RE: Derivatives and Payments Titles RE rv s e t

'Damon.Munchus@do.treas.gov', Chon, Julie (Banking) to: Shawn_P._Maher@who.eop.gov, Ju e Kim.Wallace@do.treas.gov,

"Michael.Barr@do.treas.gov", "dfarrell@who.eop.gov", Cc: "Mark.VanderWeide@do.treas.gov", "Amias.Gerety@do.treas.gov", "Anita.Hunt@do.treas.gov", "Jarsulic, Marc (Banking)", "Shahinian, 11/02/2009 05:21 PM

Here are the Word documents. In your comments, please use page references to the PDF files--this will make it easier for Senate Leg Counsel to follow. Title VIII -- GRA09851 Title VII -- GRA09852 -----Original Message----From: Damon.Munchus@do.treas.gov [mailto:Damon.Munchus@do.treas.gov] Sent: Monday, November 02, 2009 5:10 PM To: Chon, Julie (Banking); Shawn_P._Maher@who.eop.gov; Kim.Wallace@do.treas.gov; KelleyAn@sec.gov; JRiley@CFTC.gov; Tara.W.Foscato@frb.gov; Laricke.D.Blanchard@frb.gov; Michael.Nelson@ny.frb.org Cc: Michael.Barr@do.treas.gov; dfarrell@who.eop.gov; Mark.VanderWeide@do.treas.gov; Amias.Gerety@do.treas.gov; Anita.Hunt@do.treas.gov; Jarsulic, Marc (Banking); Shahinian, Dean (Banking); Jickling, Mark (Banking); Holtan, Alexander (Banking); Friend, Amy (Banking); Silverman, Ed (Banking) Subject: RE: Derivatives and Payments Titles At the request of our staff, is there any chance we could obtain this in Microsoft Word? -----Original Message----From: Chon, Julie (Banking) [mailto:Julie_Chon@banking.senate.gov] Sent: Monday, November 02, 2009 4:57 PM To: Maher, Shawn; Wallace, Kim; Munchus, Damon; 'KelleyAn@sec.gov'; 'John P. Riley (JRiley@CFTC.gov)'; 'Tara.W.Foscato@frb.gov'; 'Laricke.D.Blanchard@frb.gov'; 'Michael.Nelson@ny.frb.org' Cc: Barr, Michael; dfarrell@who.eop.gov; Van der Weide, Mark; Gerety, Amias; Hunt, Anita Maria; Jarsulic, Marc (Banking); Shahinian, Dean (Banking); Jickling, Mark (Banking); Holtan, Alexander (Banking); Friend, Amy (Banking); Silverman, Ed (Banking) Subject: Derivatives and Payments Titles Attached are draft derivatives and payments titles for your technical feedback. We would appreciate it if you could share your comments by this Wednesday morning, Nov 4th. Please feel free to call me with any questions, and if you think it would be beneficial, we'd be happy to schedule and in-person walk-through with each of your agencies this week.

Thanks, Julie (b)(6)

Title VIII - GRA09851 Title VII - GRA09852

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TITLE VIIIMPROVEMENTS TO REGULATION OF OVER-THE-COUNTER DERIVATIVES MARKETS SEC. 701. SHORT TITLE.
This title may be cited as the Over-the-Counter Derivatives Markets Act of 2009.

SEC. 702. FINDINGS AND PURPOSES.

(a) Findings.Congress finds that (1) in recent years, the global over-the-counter derivatives market in notional amounts outstanding has grown rapidly, from $100 trillion in 2002 to $592 trillion in 2008 according to the Bank for International Settlements; (2) the interconnectedness of the countrys largest financial institutions through the unregulated derivatives market raised significant concerns about counterparty risk exposures during the recent financial crisis; (3) a substantial amount of American taxpayer money was used to make counterparty payments because there was insufficient margin and capital held by large financial institutions; (4) although derivatives can be used to manage risk, they can also increase leverage and allow excessive risk-taking because market participants can take large positions on a relatively small capital base; (5) in the over-the-counter derivatives market, margin and capital requirements are set bilaterally and do not take into account the risk that each trade imposes on the rest of the financial system, thereby allowing systemically important exposures to build up without sufficient capital to mitigate associated risks to American taxpayers and the financial system; (6) in the recent crisis, fears about counterparty risk exposures caused credit markets to freeze, as market participants questioned the viability of counterparties and the safety of their own assets; (7) lack of transparency about counterparty exposures and valuation of derivatives positions made it more difficult for regulators to respond to the crisis and made resolution of these positions more expensive for the taxpayer; (8) bilaterally-executed derivatives contracts can provide key benefits to certain market participants and should be permitted under comprehensive regulation, but all derivatives activities should be accompanied by appropriate risk management and prudential standards; (9) the derivatives market suffers from a lack of reliable and accurate transaction information that is available to the public, investors, market participants, and regulators, hampering surveillance and oversight of such markets; (10) clearing more derivatives through well-regulated central counterparties will benefit the public by reducing costs and risks to American taxpayers, the financial system, and 1
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market participants; (11) trading more derivatives on regulated exchanges should be encouraged because it will result in more price transparency, efficiency in execution, and liquidity; and (12) the Group of 20 nations agreed that (A) all standardized over-the-counter derivative contracts should be traded on exchanges or electronic trading platforms, where appropriate, and cleared through central counterparties by the end of calendar year 2012 at the latest; (B) over-the-counter derivative contracts should be reported to trade repositories; and (C) non-centrally cleared contracts should be subject to higher capital requirements. (b) Purposes.The purposes of this title are (1) to establish well-regulated markets for derivatives to increase transparency and reduce costs and risks to American taxpayers, the financial system, and market participants; and (2) to promote the public interest, the protection of investors, the protection of market participants, and the maintenance of fair and orderly markets to assure (A) the prompt and accurate clearance and settlement of transactions in derivatives that can be cleared through a central counterparty; (B) the prompt and accurate reporting of transactions to regulators and trade repositories; (C) the availability to the public, investors, market participants, and regulators of reliable and accurate quotation and transaction information in swaps and securitybased swaps; (D) economically efficient execution of transactions in swaps and security-based swaps; and (E) fair competition among markets in the trading of swaps and security-based swaps.

Subtitle ARegulation of Swap Markets SEC. 711. DEFINITIONS.

(a) Amendments to Definitions in the Commodity Exchange Act.Section 1a of the Commodity Exchange Act (7 U.S.C. 1a) is amended (1) by redesignating paragraphs (9) through (34) as paragraphs (10) through (35), respectively; (2) by adding after paragraph (8) the following: (9) DERIVATIVE.The term derivative means (A) a contract of sale of a commodity for future delivery; or (B) a swap.; 2
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(3) by redesignating paragraph (35) (as redesignated by paragraph (1)) as paragraph (36); (4) by adding after paragraph (34) (as so redesignated) the following: (35) SWAP. (A) IN GENERAL.Except as provided in subparagraph (B), the term swap means any agreement, contract, or transaction that (i) is a put, call, cap, floor, collar, or similar option of any kind for the purchase or sale of, or based on the value of, 1 or more interest or other rates, currencies, commodities, securities, instruments of indebtedness, indices, quantitative measures, or other financial or economic interests or property of any kind; (ii) provides for any purchase, sale, payment, or delivery (other than a dividend on an equity security) that is dependent on the occurrence, nonoccurrence, or the extent of the occurrence of an event or contingency associated with a potential financial, economic, or commercial consequence; (iii) provides on an executory basis for the exchange, on a fixed or contingent basis, of 1 or more payments based on the value or level of 1 or more interest or other rates, currencies, commodities, securities, instruments of indebtedness, indices, quantitative measures, or other financial or economic interests or property of any kind, or any interest therein or based on the value thereof, and that transfers, as between the parties to the transaction, in whole or in part, the financial risk associated with a future change in any such value or level without also conveying a current or future direct or indirect ownership interest in an asset (including any enterprise or investment pool) or liability that incorporates the financial risk so transferred, including any agreement, contract, or transaction commonly known as an interest rate swap, a rate floor, rate cap, rate collar, crosscurrency rate swap, basis swap, currency swap, total return swap, equity index swap, equity swap, debt index swap, debt swap, credit spread, credit default swap, credit swap, weather swap, energy swap, metal swap, agricultural swap, emissions swap, or commodity swap; (iv) is an agreement, contract, or transaction that is, or in the future becomes, commonly known to the trade as a swap; or (v) is any combination or permutation of, or option on, any agreement, contract, or transaction described in any of clauses (i) through (iv). (B) EXCLUSIONS.The term swap does not include (i) any contract of sale of a commodity for future delivery or security futures product traded on or subject to the rules of any board of trade designated as a contract market under section 5 or 5f; (ii) any sale of a nonfinancial commodity for deferred shipment or delivery, so long as such transaction is physically settled; (iii) any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities, including any interest therein or based on 3
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the value thereof, that is subject to the Securities Act of 1933 (15 U.S.C. 77a et seq.) and the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.); (iv) any put, call, straddle, option, or privilege relating to foreign currency entered into on a national securities exchange registered pursuant to section 6(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78f(a)); (v) any agreement, contract, or transaction providing for the purchase or sale of 1 or more securities on a fixed basis that is subject to the Securities Act of 1933 (15 U.S.C. 77a et seq.) and the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.); (vi) any agreement, contract, or transaction providing for the purchase or sale of 1 or more securities on a contingent basis that is subject to the Securities Act of 1933 (15 U.S.C. 77a et seq.) and the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.), unless such agreement, contract, or transaction predicates such purchase or sale on the occurrence of a bona fide contingency that might reasonably be expected to affect or be affected by the creditworthiness of a party other than a party to the agreement, contract, or transaction; (vii) any note, bond, or evidence of indebtedness that is a security as defined in section 2(a)(1) of the Securities Act of 1933 (15 U.S.C. 77b(a)(1)); or (viii) any agreement, contract, or transaction that is (I) based on a security; and (II) entered into directly or through an underwriter, that term is as defined in section 2(a)(11) of the Securities Act of 1933 (15 U.S.C. 77b(a)(11)), by the issuer of such security for the purposes of raising capital, unless such agreement, contract, or transaction is entered into to manage a risk associated with capital raising; (ix) any foreign exchange swap; (x) any foreign exchange forward; (xi) any agreement, contract, or transaction a counterparty of which is a Federal Reserve bank, the United States Government, or an agency of the United States Government that is expressly backed by the full faith and credit of the United States; and (xii) any security-based swap, other than a security-based swap as described in paragraph 38(C). (C) RULE OF CONSTRUCTION REGARDING MASTER AGREEMENTS.The term swap shall be construed to include a master agreement that provides for an agreement, contract, or transaction that is a swap pursuant to subparagraph (A), together with all supplements to any such master agreement, without regard to whether the master agreement contains an agreement, contract, or transaction that is not a swap pursuant to subparagraph (A), except that the master agreement shall be considered to be a swap only with respect to each agreement, contract, or transaction under the master agreement that is a swap pursuant to subparagraph (A).; 4
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(5) in paragraph (13) (as so redesignated) (A) in subparagraph (A) (i) in clause (vii), by striking $25,000,000 and inserting $50,000,000; and (ii) in clause (xi), by striking total assets in an amount and inserting amounts invested on a discretionary basis; and (B) in subparagraph (C), by striking determines and inserting and the Securities and Exchange Commission may further jointly determine; (6) in paragraph (30) (as so redesignated) (A) by redesignating subparagraph (E) as subparagraph (G); (B) in subparagraph (D), by striking and; and (C) by inserting after subparagraph (D) the following: (E) an alternative swap execution facility registered under section 5h; (F) a swap repository; and; and (7) by adding after paragraph (36) (as so redesignated) the following: (37) BOARD.The term Board means the Board of Governors of the Federal Reserve System. (38) SECURITY-BASED SWAP. (A) IN GENERAL.Except as provided in subparagraph (B), the term securitybased swap means any agreement, contract, or transaction that would be a swap under paragraph (35) (without regard to paragraph (35)(B)(xii)), and that is based on (i) an index that is a narrow-based security index, including any interest therein or based on the value thereof; (ii) a single security or loan, including any interest therein or based on the value thereof; or (iii) the occurrence, nonoccurrence, or extent of the occurrence of an event relating to a single issuer of a security or the issuers of securities in a narrowbased security index, provided that such event directly affects the financial statements, financial condition, or financial obligations of the issuer. (B) EXCLUSION.The term security-based swap does not include any agreement, contract, or transaction that meets the definition of security-based swap only because such agreement, contract, or transaction references or is based upon a government security. (C) MIXED SWAP.The term security-based swap includes any agreement, contract, or transaction that is as described in subparagraph (A) and also is based on (i) the value of 1 or more interest or other rates, currencies, commodities, instruments of indebtedness, indices, quantitative measures, other financial or economic interest or property of any kind (other than a single security or a narrow-based security index); or 5
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(ii) the occurrence, nonoccurrence, or the extent of the occurrence of an event or contingency associated with a potential financial, economic, or commercial consequence (other than an event described in subparagraph (A)(iii)). (D) RULE OF CONSTRUCTION REGARDING MASTER AGREEMENTS.The term security-based swap shall be construed to include a master agreement that provides for an agreement, contract, or transaction that is a security-based swap pursuant to subparagraph (A), together with all supplements to any such master agreement, without regard to whether the master agreement contains an agreement, contract, or transaction that is not a security-based swap pursuant to subparagraph (A), except that the master agreement shall be considered to be a security-based swap only with respect to each agreement, contract, or transaction under the master agreement that is a security-based swap pursuant to subparagraph (A). (39) SWAP DEALER. (A) IN GENERAL.The term swap dealer means any person engaged in the business of buying and selling swaps for such persons own account, through a broker or otherwise. (B) EXCEPTION.The term swap dealer does not include a person that buys or sells swaps for such persons own account, either individually or in a fiduciary capacity, but not as a part of a regular business. (40) MAJOR SWAP PARTICIPANT. (A) IN GENERAL.The term major swap participant means any person who (i) is not a swap dealer; and (ii) maintains a substantial net position in outstanding swaps, other than to create and maintain an effective hedge under generally accepted accounting principles, as the Commission and the Securities and Exchange Commission may further jointly define by rule or regulation. (B) DEFINITION OF SUBSTANTIAL NET POSITION.The Commission and the Securities and Exchange Commission, in consultation with the Board for Financial Stability, shall jointly define by rule or regulation the term substantial net position in a manner that is prudent for systemic risk management. In the event that the regulators are unable to agree upon a definition within 60 days of the commencement of such consultations, the Board for Financial Stability shall make such determination, which shall be binding on and adopted by such regulators. (41) MAJOR SECURITY-BASED SWAP PARTICIPANT. (A) IN GENERAL.The term major security-based swap participant means any person who (i) is not a security-based swap dealer; and (ii) maintains a substantial net position in outstanding security-based swaps, other than to create and maintain an effective hedge under generally accepted accounting principles, as the Commission and the Securities and Exchange Commission may further jointly define by rule or regulation. 6

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(B) DEFINITION OF SUBSTANTIAL NET POSITION.The Commission and the Securities and Exchange Commission, in consultation with the Board for Financial Stability, shall jointly define by rule or regulation the term substantial net position in a manner that is prudent for systemic risk management. In the event that the regulators are unable to agree upon a definition within 60 days of the commencement of such consultations, the Board for Financial Stability shall make such determination, which shall be binding on and adopted by such regulators. (42) APPROPRIATE FEDERAL BANKING AGENCY.The term appropriate Federal banking agency has the same meaning as in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813). (43) FIRA.The term FIRA means the Financial Institutions Regulatory Administration. (44) SECURITY-BASED SWAP DEALER. (A) IN GENERAL.The term security-based swap dealer means any person engaged in the business of buying and selling security-based swaps for such persons own account, through a broker or otherwise. (B) EXCEPTION.The term security-based swap dealer does not include a person that buys or sells security-based swaps for such persons own account, either individually or in a fiduciary capacity, but not as a part of a regular business. (45) GOVERNMENT SECURITY.The term government security has the same meaning as in section 3(a)(42) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(42)). (46) FOREIGN EXCHANGE FORWARD.The term foreign exchange forward means a transaction that solely involves the exchange of 2 different currencies on a specific future date at a fixed rate agreed at the inception of the contract. (47) FOREIGN EXCHANGE SWAP.The term foreign exchange swap means a transaction that solely involves the exchange of 2 different currencies on a specific date at a fixed rate agreed at the inception of the contract, and a reverse exchange of the same 2 currencies at a date further in the future and at a fixed rate agreed at the inception of the contract. (48) PERSON ASSOCIATED WITH A SECURITY-BASED SWAP DEALER OR MAJOR SECURITYBASED SWAP PARTICIPANT.The term person associated with a security-based swap dealer or major security-based swap participant or associated person of a security-based swap dealer or major security-based swap participant means (A) any partner, officer, director, or branch manager of such security-based swap dealer or major security-based swap participant (or any person occupying a similar status or performing similar functions); (B) any person directly or indirectly controlling, controlled by, or under common control with such security-based swap dealer or major security-based swap participant; or (C) any employee of such security-based swap dealer or major security-based swap participant, except that any person associated with a security-based swap dealer or 7
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major security-based swap participant whose functions are solely clerical or ministerial shall not be included in the meaning of such term other than for purposes of section 15F(e)(2) of the Securities Exchange Act of 1934 (15 U.S.C. 78o10). (49) PERSON ASSOCIATED WITH A SWAP DEALER OR MAJOR SWAP PARTICIPANT.The term person associated with a swap dealer or major swap participant or associated person of a swap dealer or major swap participant means (A) any partner, officer, director, or branch manager of such swap dealer or major swap participant (or any person occupying a similar status or performing similar functions); (B) any person directly or indirectly controlling, controlled by, or under common control with such swap dealer or major swap participant; or (C) any employee of such swap dealer or major swap participant, except that any person associated with a swap dealer or major swap participant whose functions are solely clerical or ministerial shall not be included in the meaning of such term other than for purposes of section 4s(b)(6) of this Act. (50) SWAP REPOSITORY.The term swap repository means any person that collects, calculates, processes, or prepares information with respect to transactions or positions in swaps or security-based swaps.. (b) Joint Rulemaking on Further Definition of Terms. (1) IN GENERAL.The Commodity Futures Trading Commission and the Securities and Exchange Commission shall jointly adopt a rule further defining the terms swap, security-based swap, swap dealer, security-based swap dealer, major swap participant, major security-based swap participant, and eligible contract participant not later than 180 days after the effective date of this title. (2) PREVENTION OF EVASIONS.The Commodity Futures Trading Commission and the Securities and Exchange Commission may prescribe rules defining the term swap or security-based swap to include transactions that have been structured to evade this title. (c) Joint Rulemaking Under This Title. (1) UNIFORM RULES.Rules and regulations prescribed jointly under this title by the Commodity Futures Trading Commission and the Securities and Exchange Commission shall be uniform. (2) TREASURY DEPARTMENT.In the event that the Commodity Futures Trading Commission and the Securities and Exchange Commission fail to jointly prescribe uniform rules and regulations under any provision of this title in a timely manner, the Board for Financial Stability, in consultation with the Commodity Futures Trading Commission and the Securities and Exchange Commission, shall prescribe rules and regulations under such provision. A rule prescribed by the Board for Financial Stability shall be enforced as if prescribed jointly by the Commodity Futures Trading Commission and the Securities and Exchange Commission and shall remain in effect until the Board for Financial Stability rescinds the rule or until the effective date of a corresponding rule prescribed jointly by the Commodity Futures Trading Commission and the Securities and Exchange Commission in accordance with this section, whichever is later. 8
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(3) DEADLINE.The Board for Financial Stability shall adopt rules and regulations under paragraph (2) within 180 days of the time that the Commodity Futures Trading Commission and the Securities and Exchange Commission failed to adopt uniform rules and regulations. (4) TREATMENT OF SIMILAR PRODUCTS.In adopting joint rules and regulations under this title, the Commodity Futures Trading Commission and the Securities and Exchange Commission shall prescribe requirements to treat functionally or economically similar products similarly. (5) TREATMENT OF DISSIMILAR PRODUCTS.Nothing in this title shall be construed to require the Commodity Futures Trading Commission and the Securities and Exchange Commission to adopt joint rules that treat functionally or economically different products identically. (6) JOINT INTERPRETATION.Any interpretation of, or guidance regarding, a provision of this title, shall be effective only if issued jointly by the Commodity Futures Trading Commission and the Securities and Exchange Commission if this title requires the Commodity Futures Trading Commission and the Securities and Exchange Commission to issue joint regulations to implement the provision. (d) Exemptions.Section 4(c)(1) of the Commodity Exchange Act (7 U.S.C. 6(c)(1)) is amended by adding at the end the following: The Commission shall not have the authority to grant exemptions from the swap-related provisions of the Over-the-Counter Derivatives Markets Act of 2009, except as expressly authorized under the provisions of that Act..

SEC. 712. JURISDICTION.

(a) Exclusive Jurisdiction.The first sentence of section 2(a)(1)(A) of the Commodity Exchange Act (7 U.S.C. 2(a)(1)(A)) is amended (1) by striking (C) and (D) and inserting (C), (D), and (G); (2) by striking subsections (c) through (i) and inserting subsections (c) and (f); and (3) by striking involving contracts of sale and inserting involving swaps or contracts of sale. (b) No Limitation.Section 2(a)(1) of the Commodity Exchange Act (7 U.S.C. 2(a)(1)) is amended by adding at the end the following: (G) Nothing in this subsection shall supersede, limit, or restrict, or be construed to supersede, limit, or restrict (i) the jurisdiction conferred on the Securities and Exchange Commission or other regulatory authority by the Over-the-Counter Derivatives Markets Act of 2009; or (ii) the authority of the Securities and Exchange Commission or other regulatory authority under the Over-the-Counter Derivatives Markets Act of 2009, including any authority to regulate with respect to a security-based swap, as such is described in paragraph 38(C) of section 1a.. (c) Additions.Section 2(c)(2)(A) of the Commodity Exchange Act (7 U.S.C. 2(c)(2)(A)) is amended 9
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(1) in clause (i), by striking or; (2) by redesignating clause (ii) as clause (iii); and (3) by inserting after clause (i) the following: (ii) a swap; or.

SEC. 713. CLEARING.

(a) Clearing Requirement. (1) REPEALS.Subsections (d), (e), (g), and (h) of section 2 of the Commodity Exchange Act (7 U.S.C. 2(d), 2(e), 2(g), and 2(h)) are repealed. (2) APPLICABILITY.Section 2 of the Commodity Exchange Act (7 U.S.C. 2) is further amended by inserting after subsection (c) the following: (d) Swaps.Nothing in this Act, other than subsections (a)(1)(A), (a)(1)(B), (f), and (j), sections 4a, 4b, 4b1, 4c(a), 4c(b), 4o, 4r, 4s, 4t, 4u, 5b, 5c, 5h, 6(c), 6(d), 6c, 6d, 8, 8a, 9, 12(e)(2), 12(f), 13(a), 13(b), 21, and 22(a)(4) and such other provisions of this Act as are applicable by their terms to registered entities and Commission registrants, governs or applies to a swap. (e) Limitation on Participation.It shall be unlawful for any person, other than an eligible contract participant, to enter into a swap unless the swap is entered into on or subject to the rules of a board of trade designated as a contract market under section 5.. (3) CLEARING REQUIREMENT.Section 2 of the Commodity Exchange Act (7 U.S.C. 2) is further amended by adding at the end the following: (j) Clearing Requirement. (1) IN GENERAL.Except as provided in paragraph (9), it shall be unlawful to enter into a swap unless (A) the swap is cleared by a derivatives clearing organization registered under this Act; and (B) the rules of the derivatives clearing organization described in subparagraph (A) (i) prescribe that all swaps with the same terms and conditions are fungible and may be offset with each other; and (ii) provide for nondiscriminatory clearing of a swap executed on or through the rules of an unaffiliated designated contract market or an alternative swap execution facility. (2) COMMISSION APPROVAL. (A) IN GENERAL.A derivatives clearing organization shall submit to the Commission for prior approval each swap, or any group, category, type, or class of swaps, that it seeks to accept for clearing, which submission the Commission shall make available to the public. (B) DEADLINE.The Commission shall take final action on a request submitted 10
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pursuant to subparagraph (A) not later than 90 days after submission of the request, unless the derivatives clearing organization submitting the request agrees to an extension of the time limitation established under this subparagraph. A request on which the Commission fails to take final action within the time limitation established under this subparagraph is deemed approved. (C) APPROVAL.The Commission shall approve, unconditionally or subject to such terms and conditions as the Commission determines to be appropriate, any request submitted pursuant to subparagraph (A) if the Commission finds that the request is consistent with section 5b(c)(2). (D) RULES.Not later than 180 days after the date of the enactment of the Overthe-Counter Derivatives Markets Act of 2009, the Commission shall adopt rules for a derivatives clearing organizations submission for approval, pursuant to this paragraph, of a swap, or a group, category, type or class of swaps, that it seeks to accept for clearing. (3) STAY OF CLEARING REQUIREMENT.At any time after issuance of an approval pursuant to paragraph (2): (A) REVIEW PROCESS.The Commission, on application of a counterparty to a swap or on its own initiative, may stay the clearing requirement of paragraph (1) until the Commission completes a review of the terms of the swap (or the group, category, type, or class of swaps) and the clearing arrangement. (B) DEADLINE.The Commission shall complete a review undertaken pursuant to subparagraph (A) not later than 90 days after issuance of the stay, unless the derivatives clearing organization that clears the swap, or group, category, type or class of swaps, agrees to an extension of the time limitation established under this subparagraph. (C) DETERMINATION.Upon completion of the review undertaken pursuant to subparagraph (A), the Commission may (i) determine, unconditionally or subject to such terms and conditions as the Commission determines to be appropriate, that the swap, or group, category, type, or class of swaps, must be cleared pursuant to this subsection if it finds that such clearing is consistent with section 5b(c)(2); or (ii) determine that the clearing requirement of paragraph (1) shall not apply to the swap, or group, category, type, or class of swaps. (D) RULES.Not later than 180 days after the date of the enactment of the Overthe-Counter Derivatives Markets Act of 2009, the Commission shall adopt rules for reviewing, pursuant to this paragraph, a derivatives clearing organizations clearing of a swap, or a group, category, type, or class of swaps, that it has accepted for clearing. (4) SWAPS REQUIRED TO BE ACCEPTED FOR CLEARING. (A) RULEMAKING.Within 180 days of the date of enactment of the Over-theCounter Derivatives Markets Act of 2009, the Commission and the Securities and Exchange Commission shall jointly adopt rules to further identify swaps, or any group, category, type, or class of swaps, that should be accepted for clearing. In adopting such 11

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rules, the Commission and the Securities and Exchange Commission shall take into account the following factors: (i) The extent to which any of the terms of the swap, including price, are disseminated to third parties or are referenced in other agreements, contracts, or transactions. (ii) The volume of transactions in the swap. (iii) The extent to which the terms of the swap are similar to the terms of other agreements, contracts, or transactions that are centrally cleared. (iv) Whether any differences in the terms of the swap, compared to other agreements, contracts, or transactions that are centrally cleared, are of economic significance. (v) Whether a derivatives clearing organization is prepared to clear the swap and such derivatives clearing organization has in place effective risk management systems. (vi) Any other factors the Commission and the Securities and Exchange Commission determine to be appropriate. (B) OTHER DESIGNATIONS.The Commission may separately designate a particular swap or class of swaps as subject to the clearing requirement in paragraph (1), taking into account the factors described in clauses (i) through (vi) of subparagraph (A) and the joint rules adopted under such subparagraph. (5) PREVENTION OF EVASION.The Commission and the Securities and Exchange Commission shall have authority to prescribe rules under this subsection, or issue interpretations of such rules, as necessary to prevent evasions of this title provided that any such rules or interpretations shall be issued jointly to be effective. (6) REQUIRED REPORTING.Both counterparties to a swap that is not accepted for clearing by any derivatives clearing organization shall report such a swap either to a registered swap repository described in section 21 or, if there is no repository that would accept the swap, to the Commission pursuant to section 4r within such time period as the Commission may by rule or regulation prescribe. (7) TRANSITION RULES.Rules adopted by the Commission under this section shall provide for the reporting of data, as follows: (A) Swaps that were entered into before the date of enactment of the Over-theCounter Derivatives Markets Act of 2009 shall be reported to a registered swap repository or the Commission not later than 180 days after the effective date of the Over-the-Counter Derivatives Markets Act of 2009. (B) Swaps that were entered into on or after the date of enactment of the Over-theCounter Derivatives Markets Act of 2009 shall be reported to a registered swap repository or the Commission not later than the later of (i) 90 days after the effective date of the Over-the-Counter Derivatives Markets Act of 2009; or 12
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(ii) such other time after entering into the swap as the Commission may prescribe by rule or regulation. (8) TRADE EXECUTION. (A) IN GENERAL.With respect to transactions involving swaps subject to the clearing requirement of paragraph (1), counterparties shall (i) execute the transaction on a board of trade designated as a contract market under section 5; or (ii) execute the transaction on an alternative swap execution facility registered under section 5h. (B) EXCEPTION.The requirements of clauses (i) and (ii) of subparagraph (A) shall not apply if no board of trade or alternative swap execution facility makes the swap available to trade. (9) EXEMPTIONS. (A) IN GENERAL.The Commission by rule or order, as the Commission deems necessary or appropriate in the public interest, may conditionally or unconditionally exempt a swap from the requirements of paragraphs (1) and (8), and any rules issued under this subsection, if (i) no derivatives clearing organization registered under this Act will accept the swap for clearing; or (ii) 1 of the counterparties to the swap (I) is not a swap dealer or major swap participant; and (II) does not meet the eligibility requirements of any derivatives clearing organization that clears the swap. (B) PRIOR CONSULTATION WITH THE SECURITIES AND EXCHANGE COMMISSION AND BOARD FOR FINANCIAL STABILITY. (i) CONSULTATION.Before acting by rule or order to exempt a swap, or any group, category, type, or class of swaps from any requirement or rule under this section, the Commission shall consult with, and consider the views of, the Securities and Exchange Commission and the Board for Financial Stability concerning whether such exemption is necessary and appropriate for the reduction of systemic risk and in the public interest. (ii) PROHIBITION ON ISSUANCE.Not later than 45 days prior to issuing any exemption under this paragraph, the Commission shall send a notice to the Securities and Exchange Commission and the Board for Financial Stability describing such exemption. If either the Securities and Exchange Commission or the Board for Financial Stability issues a finding under clause (i) that such an exemption does not meet the standard described in clause (i), the Commission may not issue such exemption. (iii) DEADLINE.Any finding by the Securities and Exchange Commission or the Board for Financial Stability shall be made and provided in writing to the 13

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Commission not later than 45 days after the date of receipt of notice of a proposed exemption by the Commission. (iv) NONDELEGATION.Action by the Securities and Exchange Commission or the Board for Financial Stability under this subparagraph may not be delegated. (C) REQUESTED CLEARANCE.If any party to a swap that is exempt from the clearing requirements of paragraph (1) requests that such swap be cleared by a derivatives clearing organization, and a derivatives clearing organization registered under this Act will accept such swap for clearing, then (i) the exemption shall not apply; and (ii) the swap shall be cleared by such organization.. (b) Derivatives Clearing Organizations. (1) IN GENERAL.Subsections (a) and (b) of section 5b of the Commodity Exchange Act (7 U.S.C. 7a1) are amended to read as follows: (a) Registration Requirement.It shall be unlawful for a derivatives clearing organization, unless registered with the Commission, directly or indirectly to make use of the mails or any means or instrumentality of interstate commerce to perform the functions of a derivatives clearing organization described in section 1a(10) with respect to (1) a contract of sale of a commodity for future delivery (or option on such a contract) or option on a commodity, in each case unless the contract or option is (A) excluded from this Act by section 2(a)(1)(C)(i), 2(c), or 2(f); or (B) a security futures product cleared by a clearing agency registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.); or (2) a swap. (b) Voluntary Registration. (1) DERIVATIVES CLEARING ORGANIZATIONS.A person that clears agreements, contracts, or transactions that are not required to be cleared under this Act may register with the Commission as a derivatives clearing organization. (2) CLEARING AGENCIES.A derivatives clearing organization may clear security-based swaps that are required to be cleared by a person who is registered as a clearing agency under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.).. (2) REQUIRED REGISTRATION.Section 5b of the Commodity Exchange Act (7 U.S.C. 7a1) is amended by adding at the end the following: (g) Required Registration for Banks and Clearing Agencies.A person that is required to be registered as a derivatives clearing organization under this section shall register with the Commission regardless of whether the person is also a bank or a clearing agency registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.). (h) Harmonization of Rules.Not later than 180 days after the effective date of the Over-the14
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Counter Derivatives Markets Act of 2009, the Commission and the Securities and Exchange Commission shall jointly adopt uniform rules governing (1) persons that are registered as derivatives clearing organizations for swaps under this subsection; and (2) persons that are registered as clearing agencies for security-based swaps under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.). (i) Consultation.The Commission and the Securities and Exchange Commission shall consult with the appropriate Federal banking agencies prior to adopting rules under this section with respect to swaps. (j) Exemptions.The Commission may exempt, conditionally or unconditionally, a derivatives clearing organization from registration under this section for the clearing of swaps if the Commission finds that such derivatives clearing organization is subject to comparable, comprehensive supervision and regulation on a consolidated basis by the Securities and Exchange Commission, the Financial Institutions Regulatory Administration, or the appropriate governmental authorities in the organizations home country. (k) Designation of Compliance Officer. (1) IN GENERAL.Each derivatives clearing organization shall designate an individual to serve as a compliance officer. (2) DUTIES.The compliance officer shall perform the following duties: (A) Report directly to the board or to the senior officer of the derivatives clearing organization. (B) Review the compliance of the derivatives clearing organization with the core principles established in section 5b(c)(2). (C) Consult with the board of the derivatives clearing organization, a body performing a function similar to that of a board, or the senior officer of the derivatives clearing organization, to resolve any conflicts of interest that may arise. (D) Administering the policies and procedures of the derivatives clearing organization required to be established pursuant to this section; (E) Ensuring compliance with commodity laws and the rules and regulations issued thereunder, including rules prescribed by the Commission pursuant to this section. (F) Establishing procedures for remediation of noncompliance issues found during compliance office reviews, lookbacks, internal or external audit findings, self-reported errors, or through validated complaints. Procedures to be established under this subparagraph include procedures related to the handling, management response, remediation, retesting, and closing of noncompliance issues. (3) ANNUAL REPORTS REQUIRED. (A) IN GENERAL.The compliance officer shall annually prepare and sign a report on the compliance of the derivatives clearing organization with the commodity laws and the policies and procedures of the organization, including the code of ethics and conflict of interest policies of the organization, in accordance with rules prescribed by 15
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the Commission. (B) SUBMISSION.The compliance report required under subparagraph (A) shall accompany the financial reports of the derivatives clearing organization that are required to be furnished to the Commission pursuant to this section and shall include a certification that, under penalty of law, the report is accurate and complete.. (3) CORE PRINCIPALS.Section 5b(c)(2) of the Commodity Exchange Act (7 U.S.C. 7a 1(c)(2)) is amended to read as follows: (2) CORE PRINCIPLES FOR DERIVATIVES CLEARING ORGANIZATIONS. (A) COMPLIANCE. (i) IN GENERAL.To be registered and to maintain registration as a derivatives clearing organization, a derivatives clearing organization shall comply with the core principles established in this paragraph and any requirement that the Commission may impose by rule or regulation pursuant to section 8a(5). (ii) REASONABLE DISCRETION.Except where the Commission determines otherwise by rule or regulation, a derivatives clearing organization shall have reasonable discretion in establishing the manner in which it complies with the core principles established in this paragraph. (B) FINANCIAL RESOURCES. (i) IN GENERAL.Each derivatives clearing organization shall have adequate financial, operational, and managerial resources to discharge its responsibilities. (ii) MINIMUM RESOURCES.The financial resources of each derivatives clearing organization shall, at a minimum, exceed the total amount that would (I) enable the organization to meet its financial obligations to its members and participants notwithstanding a default by the member or participant creating the largest financial exposure for that in extreme but plausible market conditions; and (II) enable the organization to cover its operating costs for a period of 1 year, calculated on a rolling basis. (C) PARTICIPANT AND PRODUCT ELIGIBILITY. (i) STANDARDS.Each derivatives clearing organization shall establish (I) appropriate admission and continuing eligibility standards (including sufficient financial resources and operational capacity to meet obligations arising from participation in the derivatives clearing organization) for members of and participants in the organization; and (II) appropriate standards for determining eligibility of agreements, contracts, or transactions submitted to the organization for clearing. (ii) ONGOING VERIFICATION.Each derivatives clearing organization shall have procedures in place to verify that its participation and membership requirements are met on an ongoing basis. 16
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(iii) FAIR STANDARDS.Each derivatives clearing organizations participation and membership requirements shall be objective, publicly disclosed, and permit fair and open access. (iv) ACCEPTANCE OF CERTAIN SWAPS.The rules of each derivatives clearing organization shall provide for nondiscriminatory clearing of a swap executed on or through the rules of an unaffiliated designated contract market or an alternative swap execution facility. (D) RISK MANAGEMENT. (i) IN GENERAL.Each derivatives clearing organization shall have the ability to manage the risks associated with discharging the responsibilities of a derivatives clearing organization through the use of appropriate tools and procedures. (ii) CREDIT EXPOSURE.Each derivatives clearing organization shall measure its credit exposures to its members and participants at least once each business day and shall monitor such exposures throughout the business day. (iii) LIMITING EXPOSURE.Through margin requirements and other risk control mechanisms, a derivatives clearing organization shall limit its exposures to potential losses from defaults by its members and participants so that the operations of the organization would not be disrupted and nondefaulting members or participants would not be exposed to losses that such members or participants cannot anticipate or control. (iv) MARGIN REQUIREMENTS.The margin required by a derivatives clearing organization from its members and participants shall be sufficient to cover potential exposures in normal market conditions. (v) RISK-BASED MARGIN REQUIREMENTS.The models and parameters used by a derivatives clearing organization in setting the margin requirements under clause (iv) shall be risk-based and reviewed regularly. (E) SETTLEMENT PROCEDURES.Each derivatives clearing organization shall (i) complete money settlements on a timely basis, and not less than once each business day; (ii) employ money settlement arrangements that eliminate or strictly limit the exposure of the organization to settlement bank risks, such as credit and liquidity risks from the use of banks to effect money settlements; (iii) ensure money settlements are final when effected; (iv) maintain an accurate record of the flow of funds associated with each money settlement; (v) have the ability to comply with the terms and conditions of any permitted netting or offset arrangements with other clearing organizations; (vi) for physical settlements, establish rules that clearly state the obligations of the organization with respect to physical deliveries; and 17
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(vii) identify and manage the risks from the obligations described under clause (vi). (F) TREATMENT OF FUNDS. (i) SAFETY OF FUNDS.Each derivatives clearing organization shall have standards and procedures designed to protect and ensure the safety of member and participant funds and assets. (ii) HOLDING OF FUNDS.Each derivatives clearing organization shall hold member and participant funds and assets in a manner whereby risk of loss or of delay in the organizations access to the assets and funds is minimized. (iii) MINIMIZING RISKS.Assets and funds invested by a derivatives clearing organization shall be held in instruments with minimal credit, market, and liquidity risks. (G) DEFAULT RULES AND PROCEDURES. (i) INSOLVENCY ISSUES.Each derivatives clearing organization shall have rules and procedures designed to allow for the efficient, fair, and safe management of events when members or participants become insolvent or otherwise default on their obligations to the organization. (ii) DEFAULT PROCEDURES.The default procedures of each derivatives clearing organization shall be clearly stated, and shall ensure that the organization can take timely action to contain losses and liquidity pressures and to continue meeting its obligations. (iii) PUBLIC AVAILABILITY.The default procedures of each derivatives clearing organization shall be publicly available. (H) ENFORCEMENT.Each derivatives clearing organization shall (i) maintain adequate arrangements and resources for the effective (I) monitoring and enforcement of compliance with the rules of the organization; and (II) resolution of disputes; and (ii) have the authority and ability to discipline, limit, suspend, or terminate the activities of a member or participant for violations of the rules of the organization. (I) SYSTEM SAFEGUARDS.Each derivatives clearing organization shall (i) establish and maintain a program of risk analysis and oversight to identify and minimize sources of operational risk through the development of appropriate controls and procedures, and the development of automated systems, that are reliable, secure, and have adequate scalable capacity; (ii) establish and maintain emergency procedures, backup facilities, and a plan for disaster recovery that allows for the timely recovery and resumption of operations and the fulfillment of the responsibilities and obligations of the organization; and 18
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(iii) periodically conduct tests to verify that backup resources are sufficient to ensure (I) continued order processing; and (II) trade matching, price reporting, market surveillance, and maintenance of a comprehensive and accurate audit trail. (J) REPORTING.Each derivatives clearing organization shall provide to the Commission all information necessary for the Commission to conduct oversight of the organization. (K) RECORDKEEPING.Each derivatives clearing organization shall maintain for a period of 5 years records of all activities related to the business of the organization as a derivatives clearing organization in a form and manner acceptable to the Commission. (L) PUBLIC INFORMATION. (i) IN GENERAL.Each derivatives clearing organization shall provide market participants with sufficient information to identify and evaluate accurately the risks and costs associated with using the services of the organization. (ii) AVAILABILITY OF RULES.Each derivatives clearing organization shall make information concerning the rules and operating procedures governing the clearing and settlement systems (including default procedures) of the organization available to market participants. (iii) ADDITIONAL DISCLOSURES.Each derivatives clearing organization shall disclose publicly, and to the Commission, information concerning (I) the terms and conditions of contracts, agreements, and transactions cleared and settled by the organization; (II) clearing and other fees that the organization charges its members and participants; (III) the margin-setting methodology and the size and composition of the financial resource package of the organization; (IV) other information relevant to participation in the settlement and clearing activities of the organization; and (V) daily settlement prices, volume, and open interest for all contracts settled or cleared by the organization. (M) INFORMATION-SHARING.Each derivatives clearing organization shall (i) enter into and abide by the terms of all appropriate and applicable domestic and international information-sharing agreements; and (ii) use relevant information obtained from the agreements in carrying out the risk management program of the organization. (N) ANTITRUST CONSIDERATIONS.Unless appropriate to achieve the purposes of this chapter, a derivatives clearing organization shall avoid (i) adopting any rule or taking any action that results in any unreasonable 19

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restraint of trade; or (ii) imposing any material anticompetitive burden. (O) GOVERNANCE FITNESS STANDARDS. (i) TRANSPARENCY.Each derivatives clearing organization shall establish governance arrangements that are transparent in order to fulfill public interest requirements and to support the objectives of owners and participants. (ii) FITNESS STANDARDS.Each derivatives clearing organization shall establish and enforce appropriate fitness standards for directors, members of any disciplinary committee, and members of the organization, and any other persons with direct access to the settlement or clearing activities of the organization, including any parties affiliated with any of the persons described in this clause. (P) CONFLICTS OF INTEREST.Each derivatives clearing organization shall establish and enforce rules to minimize conflicts of interest in the decision-making process of the organization and establish a process for resolving such conflicts of interest. (Q) COMPOSITION OF THE BOARDS.Each derivatives clearing organization shall ensure that the composition of the governing board or committee includes market participants. (R) LEGAL RISK.Each derivatives clearing organization shall have a wellfounded, transparent, and enforceable legal framework for each aspect of its activities.. (4) REPORTING.Section 5b of the Commodity Exchange Act (7 U.S.C. 7a1) is further amended by adding after subsection (j), as added by this section, the following: (k) Reporting. (1) TRANSPARENCY. (A) IN GENERAL.A derivatives clearing organization that clears swaps shall provide to the Commission and any swap repository designated by the Commission all information determined by the Commission to be necessary to perform its responsibilities under this Act. (B) DATA COLLECTION REQUIREMENTS.The Commission shall adopt data collection and maintenance requirements for swaps cleared by derivatives clearing organizations that are comparable to the corresponding requirements for swaps accepted by swap repositories and swaps traded on alternative swap execution facilities. (C) SHARING OF INFORMATION.Subject to section 8, the Commission shall share such information, upon request, with the Board, the Securities and Exchange Commission, the appropriate Federal banking agencies, the Board for Financial Stability, and the Department of Justice or to other persons the Commission deems appropriate, including foreign financial supervisors (including foreign futures authorities), foreign central banks, and foreign ministries. 20
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(2) PUBLIC INFORMATION.A derivatives clearing organization that clears swaps shall provide to the Commission, or its designee, such information as is required by, and in a form and at a frequency to be determined by, the Commission, in order to comply with the public reporting requirements contained in section 8(j).. (5) TECHNICAL CHANGE.Section 8(e) of the Commodity Exchange Act (7 U.S.C. 12(e)) is amended in the last sentence (A) by inserting , central bank and ministries, after department each place that term appears; and (B) by striking futures authority. and inserting futures authority,. (c) Legal Certainty for Identified Banking Products. (1) REPEAL.Sections 402(d), 404, 407, 408(b), and 408(c)(2) of the Legal Certainty for Bank Products Act of 2000 (7 U.S.C. 27(d), 27b, 27e, 27f(b), and 27f(c)(2)) are repealed. (2) LEGAL CERTAINTY.Section 403 of the Legal Certainty for Bank Products Act of 2000 (7 U.S.C. 27a) is amended to read as follows:

SEC. 403. EXCLUSION OF IDENTIFIED BANKING PRODUCT.

(a) Exclusion.Except as provided in subsection (b), no provisions of the Commodity Exchange Act (7 U.S.C. 1 et seq.) shall apply to, and the Commodity Futures Trading Commission and the Securities and Exchange Commission shall not exercise regulatory authority under the Commodity Exchange Act with respect to, an identified banking product. (b) Exception.An appropriate Federal banking agency may except an identified banking product from the exclusion in subsection (a) if the agency determines, in consultation with the Commodity Futures Trading Commission and the Securities and Exchange Commission, that the product (1) would meet the definition of swap in section 1a(35) of the Commodity Exchange Act (7 U.S.C. 1a(35)) or security-based swap in section 1a(38) of the Commodity Exchange Act(7 U.S.C. 1a(38)); and (2) has become known to the trade as a swap or security-based swap, or otherwise has been structured as an identified banking product for the purpose of evading the provisions of the Commodity Exchange Act (7 U.S.C. 1 et seq.), the Securities Act of 1933 (15 U.S.C. 77a et seq.), or the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.)..

SEC. 714. PUBLIC REPORTING OF AGGREGATE SWAP DATA.

Section 8 of the Commodity Exchange Act (7 U.S.C. 12) is amended by adding at the end the following: (j) Public Reporting of Aggregate Swap Data. (1) IN GENERAL.The Commission, or a person designated by the Commission pursuant to paragraph (2), shall make available to the public, in a manner that does not disclose the 21
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business transactions and market positions of any person, aggregate data on swap trading volumes and positions from the sources set forth in paragraph (3). (2) DESIGNEE OF THE COMMISSION.The Commission may designate a derivatives clearing organization or a swap repository to carry out the public reporting described in paragraph (1). (3) SOURCES OF INFORMATION.The sources of the information to be publicly reported as described in paragraph (1) are (A) derivatives clearing organizations pursuant to section 5b(k)(2); (B) swap repositories pursuant to section 21(c)(3); and (C) reports received by the Commission pursuant to section 4r..

SEC. 715. SWAP REPOSITORIES.

The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by inserting after section 20 the following:

SEC. 21. SWAP REPOSITORIES.

(a) Registration Requirement. (1) IN GENERAL.A person may register as a swap repository by filing with the Commission an application in such form as the Commission, by rule, may prescribe, containing the rules of the swap repository and such other information and documentation as the Commission, by rule, may prescribe as necessary or appropriate in the public interest, for the protection of investors, or in the furtherance of the purposes of this section. (2) INSPECTION AND EXAMINATION.Registered swap repositories shall be subject to inspection and examination by any representative of the Commission. (b) Standard Setting. (1) DATA IDENTIFICATION.The Commission shall prescribe standards that specify the data elements for each swap that shall be collected and maintained by each registered swap repository. (2) DATA COLLECTION AND MAINTENANCE.The Commission shall prescribe data collection and data maintenance standards for swap repositories. (3) COMPARABILITY.The standards prescribed by the Commission under this subsection shall be comparable to the data standards imposed by the Commission on derivatives clearing organizations that clear swaps. (c) Duties.A swap repository shall (1) accept data prescribed by the Commission for each swap under subsection (b); (2) maintain such data in such form and manner and for such period as may be required by the Commission; (3) provide to the Commission, or its designee, such information as is required by, and in a form and at a frequency to be determined by, the Commission, in order to comply with 22
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the public reporting requirements contained in section 8(j); and (4) make available, on a confidential basis pursuant to section 8, all data obtained by the swap repository, including individual counterparty trade and position data, to the Commission, the appropriate Federal banking agencies, the Board for Financial Stability, the Securities and Exchange Commission, and the Department of Justice or to other persons the Commission deems appropriate, including foreign financial supervisors (including foreign futures authorities), foreign central banks, and foreign ministries. (d) Required Registration for Security-Based Swap Repositories.Any person that is required to be registered as a swap repository under this section shall register with the Commission regardless of whether that person also is registered with the Securities and Exchange Commission as a security-based swap repository. (e) Harmonization of Rules.Not later than 180 days after the effective date of the Over-theCounter Derivatives Markets Act of 2009, the Commission and the Securities and Exchange Commission shall jointly adopt uniform rules governing persons that are registered under this section and persons that are registered as security-based swap repositories under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.), including uniform rules that specify the data elements that shall be collected and maintained by each repository. (f) Exemptions.The Commission may exempt, conditionally or unconditionally, a swap repository from the requirements of this section if the Commission finds that such swap repository is subject to comparable, comprehensive supervision and regulation on a consolidated basis by the Securities and Exchange Commission, the Financial Institutions Regulatory Administration, or the appropriate governmental authorities in the organizations home country..

SEC. 716. REPORTING AND RECORDKEEPING.

The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by inserting after section 4q the following:

SEC. 4r. REPORTING AND RECORDKEEPING FOR CERTAIN SWAPS.

(a) In General.Any person who enters into a swap shall satisfy the reporting requirements of subsection (b), if such person (1) did not clear the swap in accordance with section 2(j)(1); and (2) did not have data regarding the swap accepted by a swap repository in accordance with rules (including timeframes) adopted by the Commission under section 21. (b) Reports.Any person described in subsection (a) shall (1) make such reports in such form and manner and for such period as the Commission shall prescribe by rule or regulation regarding the swaps held by the person; and (2) keep books and records pertaining to the swaps held by the person in such form and manner and for such period as may be required by the Commission, which books and records shall be open to inspection by any representative of the Commission, an appropriate 23
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Federal banking agency, the Securities and Exchange Commission, the Board for Financial Stability, and the Department of Justice. (c) Identical Data.In adopting rules under this section, the Commission shall require persons described in subsection (a) to report the same or a more comprehensive set of data than the Commission requires swap repositories to collect under section 21..

SEC. 717. REGISTRATION AND REGULATION OF SWAP DEALERS AND MAJOR SWAP PARTICIPANTS.
The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by inserting after section 4r (as added by section 716) the following:

SEC. 4s. REGISTRATION AND REGULATION OF SWAP DEALERS AND MAJOR SWAP PARTICIPANTS.
(a) Registration.It shall be unlawful for any person (1) to act as a swap dealer unless such person is registered as a swap dealer with the Commission; and (2) to act as a major swap participant unless such person shall have registered as a major swap participant with the Commission. (b) Requirements. (1) IN GENERAL.A person shall register as a swap dealer or major swap participant by filing a registration application with the Commission. (2) CONTENTS.The application required under paragraph (1) shall be made in such form and manner as prescribed by the Commission, giving any information and facts as the Commission may deem necessary concerning the business in which the applicant is or will be engaged. Such person, when registered as a swap dealer or major swap participant, shall continue to report and furnish to the Commission such information pertaining to such persons business as the Commission may require. (3) EXPIRATION.Each registration shall expire at such time as the Commission may by rule or regulation prescribe. (4) RULES.Except as provided in subsections (c), (d), and (e), the Commission may prescribe rules applicable to swap dealers and major swap participants, including rules that limit the activities of swap dealers and major swap participants. (5) TRANSITION.Rules adopted under this section shall provide for the registration of swap dealers and major swap participants not later than 1 year after the effective date of the Over-the-Counter Derivatives Markets Act of 2009. (6) STATUTORY DISQUALIFICATION.Except to the extent otherwise specifically provided by rule, regulation, or order, it shall be unlawful for a swap dealer or a major swap participant to permit any person associated with a swap dealer or a major swap participant who is subject to a statutory disqualification to effect or be involved in effecting swaps on behalf of such swap dealer or major swap participant, if such swap dealer or major swap 24
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participant knew, or in the exercise of reasonable care should have known, of such statutory disqualification. (c) Dual Registration. (1) SWAP DEALER.Any person that is required to be registered as a swap dealer under this section shall register with the Commission regardless of whether that person also is a bank or is registered with the Securities and Exchange Commission as a security-based swap dealer. (2) MAJOR SWAP PARTICIPANT.Any person that is required to be registered as a major swap participant under this section shall register with the Commission regardless of whether that person also is a bank or is registered with the Securities and Exchange Commission as a major security-based swap participant. (d) Joint Rules. (1) IN GENERAL.Not later than 180 days after the effective date of the Over-theCounter Derivatives Markets Act of 2009, the Commission and the Securities and Exchange Commission shall jointly adopt uniform rules for persons that are registered (A) as swap dealers or major swap participants under this section; and (B) as security-based swap dealers or major security-based swap participants under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.). (2) EXCEPTION FOR PRUDENTIAL REQUIREMENTS.The Commission and the Securities and Exchange Commission shall not prescribe rules imposing prudential requirements (including activity restrictions) on swap dealers, major swap participants, security-based swap dealers, or major security-based swap participants for which the Financial Institutions Regulatory Administration is the primary regulatory authority. This provision shall not be construed as limiting the authority of the Commission and the Securities and Exchange Commission to prescribe appropriate business conduct, reporting, and recordkeeping requirements to protect investors. (e) Capital and Margin Requirements. (1) IN GENERAL. (A) BANK SWAP DEALERS AND MAJOR SWAP PARTICIPANTS.Each registered swap dealer and major swap participant for which the Financial Institutions Regulatory Administration is the primary regulatory authority shall meet such minimum capital requirements and minimum initial and variation margin requirements as FIRA shall by rule or regulation prescribe to help ensure the safety and soundness of the swap dealer or major swap participant. (B) NONBANK SWAP DEALERS AND MAJOR SWAP PARTICIPANTS.Each registered swap dealer and major swap participant for which the Financial Institutions Regulatory Administration is not the primary regulatory authority shall meet such minimum capital requirements and minimum initial and variation margin requirements as the Commission and the Securities and Exchange Commission shall by rule or regulation jointly prescribe to help ensure the safety and soundness of the swap dealer or major swap participant. 25
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(2) JOINT RULES. (A) BANK SWAP DEALERS AND MAJOR SWAP PARTICIPANTS.Within 180 days of the date of the enactment of the Over-the-Counter Derivatives Markets Act of 2009, the Financial Institutions Regulatory Administration, in consultation with the Commission and the Securities and Exchange Commission, shall jointly adopt rules imposing capital and margin requirements under this subsection for swap dealers and major swap participants. (B) NONBANK SWAP DEALERS AND MAJOR SWAP PARTICIPANTS.Within 180 days of the date of the enactment of the Over-the-Counter Derivatives Markets Act of 2009, the Commission and the Securities and Exchange Commission, in consultation with the Financial Institutions Regulatory Administration, shall jointly adopt rules imposing capital and margin requirements under this subsection for swap dealers and major swap participants for which the FIRA is not the primary regulatory authority. (3) CAPITAL. (A) BANK SWAP DEALERS AND MAJOR SWAP PARTICIPANTS.In setting capital requirements under this subsection, the Financial Institutions Regulatory Administration shall impose (i) a capital requirement that is greater than zero for swaps that are cleared by a derivatives clearing organization; and (ii) to offset the greater risk to the swap dealer or major swap participant and to the financial system arising from the use of swaps that are not centrally cleared, higher capital requirements for swaps that are not cleared by a registered derivatives clearing organization than for swaps that are centrally cleared. (B) NONBANK SWAP DEALERS AND MAJOR SWAP PARTICIPANTS.Capital requirements set by the Commission and the Securities and Exchange Commission under this subsection shall be as strict as or stricter than the capital requirements set by the Financial Institutions Regulatory Administration under this subsection. (C) BANK HOLDING COMPANIES.Capital requirements set by the Financial Institutions Regulatory Administration for swaps of bank holding companies on a consolidated basis shall be as strict as or stricter than the capital requirements for bank swap dealers and major swap participants set by FIRA under this subsection. (4) MARGIN. (A) BANK SWAP DEALERS AND MAJOR SWAP PARTICIPANTS. (i) IN GENERAL.The Financial Institutions Regulatory Administration shall impose both initial and variation margin requirements under this subsection on all swaps that are not cleared by a registered derivatives clearing organization. (ii) EXEMPTION.The Financial Institutions Regulatory Administration by rule or order, as the FIRA deems necessary or appropriate in the public interest, may conditionally or unconditionally exempt from the requirements of this subsection and the rules issued under this subsection, any swap in which 1 of the counterparties is 26
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(I) not a swap dealer, major swap participant, security-based swap dealer, or a major security-based swap participant; (II) using the swap as part of an effective hedge under generally accepted accounting principles; and (III) predominantly engaged in activities that are not financial in nature, as defined in section 4(k) of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(k)). (iii) PRIOR CONSULTATION WITH BOARD FOR FINANCIAL STABILITY. (I) CONSULTATION.Before acting by rule or order to exempt a swap from any requirement or rule under this subsection, the Financial Institutions Regulatory Administration shall consult with, and consider the views of, the Board for Financial Stability concerning whether such exemption is necessary and appropriate for the reduction of systemic risk and in the public interest. (II) PROHIBITION ON ISSUANCE.Not later than 45 days prior to issuing any exemption under this subparagraph, the Financial Institutions Regulatory Administration shall send a notice to the Board for Financial Stability describing such exemption. If the Board for Financial Stability issues a finding under subclause (I) that such an exemption does not meet the standard described in subclause (I), the FIRA may not issue such exemption. (III) DEADLINE.Any finding by the Board for Financial Stability shall be made and provided in writing to the Financial Institutions Regulatory Administration not later than 45 days after the date of receipt of notice of a proposed exemption by the Financial Institutions Regulatory Administration. (IV) NONDELEGATION.Actions by the Board for Financial Stability under this clause may not be delegated. (B) NONBANK SWAP DEALERS AND MAJOR SWAP PARTICIPANTS.Margin requirements for swaps set by the Commission and the Securities and Exchange Commission under this subsection shall be as strict as or stricter than margin requirements for swaps set by the Financial Institutions Regulatory Administration. (5) MARGIN REQUIREMENTS.In prescribing margin requirements under this subsection, the Financial Institutions Regulatory Administration may permit the use of noncash collateral, as the FIRA determines to be consistent with (A) preserving the financial integrity of markets trading swaps; and (B) preventing systemic risk. (6) REQUESTED MARGIN.If any party to a swap that is exempt from the margin requirements of paragraph (4)(A)(i) pursuant to the provisions of paragraph (4)(A)(ii) requests that such swap be margined, then (A) the exemption shall not apply; and (B) the counterparty to such swap shall provide the requested margin. 27
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(f) Reporting and Recordkeeping. (1) IN GENERAL.Each registered swap dealer and major swap participant (A) shall make such reports as are prescribed by the Commission by rule or regulation regarding the transactions and positions and financial condition of such dealer or participant; (B) for which (i) the Financial Institutions Regulatory Administration is the primary regulatory authority shall keep books and records of all activities related to its business as a swap dealer or major swap participant in such form and manner and for such period as may be prescribed by the Commission by rule or regulation; and (ii) the Financial Institutions Regulatory Administration is not the primary regulatory authority shall keep books and records in such form and manner and for such period as may be prescribed by the Commission by rule or regulation; and (C) shall keep such books and records open to inspection and examination by any representative of the Commission. (2) RULES.Within 1 year of the date of the enactment of the Over-the-Counter Derivatives Markets Act of 2009, the Commission and the Securities and Exchange Commission, in consultation with the appropriate Federal banking agencies, shall jointly adopt rules governing reporting and recordkeeping for swap dealers, major swap participants, security-based swap dealers, and major security-based swap participants. (g) Daily Trading Records. (1) IN GENERAL.Each registered swap dealer and major swap participant shall, for such period as may be prescribed by the Commission by rule or regulation, maintain daily trading records of that dealers or participants (A) swaps and all related records (including related cash or forward transactions); and (B) recorded communications, including the electronic mail, instant messages, and recordings of telephone calls. (2) INFORMATION REQUIREMENTS.The daily trading records required to be maintained under paragraph (1) shall include such information as the Commission shall prescribe by rule or regulation. (3) CUSTOMER RECORDS.Each registered swap dealer and major swap participant shall maintain daily trading records for each customer or counterparty in such manner and form as to be identifiable with each swap transaction. (4) AUDIT TRAIL. (A) MAINTENANCE OF AUDIT TRAIL.Each registered swap dealer and major swap participant shall maintain a complete audit trail for conducting comprehensive and accurate trade reconstructions. 28
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(B) PERMISSIBLE COMPLIANCE BY ENTITY OTHER THAN DEALER OR PARTICIPANT. A registered swap repository may, at the request of a registered swap dealer or major swap participant, satisfy the requirement of subparagraph (A) on behalf of such registered swap dealer or major swap participant. (5) RULES.Within 1 year of the date of the enactment of the Over-the-Counter Derivatives Markets Act of 2009, the Commission and the Securities and Exchange Commission, in consultation with the appropriate Federal banking agencies, shall jointly adopt rules governing daily trading records for swap dealers, major swap participants, security-based swap dealers, and major security-based swap participants. (h) Business Conduct Standards. (1) IN GENERAL.Each registered swap dealer and major swap participant shall conform with such business conduct standards as may be prescribed by the Commission by rule or regulation, including any standards addressing (A) fraud, manipulation, and other abusive practices involving swaps (including swaps that are offered but not entered into); (B) diligent supervision of its business as a swap dealer; (C) adherence to all applicable position limits; and (D) such other matters as the Commission shall determine to be necessary or appropriate. (2) BUSINESS CONDUCT REQUIREMENTS.Business conduct requirements adopted by the Commission pursuant to paragraph (1) shall (A) establish the standard of care for a swap dealer or major swap participant to verify that any counterparty meets the eligibility standards for an eligible contract participant; (B) require disclosure by the swap dealer or major swap participant to any counterparty to the transaction (other than a swap dealer, major swap participant, security-based swap dealer, or major security-based swap participant) of (i) information about the material risks and characteristics of the swap; (ii) the source and amount of any fees or other material remuneration that the swap dealer or major swap participant would directly or indirectly expect to receive in connection with the swap; and (iii) any other material incentives or conflicts of interest that the swap dealer or major swap participant may have in connection with the swap; (C) establish a standard of conduct for a swap dealer or major swap participant to communicate in a fair and balanced manner based on principles of fair dealing and good faith; (D) establish a standard of conduct with respect to a counterparty that is an eligible contract participant within the meaning of subclause (I) or (II) of section 1a(13) of this Act, having a reasonable basis to believe that the counterparty has an independent representative that 29

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(i) has sufficient knowledge to evaluate the transaction and risks; (ii) is not subject to a statutory disqualification; (iii) is independent of the significant security-based derivatives market participant; (iv) undertakes a duty to act in the best interests of the counterparty it represents; (v) makes appropriate disclosures; and (vi) will provide written representations to the eligible contract participant regarding fair pricing and the appropriateness of the transaction; and (E) establish such other standards and requirements as the Commission may determine are necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of this title. (3) RULES.Not later than 1 year after the date of enactment of the Over-the-Counter Derivatives Markets Act of 2009, the Commission and the Securities and Exchange Commission, in consultation with the appropriate Federal banking agencies, shall jointly prescribe rules under this subsection governing business conduct standards for swap dealers, major swap participants, security-based swap dealers, and major security-based swap participants. (i) Documentation and Back Office Standards. (1) IN GENERAL.Each registered swap dealer and major swap participant shall conform with standards, as may be prescribed by the Commission by rule or regulation, addressing timely and accurate confirmation, processing, netting, documentation, and valuation of all swaps. (2) RULES.Not later than 1 year after the date of the enactment of the Over-theCounter Derivatives Markets Act of 2009, the Commission and the Securities and Exchange Commission, in consultation with the appropriate Federal banking agencies, shall adopt rules governing documentation and back office standards for swap dealers, major swap participants, security-based swap dealers, and major security-based swap participants. (j) Dealer Responsibilities.Each registered swap dealer and major swap participant shall, at all times, comply with the following requirements: (1) MONITORING OF TRADING.The swap dealer or major swap participant shall monitor its trading in swaps to prevent violations of applicable position limits. (2) DISCLOSURE OF GENERAL INFORMATION.The swap dealer or major swap participant shall disclose to the Commission and to the Financial Institutions Regulatory Administration information concerning (A) terms and conditions of its swaps; (B) swap trading operations, mechanisms, and practices; (C) financial integrity protections relating to swaps; and (D) other information relevant to its trading in swaps. 30
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(3) ABILITY TO OBTAIN INFORMATION.The swap dealer or major swap participant shall (A) establish and enforce internal systems and procedures to obtain any necessary information to perform any of the functions described in this section; and (B) provide the information to the Commission and to the Financial Institutions Regulatory Administration upon request. (4) CONFLICTS OF INTEREST.The swap dealer and major swap participant shall implement conflict of interest systems and procedures that (A) establish structural and institutional safeguards to assure that the activities of any person within the firm relating to research or analysis of the price or market for any commodity are separated by appropriate informational partitions within the firm from the review, pressure, or oversight of those whose involvement in trading or clearing activities might potentially bias their judgment or supervision; and (B) address such other issues as the Commission determines appropriate. (5) ANTITRUST CONSIDERATIONS.Unless necessary or appropriate to achieve the purposes of this Act, a swap dealer or major swap participant shall avoid (A) adopting any processes or taking any actions that result in any unreasonable restraints of trade; or (B) imposing any material anticompetitive burden on trading. (k) Rules.The Commission, the Securities and Exchange Commission, and the Financial Institutions Regulatory Administration shall consult with each other prior to adopting any rules under the Over-the-Counter Derivatives Markets Act of 2009..

SEC. 718. SEGREGATION OF ASSETS HELD AS COLLATERAL IN SWAP TRANSACTIONS.

The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by inserting after section 4s (as added by section 717) the following:

SEC. 4t. SEGREGATION OF ASSETS HELD AS COLLATERAL IN SWAP TRANSACTIONS.

(a) Cleared Swaps.A swap dealer, futures commission merchant, or derivatives clearing organization by or through which funds or other property are held as margin or collateral to secure the obligations of a counterparty under a swap to be cleared by or through a derivatives clearing organization shall segregate, maintain, and use the funds or other property for the benefit of the counterparty, in accordance with such rules and relations as the Commission or Financial Institutions Regulatory Administration shall prescribe. Any such funds or other property shall be treated as customer property under this Act. (b) Other Swaps.At the request of a swap counterparty who provides funds or other property to a swap dealer as margin or collateral to secure the obligations of the counterparty under a swap between the counterparty and the swap dealer that is not submitted for clearing to a 31
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derivatives clearing organization, the swap dealer shall segregate the funds or other property for the benefit of the counterparty, and maintain the funds or other property in an account which is carried by a third-party custodian and designated as a segregated account for the counterparty, in accordance with such rules and regulations as the Commission or Financial Institutions Regulatory Administration may prescribe. This subsection shall not be interpreted to preclude commercial arrangements regarding the investment of the segregated funds or other property and the related allocation of gains and losses resulting from any such investment..

SEC. 719. CONFLICTS OF INTEREST.

Section 4d of the Commodity Exchange Act (7 U.S.C. 6d) is amended by (1) redesignating subsection (c) as subsection (d); and (2) inserting after subsection (b) the following: (c) Conflicts of Interest.The Commission shall require that futures commission merchants and introducing brokers implement conflict of interest systems and procedures that (1) establish structural and institutional safeguards to assure that the activities of any person within the firm relating to research or analysis of the price or market for any commodity are separated by appropriate informational partitions within the firm from the review, pressure, or oversight of those whose involvement in trading or clearing activities might potentially bias their judgment or supervision; and (2) address such other issues as the Commission determines appropriate..

SEC. 720. ALTERNATIVE SWAP EXECUTION FACILITIES.

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

SEC. 5h. ALTERNATIVE SWAP EXECUTION FACILITIES.

(a) Registration. (1) IN GENERAL.No person may operate a facility for the trading of swaps unless the facility is registered as an alternative swap execution facility under this section. (2) DUAL REGISTRATION.Any person that is required to be registered as an alternative swap execution facility under this section shall register with the Commission regardless of whether that person also is registered with the Securities and Exchange Commission as an alternative swap execution facility. (b) Requirements for Trading.An alternative swap execution facility that is registered under subsection (a) may trade any swap. (c) Trading by Contract Markets.A board of trade that operates a contract market shall, to the extent that the board of trade also operates an alternative swap execution facility and uses the same electronic trade execution system for trading on the contract market and the alternative 32
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swap execution facility, identify whether the electronic trading is taking place on the contract market or the alternative swap execution facility. (d) Criteria for Registration. (1) IN GENERAL.To be registered as an alternative swap execution facility, the facility shall be required to demonstrate to the Commission that it meets the criteria established under this section. (2) DETERRENCE OF ABUSES.Each alternative swap execution facility shall establish and enforce trading and participation rules that will deter abuses and have the capacity to detect, investigate, and enforce those rules, including (A) means to obtain information necessary to perform the functions required under this section; or (B) means to (i) provide market participants with impartial access to the market; and (ii) capture information that may be used in establishing whether any violations of this section have occurred. (3) TRADING PROCEDURES.Each alternative swap execution facility shall establish and enforce rules or terms and conditions defining, or specifications detailing, trading procedures to be used in entering and executing orders traded on or through its facilities. (4) FINANCIAL INTEGRITY OF TRANSACTIONS.Each alternative swap execution facility shall establish and enforce rules and procedures for ensuring the financial integrity of swaps entered on or through its facilities, including the clearance and settlement of the swaps pursuant to section 2(j)(1). (e) Core Principles for Alternative Swap Execution Facilities. (1) COMPLIANCE. (A) IN GENERAL.To maintain its registration as an alternative swap execution facility, the facility shall comply with the core principles established in this subsection and any requirement that the Commission may impose by rule or regulation pursuant to section 8a(5). (B) REASONABLE DISCRETION.Except where the Commission determines otherwise by rule or regulation, the facility shall have reasonable discretion in establishing the manner in which it complies with the core principles established in this subsection. (2) COMPLIANCE WITH RULES.Each alternative swap execution facility shall monitor and enforce compliance with any of the rules of the facility, including the terms and conditions of the swaps traded on or through the facility and any limitations on access to the facility. (3) SWAPS NOT READILY SUSCEPTIBLE TO MANIPULATION.Each alternative swap execution facility shall permit trading only in swaps that are not readily susceptible to manipulation. (4) MONITORING OF TRADING.Each alternative swap execution facility shall monitor 33
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trading in swaps to prevent manipulation, price distortion, and disruptions of the delivery or cash settlement process through surveillance, compliance, and disciplinary practices and procedures, including methods for conducting real-time monitoring of trading and comprehensive and accurate trade reconstructions. (5) ABILITY TO OBTAIN INFORMATION.Each alternative swap execution facility shall (A) establish and enforce rules that will allow the facility to obtain any necessary information to perform any of the functions described in this subsection; (B) provide the information to the Commission upon request; and (C) have the capacity to carry out such international information-sharing agreements as the Commission may require. (6) POSITION LIMITS OR ACCOUNTABILITY. (A) IN GENERAL.To reduce the potential threat of market manipulation or congestion, especially during trading in the delivery month, and to eliminate or prevent excessive speculation as described in section 4a(a), an alternative swap execution facility shall adopt for each of its contracts, where necessary and appropriate, position limitations or position accountability for speculators. (B) FOR CERTAIN CONTRACTS.For any contract that is subject to a position limitation established by the Commission pursuant to section 4a(a), an alternative swap execution facility shall set its position limitation at a level no higher than the Commission limitation. (7) EMERGENCY AUTHORITY.Each alternative swap execution facility shall adopt rules to provide for the exercise of emergency authority, in consultation or cooperation with the Commission, where necessary and appropriate, including the authority (A) to liquidate or transfer open positions in any swap; or (B) to suspend or curtail trading in a swap. (8) TIMELY PUBLICATION OF TRADING INFORMATION.Each alternative swap execution facility shall make public timely information on price, trading volume, and other trading data on swaps to the extent prescribed by the Commission. (9) RECORDKEEPING AND REPORTING. (A) IN GENERAL.Each alternative swap execution facility shall (i) maintain records of all activities related to the business of the facility, including a complete audit trail, in a form and manner acceptable to the Commission for a period of 5 years; and (ii) report to the Commission all information determined by the Commission to be necessary or appropriate for the Commission to perform its responsibilities under this Act in a form and manner acceptable to the Commission. (B) DATA COLLECTION REQUIREMENTS.The Commission shall adopt data collection and reporting requirements for alternative swap execution facilities that are comparable to corresponding requirements for derivatives clearing organizations and swap repositories. 34
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(10) ANTITRUST CONSIDERATIONS.Unless necessary or appropriate to achieve the purposes of this Act, an alternative swap execution facility shall avoid (A) adopting any rules or taking any actions that result in any unreasonable restraints of trade; or (B) imposing any material anticompetitive burden on trading on the swap execution facility. (11) CONFLICTS OF INTEREST.Each alternative swap execution facility shall (A) establish and enforce rules to minimize conflicts of interest in its decisionmaking process; and (B) establish a process for resolving any conflicts of interest. (12) DESIGNATION OF COMPLIANCE OFFICER. (A) IN GENERAL.Each alternative swap execution facility shall designate an individual to serve as a compliance officer. (B) DUTIES.The compliance officer shall perform the following duties: (i) Report directly to the board or to the senior officer of the facility. (ii) Review the compliance of the facility with the core principles established in this subsection. (iii) Consult with the board of the facility, a body performing a function similar to that of a board, or the senior officer of the facility, to resolve any conflicts of interest that may arise. (iv) Administering the policies and procedures of the facility required to be established pursuant to this section. (v) Ensuring compliance with commodity laws and the rules and regulations issued thereunder, including any rules prescribed by the Commission pursuant to this section. (vi) Establishing procedures for remediation of noncompliance issues found during compliance office reviews, lookbacks, internal or external audit findings, self-reported errors, or through validated complaints. Procedures to be established under this paragraph include procedures related to the handling, management response, remediation, retesting, and closing of noncompliance issues. (C) ANNUAL REPORTS REQUIRED. (i) IN GENERAL.The compliance officer shall annually prepare and sign a report on the compliance of the alternative swap execution facility with the commodity laws and the policies and procedures of the facility, including the code of ethics and conflict of interest policies of the facility, in accordance with rules prescribed by the Commission. (ii) SUBMISSION.The compliance report required under clause (i) shall accompany the financial reports of the alternative swap execution facility that are required to be furnished to the Commission pursuant to this section and shall 35
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include a certification that, under penalty of law, the report is accurate and complete. (f) Exemptions.The Commission may exempt, conditionally or unconditionally, an alternative swap execution facility from registration under this section if the Commission finds that such facility is subject to comparable, comprehensive supervision and regulation on a consolidated basis by the Securities and Exchange Commission, the Financial Institutions Regulatory Administration, or the appropriate governmental authorities in the organizations home country. (g) Harmonization of Rules.Within 180 days of the date of the enactment of the Over-theCounter Derivatives Markets Act of 2009, the Commission and the Securities and Exchange Commission shall jointly prescribe rules governing the regulation of alternative swap execution facilities under this section and section 3C of the Securities Exchange Act of 1934..

SEC. 721. DERIVATIVES TRANSACTION EXECUTION FACILITIES AND EXEMPT BOARDS OF TRADE.
Sections 5a and 5d of the Commodity Exchange Act (7 U.S.C. 7a and 7a-3) are repealed.

SEC. 722. DESIGNATED CONTRACT MARKETS.

(a) Execution of Transactions.Section 5(d) of the Commodity Exchange Act (7 U.S.C. 7(d)) is amended by amending paragraph (9) to read as follows: (9) EXECUTION OF TRANSACTIONS. (A) OPEN MARKET.The board of trade shall provide a competitive, open, and efficient market and mechanism for executing transactions that protects the price discovery process of trading in the board of trades centralized market. (B) PERMISSIBLE TRANSACTIONS.The rules may authorize, for bona fide business purposes (i) transfer trades or office trades; (ii) an exchange of (I) futures in connection with a cash commodity transaction; (II) futures for cash commodities; or (III) futures for swaps; or (iii) a futures commission merchant, acting as principal or agent, to enter into or confirm the execution of a contract for the purchase or sale of a commodity for future delivery if the contract is reported, recorded, or cleared in accordance with the rules of the contract market or a derivatives clearing organization.. (b) Additional Principles.Section 5(d) of the Commodity Exchange Act (7 U.S.C. 7(d)) is amended by adding at the end the following: (19) FINANCIAL RESOURCES.The board of trade shall demonstrate that it has adequate financial, operational, and managerial resources to discharge the responsibilities of a contract market. For the board of trades financial resources to be considered adequate, their 36
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value shall exceed the total amount that would enable the contract market to cover its operating costs for a period of 1 year, calculated on a rolling basis. (20) SYSTEM SAFEGUARDS.The board of trade shall (A) establish and maintain a program of risk analysis and oversight to identify and minimize sources of operational risk through the development of appropriate controls and procedures, and the development of automated systems, that are reliable, secure, and give adequate scalable capacity; (B) establish and maintain emergency procedures, backup facilities, and a plan for disaster recovery that allow for the timely recovery and resumption of operations and the fulfillment of the board of trades responsibilities and obligations; and (C) periodically conduct tests to verify that back-up resources are sufficient to ensure continued order processing and trade matching, price reporting, market surveillance, and maintenance of a comprehensive and accurate audit trail..

SEC. 723. MARGIN.

Section 8a of the Commodity Exchange Act (7 U.S.C. 12a) is amended in paragraph (7)(C), by striking , excepting the setting of levels of margin.

SEC. 724. POSITION LIMITS.

(a) Excessive Speculation.Section 4a(a) of the Commodity Exchange Act (7 U.S.C. 6a(a)) is amended (1) by inserting (1) after (a); (2) in the first sentence, by striking on electronic trading facilities with respect to a significant price discovery contract and inserting swaps that perform or affect a significant price discovery function with respect to regulated markets; (3) in the second sentence, by (A) inserting , including any group or class of traders, after held by any person; and (B) striking on an electronic trading facility with respect to a significant price discovery contract, and inserting swaps that perform or affect a significant price discovery function with respect to regulated markets,; and (4) inserting at the end the following: (2) AGGREGATE POSITION LIMITS.The Commission may, 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) 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 37
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order matching system; and (C) swap contracts that perform or affect a significant price discovery function with respect to regulated markets. (3) SIGNIFICANT PRICE DISCOVERY FUNCTION.In making a determination under paragraph (2) whether a swap performs or affects a significant price discovery function with respect to regulated markets, the Commission shall consider, as appropriate the following: (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. (4) 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, or any transaction or class of transactions from any requirement the Commission may establish under this section with respect to position limits.. (b) Tracking Position Limits.Section 4a(b) of the Commodity Exchange Act (7 U.S.C. 6a(b)) is amended (1) in paragraph (1), by striking or derivatives transaction execution facility or facilities or electronic trading facility and inserting or alternative swap execution facility or facilities; and (2) in paragraph (2), by striking or derivatives transaction execution facility or facilities or electronic trading facility and inserting or alternative swap execution facility.

SEC. 725. ENHANCED AUTHORITY OVER REGISTERED ENTITIES.

(a) Section 5(d)(1) of the Commodity Exchange Act (7 U.S.C. 7(d)(1)) is amended by striking 38
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The board of trade shall have and inserting Except where the Commission otherwise determines by rule or regulation pursuant to section 8a(5), the board of trade shall have. (b) Section 5b(c)(2)(A) of the Commodity Exchange Act (7 U.S.C. 7a1(c)(2)(A)) is amended by striking The applicant shall have and inserting Except where the Commission otherwise determines by rule or regulation pursuant to section 8a(5), the applicant shall have. (c) Section 5c(a) of the Commodity Exchange Act (7 U.S.C. 7a2(a)) is amended (1) in paragraph (1), by striking 5a(d) and 5b(c)(2) and inserting 5b(c)(2) and 5h(e); and (2) in paragraph (2), by striking shall not and inserting may. (d) Section 5c(c)(1) of the Commodity Exchange Act (7 U.S.C. 7a2(c)(1)) is amended (1) by striking (1) IN GENERAL.Subject to and inserting the following: (1) IN GENERAL. (A) Subject to; and (2) by adding at the end the following: (B) Unless section 805(e) of the Payment, Clearing, and Settlement Supervision Act of 2009 applies, the new contract or instrument or clearing of the new contract or instrument, new rule, or rule amendment shall become effective, pursuant to the registered entitys certification, 10 business days after the Commissions receipt of the certification (or such shorter period as may be determined by the Commission by rule or regulation) unless the Commission notifies the registered entity within such time that the Commission is staying the certification because there exist novel or complex issues that require additional time to analyze, an inadequate explanation by the submitting registered entity, or a potential inconsistency with this Act (including regulations under this Act). (C) A notification by the Commission pursuant to subparagraph (B) shall stay the certification of the new contract or instrument or clearing of the new contract or instrument, new rule or new amendment for up to an additional 90 days from the date of such notification.. (e) Section 5c(d) of the Commodity Exchange Act (7 U.S.C. 7a2(d)) is repealed.

SEC. 726. FOREIGN BOARDS OF TRADE.

(a) Technical Amendment.Section 4(b) of the Commodity Exchange Act (7 U.S.C. 6(b)) is amended in the third sentence by striking No rule or regulation and inserting Except as provided in paragraphs (1) and (2), no rule or regulation. (b) Registration.Section 4(b) of the Commodity Exchange Act (7 U.S.C. 6(b)) is further amended by inserting before The Commission the following: (1) REGISTRATION.The Commission may adopt rules and regulations requiring registration with the Commission for a foreign board of trade that provides the members of the foreign board of trade or other participants located in the United States direct access to the electronic trading and order matching system of the foreign board of trade, including 39
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rules and regulations prescribing procedures and requirements applicable to the registration of such foreign boards of trade. For purposes of this paragraph, direct access refers to an explicit grant of authority by a foreign board of trade to an identified member or other participant located in the United States to enter trades directly into the trade matching system of the foreign board of trade. (2) LINKED CONTRACTS.It shall be unlawful for a foreign board of trade to provide to the members of the foreign board of trade or other participants located in the United States direct access to the electronic trading and order-matching system of the foreign board of trade 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, unless the Commission determines that (A) the foreign board of trade makes public daily trading information regarding the agreement, contract, or transaction that is comparable to the daily trading information published by the registered entity for the 1 or more contracts against which the agreement, contract, or transaction traded on the foreign board of trade settles; and (B) the foreign board of trade (or the foreign futures authority that oversees the foreign board of trade) (i) adopts position limits (including related hedge exemption provisions) for the agreement, contract, or transaction that are comparable to the position limits (including related hedge exemption provisions) adopted by the registered entity for the 1 or more contracts against which the agreement, contract, or transaction traded on the foreign board of trade settles; (ii) has the authority to require or direct market participants to limit, reduce, or liquidate any position the foreign board of trade (or the foreign futures authority that oversees the foreign board of trade) determines to be necessary to prevent or reduce the threat of price manipulation, excessive speculation as described in section 4a, price distortion, or disruption of delivery or the cash settlement process; (iii) agrees to promptly notify the Commission, with regard to the 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, of any change regarding (I) the information that the foreign board of trade will make publicly available; (II) the position limits that the foreign board of trade or foreign futures authority will adopt and enforce; (III) the position reductions required to prevent manipulation, excessive speculation as described in section 4a, price distortion, or disruption of delivery or the cash settlement process; and (IV) any other area of interest expressed by the Commission to the foreign board of trade or foreign futures authority; (iv) provides information to the Commission regarding large trader positions 40
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in the agreement, contract, or transaction that is comparable to the large trader position information collected by the Commission for the 1 or more contracts against which the agreement, contract, or transaction traded on the foreign board of trade settles; and (v) provides the Commission with information necessary to publish reports on aggregate trader positions for the agreement, contract, or transaction traded on the foreign board of trade that are comparable to such reports on aggregate trader positions for the 1 or more contracts against which the agreement, contract, or transaction traded on the foreign board of trade settles. (3) EXISTING FOREIGN BOARDS OF TRADE.Paragraphs (1) and (2) shall not be effective with respect to any foreign board of trade to which the Commission has granted direct access permission before the date of the enactment of this subsection until the date that is 180 days after such date of enactment. (4) PERSONS LOCATED IN THE UNITED STATES.. (c) Liability of Registered Persons Trading on a Foreign Board of Trade. (1) Section 4(a) of the Commodity Exchange Act (7 U.S.C. 6(a)) is amended by inserting or by subsection (f) after Unless exempted by the Commission pursuant to subsection (c). (2) Section 4 of the Commodity Exchange Act (7 U.S.C. 6) is further amended by adding at the end the following: (f) Additional Exemption.A person registered with the Commission, or exempt from registration by the Commission, under this Act may not be found to have violated subsection (a) with respect to a transaction in, or in connection with, a contract of sale of a commodity for future delivery if the person has reason to believe that the transaction and the contract is made on or subject to the rules of a foreign board of trade that has complied with paragraphs (1) and (2) of subsection (b).. (d) Contract Enforcement for Foreign Futures Contracts.Section 22(a) of the Commodity Exchange Act (7 U.S.C. 25(a)) is amended by adding at the end the following: (5) CONTRACT ENFORCEMENT FOR FOREIGN FUTURES CONTRACTS.A contract of sale of a commodity for future delivery traded or executed on or through the facilities of a board of trade, exchange, or market located outside the United States for purposes of section 4(a) shall not be void, voidable, or unenforceable, and a party to such a contract shall not be entitled to rescind or recover any payment made with respect to the contract, based on the failure of the foreign board of trade to comply with any provision of this Act..

SEC. 727. LEGAL CERTAINTY FOR SWAPS.

Section 22(a)(4) of the Commodity Exchange Act (7 U.S.C. 25(a)(4)) is amended to read as follows: (4) CONTRACT ENFORCEMENT BETWEEN ELIGIBLE COUNTERPARTIES. (A) HYBRIDS.No hybrid instrument sold to any investor shall be void, voidable, or unenforceable, and no party to such hybrid instrument shall be entitled to rescind, or 41
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recover any payment made with respect to, such a hybrid instrument under this section or any other provision of Federal or State law, based solely on the failure of the hybrid instrument to comply with the terms or conditions of section 2(f) or regulations of the Commission. (B) AGREEMENTS BETWEEN CONTRACT PARTICIPANTS.No agreement, contract, or transaction between eligible contract participants or persons reasonably believed to be eligible contract participants shall be void, voidable, or unenforceable, and no party thereto shall be entitled to rescind, or recover any payment made with respect to, such agreement, contract, or transaction under this section or any other provision of Federal or State law, based solely on the failure of the agreement, contract, or transaction to meet the definition of a swap set forth in section 1a or to be cleared pursuant to section 2(j)(1)..

SEC. 728. MULTILATERAL CLEARING ORGANIZATIONS.

(a) Section 408(2)(C) of the Federal Deposit Insurance Corporation Improvement Act of 1991 (12 U.S.C. 4421(2)(C)) is amended by striking section 2(c), 2(d), 2(f), or 2(g) of such Act, or exempted under section 2(h) or 4(c) of such Act and inserting section 2(c) or 2(f) of such Act. (b) Section 408 of the Federal Deposit Insurance Corporation Improvement Act of 1991 (12 U.S.C. 4421) is further amended by inserting at the end the following: (4) The term over-the-counter derivative instrument does not include a swap or a security-based swap, those terms are as defined in sections 1a(35) and 1a(38) of the Commodity Exchange Act (7 U.S.C. 1a(35) and 1a(38))..

SEC. 729. PRIMARY ENFORCEMENT AUTHORITY.

The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by adding the following new section after section 4b:

SEC. 4b1. PRIMARY ENFORCEMENT AUTHORITY.

(a) Commodities Futures Trading Commission.Except as provided in subsections (b), (c), and (d), the Commission shall have primary authority to enforce the provisions of subtitle A of the Over-the-Counter Derivatives Markets Act of 2009 with respect to any person. (b) FIRA.The Financial Institutions Regulatory Administration shall have exclusive authority to enforce the provisions of section 4s(e) and other prudential requirements of this Act with respect to banks, and branches or agencies of foreign banks that are swap dealers or major swap participants. (c) Referral.If the Financial Institutions Regulatory Administration has cause to believe that a swap dealer or major swap participant for which FIRA is the primary regulatory authority may have engaged in conduct that constitutes a violation of the nonprudential requirements of section 4s or rules adopted by the Commission thereunder, the Financial Institutions Regulatory Administration may recommend in writing to the Commission that the Commission initiate an enforcement proceeding as authorized under this Act. The recommendation shall be accompanied by a written explanation of the concerns giving rise to the recommendation. 42
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(d) Backstop Enforcement Authority.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 recommendation under subsection (c), the Financial Institutions Regulatory Administration may initiate an enforcement proceeding as permitted under Federal law..

SEC. 730. ENFORCEMENT.

(a) Section 4b(a)(2) of the Commodity Exchange Act (7 U.S.C. 6b(a)(2)) is amended by striking or other agreement, contract, or transaction subject to paragraphs (1) and (2) of section 5a(g), and inserting or swap,. (b) Section 4b(b) of the Commodity Exchange Act (7 U.S.C. 6b(b)) is amended by striking or other agreement, contract or transaction subject to paragraphs (1) and (2) of section 5a(g), and inserting or swap,. (c) Section 4c(a) of the Commodity Exchange Act (7 U.S.C. 6c(a)) is amended by inserting or swap before if the transaction is used or may be used. (d) Section 9(a)(2) of the Commodity Exchange Act (7 U.S.C. 13(a)(2)) is amended by inserting or of any swap, before or to corner. (e) Section 9(a)(4) of the Commodity Exchange Act (7 U.S.C. 13(a)(4)) is amended by inserting swap repository, before or futures association. (f) Section 9(e)(1) of the Commodity Exchange Act (7 U.S.C. 13(e)(1)) is amended (1) by inserting swap repository, before or registered futures association; and (2) by inserting , or swaps, before on the basis. (g) Section 8(b) of the Federal Deposit Insurance Act (12 U.S.C. 1818(b)) is amended (1) by redesignating paragraphs (6), (7), (8), (9), and (10) as paragraphs (7), (8), (9), (10), and (11), respectively; and (2) by inserting after paragraph (5), the following: (6) This section shall apply to any swap dealer, major swap participant, security-based swap dealer, major security-based swap participant, derivatives clearing organization, swap repository, or alternative swap execution facility, whether or not it is an insured depository institution, for which the Financial Institutions Regulatory Administration is the primary regulatory authority for purposes of the Over-the-Counter Derivatives Markets Act of 2009..

SEC. 731. RETAIL COMMODITY TRANSACTIONS.

Section 2(c) of the Commodity Exchange Act (7 U.S.C. 2(c)) is amended (1) in paragraph (1), by striking (to the extent provided in section 5a(g), 5b, 5d, or 12(e)(2)(B)) and inserting 5b, or 12(e)(2)(B)); and (2) in paragraph (2), by adding at the end the following: (D) RETAIL COMMODITY TRANSACTIONS. (i) This subparagraph shall apply to any agreement, contract, or transaction in 43
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any commodity that is (I) entered into with, or offered to (even if not entered into with), a person that is not an eligible contract participant or eligible commercial entity; and (II) entered into, or offered (even if not 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) Clause (i) shall not apply to (I) an agreement, contract, or transaction described in paragraph (1) or subparagraphs (A), (B), or (C), including any agreement, contract, or transaction specifically excluded from subparagraph (A), (B), or (C); (II) any security; (III) a contract of sale that (aa) results in actual delivery within 28 days or such other period as the Commission may determine by rule or regulation based upon the typical commercial practice in cash or spot markets for the commodity involved; or (bb) creates an enforceable obligation to deliver between a seller and a buyer that have the ability to deliver and accept delivery, respectively, in connection with their line of business; (IV) an agreement, contract, or transaction that is listed on a national securities exchange registered under section 6(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78f(a)); or (V) an identified banking product, as defined in section 402(b) of the Legal Certainty for Bank Products Act of 2000 (7 U.S.C. 27(b)). (iii) Sections 4(a), 4(b), and 4b shall apply to any agreement, contract or transaction described in clause (i), that is not excluded from clause (i) by clause (ii), as if the agreement, contract, or transaction were a contract of sale of a commodity for future delivery. (iv) This subparagraph shall not be construed to limit any jurisdiction that the Commission may otherwise have under any other provision of this Act over an agreement, contract, or transaction that is a contract of sale of a commodity for future delivery. (v) 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 provisions of this Act with respect to security futures products and persons effecting transactions in security futures products. (vi) For the purposes of this subparagraph, an agricultural producer, packer, or handler shall be considered an eligible commercial entity for any agreement, contract, or transaction for a commodity in connection with its line of business.. 44
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SEC. 732. LARGE SWAP TRADER REPORTING.

The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by adding after section 4t (as added by section 718) the following:

SEC. 4u. LARGE SWAP TRADER REPORTING.

(a) Prohibition.It shall be unlawful for any person to enter into any swap that performs or affects a significant price discovery function with respect to regulated markets if (1) such person shall directly or indirectly enter into such swaps during any 1 day in an amount equal to or in excess of such amount as shall be fixed from time to time by the Commission; and (2) such person shall directly or indirectly have or obtain a position in such swaps equal to or in excess of such amount as shall be fixed from time to time by the Commission, unless (A) such person files or causes to be filed with the properly designated officer of the Commission such reports regarding any transactions or positions described in paragraph (1) and this paragraph as the Commission may by rule or regulation require; and (B) in accordance with the rules and regulations of the Commission, such person shall keep books and records of (i) all such swaps and any transactions and positions in any related commodity traded on or subject to the rules of any board of trade; and (ii) cash or spot transactions in, inventories of, and purchase and sale commitments of, such a commodity. (b) Recordkeeping.Any books and records required to be kept under subsection (a) shall (1) show complete details concerning all transactions and positions as the Commission may by rule or regulation prescribe; and (2) be open at all times to inspection and examination by any representative of the Commission. (c) Rule of Construction.For the purpose of this section, the swaps, futures, and cash or spot transactions and positions of any person shall include such transactions and positions of any persons directly or indirectly controlled by such person. (d) Considerations.In making a determination under this section whether a swap performs or affects a significant price discovery function with respect to regulated markets, the Commission shall consider the factors set forth in section 4a(a)(3)..

SEC. 733. OTHER AUTHORITY.

Unless otherwise provided by its terms, this subtitle does not divest any appropriate Federal banking agency, the Commission, the Securities and Exchange Commission, or other Federal or State agency, of any authority derived from any other applicable law. 45
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SEC. 734. ANTITRUST.

Nothing in the amendments made by this subtitle shall be construed to modify, impair, or supersede the operation of any of the antitrust laws. For purposes of this subtitle, the term antitrust laws has the same meaning given such term in subsection (a) of the first section of the Clayton Act, except that such term includes section 5 of the Federal Trade Commission Act to the extent that such section 5 applies to unfair methods of competition.

Subtitle BRegulation of Security-Based Swap Markets SEC. 751. DEFINITIONS UNDER THE SECURITIES EXCHANGE ACT OF 1934.
Section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)) is amended (1) in subparagraphs (A) and (B) of paragraph (5), by inserting (but not security-based swaps, other than security-based swaps with or for persons that are not eligible contract participants) after securities each place that term appears; (2) in paragraph (10), by inserting security-based swap, after security future,; (3) in paragraph (13), by adding at the end the following: For security-based swaps, such terms include the execution, termination (prior to its scheduled maturity date), assignment, exchange, or similar transfer or conveyance of, or extinguishing of rights or obligations under, a security-based swap, as the context may require.; (4) in paragraph (14), by adding at the end the following: For security-based swaps, such terms include the execution, termination (prior to its scheduled maturity date), assignment, exchange, or similar transfer or conveyance of, or extinguishing of rights or obligations under, a security-based swap, as the context may require.; (5) in paragraph (39) (A) by striking or government securities dealer and inserting government securities dealer, security-based swap dealer, or major security-based swap participant each place that term appears; and (B) in subparagraph (B)(i)(II), by inserting security-based swap dealer, major security-based swap participant, after government securities dealer,; and (6) by adding at the end the following: (65) ELIGIBLE CONTRACT PARTICIPANT.The term eligible contract participant has the same meaning as in section 1a(13) of the Commodity Exchange Act (7 U.S.C. 1a(13)). (66) MAJOR SWAP PARTICIPANT.The term major swap participant has the same meaning as in section 1a(40) of the Commodity Exchange Act (7 U.S.C. 1a(40)). (67) MAJOR SECURITY-BASED SWAP PARTICIPANT.The term major security-based swap participant has the same meaning as in section 1a(41) of the Commodity Exchange Act (7 U.S.C. 1a(41)). (68) SECURITY-BASED SWAP.The term security-based swap has the same meaning as in section 1a(38) of the Commodity Exchange Act (7 U.S.C. 1a(38)). 46
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(69) SWAP.The term swap has the same meaning as in section 1a(35) of the Commodity Exchange Act (7 U.S.C. 1a(35)). (70) PERSON ASSOCIATED WITH A SECURITY-BASED SWAP DEALER OR MAJOR SECURITYBASED SWAP PARTICIPANT.The term person associated with a security-based swap dealer or major security-based swap participant or associated person of a security-based swap dealer or major security-based swap participant has the same meaning as in section 1a(48) of the Commodity Exchange Act (7 U.S.C. 1a(48)). (71) SECURITY-BASED SWAP DEALER.The term security-based swap dealer has the same meaning as in section 1a(44) of the Commodity Exchange Act (7 U.S.C. 1a(44)). (72) APPROPRIATE FEDERAL BANKING AGENCY.The term appropriate Federal banking agency has the same meaning as in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813). (73) BOARD.The term Board means the Board of Governors of the Federal Reserve System. (74) FIRA.The term FIRA has the same meaning as in section 1a(43) of the Commodity Exchange Act (7 U.S.C. 1a(43)). (75) SWAP DEALER.The term swap dealer has the same meaning as in section 1a(39) of the Commodity Exchange Act (7 U.S.C. 1a(39)). (76) SECURITY-BASED SWAP AGREEMENT. (A) IN GENERAL.For purposes of sections 10, 16, 20, and 21A of this Act, and section 17 of the Securities Act of 1933, the term security-based swap agreement means a swap agreement as defined in section 206A of the Gramm-Leach-Bliley Act (15 U.S.C. 78c note) of which a material term is based on the price, yield, value, or volatility of any security or any group or index of securities, or any interest therein. (B) EXCLUSIONS.The term security-based swap agreement does not include any security-based swap..

SEC. 752. REPEAL OF PROHIBITION ON REGULATION OF SECURITY-BASED SWAPS.

(a) Repeal.Section 206B of the Gramm-Leach-Bliley Act (15 U.S.C. 78c note) is repealed. (b) Conforming Amendments to the Securities Act of 1933. (1) Section 2A(b) of the Securities Act of 1933 (15 U.S.C. 77b1) is amended by striking (as defined in section 206B of the Gramm-Leach-Bliley Act) each place that term appears; (2) Section 17 of the Securities Act of 1933 (15 U.S.C. 77q) is amended (A) in subsection (a) (i) by inserting (including security-based swaps) after securities; and (ii) by striking 206B of the Gramm-Leach-Bliley Act and inserting 3(a)(76) of the Securities Exchange Act of 1934; and 47
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(B) in subsection (d), by striking 206B of the Gramm-Leach-Bliley Act and inserting 3(a)(76) of the Securities Exchange Act of 1934. (c) Conforming Amendments to the Securities Exchange Act of 1934.The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended (1) in section 3A (15 U.S.C. 78c1), by striking (as defined in section 206B of the Gramm-Leach-Bliley Act) each place that term appears; (2) in section 9(a) (15 U.S.C. 78i(a)), by striking paragraphs (2) through (5) and inserting the following: (2) To effect, alone or with 1 or more other persons, a series of transactions in any security registered on a national securities exchange or in connection with any securitybased swap with respect to such security creating actual or apparent active trading in such security, or raising or depressing the price of such security, for the purpose of inducing the purchase or sale of such security by others. (3) If a dealer, broker, security-based swap dealer, major security-based swap participant, or other person selling or offering for sale or purchasing or offering to purchase the security to induce the purchase or sale of any security registered on a national securities exchange or any security-based swap with respect to such security by the circulation or dissemination in the ordinary course of business of information to the effect that the price of any such security will or is likely to rise or fall because of market operations of any 1 or more persons conducted for the purpose of raising or depressing the price of such security. (4) If a dealer, broker, security-based swap dealer, major security-based swap participant, or other person selling or offering for sale or purchasing or offering to purchase the security, to make, regarding any security registered on a national securities exchange or any security-based swap with respect to such security, for the purpose of inducing the purchase or sale of such security or such security-based swap, any statement which was at the time and in the light of the circumstances under which it was made, false or misleading with respect to any material fact, and which he or she knew or had reasonable ground to believe was so false or misleading. (5) For a consideration, received directly or indirectly from a dealer, broker, securitybased swap dealer, major security-based swap participant, or other person selling or offering for sale or purchasing or offering to purchase the security, to induce the purchase of any security registered on a national securities exchange or any security-based swap with respect to such security by the circulation or dissemination of information to the effect that the price of any such security will or is likely to rise or fall because of the market operations of any 1 or more persons conducted for the purpose of raising or depressing the price of such security.; (3) in section 10 (15 U.S.C. 78j), by striking (as defined in section 206B of the GrammLeach-Bliley Act) each place that term appears; (4) in section 15(c)(1) (15 U.S.C. 78o(c)(1)) (A) in subparagraph (A), by striking , or any security-based swap agreement (as defined in section 206B of the Gramm-Leach-Bliley Act),; and (B) in subparagraphs (B) and (C), by striking agreement (as defined in section 48

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206B of the Gramm-Leach-Bliley Act) each place that term appears; (5) in section 15(i) (15 U.S.C. 78o(i), as added by section 303(f) of the Commodity Futures Modernization Act of 2000 (Public Law 106554; 114 Stat. 2763A455)), by striking (as defined in section 206B of the Gramm-Leach-Bliley Act); (6) in section 16 (15 U.S.C. 78p) (A) in subsection (a)(2)(C), by striking (as defined in section 206(b) of the GrammLeach-Bliley Act); (B) in subsection (b), by striking (as defined in section 206B of the Gramm-LeachBliley Act) each place that term appears; and (C) in subsection (g), by striking (as defined in section 206B of the Gramm-LeachBliley Act); (7) in section 20 (15 U.S.C. 78t) (A) in subsection (d), by striking (as defined in section 206B of the Gramm-LeachBliley Act); and (B) in subsection (f), by striking (as defined in section 206B of the Gramm-LeachBliley Act); and (8) in section 21A (15 U.S.C. 78u1) (A) in subsection (a)(1), by striking (as defined in section 206B of the GrammLeach-Bliley Act); and (B) in subsection (g), by striking (as defined in section 206B of the Gramm-LeachBliley Act).

SEC. 753. AMENDMENTS TO THE SECURITIES EXCHANGE ACT OF 1934.

(a) Clearing for Security-Based Swaps.The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended by adding the following section after section 3A:

SEC. 3B. CLEARING FOR SECURITY-BASED SWAPS.

(a) Clearing Requirement. (1) IN GENERAL.Except as provided in paragraph (8), it shall be unlawful to enter into a security-based swap unless (A) the security-based swap is cleared by a clearing agency registered under section 17A of this Act; and (B) the rules of the clearing agency described in subparagraph (A) (i) prescribe that all security-based swaps with the same terms and conditions are fungible and may be offset with each other; and (ii) provide for nondiscriminatory clearing of a security-based swap executed on or through the rules of an unaffiliated designated contract market or an 49
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alternative swap execution facility. (2) COMMISSION APPROVAL. (A) IN GENERAL.A clearing agency shall submit to the Commission for prior approval each security-based swap, or any group, category, type, or class of securitybased swaps, that it seeks to accept for clearing, which submission the Commission shall make available to the public. (B) DEADLINE.The Commission shall take final action on a request submitted pursuant to subparagraph (A) not later than 90 days after submission of the request, unless the clearing agency submitting the request agrees to an extension of the time limitation established under this subparagraph. A request on which the Commission fails to take final action within the time limitation established under this subparagraph is deemed approved. (C) APPROVAL.The Commission shall approve, unconditionally or subject to such terms and conditions as the Commission determines to be appropriate, any request submitted pursuant to subparagraph (A) if the Commission finds that the request is consistent with the requirements of section 17A. (D) RULES.Not later than 180 days after the date of the enactment of the Overthe-Counter Derivatives Markets Act of 2009, the Commission shall adopt rules for a clearing agencys submission for approval, pursuant to this paragraph, of a securitybased swap, or a group, category, type or class of security-based swaps, that it seeks to accept for clearing. (3) STAY OF CLEARING REQUIREMENT.At any time after issuance of an approval pursuant to paragraph (2): (A) REVIEW PROCESS.The Commission, on application of a counterparty to a security-based swap or on its own initiative, may stay the clearing requirement of paragraph (1) until the Commission completes a review of the terms of the securitybased swap (or the group, category, type, or class of security-based swaps) and the clearing arrangement. (B) DEADLINE.The Commission shall complete a review undertaken pursuant to subparagraph (A) not later than 90 days after issuance of the stay, unless the clearing agency that clears the security-based swap, or group, category, type or class of security-based swaps, agrees to an extension of the time limitation established under this subparagraph. (C) DETERMINATION.Upon completion of the review undertaken pursuant to subparagraph (A), the Commission may (i) determine, unconditionally or subject to such terms and conditions as the Commission determines to be appropriate, that the security-based swap, or group, category, type, or class of security-based swaps, must be cleared pursuant to this subsection if it finds that such clearing is consistent with the requirements of section 17A; or (ii) determine that the clearing requirement of paragraph (1) shall not apply to the security-based swap, or group, category, type, or class of security-based 50

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swaps. (D) RULES.Not later than 180 days after the date of the enactment of the Overthe-Counter Derivatives Markets Act of 2009, the Commission shall adopt rules for reviewing, pursuant to this paragraph, a clearing agencys clearing of a security-based swap, or a group, category, type, or class of security-based swaps, that it has accepted for clearing. (4) SECURITY-BASED SWAPS REQUIRED TO BE ACCEPTED FOR CLEARING. (A) RULEMAKING.Within 180 days of the date of enactment of the Over-theCounter Derivatives Markets Act of 2009, the Commission and the Commodity Futures Trading Commission shall jointly adopt rules to further identify security-based swaps, or any group, category, type, or class of security-based swaps, that should be accepted for clearing. In adopting such rules, the Commission and the Commodity Futures Trading Commission shall take into account the following factors: (i) The extent to which any of the terms of the security-based swap, including price, are disseminated to third parties or are referenced in other agreements, contracts, or transactions. (ii) The volume of transactions in the security-based swap. (iii) The extent to which the terms of the security-based swap are similar to the terms of other agreements, contracts, or transactions that are centrally cleared. (iv) Whether any differences in the terms of the security-based swap, compared to other agreements, contracts, or transactions that are centrally cleared, are of economic significance. (v) Whether a clearing agency is prepared to clear the security-based swap and such clearing agency has in place effective risk management systems. (vi) Any other factors the Commission and the Securities and Exchange Commission determine to be appropriate. (B) OTHER DESIGNATIONS.The Commission may separately designate a particular security-based swap or class of security-based swaps as subject to the clearing requirement in paragraph (1), taking into account the factors established in clauses (i) through (vi) of subparagraph (A) and the joint rules adopted in such subparagraph. (5) PREVENTION OF EVASION.The Commission shall have authority to prescribe rules under this section, or issue interpretations of such rules, as necessary to prevent evasions of this section. (6) REQUIRED REPORTING.Both counterparties to a security-based swap that is not accepted for clearing by any clearing agency shall report such a security-based swap either to a registered security-based swap repository described in section 13(n) or, if there is no repository that would accept the security-based swap, to the Commission pursuant to section 13A within such time period as the Commission may by rule or regulation prescribe. (7) TRANSITION RULES.Rules adopted by the Commission under this section shall provide for the reporting of data, as follows: 51
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(A) Security-based swaps that were entered into before the date of enactment of the Over-the-Counter Derivatives Markets Act of 2009 shall be reported to a registered security-based swap repository or the Commission not later than 180 days after the effective date of the Over-the-Counter Derivatives Markets Act of 2009. (B) Security-based swaps that were entered into on or after the date of enactment of the Over-the-Counter Derivatives Markets Act of 2009 shall be reported to a registered security-based swap repository or the Commission not later than the later of (i) 90 days after the effective date of the Over-the-Counter Derivatives Markets Act of 2009; or (ii) such other time after entering into the swap as the Commission may prescribe by rule or regulation. (8) TRADE EXECUTION. (A) IN GENERAL.With respect to transactions involving security-based swaps subject to the clearing requirement of paragraph (1), counterparties shall (i) execute the transaction on an exchange; or (ii) execute the transaction on an alternative swap execution facility registered under section 3C. (B) EXCEPTION.The requirements of clauses (i) and (ii) of subparagraph (A) shall not apply if no exchange or alternative swap execution facility makes the swap available to trade. (9) EXEMPTIONS. (A) IN GENERAL.The Commission by rule or order, as the Commission deems necessary or appropriate in the public interest, may conditionally or unconditionally exempt a security-based swap from the requirements of paragraphs (1) and (8), and any rules issued under this subsection, if (i) no clearing agency registered under this Act will accept the security-based swap for clearing; or (ii) 1 of the counterparties to the security-based swap (I) is not a security-based swap dealer or major security-based swap participant; and (II) does not meet the eligibility requirements of any clearing agency that clears the security-based swap. (B) PRIOR CONSULTATION WITH THE COMMODITY FUTURES TRADING COMMISSION AND BOARD FOR FINANCIAL STABILITY. (i) CONSULTATION.Before acting by rule or order to exempt a security-based swap, or any group, category, type, or class of security-based swaps from any requirement or rule under this subsection, the Commission shall consult with, and consider the views of, the Commodity Futures Trading Commission and the Board for Financial Stability concerning whether such exemption is necessary and appropriate for the reduction of systemic risk and in the public interest. 52

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(ii) PROHIBITION ON ISSUANCE.Not later than 45 days prior to issuing any exemption under this paragraph, the Commission shall send a notice to the Commodity Futures Trading Commission and the Board for Financial Stability describing such exemption. If either the Commodity Futures Trading Commission or the Board for Financial Stability issues a finding under clause (i) that such an exemption does not meet the standard described in clause (i), the Commission may not issue such exemption. (iii) DEADLINE.Any finding by the Commodity Futures Trading Commission or the Board for Financial Stability shall be made and provided in writing to the Commission not later than 45 days after the date of receipt of notice of a proposed exemption by the Commission. (iv) NONDELEGATION.Action by the Commodity Futures Trading Commission or the Board for Financial Stability under this subparagraph may not be delegated. (C) REQUESTED CLEARANCE.If any party to a security-based swap that is exempt from the clearing requirements of paragraph (1) requests that such security-based swap be cleared by a clearing agency, and a clearing agency registered under this Act will accept such security-based swap for clearing, then (i) the exemption shall not apply; and (ii) the swap shall be cleared by such agency. (10) VOLUNTARY REGISTRATION. (A) CLEARING AGENCIES.A person that clears agreements, contracts, or transactions that are not required to be cleared under this Act may register with the Commission as a clearing agency. (B) DERIVATIVES CLEARING ORGANIZATIONS.A clearing agency may clear swaps that are required to be cleared by a person who is registered as a derivatives clearing organization under the Commodity Exchange Act (7 U.S.C. 1 et seq.). (11) REQUIRED REGISTRATION FOR BANKS AND CLEARING AGENCIES.A person that is required to be registered as a clearing agency under this section shall register with the Commission regardless of whether the person is also a bank or a derivatives clearing organization registered with the Commodity Futures Trading Commission under the Commodity Exchange Act (7 U.S.C. 1 et seq.). (b) Reporting. (1) TRANSPARENCY. (A) IN GENERAL.A clearing agency that clears security-based swaps shall provide to the Commission and any security-based swap repository designated by the Commission all information determined by the Commission to be necessary to perform its responsibilities under this Act. (B) DATA COLLECTION REQUIREMENTS.The Commission shall adopt data collection and maintenance requirements for security-based swaps cleared by clearing agencies that are comparable to the corresponding requirements for security-based 53

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swaps accepted by security-based swap repositories and security-based swaps traded on alternative swap execution facilities. (C) SHARING OF INFORMATION.The Commission shall share such information, upon request, with the Board, the Commodity Futures Trading Commission, the appropriate Federal banking agencies, the Board for Financial Stability, and the Department of Justice or to other persons the Commission deems appropriate, including foreign financial supervisors (including foreign futures authorities), foreign central banks, and foreign ministries. (2) PUBLIC INFORMATION.A clearing agency that clears security-based swaps shall provide to the Commission, or its designee, such information as is required by, and in a form and at a frequency to be determined by, the Commission, in order to comply with the public reporting requirements contained in section 13. (c) Designation of Compliance Officer. (1) IN GENERAL.Each clearing agency that clears security-based swaps shall designate an individual to serve as a compliance officer. (2) DUTIES.The compliance officer shall perform the following duties: (A) Report directly to the board or to the senior officer of the clearing agency. (B) Consult with the board of the clearing agency, a body performing a function similar to that of a board, or the senior officer of the clearing agency, to resolve any conflicts of interest that may arise. (C) Administering the policies and procedures of the clearing agency required to be established pursuant to this section. (D) Ensuring compliance with securities laws and the rules and regulations issued thereunder, including rules prescribed by the Commission pursuant to this section. (E) Establishing procedures for remediation of noncompliance issues found during compliance office reviews, lookbacks, internal or external audit findings, self-reported errors, or through validated complaints. Procedures to be established under this subsection include procedures related to the handling, management response, remediation, retesting, and closing of noncompliance issues. (3) ANNUAL REPORTS REQUIRED. (A) IN GENERAL.The compliance officer shall annually prepare and sign a report on the compliance of the clearing agency with the securities laws and the policies and procedures of the agency, including the code of ethics and conflict of interest policies of the agency, in accordance with rules prescribed by the Commission. (B) SUBMISSION.The compliance report required under subparagraph (A) shall accompany the financial reports of the clearing agency that are required to be furnished to the Commission pursuant to this section and shall include a certification that, under penalty of law, the report is accurate and complete. (d) Consultation.The Commission and the Commodity Futures Trading Commission shall consult with the appropriate Federal banking agencies and each other prior to adopting rules 54
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under this section. (e) Harmonization of Rules.Not later than 180 days after the effective date of the Over-theCounter Derivatives Markets Act of 2009, the Commission and the Commodity Futures Trading Commission shall jointly adopt uniform rules governing persons that are registered as derivatives clearing organizations for swaps under the Commodity Exchange Act (7 U.S.C. 1 et seq.) and persons that are registered as clearing agencies for security-based swaps under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.).. (b) Alternative Swap Execution Facilities.The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is further amended by adding after section 3B the following:

SEC. 3C. ALTERNATIVE SWAP EXECUTION FACILITIES.

(a) Registration. (1) IN GENERAL.No person may operate a facility for the trading of security-based swaps unless the facility is registered as an alternative swap execution facility under this section. (2) DUAL REGISTRATION.Any person that is required to be registered as an alternative swap execution facility under this section shall register with the Commission regardless of whether that person also is registered with the Commodity Futures Trading Commission as an alternative swap execution facility. (b) Requirements for Trading.An alternative swap execution facility that is registered under subsection (a) may trade any security-based swap. (c) Trading by Exchanges.An exchange shall, to the extent that the exchange also operates an alternative swap execution facility and uses the same electronic trade execution system for trading on the exchange and the alternative swap execution facility, identify whether the electronic trading is taking place on the exchange or the alternative swap execution facility. (d) Criteria for Registration. (1) IN GENERAL.To be registered as an alternative swap execution facility, the facility shall be required to demonstrate to the Commission that it meets the criteria established by this section. (2) DETERRENCE OF ABUSES.Each alternative swap execution facility shall establish and enforce trading and participation rules that will deter abuses and have the capacity to detect, investigate, and enforce those rules, including (A) means to obtain information necessary to perform the functions required under this section; or (B) means to (i) provide market participants with impartial access to the market; and (ii) capture information that may be used in establishing whether any violations of this section have occurred. (3) TRADING PROCEDURES.Each alternative swap execution facility shall establish and 55
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enforce rules or terms and conditions defining, or specifications detailing, trading procedures to be used in entering and executing orders traded on or through its facilities. (4) FINANCIAL INTEGRITY OF TRANSACTIONS.Each alternative swap execution facility shall establish and enforce rules and procedures for ensuring the financial integrity of security-based swaps entered on or through its facilities, including the clearance and settlement of the security-based swaps. (e) Core Principles for Alternative Swap Execution Facilities. (1) COMPLIANCE. (A) IN GENERAL.To maintain its registration as an alternative swap execution facility, the facility shall comply with the core principles established in this subsection and any requirement that the Commission may impose by rule or regulation. (B) REASONABLE DISCRETION.Except where the Commission determines otherwise by rule or regulation, the facility shall have reasonable discretion in establishing the manner in which it complies with the core principles established in this subsection. (2) COMPLIANCE WITH RULES.Each alternative swap execution facility shall monitor and enforce compliance with any of the rules of the facility, including the terms and conditions of the security-based swaps traded on or through the facility and any limitations on access to the facility. (3) SECURITY-BASED SWAPS NOT READILY SUSCEPTIBLE TO MANIPULATION.Each alternative swap execution facility shall permit trading only in security-based swaps that are not readily susceptible to manipulation. (4) MONITORING OF TRADING.Each alternative swap execution facility shall monitor trading in security-based swaps to prevent manipulation and price distortion through surveillance, compliance, and disciplinary practices and procedures, including methods for conducting real-time monitoring of trading and comprehensive and accurate trade reconstructions. (5) ABILITY TO OBTAIN INFORMATION.Each alternative swap execution facility shall (A) establish and enforce rules that will allow the facility to obtain any necessary information to perform any of the functions described in this subsection; (B) provide the information to the Commission upon request; and (C) have the capacity to carry out such international information-sharing agreements as the Commission may require. (6) POSITION LIMITS OR ACCOUNTABILITY. (A) IN GENERAL.To reduce the potential threat of market manipulation or congestion, an alternative swap execution facility shall adopt for each of its contracts, where necessary and appropriate, position limitations or position accountability. (B) FOR CERTAIN CONTRACTS.For any contract that is subject to a position limitation established by the Commission pursuant to section 10B, an alternative swap execution facility shall set its position limitation at a level no higher than the 56
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Commission limitation. (7) EMERGENCY AUTHORITY.Each alternative swap execution facility shall adopt rules to provide for the exercise of emergency authority, in consultation or cooperation with the Commission, where necessary and appropriate, including the authority to suspend or curtail trading in a security-based swap. (8) TIMELY PUBLICATION OF TRADING INFORMATION.Each alternative swap execution facility shall make public timely information on price, trading volume, and other trading data to the extent prescribed by the Commission. (9) RECORDKEEPING AND REPORTING. (A) IN GENERAL.Each alternative swap execution facility shall (i) maintain records of all activities related to the business of the facility, including a complete audit trail, in a form and manner acceptable to the Commission for a period of 5 years; and (ii) report to the Commission all information determined by the Commission to be necessary or appropriate for the Commission to perform its responsibilities under this Act in a form and manner acceptable to the Commission. (B) DATA COLLECTION REQUIREMENTS.The Commission shall adopt data collection and reporting requirements for alternative swap execution facilities that are comparable to corresponding requirements for clearing agencies and security-based swap repositories. (10) ANTITRUST CONSIDERATIONS.Unless necessary or appropriate to achieve the purposes of this Act, an alternative swap execution facility shall avoid (A) adopting any rules or taking any actions that result in any unreasonable restraints of trade; or (B) imposing any material anticompetitive burden on trading on the swap execution facility. (11) CONFLICTS OF INTEREST.Each alternative swap execution facility shall (A) establish and enforce rules to minimize conflicts of interest in its decisionmaking process; and (B) establish a process for resolving any conflicts of interest. (12) DESIGNATION OF COMPLIANCE OFFICER. (A) IN GENERAL.Each alternative swap execution facility shall designate an individual to serve as a compliance officer. (B) DUTIES.The compliance officer shall perform the following duties: (i) Report directly to the board or to the senior officer of the facility. (ii) Review the compliance of the facility with the core principles established in this subsection. (iii) Consult with the board of the facility, a body performing a function 57
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similar to that of a board, or the senior officer of the facility, to resolve any conflicts of interest that may arise. (iv) Administering the policies and procedures of the facility required to be established pursuant to this section. (v) Ensuring compliance with securities laws and the rules and regulations issued thereunder, including any rules prescribed by the Commission pursuant to this section. (vi) Establishing procedures for remediation of noncompliance issues found during compliance office reviews, lookbacks, internal or external audit findings, self-reported errors, or through validated complaints. Procedures to be established under this paragraph include procedures related to the handling, management response, remediation, retesting, and closing of noncompliance issues. (C) ANNUAL REPORTS REQUIRED. (i) IN GENERAL.The compliance officer shall annually prepare and sign a report on the compliance of the alternative swap execution facility with the securities laws and the policies and procedures of the facility, including the code of ethics and conflict of interest policies of the facility, in accordance with rules prescribed by the Commission. (ii) SUBMISSION.The compliance report required under clause (i) shall accompany the financial reports of the alternative swap execution facility that are required to be furnished to the Commission pursuant to this section and shall include a certification that, under penalty of law, the report is accurate and complete. (f) Exemptions.The Commission may exempt, conditionally or unconditionally, an alternative swap execution facility from registration under this section if the Commission finds that such organization is subject to comparable, comprehensive supervision and regulation on a consolidated basis by the Commodity Futures Trading Commission, the Financial Institutions Regulatory Administration, or the appropriate governmental authorities in the organizations home country. (g) Harmonization of Rules.Within 180 days of the date of the enactment of the Over-theCounter Derivatives Markets Act of 2009, the Commission and the Commodity Futures Trading Commission shall jointly prescribe rules governing the regulation of alternative swap execution facilities under this section and section 5h of the Commodity Exchange Act.. (c) Trading in Security-Based Swap Agreements.Section 6 of the Securities Exchange Act of 1934 (15 U.S.C. 78f) is amended by adding at the end the following: (l) Prohibition.It shall be unlawful for any person to effect a transaction in a security-based swap with or for a person that is not an eligible contract participant unless such transaction is effected on a national securities exchange registered pursuant to subsection (b).. (d) Registration and Regulation of Swap Dealers and Major Swap Participants.The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is amended by inserting after section 15E (15 U.S.C. 78o7) the following: 58
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SEC. 15F. REGISTRATION AND REGULATION OF SECURITY-BASED SWAP DEALERS AND MAJOR SECURITY-BASED SWAP PARTICIPANTS.
(a) Registration.It shall be unlawful for any person (1) to act as a security-based swap dealer unless such person is registered as a securitybased swap dealer with the Commission; and (2) to act as a major security-based swap participant unless such person is registered as a major security-based swap participant with the Commission. (b) Requirements. (1) IN GENERAL.A person shall register as a security-based swap dealer or major security-based swap participant by filing a registration application with the Commission. (2) CONTENTS.The application required under paragraph (1) shall be made in such form and manner as prescribed by the Commission, giving any information and facts as the Commission may deem necessary concerning the business in which the applicant is or will be engaged. Such person, when registered as a security-based swap dealer or major security-based swap participant, shall continue to report and furnish to the Commission such information pertaining to such persons business as the Commission may require. (3) EXPIRATION.Each registration shall expire at such time as the Commission may by rule or regulation prescribe. (4) RULES.Except as provided in subsections (c), (d), and (e), the Commission may prescribe rules applicable to security-based swap dealers and major security-based swap participants, including rules that limit the activities of security-based swap dealers and major security-based swap participants. Except as provided in subsections (c) and (e), the Commission may provide conditional or unconditional exemptions from rules prescribed under this section for security-based swap dealers and major security-based swap participants that are subject to substantially similar requirements as brokers or dealers. (5) TRANSITION.Rules adopted under this section shall provide for the registration of security-based swap dealers and major security-based swap participants not later than 1 year after the effective date of the Over-the-Counter Derivatives Markets Act of 2009. (c) Dual Registration. (1) SECURITY-BASED SWAP DEALERS.Any person that is required to be registered as a security-based swap dealer under this section shall register with the Commission regardless of whether that person also is a bank or is registered with the Commodity Futures Trading Commission as a swap dealer. (2) MAJOR SECURITY-BASED SWAP PARTICIPANTS.Any person that is required to be registered as a major security-based swap participant under this section shall register with the Commission regardless of whether that person also is a bank or is registered with the Commodity Futures Trading Commission as a major swap participant. (d) Joint Rules. 59
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(1) IN GENERAL.Not later than 180 days after the effective date of the Over-theCounter Derivatives Markets Act of 2009, the Commission and the Commodity Futures Trading Commission shall jointly adopt uniform rules for persons that are registered (A) as security-based swap dealers or major security-based swap participants under this Act; and (B) as swap dealers or major swap participants under the Commodity Exchange Act (7 U.S.C. 1 et seq.). (2) EXCEPTION FOR PRUDENTIAL REQUIREMENTS.The Commission and the Commodity Futures Trading Commission shall not prescribe rules imposing prudential requirements (including activity restrictions) on security-based swap dealers or major security-based swap participants for which the Financial Institutions Regulatory Administration is the primary regulatory authority. This provision shall not be construed as limiting the authority of the Commission and the Commodity Futures Trading Commission to prescribe appropriate business conduct, reporting, and recordkeeping requirements to protect investors. (e) Capital and Margin Requirements. (1) IN GENERAL. (A) BANK SECURITY-BASED SWAP DEALERS AND MAJOR SECURITY-BASED SWAP PARTICIPANTS.Each registered security-based swap dealer and major security-based swap participant for which the Financial Institutions Regulatory Administration is the primary regulatory authority shall meet such minimum capital requirements and minimum initial and variation margin requirements as the FIRA shall by rule or regulation prescribe to help ensure the safety and soundness of the security-based swap dealer or major security-based swap participant. (B) NONBANK SECURITY-BASED SWAP DEALERS AND MAJOR SECURITY-BASED SWAP PARTICIPANTS.Each registered security-based swap dealer and major security-based swap participant for which the Financial Institutions Regulatory Administration is not the primary regulatory authority shall meet such minimum capital requirements and minimum initial and variation margin requirements as the Commission and the Commodity Futures Trading Commission shall by rule or regulation jointly prescribe to help ensure the safety and soundness of the security-based swap dealer or major security-based swap participant. (2) JOINT RULES. (A) BANK SECURITY-BASED SWAP DEALERS AND MAJOR SECURITY-BASED SWAP PARTICIPANTS.Within 180 days of the date of the enactment of the Over-the-Counter Derivatives Markets Act of 2009, the Financial Institutions Regulatory Administration, in consultation with the Commission and the Commodity Futures Trading Commission, shall jointly adopt rules imposing capital and margin requirements under this subsection for security-based swap dealers and major security-based swap participants. (B) NONBANK SECURITY-BASED SWAP DEALERS AND MAJOR SECURITY-BASED SWAP PARTICIPANTS.Within 180 days of the date of the enactment of the Over-the-Counter 60
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Derivatives Markets Act of 2009, the Commission and the Commodity Futures Trading Commission, in consultation with the Financial Institutions Regulatory Administration, shall jointly adopt rules imposing capital and margin requirements under this subsection for security-based swap dealers and major security-based swap participants for which the FIRA is not the primary regulatory authority. (3) CAPITAL. (A) BANK SECURITY-BASED SWAP DEALERS AND MAJOR SECURITY-BASED SWAP PARTICIPANTS.In setting capital requirements under this subsection, the Financial Institutions Regulatory Administration shall impose (i) a capital requirement that is greater than zero for security-based swaps that are cleared by a clearing agency; and (ii) to offset the greater risk to the security-based swap dealer or major security-based swap participant and to the financial system arising from the use of security-based swaps that are not centrally cleared, higher capital requirements for security-based swaps that are not cleared by a clearing agency than for securitybased swaps that are centrally cleared. (B) NONBANK SECURITY-BASED SWAP DEALERS AND MAJOR SECURITY-BASED SWAP PARTICIPANTS.Capital requirements set by the Commission and the Commodity Futures Trading Commission under this subsection shall be as strict as or stricter than the capital requirements set by the Financial Institutions Regulatory Administration under this subsection. (C) BANK HOLDING COMPANIES.Capital requirements set by the Financial Institutions Regulatory Administration for security-based swaps of bank holding companies on a consolidated basis shall be as strict as or stricter than the capital requirements for bank security-based swap dealers and major security-based swap participants set by the Financial Institutions Regulatory Administration under this subsection. (4) MARGIN. (A) BANK SWAP DEALERS AND MAJOR SWAP PARTICIPANTS. (i) IN GENERAL.The Financial Institutions Regulatory Administration shall impose both initial and variation margin requirements under this subsection on all security-based swaps that are not cleared by a clearing agency. (ii) EXEMPTION.The Financial Institutions Regulatory Administration by rule or order, as the FIRA deems necessary or appropriate in the public interest, may conditionally or unconditionally exempt from the requirements of this subsection and the rules issued under this subsection, any security-based swap in which 1 of the counterparties is (I) not a swap dealer, major swap participant, security-based swap dealer, or a major security-based swap participant; (II) using the swap as part of an effective hedge under generally accepted accounting principles; and 61
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(III) predominantly engaged in activities that are not financial in nature, as defined in section 4(k) of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(k)). (iii) PRIOR CONSULTATION WITH BOARD FOR FINANCIAL STABILITY. (I) CONSULTATION.Before acting by rule or order to exempt a securitybased swap from any requirement or rule under this subsection, the Financial Institutions Regulatory Administration shall consult with, and consider the views of, the Board for Financial Stability concerning whether such exemption is necessary and appropriate for the reduction of systemic risk and in the public interest. (II) PROHIBITION ON ISSUANCE.Not later than 45 days prior to issuing any exemption under this subparagraph, the Financial Institutions Regulatory Administration shall send a notice to the Board for Financial Stability describing such exemption. If the Board for Financial Stability issues a finding under subclause (I) that such an exemption does not meet the standard described in subclause (I), the Financial Institutions Regulatory Administration may not issue such exemption. (III) DEADLINE.Any finding by the Board for Financial Stability shall be made and provided in writing to the Financial Institutions Regulatory Administration not later than 45 days after the date of receipt of notice of a proposed exemption by the FIRA. (IV) NONDELEGATION.Action by the Board for Financial Stability under this clause may not be delegated. (B) NONBANK SECURITY-BASED SWAP DEALERS AND MAJOR SECURITY-BASED SWAP PARTICIPANTS.Margin requirements for security-based swaps set by the Commission and the Commodity Futures Trading Commission under this subsection shall be as strict as or stricter than margin requirements for security-based swaps set by the Financial Institutions Regulatory Administration. (5) MARGIN REQUIREMENTS.In prescribing margin requirements under this subsection, the Financial Institutions Regulatory Administration may permit the use of noncash collateral, as the FIRA determines to be consistent with (A) preserving the financial integrity of markets trading security-based swaps (or security derivatives); and (B) preventing systemic risk. (6) REQUESTED MARGIN.If any party to a security-based swap that is exempt from the margin requirements of paragraph (4)(A)(i) pursuant to the provisions of paragraph (4)(A)(ii) requests that such security-based swap be margined, then (A) the exemption shall not apply; and (B) the counterparty to such security-based swap shall provide the requested margin. (f) Reporting and Recordkeeping. 62
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(1) IN GENERAL.Each registered security-based swap dealer and major security-based swap participant (A) shall make such reports as are prescribed by the Commission by rule or regulation regarding the transactions and positions and financial condition of such dealer or participant; (B) for which (i) the Financial Institutions Regulatory Administration is the primary regulatory authority shall keep books and records of all activities related to its business as a security-based swap dealer or major security-based swap participant in such form and manner and for such period as may be prescribed by the Commission by rule or regulation; and (ii) the Financial Institutions Regulatory Administration is not the primary regulatory authority shall keep books and records in such form and manner and for such period as may be prescribed by the Commission by rule or regulation; and (C) shall keep such books and records open to inspection and examination by any representative of the Commission. (2) RULES.Within 1 year of the date of the enactment of the Over-the-Counter Derivatives Markets Act of 2009, the Commission and the Commodity Futures Trading Commission, in consultation with the appropriate Federal banking agencies, shall jointly adopt rules governing reporting and recordkeeping for swap dealers, major swap participants, security-based swap dealers and major security-based swap participants. (g) Daily Trading Records. (1) IN GENERAL.Each registered security-based swap dealer and major security-based swap participant shall, for such period as may be prescribed by the Commission by rule or regulation, maintain daily trading records of that dealers or participants (A) security-based swaps and all related records (including related transactions); and (B) recorded communications, including electronic mail, instant messages, and recordings of telephone calls. (2) INFORMATION REQUIREMENTS.The daily trading records required to be maintained under paragraph (1) shall include such information as the Commission shall prescribe by rule or regulation. (3) CUSTOMER RECORDS.Each registered security-based swap dealer or major security-based swap participant shall maintain daily trading records for each customer or counterparty in such manner and form as to be identifiable with each security-based swap transaction. (4) AUDIT TRAIL. (A) MAINTENANCE OF AUDIT TRAIL.Each registered security-based swap dealer or major security-based swap participant shall maintain a complete audit trail for 63
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conducting comprehensive and accurate trade reconstructions. (B) PERMISSIBLE COMPLIANCE BY ENTITY OTHER THAN DEALER OR PARTICIPANT. A registered security-based swap repository may, at the request of a registered security-based swap dealer or major security-based swap participant, satisfy the requirement of subparagraph (A) on behalf of such registered security-based swap dealer or major security-based swap participant. (5) RULES.Not later than 1 year after the date of the enactment of the Over-theCounter Derivatives Markets Act of 2009, the Commission and the Commodity Futures Trading Commission, in consultation with the appropriate Federal banking agencies, shall jointly adopt rules governing daily trading records for swap dealers, major swap participants, security-based swap dealers, and major security-based swap participants. (h) Business Conduct Standards. (1) IN GENERAL.Each registered security-based swap dealer and major security-based swap participant shall conform with such business conduct standards as may be prescribed by the Commission by rule or regulation, including any standards addressing (A) fraud, manipulation, and other abusive practices involving security-based swaps (including security-based swaps that are offered but not entered into); (B) diligent supervision of its business as a security-based swap dealer; (C) adherence to all applicable position limits; and (D) such other matters as the Commission shall determine to be necessary or appropriate. (2) BUSINESS CONDUCT REQUIREMENTS.Business conduct requirements adopted by the Commission pursuant to paragraph (1) shall (A) establish a standard of care for a security-based swap dealer or major securitybased swap participant to verify that any security-based swap counterparty meets the eligibility standards for an eligible contract participant; (B) require disclosure by the security-based swap dealer or major security-based swap participant to any counterparty to the security-based swap (other than a swap dealer, major swap participant, security-based swap dealer, or major security-based swap participant) of (i) information about the material risks and characteristics of the securitybased swap; (ii) the source and amount of any fees or other material remuneration that the security-based swap dealer or major security-based swap participant would directly or indirectly expect to receive in connection with the security-based swap; and (iii) any other material incentives or conflicts of interest that the securitybased swap dealer or major security-based swap participant may have in connection with the security-based swap; and (C) establish a standard of conduct for a security-based swap dealer or major 64

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security-based swap participant to communicate in a fair and balanced manner based on principles of fair dealing and good faith; (D) establish a standard of conduct with respect to a counterparty that is an eligible contract participant within the meaning of subclause (I) or (II) of section 1a(13) of the Commodity Exchange Act (7 U.S.C. 1a(13)), having a reasonable basis to believe that the counterparty has an independent representative that (i) has sufficient knowledge to evaluate the transaction and risks; (ii) is not subject to a statutory disqualification; (iii) is independent of the significant security-based derivatives market participant; (iv) undertakes a duty to act in the best interests of the counterparty it represents; (v) makes appropriate disclosures; and (vi) will provide written representations to the eligible contract participant regarding fair pricing and the appropriateness of the transaction; and (E) establish such other standards and requirements as the Commission may determine are necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of this title. (3) RULES.Not later than 1 year after the date of the enactment of the Over-theCounter Derivatives Markets Act of 2009, the Commission and the Commodity Futures Trading Commission, in consultation with the appropriate Federal banking agencies, shall jointly prescribe rules under this subsection governing business conduct standards for swap dealers, major swap participants, security-based swap dealers, and major security-based swap participants. (i) Documentation and Back Office Standards. (1) IN GENERAL.Each registered security-based swap dealer and major security-based swap participant shall conform with standards, as may be prescribed by the Commission by rule or regulation, addressing timely and accurate confirmation, processing, netting, documentation, and valuation of all security-based swaps. (2) RULES.Not later than 1 year after the date of the enactment of the Over-theCounter Derivatives Markets Act of 2009, the Commission and the Commodity Futures Trading Commission, in consultation with the appropriate Federal banking agencies, shall jointly adopt rules governing documentation and back office standards for swap dealers, major swap participants, security-based swap dealers, and major security-based swap participants. (j) Dealer Responsibilities.Each registered security-based swap dealer and major securitybased swap participant shall, at all times, comply with the following requirements: (1) MONITORING OF TRADING.The security-based swap dealer or major security-based swap participant shall monitor its trading in security-based swaps to prevent violations of applicable position limits. 65
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(2) DISCLOSURE OF GENERAL INFORMATION.The security-based swap dealer or major security-based swap participant shall disclose to the Commission and to the Financial Institutions Regulatory Administration information concerning (A) terms and conditions of its security-based swaps; (B) security-based swap trading operations, mechanisms, and practices; (C) financial integrity protections relating to security-based swaps; and (D) other information relevant to its trading in security-based swaps. (3) ABILITY TO OBTAIN INFORMATION.The security-based swap dealer or major swap security-based participant shall (A) establish and enforce internal systems and procedures to obtain any necessary information to perform any of the functions described in this section; and (B) provide the information to the Commission and to the Financial Institutions Regulatory Administration upon request. (4) CONFLICTS OF INTEREST.The security-based swap dealer and major security-based swap participant shall implement conflict of interest systems and procedures that (A) establish structural and institutional safeguards to assure that the activities of any person within the firm relating to research or analysis of the price or market for any security are separated by appropriate informational partitions within the firm from the review, pressure, or oversight of those whose involvement in trading or clearing activities might potentially bias their judgment or supervision; and (B) address such other issues as the Commission determines appropriate. (5) ANTITRUST CONSIDERATIONS.Unless necessary or appropriate to achieve the purposes of this Act, a security-based swap dealer or major security-based swap participant shall avoid (A) adopting any processes or taking any actions that result in any unreasonable restraints of trade; or (B) imposing any material anticompetitive burden on trading. (k) Rules.The Commission, the Commodity Futures Trading Commission, and the Financial Institutions Regulatory Administration shall consult with each other prior to adopting any rules under the Over-the-Counter Derivatives Markets Act of 2009. (l) Statutory Disqualification.Except to the extent otherwise specifically provided by rule, regulation, or order of the Commission, it shall be unlawful for a security-based swap dealer or a major security-based swap participant to permit any person associated with a security-based swap dealer or a major security-based swap participant who is subject to a statutory disqualification to effect or be involved in effecting security-based swaps on behalf of such security-based swap dealer or major security-based swap participant, if such security-based swap dealer or major security-based swap participant knew, or in the exercise of reasonable care should have known, of such statutory disqualification. (m) Enforcement and Administrative Proceeding Authority. 66
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(1) PRIMARY ENFORCEMENT AUTHORITY. (A) SECURITIES AND EXCHANGE COMMISSION.Except as provided in subsection (b), the Commission shall have primary authority to enforce the provisions of subtitle B of the Over-the-Counter Derivatives Markets Act of 2009 with respect to any person. (B) FIRA.The Financial Institutions Regulatory Administration shall have exclusive authority to enforce the provisions of section 15F(e) and other prudential requirements of this Act with respect to banks, and branches or agencies of foreign banks that are security-based swap dealers or major security-based swap participants. (C) REFERRAL.If the Financial Institutions Regulatory Administration has cause to believe that such security-based swap dealer or major security-based swap participant for which the FIRA is the primary regulatory authority may have engaged in conduct that constitutes a violation of the nonprudential requirements of section 15F or rules adopted by the Commission thereunder, the Financial Institutions Regulatory Administration may recommend in writing to the Commission that the Commission initiate an enforcement proceeding as authorized under this Act. The recommendation shall be accompanied by a written explanation of the concerns giving rise to the recommendation. (D) BACKSTOP ENFORCEMENT AUTHORITY.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 recommendation under subparagraph (C), the Financial Institutions Regulatory Administration may initiate an enforcement proceeding as permitted under Federal law. (2) ENFORCEMENT ACTIONS.The Commission, by order, shall censure, place limitations on the activities, functions, or operations of, or reject the filing of any securitybased swap dealer or major security-based swap participant that has registered with the Commission pursuant to subsection (b) if it finds, on the record after notice and opportunity for hearing, that such censure, placing of limitations, or rejection is in the public interest and that such security-based swap dealer or major security-based swap participant, or any person associated with such security-based swap dealer or major security-based swap participant effecting or involved in effecting transactions in security-based swaps on behalf of such security-based swap dealer or major security-based swap participant, whether prior or subsequent to becoming so associated (A) has committed or omitted any act, or is subject to an order or finding, described in subparagraph (A), (D), or (E) of paragraph (4) of section 15(b); (B) has been convicted of any offense specified in subparagraph (B) of such paragraph (4) within 10 years of the commencement of the proceedings under this subsection; (C) is enjoined from any action, conduct, or practice specified in subparagraph (C) of such paragraph (4); (D) is subject to an order or a final order specified in subparagraph (F) or (H), respectively, of such paragraph (4); or (E) has been found by a foreign financial regulatory authority to have committed or 67
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omitted any act, or violated any foreign statute or regulation, described in subparagraph (G) of such paragraph (4). (3) PERSONNEL ENFORCEMENT ACTIONS.With respect to any person who is associated, who is seeking to become associated, or, at the time of the alleged misconduct, who was associated or was seeking to become associated with a security-based swap dealer or major security-based swap participant for the purpose of effecting or being involved in effecting security-based swaps on behalf of such security-based swap dealer or major security-based swap participant, the Commission, by order, shall censure, place limitations on the activities or functions of such person, or suspend for a period not exceeding 12 months, or bar such person from being associated with a security-based swap dealer or major security-based swap participant, if the Commission finds, on the record after notice and opportunity for a hearing, that such censure, placing of limitations, suspension, or bar is in the public interest and that such person (A) has committed or omitted any act, or is subject to an order or finding, described in subparagraph (A), (D), or (E) of paragraph (4) of section 15(b); (B) as been convicted of any offense specified in subparagraph (B) of such paragraph (4) within 10 years of the commencement of the proceedings under this subsection; (C) is enjoined from any action, conduct, or practice specified in subparagraph (C) of such paragraph (4); (D) is subject to an order or a final order specified in subparagraph (F) or (H), respectively, of such paragraph (4); or (E) has been found by a foreign financial regulatory authority to have committed or omitted any act, or violated any foreign statute or regulation, described in subparagraph (G) of such paragraph (4). (4) NO VIOLATIONS OF ORDERS.It shall be unlawful (A) for any person as to whom an order under paragraph (3) is in effect, without the consent of the Commission, willfully to become, or to be, associated with a securitybased swap dealer or major security-based swap participant in contravention of such order; or (B) for any security-based swap dealer or major security-based swap participant to permit such a person, without the consent of the Commission, to become or remain a person associated with the security-based swap dealer or major security-based swap participant in contravention of such order, if such security-based swap dealer or major security-based swap participant knew, or in the exercise of reasonable care should have known, of such order.. (e) Additions of Security-Based Swaps to Certain Enforcement Provisions.Paragraphs (1) through (3) of section 9(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78i(b)(1)(3)) are amended to read as follows: (1) any transaction in connection with any security whereby any party to such transaction acquires 68
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(A) any put, call, straddle, or other option or privilege of buying the security from or selling the security to another without being bound to do so; (B) any security futures product on the security; or (C) any security-based swap involving the security or the issuer of the security; (2) any transaction in connection with any security with relation to which he has, directly or indirectly, any interest in any (A) such put, call, straddle, option, or privilege; (B) such security futures product; or (C) such security-based swap; or (3) any transaction in any security for the account of any person who he has reason to believe has, and who actually has, directly or indirectly, any interest in any (A) such put, call, straddle, option, or privilege; (B) such security futures product with relation to such security; or (C) any security-based swap involving such security or the issuer of such security.. (f) Rulemaking Authority To Prevent Fraud, Manipulation and Deceptive Conduct in SecurityBased Swaps.Section 9 of the Securities Exchange Act of 1934 (15 U.S.C. 78i) is amended by adding at the end the following: (j) Prohibition.It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails, or of any facility of any national securities exchange, to effect any transaction in, or to induce or attempt to induce the purchase or sale of, any security-based swap, in connection with which such person engages in any fraudulent, deceptive, or manipulative act or practice, makes any fictitious quotation, or engages in any transaction, practice, or course of business which operates as a fraud or deceit upon any person. The Commission shall, for the purposes of this paragraph, by rules and regulations define, and prescribe means reasonably designed to prevent, such transactions, acts, practices, and courses of business as are fraudulent, deceptive, or manipulative, and such quotations as are fictitious.. (g) Position Limits and Position Accountability for Security-Based Swaps.The Securities Exchange Act of 1934 is amended by inserting after section 10A (15 U.S.C. 78j1) the following new section:

SEC. 10B. POSITION LIMITS AND POSITION ACCOUNTABILITY FOR SECURITY-BASED SWAPS AND LARGE TRADER REPORTING.
(a) Aggregate Position Limits.As a means reasonably designed to prevent fraud and manipulation, the Commission may, by rule or regulation, as necessary or appropriate in the public interest or for the protection of investors, establish limits (including related hedge exemption provisions) on the aggregate number or amount of positions that may be held by any 69
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person or persons across (1) securities listed on a national securities exchange; and (2) security-based swaps that perform or affect a significant price discovery function with respect to regulated markets. (b) Exemptions.The Commission, by rule, regulation, or order, may conditionally or unconditionally exempt any person or class of persons, any security-based swap or class of security-based swaps, or any transaction or class of transactions from any requirement it may establish under this section with respect to position limits. (c) Self-Regulatory Organization Rules.As a means reasonably designed to prevent fraud or manipulation, the Commission, by rule, regulation, or order, as necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of this title, may direct a self-regulatory organization (1) to adopt rules regarding the size of positions in any security-based swap and any security on which such security-based swap is based that may be held by (A) any member of such self-regulatory organization; or (B) any person for whom a member of such self-regulatory organization effects transactions in such security-based swap or other security; and (2) to adopt rules reasonably designed to ensure compliance with requirements prescribed by the Commission under subsection (a). (d) Large Security-Based Swap Trader Reporting. (1) PROHIBITION.It shall be unlawful for any person to enter into any security-based swap that performs or affects a significant price discovery function with respect to regulated markets if (A) such person shall directly or indirectly enter into such security-based swaps during any 1 day in an amount equal to or in excess of such amount as shall be fixed from time to time by the Commission; and (B) such person shall directly or indirectly have or obtain a position in such security-based swaps equal to or in excess of such amount as shall be fixed from time to time by the Commission, unless such person (i) files or causes to be filed with the properly designated officer of the Commission such reports regarding any transactions or positions described in subparagraphs (A) and (B) as the Commission may by rule or regulation require; and (ii) needs books and records of all such security-based swaps and any transactions and positions in any related security traded on or subject to the rules of any national securities exchange, and of purchase and sale commitments of, such a security. (2) RECORDKEEPING.The books and records required to be kept under paragraph (1) shall (A) show complete details concerning all transactions and positions as the 70
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Commission may by rule or regulation prescribe; and (B) be open at all times to inspection and examination by any representative of the Commission. (3) RULE OF CONSTRUCTION.For the purpose of this subsection, the security-based swaps, and securities transactions and positions of any person shall include such securitybased swaps, transactions and positions of any persons directly or indirectly controlled by such person. (e) Significant Price Discovery Function.In making a determination under this section whether a security-based swap performs or affects a significant price discovery function with respect to regulated markets, the Commission shall consider, as appropriate, the following: (1) PRICE LINKAGE.The extent to which the security-based swap uses or otherwise relies on a daily or final settlement price, or other major price parameter, of a security traded on a national securities exchange, to value a position, transfer or convert a position, financially settle a position, or close out a position. (2) ARBITRAGE.The extent to which the price for the security-based swap is sufficiently related to the price of a security traded on a national securities exchange so as to permit market participants to effectively arbitrage between the markets by simultaneously maintaining positions or executing trades in both markets on a frequent and recurring basis. (3) MATERIAL PRICE REFERENCE.The extent to which, on a frequent and recurring basis, bids, offers, or transactions in a security traded on a national securities exchange are directly based on, or are determined by referencing, the price generated by the securitybased swap. (4) MATERIAL LIQUIDITY.The extent to which the volume of security-based swaps being traded is sufficient to have a material effect on a security traded on a national securities exchange. (5) OTHER MATERIAL FACTORS.Such other material factors as the Commission specifies by rule or regulation as relevant to determine whether a security-based swap serves a significant price discovery function with respect to a regulated market.. (h) Public Reporting and Repositories for Security-Based Swap Agreements.Section 13 of the Securities Exchange Act of 1934 (15 U.S.C. 78m) is amended by adding at the end the following: (m) Public Reporting of Aggregate Security-Based Swap Data. (1) IN GENERAL.The Commission, or a person designated by the Commission pursuant to paragraph (2), shall make available to the public, in a manner that does not disclose the business transactions and market positions of any person, aggregate data on security-based swap trading volumes and positions from the sources set forth in paragraph (3). (2) DESIGNEE OF THE COMMISSION.The Commission may designate a clearing agency or a security-based swap repository to carry out the public reporting requirement described in paragraph (1). (3) SOURCES OF INFORMATION.The sources of the information to be publicly reported as described in paragraph (1) are 71
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(A) clearing agencies pursuant to section 3B; (B) security-based swap repositories pursuant to subsection (n); and (C) reports received by the Commission pursuant to section 13A. (n) Security-Based Swap Repositories. (1) REGISTRATION REQUIREMENT. (A) IN GENERAL.A person may register as a security-based swap repository by filing with the Commission an application in such form as the Commission, by rule, may prescribe, containing the rules of the security-based swap repository and such other information and documentation as the Commission, by rule, may prescribe as necessary or appropriate in the public interest, for the protection of investors, or in the furtherance of the purposes of this section. (B) INSPECTION AND EXAMINATION.Registered security-based swap repositories shall be subject to inspection and examination by any representatives of the Commission. (2) STANDARD SETTING. (A) DATA IDENTIFICATION.The Commission shall prescribe standards that specify the data elements for each security-based swap that shall be collected and maintained by each security-based swap repository. (B) DATA COLLECTION AND MAINTENANCE.The Commission shall prescribe data collection and data maintenance standards for security-based swap repositories. (C) COMPARABILITY.The standards prescribed by the Commission under this subsection shall be comparable to the data standards imposed by the Commission on clearing agencies that clear security-based swaps. (3) DUTIES.A security-based swap repository shall (A) accept data prescribed by the Commission for each security-based swap under paragraph (2); (B) maintain such data in such form and manner and for such period as may be required by the Commission; (C) provide to the Commission, or its designee, such information as is required by, and in a form and at a frequency to be determined by, the Commission, in order to comply with the public reporting requirements contained in subsection (m); and (D) make available, on a confidential basis, all data obtained by the security-based swap repository, including individual counterparty trade and position data, to the Commission, the appropriate Federal banking agencies, the Commodity Futures Trading Commission, the Board for Financial Stability, and the Department of Justice or to other persons the Commission deems appropriate, including foreign financial supervisors (including foreign futures authorities), foreign central banks, and foreign ministries. (4) REQUIRED REGISTRATION FOR SECURITY-BASED SWAP REPOSITORIES.Any person that is required to be registered as a securities-based swap repository under this subsection 72
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shall register with the Commission, regardless of whether that person also is registered with the Commodity Futures Trading Commission as a swap repository. (5) HARMONIZATION OF RULES.Not later than 180 days after the effective date of the Over-the-Counter Derivatives Markets Act of 2009, the Commission and the Commodity Futures Trading Commission shall jointly adopt uniform rules governing persons that are registered under this section and persons that are registered as swap repositories under the Commodity Exchange Act (7 U.S.C. 1 et seq.), including uniform rules that specify the data elements that shall be collected and maintained by each repository. (6) EXEMPTIONS.The Commission may exempt, conditionally or unconditionally, a security-based swap repository from the requirements of this section if the Commission finds that such security-based swap repository is subject to comparable, comprehensive supervision or regulation on a consolidated basis by the Commodity Futures Trading Commission, the Financial Institutions Regulatory Administration, or the appropriate governmental authorities in the organizations home country..

SEC. 754. SEGREGATION OF ASSETS HELD AS COLLATERAL IN SWAP TRANSACTIONS.

The Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is further amended by adding after section 3C (as added by section 753) the following:

SEC. 3D. SEGREGATION OF ASSETS HELD AS COLLATERAL IN SWAP TRANSACTIONS.

(a) Cleared Swaps.A security-based swap dealer or clearing agency by or through which funds or other property are held as margin or collateral to secure the obligations of a counterparty under a security-based swap to be cleared by or through a derivatives clearing agency shall segregate, maintain, and use the funds or other property for the benefit of the counterparty, in accordance with such rules and regulations as the Commission or the Financial Institutions Regulatory Administration shall prescribe. Any such funds or other property shall be treated as customer property under this Act. (b) Other Swaps.At the request of a counterparty to a security-based swap who provides funds or other property to a swap dealer as margin or collateral to secure the obligations of the counterparty under a security-based swap between the counterparty and the swap dealer that is not submitted for clearing to a derivatives clearing agency, the swap dealer shall segregate the funds or other property for the benefit of the counterparty, and maintain the funds or other property in an account which is carried by a third-party custodian and designated as a segregated account for the counterparty, in accordance with such rules and regulations as the Commission or the Financial Institutions Regulatory Administration may prescribe. This subsection shall not be interpreted to preclude commercial arrangements regarding the investment of the segregated funds or other property and the related allocation of gains and losses resulting from any such investment..

SEC. 755. REPORTING AND RECORDKEEPING.

(a) Additional Reporting Requirements.The Securities Exchange Act of 1934 (15 U.S.C. 73
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78a et seq.) is amended by inserting after section 13 the following section:

SEC. 13A. REPORTING AND RECORDKEEPING FOR CERTAIN SECURITY-BASED SWAPS.

(a) In General.Any person who enters into a security-based swap shall satisfy the reporting requirements under subsection (b), if such person (1) did not clear the security-based swap in accordance with section 3B; and (2) did not have data regarding the security-based swap accepted by a security-based swap repository in accordance with rules adopted by the Commission under section 13(n). (b) Reports.Any person described in subsection (a) shall (1) make such reports in such form and manner and for such period as the Commission shall prescribe by rule or regulation regarding the security-based swaps held by the person; and (2) keep books and records pertaining to the security-based swaps held by the person in such form and manner and for such period as may be required by the Commission, which books and records shall be open to inspection by any representative of the Commission, an appropriate Federal banking agency, the Commodity Futures Trading Commission, the Board for Financial Stability, and the Department of Justice. (c) Identical Data.In adopting rules under this section, the Commission shall require persons described in subsection (a) to report the same or more comprehensive data than the Commission requires security-based swap repositories to collect under section 13(n).. (b) Beneficial Ownership Reporting. (1) Section 13(d)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(d)(1)) is amended by inserting or otherwise becomes or is deemed to become a beneficial owner of any of the foregoing upon the purchase or sale of a security-based swap or other derivative instrument that the Commission may define by rule, and after Alaska Native Claims Settlement Act,. (2) Section 13(g)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(g)(1)) is amended by inserting or otherwise becomes or is deemed to become a beneficial owner of any security of a class described in subsection (d)(1) upon the purchase or sale of a securitybased swap or other derivative instrument that the Commission may define by rule after subsection (d)(1) of this section. (c) Reports by Institutional Investment Managers.Section 13(f)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(f)(1)) is amended by striking section 13(d)(1) of this title and inserting subsection (d)(1) of this section or otherwise becomes or is deemed to become a beneficial owner of any security of a class described in subsection (d)(1) upon the purchase or sale of a security-based swap or other derivative instrument that the Commission may define by rule,. (d) Administrative Proceeding Authority.Section 15(b)(4) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(b)(4)) is amended 74
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(1) in subparagraph (C), by inserting security-based swap dealer, major security-based swap participant, after government securities dealer,; and (2) in subparagraph (F), by inserting , or security-based swap dealer, or a major securitybased swap participant after or dealer. (e) Transactions by Corporate Insiders.Section 16(f) of the Securities Exchange Act of 1934 (15 U.S.C. 78p) is amended by inserting or security-based swaps after security futures products.

SEC. 756. STATE GAMING AND BUCKET SHOP LAWS.

Section 28(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78bb(a)) is amended to read as follows: (a) Additional Rights and Remedies; Recovery of Actual Damages; State Securities Commissions.Except as provided in subsection (f), the rights and remedies provided by this title shall be in addition to any and all other rights and remedies that may exist at law or in equity, but no person permitted to maintain a suit for damages under the provisions of this title shall recover, through satisfaction of judgment in 1 or more actions, a total amount in excess of his actual damages on account of the act complained of. Except as otherwise specifically provided in this title, nothing in this title shall affect the jurisdiction of the securities commission (or any agency or officer performing like functions) of any State over any security or any person insofar as it does not conflict with the provisions of this title or the rules and regulations thereunder. No State law which prohibits or regulates the making or promoting of wagering or gaming contracts, or the operation of bucket shops or other similar or related activities, shall invalidate (1) any put, call, straddle, option, privilege, or other security subject to this title (except a security-based swap agreement and any security that has a pari-mutuel payout or otherwise is determined by the Commission, acting by rule, regulation, or order, to be appropriately subject to such laws), or apply to any activity which is incidental or related to the offer, purchase, sale, exercise, settlement, or closeout of any such security; (2) any security-based swap between eligible contract participants; or (3) any security-based swap effected on a national securities exchange registered pursuant to section 6(b). No provision of State law regarding the offer, sale, or distribution of securities shall apply to any transaction in a security-based swap or a security futures product, except that this sentence shall not be construed as limiting any State antifraud law of general applicability..

SEC. 757. AMENDMENTS TO THE SECURITIES ACT OF 1933; TREATMENT OF SECURITY-BASED SWAPS.
(a) Definitions.Section 2(a) of the Securities Act of 1933 (15 U.S.C. 77b(a)) is amended (1) in paragraph (1), by inserting security-based swap, after security future,; (2) in paragraph (3), by adding at the end the following: Any offer or sale of a securitybased swap by or on behalf of the issuer of the securities upon which such security-based 75
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swap is based or is referenced, an affiliate of the issuer, or an underwriter, shall constitute a contract for sale of, sale of, offer for sale, or offer to sell such securities,; and (3) by adding at the end the following: (17) The terms swap and security-based swap have the same meanings as provided in sections 1a(35) and (38) of the Commodity Exchange Act (7 U.S.C. 1a(35) and (38)). (18) The terms purchase or sale of a security-based swap shall be deemed to mean the execution, termination (prior to its scheduled maturity date), assignment, exchange, or similar transfer or conveyance of, or extinguishing of rights or obligations under, a securitybased swap, as the context may require.. (b) Registration of Security-Based Swaps.Section 5 of the Securities Act of 1933 (15 U.S.C. 77e) is amended by adding at the end the following: (d) Mandatory Registration: Prohibition on Sale.Notwithstanding the provisions of section 3 or section 4, unless a registration statement meeting the requirements of subsection (a) of section 10 is in effect as to a security-based swap, it shall be unlawful for any person, directly or indirectly, to make use of any means or instruments of transportation or communication in interstate commerce or of the mails to offer to sell, offer to buy or purchase or sell a securitybased swap to any person who is not an eligible contract participant as defined in section 1a(13) of the Commodity Exchange Act (7 U.S.C. 1a(13))..

SEC. 758. OTHER AUTHORITY.

Unless otherwise provided by its terms, this subtitle does not divest any appropriate Federal banking agency, the Commission, the Commodity Futures Trading Commission, or other Federal or State agency, of any authority derived from any other applicable law.

SEC. 759. JURISDICTION.

Section 36 of the Securities Exchange Act of 1934 (15 U.S.C. 78mm) is amended by adding at the end the following: (c) Derivatives.The Commission shall not have the authority to grant exemptions from the security-based swap provisions of this Act or the Over-the-Counter Derivatives Markets Act of 2009, except as expressly authorized under the provisions of that Act..

Subtitle COther Provisions SEC. 761. INTERNATIONAL HARMONIZATION.

In order to promote effective and consistent global regulation of swaps and security-based swaps, the Securities and Exchange Commission, the Commodity Futures Trading Commission, the Financial Institutions Regulatory Administration, the Board for Financial Stability, and the Treasury Department (1) shall, both individually and collectively, consult and coordinate with foreign regulatory authorities on the establishment of consistent international standards with respect to the regulation of such swaps; and (2) may, both individually and collectively, agree to such information-sharing 76
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arrangements as may be deemed to be necessary or appropriate in the public interest or for the protection of investors and swap counterparties.

SEC. 762. INTERAGENCY COOPERATION.

(a) Joint Advisory Committee. (1) ESTABLISHMENT.The Securities and Exchange Commission and the Commodity Futures Trading Commission, shall establish a joint advisory committee to consider and develop solutions to emerging and ongoing issues of common interest relating to the trade and regulation of swaps and securities-based swaps. (2) MEMBERSHIP.The joint advisory committee shall be composed of individuals with expertise in commodities and securities trading, commodities and securities law, investor protection, consumer protection, and international markets. (3) REPORTING.Not later than 6 months after the date of enactment of this title, and every 6 months thereafter, the joint advisory committee shall report its findings and recommendations to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives. (b) Joint Enforcement Task Force.The Securities and Exchange Commission and the Commodity Futures Trading Commission shall jointly establish an inter-agency group to be known as the Joint Enforcement Task Force in order to improve market oversight, enhance enforcement, and relieve duplicative regulatory burdens. The Task Force shall consist of staff from each agency to coordinate and develop processes for conducting joint investigations in response to events that affect both the commodities and securities markets. The Task Force shall prepare and offer training programs for the staffs of both agencies, develop enforcement and examination standards and protocols, and coordinate information sharing. (c) Trading and Markets Fellowship Program. (1) IN GENERAL.The Securities and Exchange Commission, the Commodity Futures Trading Commission, and the Board of Governors of the Federal Reserve System shall jointly establish a Trading and Markets Fellowship Program in order to enhance staff understanding about the interactions between financial markets and the economy. (2) SELECTION OF FELLOWS.On January 1 of each calendar year, the Chairmen of the Securities and Exchange Commission, the Commodity Futures Trading Commission, and the Board of Governors of the Federal Reserve System shall jointly announce the selection of 3 employees from their respective agencies to participate in the fellowship program established under paragraph (1), for a total annual class size of 9 fellows per calendar year. (3) JOINT TRAINING CURRICULUM. (A) DEVELOPMENT.The Securities and Exchange Commission, the Commodity Futures Trading Commission, and the Board of Governors of the Federal Reserve System shall jointly develop a 1-month long training curriculum that focuses on the mission and activities of each agency, enforcement matters, and economic and financial analysis. (B) FACULTY.The training curriculum developed under subparagraph (A) shall be taught by senior officials from each agency, experienced academics, and professionals 77
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from commodities and securities trading. (C) MANDATORY ATTENDANCE.Each of the 9 fellows selected under paragraph (2) shall complete the training curriculum developed under this paragraph. (4) CROSS-AGENCY ROTATION. (A) IN GENERAL.Following the completion of the 1-month training curriculum developed under paragraph (3), each fellow shall be assigned to serve at each participating agency for 3 months each. (B) SUBMISSION OF PAPER.Upon completion of the Trading and Markets Fellowship Program, each fellow shall submit a written paper to the Chairmen of the Securities and Exchange Commission, the Commodity Futures Trading Commission, and the Board of Governors of the Federal Reserve System (i) summarizing his or her observations from participating in the program; and (ii) providing recommendations for enhancing the contribution of each agency to the stable functioning of the financial markets and economy of the nation. (d) Cross-Agency Enforcement.The Securities and Exchange Commission and the Commodity Futures Trading Commission shall jointly establish a cross-agency training and education curriculum for enforcement personnel in order to improve the ability of employees at both agencies to understand and respond to matters where both agencies have enforcement jurisdiction and interest. (e) Detailing of Staff.The Securities and Exchange Commission and the Commodity Futures Trading Commission shall jointly establish a program for the regular detailing of staff between such agencies.

SEC. 763. STUDY AND REPORT ON IMPLEMENTATION.

(a) Study Required.The Comptroller General of the United States shall conduct a study of (1) how the Commodity Futures Trading Commission and the Securities and Exchange Commission have implemented this title and the amendments made by this title; (2) the extent to which jurisdictional disputes have created challenges in the process of implementing this title and the amendments made by this title; (3) the benefits and drawbacks of harmonizing laws implemented by the Commodity Futures Trading Commission and the Securities and Exchange Commission, and merging those agencies; (4) the benefits and feasibility of (A) holding of both futures and securities products in the same account to allow cross-netting; and (B) creating the ability to cross-net across securities and futures accounts; and (5) the benefits and feasibility of imposing a uniform fiduciary duty on financial intermediaries who provide similar investment advisory services. (b) Report Required.Not later than 1 year after the date of enactment of this title, the 78
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Comptroller General shall submit a report on the results of the study required by this section to Congress, the Commodity Futures Trading Commission, and the Securities and Exchange Commission.

SEC. 764. EFFECTIVE DATE.

Except as specifically provided in the amendments made by this title, this title, and the amendments made by this title, shall take effect 180 days after the date of enactment of this Act.

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TITLE VIIIPAYMENT, CLEARING, AND SETTLEMENT SUPERVISION SEC. 801. SHORT TITLE.
This title may be cited as the Payment, Clearing, and Settlement Supervision Act of 2009.

SEC. 802. FINDINGS AND PURPOSES.

(a) Findings.Congress finds the following: (1) The proper functioning of the financial markets is dependent upon safe and efficient arrangements for the clearing and settlement of payment, securities, and other financial transactions. (2) Financial market utilities that conduct or support multilateral payment, clearing, or settlement activities may reduce risks for their participants and the broader financial system, but such utilities may also concentrate and create new risks and thus must be well designed and operated in a safe and sound manner. (3) Payment, clearing, and settlement activities conducted by financial institutions also present important risks to the participating financial institutions and to the financial system. (4) Enhancements to the regulation and supervision of systemically important financial market utilities and the conduct of systemically important payment, clearing, and settlement activities by financial institutions are necessary (A) to provide consistency; (B) to promote robust risk management and safety and soundness; (C) to reduce systemic risks; and (D) to support the stability of the broader financial system. (b) Purpose.The purpose of this title is to mitigate systemic risk in the financial system and promote financial stability by (1) authorizing the Board of Governors of the Federal Reserve System to prescribe uniform standards for the (A) management of risks by systemically important financial market utilities; and (B) conduct of systemically important payment, clearing, and settlement activities by financial institutions; (2) providing the Board of Governors of the Federal Reserve System an enhanced role in the supervision of risk management standards for systemically important financial market utilities; (3) strengthening the liquidity of systemically important financial market utilities; and (4) providing the Board of Governors of the Federal Reserve System an enhanced role in the supervision of risk management standards for systemically important payment, clearing, 1
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and settlement activities by financial institutions.

SEC. 803. DEFINITIONS.

In this title, the following definitions shall apply: (1) AFFILIATE.The term affiliate means any company that controls, is controlled by, or is under common control with another company. [(2) APPROPRIATE FINANCIAL REGULATOR.The term appropriate financial regulator means] [(A) the Financial Institutions Regulatory Administration, with respect to national banks and any Federal branch or Federal agency of a foreign bank;] [(B) the Board of Directors of the Corporation, with respect to state-chartered banks insured by the Corporation (other than member banks of the Federal Reserve System) and insured State branches of foreign banks;] [(C) the Financial Institutions Regulatory Administration, with respect to any savings association and any savings and loan holding company;] [(D) the Board, with respect to] [(i) member banks of the Federal Reserve System (other than national banks);] [(ii) branches and agencies of foreign banks (other than Federal branches, Federal agencies, and insured State branches of foreign banks);] [(iii) commercial lending companies owned or controlled by foreign banks;] [(iv) organizations operating under section 25 or 25A of the Federal Reserve Act (12 U.S.C. 601604a or 611 through 631); and] [(v) bank holding companies and their nonbank subsidiaries (except brokers, dealers, investment companies, and investment advisers registered with the Securities and Exchange Commission, and futures commission merchants, commodity trading advisors, and commodity pool operators registered with the Commodity Futures Trading Commission);] [(E) the National Credit Union Administration Board, with respect to any insured credit union under the Federal Credit Union Act (12 U.S.C. 1751 et seq.);] [(F) the Securities and Exchange Commission, with respect to] [(i) any broker or dealer registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.);] [(ii) any investment company registered with the Securities and Exchange Commission under the Investment Company Act of 1940 (15 U.S.C. 80a1 et seq.); and] [(iii) any investment adviser registered with the Securities and Exchange Commission under the Investment Advisers Act of 1940 (15 U.S.C. 80b1 et seq.);] [(G) the Commodity Futures Trading Commission, with respect to futures 2
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commission merchants, commodity trading advisors, and commodity pool operators registered with the Commodity Futures Trading Commission under the Commodity Exchange Act (7 U.S.C. 1 et seq.);] [(H) the applicable State insurance authority, with respect to any financial institution engaged in providing insurance under State insurance law; and] [(I) the Board, with respect to any other financial institution engaged in a designated activity.] (3) BOARD.The term Board means the Board of Governors of the Federal Reserve System. (4) CORPORATION.The term Corporation means the Federal Deposit Insurance Corporation. (5) DESIGNATED ACTIVITY.The term designated activity means a payment, clearing, or settlement activity that the Board for Financial Stability has designated as systemically important under section 804. (6) DESIGNATED FINANCIAL MARKET UTILITY.The term designated financial market utility means a financial market utility that the Board for Financial Stability has designated as systemically important under section 804. (7) FINANCIAL INSTITUTION.The term financial institution means (A) a depository institution, as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813); (B) a branch or agency of a foreign bank, as defined in section 1(b) of the International Banking Act of 1978 (12 U.S.C. 3101); (C) an organization operating under section 25 or 25A of the Federal Reserve Act (12 U.S.C. 601604a and 611 through 631); (D) a credit union, as defined in section 101 of the Federal Credit Union Act (12 U.S.C. 1752); (E) a broker or dealer, as defined in section 3 of the Securities Exchange Act of 1934 (15 U.S.C. 78c); (F) an investment company, as defined in section 3 of the Investment Company Act of 1940 (15 U.S.C. 80a3); (G) an insurance company, as defined in section 2 of the Investment Company Act of 1940 (15 U.S.C. 80a2); (H) an investment adviser, as defined in section 202 of the Investment Advisers Act of 1940 (15 U.S.C. 80b2); (I) a futures commission merchant, commodity trading advisor, or commodity pool operator, as defined in section 1a of the Commodity Exchange Act (7 U.S.C. 1a); and (J) any company engaged in activities that are financial in nature or incidental to a financial activity, as described in section 4 of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(k)). 3
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(8) FINANCIAL MARKET UTILITY.The term financial market utility means any person that manages or operates a multilateral system for the purpose of transferring, clearing, or settling payments, securities, or other financial transactions among financial institutions or between financial institutions and the person. (9) PAYMENT, CLEARING, OR SETTLEMENT ACTIVITY. (A) IN GENERAL.The term payment, clearing, or settlement activity means an activity carried out by 1 or more financial institutions to facilitate the completion of financial transactions. (B) FINANCIAL TRANSACTION.For the purposes of subparagraph (A), the term financial transaction includes (i) funds transfers; (ii) securities contracts; (iii) contracts of sale of a commodity for future delivery; (iv) forward contracts; (v) repurchase agreements; (vi) swap agreements; (vii) foreign exchange contracts; (viii) financial derivatives contracts; and (ix) any similar transaction that the Board for Financial Stability determines, by rule or order, to be a financial transaction for purposes of this title. (C) INCLUDED ACTIVITIES.When conducted with respect to a financial transaction, payment, clearing, and settlement activities may include (i) the calculation and communication of unsettled obligations between counterparties; (ii) the netting of transactions; (iii) provision and maintenance of trade, contract, or instrument information; (iv) the management of risks and activities associated with continuing obligations; (v) transmittal and storage of payment instructions; (vi) the movement of funds; (vii) the final settlement of obligations; and (viii) other similar functions. (10) PERSON.The term person means any corporation, company, association, firm, partnership, society, joint stock company, or other legal entity other than a natural person. (11) SECRETARY.The term Secretary means the Secretary of the Treasury. (12) STATE.The term State means any State, commonwealth, territory, or possession 4
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of the United States, the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, American Samoa, Guam, or the United States Virgin Islands. (13) SUPERVISORY AGENCY.The term Supervisory Agency means the Federal agency that has primary jurisdiction over a designated financial market utility under Federal banking, securities, or commodity futures laws, including (A) the Securities and Exchange Commission, with respect to a designated financial market utility that is a clearing agency registered with the Securities and Exchange Commission; (B) the Commodity Futures Trading Commission, with respect to a designated financial market utility that is a derivatives clearing organization registered with the Commodity Futures Trading Commission; and (C) the Financial Institutions Regulatory Administration, with respect to a designated financial market utility that is (i) an insured State nonmember bank or an insured branch of a foreign bank; (ii) a national bank or a Federal branch (other than an insured branch) or a Federal agency of a foreign bank; and (iii) a savings association or a savings and loan holding company. (14) SYSTEMICALLY IMPORTANT AND SYSTEMIC IMPORTANCE.The terms systemically important and systemic importance mean a situation where the failure of or a disruption to the functioning of a financial market utility or the conduct of a payment, clearing, or settlement activity could create, or increase, the risk of significant liquidity or credit problems spreading among financial institutions or markets and thereby threaten the stability of the financial system.

SEC. 804. DESIGNATION OF SYSTEMIC IMPORTANCE.

(a) Designation. (1) BOARD FOR FINANCIAL STABILITY.The Board for Financial Stability, on a nondelegable basis, shall designate those financial market utilities or payment, clearing, or settlement activities that the Board for Financial Stability determines are, or are likely to become, systemically important. (2) CONSIDERATIONS.In determining whether a financial market utility or payment, clearing, or settlement activity is, or is likely to become, systemically important, the Board for Financial Stability shall take into consideration the following: (A) The aggregate monetary value of transactions processed by the financial market utility or carried out through the payment, clearing, or settlement activity. (B) The relationship, interdependencies, or other interactions of the financial market utility or payment, clearing, or settlement activity with other financial market utilities or payment, clearing, or settlement activities. (C) The effect that the failure of or a disruption to the financial market utility or 5
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payment, clearing, or settlement activity would have on critical markets, financial institutions, or the broader financial system. (D) Any other factors that the Board for Financial Stability deems appropriate. (b) Rescission of Designation. (1) IN GENERAL.The Board for Financial Stability, on a nondelegable basis, shall rescind a designation of systemic importance for a designated financial market utility or designated activity if the Board for Financial Stability determines that the utility or activity no longer meets the standards for systemic importance. (2) EFFECT OF RESCISSION.Upon rescission, the financial market utility or financial institutions conducting the activity will no longer be subject to the provisions of this title or any rules or orders prescribed by the Board for Financial Stability under this title. (c) Consultation and Notice and Opportunity for Hearing. (1) FINANCIAL MARKET UTILITY.Before making any determination under subsection (a) or (b) with regard to a financial market utility, the Board for Financial Stability shall consult with the relevant Supervisory Agency. (2) ADVANCE NOTICE AND OPPORTUNITY FOR HEARING. (A) IN GENERAL.Before making any determination under subsection (a) or (b) with regard to a financial market utility or a payment, clearing, or settlement activity, the Board for Financial Stability shall provide the financial market utility or, in the case of a payment, clearing, or settlement activity, financial institutions with advance notice of the proposed determination of the Board for Financial Stability. (B) NOTICE IN FEDERAL REGISTER.The Board for Financial Stability shall provide such advance notice to financial institutions by publishing a notice in the Federal Register. (C) REQUESTS FOR HEARING.Within 30 days from the date of any notice of the proposed determination of the Board for Financial Stability, the financial market utility or, in the case of a payment, clearing, or settlement activity, a financial institution engaged in the designated activity may request in writing an opportunity for a written or oral hearing before the Board for Financial Stability to demonstrate that the proposed designation or rescission of designation is not supported by substantial evidence. (D) WRITTEN SUBMISSIONS.Upon receipt of a timely request, the Board for Financial Stability shall fix a time, not more than 30 days after receipt of the request, unless extended at the request of the financial market utility or financial institution, and place at which the financial market utility or financial institution may appear, personally or through counsel, to submit written materials, or, at the sole discretion of the Board for Financial Stability, oral testimony or oral argument. (3) EMERGENCY EXCEPTION. (A) WAIVER OR MODIFICATION BY VOTE OF THE BOARD FOR FINANCIAL STABILITY. The Board for Financial Stability may waive or modify the requirements of paragraph (3) if the Board for Financial Stability determines, by an affirmative vote of not less 6

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than \2/3\ of all members then serving and available, that the waiver or modification is necessary to prevent or mitigate an immediate threat to the financial system posed by the financial market utility or the payment, clearing, or settlement activity. (B) NOTICE OF WAIVER OR MODIFICATION.The Board for Financial Stability shall provide notice of the waiver or modification to the financial market utility concerned or, in the case of a payment, clearing, or settlement activity, to financial institutions, as soon as practicable, which shall be no later than 24 hours after the waiver or modification in the case of a financial market utility and 3 business days in the case of financial institutions. The Board for Financial Stability shall provide the notice to financial institutions by posting a notice on the website of the Board for Financial Stability and by publishing a notice in the Federal Register. (d) Notification of Final Determination. (1) AFTER HEARING.Within 60 days of any hearing under subsection (c)(3), the Board for Financial Stability shall notify the financial market utility or financial institutions of the final determination of the Board in writing, which shall include findings of fact upon which the determination of the Board for Financial Stability is based. (2) WHEN NO HEARING REQUESTED.If the Board for Financial Stability does not receive a timely request for a hearing under subsection (c)(3), the Board for Financial Stability shall notify the financial market utility or financial institutions of the final determination of the Board for Financial Stability in writing not later than 30 days after the expiration of the date by which a financial market utility or a financial institution could have requested a hearing. All notices to financial institutions under this subsection shall be published in the Federal Register.

SEC. 805. STANDARDS FOR SYSTEMICALLY IMPORTANT FINANCIAL MARKET UTILITIES AND PAYMENT, CLEARING, OR SETTLEMENT ACTIVITIES.
(a) Authority To Prescribe Standards.The Board, by rule or order, and in consultation with the Board for Financial Stability, Commodity Futures Trading Commission, the Securities and Exchange Commission, and the appropriate Supervisory Agency, shall prescribe risk management standards, taking into consideration relevant international standards, governing (1) the operations of designated financial market utilities; and (2) the conduct of designated activities by financial institutions. (b) Objectives and Principles.The objectives and principles for the risk management standards prescribed under subsection (a) shall be to (1) promote robust risk management; (2) promote safety and soundness; (3) reduce systemic risks; and (4) support the stability of the broader financial system. (c) Scope.The standards prescribed under subsection (a) may address areas such as 7
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(1) risk management policies and procedures; (2) margin, collateral, capital, and default policies and procedures; (3) the ability to complete timely clearing and settlement of financial transactions; and (4) other areas that the Board determines are necessary to achieve the objectives and principles in subsection (b). (d) Compliance Required.Designated financial market utilities and financial institutions engaged in designated activities shall conduct their operations in compliance with the applicable risk management standards prescribed by the Board.

SEC. 806. OPERATIONS OF DESIGNATED FINANCIAL MARKET UTILITIES.

(a) Federal Reserve Account and Services.The Board may authorize a Federal Reserve Bank to establish and maintain an account for a designated financial market utility and provide services to the designated financial market utility that the Federal Reserve Bank is authorized under the Federal Reserve Act to provide to a depository institution, subject to any applicable rules, orders, standards, or guidelines prescribed by the Board. (b) Advances.The Board may authorize a Federal Reserve Bank to provide to a designated financial market utility the same discount and borrowing privileges as the Federal Reserve Bank may provide to a depository institution under the Federal Reserve Act, subject to any applicable rules, orders, standards, or guidelines prescribed by the Board. (c) Earnings on Federal Reserve Balances.A Federal Reserve Bank may pay earnings on balances maintained by or on behalf of a designated financial market utility in the same manner and to the same extent as the Federal Reserve Bank may pay earnings to a depository institution under the Federal Reserve Act, subject to any applicable rules, orders, standards, or guidelines prescribed by the Board. (d) Reserve Requirements.The Board may exempt a designated financial market utility from, or modify any, reserve requirements under section 19 of the Federal Reserve Act (12 U.S.C. 461) applicable to a designated financial market utility. (e) Changes to Rules, Procedures, or Operations. (1) REFERENCE.For purposes of paragraphs (2) and (3), all references to the phrase Supervisory Agency or the Board mean Supervisory Agency or, in the absence of a Supervisory Agency, the Board. (2) ADVANCE NOTICE. (A) ADVANCE NOTICE OF PROPOSED CHANGES REQUIRED.A designated financial market utility shall provide 60-days advance notice to its Supervisory Agency and the Board of any proposed change to its rules, procedures, or operations that could as such term is to be defined by the Board materially affect, the nature or level of risks presented by the designated financial market utility. (B) CONTENTS OF NOTICE.The notice of a proposed change shall describe (i) the nature of the change and expected effects on risks to the designated 8
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financial market utility, its participants, or the market; and (ii) how the designated financial market utility plans to manage any identified risks. (C) ADDITIONAL INFORMATION.The Supervisory Agency or the Board may require a designated financial market utility to provide any information necessary to assess the effect the proposed change would have on the nature or level of risks associated with the designated financial market utilitys payment, clearing, or settlement activities and the sufficiency of any proposed risk management techniques. (D) NOTICE OF OBJECTION.The Supervisory Agency or the Board shall notify the designated financial market utility of any objection regarding the proposed change within 60 days from the later of (i) the date that the notice of the proposed change is received; or (ii) the date any further information requested for consideration of the notice is received. (E) CHANGE NOT ALLOWED IF OBJECTION.A designated financial market utility shall not implement a change to which the Board or the Supervisory Agency has an objection. (F) CHANGE ALLOWED IF NO OBJECTION WITHIN 60 DAYS.A designated financial market utility may implement a change if it has not received an objection to the proposed change within 60 days of the later of (i) the date that the Supervisory Agency or the Board receives the notice of proposed change; or (ii) the date the Supervisory Agency or the Board receives any further information it requests for consideration of the notice. (G) REVIEW EXTENSION FOR NOVEL OR COMPLEX ISSUES.The Supervisory Agency or the Board may, during the 60-day review period, extend the review period for an additional 60 days for proposed changes that raise novel or complex issues, subject to the Supervisory Agency or the Board providing the designated financial market utility with prompt written notice of the extension. Any extension under this subparagraph will extend the time periods under subparagraphs (D) and (F). (H) CHANGE ALLOWED EARLIER IF NOTIFIED OF NO OBJECTION.A designated financial market utility may implement a change in less than 60 days from the date of receipt of the notice of proposed change by the Supervisory Agency or the Board, or the date the Supervisory Agency or the Board receives any further information it requested, if the Supervisory Agency or the Board notifies the designated financial market utility in writing that it does not object to the proposed change and authorizes the designated financial market utility to implement the change on an earlier date, subject to any conditions imposed by the Supervisory Agency or the Board. (3) EMERGENCY CHANGES. (A) IN GENERAL.A designated financial market utility may implement a change that would otherwise require advance notice under this subsection if it determines 9

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that (i) an emergency exists; and (ii) immediate implementation of the change is necessary for the designated financial market utility to continue to provide its services in a safe and sound manner. (B) NOTICE REQUIRED WITHIN 24 HOURS.The designated financial market utility shall provide notice of any such emergency change to its Supervisory Agency and the Board, as soon as practicable, which shall be no later than 24 hours after implementation of the change. (C) CONTENTS OF EMERGENCY NOTICE.In addition to the information required for changes requiring advance notice, the notice of an emergency change shall describe (i) the nature of the emergency; and (ii) the reason the change was necessary for the designated financial market utility to continue to provide its services in a safe and sound manner. (D) MODIFICATION OR RESCISSION OF CHANGE MAY BE REQUIRED.The Supervisory Agency or the Board may require modification or rescission of the change if it finds that the change is not consistent with the purposes of this Act or any rules, orders, or standards prescribed by the Board hereunder. (4) COPYING THE BOARD.In the case of a designated financial market utility that has a Supervisory Agency, the Supervisory Agency shall provide the Board concurrently with a complete copy of any notice, request, or other information it issues, submits, or receives under this subsection. (5) CONSULTATION WITH BOARD.Before taking any action on, or completing its review of, a change proposed by a designated financial market utility, the Supervisory Agency shall consult with the Board.

SEC. 807. EXAMINATION OF AND ENFORCEMENT ACTIONS AGAINST DESIGNATED FINANCIAL MARKET UTILITIES.
(a) Examination.Notwithstanding any other provision of law and subject to subsection (d), the Supervisory Agency shall conduct examinations of a designated financial market utility at least once annually in order to determine the following: (1) The nature of the operations of, and the risks borne by, the designated financial market utility. (2) The financial and operational risks presented by the designated financial market utility to financial institutions, critical markets, or the broader financial system. (3) The resources and capabilities of the designated financial market utility to monitor and control such risks. (4) The safety and soundness of the designated financial market utility. 10
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(5) The designated financial market utilitys compliance with (A) this title; and (B) the rules and orders prescribed by the Board under this title. (b) Service Providers.Whenever a service integral to the operation of a designated financial market utility is performed for the designated financial market utility by another entity, whether an affiliate or non-affiliate and whether on or off the premises of the designated financial market utility, the Supervisory Agency may examine whether the provision of that service is in compliance with applicable law, rules, orders, and standards to the same extent as if the designated financial market utility were performing the service on its own premises. (c) Enforcement.Except as provided in subsections (e) and (f), a designated financial market utility shall be subject to the provisions of subsections (b) through (n) of section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818) in the same manner and to the same extent as if the designated financial market utility were an insured depository institution for which the Supervisory Agency is the appropriate Federal banking agency, as that term is defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813). (d) Board Involvement in Examinations. (1) BOARD CONSULTATION ON EXAMINATION PLANNING.The Supervisory Agency shall consult with the Board regarding the scope and methodology of any examination conducted under subsections (a) and (b). (2) BOARD PARTICIPATION IN EXAMINATION.The Board may, in its discretion, participate in any examination led by a Supervisory Agency and conducted under subsections (a) and (b). (e) Board Enforcement Recommendations. (1) RECOMMENDATION.The Board may at any time recommend to the Supervisory Agency that such agency take enforcement action against a designated financial market utility. Any such recommendation for enforcement action shall provide a detailed analysis supporting the Boards recommendation. (2) CONSIDERATION.The Supervisory Agency shall consider the Boards recommendation and submit a response to the Board within 30 days. (3) MEDIATION.If the Supervisory Agency rejects, in whole or in the part, the Boards recommendation, the Board may dispute the matter by referring it to the Board for Financial Stability, which shall attempt to resolve the dispute. (4) ENFORCEMENT ACTION.If the Board for Financial Stability is unable to resolve the dispute under paragraph (3) within 30 days from the date of referral, the Board may (A) exercise the enforcement authority referenced in subsection (c) as if it were the Supervisory Agency; and (B) take enforcement action against the designated financial market utility. (f) Designated Financial Market Utilities Without a Supervisory Agency.In the case of a designated financial market utility that is not under the primary jurisdiction of a Supervisory Agency, the Board shall have examination and enforcement authority under subsections (a) 11
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through (c) with respect to the designated financial market utility and any service providers in the same manner and to the same extent as if the Board were the Supervisory Agency. (g) Emergency Enforcement Actions by the Board. (1) IMMINENT RISK OF SUBSTANTIAL HARM.The Board may, after consulting with the Board for Financial Stability and the Supervisory Agency, take enforcement action against a designated financial market utility if the Board has reasonable cause to believe that (A) either (i) an action engaged in, or contemplated by, a designated financial market utility (including any change proposed by the designated financial market utility to its rules, procedures, or operations that would otherwise be subject to section 806(e)); or (ii) the condition of a designated financial market utility, poses an imminent risk of substantial harm to financial institutions, critical markets, or the broader financial system; and (B) the imminent risk of substantial harm precludes the Boards use of the procedures in subsection (e). (2) ENFORCEMENT AUTHORITY.The Board is authorized to take action under paragraph (1). In taking any enforcement action against a designated financial market utility authorized under this paragraph, the Board may act in the same manner and to the same extent as the Financial Institution Regulatory Administration would act in taking enforcement action against a bank or depository institution. (3) PROMPT NOTICE TO SUPERVISORY AGENCY OF ENFORCEMENT ACTION.Within 24 hours of taking an enforcement action under this subsection, the Board shall provide written notice to the designated financial market utilitys Supervisory Agency containing a detailed analysis of the Boards action, with supporting documentation included.

SEC. 808. EXAMINATION OF AND ENFORCEMENT ACTIONS AGAINST FINANCIAL INSTITUTIONS ENGAGED IN DESIGNATED ACTIVITIES.
(a) Examination.The appropriate financial regulator is authorized to examine a financial institution engaged in designated activities in order to determine the following: (1) The nature and scope of the designated activities engaged in by the financial institution. (2) The financial and operational risks the designated activities engaged in by the financial institution may pose to the safety and soundness of the financial institution. (3) The financial and operational risks the designated activities engaged in by the financial institution may pose to other financial institutions, critical markets, or the broader financial system. (4) The resources available to and the capabilities of the financial institution to monitor and control the risks described in paragraphs (2) and (3). 12
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(5) The financial institutions compliance with this title and the rules and orders prescribed by the Board under this title. (b) Enforcement.The appropriate financial regulator shall take such actions that it deems necessary to ensure that a financial institution engaged in designated activities complies with (1) this title; and (2) the rules and orders prescribed by the Board under this title. (c) Technical Assistance.The Board shall consult with and provide such technical assistance as may be required by the appropriate financial regulators to ensure that the Boards rules and orders prescribed under this title are interpreted and applied in as consistent and uniform a manner as practicable. (d) Delegation. (1) EXAMINATION. (A) REQUEST TO BOARD.The appropriate financial regulator may request the Board to conduct or participate in an examination of a financial institution engaged in designated activities in order to assess the financial institutions compliance with (i) this title; or (ii) the Boards rules or orders prescribed under this title. (B) EXAMINATION BY BOARD.Upon receipt of an appropriate written request, the Board will conduct the examination under such terms and conditions to which the Board and the appropriate financial regulator mutually agree. (2) ENFORCEMENT. (A) REQUEST TO BOARD.The appropriate financial regulator may request the Board to enforce this title or the rules or orders prescribed by the Board under this title against a financial institution engaged in designated activities. (B) ENFORCEMENT BY BOARD.Upon receipt of an appropriate written request, the Board shall determine whether an enforcement action is warranted, and, if so, it shall enforce compliance with this title or the rules or orders prescribed by the Board under this title utilizing the authorities referenced in section 807(c), in which case the Board may act in the same manner and to the same extent as the Financial Institution Regulatory Administration would act in taking enforcement action against a bank or depository institution. (e) Back-up Authority of the Board. (1) EXAMINATION AND ENFORCEMENT.Notwithstanding any other provision of law, the Board may (A) conduct an examination of any financial institution engaged in a designated activity; and (B) enforce the provisions of this title or any rules or orders prescribed by the Board under this title against any financial institution engaged in a designated activity. (2) LIMITATIONS. 13
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(A) EXAMINATION.The Board may exercise the authority described in paragraph (1)(A) only if the Board has (i) reasonable cause to believe that a financial institution is not in compliance with this title or the rules or orders prescribed by the Board under this title with respect to a designated activity; (ii) notified, in writing, the appropriate financial regulator and the Board for Financial Stability of its belief under clause (i) with supporting documentation included; (iii) requested the appropriate financial regulator to conduct a prompt examination of the financial institution; and (iv) either (I) not been afforded a reasonable opportunity to participate in an examination of the financial institution by the appropriate financial regulator within 30 days after the date of the Boards notification under clause (ii); or (II) reasonable cause to believe that the financial institutions noncompliance with this title or the rules or orders prescribed by the Board under this title poses a substantial risk to other financial institutions, critical markets, or the broader financial system, subject to the Board affording the appropriate financial regulator a reasonable opportunity to participate in the examination. (B) ENFORCEMENT.The Board may exercise the authority described in paragraph (1)(B) only if the Board has (i) reasonable cause to believe that a financial institution is not in compliance with this title or the rules or orders prescribed by the Board under this title with respect to a designated activity; (ii) notified, in writing, the appropriate financial regulator and the Board for Financial Stability of its belief under clause (i) with supporting documentation included and with a recommendation that the appropriate financial regulator take 1 or more specific enforcement actions against the financial institution; and (iii) either (I) not been notified, in writing, by the appropriate financial regulator of the commencement of an enforcement action recommended by the Board against the financial institution within 30 days from the date of the notification under clause (ii); or (II) reasonable cause to believe that the financial institutions noncompliance with this title or the rules or orders prescribed by the Board under this title poses a substantial risk to other financial institutions, critical markets, or the broader financial system, subject to the Board notifying the appropriate financial regulator of the Boards enforcement action. (3) ENFORCEMENT PROVISIONS.The Board is authorized to take action under paragraph (1). In taking any enforcement action under this paragraph, the Board may act in the same 14
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manner and to the same extent as the Financial Institution Regulatory Administration would act in taking enforcement action against a bank or depository institution.

SEC. 809. REQUESTS FOR INFORMATION, REPORTS, OR RECORDS.

(a) Information to Assess Systemic Importance. (1) FINANCIAL MARKET UTILITIES.The Board for Financial Stability is authorized to require any financial market utility to submit such information as the Board for Financial Stability may require for the sole purpose of assessing whether that financial market utility is systemically important, but only if the Board for Financial Stability has reasonable cause to believe that the financial market utility meets the standards for systemic importance set forth in section 804. (2) FINANCIAL INSTITUTIONS ENGAGED IN PAYMENT, CLEARING, OR SETTLEMENT ACTIVITIES.The Board for Financial Stability is authorized to require any financial institution to submit such information as the Board for Financial Stability may require for the sole purpose of assessing whether any payment, clearing, or settlement activity engaged in or supported by a financial institution is systemically important, but only if the Board for Financial Stability has reasonable cause to believe that the activity meets the standards for systemic importance set forth in section 804. (b) Reporting After Designation. (1) DESIGNATED FINANCIAL MARKET UTILITIES.The Board and the Board for Financial Stability may require a designated financial market utility to submit reports or data to the Board and the Board for Financial Stability in such frequency and form as deemed necessary by the Board and the Board for Financial Stability in order to assess the safety and soundness of the utility and the systemic risk that the utilitys operations pose to the financial system. (2) FINANCIAL INSTITUTIONS ENGAGED IN DESIGNATED ACTIVITIES.The Board and the Board for Financial Stability may require 1 or more financial institutions engaged in a designated activity to submit, in such frequency and form as deemed necessary by the Board and the Board for Financial Stability, reports and data to the Board and the Board for Financial Stability solely with respect to the conduct of the designated activity and solely to assess whether (A) the rules, orders, or standards prescribed by the Board with respect to the designated activity appropriately address the risks to the financial system presented by such activity; and (B) the financial institutions are in compliance with this title and the rules and orders prescribed by the Board under this title with respect to the designated activity. (c) Coordination With Appropriate Federal Supervisory Agency. (1) ADVANCE COORDINATION.Before directly requesting any material information from, or imposing reporting or recordkeeping requirements on, any financial market utility or any financial institution engaged in a payment, clearing, or settlement activity, the Board and the Board for Financial Stability shall coordinate with the Supervisory Agency for a 15
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financial market utility or the appropriate financial regulator for a financial institution to determine if the information is available from or may be obtained by the agency in the form, format, or detail required by the Board and the Board for Financial Stability. (2) SUPERVISORY REPORTS.Notwithstanding any other provision of law, the Supervisory Agency, the appropriate financial regulator, and the Board are authorized to disclose to each other and the Board for Financial Stability a copy of any examination report a copy of any examination report or similar report regarding any financial market utility or any financial institution engaged in payment, clearing, or settlement activities. (d) Timing of Response From Appropriate Federal Supervisory Agency.If the information, report, records, or data requested by the Board or the Board for Financial Stability under subsection (c)(1) are not provided in full by the Supervisory Agency or the appropriate financial regulator in less than 15 days after the date on which the material is requested, the Board or the Board for Financial Stability may request the information or impose recordkeeping or reporting requirements directly on such persons as provided in subsections (a) and (b) with notice to the agency. (e) Sharing of Information. (1) MATERIAL CONCERNS.Notwithstanding any other provision of law, the Board, the Board for Financial Stability, the appropriate financial regulator, and any Supervisory Agency are authorized to (A) promptly notify each other of material concerns about a designated financial market utility or any financial institution engaged in designated activities; and (B) share appropriate reports, information or data relating to such concerns. (2) OTHER INFORMATION.Notwithstanding any other provision of law, the Board or the Board for Financial Stability may, under such terms and conditions as it deems appropriate, provide confidential supervisory information and other information obtained under this title to other persons it deems appropriate, including the Secretary, State financial institution supervisory agencies, foreign financial supervisors, foreign central banks, and foreign finance ministries, subject to reasonable assurances of confidentiality. (f) Privilege Maintained.The Board, the Board for Financial Stability, the appropriate financial regulator, and any Supervisory Agency providing reports or data under this section shall not be deemed to have waived any privilege applicable to those reports or data, or any portion thereof, by providing the reports or data to the other party or by permitting the reports or data, or any copies thereof, to be used by the other party. (g) Disclosure Exemption.Information obtained by the Board or the Board for Financial Stability under this section and any materials prepared by the Board or the Board for Financial Stability regarding its assessment of the systemic importance of financial market utilities or any payment, clearing, or settlement activities engaged in by financial institutions, and in connection with its supervision of designated financial market utilities and designated activities, shall be confidential supervisory information exempt from disclosure under section 552 of title 5, United States Code. For purposes of such section 552, this subsection shall be considered a statute described in subsection (b)(3) of such section 552.

SEC. 810. RULEMAKING.

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The Board and the Board for Financial Stability are authorized to prescribe such rules and issue such orders as may be necessary to administer and carry out the purposes of this title and prevent evasions thereof.

SEC. 811. OTHER AUTHORITY.

Unless otherwise provided by its terms, this title does not divest any appropriate financial regulator, any Supervisory Agency, or any other Federal or State agency, of any authority derived from any other applicable law.

SEC. 812. EFFECTIVE DATE.

This title is effective as of the date of enactment of this Act.

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