H.R. 2289 — what changed

changed Section 15(a) of the Commodity Exchange Act (7 U.S.C. 19(a)) is amended by striking paragraphs (1) and (2) and inserting the following:amended—

added “(1) In general—Before promulgating a regulation under this Act or issuing an order (except as provided in paragraph (3)), the Commission, through the Office of the Chief Economist, shall assess and publish in the regulation or order the costs and benefits, both qualitative and quantitative, of the proposed regulation or order, and the proposed regulation or order shall state its statutory justification.

added “(2) Considerations—In making a reasoned determination of the costs and the benefits, the Commission shall evaluate—

added “(A) considerations of protection of market participants and the public;

added “(B) considerations of the efficiency, competitiveness, and financial integrity of futures and swaps markets;

added “(C) considerations of the impact on market liquidity in the futures and swaps markets;

added “(D) considerations of price discovery;

added “(E) considerations of sound risk management practices;

added “(F) available alternatives to direct regulation;

added “(G) the degree and nature of the risks posed by various activities within the scope of its jurisdiction;

added “(H) the costs of complying with the proposed regulation or order by all regulated entities, including a methodology for quantifying the costs (recognizing that some costs are difficult to quantify);

added “(I) whether the proposed regulation or order is inconsistent, incompatible, or duplicative of other Federal regulations or orders;

added “(J) the cost to the Commission of implementing the proposed regulation or order by the Commission staff, including a methodology for quantifying the costs;

added “(K) whether, in choosing among alternative regulatory approaches, those approaches maximize net benefits (including potential economic and other benefits, distributive impacts, and equity); and

added “(L) other public interest considerations.”

added “(4) Judicial review—Notwithstanding section 24(d), a court shall affirm a Commission assessment of costs and benefits under this subsection, unless the court finds the assessment to be an abuse of discretion.”

removed “(1) In general—Before promulgating a regulation under this Act or issuing an order (except as provided in paragraph (3)), the Commission, through the Office of the Chief Economist, shall assess and publish in the regulation or order the costs and benefits, both qualitative and quantitative, of the proposed regulation or order, and the proposed regulation or order shall state its statutory justification.

removed “(2) Considerations—In making a reasoned determination of the costs and the benefits, the Commission shall evaluate—

removed “(A) considerations of protection of market participants and the public;

removed “(B) considerations of the efficiency, competitiveness, and financial integrity of futures and swaps markets;

removed “(C) considerations of the impact on market liquidity in the futures and swaps markets;

removed “(D) considerations of price discovery;

removed “(E) considerations of sound risk management practices;

removed “(F) available alternatives to direct regulation;

removed “(G) the degree and nature of the risks posed by various activities within the scope of its jurisdiction;

removed “(H) the costs of complying with the proposed regulation or order by all regulated entities, including a methodology for quantifying the costs (recognizing that some costs are difficult to quantify);

removed “(I) whether the proposed regulation or order is inconsistent, incompatible, or duplicative of other Federal regulations or orders;

removed “(J) the cost to the Commission of implementing the proposed regulation or order by the Commission staff, including a methodology for quantifying the costs;

removed “(K) whether, in choosing among alternative regulatory approaches, those approaches maximize net benefits (including potential economic and other benefits, distributive impacts, and equity); and

removed “(L) other public interest considerations.”

changed “(17) “(16) Office of the chief economist

“(A) Establishment—There is established in the Commission the Office of the Chief Economist.

“(B) Head—The Office of the Chief Economist shall be headed by the Chief Economist, who shall be appointed by the Commission and serve at the pleasure of the Commission.

“(C) Functions—The Chief Economist shall report directly to the Commission and perform such functions and duties as the Commission may prescribe.

“(D) Professional staff—The Commission shall appoint such other economists as may be necessary to assist the Chief Economist in performing such economic analysis, regulatory cost-benefit analysis, or research any member of the Commission may request.”

Section 2(a) of the Commodity Exchange Act (7 U.S.C. 2(a)), as amended by section 204(a) of this Act, is amended by adding at the end the following:

changed “(18) “(17) Strategic technology plan

“(A) In general—Every 5 years, the Commission shall develop and submit to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate a detailed plan focused on the acquisition and use of technology by the Commission.

“(B) Contents—The plan shall—

“(i) include for each related division or office a detailed technology strategy focused on market surveillance and risk detection, market data collection, aggregation, interpretation, standardization, harmonization, normalization, validation, streamlining or other data analytic processes, and internal management and protection of data collected by the Commission, including a detailed accounting of how the funds provided for technology will be used and the priorities that will apply in the use of the funds; and

“(ii) set forth annual goals to be accomplished and annual budgets needed to accomplish the goals.”

“(i) In general—An affiliate of a person that qualifies for an exception under subparagraph (A) (including an affiliate entity predominantly engaged in providing financing for the purchase of the merchandise or manufactured goods of the person) may qualify for the exception only if the affiliate enters into the swap to hedge or mitigate the commercial risk of the person or other affiliate of the person that is not a financial entity, provided that if the hedge or mitigation of such commercial risk is addressed by entering into a swap with a swap dealer or major swap participant, an appropriate credit support measure or other mechanism must be utilized.”

“(XXIII) a utility operations-related swap;”

“(52) Utility operations-related swap—The term “utility operations-related swap” means a swap that—

“(A) is entered into by a utility to hedge or mitigate a commercial risk;

“(B) is not a contract, agreement, or transaction based on, derived on, or referencing—

changed “(i) an interest rate, credit, equity, or currency asset class; orclass;

“(ii) except as used for fuel for electric energy generation, a metal, agricultural commodity, or crude oil or gasoline commodity of any grade; or

“(iii) any other commodity or category of commodities identified for this purpose in a rule or order adopted by the Commission in consultation with the appropriate Federal and State regulatory commissions; and

“(C) is associated with—

“(i) the generation, production, purchase, or sale of natural gas or electric energy, the supply of natural gas or electric energy to a utility, or the delivery of natural gas or electric energy service to utility customers;

“(ii) fuel supply for the facilities or operations of a utility;

“(iii) compliance with an electric system reliability obligation;

“(iv) compliance with an energy, energy efficiency, conservation, or renewable energy or environmental statute, regulation, or government order applicable to a utility; or

“(v) any other electric energy or natural gas swap to which a utility is a party.”

“(iii) Limitation—Such definition shall not include an entity—

“(I) whose primary business is providing financing, and who uses derivatives for the purpose of hedging underlying commercial risks related to interest rate and foreign currency exposures, 90 percent or more of which arise from financing that facilitates the purchase or lease of products, 90 percent or more of which are manufactured by the parent company or another subsidiary of the parent company; or

“(II) who is not supervised by a prudential regulator, and is not described in any of subclauses (I) through (VII) of clause (i), and—

“(aa) is a commercial market participant; or

“(bb) enters into swaps, contracts for future delivery, and other derivatives on behalf of, or to hedge or mitigate the commercial risk of, whether directly or in the aggregate, affiliates that are not so supervised or described.”

changed “(7) “(8) Commercial market participant—The term “commercial market participant” means any producer, processor, merchant, or commercial user of an exempt or agricultural commodity, or the products or byproducts of such a commodity.”

changed Section 1a(47)(B)(ii) 1a(48)(B)(ii) of the Commodity Exchange Act (7 U.S.C. 1a(47)(B)(ii)) 1a(47)(B)(ii)), as so redesignated by section 306(b)(1) of this Act, is amended to read as follows:

“(ii) any purchase or sale of a nonfinancial commodity or security for deferred shipment or delivery, so long as the transaction is intended to be physically settled, including any stand-alone or embedded option for which exercise results in a physical delivery obligation;”

changed Section 1a(49)(D) 1a(50)(D) of the Commodity Exchange Act (7 U.S.C. 1a(49)(D)) 1a(49)(D)), as so redesignated by section 306(b)(1) of this Act, is amended—

“(D) Exception

“(i) In general—The Commission”

“(ii) De minimis quantity—The de minimis quantity of swap dealing described in clause (i) shall be set at a quantity of $8,000,000,000, and may be amended or changed only through a new affirmative action of the Commission undertaken by rule or regulation.”

“(I) the transaction is conducted on or subject to the rules of a board of trade that has been designated by the Commission as a contract market in such security futures product; or”

“(c) The Commission shall issue regulations to continue to permit the trading of options on contract markets under such terms and conditions that the Commission from time to time may prescribe.”