Sec. 101 Short title
This title may be cited as the “Futures Customer Protection Act”.
Title I — Customer protections
I Customer protections
Sec. 102 Enhanced protections for futures customers
Section 17 of the Commodity Exchange Act (7 U.S.C. 21) is amended by adding at the end the following:
“(s) A registered futures association shall—
“(1) require each member of the association that is a futures commission merchant to maintain written policies and procedures regarding the maintenance of—
“(A) the residual interest of the member, as described in section 1.23 of title 17, Code of Federal Regulations, in any customer segregated funds account of the member, as identified in section 1.20 of such title, and in any foreign futures and foreign options customer secured amount funds account of the member, as identified in section 30.7 of such title; and
“(B) the residual interest of the member, as described in section 22.2(e)(4) of such title, in any cleared swaps customer collateral account of the member, as identified in section 22.2 of such title; and
“(2) establish rules to govern the withdrawal, transfer or disbursement by any member of the association, that is a futures commission merchant, of the member's residual interest in customer segregated funds as provided in such section 1.20, in foreign futures and foreign options customer secured amount funds, identified as provided in such section 30.7, and from a cleared swaps customer collateral, identified as provided in such section 22.2.”
Sec. 103 Electronic confirmation of customer funds
Section 17 of the Commodity Exchange Act (7 U.S.C. 21), as amended by section 102 of this Act, is amended by adding at the end the following:
“(t) A registered futures association shall require any member of the association that is a futures commission merchant to—
“(1) use an electronic system or systems to report financial and operational information to the association, including information related to customer segregated funds, foreign futures and foreign options customer secured amount funds accounts, and cleared swaps customer collateral, in accordance with such terms, conditions, documentation standards, and regular time intervals as are established by the association;
“(2) instruct each depository, including any bank, trust company, derivatives clearing organization, or futures commission merchant, holding customer segregated funds under section 1.20 of title 17, Code of Federal Regulations, foreign futures and foreign options customer secured amount funds under section 30.7 of such title, or cleared swap customer funds under section 22.2 of such title, to report balances in the futures commission merchant's section 1.20 customer segregated funds, section 30.7 foreign futures and foreign options customer secured amount funds, and section 22.2 cleared swap customer funds, to the registered futures association or another party designated by the registered futures association, in the form, manner, and interval prescribed by the registered futures association; and
“(3) hold section 1.20 customer segregated funds, section 30.7 foreign futures and foreign options customer secured amount funds and section 22.2 cleared swaps customer funds in a depository that reports the balances in these accounts of the futures commission merchant held at the depository to the registered futures association or another party designated by the registered futures association in the form, manner, and interval prescribed by the registered futures association.”
Sec. 104 Notice and certifications providing additional customer protections
Section 17 of the Commodity Exchange Act (7 U.S.C. 21), as amended by sections 102 and 103 of this Act, is amended by adding at the end the following:
“(u) A futures commission merchant that has adjusted net capital in an amount less than the amount required by regulations established by the Commission or a self-regulatory organization of which the futures commission merchant is a member shall immediately notify the Commission and the self-regulatory organization of this occurrence.
“(v) A futures commission merchant that does not hold a sufficient amount of funds in segregated accounts for futures customers under section 1.20 of title 17, Code of Federal Regulations, in foreign futures and foreign options secured amount accounts for foreign futures and foreign options secured amount customers under section 30.7 of such title, or in segregated accounts for cleared swap customers under section 22.2 of such title, as required by regulations established by the Commission or a self-regulatory organization of which the futures commission merchant is a member, shall immediately notify the Commission and the self-regulatory organization of this occurrence.
“(w) Within such time period established by the Commission after the end of each fiscal year, a futures commission merchant shall file with the Commission a report from the chief compliance officer of the futures commission merchant containing an assessment of the internal compliance programs of the futures commission merchant.”
Sec. 105 Futures commission merchant compliance
by redesignating paragraphs (1) and (2) as subparagraphs (A) and (B);
by inserting “(1)” before “It shall be unlawful”; and
by adding at the end the following new paragraph:
“(2) Any rules or regulations requiring a futures commission merchant to maintain a residual interest in accounts held for the benefit of customers in amounts at least sufficient to exceed the sum of all uncollected margin deficits of such customers shall provide that a futures commission merchant shall meet its residual interest requirement as of the end of each business day calculated as of the close of business on the previous business day.”
Conforming amendment— Section 4d(h) of the Commodity Exchange Act (7 U.S.C. 6d(h)) is amended by striking “Notwithstanding subsection (a)(2)” and inserting “Notwithstanding subsection (a)(1)(B)”.
Sec. 106 Certainty for futures customers and market participants
Section 20(a) of the Commodity Exchange Act (7 U.S.C. 24(a)) is amended—
by striking “and” at the end of paragraph (4);
by striking the period at the end of paragraph (5) and inserting “; and”; and
by adding at the end the following:
“(6) that cash, securities, or other property of the estate of a commodity broker, including the trading or operating accounts of the commodity broker and commodities held in inventory by the commodity broker, shall be included in customer property, subject to any otherwise unavoidable security interest, or otherwise unavoidable contractual offset or netting rights of creditors (including rights set forth in a rule or bylaw of a derivatives clearing organization or a clearing agency) in respect of such property, but only to the extent that the property that is otherwise customer property is insufficient to satisfy the net equity claims of public customers (as such term may be defined by the Commission by rule or regulation) of the commodity broker.”
Sec. 107 Study on high-frequency trading
In general— Not later than one year after the date of the enactment of this Act, the Commodity Futures Trading Commission shall submit to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate a report examining the effect of the practice commonly referred to as high-frequency trading on markets under its jurisdiction.
Specific areas examined in report— In preparing the report submitted under subsection (a), the Commission shall particularly examine each of the following areas:
The technology, personnel, or other resources the Commission may require for purposes of monitoring the effect of high-frequency trading.
The role such trading plays in providing market liquidity.
Whether the technology creates discrepancies in the marketplace between market participants.
Whether the existing authority of the Commission with respect to such trading is sufficient to meet the Commission’s mission to—
protect market participants and the public from fraud, manipulation, abusive practices, and systemic risk related to derivatives; and
foster transparent, open, competitive, and financially sound markets.
Whether such trading increases market volatility, including short term market swings.