraph (B) is solely incidental to the conduct of their business or profession.

  • (D) Advisors The Commission, by rule or regulation, may include within the term "commodity trading advisor", any person advising as to the value of commodities or issuing reports or analyses concerning commodities if the Commission determines that the rule or regulation will effectuate the purposes of this paragraph.

(7) Contract of sale The term "contract of sale" includes sales, agreements of sale, and agreements to sell.

(8) Cooperative association of producers The term "cooperative association of producers" means any cooperative association, corporate, or otherwise, not less than 75 percent in good faith owned or controlled, directly or indirectly, by producers of agricultural products and otherwise complying with sections 291 and 292 of this title, including any organization acting for a group of such associations and owned or controlled by such associations, except that business done for or with the United States, or any agency thereof, shall not be considered either member or nonmember business in determining the compliance of any such association with this chapter.

(9) 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 an agreement, contract, or transaction—

    • (i) enables each party to the 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 participants in the derivatives clearing organization; or

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

  • (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 central 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.

(10) Electronic trading facility The term "electronic trading facility" means a trading facility that—

  • (A) operates by means of an electronic or telecommunications network; and

  • (B) maintains an automated audit trail of bids, offers, and the matching of orders or the execution of transactions on the facility.

(11) Eligible commercial entity The term "eligible commercial entity" means, with respect to an agreement, contract or transaction in a commodity—

  • (A) an eligible contract participant described in clause (i), (ii), (v), (vii), (viii), or (ix) of paragraph (12)(A) that, in connection with its business—
    • (i) has a demonstrable ability, directly or through separate contractual arrangements, to make or take delivery of the underlying commodity;

    • (ii) incurs risks, in addition to price risk, related to the commodity; or

    • (iii) is a dealer that regularly provides risk management or hedging services to, or engages in market-making activities with, the foregoing entities involving transactions to purchase or sell the commodity or derivative agreements, contracts, or transactions in the commodity;

  • (B) an eligible contract participant, other than a natural person or an instrumentality, department, or agency of a State or local governmental entity, that—
    • (i) regularly enters into transactions to purchase or sell the commodity or derivative agreements, contracts, or transactions in the commodity; and

    • (ii) either—
      • (I) in the case of a collective investment vehicle whose participants include persons other than—
        • (aa) qualified eligible persons, as defined in Commission rule 4.7(a) (17 CFR 4.7(a));

        • (bb) accredited investors, as defined in Regulation D of the Securities and Exchange Commission under the Securities Act of 1933 [15 U.S.C. 77a et seq.] (17 CFR 230.501(a)), with total assets of $2,000,000; or

        • (cc) qualified purchasers, as defined in section 2(a)(51)(A) of the Investment Company Act of 1940 [15 U.S.C. 80a-2 (a)(51)(A)];

          in each case as in effect on December 21, 2000, has, or is one of a group of vehicles under common control or management having in the aggregate, $1,000,000,000 in total assets; or

      • (II) in the case of other persons, has, or is one of a group of persons under common control or management having in the aggregate, $100,000,000 in total assets; or

  • (C) such other persons as the Commission shall determine appropriate and shall designate by rule, regulation, or order.

(12) Eligible contract participant The term "eligible contract participant" means—

  • (A) acting for its own account—
    • (i) a financial institution;

    • (ii) an insurance company that is regulated by a State, or that is regulated by a foreign government and is subject to comparable regulation as determined by the Commission, including a regulated 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 chapter 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—
        • (aa) has a net worth exceeding $1,000,000; and

        • (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.), a governmental employee benefit plan, 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—
        • (aa) an investment adviser or commodity trading advisor subject to regulation under the Investment Advisers Act of 1940 (15 U.S.C. 80b-1 et seq.) or this chapter;

        • (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 described in clause (ii), or a regulated 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);

        except that such term does not include an entity, instrumentality, agency, or department referred to in subclause (I) or (III) of this clause unless (aa) the entity, instrumentality, agency, or department is a person described in clause (i), (ii), or (iii) of paragraph (11)(A) of this section; (bb) the entity, instrumentality, agency, or department owns and invests on a discretionary basis $25,000,000 or more in investments; or (cc) the agreement, contract, or transaction is offered by, and entered into with, an entity that is listed in any of subclauses (I) through (VI) of section 2 (c)(2)(B)(ii) of this title;

    • (viii)
      • (I) 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);

      • (II) an associated person of a registered broker or dealer 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));

      • (III) an investment bank holding company (as defined in section 17(i) of the Securities Exchange Act of 1934 (15 U.S.C. 78q (i));

    • (ix) a futures commission merchant subject to regulation under this chapter 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 chapter in connection with any transaction that takes place on or through the facilities of a registered entity (other than an electronic trading facility with respect to a significant price discovery contract) or an exempt board of trade, or any affiliate thereof, on which such person regularly trades; or

    • (xi) an individual who has total assets in an amount in excess of—
      • (I) $10,000,000; or

      • (II) $5,000,000 and who enters into the agreement, contract, or transaction in order to manage the risk associated with an asset owned or liability incurred, or reasonably likely to be owned or incurred, by the individual;

  • (B)
    • (i) a person described in clause (i), (ii), (iv), (v), (viii), (ix), or (x) of subparagraph (A) or in subparagraph (C), acting as broker or performing an equivalent agency function on behalf of another person described in subparagraph (A) or (C); or

    • (ii) an investment adviser subject to regulation under the Investment Advisers Act of 1940 [15 U.S.C. 80b-1 et seq.], a commodity trading advisor subject to regulation under this chapter, a foreign person performing a similar role or function subject as such to foreign regulation, or a person described in clause (i), (ii), (iv), (v), (viii), (ix), or (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; or

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

(13) Excluded commodity The term "excluded commodity" means—

  • (i) an interest rate, exchange rate, currency, security, security index, credit risk or measure, debt or equity instrument, index or measure of inflation, or other macroeconomic index or measure;

  • (ii) any other rate, differential, index, or measure of economic or commercial risk, return, or value that is—
    • (I) not based in substantial part on the value of a narrow group of commodities not described in clause (i); or

    • (II) based solely on one or more commodities that have no cash market;

  • (iii) any economic or commercial index based on prices, rates, values, or levels that are not within the control of any party to the relevant contract, agreement, or transaction; or

  • (iv) an occurrence, extent of an occurrence, or contingency (other than a change in the price, rate, value, or level of a commodity not described in clause (i)) that is—
    • (I) beyond the control of the parties to the relevant contract, agreement, or transaction; and

    • (II) associated with a financial, commercial, or economic consequence.

(14) Exempt commodity The term "exempt commodity" means a commodity that is not an excluded commodity or an agricultural commodity.

(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 1752 of title 12);

  • (E) a depository institution (as defined in section 1813 of title 12);

  • (F) a foreign bank or a branch or agency of a foreign bank (each as defined in section 3101 of title 12);

  • (G) any financial holding company (as defined in section 1841 of title 12);

  • (H) a trust company; or

  • (I) a similarly regulated subsidiary or affiliate of an entity described in any of subparagraphs (A) through (H).

(16) Floor broker The term "floor broker" means any person who, in or surrounding any pit, ring, post, or other place provided by a contract market or derivatives transaction execution facility for the meeting of persons similarly engaged, shall purchase or sell for any other person any commodity for future delivery on or subject to the rules of any contract market or derivatives transaction execution facility.

(17) Floor trader The term "floor trader" means any person who, in or surrounding any pit, ring, post, or other place provided by a contract market or derivatives transaction execution facility for the meeting of persons similarly engaged, purchases, or sells solely for such person's own account, any commodity for future delivery on or subject to the rules of any contract market or derivatives transaction execution facility.

(18) Foreign futures authority The term "foreign futures authority" means any foreign government, or any department, agency, governmental body, or regulatory organization empowered by a foreign government to administer or enforce a law, rule, or regulation as it relates to a futures or options matter, or any department or agency of a political subdivision of a foreign government empowered to administer or enforce a law, rule, or regulation as it relates to a futures or options matter.

(19) Future delivery The term "future delivery" does not include any sale of any cash commodity for deferred shipment or delivery.

(20) Futures commission merchant The term "futures commission merchant" means an individual, association, partnership, corporation, or trust that—

  • (A) is engaged in soliciting or in accepting orders for the purchase or sale of any commodity for future delivery on or subject to the rules of any contract market or derivatives transaction execution facility; and

  • (B) in or in connection with such solicitation or acceptance of orders, accepts any money, securities, or property (or extends credit in lieu thereof) to margin, guarantee, or secure any trades or contracts that result or may result therefrom.

(21) Hybrid instrument The term "hybrid instrument" means a security having one or more payments indexed to the value, level, or rate of, or providing for the delivery of, one or more commodities.

(22) Interstate commerce The term "interstate commerce" means commerce—

  • (A) between any State, territory, or possession, or the District of Columbia, and any place outside thereof; or

  • (B) between points within the same state, territory, or possession, or the District of Columbia, but through any place outside thereof, or within any territory or possession, or the District of Columbia.

(23) Introducing broker The term "introducing broker" means any person (except an individual who elects to be and is registered as an associated person of a futures commission merchant) engaged in soliciting or in accepting orders for the purchase or sale of any commodity for future delivery on or subject to the rules of any contract market or derivatives transaction execution facility who does not accept any money, securities, or property (or extend credit in lieu thereof) to margin, guarantee, or secure any trades or contracts that result or may result therefrom.

(24) Member of a registered entity; member of a derivatives transaction execution facility The term "member" means, with respect to a registered entity or derivatives transaction execution facility, an individual, association, partnership, corporation, or trust—

  • (A) owning or holding membership in, or admitted to membership representation on, the registered entity or derivatives transaction execution facility; or

  • (B) having trading privileges on the registered entity or derivatives transaction execution facility.

    A participant in an alternative trading system that is designated as a contract market pursuant to section 7b-1 of this title is deemed a member of the contract market for purposes of transactions in security futures products through the contract market.

(25) Narrow-based security index
  • (A) The term "narrow-based security index" means an index—
    • (i) that has 9 or fewer component securities;

    • (ii) in which a component security comprises more than 30 percent of the index's weighting;

    • (iii) in which the five highest weighted component securities in the aggregate comprise more than 60 percent of the index's weighting; or

    • (iv) in which the lowest weighted component securities comprising, in the aggregate, 25 percent of the index's weighting have an aggregate dollar value of average daily trading volume of less than $50,000,000 (or in the case of an index with 15 or more component securities, $30,000,000), except that if there are two or more securities with equal weighting that could be included in the calculation of the lowest weighted component securities comprising, in the aggregate, 25 percent of the index's weighting, such securities shall be ranked from lowest to highest dollar value of average daily trading volume and shall be included in the calculation based on their ranking starting with the lowest ranked security.

  • (B) Notwithstanding subparagraph (A), an index is not a narrow-based security index if—
    • (i)
      • (I) it has at least 9 component securities;

      • (II) no component security comprises more than 30 percent of the index's weighting; and

      • (III) each component security is—
        • (aa) registered pursuant to section 12 of the Securities Exchange Act of 1934 [15 U.S.C. 78l];

        • (bb) one of 750 securities with the largest market capitalization; and

        • (cc) one of 675 securities with the largest dollar value of average daily trading volume;

    • (ii) a board of trade was designated as a contract market by the Commodity Futures Trading Commission with respect to a contract of sale for future delivery on the index, before December 21, 2000;

    • (iii)
      • (I) a contract of sale for future delivery on the index traded on a designated contract market or registered derivatives transaction execution facility for at least 30 days as a contract of sale for future delivery on an index that was not a narrow-based security index; and

      • (II) it has been a narrow-based security index for no more than 45 business days over 3 consecutive calendar months;

    • (iv) a contract of sale for future delivery on the index is traded on or subject to the rules of a foreign board of trade and meets such requirements as are jointly established by rule or regulation by the Commission and the Securities and Exchange Commission;

    • (v) no more than 18 months have passed since December 21, 2000, and—
      • (I) it is traded on or subject to the rules of a foreign board of trade;

      • (II) the offer and sale in the United States of a contract of sale for future delivery on the index was authorized before December 21, 2000; and

      • (III) the conditions of such authorization continue to be met; or

    • (vi) a contract of sale for future delivery on the index is traded on or subject to the rules of a board of trade and meets such requirements as are jointly established by rule, regulation, or order by the Commission and the Securities and Exchange Commission.

  • (C) Within 1 year after December 21, 2000, the Commission and the Securities and Exchange Commission jointly shall adopt rules or regulations that set forth the requirements under subparagraph (B)(iv).

  • (D) An index that is a narrow-based security index solely because it was a narrow-based security index for more than 45 business days over 3 consecutive calendar months pursuant to clause (iii) of subparagraph (B) shall not be a narrow-based security index for the 3 following calendar months.

  • (E) For purposes of subparagraphs (A) and (B)—
    • (i) the dollar value of average daily trading volume and the market capitalization shall be calculated as of the preceding 6 full calendar months; and

    • (ii) the Commission and the Securities and Exchange Commission shall, by rule or regulation, jointly specify the method to be used to determine market capitalization and dollar value of average daily trading volume.

(26) 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".

(27) 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 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 facility; and

    • (ii) include disciplinary sanctions other than the exclusion of participants from trading.

(28) Person The term "person" imports the plural or singular, and includes individuals, associations, partnerships, corporations, and trusts.

(29) Registered entity The term "registered entity" means—

  • (A) a board of trade designated as a contract market under section 7 of this title;

  • (B) a derivatives transaction execution facility registered under section 7a of this title;

  • (C) a derivatives clearing organization registered under section 7a-1 of this title;

  • (D) a board of trade designated as a contract market under section 7b-1 of this title; and

  • (E) with respect to a contract that the Commission determines is a significant price discovery contract, any electronic trading facility on which the contract is executed or traded.

(30) Security The term "security" means a security as defined in section 2(a)(1) of the Securities Act of 1933 (15 U.S.C. 77b (a)(1)) or section 3(a)(10) of the Securities Exchange Act of 1934 (15 U.S.C. 78c (a)(10)).

(31) Security future The term "security future" means a contract of sale for future delivery of a single security or of a narrow-based security index, including any interest therein or based on the value thereof, except an exempted security under section 3(a)(12) of the Securities Exchange Act of 1934 [15 U.S.C. 78c (a)(12)] as in effect on January 11, 1983 (other than any municipal security as defined in section 3(a)(29) of the Securities Exchange Act of 1934 [15 U.S.C. 78c (a)(29)] as in effect on January 11, 1983). The term "security future" does not include any agreement, contract, or transaction excluded from this chapter under section 2 (c), 2 (d), 2 (f), or 2 (g) of this title (as in effect on December 21, 2000) or sections 27 to 27f of this title.

(32) Security futures product The term "security futures product" means a security future or any put, call, straddle, option, or privilege on any security future.

(33) Significant price discovery contract The term "significant price discovery contract" means an agreement, contract, or transaction subject to section 2 (h)(7) of this title.

(34) 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—

    • (i) by accepting bids or offers made by other participants that are open to multiple partipants in the facility or system; or

    • (ii) through the interaction of multiple bids or multiple offers within a system with a pre-determined non-discretionary automated trade matching and execution algorithm.

  • (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 bids and multiple offers within a predetermined, nondiscretionary automated trade matching and execution 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.

      Any person, group of persons, dealer, broker, or facility described in clause (i) or (ii) is excluded from the meaning of the term "trading facility" for the purposes of this chapter without any prior specific approval, certification, or other action by the Commission.

  • (C) Special rule A person or group of persons that would not otherwise constitute a trading facility shall not be considered to be a trading facility solely as a result of the submission to a derivatives clearing organization of transactions executed on or through the person or group of persons.

    Requirements of Secretary of the Treasury regarding exemption of foreign exchange swaps and foreign exchange forwards from definition of the term "swap"

    (a) Required considerations In determining whether to exempt foreign exchange swaps and foreign exchange forwards from the definition of the term "swap", the Secretary of the Treasury (referred to in this section as the "Secretary") shall consider—

    • (1) whether the required trading and clearing of foreign exchange swaps and foreign exchange forwards would create systemic risk, lower transparency, or threaten the financial stability of the United States;

    • (2) whether foreign exchange swaps and foreign exchange forwards are already subject to a regulatory scheme that is materially comparable to that established by this chapter for other classes of swaps;

    • (3) the extent to which bank regulators of participants in the foreign exchange market provide adequate supervision, including capital and margin requirements;

    • (4) the extent of adequate payment and settlement systems; and

    • (5) the use of a potential exemption of foreign exchange swaps and foreign exchange forwards to evade otherwise applicable regulatory requirements.

    (b) Determination If the Secretary makes a determination to exempt foreign exchange swaps and foreign exchange forwards from the definition of the term "swap", the Secretary shall submit to the appropriate committees of Congress a determination that contains—

    • (1) an explanation regarding why foreign exchange swaps and foreign exchange forwards are qualitatively different from other classes of swaps in a way that would make the foreign exchange swaps and foreign exchange forwards ill-suited for regulation as swaps; and

    • (2) an identification of the objective differences of foreign exchange swaps and foreign exchange forwards with respect to standard swaps that warrant an exempted status.

    (c) Effect of determination A determination by the Secretary under subsection (b) shall not exempt any foreign exchange swaps and foreign exchange forwards traded on a designated contract market or swap execution facility from any applicable antifraud and antimanipulation provision under this chapter.

    Jurisdiction of Commission; liability of principal for act of agent; Commodity Futures Trading Commission; transaction in interstate commerce

    (a) Jurisdiction of Commission; Commodity Futures Trading Commission
    • (1) Jurisdiction of Commission
      • (A) In general The Commission shall have exclusive jurisdiction, except to the extent otherwise provided in subparagraphs (C) and (D) of this paragraph and subsections (c) through (i) of this section, 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 contracts of sale of a commodity for future delivery (including significant price discovery contracts), traded or executed on a contract market designated or derivatives transaction execution facility registered pursuant to section 7 or 7a of this title or any other board of trade, exchange, or market, and transactions subject to regulation by the Commission pursuant to section 23 of this title. Except as hereinabove provided, nothing contained in this section shall

        • (I) supersede or limit the jurisdiction at any time conferred on the Securities and Exchange Commission or other regulatory authorities under the laws of the United States or of any State, or

          • (II) restrict the Securities and Exchange Commission and such other authorities from carrying out their duties and responsibilities in accordance with such laws. Nothing in this section shall supersede or limit the jurisdiction conferred on courts of the United States or any State.

          • (B) Liability of principal for act of agent The act, omission, or failure of any official, agent, or other person acting for any individual, association, partnership, corporation, or trust within the scope of his employment or office shall be deemed the act, omission, or failure of such individual, association, partnership, corporation, or trust, as well as of such official, agent, or other person.

          • (C) Designation of boards of trade as contract markets; contracts for future delivery; security futures products; filing with Board of Governors of Federal Reserve System; judicial review Notwithstanding any other provision of law—

            • (i) This chapter shall not apply to and the Commission shall have no jurisdiction to designate a board of trade as a contract market for any transaction whereby any party to such transaction acquires any put, call, or other option on one or more securities (as defined in section 77b (1) of title 15 or section 3(a)(10) of the Securities Exchange Act of 1934 [15 U.S.C. 78c (a)(10)] on January 11, 1983), including any group or index of such securities, or any interest therein or based on the value thereof.

            • (ii) This chapter shall apply to and the Commission shall have exclusive jurisdiction with respect to accounts, agreements (including any transaction which is of the character of, or is commonly known to the trade as, an "option", "privilege", "indemnity", "bid", "offer", "put", "call", "advance guaranty", or "decline guaranty") and transactions involving, and may designate a board of trade as a contract market in, or register a derivatives transaction execution facility that trades or executes, contracts of sale (or options on such contracts) for future delivery of a group or index of securities (or any interest therein or based upon the value thereof): Provided, however, That no board of trade shall be designated as a contract market with respect to any such contracts of sale (or options on such contracts) for future delivery, and no derivatives transaction execution facility shall trade or execute such contracts of sale (or options on such contracts) for future delivery, unless the board of trade or the derivatives transaction execution facility, and the applicable contract, meet the following minimum requirements:
              • (I) Settlement of or delivery on such contract (or option on such contract) shall be effected in cash or by means other than the transfer or receipt of any security, except an exempted security under section 77c of title 15 or section 3(a)(12) of the Securities Exchange Act of 1934 [15 U.S.C. 78c (a)(12)] as in effect on January 11, 1983, (other than any municipal security, as defined in section 3(a)(29) of the Securities Exchange Act of 1934 [15 U.S.C. 78c (a)(29)] on January 11, 1983);

              • (II) Trading in such contract (or option on such contract) shall not be readily susceptible to manipulation of the price of such contract (or option on such contract), nor to causing or being used in the manipulation of the price of any underlying security, option on such security or option on a group or index including such securities; and

              • (III) Such group or index of securities shall not constitute a narrow-based security index.

            • (iii) If, in its discretion, the Commission determines that a stock index futures contract, notwithstanding its conformance with the requirements in clause (ii) of this subparagraph, can reasonably be used as a surrogate for trading a security (including a security futures product), it may, by order, require such contract and any option thereon be traded and regulated as security futures products as defined in section 3(a)(56) of the Securities Exchange Act of 1934 [15 U.S.C. 78c (a)(56)] and section 1a of this title subject to all rules and regulations applicable to security futures products under this chapter and the securities laws as defined in section 3(a)(47) of the Securities Exchange Act of 1934 [15 U.S.C. 78c (a)(47)].

            • (iv) No person shall offer to enter into, enter into, or confirm the execution of any contract of sale (or option on such contract) for future delivery of any security, or interest therein or based on the value thereof, except an exempted security under or section 3(a)(12) of the Securities Exchange Act of 1934 [15 U.S.C. 78c (a)(12)] as in effect on January 11, 1983 (other than any municipal security as defined in section 3(a)(29) of the Securities Exchange Act of 1934 [15 U.S.C. 78c (a)(29)] on January 11, 1983), or except as provided in clause (ii) of this subparagraph or subparagraph (D), any group or index of such securities or any interest therein or based on the value thereof.

            • (v)
              • (I) Notwithstanding any other provision of this chapter, any contract market in a stock index futures contract (or option thereon) other than a security futures product, or any derivatives transaction execution facility on which such contract or option is traded, shall file with the Board of Governors of the Federal Reserve System any rule establishing or changing the levels of margin (initial and maintenance) for such stock index futures contract (or option thereon) other than security futures products.

              • (II) The Board may at any time request any contract market or derivatives transaction execution facility to set the margin for any stock index futures contract (or option thereon), other than for any security futures product, at such levels as the Board in its judgment determines are appropriate to preserve the financial integrity of the contract market or derivatives transaction execution facility, or its clearing system, or to prevent systemic risk. If the contract market or derivatives transaction execution facility fails to do so within the time specified by the Board in its request, the Board may direct the contract market or derivatives transaction execution facility to alter or supplement the rules of the contract market or derivatives transaction execution facility as specified in the request.

              • (III) Subject to such conditions as the Board may determine, the Board may delegate any or all of its authority, relating to margin for any stock index futures contract (or option thereon), other than security futures products, under this clause to the Commission.

              • (IV) It shall be unlawful for any futures commission merchant to, directly or indirectly, extend or maintain credit to or for, or collect margin from any customer on any security futures product unless such activities comply with the regulations prescribed pursuant to section 7(c)(2)(B) of the Securities Exchange Act of 1934 [15 U.S.C. 78g (c)(2)(B)].

              • (V) Nothing in this clause shall supersede or limit the authority granted to the Commission in section 12a (9) of this title to direct a contract market or registered derivatives transaction execution facility, on finding an emergency to exist, to raise temporary margin levels on any futures contract, or option on the contract covered by this clause, or on any security futures product.

              • (VI) Any action taken by the Board, or by the Commission acting under the delegation of authority under subclause III, under this clause directing a contract market to alter or supplement a contract market rule shall be subject to review only in the Court of Appeals where the party seeking review resides or has its principal place of business, or in the United States Court of Appeals for the District of Columbia Circuit. The review shall be based on the examination of all information before the Board or the Commission, as the case may be, at the time the determination was made. The court reviewing the action of the Board or the Commission shall not enter a stay or order of mandamus unless the court has determined, after notice and a hearing before a panel of the court, that the agency action complained of was arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.

          • (D) Jurisdiction and authority of Securities and Exchange Commission over security futures; requirements for security futures trading; periodic or special examinations by Commission representatives
            • (i) Notwithstanding any other provision of this chapter, the Securities and Exchange Commission shall have jurisdiction and authority over security futures as defined in section 3(a)(55) of the Securities Exchange Act of 1934 [15 U.S.C. 78c (a)(55)], section 77b(a)(16) of title 15, section 80a-2 (a)(52) of title 15, and section 80b-2 (a)(27) of title 15, options on security futures, and persons effecting transactions in security futures and options thereon, and this chapter shall apply to and the Commission shall have jurisdiction with respect to accounts, agreements (including any transaction which is of the character of, or is commonly known to the trade as, an "option", "privilege", "indemnity", "bid", "offer", "put", "call", "advance guaranty", or "decline guaranty"), contracts, and transactions involving, and may designate a board of trade as a contract market in, or register a derivatives transaction execution facility that trades or executes, a security futures product as defined in section 1a of this title: Provided, however, That, except as provided in clause (vi) of this subparagraph, no board of trade shall be designated as a contract market with respect to, or registered as a derivatives transaction execution facility for, any such contracts of sale for future delivery unless the board of trade and the applicable contract meet the following criteria:
              • (I) Except as otherwise provided in a rule, regulation, or order issued pursuant to clause (v) of this subparagraph, any security underlying the security future, including each component security of a narrow-based security index, is registered pursuant to section 12 of the Securities Exchange Act of 1934 [15 U.S.C. 78l].

              • (II) If the security futures product is not cash settled, the board of trade on which the security futures product is traded has arrangements in place with a clearing agency registered pursuant to section 17A of the Securities Exchange Act of 1934 [15 U.S.C. 78q-1] for the payment and delivery of the securities underlying the security futures product.

              • (III) Except as otherwise provided in a rule, regulation, or order issued pursuant to clause (v) of this subparagraph, the security future is based upon common stock and such other equity securities as the Commission and the Securities and Exchange Commission jointly determine appropriate.

              • (IV) The security futures product is cleared by a clearing agency that has in place provisions for linked and coordinated clearing with other clearing agencies that clear security futures products, which permits the security futures product to be purchased on a designated contract market, registered derivatives transaction execution facility, national securities exchange registered under section 6(a) of the Securities Exchange Act of 1934 [15 U.S.C. 78f (a)], or national securities association registered pursuant to section 15A(a) of the Securities Exchange Act of 1934 [15 U.S.C. 78o-3 (a)] and offset on another designated contract market, registered derivatives transaction execution facility, national securities exchange registered under section 6(a) of the Securities Exchange Act of 1934, or national securities association registered pursuant to section 15A(a) of the Securities Exchange Act of 1934.

              • (V) Only futures commission merchants, introducing brokers, commodity trading advisors, commodity pool operators or associated persons subject to suitability rules comparable to those of a national securities association registered pursuant to section 15A(a) of the Securities Exchange Act of 1934 [15 U.S.C. 78o-3 (a)] solicit, accept any order for, or otherwise deal in any transaction in or in connection with the security futures product.

              • (VI) The security futures product is subject to a prohibition against dual trading in section 6j of this title and the rules and regulations thereunder or the provisions of section 11(a) of the Securities Exchange Act of 1934 [15 U.S.C. 78k (a)] and the rules and regulations thereunder, except to the extent otherwise permitted under the Securities Exchange Act of 1934 [15 U.S.C. 78a et seq.] and the rules and regulations thereunder.

              • (VII) Trading in the security futures product is not readily susceptible to manipulation of the price of such security futures product, nor to causing or being used in the manipulation of the price of any underlying security, option on such security, or option on a group or index including such securities;

              • (VIII) The board of trade on which the security futures product is traded has procedures in place for coordinated surveillance among such board of trade, any market on which any security underlying the security futures product is traded, and other markets on which any related security is traded to detect manipulation and insider trading, except that, if the board of trade is an alternative trading system, a national securities association registered pursuant to section 15A(a) of the Securities Exchange Act of 1934 [15 U.S.C. 78o-3 (a)] or national securities exchange registered pursuant to section 6(a) of the Securities Exchange Act of 1934 [15 U.S.C. 78f (a)] of which such alternative trading system is a member has in place such procedures.

              • (IX) The board of trade on which the security futures product is traded has in place audit trails necessary or appropriate to facilitate the coordinated surveillance required in subclause (VIII), except that, if the board of trade is an alternative trading system, a national securities association registered pursuant to section 15A(a) of the Securities Exchange Act of 1934 [15 U.S.C. 78o-3 (a)] or national securities exchange registered pursuant to section 6(a) of the Securities Exchange Act of 1934 [15 U.S.C. 78f (a)] of which such alternative trading system is a member has rules to require such audit trails.

              • (X) The board of trade on which the security futures product is traded has in place procedures to coordinate trading halts between such board of trade and markets on which any security underlying the security futures product is traded and other markets on which any related security is traded, except that, if the board of trade is an alternative trading system, a national securities association registered pursuant to section 15A(a) of the Securities Exchange Act of 1934 [15 U.S.C. 78o-3 (a)] or national securities exchange registered pursuant to section 6(a) of the Securities Exchange Act of 1934 [15 U.S.C. 78f (a)] of which such alternative trading system is a member has rules to require such coordinated trading halts.

              • (XI) The margin requirements for a security futures product comply with the regulations prescribed pursuant to section 7(c)(2)(B) of the Securities Exchange Act of 1934 [15 U.S.C. 78g (c)(2)(B)], except that nothing in this subclause shall be construed to prevent a board of trade from requiring higher margin levels for a security futures product when it deems such action to be necessary or appropriate.

            • (ii) It shall be unlawful for any person to offer, to enter into, to execute, to confirm the execution of, or to conduct any office or business anywhere in the United States, its territories or possessions, for the purpose of soliciting, or accepting any order for, or otherwise dealing in, any transaction in, or in connection with, a security futures product unless—
              • (I) the transaction is conducted on or subject to the rules of a board of trade that—
                • (aa) has been designated by the Commission as a contract market in such security futures product; or

                • (bb) is a registered derivatives transaction execution facility for the security futures product that has provided a certification with respect to the security futures product pursuant to clause (vii);

              • (II) the contract is executed or consummated by, through, or with a member of the contract market or registered derivatives transaction execution facility; and

              • (III) the security futures product is evidenced by a record in writing which shows the date, the parties to such security futures product and their addresses, the property covered, and its price, and each contract market member or registered derivatives transaction execution facility member shall keep the record for a period of 3 years from the date of the transaction, or for a longer period if the Commission so directs, which record shall at all times be open to the inspection of any duly authorized representative of the Commission.

            • (iii)
              • (I) Except as provided in subclause (II) but notwithstanding any other provision of this chapter, no person shall offer to enter into, enter into, or confirm the execution of any option on a security future.

              • (II) After 3 years after December 21, 2000, the Commission and the Securities and Exchange Commission may by order jointly determine to permit trading of options on any security future authorized to be traded under the provisions of this chapter and the Securities Exchange Act of 1934 [15 U.S.C. 78a et seq.].

            • (iv)
              • (I) All relevant records of a futures commission merchant or introducing broker registered pursuant to section 6f (a)(2) of this title, floor broker or floor trader exempt from registration pursuant to section 6f (a)(3) of this title, associated person exempt from registration pursuant to section 6k (6) of this title, or board of trade designated as a contract market in a security futures product pursuant to section 7b-1 of this title shall be subject to such reasonable periodic or special examinations by representatives of the Commission as the Commission deems necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of this chapter, and the Commission, before conducting any such examination, shall give notice to the Securities and Exchange Commission of the proposed examination and consult with the Securities and Exchange Commission concerning the feasibility and desirability of coordinating the examination with examinations conducted by the Securities and Exchange Commission in order to avoid unnecessary regulatory duplication or undue regulatory burdens for the registrant or board of trade.

              • (II) The Commission shall notify the Securities and Exchange Commission of any examination conducted of any futures commission merchant or introducing broker registered pursuant to section 6f (a)(2) of this title, floor broker or floor trader exempt from registration pursuant to section 6f (a)(3) of this title, associated person exempt from registration pursuant to section 6k (6) of this title, or board of trade designated as a contract market in a security futures product pursuant to section 7b-1 of this title, and, upon request, furnish to the Securities and Exchange Commission any examination report and data supplied to or prepared by the Commission in connection with the examination.

              • (III) Before conducting an examination under subclause (I), the Commission shall use the reports of examinations, unless the information sought is unavailable in the reports, of any futures commission merchant or introducing broker registered pursuant to section 6f (a)(2) of this title, floor broker or floor trader exempt from registration pursuant to section 6f (a)(3) of this title, associated person exempt from registration pursuant to section 6k (6) of this title, or board of trade designated as a contract market in a security futures product pursuant to section 7b-1 of this title that is made by the Securities and Exchange Commission, a national securities association registered pursuant to section 15A(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78o-3 (a)), or a national securities exchange registered pursuant to section 6(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78f (a)).

              • (IV) Any records required under this subsection for a futures commission merchant or introducing broker registered pursuant to section 6f (a)(2) of this title, floor broker or floor trader exempt from registration pursuant to section 6f (a)(3) of this title, associated person exempt from registration pursuant to section 6k (6) of this title, or board of trade designated as a contract market in a security futures product pursuant to section 7b-1 of this title, shall be limited to records with respect to accounts, agreements, contracts, and transactions involving security futures products.

            • (v)
              • (I) The Commission and the Securities and Exchange Commission, by rule, regulation, or order, may jointly modify the criteria specified in subclause (I) or (III) of clause (i), including the trading of security futures based on securities other than equity securities, to the extent such modification fosters the development of fair and orderly markets in security futures products, is necessary or appropriate in the public interest, and is consistent with the protection of investors.

              • (II) The Commission and the Securities and Exchange Commission, by order, may jointly exempt any person from compliance with the criterion specified in clause (i)(IV) to the extent such exemption fosters the development of fair and orderly markets in security futures products, is necessary or appropriate in the public interest, and is consistent with the protection of investors.

            • (vi)
              • (I) Notwithstanding clauses (i) and (vii), until the compliance date, a board of trade shall not be required to meet the criterion specified in clause (i)(IV).

              • (II) The Commission and the Securities and Exchange Commission shall jointly publish in the Federal Register a notice of the compliance date no later than 165 days before the compliance date.

              • (III) For purposes of this clause, the term "compliance date" means the later of—
                • (aa) 180 days after the end of the first full calendar month period in which the average aggregate comparable share volume for all security futures products based on single equity securities traded on all designated contract markets and registered derivatives transaction execution facilities equals or exceeds 10 percent of the average aggregate comparable share volume of options on single equity securities traded on all national securities exchanges registered pursuant to section 6(a) of the Securities Exchange Act of 1934 [15 U.S.C. 78f (a)] and any national securities associations registered pursuant to section 15A(a) of such Act [15 U.S.C. 78o-3 (a)]; or

                • (bb) 2 years after the date on which trading in any security futures product commences under this chapter.

            • (vii) It shall be unlawful for a board of trade to trade or execute a security futures product unless the board of trade has provided the Commission with a certification that the specific security futures product and the board of trade, as applicable, meet the criteria specified in subclauses (I) through (XI) of clause (i), except as otherwise provided in clause (vi).

          • (E) Obligation to address security futures products traded on foreign exchanges
            • (i) To the extent necessary or appropriate in the public interest, to promote fair competition, and consistent with promotion of market efficiency, innovation, and expansion of investment opportunities, the protection of investors, and the maintenance of fair and orderly markets, the Commission and the Securities and Exchange Commission shall jointly issue such rules, regulations, or orders as are necessary and appropriate to permit the offer and sale of a security futures product traded on or subject to the rules of a foreign board of trade to United States persons.

            • (ii) The rules, regulations, or orders adopted under clause (i) shall take into account, as appropriate, the nature and size of the markets that the securities underlying the security futures product reflects.

          • (F) Security futures products traded on foreign boards of trade
            • (i) Nothing in this chapter is intended to prohibit a futures commission merchant from carrying security futures products traded on or subject to the rules of a foreign board of trade in the accounts of persons located outside of the United States.

            • (ii) Nothing in this chapter is intended to prohibit any eligible contract participant located in the United States from purchasing or carrying securities futures products traded on or subject to the rules of a foreign board of trade, exchange, or market to the same extent such person may be authorized to purchase or carry other securities traded on a foreign board of trade, exchange, or market so long as any underlying security for such security futures products is traded principally on, by, or through any exchange or market located outside the United States.

        • (2) Establishment of Commodity Futures Trading Commission; composition; terms of Commissioners
          • (A) There is hereby established, as an independent agency of the United States Government, a Commodity Futures Trading Commission. The Commission shall be composed of five Commissioners who shall be appointed by the President, by and with the advice and consent of the Senate. In nominating persons for appointment, the President shall—
            • (i) select persons who shall each have demonstrated knowledge in futures trading or its regulation, or the production, merchandising, processing or distribution of one or more of the commodities or other goods and articles, services, rights, and interests covered by this chapter; and

            • (ii) seek to ensure that the demonstrated knowledge of the Commissioners is balanced with respect to such areas.

              Not more than three of the members of the Commission shall be members of the same political party. Each Commissioner shall hold office for a term of five years and until his successor is appointed and has qualified, except that he shall not so continue to serve beyond the expiration of the next session of Congress subsequent to the expiration of said fixed term of office, and except (i) any Commissioner appointed to fill a vacancy occurring prior to the expiration of the term for which his predecessor was appointed shall be appointed for the remainder of such term, and (ii) the terms of office of the Commissioners first taking office after the enactment of this paragraph shall expire as designated by the President at the time of nomination, one at the end of one year, one at the end of two years, one at the end of three years, one at the end of four years, and one at the end of five years.

          • (B) The President shall appoint, by and with the advice and consent of the Senate, a member of the Commission as Chairman, who shall serve as Chairman at the pleasure of the President. An individual may be appointed as Chairman at the same time that person is appointed as a Commissioner. The Chairman shall be the chief administrative officer of the Commission and shall preside at hearings before the Commission. At any time, the President may appoint, by and with the advice and consent of the Senate, a different Chairman, and the Commissioner previously appointed as Chairman may complete that Commissioner's term as a Commissioner.

        • (3) Vacancies A vacancy in the Commission shall not impair the right of the remaining Commissioners to exercise all the powers of the Commission.

        • (4) General Counsel The Commission shall have a General Counsel, who shall be appointed by the Commission and serve at the pleasure of the Commission. The General Counsel shall report directly to the Commission and serve as its legal advisor. The Commission shall appoint such other attorneys as may be necessary, in the opinion of the Commission, to assist the General Counsel, represent the Commission in all disciplinary proceedings pending before it, represent the Commission in courts of law whenever appropriate, assist the Department of Justice in handling litigation concerning the Commission in courts of law, and perform such other legal duties and functions as the Commission may direct.

        • (5) Executive Director The Commission shall have an Executive Director, who shall be appointed by the Commission and serve at the pleasure of the Commission. The Executive Director shall report directly to the Commission and perform such functions and duties as the Commission may prescribe.

        • (6) Powers and Functions of Chairman
          • (A) Except as otherwise provided in this paragraph and in paragraphs (4) and (5) of this subsection, the executive and administrative functions of the Commission, including functions of the Commission with respect to the appointment and supervision of personnel employed under the Commission, the distribution of business among such personnel and among administrative units of the Commission, and the use and expenditure of funds, according to budget categories, plans, programs, and priorities established and approved by the Commission, shall be exercised solely by the Chairman.

          • (B) In carrying out any of his functions under the provisions of this paragraph, the Chairman shall be governed by general policies, plans, priorities, and budgets approved by the Commission and by such regulatory decisions, findings, and determination as the Commission may by law be authorized to make.

          • (C) The appointment by the Chairman of the heads of major administrative units under the Commission shall be subject to the approval of the Commission.

          • (D) Personnel employed regularly and full time in the immediate offices of Commissioners other than the Chairman shall not be affected by the provisions of this paragraph.

          • (E) There are hereby reserved to the Commission its functions with respect to revising budget estimates and with respect to determining the distribution of appropriated funds according to major programs and purposes.

          • (F) The Chairman may from time to time make such provisions as he shall deem appropriate authorizing the performance by any officer, employee, or administrative unit under his jurisdiction of any functions of the Chairman under this paragraph.

        • (7) Appointment and compensation
          • (A) In general The Commission may appoint and fix the compensation of such officers, attorneys, economists, examiners, and other employees as may be necessary for carrying out the functions of the Commission under this chapter.

          • (B) Rates of pay Rates of basic pay for all employees of the Commission may be set and adjusted by the Commission without regard to chapter 51 or subchapter III of chapter 53 of title 5.

          • (C) Comparability
            • (i) In general The Commission may provide additional compensation and benefits to employees of the Commission if the same type of compensation or benefits are provided by any agency referred to in section 1833b (a) of title 12 or could be provided by such an agency under applicable provisions of law (including rules and regulations).

            • (ii) Consultation In setting and adjusting the total amount of compensation and benefits for employees, the Commission shall consult with, and seek to maintain comparability with, the agencies referred to in section 1833b (a) of title 12.

        • (8) Conflict of interest No Commissioner or employee of the Commission shall accept employment or compensation from any person, exchange, or clearinghouse subject to regulation by the Commission under this chapter during his term of office, nor shall he participate, directly or indirectly, in any registered entity operations or transactions of a character subject to regulation by the Commission.

        • (9) Liaison with Department of Agriculture; communications with Department of the Treasury, Federal Reserve Board, and Securities and Exchange Commission; application by a board of trade for designation as a contract market for future delivery of securities
          • (A) The Commission shall, in cooperation with the Secretary of Agriculture, maintain a liaison between the Commission and the Department of Agriculture. The Secretary shall take such steps as may be necessary to enable the Commission to obtain information and utilize such services and facilities of the Department of Agriculture as may be necessary in order to maintain effectively such liaison. In addition, the Secretary shall appoint a liaison officer, who shall be an employee of the Office of the Secretary, for the purpose of maintaining a liaison between the Department of Agriculture and the Commission. The Commission shall furnish such liaison officer appropriate office space within the offices of the Commission and shall allow such liaison officer to attend and observe all deliberations and proceedings of the Commission.

          • (B)
            • (i) The Commission shall maintain communications with the Department of the Treasury, the Board of Governors of the Federal Reserve System, and the Securities and Exchange Commission for the purpose of keeping such agencies fully informed of Commission activities that relate to the responsibilities of those agencies, for the purpose of seeking the views of those agencies on such activities, and for considering the relationships between the volume and nature of investment and trading in contracts of sale of a commodity for future delivery and in securities and financial instruments under the jurisdiction of such agencies.

            • (ii) When a board of trade applies for designation or registration as a contract market or derivatives transaction execution facility involving transactions for future delivery of any security issued or guaranteed by the United States or any agency thereof, the Commission shall promptly deliver a copy of such application to the Department of the Treasury and the Board of Governors of the Federal Reserve System. The Commission may not designate or register a board of trade as a contract market or derivatives transaction execution facility based on such application until forty-five days after the date the Commission delivers the application to such agencies or until the Commission receives comments from each of such agencies on the application, whichever period is shorter. Any comments received by the Commission from such agencies shall be included as part of the public record of the Commission's designation proceeding. In designating, registering, or refusing, suspending, or revoking the designation or registration of, a board of trade as a contract market or derivatives transaction execution facility involving transactions for future delivery referred to in this clause or in considering any possible action under this chapter (including without limitation emergency action under section 12a (9) of this title) with respect to such transactions, the Commission shall take into consideration all comments it receives from the Department of the Treasury and the Board of Governors of the Federal Reserve System and shall consider the effect that any such designation, registration, suspension, revocation, or action may have on the debt financing requirements of the United States Government and the continued efficiency and integrity of the underlying market for government securities.

            • (iii) The provisions of this subparagraph shall not create any rights, liabilities, or obligations upon which actions may be brought against the Commission.

        • (10) Transmittal of budget requests and legislative recommendations to congressional committees
          • (A) Whenever the Commission submits any budget estimate or request to the President or the Office of Management and Budget, it shall concurrently transmit copies of that estimate or request to the House and Senate Appropriations Committees and the House Committee on Agriculture and the Senate Committee on Agriculture, Nutrition, and Forestry.

          • (B) Whenever the Commission transmits any legislative recommendations, or testimony, or comments on legislation to the President or the Office of Management and Budget, it shall concurrently transmit copies thereof to the House Committee on Agriculture and the Senate Committee on Agriculture, Nutrition, and Forestry. No officer or agency of the United States shall have any authority to require the Commission to submit its legislative recommendations, or testimony, or comments on legislation to any officer or agency of the United States for approval, comments, or review, prior to the submission of such recommendations, testimony, or comments to the Congress. In instances in which the Commission voluntarily seeks to obtain the comments or review of any officer or agency of the United States, the Commission shall include a description of such actions in its legislative recommendations, testimony, or comments on legislation which it transmits to the Congress.

          • (C) Whenever the Commission issues for official publication any opinion, release, rule, order, interpretation, or other determination on a matter, the Commission shall provide that any dissenting, concurring, or separate opinion by any Commissioner on the matter be published in full along with the Commission opinion, release, rule, order, interpretation, or determination.

        • (11) Seal The Commission shall have an official seal, which shall be judicially noticed.

        • (12) Rules and regulations The Commission is authorized to promulgate such rules and regulations as it deems necessary to govern the operating procedures and conduct of the business of the Commission.

        (b) Transaction in interstate commerce For the purposes of this chapter (but not in any wise limiting the foregoing definition of interstate commerce) a transaction in respect to any article shall be considered to be in interstate commerce if such article is part of that current of commerce usual in the commodity trade whereby commodities and commodity products and by-products thereof are sent from one State, with the expectation that they will end their transit, after purchase, in another, including in addition to cases within the above general description, all cases where purchase or sale is either for shipment to another State, or for manufacture within the State and the shipment outside the State of the products resulting from such manufacture. Articles normally in such current of commerce shall not be considered out of such commerce through resort being had to any means or device intended to remove transactions in respect thereto from the provisions of this chapter. For the purpose of this paragraph the word "State" includes Territory, the District of Columbia, possession of the United States, and foreign nation.

        (c) Agreements, contracts, and transactions in foreign currency, government securities, and certain other commodities
        • (1) In general Except as provided in paragraph (2), nothing in this chapter (other than section 7a (to the extent provided in section 7a (g) of this title), 7a-1, 7a-3, or 16(e)(2)(B) of this title) governs or applies to an agreement, contract, or transaction in—

          • (A) foreign currency;

          • (B) government securities;

          • (C) security warrants;

          • (D) security rights;

          • (E) resales of installment loan contracts;

          • (F) repurchase transactions in an excluded commodity; or

          • (G) mortgages or mortgage purchase commitments.

        • (2) Commission jurisdiction
          • (A) Agreements, contracts, and transactions traded on an organized exchange This chapter applies to, and the Commission shall have jurisdiction over, an agreement, contract, or transaction described in paragraph (1) that is—

            • (i) a contract of sale of a commodity for future delivery (or an option on such a contract), or an option on a commodity (other than foreign currency or a security or a group or index of securities), that is executed or traded on an organized exchange; or

            • (ii) an option on foreign currency executed or traded on an organized exchange that is not a national securities exchange registered pursuant to section 6(a) of the Securities Exchange Act of 1934 [15 U.S.C. 78f (a)].

          • (B) Agreements, contracts, and transactions in retail foreign currency
            • (i) This chapter 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)

          • (AA) a futures commission merchant that is primarily or substantially engaged in the business activities described in section 1a (20) of this title, is registered under this chapter, is not a person described in item (bb) of this subclause, and maintains adjusted net capital equal to or in excess of the dollar amount that applies for purposes of clause (ii) of this subparagraph; or

          • (BB) an affiliated person of a futures commission merchant that is primarily or substantially engaged in the business activities described in section 1a (20) of this title, is registered under this chapter, and is not a person described in item (bb) of this subclause, if the affiliated person maintains adjusted net capital equal to or in excess of the dollar amount that applies for purposes of clause (ii) of this subparagraph and is not a person described in such item (bb), and the futures commission merchant makes and keeps records under section 6f (c)(2)(B) of this title concerning the futures and other financial activities of the affiliated person;
            • (dd) an insurance company described in section 1a (12)(A)(ii) of this title, or a regulated subsidiary or affiliate of such an insurance company;

            • (ee) a financial holding company (as defined in section 1841 of title 12);

            • (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))); or

            • (gg) a retail foreign exchange dealer that maintains adjusted net capital equal to or in excess of the dollar amount that applies for purposes of clause (ii) of this subparagraph and is registered in such capacity with the Commission, subject to such terms and conditions as the Commission shall prescribe, and is a member of a futures association registered under section 21 of this title.

              • (ii) The dollar amount that applies for purposes of this clause is—
                • (I) $10,000,000, beginning 120 days after the date of the enactment of this clause;

                • (II) $15,000,000, beginning 240 days after such date of enactment; and

                • (III) $20,000,000, beginning 360 days after such date of enactment.

              • (iii) Notwithstanding items (cc) and (gg) of clause (i)(II) of this subparagraph, agreements, contracts, or transactions described in clause (i) of this subparagraph shall be subject to subsection (a)(1)(B) of this section and sections 6 (b), 6b, 6c (b), 6o, 9, 15, and 13b of this title (except to the extent that sections 9, 15, and 13b of this title 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), 13a-1, 13a-2, 12(a), 13c(a), and 13c(b) of this title if the agreements, contracts, or transactions are offered, or entered into, by a person that is registered as a futures commission merchant or retail foreign exchange dealer, or an affiliated person of a futures commission merchant registered under this chapter that is not also a person described in any of item (aa), (bb), (dd), (ee), or (ff) of clause (i)(II) of this subparagraph.

              • (iv)
                • (I) Notwithstanding items (cc) and (gg) of clause (i)(II), a person, unless registered in such capacity as the Commission by rule, regulation, or order shall determine and a member of a futures association registered under section 21 of this title, shall not—

            • (aa) solicit or accept orders from any person that is not an eligible contract participant in connection with agreements, contracts, or transactions described in clause (i) entered into with or to be entered into with a person who is not described in item (aa), (bb), (dd), (ee), or (ff) of clause (i)(II);

            • (bb) exercise discretionary trading authority or obtain written authorization to exercise discretionary trading authority over any account for or on behalf of any person that is not an eligible contract participant in connection with agreements, contracts, or transactions described in clause (i) entered into with or to be entered into with a person who is not described in item (aa), (bb), (dd), (ee), or (ff) of clause (i)(II); or

            • (cc) operate or solicit funds, securities, or property for any pooled investment vehicle that is not an eligible contract participant in connection with agreements, contracts, or transactions described in clause (i) entered into with or to be entered into with a person who is not described in item (aa), (bb), (dd), (ee), or (ff) of clause (i)(II).

              • (II) Subclause (I) of this clause shall not apply to—

            • (aa) any person described in any of item (aa), (bb), (dd), (ee), or (ff) of clause (i)(II);

            • (bb) any such person's associated persons; or

            • (cc) any person who would be exempt from registration if engaging in the same activities in connection with transactions conducted on or subject to the rules of a contract market or a derivatives transaction execution facility.

              • (III) Notwithstanding items (cc) and (gg) of clause (i)(II), the Commission may make, promulgate, and enforce such rules and regulations as, in the judgment of the Commission, are reasonably necessary to effectuate any of the provisions of, or to accomplish any of the purposes of, this chapter in connection with the activities of persons subject to subclause (I).

              • (IV) Subclause (III) of this clause shall not apply to—

            • (aa) any person described in any of item (aa) through (ff) of clause (i)(II);

            • (bb) any such person's associated persons; or

            • (cc) any person who would be exempt from registration if engaging in the same activities in connection with transactions conducted on or subject to the rules of a contract market or a derivatives transaction execution facility.

              • (v) Notwithstanding items (cc) and (gg) of clause (i)(II), the Commission may make, promulgate, and enforce such rules and regulations as, in the judgment of the Commission, are reasonably necessary to effectuate any of the provisions of, or to accomplish any of the purposes of, this chapter in connection with agreements, contracts, or transactions described in clause (i) which are offered, or entered into, by a person described in item (cc) or (gg) of clause (i)(II).

          • (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) of this clause shall not apply to—
                • (aa) a security that is not a security futures product; or

                • (bb) a contract of sale that—

          • (AA) results in actual delivery within 2 days; or

          • (BB) creates an enforceable obligation to deliver between a seller and buyer that have the ability to deliver and accept delivery, respectively, in connection with their line of business.

            • (ii)
              • (I) Agreements, contracts, or transactions described in clause (i) of this subparagraph shall be subject to subsection (a)(1)(B) of this section and sections 6 (b), 6b, 6c (b), 6o, 9, 15, and 13b of this title (except to the extent that sections 9, 15, and 13b of this title 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), 13a-1, 13a-2, 12(a), 13c(a), and 13c(b) of this title.

              • (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) The Commission may make, promulgate, and enforce such rules and regulations as, in the judgment of the Commission, are reasonably necessary to effectuate any of the provisions of or to accomplish any of the purposes of this chapter in connection with agreements, contracts, or transactions described in clause (i) of this subparagraph if the agreements, contracts, or transactions are offered, or entered into, by a person that is not described in item (aa) through (ff) of subparagraph (B)(i)(II).

            • (iii)
              • (I) A person, unless registered in such capacity as the Commission by rule, regulation, or order shall determine and a member of a futures association registered under section 21 of this title, shall not—
                • (aa) solicit or accept orders from any person that is not an eligible contract participant in connection with agreements, contracts, or transactions described in clause (i) of this subparagraph entered into with or to be entered into with a person who is not described in item (aa), (bb), (dd), (ee), or (ff) of subparagraph (B)(i)(II);

                • (bb) exercise discretionary trading authority or obtain written authorization to exercise written trading authority over any account for or on behalf of any person that is not an eligible contract participant in connection with agreements, contracts, or transactions described in clause (i) of this subparagraph entered into with or to be entered into with a person who is not described in item (aa), (bb), (dd), (ee), or (ff) of subparagraph (B)(i)(II); or

                • (cc) operate or solicit funds, securities, or property for any pooled investment vehicle that is not an eligible contract participant in connection with agreements, contracts, or transactions described in clause (i) of this subparagraph entered into with or to be entered into with a person who is not described in item (aa), (bb), (dd), (ee), or (ff) of subparagraph (B)(i)(II).

              • (II) Subclause (I) of this clause shall not apply to—
                • (aa) any person described in item (aa), (bb), (dd), (ee), or (ff) of subparagraph (B)(i)(II);

                • (bb) any such person's associated persons; or

                • (cc) any person who would be exempt from registration if engaging in the same activities in connection with transactions conducted on or subject to the rules of a contract market or a derivatives transaction execution facility.

              • (III) The Commission may make, promulgate, and enforce such rules and regulations as, in the judgment of the Commission, are reasonably necessary to effectuate any of the provisions of, or to accomplish any of the purposes of, this chapter in connection with the activities of persons subject to subclause (I).

              • (IV) Subclause (III) of this clause shall not apply to—
                • (aa) any person described in item (aa) through (ff) of subparagraph (B)(i)(II);

                • (bb) any such person's associated persons; or

                • (cc) any person who would be exempt from registration if engaging in the same activities in connection with transactions conducted on or subject to the rules of a contract market or a derivatives transaction execution facility.

            • (iv) Sections 6 (b) and 6b of this title 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 chapter 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 chapter with respect to security futures products and persons effecting transactions in security futures products.

        (d) Excluded derivative transactions
        • (1) In general Nothing in this chapter (other than section 7a-1 or 16 (e)(2)(B) of this title 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 chapter (other than section 7a (to the extent provided in section 7a (g) of this title), 7a-1, 7a-3, or 16(e)(2)(B) of this title) 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 principal-to-principal basis between parties trading for their own accounts or as described in section 1a (12)(B)(ii) of this title;

          • (B) the agreement, contract, or transaction is entered into only between persons that are eligible contract participants described in subparagraph (A), (B)(ii), or (C) of section 1a (12) of this title) 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.

        (e) Excluded electronic trading facilities
        • (1) In general Nothing in this chapter (other than section 16 (e)(2)(B) of this title) 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 subsection (d)(2), (g), or (h)(3) of this section.

        • (2) Effect on authority to establish and operate Nothing in this chapter shall prohibit a board of trade designated by the Commission as a contract market or derivatives transaction execution facility, or operating as an exempt board of trade from establishing and operating an electronic trading facility excluded under this chapter pursuant to paragraph (1).

        • (3) Effect on transactions No failure by an electronic trading facility to limit transactions as required by paragraph (1) of this subsection or to comply with subsection (h)(5) of this section shall in itself affect the legality, validity, or enforceability of an agreement, contract, or transaction entered into or traded on the electronic trading facility or cause a participant on the system to be in violation of this chapter.

        • (4) Special rule A person or group of persons that would not otherwise constitute a trading facility shall not be considered to be a trading facility solely as a result of the submission to a derivatives clearing organization of transactions executed on or through the person or group of persons.

        (f) Exclusion for qualifying hybrid instruments
        • (1) In general Nothing in this chapter (other than section 16 (e)(2)(B) of this title) governs or is applicable to a hybrid instrument that is predominantly a security.

        • (2) Predominance A hybrid instrument shall be considered to be predominantly a security if—

          • (A) the issuer of the hybrid instrument receives payment in full of the purchase price of the hybrid instrument, substantially contemporaneously with delivery of the hybrid instrument;

          • (B) the purchaser or holder of the hybrid instrument is not required to make any payment to the issuer in addition to the purchase price paid under subparagraph (A), whether as margin, settlement payment, or otherwise, during the life of the hybrid instrument or at maturity;

          • (C) the issuer of the hybrid instrument is not subject by the terms of the instrument to mark-to-market margining requirements; and

          • (D) the hybrid instrument is not marketed as a contract of sale of a commodity for future delivery (or option on such a contract) subject to this chapter.

        • (3) Mark-to-market margining requirements For the purposes of paragraph (2)(C), mark-to-market margining requirements do not include the obligation of an issuer of a secured debt instrument to increase the amount of collateral held in pledge for the benefit of the purchaser of the secured debt instrument to secure the repayment obligations of the issuer under the secured debt instrument.

        (g) Excluded swap transactions No provision of this chapter (other than section 7a (to the extent provided in section 7a (g) of this title), 7a-1, 7a-3, or 16(e)(2) of this title) shall apply to or govern any agreement, contract, or transaction in a commodity other than an agricultural commodity if the agreement, contract, or transaction is—

        • (1) entered into only between persons that are eligible contract participants at the time they enter into the agreement, contract, or transaction;

        • (2) subject to individual negotiation by the parties; and

        • (3) not executed or traded on a trading facility.

        (h) Legal certainty for certain transactions in exempt commodities
        • (1) Except as provided in paragraph (2), nothing in this chapter shall apply to a contract, agreement, or transaction in an exempt commodity which—
          • (A) is entered into solely between persons that are eligible contract participants at the time the persons enter into the agreement, contract, or transaction; and

          • (B) is not entered into on a trading facility.

        • (2) An agreement, contract, or transaction described in paragraph (1) of this subsection shall be subject to—
          • (A) sections 7a-1 and 16 (e)(2)(B) of this title;

          • (B) sections 6b, 6o, 9, 15, 13b, 13a-1, 13a-2, and 12a of this title, and the regulations of the Commission pursuant to section 6c (b) of this title proscribing fraud in connection with commodity option transactions, to the extent the agreement, contract, or transaction is not between eligible commercial entities (unless one of the entities is an instrumentality, department, or agency of a State or local governmental entity) and would otherwise be subject to such sections and regulations; and

          • (C) sections 9, 15, 13b, 13a-1, 13a-2, 12a, and 13 (a)(2) of this title, to the extent such sections prohibit manipulation of the market price of any commodity in interstate commerce and the agreement, contract, or transaction would otherwise be subject to such

            Transferred





            Findings and purpose

            (a) Findings The transactions subject to this chapter 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, or disseminating pricing information through trading in liquid, fair and financially secure trading facilities.

            (b) Purpose It is the purpose of this chapter to serve the public interests described in subsection (a) of this section through a system of effective self-regulation of trading facilities, clearing systems, market participants and market professionals under the oversight of the Commission. To foster these public interests, it is further the purpose of this chapter to deter and prevent price manipulation or any other disruptions to market integrity; to ensure the financial integrity of all transactions subject to this chapter and the avoidance of systemic risk; to protect all market participants from fraudulent or other abusive sales practices and misuses of customer assets; and to promote responsible innovation and fair competition among boards of trade, other markets and market participants.



            Regulation of futures trading and foreign transactions

            (a) Restriction on futures trading Unless exempted by the Commission pursuant to subsection (c) of this section, it shall be unlawful for any person to offer to enter into, to enter into, to execute, to confirm the execution of, or to conduct any office or business anywhere in the United States, its territories or possessions, for the purpose of soliciting or accepting any order for, or otherwise dealing in, any transaction in, or in connection with, a contract for the purchase or sale of a commodity for future delivery (other than a contract which is made on or subject to the rules of a board of trade, exchange, or market located outside the United States, its territories or possessions) unless—

            • (1) such transaction is conducted on or subject to the rules of a board of trade which has been designated or registered by the Commission as a contract market or derivatives transaction execution facility for such commodity;

            • (2) such contract is executed or consummated by or through a contract market; and

            • (3) such contract is evidenced by a record in writing which shows the date, the parties to such contract and their addresses, the property covered and its price, and the terms of delivery: Provided, That each contract market or derivatives transaction execution facility member shall keep such record for a period of three years from the date thereof, or for a longer period if the Commission shall so direct, which record shall at all times be open to the inspection of any representative of the Commission or the Department of Justice.

            (b) Regulation of foreign transactions by United States persons The Commission may adopt rules and regulations proscribing fraud and requiring minimum financial standards, the disclosure of risk, the filing of reports, the keeping of books and records, the safeguarding of customers' funds, and registration with the Commission by any person located in the United States, its territories or possessions, who engages in the offer or sale of any contract of sale of a commodity for future delivery that is made or to be made on or subject to the rules of a board of trade, exchange, or market located outside the United States, its territories or possessions. Such rules and regulations may impose different requirements for such persons depending upon the particular foreign board of trade, exchange, or market involved. No rule or regulation may be adopted by the Commission under this subsection that

            • (1) requires Commission approval of any contract, rule, regulation, or action of any foreign board of trade, exchange, or market, or clearinghouse for such board of trade, exchange, or market, or

            • (2) governs in any way any rule or contract term or action of any foreign board of trade, exchange, or market, or clearinghouse for such board of trade, exchange, or market.

            (c) Public interest exemptions
            • (1) In order to promote responsible economic or financial innovation and fair competition, the Commission by rule, regulation, or order, after notice and opportunity for hearing, may (on its own initiative or on application of any person, including any board of trade designated or registered as a contract market or derivatives transaction execution facility for transactions for future delivery in any commodity under section 7 of this title) exempt any agreement, contract, or transaction (or class thereof) that is otherwise subject to subsection (a) of this section (including any person or class of persons offering, entering into, rendering advice or rendering other services with respect to, the agreement, contract, or transaction), either unconditionally or on stated terms or conditions or for stated periods and either retroactively or prospectively, or both, from any of the requirements of subsection (a) of this section, or from any other provision of this chapter (except subparagraphs (C)(ii) and (D) of section 2 (a)(1) of this title, except that the Commission and the Securities and Exchange Commission may by rule, regulation, or order jointly exclude any agreement, contract, or transaction from section 2 (a)(1)(D) of this title), if the Commission determines that the exemption would be consistent with the public interest.

            • (2) The Commission shall not grant any exemption under paragraph (1) from any of the requirements of subsection (a) of this section unless the Commission determines that—
              • (A) the requirement should not be applied to the agreement, contract, or transaction for which the exemption is sought and that the exemption would be consistent with the public interest and the purposes of this chapter; and

              • (B) the agreement, contract, or transaction—
                • (i) will be entered into solely between appropriate persons; and

                • (ii) will not have a material adverse effect on the ability of the Commission or any contract market or derivatives transaction execution facility to discharge its regulatory or self-regulatory duties under this chapter.

            • (3) For purposes of this subsection, the term "appropriate person" shall be limited to the following persons or classes thereof:
              • (A) A bank or trust company (acting in an individual or fiduciary capacity).

              • (B) A savings association.

              • (C) An insurance company.

              • (D) An investment company subject to regulation under the Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.).

              • (E) A commodity pool formed or operated by a person subject to regulation under this chapter.

              • (F) A corporation, partnership, proprietorship, organization, trust, or other business entity with a net worth exceeding $1,000,000 or total assets exceeding $5,000,000, or the obligations of which under the agreement, contract or transaction are guaranteed or otherwise supported by a letter of credit or keepwell, support, or other agreement by any such entity or by an entity referred to in subparagraph (A), (B), (C), (H), (I), or (K) of this paragraph.

              • (G) An employee benefit plan with assets exceeding $1,000,000, or whose investment decisions are made by a bank, trust company, insurance company, investment adviser registered under the Investment Advisers Act of 1940 [15 U.S.C. 80b-1 et seq.], or a commodity trading advisor subject to regulation under this chapter.

              • (H) Any governmental entity (including the United States, any state, or any foreign government) or political subdivision thereof, or any multinational or supranational entity or any instrumentality, agency, or department of any of the foregoing.

              • (I) A broker-dealer subject to regulation under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) acting on its own behalf or on behalf of another appropriate person.

              • (J) A futures commission merchant, floor broker, or floor trader subject to regulation under this chapter acting on its own behalf or on behalf of another appropriate person.

              • (K) Such other persons that the Commission determines to be appropriate in light of their financial or other qualifications, or the applicability of appropriate regulatory protections.

            • (4) During the pendency of an application for an order granting an exemption under paragraph (1), the Commission may limit the public availability of any information received from the applicant if the applicant submits a written request to limit disclosure contemporaneous with the application, and the Commission determines that—
              • (A) the information sought to be restricted constitutes a trade secret; or

              • (B) public disclosure of the information would result in material competitive harm to the applicant.

            • (5) The Commission may—
              • (A) promptly following October 28, 1992, or upon application by any person, exercise the exemptive authority granted under paragraph (1) with respect to classes of hybrid instruments that are predominantly securities or depository instruments, to the extent that such instruments may be regarded as subject to the provisions of this chapter; or

              • (B) promptly following October 28, 1992, or upon application by any person, exercise the exemptive authority granted under paragraph (1) effective as of October 23, 1974, with respect to classes of swap agreements (as defined in section 101 of title 11) that are not part of a fungible class of agreements that are standardized as to their material economic terms, to the extent that such agreements may be regarded as subject to the provisions of this chapter.

                Any exemption pursuant to this paragraph shall be subject to such terms and conditions as the Commission shall determine to be appropriate pursuant to paragraph (1).

            (d) Effect of exemption on investigative authority of Commission The granting of an exemption under this section shall not affect the authority of the Commission under any other provision of this chapter to conduct investigations in order to determine compliance with the requirements or conditions of such exemption or to take enforcement action for any violation of any provision of this chapter or any rule, regulation or order thereunder caused by the failure to comply with or satisfy such conditions or requirements.

            Excessive speculation

            (a) Burden on interstate commerce; trading or position limits
            • (1) In general Excessive speculation in any commodity under contracts of sale of such commodity for future delivery made on or subject to the rules of contract markets or derivatives transaction execution facilities, or swaps that perform or affect a significant price discovery function with respect to registered entities causing sudden or unreasonable fluctuations or unwarranted changes in the price of such commodity, is an undue and unnecessary burden on interstate commerce in such commodity. For the purpose of diminishing, eliminating, or preventing such burden, the Commission shall, from time to time, after due notice and opportunity for hearing, by rule, regulation, or order, proclaim and fix such limits on the amounts of trading which may be done or positions which may be held by any person, including any group or class of traders, under contracts of sale of such commodity for future delivery on or subject to the rules of any contract market or derivatives transaction execution facility, or swaps traded on or subject to the rules of a designated contract market or a swap execution facility, or swaps not traded on or subject to the rules of a designated contract market or a swap execution facility that performs a significant price discovery function with respect to a registered entity, as the Commission finds are necessary to diminish, eliminate, or prevent such burden. In determining whether any person has exceeded such limits, the positions held and trading done by any persons directly or indirectly controlled by such person shall be included with the positions held and trading done by such person; and further, such limits upon positions and trading shall apply to positions held by, and trading done by, two or more persons acting pursuant to an expressed or implied agreement or understanding, the same as if the positions were held by, or the trading were done by, a single person. Nothing in this section shall be construed to prohibit the Commission from fixing different trading or position limits for different commodities, markets, futures, or delivery months, or for different number of days remaining until the last day of trading in a contract, or different trading limits for buying and selling operations, or different limits for the purposes of paragraphs (1) and (2) of subsection (b) of this section, or from exempting transactions normally known to the trade as "spreads" or "straddles" or "arbitrage" or from fixing limits applying to such transactions or positions different from limits fixed for other transactions or positions. The word "arbitrage" in domestic markets shall be defined to mean the same as "spread" or "straddle". The Commission is authorized to define the term "international arbitrage".

            • (2) Establishment of limitations
              • (A) In general In accordance with the standards set forth in paragraph (1) of this subsection and consistent with the good faith exception cited in subsection (b)(2), with respect to physical commodities other than excluded commodities as defined by the Commission, the Commission shall by rule, regulation, or order establish limits on the amount of positions, as appropriate, other than bona fide hedge positions, that may be held by any person with respect to contracts of sale for future delivery or with respect to options on the contracts or commodities traded on or subject to the rules of a designated contract market.

              • (B) Timing
                • (i) Exempt commodities For exempt commodities, the limits required under subparagraph (A) shall be established within 180 days after July 21, 2010.

                • (ii) Agricultural commodities For agricultural commodities, the limits required under subparagraph (A) shall be established within 270 days after July 21, 2010.

              • (C) Goal In establishing the limits required under subparagraph (A), the Commission shall strive to ensure that trading on foreign boards of trade in the same commodity will be subject to comparable limits and that any limits to be imposed by the Commission will not cause price discovery in the commodity to shift to trading on the foreign boards of trade.

            • (3) Specific limitations In establishing the limits required in paragraph (2), the Commission, as appropriate, shall set limits—

              • (A) on the number of positions that may be held by any person for the spot month, each other month, and the aggregate number of positions that may be held by any person for all months; and

              • (B) to the maximum extent practicable, in its discretion—
                • (i) to diminish, eliminate, or prevent excessive speculation as described under this section;

                • (ii) to deter and prevent market manipulation, squeezes, and corners;

                • (iii) to ensure sufficient market liquidity for bona fide hedgers; and

                • (iv) to ensure that the price discovery function of the underlying market is not disrupted.

            • (4) Significant price discovery function In making a determination whether a swap performs or affects a significant price discovery function with respect to regulated markets, the Commission shall consider, as appropriate:

              • (A) Price linkage The extent to which the swap uses or otherwise relies on a daily or final settlement price, or other major price parameter, of another contract traded on a regulated market based upon the same underlying commodity, to value a position, transfer or convert a position, financially settle a position, or close out a position.

              • (B) Arbitrage The extent to which the price for the swap is sufficiently related to the price of another contract traded on a regulated market based upon the same underlying commodity so as to permit market participants to effectively arbitrage between the markets by simultaneously maintaining positions or executing trades in the swaps on a frequent and recurring basis.

              • (C) Material price reference The extent to which, on a frequent and recurring basis, bids, offers, or transactions in a contract traded on a regulated market are directly based on, or are determined by referencing, the price generated by the swap.

              • (D) Material liquidity The extent to which the volume of swaps being traded in the commodity is sufficient to have a material effect on another contract traded on a regulated market.

              • (E) Other material factors Such other material factors as the Commission specifies by rule or regulation as relevant to determine whether a swap serves a significant price discovery function with respect to a regulated market.

            • (5) Economically equivalent contracts
              • (A) Notwithstanding any other provision of this section, the Commission shall establish limits on the amount of positions, including aggregate position limits, as appropriate, other than bona fide hedge positions, that may be held by any person with respect to swaps that are economically equivalent to contracts of sale for future delivery or to options on the contracts or commodities traded on or subject to the rules of a designated contract market subject to paragraph (2).

              • (B) In establishing limits pursuant to subparagraph (A), the Commission shall—
                • (i) develop the limits concurrently with limits established under paragraph (2), and the limits shall have similar requirements as under paragraph (3)(B); and

                • (ii) establish the limits simultaneously with limits established under paragraph (2).

            • (6) Aggregate position limits The Commission shall, by rule or regulation, establish limits (including related hedge exemption provisions) on the aggregate number or amount of positions in contracts based upon the same underlying commodity (as defined by the Commission) that may be held by any person, including any group or class of traders, for each month across—

              • (A) contracts listed by designated contract markets;

              • (B) with respect to an agreement contract, or transaction that settles against any price (including the daily or final settlement price) of 1 or more contracts listed for trading on a registered entity, contracts traded on a foreign board of trade that provides members or other participants located in the United States with direct access to its electronic trading and order matching system; and

              • (C) swap contracts that perform or affect a significant price discovery function with respect to regulated entities.

            • (7) Exemptions The Commission, by rule, regulation, or order, may exempt, conditionally or unconditionally, any person or class of persons, any swap or class of swaps, any contract of sale of a commodity for future delivery or class of such contracts, any option or class of options, or any transaction or class of transactions from any requirement it may establish under this section with respect to position limits.

            (b) Prohibition on trading or positions in excess of limits fixed by Commission The Commission shall, in such rule, regulation, or order, fix a reasonable time (not to exceed ten days) after the promulgation of the rule, regulation, or order; after which, and until such rule, regulation, or order is suspended, modified, or revoked, it shall be unlawful for any person—

            • (1) directly or indirectly to buy or sell, or agree to buy or sell, under contracts of sale of such commodity for future delivery on or subject to the rules of the contract market or markets, or swap execution facility or facilities with respect to a significant price discovery contract, to which the rule, regulation, or order applies, any amount of such commodity during any one business day in excess of any trading limit fixed for one business day by the Commission in such rule, regulation, or order for or with respect to such commodity; or

            • (2) directly or indirectly to hold or control a net long or a net short position in any commodity for future delivery on or subject to the rules of any contract market or swap execution facility with respect to a significant price discovery contract in excess of any position limit fixed by the Commission for or with respect to such commodity: Provided, That such position limit shall not apply to a position acquired in good faith prior to the effective date of such rule, regulation, or order.

            (c) Applicability to bona fide hedging transactions or positions
            • (1) No rule, regulation, or order issued under subsection (a) of this section shall apply to transactions or positions which are shown to be bona fide hedging transactions or positions as such terms shall be defined by the Commission by rule, regulation, or order consistent with the purposes of this chapter. Such terms may be defined to permit producers, purchasers, sellers, middlemen, and users of a commodity or a product derived therefrom to hedge their legitimate anticipated business needs for that period of time into the future for which an appropriate futures contract is open and available on an exchange. To determine the adequacy of this chapter and the powers of the Commission acting thereunder to prevent unwarranted price pressures by large hedgers, the Commission shall monitor and analyze the trading activities of the largest hedgers, as determined by the Commission, operating in the cattle, hog, or pork belly markets and shall report its findings and recommendations to the Senate Committee on Agriculture, Nutrition, and Forestry and the House Committee on Agriculture in its annual reports for at least two years following January 11, 1983.

            • (2) For the purposes of implementation of subsection (a)(2) for contracts of sale for future delivery or options on the contracts or commodities, the Commission shall define what constitutes a bona fide hedging transaction or position as a transaction or position that—
              • (A)
                • (i) represents a substitute for transactions made or to be made or positions taken or to be taken at a later time in a physical marketing channel;

                • (ii) is economically appropriate to the reduction of risks in the conduct and management of a commercial enterprise; and

                • (iii) arises from the potential change in the value of—
                  • (I) assets that a person owns, produces, manufactures, processes, or merchandises or anticipates owning, producing, manufacturing, processing, or merchandising;

                  • (II) liabilities that a person owns or anticipates incurring; or

                  • (III) services that a person provides, purchases, or anticipates providing or purchasing; or

              • (B) reduces risks attendant to a position resulting from a swap that—
                • (i) was executed opposite a counterparty for which the transaction would qualify as a bona fide hedging transaction pursuant to subparagraph (A); or

                • (ii) meets the requirements of subparagraph (A).

            (d) Persons subject to regulation; applicability to transactions made by or on behalf of United States This section shall apply to a person that is registered as a futures commission merchant, an introducing broker, or a floor broker under authority of this chapter only to the extent that transactions made by such person are made on behalf of or for the account or benefit of such person. This section shall not apply to transactions made by, or on behalf of, or at the direction of, the United States, or a duly authorized agency thereof.

            (e) Rulemaking power and penalties for violation Nothing in this section shall prohibit or impair the adoption by any contract market, derivatives transaction execution facility, or by any other board of trade licensed, designated, or registered by the Commission or by any electronic trading facility of any bylaw, rule, regulation, or resolution fixing limits on the amount of trading which may be done or positions which may be held by any person under contracts of sale of any commodity for future delivery traded on or subject to the rules of such contract market or derivatives transaction execution facility or on an electronic trading facility, or under options on such contracts or commodities traded on or subject to the rules of such contract market, derivatives transaction execution facility, or electronic trading facility or such board of trade: Provided, That if the Commission shall have fixed limits under this section for any contract or under section 6c of this title for any commodity option, then the limits fixed by the bylaws, rules, regulations, and resolutions adopted by such contract market, derivatives transaction execution facility, or electronic trading facility or such board of trade shall not be higher than the limits fixed by the Commission. It shall be a violation of this chapter for any person to violate any bylaw, rule, regulation, or resolution of any contract market, derivatives transaction execution facility, or other board of trade licensed, designated, or registered by the Commission or electronic trading facility with respect to a significant price discovery contract fixing limits on the amount of trading which may be done or positions which may be held by any person under contracts of sale of any commodity for future delivery or under options on such contracts or commodities, if such bylaw, rule, regulation, or resolution has been approved by the Commission or certified by a registered entity pursuant to section 7a-2 (c)(1) of this title: Provided, That the provisions of section 13 (a)(5) of this title shall apply only to those who knowingly violate such limits.



            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 7a (g) of this title, 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 either 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 either 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 7a (g) of this title, 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.

            (c) Buying and selling orders for commodity Nothing in this section or in any other section of this chapter shall be construed to prevent a futures commission merchant or floor broker who shall have in hand, simultaneously, buying and selling orders at the market for different principals for a like quantity of a commodity for future delivery in the same month executing such buying and selling orders at the market price: Provided, That any such execution shall take place on the floor of the exchange where such orders are to be executed at public outcry across the ring and shall be duly reported, recorded, and cleared in the same manner as other orders executed on such exchange: And provided further, That such transactions shall be made in accordance with such rules and regulations as the Commission may promulgate regarding the manner of the execution of such transactions.

            (d) Inapplicability to transactions on foreign exchanges Nothing in this section shall apply to any activity that occurs on a board of trade, exchange, or market, or clearinghouse for such board of trade, exchange, or market, located outside the United States, or territories or possessions of the United States, involving any contract of sale of a commodity for future delivery that is made, or to be made, on or subject to the rules of such board of trade, exchange, or market.



            Enforcement authority

            (a) Commodity Futures Trading Commission Except as provided in subsections (b), (c), and (d), the Commission shall have exclusive authority to enforce the provisions of subtitle A of the Wall Street Transparency and Accountability Act of 2010 with respect to any person.

            (b) Prudential regulators The prudential regulators shall have exclusive authority to enforce the provisions of section 6s (e) of this title with respect to swap dealers or major swap participants for which they are the prudential regulator.

            (c) Referrals
            • (1) Prudential regulators If the prudential regulator for a swap dealer or major swap participant has cause to believe that the swap dealer or major swap participant, or any affiliate or division of the swap dealer or major swap participant, may have engaged in conduct that constitutes a violation of the nonprudential requirements of this chapter (including section 6s of this title or rules adopted by the Commission under that section), the prudential regulator may promptly notify the Commission in a written report that includes—

              • (A) a request that the Commission initiate an enforcement proceeding under this chapter; and

              • (B) an explanation of the facts and circumstances that led to the preparation of the written report.

            • (2) Commission If the Commission has cause to believe that a swap dealer or major swap participant that has a prudential regulator may have engaged in conduct that constitutes a violation of any prudential requirement of section 6s of this title or rules adopted by the Commission under that section, the Commission may notify the prudential regulator of the conduct in a written report that includes—

              • (A) a request that the prudential regulator initiate an enforcement proceeding under this chapter or any other Federal law (including regulations); and

              • (B) an explanation of the concerns of the Commission, and a description of the facts and circumstances, that led to the preparation of the written report.

            (d) Backstop enforcement authority
            • (1) Initiation of enforcement proceeding by prudential regulator If the Commission does not initiate an enforcement proceeding before the end of the 90-day period beginning on the date on which the Commission receives a written report under subsection (c)(1), the prudential regulator may initiate an enforcement proceeding.

            • (2) Initiation of enforcement proceeding by Commission If the prudential regulator does not initiate an enforcement proceeding before the end of the 90-day period beginning on the date on which the prudential regulator receives a written report under subsection (c)(2), the Commission may initiate an enforcement proceeding.





              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 the purchase or sale of any commodity for future delivery (or any option on such a transaction or option on a 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, of the character of, or is commonly known to the trade as, a "wash sale" 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.

              (b) Regulated option trading No person shall offer to enter into, enter into or confirm the execution of, any transaction involving any commodity regulated under this chapter 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", contrary to any rule, regulation, or order of the Commission prohibiting any such transaction or allowing any such transaction under such terms and conditions as the Commission shall prescribe. Any such order, rule, or regulation may be made only after notice and opportunity for hearing, and the Commission may set different terms and conditions for different markets.

              (c) Regulations for elimination of pilot status of commodity option transactions; terms and conditions of options trading Not later than 90 days after November 10, 1986, the Commission shall issue regulations—

              • (1) to eliminate the pilot status of its program for commodity option transactions involving the trading of options on contract markets, including any numerical restrictions on the number of commodities or option contracts for which a contract market may be designated; and

              • (2) otherwise to continue to permit the trading of such commodity options under such terms and conditions that the Commission from time to time may prescribe.

              (d) Dealer options exempt from subsections (b) and (c) prohibitions; requirements Notwithstanding the provisions of subsection (c) of this section—

              • (1) any person domiciled in the United States who on May 1, 1978, was in the business of granting an option on a physical commodity, other than a commodity specifically set forth in section 2 (a) of this title prior to October 23, 1974, and was in the business of buying, selling, producing, or otherwise using that commodity, may continue to grant or issue options on that commodity in accordance with Commission regulations in effect on August 17, 1978, until thirty days after the effective date of regulations issued by the Commission under clause (2) of this subsection: Provided, That if such person files an application for registration under the regulations issued under clause (2) of this subsection within thirty days after the effective date of such regulations, that person may continue to grant or issue options pending a final determination by the Commission on the application; and

              • (2) the Commission shall issue regulations that permit grantors and futures commission merchants to offer to enter into, enter into, or confirm the execution of, any commodity option transaction on a physical commodity subject to the provisions of subsection (b) of this section, other than a commodity specifically set forth in section 2 (a) of this title prior to October 23, 1974, if—
                • (A) the grantor is a person domiciled in the United States who—
                  • (i) is in the business of buying, selling, producing, or otherwise using the underlying commodity;

                  • (ii) at all times has a net worth of at least $5,000,000 certified annually by an independent public accountant using generally accepted accounting principles;

                  • (iii) notifies the Commission and every futures commission merchant offering the grantor's option if the grantor knows or has reason to believe that the grantor's net worth has fallen below $5,000,000;

                  • (iv) segregates daily, exclusively for the benefit of purchasers, money, exempted securities (within the meaning of section 78c (a)(12) of title 15), commercial paper, bankers' acceptances, commercial bills, or unencumbered warehouse receipts, equal to an amount by which the value of each transaction exceeds the amount received or to be received by the grantor for such transaction;

                  • (v) provides an identification number for each transaction; and

                  • (vi) provides confirmation of all orders for such transactions executed, including the execution price and a transaction identification number;

                • (B) the futures commission merchant is a person who—
                  • (i) has evidence that the grantor meets the requirements specified in subclause (A) of this clause;

                  • (ii) treats and deals with all money, securities, or property received from its customers as payment of the purchase price in connection with such transactions, as belonging to such customers until the expiration of the term of the option, or, if the customer exercises the option, until all rights of the customer under the commodity option transaction have been fulfilled;

                  • (iii) records each transaction in its customer's name by the transaction identification number provided by the grantor;

                  • (iv) provides a disclosure statement to its customers, under regulations of the Commission, that discloses, among other things, all costs, including any markups or commissions involved in such transaction; and

                • (C) the grantor and futures commission merchant comply with any additional uniform and reasonable terms and conditions the Commission may prescribe, including registration with the Commission.

                  The Commission may permit persons not domiciled in the United States to grant options under this subsection, other than options on a commodity specifically set forth in section 2 (a) of this title prior to October 23, 1974, under such additional rules, regulations, and orders as the Commission may adopt to provide protection to purchasers that are substantially the equivalent of those applicable to grantors domiciled in the United States. The Commission may terminate the right of any person to grant, offer, or sell options under this subsection only after a hearing, including a finding that the continuation of such right is contrary to the public interest: Provided, That pending the completion of such termination proceedings, the Commission may suspend the right to grant, offer, or sell options of any person whose activities in the Commission's judgment present a substantial risk to the public interest.

              (e) Rules and regulations The Commission may adopt rules and regulations, after public notice and opportunity for a hearing on the record, prohibiting the granting, issuance, or sale of options permitted under subsection (d) of this section if the Commission determines that such options are contrary to the public interest.

              (f) Nonapplicability to foreign currency options Nothing in this chapter shall be deemed to govern or in any way be applicable to any transaction in an option on foreign currency traded on a national securities exchange.

              (g) Oral orders The Commission shall adopt rules requiring that a contemporaneous written record be made, as practicable, of all orders for execution on the floor or subject to the rules of each contract market or derivatives transaction execution facility placed by a member of the contract market or derivatives transaction execution facility who is present on the floor at the time such order is placed.



              Dealing by unregistered futures commission merchants or introducing brokers prohibited; duties in handling customer receipts; rules to avoid duplicative regulations

              (a) Registration requirements; duties of merchants in handling customer receipts It shall be unlawful for any person to engage as futures commission merchant or introducing broker in soliciting orders or accepting orders for the purchase or sale of any commodity for future delivery, or involving any contracts of sale of any commodity for future delivery, on or subject to the rules of any contract market or derivatives transaction execution facility unless—

              • (1) such person shall have registered, under this chapter, with the Commission as such futures commission merchant or introducing broker and such registration shall not have expired nor been suspended nor revoked; and

              • (2) such person shall, if a futures commission merchant, whether a member or nonmember of a contract market or derivatives transaction execution facility, treat and deal with all money, securities, and property received by such person to margin, guarantee, or secure the trades or contracts of any customer of such person, or accruing to such customer as the result of such trades or contracts, as belonging to such customer. Such money, securities, and property shall be separately accounted for and shall not be commingled with the funds of such commission merchant or be used to margin or guarantee the trades or contracts, or to secure or extend the credit, of any customer or person other than the one for whom the same are held: Provided, however, That such money, securities, and property of the customers of such futures commission merchant may, for convenience, be commingled and deposited in the same account or accounts with any bank or trust company or with the clearing house organization of such contract market or derivatives transaction execution facility, and that such share thereof as in the normal course of business shall be necessary to margin, guarantee, secure, transfer, adjust, or settle the contracts or trades of such customers, or resulting market positions, with the clearinghouse organization of such contract market or derivatives transaction execution facility or with any member of such contract market or derivatives transaction execution facility, may be withdrawn and applied to such purposes, including the payment of commissions, brokerage, interest, taxes, storage, and other charges, lawfully accruing in connection with such contracts and trades: Provided further, That in accordance with such terms and conditions as the Commission may prescribe by rule, regulation, or order, such money, securities, and property of the customers of such futures commission merchant may be commingled and deposited as provided in this section with any other money, securities, and property received by such futures commission merchant and required by the Commission to be separately accounted for and treated and dealt with as belonging to the customers of such futures commission merchant: Provided further, That such money may be invested in obligations of the United States, in general obligations of any State or of any political subdivision thereof, and in obligations fully guaranteed as to principal and interest by the United States, such investments to be made in accordance with such rules and regulations and subject to such conditions as the Commission may prescribe.

              (b) Duties of clearing agencies, depositories, and others in handling customer receipts It shall be unlawful for any person, including but not limited to any clearing agency of a contract market or derivatives transaction execution facility and any depository, that has received any money, securities, or property for deposit in a separate account as provided in paragraph (2) of this section, to hold, dispose of, or use any such money, securities, or property as belonging to the depositing futures commission merchant or any person other than the customers of such futures commission merchant.

              (c) Rules to avoid duplicative regulation of dual registrants Consistent with this chapter, the Commission, in consultation with the Securities and Exchange Commission, shall issue such rules, regulations, or orders as are necessary to avoid duplicative or conflicting regulations applicable to any futures commission merchant registered with the Commission pursuant to section 6f (a) of this title (except paragraph (2) thereof), that is also registered with the Securities and Exchange Commission pursuant to section 78o (b) of title 15 (except paragraph (11) thereof), involving the application of—

              • (1) section 78h, section 78o(c)(3), and section 78q of title 15 and the rules and regulations thereunder related to the treatment of customer funds, securities, or property, maintenance of books and records, financial reporting or other financial responsibility rules (as defined in section 78c (a)(40) of title 15), involving security futures products; and

              • (2) similar provisions of this chapter and the rules and regulations thereunder involving security futures products.

                Dealings by unregistered floor trader or broker prohibited

                It shall be unlawful for any person to act as floor trader in executing purchases and sales, or as floor broker in executing any orders for the purchase or sale, of any commodity for future delivery, or involving any contracts of sale of any commodity for future delivery, on or subject to the rules of any contract market or derivatives transaction execution facility unless such person shall have registered, under this chapter, with the Commission as such floor trader or floor broker and such registration shall not have expired nor been suspended nor revoked.



                Registration and financial requirements; risk assessment

                (a) Registration of futures commission merchants, introducing brokers, and floor brokers and traders
                • (1) Any person desiring to register as a futures commission merchant, introducing broker, floor broker, or floor trader hereunder shall be registered upon application to the Commission. The application shall be made in such form and manner as prescribed by the Commission, giving such information and facts as the Commission may deem necessary concerning the business in which the applicant is or will be engaged, including in the case of an application of a futures commission merchant or an introducing broker, the names and addresses of the managers of all branch offices, and the names of such officers and partners, if a partnership, and of such officers, directors, and stockholders, if a corporation, as the Commission may direct. Such person, when registered hereunder, shall likewise continue to report and furnish to the Commission the above-mentioned information and such other information pertaining to such person's business as the Commission may require. Each registration shall expire on December 31 of the year for which issued or at such other time, not less than one year from the date of issuance, as the Commission may by rule, regulation, or order prescribe, and shall be renewed upon application therefor unless the registration has been suspended (and the period of such suspension has not expired) or revoked pursuant to the provisions of this chapter.

                • (2) Notwithstanding paragraph (1), and except as provided in paragraph (3), any broker or dealer that is registered with the Securities and Exchange Commission shall be registered as a futures commission merchant or introducing broker, as applicable, if—
                  • (A) the broker or dealer limits its solicitation of orders, acceptance of orders, or execution of orders, or placing of orders on behalf of others involving any contracts of sale of any commodity for future delivery, on or subject to the rules of any contract market or registered derivatives transaction execution facility to security futures products;

                  • (B) the broker or dealer files written notice with the Commission in such form as the Commission, by rule, may prescribe containing such information as the Commission, by rule, may prescribe as necessary or appropriate in the public interest or for the protection of investors;

                  • (C) the registration of the broker or dealer is not suspended pursuant to an order of the Securities and Exchange Commission; and

                  • (D) the broker or dealer is a member of a national securities association registered pursuant to section 78o-3 (a) of title 15.

                    The registration shall be effective contemporaneously with the submission of notice, in written or electronic form, to the Commission.

                • (3) A floor broker or floor trader shall be exempt from the registration requirements of section 6e of this title and paragraph (1) of this subsection if—
                  • (A) the floor broker or floor trader is a broker or dealer registered with the Securities and Exchange Commission;

                  • (B) the floor broker or floor trader limits its solicitation of orders, acceptance of orders, or execution of orders, or placing of orders on behalf of others involving any contracts of sale of any commodity for future delivery, on or subject to the rules of any contract market to security futures products; and

                  • (C) the registration of the floor broker or floor trader is not suspended pursuant to an order of the Securities and Exchange Commission.

                • (4)
                  • (A) A broker or dealer that is registered as a futures commission merchant or introducing broker pursuant to paragraph (2), or that is a floor broker or floor trader exempt from registration pursuant to paragraph (3), shall be exempt from the following provisions of this chapter and the rules thereunder:
                    • (i) Subsections (b), (d), (e), and (g) of section 6c of this title.

                    • (ii) Sections 6d, 6e, and 6h of this title.

                    • (iii) Subsections (b) and (c) of this section.

                    • (iv) Section 6j of this title.

                    • (v) Section 6k (1) of this title.

                    • (vi) Section 6p of this title.

                    • (vii) Section 13a-2 of this title.

                    • (viii) Subsections (d) and (g) of section 12 of this title.

                    • (ix) Section 20 of this title.

                  • (B)
                    • (i) Except as provided in clause (ii) of this subparagraph, but notwithstanding any other provision of this chapter, the Commission, by rule, regulation, or order, may conditionally or unconditionally exempt any broker or dealer subject to the registration requirement of paragraph (2), or any broker or dealer exempt from registration pursuant to paragraph (3), from any provision of this chapter or of any rule or regulation thereunder, to the extent the exemption is necessary or appropriate in the public interest and is consistent with the protection of investors.

                    • (ii) The Commission shall, by rule or regulation, determine the procedures under which an exemptive order under this section shall be granted and may, in its sole discretion, decline to entertain any application for an order of exemption under this section.

                  • (C)
                    • (i) A broker or dealer that is registered as a futures commission merchant or introducing broker pursuant to paragraph (2) or an associated person thereof, or that is a floor broker or floor trader exempt from registration pursuant to paragraph (3), shall not be required to become a member of any futures association registered under section 21 of this title.

                    • (ii) No futures association registered under section 21 of this title shall limit its members from carrying an account, accepting an order, or transacting business with a broker or dealer that is registered as a futures commission merchant or introducing broker pursuant to paragraph (2) or an associated person thereof, or that is a floor broker or floor trader exempt from registration pursuant to paragraph (3).

                (b) Financial requirements for futures commission merchants and introducing brokers Notwithstanding any other provisions of this chapter, no person desiring to register as futures commission merchant or as introducing broker shall be so registered unless he meets such minimum financial requirements as the Commission may by regulation prescribe as necessary to insure his meeting his obligation as a registrant, and each person so registered shall at all times continue to meet such prescribed minimum financial requirements: Provided, That such minimum financial requirements will be considered met if the applicant for registration or registrant is a member of a contract market or derivatives transaction execution facility and conforms to minimum financial standards and related reporting requirements set by such contract market or derivatives transaction execution facility in its bylaws, rules, regulations, or resolutions and approved by the Commission as adequate to effectuate the purposes of this subsection.

                (c) Risk assessment for holding company systems
                • (1) As used in this subsection:
                  • (i) The term "affiliated person" means any person directly or indirectly controlling, controlled by, or under common control with a futures commission merchant, as the Commission, by rule or regulation, may determine will effectuate the purposes of this subsection.

                  • (ii) The term "Federal banking agency" shall have the same meaning as the term "appropriate Federal banking agency" in section 1813 (q) of title 12.

                • (2)
                  • (A) Each registered futures commission merchant shall obtain such information and make and keep such records as the Commission, by rule or regulation, prescribes concerning the registered futures commission merchant's policies, procedures, or systems for monitoring and controlling financial and operational risks to it resulting from the activities of any of its affiliated persons, other than a natural person.

                  • (B) The records required under subparagraph (A) shall describe, in the aggregate, each of the futures and other financial activities conducted by, and the customary sources of capital and funding of, those of its affiliated persons whose business activities are reasonably likely to have a material impact on the financial or operational condition of the futures commission merchant, including its adjusted net capital, its liquidity, or its ability to conduct or finance its operations.

                  • (C) The Commission, by rule or regulation, may require summary reports of such information to be filed by the futures commission merchant with the Commission no more frequently than quarterly.

                • (3)
                  • (A) , If, as a result of adverse market conditions or based on reports provided to the Commission pursuant to paragraph (2) or other available information, the Commission reasonably concludes that the Commission has concerns regarding the financial or operational condition of any registered futures commission merchant, the Commission may require the futures commission merchant to make reports concerning the futures and other financial activities of any of such person's affiliated persons, other than a natural person, whose business activities are reasonably likely to have a material impact on the financial or operational condition of the futures commission merchant.

                  • (B) The Commission, in requiring reports pursuant to this paragraph, shall specify the information required, the period for which it is required, the time and date on which the information must be furnished, and whether the information is to be furnished directly to the Commission or to a contract market or derivatives transaction execution facility or other self-regulatory organization with primary responsibility for examining the registered futures commission merchant's financial and operational condition.

                • (4)
                  • (A) in developing and implementing reporting requirements pursuant to paragraph (2) with respect to affiliated persons subject to examination by or reporting requirements of a Federal banking agency, the Commission shall consult with and consider the views of each such Federal banking agency. If a Federal banking agency comments in writing on a proposed rule of the Commission under this subsection that has been published for comment, the Commission shall respond in writing to the written comment before adopting the proposed rule. The Commission shall, at the request of the Federal banking agency, publish the comment and response in the Federal Register at the time of publishing the adopted rule.

                  • (B)
                    • (i) Except as provided in clause (ii), a registered futures commission merchant shall be considered to have complied with a recordkeeping or reporting requirement adopted pursuant to paragraph (2) concerning an affiliated person that is subject to examination by, or reporting requirements of, a Federal banking agency if the futures commission merchant utilizes for the recordkeeping or reporting requirement copies of reports filed by the affiliated person with the Federal banking agency pursuant to section 161 of title 12, section 9 of the Federal Reserve Act (12 U.S.C. 321 et seq.), section 1817(a) of title 12, section 1467a (b) of title 12, or section 1844 of title 12.

                    • (ii) The Commission may, by rule adopted pursuant to paragraph (2), require any futures commission merchant filing the reports with the Commission to obtain, maintain, or report supplemental information if the Commission makes an explicit finding that the supplemental information is necessary to inform the Commission regarding potential risks to the futures commission merchant. Prior to requiring any such supplemental information, the Commission shall first request the Federal banking agency to expand its reporting requirements to include the information.

                • (5) Prior to making a request pursuant to paragraph (3) for information with respect to an affiliated person that is subject to examination by or reporting requirements of a Federal banking agency, the Commission shall—
                  • (A) notify the agency of the information required with respect to the affiliated person; and

                  • (B) consult with the agency to determine whether the information required is available from the agency and for other purposes, unless the Commission determines that any delay resulting from the consultation would be inconsistent with ensuring the financial and operational condition of the futures commission merchant or the stability or integrity of the futures markets.

                • (6) Nothing in this subsection shall be construed to permit the Commission to require any futures commission merchant to obtain, maintain, or furnish any examination report of any Federal banking agency or any supervisory recommendations or analysis contained in the report.

                • (7) No information provided to or obtained by the Commission from any Federal banking agency pursuant to a request under paragraph (5) regarding any affiliated person that is subject to examination by or reporting requirements of a Federal banking agency may be disclosed to any other person (other than as provided in section 12 of this title or section 12a (6) of this title), without the prior written approval of the Federal banking agency.

                • (8) The Commission shall notify a Federal banking agency of any concerns of the Commission regarding significant financial or operational risks resulting from the activities of any futures commission merchant to any affiliated person thereof that is subject to examination by or reporting requirements of the Federal banking agency.

                • (9) The Commission, by rule, regulation, or order, may exempt any person or class of persons under such terms and conditions and for such periods as the Commission shall provide in the rule, regulation, or order, from this subsection and the rules and regulations issued under this subsection. In granting the exemption, the Commission shall consider, among other factors—
                  • (A) whether information of the type required under this subsection is available from a supervisory agency (as defined in section 3401 (7) of title 12), a State insurance commission or similar State agency, the Securities and Exchange Commission, or a similar foreign regulator;

                  • (B) the primary business of any affiliated person;

                  • (C) the nature and extent of domestic or foreign regulation of the affiliated person's activities;

                  • (D) the nature and extent of the registered futures commission merchant's commodity futures and options activities; and

                  • (E) with respect to the registered futures commission merchant and its affiliated persons, on a consolidated basis, the amount and proportion of assets devoted to, and revenues derived from activities in the United States futures markets.

                • (10) Information required to be provided pursuant to this subsection shall be subject to section 12 of this title. Except as specifically provided in section 12 of this title and notwithstanding any other provision of law, the Commission shall not be compelled to disclose any information required to be reported under this subsection, or any information supplied to the Commission by any domestic or foreign regulatory agency that relates to the financial or operational condition of any affiliated person of a registered futures commission merchant.

                • (11) Nothing in paragraphs (1) through (10) shall be construed to supersede or to limit in any way the authority or powers of the Commission pursuant to any other provision of this chapter or regulations issued under this chapter.