H.R. 238 — what changed
Commodity End-User Relief Act
From Introduced in House to Engrossed in House.
6 sections amended and 7 added between Introduced in House and Engrossed in House.
Sec. 208
Subpoena duration and renewal
Section 6(c)(5) of the Commodity Exchange Act (7 U.S.C. 9(5)) is amended—
(1)
by striking “(5) Subpoena.—For” and inserting the following:
“(5) Subpoena
“(A) In general—For”
(2)
by adding after and below the end the following:
“(B) Omnibus orders of investigation
“(i) Duration and renewal—An omnibus order of investigation shall not be for an indefinite duration and may be renewed only by Commission action.
changed
“(ii) Definition—In clause (i), the term “omnibus order of investigation” means an order of the Commission authorizing one or of more members of the Commission or its staff to issue subpoenas under subparagraph (A) to multiple persons in relation to a particular subject matter area.”
Sec. 213
Elimination of certain leasing authority of the Commission
added
added
Section 12(b)(3) of the Commodity Exchange Act (7 U.S.C. 16(b)(3)) is amended—
(1)
added
by striking “including, but not limited to,” and inserting “excluding”; and
(2)
added
by adding at the end the following new sentence: “In the case of an existing lease contract entered into under this paragraph, the Commission may not extend the lease term, but may agree to any other contract modification that does not result in any additional cost to the Federal Government.”.
Sec. 214
Reform of the Customer Protection Fund
added
added
Section 23(g) of the Commodity Exchange Act (7 U.S.C. 26(g)) is amended—
(1)
added
in paragraph (2)—
(A)
added
in the matter preceding subparagraph (A), by striking “or fiscal year limitation”;
(B)
added
in subparagraph (A), by striking “; and” and inserting “, without fiscal year limitation;”; and
(C)
added
in subparagraph (B), by striking “thereunder.” and inserting “, the total amount of which shall not exceed $5,000,000 per fiscal year.”;
(2)
added
in paragraph (3)(A), by striking “unless the balance of the Fund at the time the monetary judgment is collected exceeds $100,000,000” and inserting “, but only to the extent that the resulting balance of the Fund does not exceed $50,000,000”; and
(3)
added
by redesignating paragraph (5) as paragraph (6) and inserting after paragraph (4) the following:
added
“(5) Reversion to Treasury—Notwithstanding the preceding provisions of this subsection, to the extent the balance of the Fund exceeds $50,000,000, the excess amount shall be deposited in the Treasury of the United States as miscellaneous receipts.”
Sec. 304
End-users not treated as financial entities
(a)
In general— Section 2(h)(7)(C)(iii) of the Commodity Exchange Act (7 U.S.C. 2(h)(7)(C)(iii)) is amended to read as follows:
“(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.”
(b)
Commercial market participant defined—
(1)
In general— Section 1a of such Act (7 U.S.C. 1a), as amended by section 303(b) of this Act, is amended by redesignating paragraphs (7) through (52) as paragraphs (8) through (53), respectively, and by inserting after paragraph (6) the following:
“(7) 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.”
(2)
Conforming amendments—
(A)
Section 1a of such Act (7 U.S.C. 1a) is amended—
(i)
in subparagraph (A) of paragraph (18) (as so redesignated by paragraph (1) of this subsection), in the matter preceding clause (i), by striking “(18)(A)” and inserting “(19)(A)”; and
(ii)
in subparagraph (A)(vii) of paragraph (19) (as so redesignated by paragraph (1) of this subsection), in the matter following subclause (III), by striking “(17)(A)” and inserting “(18)(A)”.
(B)
Section 4(c)(1)(A)(i)(I) of such Act (7 U.S.C. 6(c)(1)(A)(i)(I)) is amended by striking “(7), paragraph (18)(A)(vii)(III), paragraphs (23), (24), (31), (32), (38), (39), (41), (42), (46), (47), (48), and (49)” and inserting “(8), paragraph (19)(A)(vii)(III), paragraphs (24), (25), (32), (33), (39), (40), (42), (43), (47), (48), (49), and (50)” .
(C)
Section 4q(a)(1) of such Act (7 U.S.C. 6o–1(a)(1)) is amended by striking “1a(9)” and inserting “1a(10)”.
(D)
Section 4s(f)(1)(D) of such Act (7 U.S.C. 6s(f)(1)(D)) is amended by striking “1a(47)(A)(v)” and inserting “1a(48)(A)(v)”.
(E)
Section 4s(h)(5)(A)(i) of such Act (7 U.S.C. 6s(h)(5)(A)(i)) is amended by striking “1a(18)” and inserting “1a(19)”.
(F)
Section 4t(b)(1)(C) of such Act (7 U.S.C. 6t(b)(1)(C)) is amended by striking “1a(47)(A)(v)” and inserting “1a(48)(A)(v)”.
(G)
Section 5(d)(23) of such Act (7 U.S.C. 7(d)(23)) is amended by striking “1a(47)(A)(v)” and inserting “1a(48)(A)(v)”.
(H)
Section 5(e)(1) of such Act (7 U.S.C. 7(e)(1)) is amended by striking “1a(9)” and inserting “1a(10)”.
(I)
Section 5b(k)(3)(A) of such Act (7 U.S.C. 7a–1(k)(3)(A)) is amended by striking “1a(47)(A)(v)” and inserting “1a(48)(A)(v)”.
(J)
Section 5h(f)(10)(A)(iii) of such Act (7 U.S.C. 7b–3(f)(10)(A)(iii)) is amended by striking “1a(47)(A)(v)” and inserting “1a(48)(A)(v)”.
(K)
Section 21(f)(4)(C) of such Act (7 U.S.C. 24a(f)(4)(C)) is amended by striking “1a(48)” and inserting “1a(49)”.
(L)
added
Section 3a(68)(A)(i) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(68)(A)(i)) is amended by striking “(47)(B)(x)” and inserting “(48)(B)(x)”.
(M)
added
Section 3C(g)(3)(A)(v) of the Securities Exchange Act of 1934 (15 U.S.C. 78c-3(g)(3)(A)(v)) is amended by striking “1a(10)” and inserting “1a(11)”.
(N)
added
Section 6(g)(5)(B)(i) of the Securities Exchange Act of 1934 (15 U.S.C. 78f(g)(5)(B)(i)) is amended—
(i)
added
in sublcause (I), by striking “1a(18)(B)(ii)” and inserting “1a(19)(B)(ii)”; and
(ii)
added
in subclause (II), by striking “1a(18)” and inserting “1a(19)”.
(O)
added
Section 15F(h)(5)(A)(i) of the Securities Exchange Act of 1934 (15 U.S.C. 78o-10(h)(5)(A)(i)) is amended by striking “1a(18)” and inserting “1a(19)”.
Sec. 311
Bona fide hedge defined to protect end-user risk management needs
Section 4a(c) of the Commodity Exchange Act (7 U.S.C. 6a(c)) is amended—
(A)
by striking “may” and inserting “shall”; and
(B)
by striking “future for which” and inserting “future, to be determined by the Commission, for which either an appropriate swap is available or”;
(A)
changed
in the matter preceding subparagraph (A), by striking “subsection (a)(2)” and all that follows through “position as” and inserting “paragraphs (2) and (5) of subsection (a) “paragraph (1) for swaps, contracts of sale for future delivery, or options on the contracts or commodities, a bona fide hedging transaction or position is”; and
(B)
in subparagraph (A)(ii), by striking “of risks” and inserting “or management of current or anticipated risks”; and
(3)
by adding at the end the following:
“(3) The Commission may further define, by rule or regulation, what constitutes a bona fide hedging transaction, provided that the rule or regulation is consistent with the requirements of subparagraphs (A) and (B) of paragraph (2).”
Sec. 312
Cross-border regulation of derivatives transactions
(a)
Rulemaking required— Within 1 year after the date of the enactment of this Act, the Commodity Futures Trading Commission shall issue a rule that addresses—
(1)
the nature of the connections to the United States that require a non-United States person to register as a swap dealer or a major swap participant under the Commodity Exchange Act and the regulations issued under such Act;
(2)
which of the United States swaps requirements apply to the swap activities of non-United States persons and United States persons and their branches, agencies, subsidiaries, and affiliates outside of the United States, and the extent to which the requirements apply; and
(3)
the circumstances under which a United States person or non-United States person in compliance with the swaps regulatory requirements of a foreign jurisdiction shall be exempt from United States swaps requirements.
(1)
Criteria— In the rule, the Commission shall establish criteria for determining that one or more categories of the swaps regulatory requirements of a foreign jurisdiction are comparable to and as comprehensive as United States swaps requirements. The criteria shall include—
(A)
the scope and objectives of the swaps regulatory requirements of the foreign jurisdiction;
(B)
the effectiveness of the supervisory compliance program administered;
(C)
the enforcement authority exercised by the foreign jurisdiction; and
(D)
such other factors as the Commission, by rule, determines to be necessary or appropriate in the public interest.
(2)
Comparability— In the rule, the Commission shall—
(A)
changed
provide that any non-United States person or any transaction between 2 two non-United States persons shall be exempt from United States swaps requirements if the person or transaction is in compliance with the swaps regulatory requirements of a foreign jurisdiction which the Commission has determined to be comparable to and as comprehensive as United States swaps requirements; and
(B)
set forth the circumstances in which a United States person or a transaction between a United States person and a non-United States person shall be exempt from United States swaps requirements if the person or transaction is in compliance with the swaps regulatory requirements of a foreign jurisdiction which the Commission has determined to be comparable to and as comprehensive as United States swaps requirements.
(3)
Outcomes-based comparison— In developing and applying the criteria, the Commission shall emphasize the results and outcomes of, rather than the design and construction of, foreign swaps regulatory requirements.
(4)
Risk-based rulemaking— In the rule, the Commission shall not take into account, for the purposes of determining the applicability of United States swaps requirements, the location of personnel that arrange, negotiate, or execute swaps.
(5)
No part of any rulemaking under this section shall limit the Commission’s antifraud or antimanipulation authority.
(c)
Application of the rule—
(1)
Assessments of foreign jurisdictions— Beginning on the date on which a final rule is issued under this section, the Commission shall begin to assess the swaps regulatory requirements of foreign jurisdictions, in the order the Commission determines appropriate, in accordance with the criteria established pursuant to subsection (b)(1). Following each assessment, the Commission shall determine, by rule or by order, whether the swaps regulatory requirements of the foreign jurisdiction are comparable to and as comprehensive as United States swaps requirements.
(2)
Substituted compliance for unassessed major markets— Beginning 18 months after the date of enactment of this Act—
(A)
the swaps regulatory requirements of each of the 8 foreign jurisdictions with the largest swaps markets, as calculated by notional value during the 12-month period ending with such date of enactment, except those with respect to which a determination has been made under paragraph (1), shall be considered to be comparable to and as comprehensive as United States swaps requirements; and
(B)
changed
a non-United States person or a transaction between 2 two non-United States persons shall be exempt from United States swaps requirements if the person or transaction is in compliance with the swaps regulatory requirements of any of such unexcepted foreign jurisdictions.
(3)
Suspension of substituted compliance— If the Commission determines, by rule or by order, that—
(A)
the swaps regulatory requirements of a foreign jurisdiction are not comparable to and as comprehensive as United States swaps requirements, using the categories and criteria established under subsection (b)(1);
(B)
the foreign jurisdiction does not exempt from its swaps regulatory requirements United States persons who are in compliance with United States swaps requirements; or
(C)
the foreign jurisdiction is not providing equivalent recognition of, or substituted compliance for, registered entities (as defined in section 1a(41) of the Commodity Exchange Act) domiciled in the United States,
(d)
Petition for review of foreign jurisdiction practices— A registered entity, commercial market participant (as defined in section 1a(7) of the Commodity Exchange Act), or Commission registrant (within the meaning of such Act) who petitions the Commission to make or change a determination under subsection (c)(1) or (c)(3) of this section shall be entitled to expedited consideration of the petition. A petition shall include any evidence or other supporting materials to justify why the petitioner believes the Commission should make or change the determination. Petitions under this section shall be considered by the Commission any time following the enactment of this Act. Within 180 days after receipt of a petition for a rulemaking under this section, the Commission shall take final action on the petition. Within 90 days after receipt of a petition to issue an order or change an order issued under this section, the Commission shall take final action on the petition.
(e)
Report to congress— If the Commission makes a determination described in this section through an order, the Commission shall articulate the basis for the determination in a written report published in the Federal Register and transmitted to the Committee on Agriculture of the House of Representatives and Committee on Agriculture, Nutrition, and Forestry of the Senate within 15 days of the determination. The determination shall not be effective until 15 days after the committees receive the report.
(f)
Definitions— As used in this Act and for purposes of the rules issued pursuant to this Act, the following definitions apply:
(1)
United States person— The term “United States person”—
(i)
any natural person resident in the United States;
(ii)
any partnership, corporation, trust, or other legal person organized or incorporated under the laws of the United States or having its principal place of business in the United States;
(iii)
any account (whether discretionary or non-discretionary) of a United States person; and
(iv)
any other person as the Commission may further define to more effectively carry out the purposes of this section; and
(B)
does not include the International Monetary Fund, the International Bank for Reconstruction and Development, the Inter-American Development Bank, the Asian Development Bank, the African Development Bank, the United Nations, their agencies or pension plans, or any other similar international organizations or their agencies or pension plans.
(2)
United states swaps requirements— The term “United States swaps requirements” means the provisions relating to swaps contained in the Commodity Exchange Act (7 U.S.C. 1a et seq.) that were added by title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (15 U.S.C. 8301 et seq.) and any rules or regulations prescribed by the Commodity Futures Trading Commission pursuant to such provisions.
(3)
Foreign jurisdiction— The term “foreign jurisdiction” means any national or supranational political entity with common rules governing swaps transactions.
(4)
Swaps regulatory requirements— The term “swaps regulatory requirements” means any provisions of law, and any rules or regulations pursuant to the provisions, governing swaps transactions or the counterparties to swaps transactions.
(g)
Conforming amendment— Section 4(c)(1)(A) of the Commodity Exchange Act (7 U.S.C. 6(c)(1)(A)) is amended by inserting “or except as necessary to effectuate the purposes of the Commodity End-User Relief Act,” after “to grant exemptions,”.
Sec. 313
Exemption of qualified charitable organizations from designation and regulation as commodity pool operators
(a)
Exclusion from definition of commodity pool— Section 1a(11) of the Commodity Exchange Act (7 U.S.C. 1a(10)), as so redesignated by section 304(b)(1) of this Act, is amended by adding at the end the following:
“(C) Exclusion—The term “commodity pool” shall not include any investment trust, syndicate, or similar form of enterprise excluded from the definition of “investment company” pursuant to section 3(c)(10) or 3(c)(14) of the Investment Company Act of 1940.”
(b)
Inapplicability of prohibition on use of instrumentalities of interstate commerce by unregistered commodity trading advisor— Section 4m of such Act (7 U.S.C. 6m) is amended—
(1)
in paragraph (1), in the second sentence, by inserting “: Provided further, That the provisions of this section shall not apply to any commodity trading advisor that is: (A) a charitable organization, as defined in section 3(c)(10)(D) of the Investment Company Act of 1940, or a trustee, director, officer, employee, or volunteer of such a charitable organization acting within the scope of the employment or duties of the person with the organization, whose trading advice is provided only to, or with respect to, one or more of the following: (i) any such charitable organization; or (ii) an investment trust, syndicate or similar form of enterprise excluded from the definition of “investment company” pursuant to section 3(c)(10) of the Investment Company Act of 1940; or (B) any plan, company, or account described in section 3(c)(14) of the Investment Company Act of 1940, any person or entity who establishes or maintains such a plan, company, or account, or any trustee, director, officer, employee, or volunteer for any of the foregoing plans, persons, or entities acting within the scope of the employment or duties of the person with the organization, whose trading advice is provided only to, or with respect to, any investment trust, syndicate, or similar form of enterprise excluded from the definition of “investment company” pursuant to section 3(c)(14) of the Investment Company Act of 1940” before the period; and
(2)
by adding at the end the following:
changed
“(4) Disclosure concerning excluded charitable organizations—The operator of or advisor to any investment trust, syndicate, or similar form of enterprise excluded from the definition of “commodity pool” by reason of section 1a(10)(C) 1a(11)(C) of this Act pursuant to section 3(c)(10) of the Investment Company Act of 1940 shall provide disclosure in accordance with section 7(e) of the Investment Company Act of 1940.”
Sec. 314
Small bank holding company clearing exemption
Section 2(h)(7)(C) of the Commodity Exchange Act (7 U.S.C. 2(h)(7)(C)) is amended by adding at the end the following:
changed
“(iv) Holding companies—A determination made by the Commission under clause (ii) shall, with respect to small banks and savings associations, also apply to their respective bank holding company (as defined in section 2 of the Bank Holding Company Act of 1956), or savings and loan holding company (as defined in section 10 of the Home Owners’ Loan Act of 1933), 1933)), if the total consolidated assets of the holding company are no greater than the asset threshold set by the Commission in determining small bank and savings association eligibility under clause (ii).”
Sec. 318
Procedure for obtaining certain intellectual property
added
added
The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by inserting after section 4t the following:
added
“4u. Procedure for obtaining certain intellectual property
added
“The Commission is not authorized to compel persons to produce or furnish algorithmic trading source code or similar intellectual property to the Commission, unless the Commission first issues a subpoena.”
Sec. 319
Determination of predominant engagement
added
added
Section 2(h)(7)(C) of the Commodity Exchange Act (7 U.S.C. 2(h)(7)(C)), as amended by section 314 of this Act, is amended by adding at the end the following:
added
“(v) In determining whether a person is predominantly engaged in a business or activity for purposes of clause (i)(VIII), there shall be excluded revenues and assets that are, or result from, any transaction that is entered into solely for purposes of hedging or mitigating commercial risk (as defined by the Commission for purposes of subparagraph (A)(ii)).”
Sec. 320
Treatment of transactions between affiliates
added
added
Section 1a(48) of the Commodity Exchange Act (7 U.S.C. 1a(47)), as so redesignated by section 304(b)(1) of this Act, is amended by adding at the end the following:
added
“(G) Treatment of transactions between affiliates
added
“(i) Exemption from swap rules—An agreement, contract, or transaction described in subparagraphs (A) through (F) shall not be regulated as a swap under this Act if all of the following apply with respect to the agreement, contract, or transaction:
added
“(I) Affiliation—One counterparty, directly or indirectly, holds a majority ownership interest in the other counterparty, or a third party, directly or indirectly, holds a majority ownership interest in both counterparties.
added
“(II) Financial statements—The affiliated counterparty that holds the majority interest in the other counterparty or the third party that, directly or indirectly, holds the majority interests in both affiliated counterparties, reports its financial statements on a consolidated basis under generally accepted accounting principles or International Financial Reporting Standards, or other similar standards, and the financial statements include the financial results of the majority-owned affiliated counterparty or counterparties.
added
“(ii) Reporting requirement—If at least one counterparty to an agreement, contract, or transaction that meets the requirements of clause (i) is a swap dealer or major swap participant, that counterparty shall report the agreement, contract, or transaction pursuant to section 4r, within such time period as the Commission may by rule or regulation prescribe—
added
“(I) to a swap data repository; or
added
“(II) if there is no swap data repository that would accept the agreement, contract or transaction, to the Commission .
added
“(iii) Risk management requirement—If at least one counterparty to an agreement, contract, or transaction that meets the requirements of clause (i) is a swap dealer or major swap participant, the agreement, contract, or transaction shall be subject to a centralized risk management program pursuant to section 4s(j) that is reasonably designed to monitor and to manage the risks associated with the agreement, contract, or transaction.
added
“(iv) Variation margin requirement—Affiliated counterparties to an agreement, contract, or transaction that meets the requirements of clause (i) shall exchange variation margin to the extent prescribed under any rule promulgated by the Commission or any prudential regulator pursuant to section 4s(e).
added
“(v) Anti-evasion requirement—An agreement, contract, or transaction that meets the requirements of clause (i) shall not be structured to evade the Dodd-Frank Wall Street Reform and Consumer Protection Act in violation of any rule promulgated by the Commission pursuant to section 721(c) of such Act.”
Sec. 321
Requirements related to position limits
added
(a)
added
In general— Section 4a(a) of the Commodity Exchange Act (7 U.S.C. 6a(a)) is amended—
(1)
added
by striking paragraphs (2), (3), (5), and (6); and
(2)
added
by redesignating paragraphs (4) and (7) as paragraphs (2) and (3), respectively.
(b)
added
Bona fide hedging transaction definition— Section 4a(c)(2)(A)(i) of such Act (7 U.S.C. 6a(c)(2)(A)(i)) is amended by inserting “normally” before “represents”.
(c)
added
Effective date— The amendments made by this section shall take effect on the date of the enactment of this section.
Sec. 415
Delay in full implementation of the final rule on ownership and control reporting
added
added
The Commodity Futures Trading Commission may not enforce non-compliance with the final rule titled “Ownership and Control Reports, Forms 102/2S, 40/40S, and 71” (78 FR 69178; November 18, 2013) until the Commission votes to approve a final rule that has been amended to—
(1)
added
provide that the reportable trading volume level shall be at least 300 contracts;
(2)
added
provide that the reporting entity shall not be required to provide natural person controller data; and
(3)
added
provide that the reporting entity is not obligated to supply data that violates foreign privacy laws.