---
kind: "range"
citation: "7 U.S.C. §§ 1–25"
title: "7"
from: "1"
to: "25"
count: 78
release: "119-102"
url: "https://uscodex.org/usc/7/1..25"
---

# §1. Short title


This chapter may be cited as the “[Commodity](/usc/7/1a.md?p=9) Exchange Act.”


# §1a. Definitions


As used in this chapter:

- (1) **Alternative trading system—** The term “alternative trading system” means an organization, association, or group of [persons](#38) that—
  - (A) is registered as a broker or dealer pursuant to section 15(b) of the [Securities](#41) Exchange Act of 1934 [[15 U.S.C. 78o(b)](/usc/15/78o.md?p=b)] (except [paragraph (11)](#11) thereof);
  - (B) performs the functions commonly performed by an [exchange](#1-D) (as defined in section 3(a)(1) of the [Securities](#41) Exchange Act of 1934 [[15 U.S.C. 78c(a)(1)](/usc/15/78c.md?p=a-1)]);
  - (C) does not—
    - (i) set rules governing the conduct of subscribers other than the conduct of such subscribers’ trading on the [alternative trading system](#1); or
    - (ii) discipline subscribers other than by exclusion from trading; and
  - (D) is exempt from the definition of the term “exchange” under such section 3(a)(1) [[15 U.S.C. 78c(a)(1)](/usc/15/78c.md?p=a-1)] by rule or regulation of the [Securities](#41) and Exchange [Commission](#8) on terms that require compliance with regulations of its trading functions.
- (2) **Appropriate Federal banking agency—** The term “appropriate Federal banking agency”—
  - (A) has the meaning given the term in [section 1813 of title 12](/usc/12/1813.md);
  - (B) means the [Board](#5) in the case of a noninsured [State](/usc/7/1359aa.md?p=5) [bank](/usc/7/27.md?p=a); and
  - (C) is the Farm Credit Administration for farm credit system institutions.
- (3) **Associated person of a security-based swap dealer or major security-based swap participant—** The term “associated person of a security-based swap dealer or major security-based swap participant” has the meaning given the term in section 3(a) of the [Securities](#41) Exchange Act of 1934 ([15 U.S.C. 78c(a)](/usc/15/78c.md?p=a)).
- (4) **Associated person of a swap dealer or major swap participant—**
  - (A) **In general—** The term “associated person of a swap dealer or major swap participant” means a [person](#38) who is associated with a [swap dealer](#49-A) or [major swap participant](#33-A) as a partner, officer, employee, or agent (or any [person](#38) occupying a similar status or performing similar functions), in any capacity that involves—
    - (i) the solicitation or acceptance of [swaps](#47-A); or
    - (ii) the supervision of any [person](#38) or [persons](#38) so engaged.
  - (B) **Exclusion—** Other than for purposes of [section 6s(b)(6) of this title](/usc/7/6s.md?p=b-6), the term “[associated person of a swap dealer or major swap participant](#4-A)” does not include any [person](#38) associated with a [swap dealer](#49-A) or [major swap participant](#33-A) the functions of which are solely clerical or ministerial.
- (5) **Board—** The term “Board” means the Board of Governors of the Federal Reserve System.
- (6) **Board of trade—** The term “board of trade” means any [organized exchange](#37) or other [trading facility](#51-A).
- (7) **Cleared swap—** The term “cleared swap” means any [swap](#47-A) that is, directly or indirectly, submitted to and cleared by a [derivatives clearing organization](#15-A) registered with the [Commission](#8).
- (8) **Commission—** The term “Commission” means the [Commodity](#9) Futures Trading Commission established under [section 2(a)(2) of this title](/usc/7/2.md?p=a-2).
- (9) **Commodity—** The term “commodity” means wheat, cotton, rice, corn, oats, barley, rye, flaxseed, [grain](/usc/7/75.md?p=g) sorghums, mill feeds, butter, eggs, Solanum tuberosum (Irish potatoes), wool, wool tops, fats and oils (including lard, tallow, cottonseed oil, peanut oil, soybean oil, and all other fats and oils), cottonseed meal, cottonseed, peanuts, soybeans, soybean meal, livestock, livestock products, and frozen concentrated orange juice, and all other goods and articles, except onions (as provided by [section 13–1 of this title](/usc/7/13–1.md)) and motion picture box office receipts (or any index, measure, value, or data related to such receipts), and all services, rights, and interests (except motion picture box office receipts, or any index, measure, value or data related to such receipts) in which [contracts](/usc/7/518.md?p=4) for [future delivery](#27) are presently or in the future dealt in.
- (10) **Commodity pool—**
  - (A) **In general—** The term “commodity pool” means any investment trust, syndicate, or similar form of enterprise operated for the purpose of trading in [commodity](#9) interests, including any—
    - (i) [commodity](#9) for [future delivery](#27), [security futures product](#45), or [swap](#47-A);
    - (ii) agreement, [contract](/usc/7/518.md?p=4), or transaction described in [section 2(c)(2)(C)(i) of this title](/usc/7/2.md?p=c-2-C-i) or [section 2(c)(2)(D)(i) of this title](/usc/7/2.md?p=c-2-D-i);
    - (iii) [commodity](#9) [option](#36) authorized under [section 6c of this title](/usc/7/6c.md); or
    - (iv) leverage transaction authorized under [section 23 of this title](/usc/7/23.md).
  - (B) **Further definition—** The [Commission](#8), by rule or regulation, may include within, or exclude from, the term “[commodity pool](#10-A)” any investment trust, syndicate, or similar form of enterprise if the [Commission](#8) determines that the rule or regulation will effectuate the purposes of this chapter.
- (11) **Commodity pool operator—**
  - (A) **In general—** The term “commodity pool operator” means any [person](#38)—
    - (i) engaged in a business that is of the nature of a [commodity pool](#10-A), investment trust, syndicate, or similar form of enterprise, and who, in connection therewith, solicits, accepts, or receives from others, [funds](/usc/7/4531.md?p=5), [securities](#41), or property, either directly or through capital contributions, the sale of stock or other forms of [securities](#41), or otherwise, for the purpose of trading in [commodity](#9) interests, including any—
      - (I) [commodity](#9) for [future delivery](#27), [security futures product](#45), or [swap](#47-A);
      - (II) agreement, [contract](/usc/7/518.md?p=4), or transaction described in [section 2(c)(2)(C)(i) of this title](/usc/7/2.md?p=c-2-C-i) or [section 2(c)(2)(D)(i) of this title](/usc/7/2.md?p=c-2-D-i);
      - (III) [commodity](#9) [option](#36) authorized under [section 6c of this title](/usc/7/6c.md); or
      - (IV) leverage transaction authorized under [section 23 of this title](/usc/7/23.md); or
    - (ii) who is registered with the [Commission](#8) as a [commodity pool operator](#11-A).
  - (B) **Further definition—** The [Commission](#8), by rule or regulation, may include within, or exclude from, the term “[commodity pool operator](#11-A)” any [person](#38) engaged in a business that is of the nature of a [commodity pool](#10-A), investment trust, syndicate, or similar form of enterprise if the [Commission](#8) determines that the rule or regulation will effectuate the purposes of this chapter.
- (12) **Commodity trading advisor—**
  - (A) **In general—** Except as otherwise provided in this paragraph, the term “commodity trading advisor” means any [person](#38) who—
    - (i) for compensation or profit, engages in the business of advising others, either directly or through publications, writings, or electronic media, as to the value of or the advisability of trading in—
      - (I) any [contract of sale](#13) of a [commodity](#9) for [future delivery](#27), [security futures product](#45), or [swap](#47-A);
      - (II) any agreement, [contract](/usc/7/518.md?p=4), or transaction described in [section 2(c)(2)(C)(i) of this title](/usc/7/2.md?p=c-2-C-i) or [section 2(c)(2)(D)(i) of this title](/usc/7/2.md?p=c-2-D-i)[^1]
      - (III) any [commodity](#9) [option](#36) authorized under [section 6c of this title](/usc/7/6c.md); or
      - (IV) any leverage transaction authorized under [section 23 of this title](/usc/7/23.md);
    - (ii) for compensation or profit, and as part of a regular business, issues or promulgates analyses or reports concerning any of the activities referred to in [clause (i)](#12-A-i);
    - (iii) is registered with the [Commission](#8) as a [commodity trading advisor](#12-A); or
    - (iv) the [Commission](#8), by rule or regulation, may include if the [Commission](#8) determines that the rule or regulation will effectuate the purposes of this chapter.
  - (B) **Exclusions—** Subject to [subparagraph (C)](#12-C), the term “commodity trading advisor” does not include—
    - (i) any [bank](/usc/7/27.md?p=a) or trust company or any [person](#38) acting as an employee thereof;
    - (ii) any news reporter, news columnist, or news editor of the print or electronic media, or any lawyer, accountant, or teacher;
    - (iii) any [floor broker](#22-A) or [futures commission merchant](#28-A);
    - (iv) the publisher or [producer](/usc/7/6802.md?p=4-A-iii-III-bb) of any print or electronic data of general and regular dissemination, including its employees;
    - (v) the fiduciary of any defined benefit plan that is subject to the Employee Retirement Income Security Act of 1974 ([29 U.S.C. 1001](/usc/29/1001.md) et seq.);
    - (vi) any [contract](/usc/7/518.md?p=4) market or derivatives transaction execution facility; and
    - (vii) such other [persons](#38) not within the intent of this paragraph as the [Commission](#8) may specify by rule, regulation, or [order](/usc/7/2902.md?p=10).
  - (C) **Incidental services—** [Subparagraph (B)](#12-B) shall apply only if the furnishing of such services by [persons](#38) referred to in [subparagraph (B)](#12-B) is solely incidental to the conduct of their business or profession.
  - (D) **Advisors—** The [Commission](#8), by rule or regulation, may include within the term “commodity trading advisor”, any [person](#38) advising as to the value of [commodities](#9) or issuing reports or analyses concerning [commodities](#9) if the [Commission](#8) determines that the rule or regulation will effectuate the purposes of this paragraph.
- (13) **Contract of sale—** The term “contract of sale” includes sales, agreements of sale, and agreements to sell.
- (14) **Cooperative association of producers—** The term “cooperative association of producers” means any cooperative association, corporate, or otherwise, not less than 75 percent in good faith owned or controlled, directly or indirectly, by [producers](/usc/7/6802.md?p=4-A-iii-III-bb) of agricultural products and otherwise complying with sections [291](/usc/7/291.md) and [292](/usc/7/292.md) of this title, including any organization acting for a group of such associations and owned or controlled by such associations, except that business done for or with the [United States](/usc/7/6402.md?p=8), or any agency thereof, shall not be considered either [member](#34) or nonmember business in determining the compliance of any such association with this chapter.
- (15) **Derivatives clearing organization—**
  - (A) **In general—** The term “derivatives clearing organization” means a clearinghouse, clearing association, clearing [corporation](/usc/7/1502.md?p=b-5), or similar entity, facility, system, or organization that, with respect to an agreement, [contract](/usc/7/518.md?p=4), or transaction—
    - (i) enables each party to the agreement, [contract](/usc/7/518.md?p=4), or transaction to substitute, through novation or otherwise, the credit of the [derivatives clearing organization](#15-A) for the credit of the parties;
    - (ii) arranges or provides, on a multilateral basis, for the settlement or netting of obligations resulting from such agreements, [contracts](/usc/7/518.md?p=4), or transactions executed by participants in the [derivatives clearing organization](#15-A); or
    - (iii) otherwise provides clearing services or arrangements that mutualize or transfer among participants in the [derivatives clearing organization](#15-A) the credit risk arising from such agreements, [contracts](/usc/7/518.md?p=4), or transactions executed by the participants.
  - (B) **Exclusions—** The term “[derivatives clearing organization](#15-A)” does not include an entity, facility, system, or organization solely because it arranges or provides for—
    - (i) settlement, netting, or novation of obligations resulting from agreements, [contracts](/usc/7/518.md?p=4), or transactions, on a bilateral basis and without a central counterparty;
    - (ii) settlement or netting of cash payments through an interbank payment system; or
    - (iii) settlement, netting, or novation of obligations resulting from a sale of a [commodity](#9) in a transaction in the spot market for the [commodity](#9).
- (16) **Electronic trading facility—** The term “electronic trading facility” means a [trading facility](#51-A) that—
  - (A) operates by means of an electronic or telecommunications network; and
  - (B) maintains an automated audit trail of [bids](#36), [offers](#36), and the matching of [orders](/usc/7/2902.md?p=10) or the execution of transactions on the facility.
- (17) **Eligible commercial entity—** The term “eligible commercial entity” means, with respect to an agreement, [contract](/usc/7/518.md?p=4) or transaction in a [commodity](#9)—
  - (A) an [eligible contract participant](#18) described in clause [(i)](#18-A-i), [(ii)](#18-A-ii), [(v)](#18-A-v), [(vii)](#18-A-vii), [(viii)](#18-A-viii), or [(ix)](#18-A-ix) of paragraph (18)(A) that, in connection with its business—
    - (i) has a demonstrable ability, directly or through separate contractual arrangements, to make or take delivery of the underlying [commodity](#9);
    - (ii) incurs risks, in addition to price risk, related to the [commodity](#9); or
    - (iii) is a dealer that regularly provides risk management or hedging services to, or engages in market-making activities with, the foregoing entities involving transactions to purchase or sell the [commodity](#9) or derivative agreements, [contracts](/usc/7/518.md?p=4), or transactions in the [commodity](#9);
  - (B) an [eligible contract participant](#18), other than a natural [person](#38) or an instrumentality, department, or agency of a [State](/usc/7/1359aa.md?p=5) or local governmental entity, that—
    - (i) regularly enters into transactions to purchase or sell the [commodity](#9) or derivative agreements, [contracts](/usc/7/518.md?p=4), or transactions in the [commodity](#9); and
    - (ii) either—
      - (I) in the case of a collective investment vehicle whose participants include [persons](#38) other than—
        - (aa) qualified eligible [persons](#38), as defined in [Commission](#8) rule 4.7(a) ([17 CFR 4.7(a)](/cfr/17/4.7.md?p=a));
        - (bb) accredited investors, as defined in Regulation D of the [Securities](#41) and [Exchange](#1-D) [Commission](#8) under the Securities Act of 1933 [[15 U.S.C. 77a](/usc/15/77a.md) et seq.] ([17 CFR 230.501(a)](/cfr/17/230.501.md?p=a)), with total assets of $2,000,000; or
        - (cc) qualified purchasers, as defined in section 2(a)(51)(A) of the Investment Company Act of 1940 [[15 U.S.C. 80a–2(a)(51)(A)](/usc/15/80a–2.md?p=a-51-A)];

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

      - (II) in the case of other [persons](#38), has, or is one of a group of [persons](#38) under common control or management having in the aggregate, $100,000,000 in total assets; or
  - (C) such other [persons](#38) as the [Commission](#8) shall determine appropriate and shall designate by rule, regulation, or [order](/usc/7/2902.md?p=10).
- (18) **Eligible contract participant—** The term “eligible contract participant” means—
  - (A) acting for its own account—
    - (i) a [financial institution](#21);
    - (ii) an insurance company that is regulated by a [State](/usc/7/1359aa.md?p=5), or that is regulated by a foreign government and is subject to comparable regulation as determined by the [Commission](#8), including a regulated subsidiary or affiliate of such an insurance company;
    - (iii) an investment company subject to regulation under the Investment Company Act of 1940 ([15 U.S.C. 80a–1](/usc/15/80a–1.md) et seq.) or a foreign [person](#38) performing a similar role or function subject as such to foreign regulation (regardless of whether each investor in the investment company or the foreign [person](#38) is itself an [eligible contract participant](#18));
    - (iv) a [commodity pool](#10-A) that—
      - (I) has total assets exceeding $5,000,000; and
      - (II) is formed and operated by a [person](#38) subject to regulation under this chapter or a foreign [person](#38) performing a similar role or function subject as such to foreign regulation (regardless of whether each investor in the [commodity pool](#10-A) or the foreign [person](#38) is itself an [eligible contract participant](#18)) provided, however, that for purposes of [section 2(c)(2)(B)(vi) of this title](/usc/7/2.md?p=c-2-B-vi) and [section 2(c)(2)(C)(vii) of this title](/usc/7/2.md?p=c-2-C-vii), the term “[eligible contract participant](#18)” shall not include a [commodity pool](#10-A) in which any participant is not otherwise an [eligible contract participant](#18);
    - (v) a [corporation](/usc/7/1502.md?p=b-5), partnership, proprietorship, organization, trust, or other entity—
      - (I) that has total assets exceeding $10,000,000;
      - (II) the obligations of which under an agreement, [contract](/usc/7/518.md?p=4), or transaction are guaranteed or otherwise supported by a letter of credit or keepwell, support, or other agreement by an entity described in [subclause (I)](#18-A-v-I), in clause [(i)](#18-A-i), [(ii)](#18-A-ii), [(iii)](#18-A-iii), [(iv)](#18-A-iv), or [(vii)](#18-A-vii), or in [subparagraph (C)](#18-C); or
      - (III) that—
        - (aa) has a net worth exceeding $1,000,000; and
        - (bb) enters into an agreement, [contract](/usc/7/518.md?p=4), or transaction in connection with the conduct of the entity’s business or to manage the risk associated with an asset or liability owned or incurred or reasonably likely to be owned or incurred by the entity in the conduct of the entity’s business;
    - (vi) an employee benefit plan subject to the Employee Retirement Income Security Act of 1974 ([29 U.S.C. 1001](/usc/29/1001.md) et seq.), a governmental employee benefit plan, or a foreign [person](#38) performing a similar role or function subject as such to foreign regulation—
      - (I) that has total assets exceeding $5,000,000; or
      - (II) the investment decisions of which are made by—
        - (aa) an investment adviser or [commodity trading advisor](#12-B) subject to regulation under the Investment Advisers Act of 1940 ([15 U.S.C. 80b–1](/usc/15/80b–1.md) et seq.) or this chapter;
        - (bb) a foreign [person](#38) performing a similar role or function subject as such to foreign regulation;
        - (cc) a [financial institution](#21); or
        - (dd) an insurance company described in [clause (ii)](#18-A-ii), or a regulated subsidiary or affiliate of such an insurance company;
    - (vii)
      - (I) a governmental entity (including the [United States](/usc/7/6402.md?p=8), a [State](/usc/7/1359aa.md?p=5), or a foreign government) or political subdivision of a governmental entity;
      - (II) a multinational or supranational government entity; or
      - (III) an instrumentality, agency, or department of an entity described in subclause [(I)](#18-A-vii-I) or [(II)](#18-A-vii-II);

    except that such term does not include an entity, instrumentality, agency, or department referred to in subclause (I) or (III) of this clause unless (aa) the entity, instrumentality, agency, or department is a [person](#38) described in clause [(i)](#17-A-i), [(ii)](#17-A-ii), or [(iii)](#17-A-iii) of paragraph (17)(A); (bb) the entity, instrumentality, agency, or department owns and invests on a discretionary basis $50,000,000 or more in investments; or (cc) the agreement, [contract](/usc/7/518.md?p=4), or transaction is offered by, and entered into with, an entity that is listed in any of subclauses (I) through (VI) of [section 2(c)(2)(B)(ii) of this title](/usc/7/2.md?p=c-2-B-ii);

    - (viii)
      - (I) a broker or dealer subject to regulation under the [Securities](#41) Exchange Act of 1934 ([15 U.S.C. 78a](/usc/15/78a.md) et seq.) or a foreign [person](#38) performing a similar role or function subject as such to foreign regulation, except that, if the broker or dealer or foreign [person](#38) is a natural [person](#38) or proprietorship, the broker or dealer or foreign [person](#38) shall not be considered to be an [eligible contract participant](#18) unless the broker or dealer or foreign [person](#38) also meets the requirements of clause [(v)](#18-A-v) or [(xi)](#18-A-xi);
      - (II) an associated [person](#38) of a registered broker or dealer concerning the financial or [securities](#41) activities of which the registered [person](#38) makes and keeps records under section 15C(b) or 17(h) of the [Securities](#41) Exchange Act of 1934 ([15 U.S.C. 78o](/usc/15/78o.md)–5(b), 78q(h));
      - (III) an investment [bank](/usc/7/27.md?p=a) holding company (as defined in [section 17(i)](/usc/7/17.md)[^2] of the [Securities](#41) Exchange Act of 1934 ([15 U.S.C. 78q(i)](/usc/15/78q.md?p=i));[^3]
    - (ix) a [futures commission merchant](#28-A) subject to regulation under this chapter or a foreign [person](#38) performing a similar role or function subject as such to foreign regulation, except that, if the [futures commission merchant](#28-A) or foreign [person](#38) is a natural [person](#38) or proprietorship, the [futures commission merchant](#28-A) or foreign [person](#38) shall not be considered to be an [eligible contract participant](#18) unless the [futures commission merchant](#28-A) or foreign [person](#38) also meets the requirements of clause [(v)](#18-A-v) or [(xi)](#18-A-xi);
    - (x) a [floor broker](#22-A) or [floor trader](#23-A) subject to regulation under this chapter in connection with any transaction that takes place on or through the facilities of a [registered entity](#40) (other than an [electronic trading facility](#16) with respect to a [significant price discovery contract](#46)) or an exempt [board of trade](#6), or any affiliate thereof, on which such [person](#38) regularly trades; or
    - (xi) an individual who has amounts invested on a discretionary basis, the aggregate of which is in excess of—
      - (I) $10,000,000; or
      - (II) $5,000,000 and who enters into the agreement, [contract](/usc/7/518.md?p=4), or transaction in [order](/usc/7/2902.md?p=10) to manage the risk associated with an asset owned or liability incurred, or reasonably likely to be owned or incurred, by the individual;
  - (B)
    - (i) a [person](#38) described in clause [(i)](#18-A-i), [(ii)](#18-A-ii), [(iv)](#18-A-iv), [(v)](#18-A-v), [(viii)](#18-A-viii), [(ix)](#18-A-ix), or [(x)](#18-A-x) of subparagraph (A) or in [subparagraph (C)](#18-C), acting as broker or performing an equivalent agency function on behalf of another [person](#38) described in subparagraph [(A)](#18-A) or [(C)](#18-C); or
    - (ii) an investment adviser subject to regulation under the Investment Advisers Act of 1940 [[15 U.S.C. 80b–1](/usc/15/80b–1.md) et seq.], a [commodity trading advisor](#12-B) subject to regulation under this chapter, a foreign [person](#38) performing a similar role or function subject as such to foreign regulation, or a [person](#38) described in clause [(i)](#18-A-i), [(ii)](#18-A-ii), [(iv)](#18-A-iv), [(v)](#18-A-v), [(viii)](#18-A-viii), [(ix)](#18-A-ix), or [(x)](#18-A-x) of subparagraph (A) or in [subparagraph (C)](#18-C), in any such case acting as investment manager or fiduciary (but excluding a [person](#38) acting as broker or performing an equivalent agency function) for another [person](#38) described in subparagraph [(A)](#18-A) or [(C)](#18-C) and who is authorized by such [person](#38) to commit such [person](#38) to the transaction; or
  - (C) any other [person](#38) that the [Commission](#8) determines to be eligible in light of the financial or other qualifications of the [person](#38).
- (19) **Excluded commodity—** The term “excluded commodity” means—
  - (i) an interest rate, [exchange](#1-D) rate, currency, [security](#41), [security](#41) index, credit risk or measure, debt or equity instrument, index or measure of inflation, or other macroeconomic index or measure;
  - (ii) any other rate, differential, index, or measure of economic or commercial risk, return, or value that is—
    - (I) not based in substantial part on the value of a narrow group of [commodities](#9) not described in [clause (i)](#19-i); or
    - (II) based solely on one or more [commodities](#9) that have no cash market;
  - (iii) any economic or commercial index based on prices, rates, values, or levels that are not within the control of any party to the relevant [contract](/usc/7/518.md?p=4), agreement, or transaction; or
  - (iv) an occurrence, extent of an occurrence, or contingency (other than a change in the price, rate, value, or level of a [commodity](#9) not described in [clause (i)](#19-i)) that is—
    - (I) beyond the control of the parties to the relevant [contract](/usc/7/518.md?p=4), agreement, or transaction; and
    - (II) associated with a financial, commercial, or economic consequence.
- (20) **Exempt commodity—** The term “exempt commodity” means a [commodity](#9) that is not an [excluded commodity](#19) or an [agricultural commodity](/usc/7/5602.md?p=1).
- (21) **Financial institution—** The term “financial institution” means—
  - (A) a [corporation](/usc/7/1502.md?p=b-5) operating under the fifth undesignated paragraph of section 25 of the Federal Reserve Act ([12 U.S.C. 603](/usc/12/603.md)), commonly known as “an agreement [corporation](/usc/7/1502.md?p=b-5)”;
  - (B) a [corporation](/usc/7/1502.md?p=b-5) organized under section 25A of the Federal Reserve Act ([12 U.S.C. 611](/usc/12/611.md) et seq.), commonly known as an “Edge Act [corporation](/usc/7/1502.md?p=b-5)”;
  - (C) an institution that is regulated by the Farm Credit Administration;
  - (D) a Federal credit union or [State](/usc/7/1359aa.md?p=5) credit union (as defined in [section 1752 of title 12](/usc/12/1752.md));
  - (E) a depository institution (as defined in [section 1813 of title 12](/usc/12/1813.md));
  - (F) a foreign [bank](/usc/7/27.md?p=a) or a branch or agency of a foreign [bank](/usc/7/27.md?p=a) (each as defined in [section 3101 of title 12](/usc/12/3101.md));
  - (G) any financial holding company (as defined in [section 1841 of title 12](/usc/12/1841.md));
  - (H) a trust company; or
  - (I) a similarly regulated subsidiary or affiliate of an entity described in any of [subparagraphs (A) through (H)](#21-A..21-H).
- (22) **Floor broker—**
  - (A) **In general—** The term “floor broker” means any [person](#38)—
    - (i) who, in or surrounding any pit, ring, post, or other place provided by a [contract](/usc/7/518.md?p=4) market for the meeting of [persons](#38) similarly engaged, shall purchase or sell for any other [person](#38)—
      - (I) any [commodity](#9) for [future delivery](#27), [security futures product](#45), or [swap](#47-A); or
      - (II) any [commodity](#9) [option](#36) authorized under [section 6c of this title](/usc/7/6c.md); or
    - (ii) who is registered with the [Commission](#8) as a [floor broker](#22-A).
  - (B) **Further definition—** The [Commission](#8), by rule or regulation, may include within, or exclude from, the term “[floor broker](#22-A)” any [person](#38) in or surrounding any pit, ring, post, or other place provided by a [contract](/usc/7/518.md?p=4) market for the meeting of [persons](#38) similarly engaged who trades for any other [person](#38) if the [Commission](#8) determines that the rule or regulation will effectuate the purposes of this chapter.
- (23) **Floor trader—**
  - (A) **In general—** The term “floor trader” means any [person](#38)—
    - (i) who, in or surrounding any pit, ring, post, or other place provided by a [contract](/usc/7/518.md?p=4) market for the meeting of [persons](#38) similarly engaged, purchases, or sells solely for such [person](#38)’s own account—
      - (I) any [commodity](#9) for [future delivery](#27), [security futures product](#45), or [swap](#47-A); or
      - (II) any [commodity](#9) [option](#36) authorized under [section 6c of this title](/usc/7/6c.md); or
    - (ii) who is registered with the [Commission](#8) as a [floor trader](#23-A).
  - (B) **Further definition—** The [Commission](#8), by rule or regulation, may include within, or exclude from, the term “[floor trader](#23-A)” any [person](#38) in or surrounding any pit, ring, post, or other place provided by a [contract](/usc/7/518.md?p=4) market for the meeting of [persons](#38) similarly engaged who trades solely for such [person](#38)’s own account if the [Commission](#8) determines that the rule or regulation will effectuate the purposes of this chapter.
- (24) **Foreign exchange forward—** The term “foreign exchange forward” means a transaction that solely involves the [exchange](#1-D) of 2 different currencies on a specific future date at a fixed rate agreed upon on the inception of the [contract](/usc/7/518.md?p=4) covering the [exchange](#1-D).
- (25) **Foreign exchange swap—** The term “foreign exchange swap” means a transaction that solely involves—
  - (A) an [exchange](#1-D) of 2 different currencies on a specific date at a fixed rate that is agreed upon on the inception of the [contract](/usc/7/518.md?p=4) covering the [exchange](#1-D); and
  - (B) a reverse [exchange](#1-D) of the 2 currencies described in [subparagraph (A)](#25-A) at a later date and at a fixed rate that is agreed upon on the inception of the [contract](/usc/7/518.md?p=4) covering the [exchange](#1-D).
- (26) **Foreign futures authority—** The term “foreign futures authority” means any foreign government, or any department, agency, governmental body, or regulatory organization empowered by a foreign government to administer or enforce a law, rule, or regulation as it relates to a futures or [options](#36) matter, or any department or agency of a political subdivision of a foreign government empowered to administer or enforce a law, rule, or regulation as it relates to a futures or [options](#36) matter.
- (27) **Future delivery—** The term “future delivery” does not include any sale of any cash [commodity](#9) for deferred shipment or delivery.
- (28) **Futures commission merchant—**
  - (A) **In general—** The term “futures commission merchant” means an individual, association, partnership, [corporation](/usc/7/1502.md?p=b-5), or trust—
    - (i) that—
      - (I) is—
        - (aa) engaged in soliciting or in accepting [orders](/usc/7/2902.md?p=10) for—
          - (AA) the purchase or sale of a [commodity](#9) for [future delivery](#27);
          - (BB) a [security futures product](#45);
          - (CC) a [swap](#47-A);
          - (DD) any agreement, [contract](/usc/7/518.md?p=4), or transaction described in [section 2(c)(2)(C)(i) of this title](/usc/7/2.md?p=c-2-C-i) or [section 2(c)(2)(D)(i) of this title](/usc/7/2.md?p=c-2-D-i);
          - (EE) any [commodity](#9) [option](#36) authorized under [section 6c of this title](/usc/7/6c.md); or
          - (FF) any leverage transaction authorized under [section 23 of this title](/usc/7/23.md); or
        - (bb) acting as a counterparty in any agreement, [contract](/usc/7/518.md?p=4), or transaction described in [section 2(c)(2)(C)(i) of this title](/usc/7/2.md?p=c-2-C-i) or [section 2(c)(2)(D)(i) of this title](/usc/7/2.md?p=c-2-D-i); and
      - (II) in or in connection with the activities described in items [(aa)](#28-A-i-I-aa) or [(bb)](#28-A-i-I-bb) of subclause (I), accepts any money, [securities](#41), or property (or extends credit in lieu thereof) to margin, guarantee, or secure any trades or [contracts](/usc/7/518.md?p=4) that result or may result therefrom; or
    - (ii) that is registered with the [Commission](#8) as a [futures commission merchant](#28-A).
  - (B) **Further definition—** The [Commission](#8), by rule or regulation, may include within, or exclude from, the term “[futures commission merchant](#28-A)” any [person](#38) who engages in soliciting or accepting [orders](/usc/7/2902.md?p=10) for, or acting as a counterparty in, any agreement, [contract](/usc/7/518.md?p=4), or transaction subject to this chapter, and who accepts any money, [securities](#41), or property (or extends credit in lieu thereof) to margin, guarantee, or secure any trades or [contracts](/usc/7/518.md?p=4) that result or may result therefrom, if the [Commission](#8) determines that the rule or regulation will effectuate the purposes of this chapter.
- (29) **Hybrid instrument—** The term “hybrid instrument” means a [security](#41) having one or more payments indexed to the value, level, or rate of, or providing for the delivery of, one or more [commodities](#9).
- (30) **Interstate commerce—** The term “interstate commerce” means commerce—
  - (A) between any [State](/usc/7/1359aa.md?p=5), territory, or possession, or the District of Columbia, and any place outside thereof; or
  - (B) between points within the same [State](/usc/7/1359aa.md?p=5), territory, or possession, or the District of Columbia, but through any place outside thereof, or within any territory or possession, or the District of Columbia.
- (31) **Introducing broker—**
  - (A) **In general—** The term “introducing broker” means any [person](#38) (except an individual who elects to be and is registered as an associated [person](#38) of a [futures commission merchant](#28-A))—
    - (i) who—
      - (I) is engaged in soliciting or in accepting [orders](/usc/7/2902.md?p=10) for—
        - (aa) the purchase or sale of any [commodity](#9) for [future delivery](#27), [security futures product](#45), or [swap](#47-A);
        - (bb) any agreement, [contract](/usc/7/518.md?p=4), or transaction described in [section 2(c)(2)(C)(i) of this title](/usc/7/2.md?p=c-2-C-i) or [section 2(c)(2)(D)(i) of this title](/usc/7/2.md?p=c-2-D-i);
        - (cc) any [commodity](#9) [option](#36) authorized under [section 6c of this title](/usc/7/6c.md); or
        - (dd) any leverage transaction authorized under [section 23 of this title](/usc/7/23.md); and
      - (II) does not accept any money, [securities](#41), or property (or extend credit in lieu thereof) to margin, guarantee, or secure any trades or [contracts](/usc/7/518.md?p=4) that result or may result therefrom; or
    - (ii) who is registered with the [Commission](#8) as an [introducing broker](#31-A).
  - (B) **Further definition—** The [Commission](#8), by rule or regulation, may include within, or exclude from, the term “[introducing broker](#31-A)” any [person](#38) who engages in soliciting or accepting [orders](/usc/7/2902.md?p=10) for any agreement, [contract](/usc/7/518.md?p=4), or transaction subject to this chapter, and who does not accept any money, [securities](#41), or property (or extend credit in lieu thereof) to margin, guarantee, or secure any trades or [contracts](/usc/7/518.md?p=4) that result or may result therefrom, if the [Commission](#8) determines that the rule or regulation will effectuate the purposes of this chapter.
- (32) **Major security-based swap participant—** The term “major security-based swap participant” has the meaning given the term in section 3(a) of the [Securities](#41) Exchange Act of 1934 ([15 U.S.C. 78c(a)](/usc/15/78c.md?p=a)).
- (33) **Major swap participant—**
  - (A) **In general—** The term “major swap participant” means any [person](#38) who is not a [swap dealer](#49-A), and—
    - (i) maintains a substantial position in [swaps](#47-A) for any of the major [swap](#47-A) categories as determined by the [Commission](#8), excluding—
      - (I) positions held for hedging or mitigating commercial risk; and
      - (II) positions maintained by any employee benefit plan (or any [contract](/usc/7/518.md?p=4) held by such a plan) as defined in paragraphs (3) and (32) of section 3 of the Employee Retirement Income Security Act of 1974 ([29 U.S.C. 1002](/usc/29/1002.md)) for the primary purpose of hedging or mitigating any risk directly associated with the operation of the plan;
    - (ii) whose outstanding [swaps](#47-A) create substantial counterparty exposure that could have serious adverse effects on the financial stability of the [United States](/usc/7/6402.md?p=8) banking system or financial markets; or
    - (iii)
      - (I) is a financial entity that is highly leveraged relative to the amount of capital it holds and that is not subject to capital requirements established by an [appropriate Federal banking agency](#2); and
      - (II) maintains a substantial position in outstanding [swaps](#47-A) in any major [swap](#47-A) category as determined by the [Commission](#8).
  - (B) **Definition of substantial position—** For purposes of [subparagraph (A)](#33-A), the [Commission](#8) shall define by rule or regulation the term “substantial position” at the threshold that the [Commission](#8) determines to be prudent for the effective monitoring, management, and oversight of entities that are systemically important or can significantly impact the financial system of the [United States](/usc/7/6402.md?p=8). In setting the definition under this subparagraph, the [Commission](#8) shall consider the [person](#38)’s relative position in uncleared as opposed to [cleared swaps](#7) and may take into consideration the value and quality of collateral held against counterparty exposures.
  - (C) **Scope of designation—** For purposes of [subparagraph (A)](#33-A), a [person](#38) may be designated as a [major swap participant](#33-A) for 1 or more categories of [swaps](#47-A) without being classified as a [major swap participant](#33-A) for all classes of [swaps](#47-A).
  - (D) **Exclusions—** The definition under this paragraph shall not include an entity whose primary business is providing financing, and 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.
- (34) **Member of a registered entity; member of a derivatives transaction execution facility—** The term “member” means, with respect to a [registered entity](#40) or derivatives transaction execution facility, an individual, association, partnership, [corporation](/usc/7/1502.md?p=b-5), or trust—
  - (A) owning or holding membership in, or admitted to membership representation on, the [registered entity](#40) or derivatives transaction execution facility; or
  - (B) having trading [privileges](#36) on the [registered entity](#40) or derivatives transaction execution facility.

  A participant in an [alternative trading system](#1) that is designated as a [contract](/usc/7/518.md?p=4) market pursuant to [section 7b–1 of this title](/usc/7/7b–1.md) is deemed a member of the [contract](/usc/7/518.md?p=4) market for purposes of transactions in [security futures products](#45) through the [contract](/usc/7/518.md?p=4) market.

- (35) **Narrow-based security index—**
  - (A) The term “narrow-based security index” means an index—
    - (i) that has 9 or fewer component [securities](#41);
    - (ii) in which a component [security](#41) comprises more than 30 percent of the index’s weighting;
    - (iii) in which the five highest weighted component [securities](#41) in the aggregate comprise more than 60 percent of the index’s weighting; or
    - (iv) in which the lowest weighted component [securities](#41) comprising, in the aggregate, 25 percent of the index’s weighting have an aggregate dollar value of average daily trading volume of less than $50,000,000 (or in the case of an index with 15 or more component [securities](#41), $30,000,000), except that if there are two or more [securities](#41) with equal weighting that could be included in the calculation of the lowest weighted component [securities](#41) comprising, in the aggregate, 25 percent of the index’s weighting, such [securities](#41) shall be ranked from lowest to highest dollar value of average daily trading volume and shall be included in the calculation based on their ranking starting with the lowest ranked [security](#41).
  - (B) Notwithstanding [subparagraph (A)](#35-A), an index is not a [narrow-based security index](#35-A) if—
    - (i)
      - (I) it has at least 9 component [securities](#41);
      - (II) no component [security](#41) comprises more than 30 percent of the index’s weighting; and
      - (III) each component [security](#41) is—
        - (aa) registered pursuant to section 12 of the [Securities](#41) Exchange Act of 1934 [[15 U.S.C. 78l](/usc/15/78l.md)];
        - (bb) one of 750 [securities](#41) with the largest market capitalization; and
        - (cc) one of 675 [securities](#41) with the largest dollar value of average daily trading volume;
    - (ii) a [board of trade](#6) was designated as a [contract](/usc/7/518.md?p=4) market by the [Commodity](#9) Futures Trading [Commission](#8) with respect to a [contract of sale](#13) for [future delivery](#27) on the index, before December 21, 2000;
    - (iii)
      - (I) a [contract of sale](#13) for [future delivery](#27) on the index traded on a designated [contract](/usc/7/518.md?p=4) market or registered derivatives transaction execution facility for at least 30 days as a [contract of sale](#13) for [future delivery](#27) on an index that was not a [narrow-based security index](#35-A); and
      - (II) it has been a [narrow-based security index](#35-A) for no more than 45 business days over 3 consecutive calendar months;
    - (iv) a [contract of sale](#13) for [future delivery](#27) on the index is traded on or subject to the rules of a foreign [board of trade](#6) and meets such requirements as are jointly established by rule or regulation by the [Commission](#8) and the [Securities](#41) and [Exchange](#1-D) [Commission](#8);
    - (v) no more than 18 months have passed since December 21, 2000, and—
      - (I) it is traded on or subject to the rules of a foreign [board of trade](#6);
      - (II) the [offer](#36) and sale in the [United States](/usc/7/6402.md?p=8) of a [contract of sale](#13) for [future delivery](#27) on the index was authorized before December 21, 2000; and
      - (III) the conditions of such authorization continue to be met; or
    - (vi) a [contract of sale](#13) for [future delivery](#27) on the index is traded on or subject to the rules of a [board of trade](#6) and meets such requirements as are jointly established by rule, regulation, or [order](/usc/7/2902.md?p=10) by the [Commission](#8) and the [Securities](#41) and [Exchange](#1-D) [Commission](#8).
  - (C) Within 1 year after December 21, 2000, the [Commission](#8) and the [Securities](#41) and [Exchange](#1-D) [Commission](#8) jointly shall adopt rules or regulations that set forth the requirements under [subparagraph (B)(iv)](#35-B-iv).
  - (D) An index that is a [narrow-based security index](#35-A) solely because it was a [narrow-based security index](#35-A) for more than 45 business days over 3 consecutive calendar months pursuant to [clause (iii)](#35-B-iii) of subparagraph (B) shall not be a [narrow-based security index](#35-A) for the 3 following calendar months.
  - (E) For purposes of subparagraphs [(A)](#35-A) and [(B)](#35-B)—
    - (i) the dollar value of average daily trading volume and the market capitalization shall be calculated as of the preceding 6 full calendar months; and
    - (ii) the [Commission](#8) and the [Securities](#41) and [Exchange](#1-D) [Commission](#8) shall, by rule or regulation, jointly specify the method to be used to determine market capitalization and dollar value of average daily trading volume.
- (36) **Option—** The term “option” means an agreement, [contract](/usc/7/518.md?p=4), or transaction that is of the character of, or is commonly known to the trade as, an “option”, “privilege”, “indemnity”, “bid”, “offer”, “put”, “call”, “advance guaranty”, or “decline guaranty”.
- (37) **Organized exchange—** The term “organized exchange” means a [trading facility](#51-A) that—
  - (A) permits trading—
    - (i) by or on behalf of a [person](#38) that is not an [eligible contract participant](#18); or
    - (ii) by [persons](#38) other than on a principal-to-principal basis; or
  - (B) has adopted (directly or through another nongovernmental entity) rules that—
    - (i) govern the conduct of participants, other than rules that govern the submission of [orders](/usc/7/2902.md?p=10) or execution of transactions on the [trading facility](#51-A); and
    - (ii) include disciplinary sanctions other than the exclusion of participants from trading.
- (38) **Person—** The term “person” imports the plural or singular, and includes individuals, associations, partnerships, [corporations](/usc/7/1502.md?p=b-5), and trusts.
- (39) **Prudential regulator—** The term “prudential regulator” means—
  - (A) the [Board](#5) in the case of a [swap dealer](#49-A), [major swap participant](#33-A), [security-based swap dealer](#43), or [major security-based swap participant](#32) that is—
    - (i) a [State](/usc/7/1359aa.md?p=5)-chartered [bank](/usc/7/27.md?p=a) that is a [member](#34) of the Federal Reserve System;
    - (ii) a [State](/usc/7/1359aa.md?p=5)-chartered branch or agency of a foreign [bank](/usc/7/27.md?p=a);
    - (iii) any foreign [bank](/usc/7/27.md?p=a) which does not operate an insured branch;
    - (iv) any organization operating under section 25A of the Federal Reserve Act [[12 U.S.C. 611](/usc/12/611.md) et seq.] or having an agreement with the [Board](#5) under section 225 of the Federal Reserve Act[^4];
    - (v) any [bank](/usc/7/27.md?p=a) holding company (as defined in section 2 of the [Bank](/usc/7/27.md?p=a) Holding Company Act of 1965[^4] ([12 U.S.C. 1841](/usc/12/1841.md))), any foreign [bank](/usc/7/27.md?p=a) (as defined in [section 3101(7) of title 12](/usc/12/3101.md?p=7)) that is treated as a [bank](/usc/7/27.md?p=a) holding company under [section 3106(a) of title 12](/usc/12/3106.md?p=a), and any subsidiary of such a company or foreign [bank](/usc/7/27.md?p=a) (other than a subsidiary that is described in subparagraph [(A)](#39-A) or [(B)](#39-B) or that is required to be registered with the [Commission](#8) as a [swap dealer](#49-A) or [major swap participant](#33-A) under this chapter or with the [Securities](#41) and [Exchange](#1-D) [Commission](#8) as a [security-based swap dealer](#43) or [major security-based swap participant](#32));
    - (vi) after the transfer date (as defined in section 311 of the Dodd-Frank Wall Street Reform and Consumer Protection Act [[12 U.S.C. 5411](/usc/12/5411.md)]), any savings and loan holding company (as defined in [section 1467a of title 12](/usc/12/1467a.md)) and any subsidiary of such company (other than a subsidiary that is described in subparagraph [(A)](#39-A) or [(B)](#39-B) or that is required to be registered as a [swap dealer](#49-A) or [major swap participant](#33-A) with the [Commission](#8) under this chapter or with the [Securities](#41) and [Exchange](#1-D) [Commission](#8) as a [security-based swap dealer](#43) or [major security-based swap participant](#32)); or
    - (vii) any organization operating under section 25A of the Federal Reserve Act ([12 U.S.C. 611](/usc/12/611.md) et seq.) or having an agreement with the [Board](#5) under section 25 of the Federal Reserve Act ([12 U.S.C. 601](/usc/12/601.md) et seq.);
  - (B) the Office of the Comptroller of the Currency in the case of a [swap dealer](#49-A), [major swap participant](#33-A), [security-based swap dealer](#43), or [major security-based swap participant](#32) that is—
    - (i) a national [bank](/usc/7/27.md?p=a);
    - (ii) a federally chartered branch or agency of a foreign [bank](/usc/7/27.md?p=a); or
    - (iii) any Federal savings association;
  - (C) the Federal Deposit Insurance [Corporation](/usc/7/1502.md?p=b-5) in the case of a [swap dealer](#49-A), [major swap participant](#33-A), [security-based swap dealer](#43), or [major security-based swap participant](#32) that is—
    - (i) a [State](/usc/7/1359aa.md?p=5)-chartered [bank](/usc/7/27.md?p=a) that is not a [member](#34) of the Federal Reserve System; or
    - (ii) any [State](/usc/7/1359aa.md?p=5) savings association;
  - (D) the Farm Credit Administration, in the case of a [swap dealer](#49-A), [major swap participant](#33-A), [security-based swap dealer](#43), or [major security-based swap participant](#32) that is an institution chartered under the Farm Credit Act of 1971 ([12 U.S.C. 2001](/usc/12/2001.md) et seq.); and
  - (E) the Federal Housing Finance Agency in the case of a [swap dealer](#49-A), [major swap participant](#33-A), [security-based swap dealer](#43), or [major security-based swap participant](#32) that is a regulated entity (as such term is defined in [section 4502 of title 12](/usc/12/4502.md)).
- (40) **Registered entity—** The term “registered entity” means—
  - (A) a [board of trade](#6) designated as a [contract](/usc/7/518.md?p=4) market under [section 7 of this title](/usc/7/7.md);
  - (B) a [derivatives clearing organization](#15-A) registered under [section 7a–1 of this title](/usc/7/7a–1.md);
  - (C) a [board of trade](#6) designated as a [contract](/usc/7/518.md?p=4) market under [section 7b–1 of this title](/usc/7/7b–1.md);
  - (D) a [swap execution facility](#50) registered under [section 7b–3 of this title](/usc/7/7b–3.md);
  - (E) a [swap data repository](#48) registered under [section 24a of this title](/usc/7/24a.md); and
  - (F) with respect to a [contract](/usc/7/518.md?p=4) that the [Commission](#8) determines is a [significant price discovery contract](#46), any [electronic trading facility](#16) on which the [contract](/usc/7/518.md?p=4) is executed or traded.
- (41) **Security—** The term “security” means a security as defined in section 2(a)(1) of the Securities Act of 1933 ([15 U.S.C. 77b(a)(1)](/usc/15/77b.md?p=a-1)) or section 3(a)(10) of the Securities Exchange Act of 1934 ([15 U.S.C. 78c(a)(10)](/usc/15/78c.md?p=a-10)).
- (42) **Security-based swap—** The term “security-based swap” has the meaning given the term in section 3(a) of the [Securities](#41) Exchange Act of 1934 ([15 U.S.C. 78c(a)](/usc/15/78c.md?p=a)).
- (43) **Security-based swap dealer—** The term “security-based swap dealer” has the meaning given the term in section 3(a) of the [Securities](#41) Exchange Act of 1934 ([15 U.S.C. 78c(a)](/usc/15/78c.md?p=a)).
- (44) **Security future—** The term “security future” means a [contract of sale](#13) for [future delivery](#27) of a single [security](#41) or of a [narrow-based security index](#35-A), including any interest therein or based on the value thereof, except an exempted [security](#41) under section 3(a)(12) of the [Securities](#41) Exchange Act of 1934 [[15 U.S.C. 78c(a)(12)](/usc/15/78c.md?p=a-12)] as in effect on January 11, 1983 (other than any municipal [security](#41) as defined in section 3(a)(29) of the [Securities](#41) Exchange Act of 1934 [[15 U.S.C. 78c(a)(29)](/usc/15/78c.md?p=a-29)] as in effect on January 11, 1983). The term “security future” does not include any agreement, [contract](/usc/7/518.md?p=4), or transaction excluded from this chapter under section [2(c)](/usc/7/2.md?p=c), [2(d)](/usc/7/2.md?p=d), [2(f)](/usc/7/2.md?p=f), or [2(g)](/usc/7/2.md?p=g) of this title (as in effect on December 21, 2000) or [sections 27 to 27f](/usc/7/27..27f.md) of this title.
- (45) **Security futures product—** The term “security futures product” means a [security future](#44) or any [put](#36), [call](#36), straddle, [option](#36), or [privilege](#36) on any [security future](#44).
- (46) **Significant price discovery contract—** The term “significant price discovery contract” means an agreement, [contract](/usc/7/518.md?p=4), or transaction subject to [section 2(h)(5) of this title](/usc/7/2.md?p=h-5).
- (47) **Swap—**
  - (A) **In general—** Except as provided in [subparagraph (B)](#47-B), the term “swap” means any agreement, [contract](/usc/7/518.md?p=4), or transaction—
    - (i) that is a [put](#36), [call](#36), cap, floor, collar, or similar [option](#36) of any kind that is for the purchase or sale, or based on the value, of 1 or more interest or other rates, currencies, [commodities](#9), [securities](#41), instruments of indebtedness, indices, quantitative measures, or other financial or economic interests or property of any kind;
    - (ii) that provides for any purchase, sale, payment, or delivery (other than a dividend on an equity [security](#41)) 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) that provides on an executory basis for the [exchange](#1-D), 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](#9), [securities](#41), 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](/usc/7/518.md?p=4), or transaction commonly known as—
      - (I) an interest rate [swap](#47-A);
      - (II) a rate floor;
      - (III) a rate cap;
      - (IV) a rate collar;
      - (V) a cross-currency rate [swap](#47-A);
      - (VI) a basis [swap](#47-A);
      - (VII) a currency [swap](#47-A);
      - (VIII) a [foreign exchange swap](#25);
      - (IX) a total return [swap](#47-A);
      - (X) an equity index [swap](#47-A);
      - (XI) an equity [swap](#47-A);
      - (XII) a debt index [swap](#47-A);
      - (XIII) a debt [swap](#47-A);
      - (XIV) a credit spread;
      - (XV) a credit default [swap](#47-A);
      - (XVI) a credit [swap](#47-A);
      - (XVII) a weather [swap](#47-A);
      - (XVIII) an energy [swap](#47-A);
      - (XIX) a metal [swap](#47-A);
      - (XX) an agricultural [swap](#47-A);
      - (XXI) an emissions [swap](#47-A); and
      - (XXII) a [commodity](#9) [swap](#47-A);
    - (iv) that is an agreement, [contract](/usc/7/518.md?p=4), or transaction that is, or in the future becomes, commonly known to the trade as a [swap](#47-A);
    - (v) including any [security-based swap](#42) agreement which meets the definition of “[swap](#47-A) agreement” as defined in section 206A of the Gramm-Leach-Bliley Act ([15 U.S.C. 78c](/usc/15/78c.md) note) of which a material term is based on the price, yield, value, or volatility of any [security](#41) or any group or index of [securities](#41), or any interest therein; or
    - (vi) that is any combination or permutation of, or [option](#36) on, any agreement, [contract](/usc/7/518.md?p=4), or transaction described in any of [clauses (i) through (v)](#47-A-i..47-A-v).
  - (B) **Exclusions—** The term “[swap](#47-A)” does not include—
    - (i) any [contract of sale](#13) of a [commodity](#9) for [future delivery](#27) (or [option](#36) on such a [contract](/usc/7/518.md?p=4)), leverage [contract](/usc/7/518.md?p=4) authorized under [section 23 of this title](/usc/7/23.md), [security futures product](#45), or agreement, [contract](/usc/7/518.md?p=4), or transaction described in [section 2(c)(2)(C)(i) of this title](/usc/7/2.md?p=c-2-C-i) or [section 2(c)(2)(D)(i) of this title](/usc/7/2.md?p=c-2-D-i);
    - (ii) any sale of a nonfinancial [commodity](#9) or [security](#41) for deferred shipment or delivery, so long as the transaction is intended to be physically settled;
    - (iii) any [put](#36), [call](#36), straddle, [option](#36), or [privilege](#36) on any [security](#41), certificate of deposit, or group or index of [securities](#41), including any interest therein or based on the value thereof, that is subject to—
      - (I) the Securities Act of 1933 ([15 U.S.C. 77a](/usc/15/77a.md) et seq.); and
      - (II) the [Securities](#41) Exchange Act of 1934 ([15 U.S.C. 78a](/usc/15/78a.md) et seq.);
    - (iv) any [put](#36), [call](#36), straddle, [option](#36), or [privilege](#36) relating to a foreign currency entered into on a national [securities](#41) [exchange](#1-D) registered pursuant to section 6(a) of the [Securities](#41) Exchange Act of 1934 ([15 U.S.C. 78f(a)](/usc/15/78f.md?p=a));
    - (v) any agreement, [contract](/usc/7/518.md?p=4), or transaction providing for the purchase or sale of 1 or more [securities](#41) on a fixed basis that is subject to—
      - (I) the Securities Act of 1933 ([15 U.S.C. 77a](/usc/15/77a.md) et seq.); and
      - (II) the [Securities](#41) Exchange Act of 1934 ([15 U.S.C. 78a](/usc/15/78a.md) et seq.);
    - (vi) any agreement, [contract](/usc/7/518.md?p=4), or transaction providing for the purchase or sale of 1 or more [securities](#41) on a contingent basis that is subject to the Securities Act of 1933 ([15 U.S.C. 77a](/usc/15/77a.md) et seq.) and the [Securities](#41) Exchange Act of 1934 ([15 U.S.C. 78a](/usc/15/78a.md) et seq.), unless the agreement, [contract](/usc/7/518.md?p=4), or transaction predicates the 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](/usc/7/518.md?p=4), or transaction;
    - (vii) any note, bond, or evidence of indebtedness that is a [security](#41), as defined in section 2(a)(1) of the Securities Act of 1933 ([15 U.S.C. 77b(a)(1)](/usc/15/77b.md?p=a-1));
    - (viii) any agreement, [contract](/usc/7/518.md?p=4), or transaction that is—
      - (I) based on a [security](#41); and
      - (II) entered into directly or through an underwriter (as defined in section 2(a)(11) of the Securities Act of 1933 ([15 U.S.C. 77b(a)(11)](/usc/15/77b.md?p=a-11))[^5] by the issuer of such [security](#41) for the purposes of raising capital, unless the agreement, [contract](/usc/7/518.md?p=4), or transaction is entered into to manage a risk associated with capital raising;
    - (ix) any agreement, [contract](/usc/7/518.md?p=4), or transaction a counterparty of which is a Federal Reserve [bank](/usc/7/27.md?p=a), the Federal Government, or a Federal agency that is expressly backed by the full faith and credit of the [United States](/usc/7/6402.md?p=8); and
    - (x) any [security-based swap](#42), other than a [security-based swap](#42) as described in [subparagraph (D)](#47-D).
  - (C) **Rule of construction regarding master agreements—**
    - (i) **In general—** Except as provided in [clause (ii)](#47-C-ii), the term “[swap](#47-A)” includes a master agreement that provides for an agreement, [contract](/usc/7/518.md?p=4), or transaction that is a [swap](#47-A) under [subparagraph (A)](#47-A), together with each supplement to any master agreement, without regard to whether the master agreement contains an agreement, [contract](/usc/7/518.md?p=4), or transaction that is not a [swap](#47-A) pursuant to [subparagraph (A)](#47-A).
    - (ii) **Exception—** For purposes of [clause (i)](#47-C-i), the master agreement shall be considered to be a [swap](#47-A) only with respect to each agreement, [contract](/usc/7/518.md?p=4), or transaction covered by the master agreement that is a [swap](#47-A) pursuant to [subparagraph (A)](#47-A).
  - (D) **Mixed swap—** The term “[security-based swap](#42)” includes any agreement, [contract](/usc/7/518.md?p=4), or transaction that is as described in section 3(a)(68)(A) of the [Securities](#41) Exchange Act of 1934 ([15 U.S.C. 78c(a)(68)(A)](/usc/15/78c.md?p=a-68-A)) and also is based on the value of 1 or more interest or other rates, currencies, [commodities](#9), instruments of indebtedness, indices, quantitative measures, other financial or economic interest or property of any kind (other than a single [security](#41) or a [narrow-based security index](#35-A)), or the occurrence, non-occurrence, 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)](#47-A-iii)).
  - (E) **Treatment of foreign exchange swaps and forwards—**
    - (i) **In general—** [Foreign exchange swaps](#25) and [foreign exchange forwards](#24) shall be considered [swaps](#47-A) under this paragraph unless the Secretary makes a written determination under [section 1b of this title](/usc/7/1b.md) that either [foreign exchange swaps](#25) or [foreign exchange forwards](#24) or both—
      - (I) should be not be regulated as [swaps](#47-A) under this chapter; and
      - (II) are not structured to evade the Dodd-Frank Wall Street Reform and Consumer Protection Act in violation of any rule promulgated by the [Commission](#8) pursuant to section 721(c) of that Act [[15 U.S.C. 8321(b)](/usc/15/8321.md?p=b)].
    - (ii) **Congressional notice; effectiveness—** The Secretary shall submit any written determination under [clause (i)](#47-E-i) to the appropriate [committees](/usc/7/2132.md?p=n) of Congress, including the [Committee](/usc/7/2132.md?p=n) on Agriculture, Nutrition, and Forestry of the Senate and the [Committee](/usc/7/2132.md?p=n) on Agriculture of the House of Representatives. Any such written determination by the Secretary shall not be effective until it is submitted to the appropriate [committees](/usc/7/2132.md?p=n) of Congress.
    - (iii) **Reporting—** Notwithstanding a written determination by the Secretary under [clause (i)](#47-E-i), all [foreign exchange swaps](#25) and [foreign exchange forwards](#24) shall be reported to either a [swap data repository](#48), or, if there is no [swap data repository](#48) that would accept such [swaps](#47-A) or forwards, to the [Commission](#8) pursuant to [section 6r of this title](/usc/7/6r.md) within such time period as the [Commission](#8) may by rule or regulation prescribe.
    - (iv) **Business standards—** Notwithstanding a written determination by the Secretary pursuant to [clause (i)](#47-E-i), any party to a [foreign exchange swap](#25) or forward that is a [swap dealer](#49-A) or [major swap participant](#33-A) shall conform to the business conduct standards contained in [section 6s(h) of this title](/usc/7/6s.md?p=h).
    - (v) **Secretary—** For purposes of this subparagraph, the term “Secretary” means the Secretary of the Treasury.
  - (F) **Exception for certain foreign exchange swaps and forwards—**
    - (i) **Registered entities—** Any [foreign exchange swap](#25) and any [foreign exchange forward](#24) that is listed and traded on or subject to the rules of a designated [contract](/usc/7/518.md?p=4) market or a [swap execution facility](#50), or that is cleared by a [derivatives clearing organization](#15-A), shall not be exempt from any provision of this chapter or amendments made by the Wall Street Transparency and Accountability Act of 2010 prohibiting fraud or manipulation.
    - (ii) **Retail transactions—** Nothing in [subparagraph (E)](#47-E) shall affect, or be construed to affect, the applicability of this chapter or the jurisdiction of the [Commission](#8) with respect to agreements, [contracts](/usc/7/518.md?p=4), or transactions in foreign currency pursuant to [section 2(c)(2) of this title](/usc/7/2.md?p=c-2).
- (48) **Swap data repository—** The term “swap data repository” means any [person](#38) that collects and maintains information or records with respect to transactions or positions in, or the terms and conditions of, [swaps](#47-A) entered into by third parties for the purpose of providing a centralized recordkeeping facility for [swaps](#47-A).
- (49) **Swap dealer—**
  - (A) **In general—** The term “swap dealer” means any [person](#38) who—
    - (i) holds itself out as a dealer in [swaps](#47-A);
    - (ii) makes a market in [swaps](#47-A);
    - (iii) regularly enters into [swaps](#47-A) with counterparties as an ordinary course of business for its own account; or
    - (iv) engages in any activity causing the [person](#38) to be commonly known in the trade as a dealer or market maker in [swaps](#47-A),
  - (B) **Inclusion—** A [person](#38) may be designated as a [swap dealer](#49-A) for a single type or single class or category of [swap](#47-A) or activities and considered not to be a [swap dealer](#49-A) for other types, classes, or categories of [swaps](#47-A) or activities.
  - (C) **Exception—** The term “[swap dealer](#49-A)” does not include a [person](#38) that enters into [swaps](#47-A) for such [person](#38)’s own account, either individually or in a fiduciary capacity, but not as a part of a regular business.
  - (D) **De minimis exception—** The [Commission](#8) shall exempt from designation as a [swap dealer](#49-A) an entity that engages in a de minimis quantity of [swap](#47-A) dealing in connection with transactions with or on behalf of its customers. The [Commission](#8) shall promulgate regulations to establish factors with respect to the making of this determination to exempt.
- (50) **Swap execution facility—** The term “swap execution facility” means a trading system or platform in which multiple participants have the ability to execute or trade [swaps](#47-A) by accepting [bids](#36) and [offers](#36) made by multiple participants in the facility or system, through any means of [interstate commerce](#30), including any [trading facility](#51-A), that—
  - (A) facilitates the execution of [swaps](#47-A) between [persons](#38); and
  - (B) is not a designated [contract](/usc/7/518.md?p=4) market.
- (51) **Trading facility—**
  - (A) **In general—** The term “trading facility” means a [person](#38) or group of [persons](#38) that constitutes, maintains, or provides a physical or electronic facility or system in which multiple participants have the ability to execute or trade agreements, [contracts](/usc/7/518.md?p=4), or transactions—
    - (i) by accepting [bids](#36) or [offers](#36) made by other participants that are open to multiple participants in the facility or system; or
    - (ii) through the interaction of multiple [bids](#36) or multiple [offers](#36) within a system with a pre-determined non-discretionary automated trade matching and execution algorithm.
  - (B) **Exclusions—** The term “[trading facility](#51-A)” does not include—
    - (i) a [person](#38) or group of [persons](#38) solely because the [person](#38) or group of [persons](#38) constitutes, maintains, or provides an electronic facility or system that enables participants to negotiate the terms of and enter into bilateral transactions as a result of communications exchanged by the parties and not from interaction of multiple [bids](#36) and multiple [offers](#36) within a predetermined, nondiscretionary automated trade matching and execution algorithm;
    - (ii) a government securities dealer or government securities broker, to the extent that the dealer or broker executes or trades agreements, [contracts](/usc/7/518.md?p=4), or transactions in government securities, or assists [persons](#38) in communicating about, negotiating, entering into, executing, or trading an agreement, [contract](/usc/7/518.md?p=4), or transaction in government securities (as the terms “government securities dealer”, “government securities broker”, and “government securities” are defined in section 3(a) of the [Securities](#41) Exchange Act of 1934 ([15 U.S.C. 78c(a)](/usc/15/78c.md?p=a))); or
    - (iii) facilities on which [bids](#36) and [offers](#36), and acceptances of [bids](#36) and [offers](#36) effected on the facility, are not binding.

    Any [person](#38), group of [persons](#38), dealer, broker, or facility described in clause [(i)](#51-B-i) or [(ii)](#51-B-ii) is excluded from the meaning of the term “[trading facility](#51-A)” for the purposes of this chapter without any prior specific approval, certification, or other action by the [Commission](#8).

  - (C) **Special rule—** A [person](#38) or group of [persons](#38) that would not otherwise constitute a [trading facility](#51-A) shall not be considered to be a [trading facility](#51-A) solely as a result of the submission to a [derivatives clearing organization](#15-A) of transactions executed on or through the [person](#38) or group of [persons](#38).

# §1b. Requirements of Secretary of the Treasury regarding exemption of foreign exchange swaps and foreign exchange forwards from definition of the term “swap”

- (a) **Required considerations—** In determining whether to exempt [foreign exchange swaps](/usc/7/1a.md?p=25) and [foreign exchange forwards](/usc/7/1a.md?p=24) from the definition of the term “swap”, the Secretary of the Treasury (referred to in this section as the “Secretary”) shall consider—
  - (1) whether the required trading and clearing of [foreign exchange swaps](/usc/7/1a.md?p=25) and [foreign exchange forwards](/usc/7/1a.md?p=24) would create systemic risk, lower transparency, or threaten the financial stability of the [United States](/usc/7/6402.md?p=8);
  - (2) whether [foreign exchange swaps](/usc/7/1a.md?p=25) and [foreign exchange forwards](/usc/7/1a.md?p=24) are already subject to a regulatory scheme that is materially comparable to that established by this chapter for other classes of [swaps](#a);
  - (3) the extent to which [bank](/usc/7/27.md?p=a) regulators of participants in the foreign [exchange](/usc/7/1a.md?p=1-D) market provide adequate supervision, including capital and margin requirements;
  - (4) the extent of adequate payment and settlement systems; and
  - (5) the use of a potential exemption of [foreign exchange swaps](/usc/7/1a.md?p=25) and [foreign exchange forwards](/usc/7/1a.md?p=24) to evade otherwise applicable regulatory requirements.
- (b) **Determination—** If the Secretary makes a determination to exempt [foreign exchange swaps](/usc/7/1a.md?p=25) and [foreign exchange forwards](/usc/7/1a.md?p=24) from the definition of the term “[swap](#a)”, the Secretary shall submit to the appropriate [committees](/usc/7/2132.md?p=n) of Congress a determination that contains—
  - (1) an explanation regarding why [foreign exchange swaps](/usc/7/1a.md?p=25) and [foreign exchange forwards](/usc/7/1a.md?p=24) are qualitatively different from other classes of [swaps](#a) in a way that would make the [foreign exchange swaps](/usc/7/1a.md?p=25) and [foreign exchange forwards](/usc/7/1a.md?p=24) ill-suited for regulation as [swaps](#a); and
  - (2) an identification of the objective differences of [foreign exchange swaps](/usc/7/1a.md?p=25) and [foreign exchange forwards](/usc/7/1a.md?p=24) with respect to standard [swaps](#a) that warrant an exempted status.
- (c) **Effect of determination—** A determination by the Secretary under [subsection (b)](#b) shall not exempt any [foreign exchange swaps](/usc/7/1a.md?p=25) and [foreign exchange forwards](/usc/7/1a.md?p=24) traded on a designated [contract](/usc/7/518.md?p=4) market or [swap execution facility](/usc/7/1a.md?p=50) from any applicable antifraud and antimanipulation provision under this chapter.[^1]

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

- (a) **Jurisdiction of Commission; Commodity Futures Trading Commission—**
  - (1) **Jurisdiction of Commission—**
    - (A) **In general—** The [Commission](/usc/7/1a.md?p=8) shall have exclusive jurisdiction, except to the extent otherwise provided in the Wall Street Transparency and Accountability Act of 2010 (including an amendment made by that Act) and subparagraphs (C), (D), and (I) of this paragraph and subsections [(c)](#c) and [(f)](#f), with respect to accounts, agreements (including any transaction which is of the character of, or is commonly known to the trade as, an “[option](/usc/7/1a.md?p=36)”, “[privilege](/usc/7/1a.md?p=36)”, “[indemnity](/usc/7/1a.md?p=36)”, “[bid](/usc/7/1a.md?p=36)”, “[offer](/usc/7/1a.md?p=36)”, “[put](/usc/7/1a.md?p=36)”, “[call](/usc/7/1a.md?p=36)”, “[advance guaranty](/usc/7/1a.md?p=36)”, or “[decline guaranty](/usc/7/1a.md?p=36)”), and transactions involving [swaps](/usc/7/1a.md?p=47-A) or [contracts](/usc/7/518.md?p=4) of sale of a [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27) (including [significant price discovery contracts](/usc/7/1a.md?p=46)), traded or executed on a [contract](/usc/7/518.md?p=4) market designated pursuant to [section 7 of this title](/usc/7/7.md) or a [swap execution facility](/usc/7/1a.md?p=50) pursuant to [section 7b–3 of this title](/usc/7/7b–3.md) or any other [board of trade](/usc/7/1a.md?p=6), [exchange](/usc/7/1a.md?p=1-D), or market, and transactions subject to regulation by the [Commission](/usc/7/1a.md?p=8) pursuant to [section 23 of this title](/usc/7/23.md). Except as hereinabove provided, nothing contained in this section shall (I) supersede or limit the jurisdiction at any time conferred on the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8) or other regulatory [authorities](/usc/7/2009aa.md?p=1) under the laws of the [United States](/usc/7/6402.md?p=8) or of any [State](/usc/7/1359aa.md?p=5), or (II) restrict the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8) and such other [authorities](/usc/7/2009aa.md?p=1) from carrying out their duties and responsibilities in accordance with such laws. Nothing in this section shall supersede or limit the jurisdiction conferred on courts of the [United States](/usc/7/6402.md?p=8) or any [State](/usc/7/1359aa.md?p=5).
    - (B) **Liability of principal for act of agent—** The act, omission, or failure of any official, agent, or other [person](/usc/7/1a.md?p=38) acting for any individual, association, partnership, [corporation](/usc/7/1502.md?p=b-5), or trust within the scope of his employment or office shall be deemed the act, omission, or failure of such individual, association, partnership, [corporation](/usc/7/1502.md?p=b-5), or trust, as well as of such official, agent, or other [person](/usc/7/1a.md?p=38).
    - (C) **Designation of boards of trade as contract markets; contracts for future delivery; security futures products; filing with Board of Governors of Federal Reserve System; judicial review—** Notwithstanding any other provision of law—
      - (i)
        - (I) Except as provided in [subclause (II)](#a-1-C-i-II), this chapter shall not apply to and the [Commission](/usc/7/1a.md?p=8) shall have no jurisdiction to designate a [board of trade](/usc/7/1a.md?p=6) as a [contract](/usc/7/518.md?p=4) market for any transaction whereby any party to such transaction acquires any [put](/usc/7/1a.md?p=36), [call](/usc/7/1a.md?p=36), or other [option](/usc/7/1a.md?p=36) on one or more [securities](/usc/7/1a.md?p=41) (as defined in section 77b(1)[^1] of [title 15](/usc/15.md) or section 3(a)(10) of the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 [[15 U.S.C. 78c(a)(10)](/usc/15/78c.md?p=a-10)] on January 11, 1983), including any group or index of such [securities](/usc/7/1a.md?p=41), or any interest therein or based on the value thereof.
        - (II) This chapter shall apply to and the [Commission](/usc/7/1a.md?p=8) shall have jurisdiction with respect to accounts, agreements, and transactions involving, and may permit the listing for trading pursuant to [section 7a–2(c) of this title](/usc/7/7a–2.md?p=c) of, a [put](/usc/7/1a.md?p=36), [call](/usc/7/1a.md?p=36), or other [option](/usc/7/1a.md?p=36) on 1 or more [securities](/usc/7/1a.md?p=41) (as defined in [section 77b(a)(1) of title 15](/usc/15/77b.md?p=a-1) or section 3(a)(10) of the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 [[15 U.S.C. 78c(a)(10)](/usc/15/78c.md?p=a-10)] on January 11, 1983), including any group or index of such [securities](/usc/7/1a.md?p=41), or any interest therein or based on the value thereof, that is exempted by the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8) pursuant to section 36(a)(1) of the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 [[15 U.S.C. 78mm(a)(1)](/usc/15/78mm.md?p=a-1)] with the condition that the [Commission](/usc/7/1a.md?p=8) exercise concurrent jurisdiction over such [put](/usc/7/1a.md?p=36), [call](/usc/7/1a.md?p=36), or other [option](/usc/7/1a.md?p=36); provided, however, that nothing in this paragraph shall be construed to affect the jurisdiction and [authority](/usc/7/2009aa.md?p=1) of the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8) over such [put](/usc/7/1a.md?p=36), [call](/usc/7/1a.md?p=36), or other [option](/usc/7/1a.md?p=36).
      - (ii) This chapter shall apply to and the [Commission](/usc/7/1a.md?p=8) shall have exclusive jurisdiction with respect to accounts, agreements (including any transaction which is of the character of, or is commonly known to the trade as, an “[option](/usc/7/1a.md?p=36)”, “[privilege](/usc/7/1a.md?p=36)”, “[indemnity](/usc/7/1a.md?p=36)”, “[bid](/usc/7/1a.md?p=36)”, “[offer](/usc/7/1a.md?p=36)”, “[put](/usc/7/1a.md?p=36)”, “[call](/usc/7/1a.md?p=36)”, “[advance guaranty](/usc/7/1a.md?p=36)”, or “[decline guaranty](/usc/7/1a.md?p=36)”) and transactions involving, and may designate a [board of trade](/usc/7/1a.md?p=6) as a [contract](/usc/7/518.md?p=4) market in, or register a derivatives transaction execution facility that trades or executes, [contracts](/usc/7/518.md?p=4) of sale (or [options](/usc/7/1a.md?p=36) on such [contracts](/usc/7/518.md?p=4)) for [future delivery](/usc/7/1a.md?p=27) of a group or index of [securities](/usc/7/1a.md?p=41) (or any interest therein or based upon the value thereof): Provided, however, That no [board of trade](/usc/7/1a.md?p=6) shall be designated as a [contract](/usc/7/518.md?p=4) market with respect to any such [contracts](/usc/7/518.md?p=4) of sale (or [options](/usc/7/1a.md?p=36) on such [contracts](/usc/7/518.md?p=4)) for [future delivery](/usc/7/1a.md?p=27), and no derivatives transaction execution facility shall trade or execute such [contracts](/usc/7/518.md?p=4) of sale (or [options](/usc/7/1a.md?p=36) on such [contracts](/usc/7/518.md?p=4)) for [future delivery](/usc/7/1a.md?p=27), unless the [board of trade](/usc/7/1a.md?p=6) or the derivatives transaction execution facility, and the applicable [contract](/usc/7/518.md?p=4), meet the following minimum requirements:
        - (I) Settlement of or delivery on such [contract](/usc/7/518.md?p=4) (or [option](/usc/7/1a.md?p=36) on such [contract](/usc/7/518.md?p=4)) shall be effected in cash or by means other than the transfer or receipt of any [security](/usc/7/1a.md?p=41), except an exempted [security](/usc/7/1a.md?p=41) under [section 77c of title 15](/usc/15/77c.md) or section 3(a)(12) of the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 [[15 U.S.C. 78c(a)(12)](/usc/15/78c.md?p=a-12)] as in effect on January 11, 1983, (other than any municipal [security](/usc/7/1a.md?p=41), as defined in section 3(a)(29) of the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 [[15 U.S.C. 78c(a)(29)](/usc/15/78c.md?p=a-29)] on January 11, 1983);
        - (II) Trading in such [contract](/usc/7/518.md?p=4) (or [option](/usc/7/1a.md?p=36) on such [contract](/usc/7/518.md?p=4)) shall not be readily susceptible to manipulation of the price of such [contract](/usc/7/518.md?p=4) (or [option](/usc/7/1a.md?p=36) on such [contract](/usc/7/518.md?p=4)), nor to causing or being used in the manipulation of the price of any underlying [security](/usc/7/1a.md?p=41), [option](/usc/7/1a.md?p=36) on such [security](/usc/7/1a.md?p=41) or [option](/usc/7/1a.md?p=36) on a group or index including such [securities](/usc/7/1a.md?p=41); and
        - (III) Such group or index of [securities](/usc/7/1a.md?p=41) shall not constitute a [narrow-based security index](/usc/7/1a.md?p=35-A).
      - (iii) If, in its discretion, the [Commission](/usc/7/1a.md?p=8) determines that a stock index futures [contract](/usc/7/518.md?p=4), notwithstanding its conformance with the requirements in clause (ii) of this subparagraph, can reasonably be used as a surrogate for trading a [security](/usc/7/1a.md?p=41) (including a [security futures product](/usc/7/1a.md?p=45)), it may, by [order](/usc/7/2902.md?p=10), require such [contract](/usc/7/518.md?p=4) and any [option](/usc/7/1a.md?p=36) thereon be traded and regulated as [security futures products](/usc/7/1a.md?p=45) as defined in section 3(a)(56) of the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 [[15 U.S.C. 78c(a)(56)](/usc/15/78c.md?p=a-56)] and [section 1a of this title](/usc/7/1a.md) subject to all rules and regulations applicable to [security futures products](/usc/7/1a.md?p=45) under this chapter and the [securities](/usc/7/1a.md?p=41) laws as defined in section 3(a)(47) of the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 [[15 U.S.C. 78c(a)(47)](/usc/15/78c.md?p=a-47)].
      - (iv) No [person](/usc/7/1a.md?p=38) shall [offer](/usc/7/1a.md?p=36) to enter into, enter into, or confirm the execution of any [contract of sale](/usc/7/1a.md?p=13) (or [option](/usc/7/1a.md?p=36) on such [contract](/usc/7/518.md?p=4)) for [future delivery](/usc/7/1a.md?p=27) of any [security](/usc/7/1a.md?p=41), or interest therein or based on the value thereof, except an exempted [security](/usc/7/1a.md?p=41) under or[^2] section 3(a)(12) of the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 [[15 U.S.C. 78c(a)(12)](/usc/15/78c.md?p=a-12)] as in effect on January 11, 1983 (other than any municipal [security](/usc/7/1a.md?p=41) as defined in section 3(a)(29) of the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 [[15 U.S.C. 78c(a)(29)](/usc/15/78c.md?p=a-29)] on January 11, 1983), or except as provided in clause (ii) of this subparagraph or [subparagraph (D)](#a-1-D), any group or index of such [securities](/usc/7/1a.md?p=41) or any interest therein or based on the value thereof.
      - (v)
        - (I) Notwithstanding any other provision of this chapter, any [contract](/usc/7/518.md?p=4) market in a stock index futures [contract](/usc/7/518.md?p=4) (or [option](/usc/7/1a.md?p=36) thereon) other than a [security futures product](/usc/7/1a.md?p=45), or any derivatives transaction execution facility on which such [contract](/usc/7/518.md?p=4) or [option](/usc/7/1a.md?p=36) is traded, shall file with the [Board](/usc/7/1a.md?p=5) of Governors of the Federal Reserve System any rule establishing or changing the levels of margin (initial and maintenance) for such stock index futures [contract](/usc/7/518.md?p=4) (or [option](/usc/7/1a.md?p=36) thereon) other than [security futures products](/usc/7/1a.md?p=45).
        - (II) The [Board](/usc/7/1a.md?p=5) may at any time request any [contract](/usc/7/518.md?p=4) market or derivatives transaction execution facility to set the margin for any stock index futures [contract](/usc/7/518.md?p=4) (or [option](/usc/7/1a.md?p=36) thereon), other than for any [security futures product](/usc/7/1a.md?p=45), at such levels as the [Board](/usc/7/1a.md?p=5) in its judgment determines are appropriate to preserve the financial integrity of the [contract](/usc/7/518.md?p=4) market or derivatives transaction execution facility, or its clearing system, or to prevent systemic risk. If the [contract](/usc/7/518.md?p=4) market or derivatives transaction execution facility fails to do so within the time specified by the [Board](/usc/7/1a.md?p=5) in its request, the [Board](/usc/7/1a.md?p=5) may direct the [contract](/usc/7/518.md?p=4) market or derivatives transaction execution facility to alter or supplement the rules of the [contract](/usc/7/518.md?p=4) market or derivatives transaction execution facility as specified in the request.
        - (III) Subject to such conditions as the [Board](/usc/7/1a.md?p=5) may determine, the [Board](/usc/7/1a.md?p=5) may delegate any or all of its [authority](/usc/7/2009aa.md?p=1), relating to margin for any stock index futures [contract](/usc/7/518.md?p=4) (or [option](/usc/7/1a.md?p=36) thereon), other than [security futures products](/usc/7/1a.md?p=45), under this clause to the [Commission](/usc/7/1a.md?p=8).
        - (IV) It shall be unlawful for any [futures commission merchant](/usc/7/1a.md?p=28-A) to, directly or indirectly, extend or maintain credit to or for, or collect margin from any customer on any [security futures product](/usc/7/1a.md?p=45) unless such activities comply with the regulations prescribed pursuant to section 7(c)(2)(B) of the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 [[15 U.S.C. 78g(c)(2)(B)](/usc/15/78g.md?p=c-2-B)].
        - (V) Nothing in this clause shall supersede or limit the [authority](/usc/7/2009aa.md?p=1) granted to the [Commission](/usc/7/1a.md?p=8) in [section 12a(9) of this title](/usc/7/12a.md?p=9) to direct a [contract](/usc/7/518.md?p=4) market or registered derivatives transaction execution facility, on finding an emergency to exist, to raise temporary margin levels on any futures [contract](/usc/7/518.md?p=4), or [option](/usc/7/1a.md?p=36) on the [contract](/usc/7/518.md?p=4) covered by this clause, or on any [security futures product](/usc/7/1a.md?p=45).
        - (VI) Any action taken by the [Board](/usc/7/1a.md?p=5), or by the [Commission](/usc/7/1a.md?p=8) acting under the delegation of [authority](/usc/7/2009aa.md?p=1) under subclause III,[^3] under this clause directing a [contract](/usc/7/518.md?p=4) market to alter or supplement a [contract](/usc/7/518.md?p=4) market rule shall be subject to review only in the Court of Appeals where the party seeking review resides or has its principal place of business, or in the [United States](/usc/7/6402.md?p=8) Court of Appeals for the District of Columbia Circuit. The review shall be based on the examination of all information before the [Board](/usc/7/1a.md?p=5) or the [Commission](/usc/7/1a.md?p=8), as the case may be, at the time the determination was made. The court reviewing the action of the [Board](/usc/7/1a.md?p=5) or the [Commission](/usc/7/1a.md?p=8) shall not enter a stay or [order](/usc/7/2902.md?p=10) of mandamus unless the court has determined, after notice and a hearing before a panel of the court, that the agency action complained of was arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.
    - (D) **Jurisdiction and authority of Securities and Exchange Commission over security futures; requirements for security futures trading; periodic or special examinations by Commission representatives—**
      - (i) Notwithstanding any other provision of this chapter, the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8) shall have jurisdiction and [authority](/usc/7/2009aa.md?p=1) over [security futures](/usc/7/1a.md?p=44) as defined in section 3(a)(55) of the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 [[15 U.S.C. 78c(a)(55)](/usc/15/78c.md?p=a-55)], [section 77b(a)(16) of title 15](/usc/15/77b.md?p=a-16), [section 80a–2(a)(52) of title 15](/usc/15/80a–2.md?p=a-52), and [section 80b–2(a)(27) of title 15](/usc/15/80b–2.md?p=a-27), [options](/usc/7/1a.md?p=36) on [security futures](/usc/7/1a.md?p=44), and [persons](/usc/7/1a.md?p=38) effecting transactions in [security futures](/usc/7/1a.md?p=44) and [options](/usc/7/1a.md?p=36) thereon, and this chapter shall apply to and the [Commission](/usc/7/1a.md?p=8) shall have jurisdiction with respect to accounts, agreements (including any transaction which is of the character of, or is commonly known to the trade as, an “[option](/usc/7/1a.md?p=36)”, “[privilege](/usc/7/1a.md?p=36)”, “[indemnity](/usc/7/1a.md?p=36)”, “[bid](/usc/7/1a.md?p=36)”, “[offer](/usc/7/1a.md?p=36)”, “[put](/usc/7/1a.md?p=36)”, “[call](/usc/7/1a.md?p=36)”, “[advance guaranty](/usc/7/1a.md?p=36)”, or “[decline guaranty](/usc/7/1a.md?p=36)”), [contracts](/usc/7/518.md?p=4), and transactions involving, and may designate a [board of trade](/usc/7/1a.md?p=6) as a [contract](/usc/7/518.md?p=4) market in, or register a derivatives transaction execution facility that trades or executes, a [security futures product](/usc/7/1a.md?p=45) as defined in [section 1a of this title](/usc/7/1a.md): Provided, however, That, except as provided in clause (vi) of this subparagraph, no [board of trade](/usc/7/1a.md?p=6) shall be designated as a [contract](/usc/7/518.md?p=4) market with respect to, or registered as a derivatives transaction execution facility for, any such [contracts](/usc/7/518.md?p=4) of sale for [future delivery](/usc/7/1a.md?p=27) unless the [board of trade](/usc/7/1a.md?p=6) and the applicable [contract](/usc/7/518.md?p=4) meet the following criteria:
        - (I) Except as otherwise provided in a rule, regulation, or [order](/usc/7/2902.md?p=10) issued pursuant to clause (v) of this subparagraph, any [security](/usc/7/1a.md?p=41) underlying the [security future](/usc/7/1a.md?p=44), including each component [security](/usc/7/1a.md?p=41) of a [narrow-based security index](/usc/7/1a.md?p=35-A), is registered pursuant to section 12 of the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 [[15 U.S.C. 78l](/usc/15/78l.md)].
        - (II) If the [security futures product](/usc/7/1a.md?p=45) is not cash settled, the [board of trade](/usc/7/1a.md?p=6) on which the [security futures product](/usc/7/1a.md?p=45) is traded has arrangements in place with a clearing agency registered pursuant to section 17A of the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 [[15 U.S.C. 78q–1](/usc/15/78q–1.md)] for the payment and delivery of the [securities](/usc/7/1a.md?p=41) underlying the [security futures product](/usc/7/1a.md?p=45).
        - (III) Except as otherwise provided in a rule, regulation, or [order](/usc/7/2902.md?p=10) issued pursuant to clause (v) of this subparagraph, the [security future](/usc/7/1a.md?p=44) is based upon common stock and such other equity [securities](/usc/7/1a.md?p=41) as the [Commission](/usc/7/1a.md?p=8) and the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8) jointly determine appropriate.
        - (IV) The [security futures product](/usc/7/1a.md?p=45) is cleared by a clearing agency that has in place provisions for linked and coordinated clearing with other clearing agencies that clear [security futures products](/usc/7/1a.md?p=45), which permits the [security futures product](/usc/7/1a.md?p=45) to be purchased on a designated [contract](/usc/7/518.md?p=4) market, registered derivatives transaction execution facility, national [securities](/usc/7/1a.md?p=41) [exchange](/usc/7/1a.md?p=1-D) registered under section 6(a) of the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 [[15 U.S.C. 78f(a)](/usc/15/78f.md?p=a)], or national [securities](/usc/7/1a.md?p=41) association registered pursuant to section 15A(a) of the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 [[15 U.S.C. 78o](/usc/15/78o.md)–3(a)] and offset on another designated [contract](/usc/7/518.md?p=4) market, registered derivatives transaction execution facility, national [securities](/usc/7/1a.md?p=41) [exchange](/usc/7/1a.md?p=1-D) registered under section 6(a) of the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934, or national [securities](/usc/7/1a.md?p=41) association registered pursuant to section 15A(a) of the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934.
        - (V) Only [futures commission merchants](/usc/7/1a.md?p=28-A), [introducing brokers](/usc/7/1a.md?p=31-A), [commodity trading advisors](/usc/7/1a.md?p=12-B), [commodity pool operators](/usc/7/1a.md?p=11-A) or associated [persons](/usc/7/1a.md?p=38) subject to suitability rules comparable to those of a national [securities](/usc/7/1a.md?p=41) association registered pursuant to section 15A(a) of the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 [[15 U.S.C. 78o](/usc/15/78o.md)–3(a)] solicit, accept any [order](/usc/7/2902.md?p=10) for, or otherwise deal in any transaction in or in connection with the [security futures product](/usc/7/1a.md?p=45).
        - (VI) The [security futures product](/usc/7/1a.md?p=45) is subject to a prohibition against dual trading in [section 6j of this title](/usc/7/6j.md) and the rules and regulations thereunder or the provisions of section 11(a) of the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 [[15 U.S.C. 78k(a)](/usc/15/78k.md?p=a)] and the rules and regulations thereunder, except to the extent otherwise permitted under the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 [[15 U.S.C. 78a](/usc/15/78a.md) et seq.] and the rules and regulations thereunder.
        - (VII) Trading in the [security futures product](/usc/7/1a.md?p=45) is not readily susceptible to manipulation of the price of such [security futures product](/usc/7/1a.md?p=45), nor to causing or being used in the manipulation of the price of any underlying [security](/usc/7/1a.md?p=41), [option](/usc/7/1a.md?p=36) on such [security](/usc/7/1a.md?p=41), or [option](/usc/7/1a.md?p=36) on a group or index including such [securities](/usc/7/1a.md?p=41);
        - (VIII) The [board of trade](/usc/7/1a.md?p=6) on which the [security futures product](/usc/7/1a.md?p=45) is traded has procedures in place for coordinated surveillance among such [board of trade](/usc/7/1a.md?p=6), any market on which any [security](/usc/7/1a.md?p=41) underlying the [security futures product](/usc/7/1a.md?p=45) is traded, and other markets on which any related [security](/usc/7/1a.md?p=41) is traded to detect manipulation and insider trading, except that, if the [board of trade](/usc/7/1a.md?p=6) is an [alternative trading system](/usc/7/1a.md?p=1), a national [securities](/usc/7/1a.md?p=41) association registered pursuant to section 15A(a) of the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 [[15 U.S.C. 78o](/usc/15/78o.md)–3(a)] or national [securities](/usc/7/1a.md?p=41) [exchange](/usc/7/1a.md?p=1-D) registered pursuant to section 6(a) of the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 [[15 U.S.C. 78f(a)](/usc/15/78f.md?p=a)] of which such [alternative trading system](/usc/7/1a.md?p=1) is a [member](/usc/7/1a.md?p=34) has in place such procedures.
        - (IX) The [board of trade](/usc/7/1a.md?p=6) on which the [security futures product](/usc/7/1a.md?p=45) is traded has in place audit trails necessary or appropriate to facilitate the coordinated surveillance required in [subclause (VIII)](#a-1-D-i-VIII), except that, if the [board of trade](/usc/7/1a.md?p=6) is an [alternative trading system](/usc/7/1a.md?p=1), a national [securities](/usc/7/1a.md?p=41) association registered pursuant to section 15A(a) of the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 [[15 U.S.C. 78o](/usc/15/78o.md)–3(a)] or national [securities](/usc/7/1a.md?p=41) [exchange](/usc/7/1a.md?p=1-D) registered pursuant to section 6(a) of the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 [[15 U.S.C. 78f(a)](/usc/15/78f.md?p=a)] of which such [alternative trading system](/usc/7/1a.md?p=1) is a [member](/usc/7/1a.md?p=34) has rules to require such audit trails.
        - (X) The [board of trade](/usc/7/1a.md?p=6) on which the [security futures product](/usc/7/1a.md?p=45) is traded has in place procedures to coordinate trading halts between such [board of trade](/usc/7/1a.md?p=6) and markets on which any [security](/usc/7/1a.md?p=41) underlying the [security futures product](/usc/7/1a.md?p=45) is traded and other markets on which any related [security](/usc/7/1a.md?p=41) is traded, except that, if the [board of trade](/usc/7/1a.md?p=6) is an [alternative trading system](/usc/7/1a.md?p=1), a national [securities](/usc/7/1a.md?p=41) association registered pursuant to section 15A(a) of the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 [[15 U.S.C. 78o](/usc/15/78o.md)–3(a)] or national [securities](/usc/7/1a.md?p=41) [exchange](/usc/7/1a.md?p=1-D) registered pursuant to section 6(a) of the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 [[15 U.S.C. 78f(a)](/usc/15/78f.md?p=a)] of which such [alternative trading system](/usc/7/1a.md?p=1) is a [member](/usc/7/1a.md?p=34) has rules to require such coordinated trading halts.
        - (XI) The margin requirements for a [security futures product](/usc/7/1a.md?p=45) comply with the regulations prescribed pursuant to section 7(c)(2)(B) of the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 [[15 U.S.C. 78g(c)(2)(B)](/usc/15/78g.md?p=c-2-B)], except that nothing in this subclause shall be construed to prevent a [board of trade](/usc/7/1a.md?p=6) from requiring higher margin levels for a [security futures product](/usc/7/1a.md?p=45) when it deems such action to be necessary or appropriate.
      - (ii) It shall be unlawful for any [person](/usc/7/1a.md?p=38) to [offer](/usc/7/1a.md?p=36), to enter into, to execute, to confirm the execution of, or to conduct any office or business anywhere in the [United States](/usc/7/6402.md?p=8), its territories or possessions, for the purpose of soliciting, or accepting any [order](/usc/7/2902.md?p=10) for, or otherwise dealing in, any transaction in, or in connection with, a [security futures product](/usc/7/1a.md?p=45) unless—
        - (I) the transaction is conducted on or subject to the rules of a [board of trade](/usc/7/1a.md?p=6) that—
          - (aa) has been designated by the [Commission](/usc/7/1a.md?p=8) as a [contract](/usc/7/518.md?p=4) market in such [security futures product](/usc/7/1a.md?p=45); or
          - (bb) is a registered derivatives transaction execution facility for the [security futures product](/usc/7/1a.md?p=45) that has provided a certification with respect to the [security futures product](/usc/7/1a.md?p=45) pursuant to [clause (vii)](#a-1-D-vii);
        - (II) the [contract](/usc/7/518.md?p=4) is executed or consummated by, through, or with a [member](/usc/7/1a.md?p=34) of the [contract](/usc/7/518.md?p=4) market or registered derivatives transaction execution facility; and
        - (III) the [security futures product](/usc/7/1a.md?p=45) is evidenced by a record in writing which shows the date, the parties to such [security futures product](/usc/7/1a.md?p=45) and their addresses, the property covered, and its price, and each [contract](/usc/7/518.md?p=4) market [member](/usc/7/1a.md?p=34) or registered derivatives transaction execution facility [member](/usc/7/1a.md?p=34) shall keep the record for a period of 3 years from the date of the transaction, or for a longer period if the [Commission](/usc/7/1a.md?p=8) so directs, which record shall at all times be open to the inspection of any duly authorized representative of the [Commission](/usc/7/1a.md?p=8).
      - (iii)
        - (I) Except as provided in [subclause (II)](#a-1-D-iii-II) but notwithstanding any other provision of this chapter, no [person](/usc/7/1a.md?p=38) shall [offer](/usc/7/1a.md?p=36) to enter into, enter into, or confirm the execution of any [option](/usc/7/1a.md?p=36) on a [security future](/usc/7/1a.md?p=44).
        - (II) After 3 years after December 21, 2000, the [Commission](/usc/7/1a.md?p=8) and the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8) may by [order](/usc/7/2902.md?p=10) jointly determine to permit trading of [options](/usc/7/1a.md?p=36) on any [security future](/usc/7/1a.md?p=44) authorized to be traded under the provisions of this chapter and the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 [[15 U.S.C. 78a](/usc/15/78a.md) et seq.].
      - (iv)
        - (I) All relevant records of a [futures commission merchant](/usc/7/1a.md?p=28-A) or [introducing broker](/usc/7/1a.md?p=31-A) registered pursuant to [section 6f(a)(2) of this title](/usc/7/6f.md?p=a-2), [floor broker](/usc/7/1a.md?p=22-A) or [floor trader](/usc/7/1a.md?p=23-A) exempt from registration pursuant to [section 6f(a)(3) of this title](/usc/7/6f.md?p=a-3), associated [person](/usc/7/1a.md?p=38) exempt from registration pursuant to [section 6k(6) of this title](/usc/7/6k.md?p=6), or [board of trade](/usc/7/1a.md?p=6) designated as a [contract](/usc/7/518.md?p=4) market in a [security futures product](/usc/7/1a.md?p=45) pursuant to [section 7b–1 of this title](/usc/7/7b–1.md) shall be subject to such reasonable periodic or special examinations by representatives of the [Commission](/usc/7/1a.md?p=8) as the [Commission](/usc/7/1a.md?p=8) deems necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of this chapter, and the [Commission](/usc/7/1a.md?p=8), before conducting any such examination, shall give notice to the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8) of the proposed examination and consult with the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8) concerning the feasibility and desirability of coordinating the examination with examinations conducted by the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8) in [order](/usc/7/2902.md?p=10) to avoid unnecessary regulatory duplication or undue regulatory burdens for the registrant or [board of trade](/usc/7/1a.md?p=6).
        - (II) The [Commission](/usc/7/1a.md?p=8) shall notify the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8) of any examination conducted of any [futures commission merchant](/usc/7/1a.md?p=28-A) or [introducing broker](/usc/7/1a.md?p=31-A) registered pursuant to [section 6f(a)(2) of this title](/usc/7/6f.md?p=a-2), [floor broker](/usc/7/1a.md?p=22-A) or [floor trader](/usc/7/1a.md?p=23-A) exempt from registration pursuant to [section 6f(a)(3) of this title](/usc/7/6f.md?p=a-3), associated [person](/usc/7/1a.md?p=38) exempt from registration pursuant to [section 6k(6) of this title](/usc/7/6k.md?p=6), or [board of trade](/usc/7/1a.md?p=6) designated as a [contract](/usc/7/518.md?p=4) market in a [security futures product](/usc/7/1a.md?p=45) pursuant to [section 7b–1 of this title](/usc/7/7b–1.md), and, upon request, furnish to the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8) any examination report and data supplied to or prepared by the [Commission](/usc/7/1a.md?p=8) in connection with the examination.
        - (III) Before conducting an examination under [subclause (I)](#a-1-D-iv-I), the [Commission](/usc/7/1a.md?p=8) shall use the reports of examinations, unless the information sought is unavailable in the reports, of any [futures commission merchant](/usc/7/1a.md?p=28-A) or [introducing broker](/usc/7/1a.md?p=31-A) registered pursuant to [section 6f(a)(2) of this title](/usc/7/6f.md?p=a-2), [floor broker](/usc/7/1a.md?p=22-A) or [floor trader](/usc/7/1a.md?p=23-A) exempt from registration pursuant to [section 6f(a)(3) of this title](/usc/7/6f.md?p=a-3), associated [person](/usc/7/1a.md?p=38) exempt from registration pursuant to [section 6k(6) of this title](/usc/7/6k.md?p=6), or [board of trade](/usc/7/1a.md?p=6) designated as a [contract](/usc/7/518.md?p=4) market in a [security futures product](/usc/7/1a.md?p=45) pursuant to [section 7b–1 of this title](/usc/7/7b–1.md) that is made by the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8), a national [securities](/usc/7/1a.md?p=41) association registered pursuant to section 15A(a) of the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 ([15 U.S.C. 78o](/usc/15/78o.md)–3(a)), or a national [securities](/usc/7/1a.md?p=41) [exchange](/usc/7/1a.md?p=1-D) registered pursuant to section 6(a) of the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 ([15 U.S.C. 78f(a)](/usc/15/78f.md?p=a)).
        - (IV) Any records required under this subsection for a [futures commission merchant](/usc/7/1a.md?p=28-A) or [introducing broker](/usc/7/1a.md?p=31-A) registered pursuant to [section 6f(a)(2) of this title](/usc/7/6f.md?p=a-2), [floor broker](/usc/7/1a.md?p=22-A) or [floor trader](/usc/7/1a.md?p=23-A) exempt from registration pursuant to [section 6f(a)(3) of this title](/usc/7/6f.md?p=a-3), associated [person](/usc/7/1a.md?p=38) exempt from registration pursuant to [section 6k(6) of this title](/usc/7/6k.md?p=6), or [board of trade](/usc/7/1a.md?p=6) designated as a [contract](/usc/7/518.md?p=4) market in a [security futures product](/usc/7/1a.md?p=45) pursuant to [section 7b–1 of this title](/usc/7/7b–1.md), shall be limited to records with respect to accounts, agreements, [contracts](/usc/7/518.md?p=4), and transactions involving [security futures products](/usc/7/1a.md?p=45).
      - (v)
        - (I) The [Commission](/usc/7/1a.md?p=8) and the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8), by rule, regulation, or [order](/usc/7/2902.md?p=10), may jointly modify the criteria specified in subclause [(I)](#a-1-D-i-I) or [(III)](#a-1-D-i-III) of clause (i), including the trading of [security futures](/usc/7/1a.md?p=44) based on [securities](/usc/7/1a.md?p=41) other than equity [securities](/usc/7/1a.md?p=41), to the extent such modification fosters the development of fair and orderly markets in [security futures products](/usc/7/1a.md?p=45), is necessary or appropriate in the public interest, and is consistent with the protection of investors.
        - (II) The [Commission](/usc/7/1a.md?p=8) and the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8), by [order](/usc/7/2902.md?p=10), may jointly exempt any [person](/usc/7/1a.md?p=38) from compliance with the criterion specified in [clause (i)(IV)](#a-1-D-i-IV) to the extent such exemption fosters the development of fair and orderly markets in [security futures products](/usc/7/1a.md?p=45), is necessary or appropriate in the public interest, and is consistent with the protection of investors.
      - (vi)
        - (I) Notwithstanding clauses [(i)](#a-1-D-i) and [(vii)](#a-1-D-vii), until the [compliance date](#a-1-D-vi-III), a [board of trade](/usc/7/1a.md?p=6) shall not be required to meet the criterion specified in [clause (i)(IV)](#a-1-D-i-IV).
        - (II) The [Commission](/usc/7/1a.md?p=8) and the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8) shall jointly publish in the Federal Register a notice of the [compliance date](#a-1-D-vi-III) no later than 165 days before the [compliance date](#a-1-D-vi-III).
        - (III) For purposes of this clause, the term “compliance date” means the later of—
          - (aa) 180 days after the end of the first full calendar month period in which the average aggregate comparable share volume for all [security futures products](/usc/7/1a.md?p=45) based on single equity [securities](/usc/7/1a.md?p=41) traded on all designated [contract](/usc/7/518.md?p=4) markets and registered derivatives transaction execution facilities equals or exceeds 10 percent of the average aggregate comparable share volume of [options](/usc/7/1a.md?p=36) on single equity [securities](/usc/7/1a.md?p=41) traded on all national [securities](/usc/7/1a.md?p=41) [exchanges](/usc/7/1a.md?p=1-D) registered pursuant to section 6(a) of the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 [[15 U.S.C. 78f(a)](/usc/15/78f.md?p=a)] and any national [securities](/usc/7/1a.md?p=41) associations registered pursuant to section 15A(a) of such Act [[15 U.S.C. 78o](/usc/15/78o.md)–3(a)]; or
          - (bb) 2 years after the date on which trading in any [security futures product](/usc/7/1a.md?p=45) commences under this chapter.
      - (vii) It shall be unlawful for a [board of trade](/usc/7/1a.md?p=6) to trade or execute a [security futures product](/usc/7/1a.md?p=45) unless the [board of trade](/usc/7/1a.md?p=6) has provided the [Commission](/usc/7/1a.md?p=8) with a certification that the specific [security futures product](/usc/7/1a.md?p=45) and the [board of trade](/usc/7/1a.md?p=6), as applicable, meet the criteria specified in [subclauses (I) through (XI)](#a-1-D-i-I..a-1-D-i-XI) of clause (i), except as otherwise provided in [clause (vi)](#a-1-D-vi).
    - (E) **Obligation to address security futures products traded on foreign exchanges—**
      - (i) To the extent necessary or appropriate in the public interest, to promote fair competition, and consistent with promotion of market efficiency, innovation, and expansion of investment opportunities, the protection of investors, and the maintenance of fair and orderly markets, the [Commission](/usc/7/1a.md?p=8) and the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8) shall jointly issue such rules, regulations, or [orders](/usc/7/2902.md?p=10) as are necessary and appropriate to permit the [offer](/usc/7/1a.md?p=36) and sale of a [security futures product](/usc/7/1a.md?p=45) traded on or subject to the rules of a foreign [board of trade](/usc/7/1a.md?p=6) to [United States](/usc/7/6402.md?p=8) [persons](/usc/7/1a.md?p=38).
      - (ii) The rules, regulations, or [orders](/usc/7/2902.md?p=10) adopted under [clause (i)](#a-1-E-i) shall take into account, as appropriate, the nature and size of the markets that the [securities](/usc/7/1a.md?p=41) underlying the [security futures product](/usc/7/1a.md?p=45) reflects.
    - (F) **Security futures products traded on foreign boards of trade—**
      - (i) Nothing in this chapter is intended to prohibit a [futures commission merchant](/usc/7/1a.md?p=28-A) from carrying [security futures products](/usc/7/1a.md?p=45) traded on or subject to the rules of a foreign [board of trade](/usc/7/1a.md?p=6) in the accounts of [persons](/usc/7/1a.md?p=38) located outside of the [United States](/usc/7/6402.md?p=8).
      - (ii) Nothing in this chapter is intended to prohibit any [eligible contract participant](/usc/7/1a.md?p=18) located in the [United States](/usc/7/6402.md?p=8) from purchasing or carrying [securities](/usc/7/1a.md?p=41) futures products traded on or subject to the rules of a foreign [board of trade](/usc/7/1a.md?p=6), [exchange](/usc/7/1a.md?p=1-D), or market to the same extent such [person](/usc/7/1a.md?p=38) may be authorized to purchase or carry other [securities](/usc/7/1a.md?p=41) traded on a foreign [board of trade](/usc/7/1a.md?p=6), [exchange](/usc/7/1a.md?p=1-D), or market so long as any underlying [security](/usc/7/1a.md?p=41) for such [security futures products](/usc/7/1a.md?p=45) is traded principally on, by, or through any [exchange](/usc/7/1a.md?p=1-D) or market located outside the [United States](/usc/7/6402.md?p=8).
    - (G)
      - (i) Nothing in this paragraph shall limit the jurisdiction conferred on the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8) by the Wall Street Transparency and Accountability Act of 2010 with regard to [security-based swap](/usc/7/1a.md?p=42) agreements as defined pursuant to section 3(a)(78) of the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 [[15 U.S.C. 78c(a)(78)](/usc/15/78c.md?p=a-78)], and [security-based swaps](/usc/7/1a.md?p=42).
      - (ii) In addition to the [authority](/usc/7/2009aa.md?p=1) of the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8) described in [clause (i)](#a-1-G-i), nothing in this subparagraph shall limit or affect any statutory [authority](/usc/7/2009aa.md?p=1) of the [Commission](/usc/7/1a.md?p=8) with respect to an agreement, [contract](/usc/7/518.md?p=4), or transaction described in [clause (i)](#a-1-G-i).
    - (H) Notwithstanding any other provision of law, the Wall Street Transparency and Accountability Act of 2010 shall not apply to, and the [Commodity](/usc/7/1a.md?p=9) Futures Trading [Commission](/usc/7/1a.md?p=8) shall have no jurisdiction under such Act (or any amendments to this chapter made by such Act) with respect to, any [security](/usc/7/1a.md?p=41) other than a [security-based swap](/usc/7/1a.md?p=42).
    - (I)
      - (i) Nothing in this chapter shall limit or affect any statutory [authority](/usc/7/2009aa.md?p=1) of the Federal Energy Regulatory [Commission](/usc/7/1a.md?p=8) or a [State](/usc/7/1359aa.md?p=5) regulatory [authority](/usc/7/2009aa.md?p=1) (as defined in [section 796(21) of title 16](/usc/16/796.md?p=21)) with respect to an agreement, [contract](/usc/7/518.md?p=4), or transaction that is entered into pursuant to a tariff or rate schedule approved by the Federal Energy Regulatory [Commission](/usc/7/1a.md?p=8) or a [State](/usc/7/1359aa.md?p=5) regulatory [authority](/usc/7/2009aa.md?p=1) and is—
        - (I) not executed, traded, or cleared on a [registered entity](/usc/7/1a.md?p=40) or [trading facility](/usc/7/1a.md?p=51-A); or
        - (II) executed, traded, or cleared on a [registered entity](/usc/7/1a.md?p=40) or [trading facility](/usc/7/1a.md?p=51-A) owned or operated by a regional transmission organization or independent system operator.
      - (ii) In addition to the [authority](/usc/7/2009aa.md?p=1) of the Federal Energy Regulatory [Commission](/usc/7/1a.md?p=8) or a [State](/usc/7/1359aa.md?p=5) regulatory [authority](/usc/7/2009aa.md?p=1) described in [clause (i)](#a-1-I-i), nothing in this subparagraph shall limit or affect—
        - (I) any statutory [authority](/usc/7/2009aa.md?p=1) of the [Commission](/usc/7/1a.md?p=8) with respect to an agreement, [contract](/usc/7/518.md?p=4), or transaction described in [clause (i)](#a-1-I-i); or
        - (II) the jurisdiction of the [Commission](/usc/7/1a.md?p=8) under [subparagraph (A)](#a-1-A) with respect to an agreement, [contract](/usc/7/518.md?p=4), or transaction that is executed, traded, or cleared on a [registered entity](/usc/7/1a.md?p=40) or [trading facility](/usc/7/1a.md?p=51-A) that is not owned or operated by a regional transmission organization or independent system operator (as defined by sections[^4] 796(27) and (28) of [title 16](/usc/16.md)).
  - (2) **Establishment of Commodity Futures Trading Commission; composition; terms of Commissioners—**
    - (A) There is hereby established, as an independent agency of the [United States](/usc/7/6402.md?p=8) Government, a [Commodity](/usc/7/1a.md?p=9) Futures Trading [Commission](/usc/7/1a.md?p=8). The [Commission](/usc/7/1a.md?p=8) shall be composed of five Commissioners who shall be appointed by the President, by and with the advice and consent of the Senate. In nominating [persons](/usc/7/1a.md?p=38) for appointment, the President shall—
      - (i) select [persons](/usc/7/1a.md?p=38) who shall each have demonstrated knowledge in futures trading or its regulation, or the production, merchandising, processing or distribution of one or more of the [commodities](/usc/7/1a.md?p=9) or other goods and articles, services, rights, and interests covered by this chapter; and
      - (ii) seek to ensure that the demonstrated knowledge of the Commissioners is balanced with respect to such [areas](/usc/7/1471.md?p=5).

      Not more than three of the [members](/usc/7/1a.md?p=34) of the [Commission](/usc/7/1a.md?p=8) shall be [members](/usc/7/1a.md?p=34) of the same political party. Each Commissioner shall hold office for a term of five years and until his successor is appointed and has qualified, except that he shall not so continue to serve beyond the expiration of the next session of Congress subsequent to the expiration of said fixed term of office, and except (i) any Commissioner appointed to fill a vacancy occurring prior to the expiration of the term for which his predecessor was appointed shall be appointed for the remainder of such term, and (ii) the terms of office of the Commissioners first taking office after the enactment of this paragraph shall expire as designated by the President at the time of nomination, one at the end of one year, one at the end of two years, one at the end of three years, one at the end of four years, and one at the end of five years.

    - (B) The President shall appoint, by and with the advice and consent of the Senate, a [member](/usc/7/1a.md?p=34) of the [Commission](/usc/7/1a.md?p=8) as Chairman, who shall serve as Chairman at the pleasure of the President. An individual may be appointed as Chairman at the same time that [person](/usc/7/1a.md?p=38) is appointed as a Commissioner. The Chairman shall be the chief administrative officer of the [Commission](/usc/7/1a.md?p=8) and shall preside at hearings before the [Commission](/usc/7/1a.md?p=8). At any time, the President may appoint, by and with the advice and consent of the Senate, a different Chairman, and the Commissioner previously appointed as Chairman may complete that Commissioner’s term as a Commissioner.
  - (3) **Vacancies—** A vacancy in the [Commission](/usc/7/1a.md?p=8) shall not impair the right of the remaining Commissioners to exercise all the powers of the [Commission](/usc/7/1a.md?p=8).
  - (4) **General Counsel—** The [Commission](/usc/7/1a.md?p=8) shall have a General Counsel, who shall be appointed by the [Commission](/usc/7/1a.md?p=8) and serve at the pleasure of the [Commission](/usc/7/1a.md?p=8). The General Counsel shall report directly to the [Commission](/usc/7/1a.md?p=8) and serve as its legal advisor. The [Commission](/usc/7/1a.md?p=8) shall appoint such other attorneys as may be necessary, in the opinion of the [Commission](/usc/7/1a.md?p=8), to assist the General Counsel, represent the [Commission](/usc/7/1a.md?p=8) in all disciplinary proceedings pending before it, represent the [Commission](/usc/7/1a.md?p=8) in courts of law whenever appropriate, assist the Department of Justice in handling litigation concerning the [Commission](/usc/7/1a.md?p=8) in courts of law, and perform such other legal duties and functions as the [Commission](/usc/7/1a.md?p=8) may direct.
  - (5) **Executive Director—** The [Commission](/usc/7/1a.md?p=8) shall have an Executive Director, who shall be appointed by the [Commission](/usc/7/1a.md?p=8) and serve at the pleasure of the [Commission](/usc/7/1a.md?p=8). The Executive Director shall report directly to the [Commission](/usc/7/1a.md?p=8) and perform such functions and duties as the [Commission](/usc/7/1a.md?p=8) may prescribe.
  - (6) **Powers and Functions of Chairman—**
    - (A) Except as otherwise provided in this paragraph and in paragraphs (4) and (5) of this subsection, the executive and administrative functions of the [Commission](/usc/7/1a.md?p=8), including functions of the [Commission](/usc/7/1a.md?p=8) with respect to the appointment and supervision of personnel employed under the [Commission](/usc/7/1a.md?p=8), the distribution of business among such personnel and among administrative units of the [Commission](/usc/7/1a.md?p=8), and the use and expenditure of [funds](/usc/7/4531.md?p=5), according to budget categories, plans, programs, and priorities established and approved by the [Commission](/usc/7/1a.md?p=8), shall be exercised solely by the Chairman.
    - (B) In carrying out any of his functions under the provisions of this paragraph, the Chairman shall be governed by general policies, plans, priorities, and budgets approved by the [Commission](/usc/7/1a.md?p=8) and by such regulatory decisions, findings, and determination as the [Commission](/usc/7/1a.md?p=8) may by law be authorized to make.
    - (C) The appointment by the Chairman of the heads of major administrative units under the [Commission](/usc/7/1a.md?p=8) shall be subject to the approval of the [Commission](/usc/7/1a.md?p=8).
    - (D) Personnel employed regularly and full time in the immediate offices of Commissioners other than the Chairman shall not be affected by the provisions of this paragraph.
    - (E) There are hereby reserved to the [Commission](/usc/7/1a.md?p=8) its functions with respect to revising budget estimates and with respect to determining the distribution of appropriated [funds](/usc/7/4531.md?p=5) according to major programs and purposes.
    - (F) The Chairman may from time to time make such provisions as he shall deem appropriate authorizing the performance by any officer, employee, or administrative unit under his jurisdiction of any functions of the Chairman under this paragraph.
  - (7) **Appointment and compensation—**
    - (A) **In general—** The [Commission](/usc/7/1a.md?p=8) may appoint and fix the compensation of such officers, attorneys, economists, examiners, and other employees as may be necessary for carrying out the functions of the [Commission](/usc/7/1a.md?p=8) under this chapter.
    - (B) **Rates of pay—** Rates of basic pay for all employees of the [Commission](/usc/7/1a.md?p=8) may be set and adjusted by the [Commission](/usc/7/1a.md?p=8) without regard to [chapter 51](/usc/7/ch51.md) or subchapter III of [chapter 53](/usc/5/chptIII-sptD-ch53.md) of title 5.
    - (C) **Comparability—**
      - (i) **In general—** The [Commission](/usc/7/1a.md?p=8) may provide additional compensation and benefits to employees of the [Commission](/usc/7/1a.md?p=8) if the same type of compensation or benefits are provided by any agency referred to in [section 1833b(a) of title 12](/usc/12/1833b.md?p=a) or could be provided by such an agency under applicable provisions of law (including rules and regulations).
      - (ii) **Consultation—** In setting and adjusting the total amount of compensation and benefits for employees, the [Commission](/usc/7/1a.md?p=8) shall consult with, and seek to maintain comparability with, the agencies referred to in [section 1833b(a) of title 12](/usc/12/1833b.md?p=a).
  - (8) **Conflict of interest—** No Commissioner or employee of the [Commission](/usc/7/1a.md?p=8) shall accept employment or compensation from any [person](/usc/7/1a.md?p=38), [exchange](/usc/7/1a.md?p=1-D), or clearinghouse subject to regulation by the [Commission](/usc/7/1a.md?p=8) under this chapter during his term of office, nor shall he participate, directly or indirectly, in any [registered entity](/usc/7/1a.md?p=40) operations or transactions of a character subject to regulation by the [Commission](/usc/7/1a.md?p=8).
  - (9) **Liaison with Department of Agriculture; communications with Department of the Treasury, Federal Reserve Board, and Securities and Exchange Commission; application by a board of trade for designation as a contract market for future delivery of securities—**
    - (A) The [Commission](/usc/7/1a.md?p=8) shall, in cooperation with the Secretary of Agriculture, maintain a liaison between the [Commission](/usc/7/1a.md?p=8) and the Department of Agriculture. The Secretary shall take such steps as may be necessary to enable the [Commission](/usc/7/1a.md?p=8) to obtain information and utilize such services and facilities of the Department of Agriculture as may be necessary in [order](/usc/7/2902.md?p=10) to maintain effectively such liaison. In addition, the Secretary shall appoint a liaison officer, who shall be an employee of the Office of the Secretary, for the purpose of maintaining a liaison between the Department of Agriculture and the [Commission](/usc/7/1a.md?p=8). The [Commission](/usc/7/1a.md?p=8) shall furnish such liaison officer appropriate office space within the offices of the [Commission](/usc/7/1a.md?p=8) and shall allow such liaison officer to attend and observe all deliberations and proceedings of the [Commission](/usc/7/1a.md?p=8).
    - (B)
      - (i) The [Commission](/usc/7/1a.md?p=8) shall maintain communications with the Department of the Treasury, the [Board](/usc/7/1a.md?p=5) of Governors of the Federal Reserve System, and the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8) for the purpose of keeping such agencies fully informed of [Commission](/usc/7/1a.md?p=8) activities that relate to the responsibilities of those agencies, for the purpose of seeking the views of those agencies on such activities, and for considering the relationships between the volume and nature of investment and trading in [contracts](/usc/7/518.md?p=4) of sale of a [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27) and in [securities](/usc/7/1a.md?p=41) and financial instruments under the jurisdiction of such agencies.
      - (ii) When a [board of trade](/usc/7/1a.md?p=6) applies for designation or registration as a [contract](/usc/7/518.md?p=4) market or derivatives transaction execution facility involving transactions for [future delivery](/usc/7/1a.md?p=27) of any [security](/usc/7/1a.md?p=41) issued or guaranteed by the [United States](/usc/7/6402.md?p=8) or any agency thereof, the [Commission](/usc/7/1a.md?p=8) shall promptly deliver a copy of such application to the Department of the Treasury and the [Board](/usc/7/1a.md?p=5) of Governors of the Federal Reserve System. The [Commission](/usc/7/1a.md?p=8) may not designate or register a [board of trade](/usc/7/1a.md?p=6) as a [contract](/usc/7/518.md?p=4) market or derivatives transaction execution facility based on such application until forty-five days after the date the [Commission](/usc/7/1a.md?p=8) delivers the application to such agencies or until the [Commission](/usc/7/1a.md?p=8) receives comments from each of such agencies on the application, whichever period is shorter. Any comments received by the [Commission](/usc/7/1a.md?p=8) from such agencies shall be included as part of the public record of the [Commission](/usc/7/1a.md?p=8)’s designation proceeding. In designating, registering, or refusing, suspending, or revoking the designation or registration of, a [board of trade](/usc/7/1a.md?p=6) as a [contract](/usc/7/518.md?p=4) market or derivatives transaction execution facility involving transactions for [future delivery](/usc/7/1a.md?p=27) referred to in this clause or in considering any possible action under this chapter (including without limitation emergency action under [section 12a(9) of this title](/usc/7/12a.md?p=9)) with respect to such transactions, the [Commission](/usc/7/1a.md?p=8) shall take into consideration all comments it receives from the Department of the Treasury and the [Board](/usc/7/1a.md?p=5) of Governors of the Federal Reserve System and shall consider the effect that any such designation, registration, suspension, revocation, or action may have on the debt financing requirements of the [United States](/usc/7/6402.md?p=8) Government and the continued efficiency and integrity of the underlying market for [government securities](/usc/7/1a.md?p=51-B-ii).
      - (iii) The provisions of this subparagraph shall not create any rights, liabilities, or obligations upon which actions may be brought against the [Commission](/usc/7/1a.md?p=8).
  - (10) **Transmittal of budget requests and legislative recommendations to congressional committees—**
    - (A) Whenever the [Commission](/usc/7/1a.md?p=8) submits any budget estimate or request to the President or the Office of Management and Budget, it shall concurrently transmit copies of that estimate or request to the House and Senate Appropriations [Committees](/usc/7/2132.md?p=n) and the House [Committee](/usc/7/2132.md?p=n) on Agriculture and the Senate [Committee](/usc/7/2132.md?p=n) on Agriculture, Nutrition, and Forestry.
    - (B) Whenever the [Commission](/usc/7/1a.md?p=8) transmits any legislative recommendations, or testimony, or comments on legislation to the President or the Office of Management and Budget, it shall concurrently transmit copies thereof to the House [Committee](/usc/7/2132.md?p=n) on Agriculture and the Senate [Committee](/usc/7/2132.md?p=n) on Agriculture, Nutrition, and Forestry. No officer or agency of the [United States](/usc/7/6402.md?p=8) shall have any [authority](/usc/7/2009aa.md?p=1) to require the [Commission](/usc/7/1a.md?p=8) to submit its legislative recommendations, or testimony, or comments on legislation to any officer or agency of the [United States](/usc/7/6402.md?p=8) for approval, comments, or review, prior to the submission of such recommendations, testimony, or comments to the Congress. In instances in which the [Commission](/usc/7/1a.md?p=8) voluntarily seeks to obtain the comments or review of any officer or agency of the [United States](/usc/7/6402.md?p=8), the [Commission](/usc/7/1a.md?p=8) shall include a description of such actions in its legislative recommendations, testimony, or comments on legislation which it transmits to the Congress.
    - (C) Whenever the [Commission](/usc/7/1a.md?p=8) issues for official publication any opinion, release, rule, [order](/usc/7/2902.md?p=10), interpretation, or other determination on a matter, the [Commission](/usc/7/1a.md?p=8) shall provide that any dissenting, concurring, or separate opinion by any Commissioner on the matter be published in full along with the [Commission](/usc/7/1a.md?p=8) opinion, release, rule, [order](/usc/7/2902.md?p=10), interpretation, or determination.
  - (11) **Seal—** The [Commission](/usc/7/1a.md?p=8) shall have an official seal, which shall be judicially noticed.
  - (12) **Rules and regulations—** The [Commission](/usc/7/1a.md?p=8) is authorized to promulgate such rules and regulations as it deems necessary to govern the operating procedures and conduct of the business of the [Commission](/usc/7/1a.md?p=8).
  - (13) **Public availability of swap transaction data—**
    - (A) **Definition of real-time public reporting—** In this paragraph, the term “real-time public reporting” means to report data relating to a [swap](/usc/7/1a.md?p=47-A) transaction, including price and volume, as soon as technologically practicable after the time at which the [swap](/usc/7/1a.md?p=47-A) transaction has been executed.
    - (B) **Purpose—** The purpose of this section is to authorize the [Commission](/usc/7/1a.md?p=8) to make [swap](/usc/7/1a.md?p=47-A) transaction and pricing data available to the public in such form and at such times as the [Commission](/usc/7/1a.md?p=8) determines appropriate to enhance price discovery.
    - (C) **General rule—** The [Commission](/usc/7/1a.md?p=8) is authorized and required to provide by rule for the public availability of [swap](/usc/7/1a.md?p=47-A) transaction and pricing data as follows:
      - (i) With respect to those [swaps](/usc/7/1a.md?p=47-A) that are subject to the mandatory clearing requirement described in [subsection (h)(1)](#h-1) (including those [swaps](/usc/7/1a.md?p=47-A) that are excepted from the requirement pursuant to [subsection (h)(7)](#h-7)), the [Commission](/usc/7/1a.md?p=8) shall require [real-time public reporting](#a-13-A) for such transactions.
      - (ii) With respect to those [swaps](/usc/7/1a.md?p=47-A) that are not subject to the mandatory clearing requirement described in [subsection (h)(1)](#h-1), but are cleared at a registered [derivatives clearing organization](/usc/7/1a.md?p=15-A), the [Commission](/usc/7/1a.md?p=8) shall require [real-time public reporting](#a-13-A) for such transactions.
      - (iii) With respect to [swaps](/usc/7/1a.md?p=47-A) that are not cleared at a registered [derivatives clearing organization](/usc/7/1a.md?p=15-A) and which are reported to a [swap data repository](/usc/7/1a.md?p=48) or the [Commission](/usc/7/1a.md?p=8) under [subsection (h)(6)](#h-6), the [Commission](/usc/7/1a.md?p=8) shall require [real-time public reporting](#a-13-A) for such transactions, in a manner that does not disclose the business transactions and market positions of any [person](/usc/7/1a.md?p=38).
      - (iv) With respect to [swaps](/usc/7/1a.md?p=47-A) that are determined to be required to be cleared under [subsection (h)(2)](#h-2) but are not cleared, the [Commission](/usc/7/1a.md?p=8) shall require [real-time public reporting](#a-13-A) for such transactions.
    - (D) **Registered entities and public reporting—** The [Commission](/usc/7/1a.md?p=8) may require [registered entities](/usc/7/1a.md?p=40) to publicly disseminate the [swap](/usc/7/1a.md?p=47-A) transaction and pricing data required to be reported under this paragraph.
    - (E) **Rulemaking required—** With respect to the rule providing for the public availability of transaction and pricing data for [swaps](/usc/7/1a.md?p=47-A) described in clauses [(i)](#a-13-C-i) and [(ii)](#a-13-C-ii) of subparagraph (C), the rule promulgated by the [Commission](/usc/7/1a.md?p=8) shall contain provisions—
      - (i) to ensure such information does not identify the participants;
      - (ii) to specify the criteria for determining what constitutes a large notional [swap](/usc/7/1a.md?p=47-A) transaction (block trade) for particular markets and [contracts](/usc/7/518.md?p=4);
      - (iii) to specify the appropriate time delay for reporting large notional [swap](/usc/7/1a.md?p=47-A) transactions (block trades) to the public; and
      - (iv) that take into account whether the public disclosure will materially reduce market liquidity.
    - (F) **Timeliness of reporting—** Parties to a [swap](/usc/7/1a.md?p=47-A) (including agents of the parties to a [swap](/usc/7/1a.md?p=47-A)) shall be responsible for reporting [swap](/usc/7/1a.md?p=47-A) transaction information to the appropriate [registered entity](/usc/7/1a.md?p=40) in a timely manner as may be prescribed by the [Commission](/usc/7/1a.md?p=8).
    - (G) **Reporting of swaps to registered swap data repositories—** Each [swap](/usc/7/1a.md?p=47-A) (whether cleared or uncleared) shall be reported to a registered [swap data repository](/usc/7/1a.md?p=48).
  - (14) **Semiannual and annual public reporting of aggregate swap data—**
    - (A) **In general—** In accordance with [subparagraph (B)](#a-14-B), the [Commission](/usc/7/1a.md?p=8) shall issue a written report on a semiannual and annual basis to make available to the public information relating to—
      - (i) the trading and clearing in the major [swap](/usc/7/1a.md?p=47-A) categories; and
      - (ii) the market participants and developments in new products.
    - (B) **Use; consultation—** In preparing a report under [subparagraph (A)](#a-14-A), the [Commission](/usc/7/1a.md?p=8) shall—
      - (i) use information from [swap data repositories](/usc/7/1a.md?p=48) and [derivatives clearing organizations](/usc/7/1a.md?p=15-A); and
      - (ii) consult with the Office of the Comptroller of the Currency, the [Bank](/usc/7/27.md?p=a) for International Settlements, and such other regulatory bodies as may be necessary.
    - (C) **Authority of the Commission—** The [Commission](/usc/7/1a.md?p=8) may, by rule, regulation, or [order](/usc/7/2902.md?p=10), delegate the public reporting responsibilities of the [Commission](/usc/7/1a.md?p=8) under this paragraph in accordance with such terms and conditions as the [Commission](/usc/7/1a.md?p=8) determines to be appropriate and in the public interest.
  - (15) **Energy and Environmental Markets Advisory Committee—**
    - (A) **Establishment—**
      - (i) **In general—** An Energy and Environmental Markets [Advisory Committee](/usc/7/8101.md?p=2) is hereby established.
      - (ii) **Membership—** The [Committee](/usc/7/2132.md?p=n) shall have 9 [members](/usc/7/1a.md?p=34).
      - (iii) **Activities—** The [Committee](/usc/7/2132.md?p=n)’s objectives and scope of activities shall be—
        - (I) to conduct public meetings;
        - (II) to submit reports and recommendations to the [Commission](/usc/7/1a.md?p=8) (including dissenting or minority views, if any); and
        - (III) otherwise to serve as a vehicle for discussion and communication on matters of concern to [exchanges](/usc/7/1a.md?p=1-D), firms, end users, and regulators regarding energy and environmental markets and their regulation by the [Commission](/usc/7/1a.md?p=8).
    - (B) **Requirements—**
      - (i) **In general—** The [Committee](/usc/7/2132.md?p=n) shall hold public meetings at such intervals as are necessary to carry out the functions of the [Committee](/usc/7/2132.md?p=n), but not less frequently than 2 times per year.
      - (ii) **Members—** [Members](/usc/7/1a.md?p=34) shall be appointed to 3-year terms, but may be removed for cause by vote of the [Commission](/usc/7/1a.md?p=8).
    - (C) **Appointment—** The [Commission](/usc/7/1a.md?p=8) shall appoint [members](/usc/7/1a.md?p=34) with a wide diversity of opinion and who represent a broad spectrum of interests, including hedgers and consumers.
    - (D) **Reimbursement—** [Members](/usc/7/1a.md?p=34) shall be entitled to per diem and travel expense reimbursement by the [Commission](/usc/7/1a.md?p=8).
    - (E) **Chapter 10 of title 5—** The [Committee](/usc/7/2132.md?p=n) shall not be subject to [chapter 10](/usc/5/chptI-ch10.md) of title 5.
- (b) **Transaction in interstate commerce—** For the purposes of this chapter (but not in any wise limiting the foregoing definition of [interstate commerce](/usc/7/1a.md?p=30)) a transaction in respect to any article shall be considered to be in [interstate commerce](/usc/7/1a.md?p=30) if such article is part of that current of commerce usual in the [commodity](/usc/7/1a.md?p=9) trade whereby [commodities](/usc/7/1a.md?p=9) and [commodity](/usc/7/1a.md?p=9) products and by-products thereof are sent from one [State](/usc/7/1359aa.md?p=5), with the expectation that they will end their transit, after purchase, in another, including in addition to cases within the above general description, all cases where purchase or sale is either for shipment to another [State](/usc/7/1359aa.md?p=5), or for manufacture within the [State](/usc/7/1359aa.md?p=5) and the shipment outside the [State](/usc/7/1359aa.md?p=5) of the products resulting from such manufacture. Articles normally in such current of commerce shall not be considered out of such commerce through resort being had to any means or device intended to remove transactions in respect thereto from the provisions of this chapter. For the purpose of this paragraph the word “[State](/usc/7/1359aa.md?p=5)” includes Territory, the District of Columbia, possession of the [United States](/usc/7/6402.md?p=8), and foreign nation.
- (c) **Agreements, contracts, and transactions in foreign currency, government securities, and certain other commodities—**
  - (1) **In general—** Except as provided in [paragraph (2)](#c-2), nothing in this chapter (other than section,[^5] 7a–1,[^5] or 16(e)(2)(B) of this title) governs or applies to an agreement, [contract](/usc/7/518.md?p=4), or transaction in—
    - (A) foreign currency;
    - (B) [government securities](/usc/7/1a.md?p=51-B-ii);
    - (C) [security](/usc/7/1a.md?p=41) warrants;
    - (D) [security](/usc/7/1a.md?p=41) rights;
    - (E) resales of installment loan [contracts](/usc/7/518.md?p=4);
    - (F) repurchase transactions in an [excluded commodity](/usc/7/1a.md?p=19); or
    - (G) mortgages or mortgage purchase commitments.
  - (2) **Commission jurisdiction—**
    - (A) **Agreements, contracts, and transactions traded on an organized exchange—** This chapter applies to, and the [Commission](/usc/7/1a.md?p=8) shall have jurisdiction over, an agreement, [contract](/usc/7/518.md?p=4), or transaction described in [paragraph (1)](#c-1) that is—
      - (i) a [contract of sale](/usc/7/1a.md?p=13) of a [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27) (or an [option](/usc/7/1a.md?p=36) on such a [contract](/usc/7/518.md?p=4)), or an [option](/usc/7/1a.md?p=36) on a [commodity](/usc/7/1a.md?p=9) (other than foreign currency or a [security](/usc/7/1a.md?p=41) or a group or index of [securities](/usc/7/1a.md?p=41)), that is executed or traded on an [organized exchange](/usc/7/1a.md?p=37);
      - (ii) a [swap](/usc/7/1a.md?p=47-A); or
      - (iii) an [option](/usc/7/1a.md?p=36) on foreign currency executed or traded on an [organized exchange](/usc/7/1a.md?p=37) that is not a national [securities](/usc/7/1a.md?p=41) [exchange](/usc/7/1a.md?p=1-D) registered pursuant to section 6(a) of the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 [[15 U.S.C. 78f(a)](/usc/15/78f.md?p=a)].
    - (B) **Agreements, contracts, and transactions in retail foreign currency—**
      - (i) This chapter applies to, and the [Commission](/usc/7/1a.md?p=8) shall have jurisdiction over, an agreement, [contract](/usc/7/518.md?p=4), or transaction in foreign currency that—
        - (I) is a [contract of sale](/usc/7/1a.md?p=13) of a [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27) (or an [option](/usc/7/1a.md?p=36) on such a [contract](/usc/7/518.md?p=4)) or an [option](/usc/7/1a.md?p=36) (other than an [option](/usc/7/1a.md?p=36) executed or traded on a national [securities](/usc/7/1a.md?p=41) [exchange](/usc/7/1a.md?p=1-D) registered pursuant to section 6(a) of the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 ([15 U.S.C. 78f(a)](/usc/15/78f.md?p=a))); and
        - (II) is offered to, or entered into with, a [person](/usc/7/1a.md?p=38) that is not an [eligible contract participant](/usc/7/1a.md?p=18), unless the counterparty, or the [person](/usc/7/1a.md?p=38) offering to be the counterparty, of the [person](/usc/7/1a.md?p=38) is—
          - (aa) a [United States](/usc/7/6402.md?p=8) [financial institution](/usc/7/1a.md?p=21);
          - (bb)
            - (AA) a broker or dealer registered under [section 15(b)](/usc/7/15.md) (except paragraph (11) thereof) or 15C of the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 ([15 U.S.C. 78o(b)](/usc/15/78o.md?p=b), 78o–5); or
            - (BB) an associated [person](/usc/7/1a.md?p=38) of a broker or dealer registered under [section 15(b)](/usc/7/15.md) (except paragraph (11) thereof) or 15C of the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 ([15 U.S.C. 78o(b)](/usc/15/78o.md?p=b), 78o–5) concerning the financial or [securities](/usc/7/1a.md?p=41) activities of which the broker or dealer makes and keeps records under section 15C(b) or 17(h) of the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 ([15 U.S.C. 78o](/usc/15/78o.md)–5(b), 78q(h));
          - (cc)
            - (AA) a [futures commission merchant](/usc/7/1a.md?p=28-A) that is primarily or substantially engaged in the business activities described in [section 1a of this title](/usc/7/1a.md), is registered under this chapter, is not a [person](/usc/7/1a.md?p=38) described in item (bb) of this subclause, and maintains adjusted net capital equal to or in excess of the dollar amount that applies for purposes of clause (ii) of this subparagraph; or
            - (BB) an affiliated [person](/usc/7/1a.md?p=38) of a [futures commission merchant](/usc/7/1a.md?p=28-A) that is primarily or substantially engaged in the business activities described in [section 1a of this title](/usc/7/1a.md), is registered under this chapter, and is not a [person](/usc/7/1a.md?p=38) described in item (bb) of this subclause, if the affiliated [person](/usc/7/1a.md?p=38) maintains adjusted net capital equal to or in excess of the dollar amount that applies for purposes of clause (ii) of this subparagraph and is not a [person](/usc/7/1a.md?p=38) described in such [item (bb)](#c-2-B-i-II-bb), and the [futures commission merchant](/usc/7/1a.md?p=28-A) makes and keeps records under [section 6f(c)(2)(B) of this title](/usc/7/6f.md?p=c-2-B) concerning the futures and other financial activities of the affiliated [person](/usc/7/1a.md?p=38);
          - (dd) a financial holding company (as defined in [section 1841 of title 12](/usc/12/1841.md)); or
          - (ff) [^6] a retail foreign [exchange](/usc/7/1a.md?p=1-D) dealer that maintains adjusted net capital equal to or in excess of the dollar amount that applies for purposes of clause (ii) of this subparagraph and is registered in such capacity with the [Commission](/usc/7/1a.md?p=8), subject to such terms and conditions as the [Commission](/usc/7/1a.md?p=8) shall prescribe, and is a [member](/usc/7/1a.md?p=34) of a futures association registered under [section 21 of this title](/usc/7/21.md).
      - (ii) The dollar amount that applies for purposes of this clause is—
        - (I) $10,000,000, beginning 120 days after the date of the enactment of this clause;
        - (II) $15,000,000, beginning 240 days after such date of enactment; and
        - (III) $20,000,000, beginning 360 days after such date of enactment.
      - (iii) Notwithstanding items [(cc)](#c-2-B-i-II-cc) and (gg) of clause (i)(II) of this subparagraph, agreements, [contracts](/usc/7/518.md?p=4), or transactions described in clause (i) of this subparagraph, and accounts or pooled investment vehicles described in [clause (vi)](#c-2-B-vi), shall be subject to [subsection (a)(1)(B)](#a-1-B) of this section and sections [6(b)](/usc/7/6.md?p=b), [6b](/usc/7/6b.md), [6c(b)](/usc/7/6c.md?p=b), [6o](/usc/7/6o.md), [9](/usc/7/9.md), and [13b](/usc/7/13b.md) of this title (except to the extent that sections [9](/usc/7/9.md) and [13b](/usc/7/13b.md) of this title prohibit manipulation of the market price of any [commodity](/usc/7/1a.md?p=9) in [interstate commerce](/usc/7/1a.md?p=30), or for [future delivery](/usc/7/1a.md?p=27) on or subject to the rules of any market), 13a–1, 13a–2, 12(a), 13c(a), and [13c(b)](/usc/7/13c.md?p=b) of this title if the agreements, [contracts](/usc/7/518.md?p=4), or transactions are offered, or entered into, by a [person](/usc/7/1a.md?p=38) that is registered as a [futures commission merchant](/usc/7/1a.md?p=28-A) or retail foreign [exchange](/usc/7/1a.md?p=1-D) dealer, or an affiliated [person](/usc/7/1a.md?p=38) of a [futures commission merchant](/usc/7/1a.md?p=28-A) registered under this chapter that is not also a [person](/usc/7/1a.md?p=38) described in any of item (aa), (bb), (ee),[^1] or (ff) of clause (i)(II) of this subparagraph.
      - (iv)
        - (I) Notwithstanding items (cc) and (gg)[^1] of [clause (i)(II)](#c-2-B-i-II), a [person](/usc/7/1a.md?p=38), unless registered in such capacity as the [Commission](/usc/7/1a.md?p=8) by rule, regulation, or [order](/usc/7/2902.md?p=10) shall determine and a [member](/usc/7/1a.md?p=34) of a futures association registered under [section 21 of this title](/usc/7/21.md), shall not—
          - (aa) solicit or accept [orders](/usc/7/2902.md?p=10) from any [person](/usc/7/1a.md?p=38) that is not an [eligible contract participant](/usc/7/1a.md?p=18) in connection with agreements, [contracts](/usc/7/518.md?p=4), or transactions described in [clause (i)](#c-2-B-i) entered into with or to be entered into with a [person](/usc/7/1a.md?p=38) who is not described in item [(aa)](#c-2-B-iv-I-aa), [(bb)](#c-2-B-iv-I-bb), (ee),[^1] or (ff) of [clause (i)(II)](#c-2-B-i-II);
          - (bb) exercise discretionary trading [authority](/usc/7/2009aa.md?p=1) or obtain written authorization to exercise discretionary trading [authority](/usc/7/2009aa.md?p=1) over any account for or on behalf of any [person](/usc/7/1a.md?p=38) that is not an [eligible contract participant](/usc/7/1a.md?p=18) in connection with agreements, [contracts](/usc/7/518.md?p=4), or transactions described in [clause (i)](#c-2-B-i) entered into with or to be entered into with a [person](/usc/7/1a.md?p=38) who is not described in item [(aa)](#c-2-B-iv-I-aa), [(bb)](#c-2-B-iv-I-bb), (ee),[^1] or (ff) of [clause (i)(II)](#c-2-B-i-II); or
          - (cc) operate or solicit [funds](/usc/7/4531.md?p=5), [securities](/usc/7/1a.md?p=41), or property for any pooled investment vehicle that is not an [eligible contract participant](/usc/7/1a.md?p=18) in connection with agreements, [contracts](/usc/7/518.md?p=4), or transactions described in [clause (i)](#c-2-B-i) entered into with or to be entered into with a [person](/usc/7/1a.md?p=38) who is not described in item [(aa)](#c-2-B-iv-I-aa), [(bb)](#c-2-B-iv-I-bb), (ee),[^1] or (ff) of [clause (i)(II)](#c-2-B-i-II).
        - (II) Subclause (I) of this clause shall not apply to—
          - (aa) any [person](/usc/7/1a.md?p=38) described in any of item [(aa)](#c-2-B-iv-II-aa), [(bb)](#c-2-B-iv-II-bb), (ee),[^1] or (ff) of [clause (i)(II)](#c-2-B-i-II);
          - (bb) any such [person](/usc/7/1a.md?p=38)’s associated [persons](/usc/7/1a.md?p=38); or
          - (cc) any [person](/usc/7/1a.md?p=38) who would be exempt from registration if engaging in the same activities in connection with transactions conducted on or subject to the rules of a [contract](/usc/7/518.md?p=4) market or a derivatives transaction execution facility.
        - (III) Notwithstanding items (cc) and (gg)[^1] of [clause (i)(II)](#c-2-B-i-II), the [Commission](/usc/7/1a.md?p=8) may make, promulgate, and enforce such rules and regulations as, in the judgment of the [Commission](/usc/7/1a.md?p=8), are reasonably necessary to effectuate any of the provisions of, or to accomplish any of the purposes of, this chapter in connection with the activities of [persons](/usc/7/1a.md?p=38) subject to [subclause (I)](#c-2-B-iv-I).
        - (IV) Subclause (III) of this clause shall not apply to—
          - (aa) any [person](/usc/7/1a.md?p=38) described in any of [item (aa) through (ff)](#c-2-B-i-II-aa..c-2-B-i-II-ff) of clause (i)(II);
          - (bb) any such [person](/usc/7/1a.md?p=38)’s associated [persons](/usc/7/1a.md?p=38); or
          - (cc) any [person](/usc/7/1a.md?p=38) who would be exempt from registration if engaging in the same activities in connection with transactions conducted on or subject to the rules of a [contract](/usc/7/518.md?p=4) market or a derivatives transaction execution facility.
      - (v) Notwithstanding items (cc) and (gg)[^1] of [clause (i)(II)](#c-2-B-i-II), the [Commission](/usc/7/1a.md?p=8) may make, promulgate, and enforce such rules and regulations as, in the judgment of the [Commission](/usc/7/1a.md?p=8), are reasonably necessary to effectuate any of the provisions of, or to accomplish any of the purposes of, this chapter in connection with agreements, [contracts](/usc/7/518.md?p=4), or transactions described in [clause (i)](#c-2-B-i) which are offered, or entered into, by a [person](/usc/7/1a.md?p=38) described in item (cc) or (gg)[^1] of [clause (i)(II)](#c-2-B-i-II).
      - (vi) This chapter applies to, and the [Commission](/usc/7/1a.md?p=8) shall have jurisdiction over, an account or pooled investment vehicle that is offered for the purpose of trading, or that trades, any agreement, [contract](/usc/7/518.md?p=4), or transaction in foreign currency described in [clause (i)](#c-2-B-i).
    - (C)
      - (i)
        - (I) This subparagraph shall apply to any agreement, [contract](/usc/7/518.md?p=4), or transaction in foreign currency that is—
          - (aa) offered to, or entered into with, a [person](/usc/7/1a.md?p=38) that is not an [eligible contract participant](/usc/7/1a.md?p=18) (except that this subparagraph shall not apply if the counterparty, or the [person](/usc/7/1a.md?p=38) offering to be the counterparty, of the [person](/usc/7/1a.md?p=38) that is not an [eligible contract participant](/usc/7/1a.md?p=18) is a [person](/usc/7/1a.md?p=38) described in any of item [(aa)](#c-2-C-i-I-aa), [(bb)](#c-2-C-i-I-bb), (ee),[^1] or (ff) of [subparagraph (B)(i)(II)](#c-2-B-i-II)); and
          - (bb) offered, or entered into, on a leveraged or margined basis, or financed by the offeror, the counterparty, or a [person](/usc/7/1a.md?p=38) acting in concert with the offeror or counterparty on a similar basis.
        - (II) Subclause (I) of this clause shall not apply to—
          - (aa) a [security](/usc/7/1a.md?p=41) that is not a [security futures product](/usc/7/1a.md?p=45); or
          - (bb) a [contract of sale](/usc/7/1a.md?p=13) that—
            - (AA) results in actual delivery within 2 days; or
            - (BB) creates an enforceable obligation to deliver between a seller and buyer that have the ability to deliver and accept delivery, respectively, in connection with their line of business.
      - (ii)
        - (I) Agreements, [contracts](/usc/7/518.md?p=4), or transactions described in clause (i) of this subparagraph, and accounts or pooled investment vehicles described in [clause (vii)](#c-2-C-vii), shall be subject to [subsection (a)(1)(B)](#a-1-B) of this section and sections [6(b)](/usc/7/6.md?p=b), [6b](/usc/7/6b.md), [6c(b)](/usc/7/6c.md?p=b), [6o](/usc/7/6o.md), [9](/usc/7/9.md), and [13b](/usc/7/13b.md) of this title (except to the extent that sections [9](/usc/7/9.md) and [13b](/usc/7/13b.md) of this title prohibit manipulation of the market price of any [commodity](/usc/7/1a.md?p=9) in [interstate commerce](/usc/7/1a.md?p=30), or for [future delivery](/usc/7/1a.md?p=27) on or subject to the rules of any market), 13a–1, 13a–2, 12(a), 13c(a), and [13c(b)](/usc/7/13c.md?p=b) of this title.
        - (II) Subclause (I) of this clause shall not apply to—
          - (aa) any [person](/usc/7/1a.md?p=38) described in any of item [(aa)](#c-2-C-ii-II-aa), [(bb)](#c-2-C-ii-II-bb), (ee),[^1] or (ff) of [subparagraph (B)(i)(II)](#c-2-B-i-II); or
          - (bb) any such [person](/usc/7/1a.md?p=38)’s associated [persons](/usc/7/1a.md?p=38).
        - (III) The [Commission](/usc/7/1a.md?p=8) may make, promulgate, and enforce such rules and regulations as, in the judgment of the [Commission](/usc/7/1a.md?p=8), are reasonably necessary to effectuate any of the provisions of or to accomplish any of the purposes of this chapter in connection with agreements, [contracts](/usc/7/518.md?p=4), or transactions described in clause (i) of this subparagraph if the agreements, [contracts](/usc/7/518.md?p=4), or transactions are offered, or entered into, by a [person](/usc/7/1a.md?p=38) that is not described in [item (aa) through (ff)](#c-2-B-i-II-aa..c-2-B-i-II-ff) of subparagraph (B)(i)(II).
      - (iii)
        - (I) A [person](/usc/7/1a.md?p=38), unless registered in such capacity as the [Commission](/usc/7/1a.md?p=8) by rule, regulation, or [order](/usc/7/2902.md?p=10) shall determine and a [member](/usc/7/1a.md?p=34) of a futures association registered under [section 21 of this title](/usc/7/21.md), shall not—
          - (aa) solicit or accept [orders](/usc/7/2902.md?p=10) from any [person](/usc/7/1a.md?p=38) that is not an [eligible contract participant](/usc/7/1a.md?p=18) in connection with agreements, [contracts](/usc/7/518.md?p=4), or transactions described in clause (i) of this subparagraph entered into with or to be entered into with a [person](/usc/7/1a.md?p=38) who is not described in item [(aa)](#c-2-C-iii-I-aa), [(bb)](#c-2-C-iii-I-bb), (ee),[^1] or (ff) of [subparagraph (B)(i)(II)](#c-2-B-i-II);
          - (bb) exercise discretionary trading [authority](/usc/7/2009aa.md?p=1) or obtain written authorization to exercise written trading [authority](/usc/7/2009aa.md?p=1) over any account for or on behalf of any [person](/usc/7/1a.md?p=38) that is not an [eligible contract participant](/usc/7/1a.md?p=18) in connection with agreements, [contracts](/usc/7/518.md?p=4), or transactions described in clause (i) of this subparagraph entered into with or to be entered into with a [person](/usc/7/1a.md?p=38) who is not described in item [(aa)](#c-2-C-iii-I-aa), [(bb)](#c-2-C-iii-I-bb), (ee),[^1] or (ff) of [subparagraph (B)(i)(II)](#c-2-B-i-II); or
          - (cc) operate or solicit [funds](/usc/7/4531.md?p=5), [securities](/usc/7/1a.md?p=41), or property for any pooled investment vehicle that is not an [eligible contract participant](/usc/7/1a.md?p=18) in connection with agreements, [contracts](/usc/7/518.md?p=4), or transactions described in clause (i) of this subparagraph entered into with or to be entered into with a [person](/usc/7/1a.md?p=38) who is not described in item [(aa)](#c-2-C-iii-I-aa), [(bb)](#c-2-C-iii-I-bb), (ee),[^1] or (ff) of [subparagraph (B)(i)(II)](#c-2-B-i-II).
        - (II) Subclause (I) of this clause shall not apply to—
          - (aa) any [person](/usc/7/1a.md?p=38) described in item [(aa)](#c-2-C-iii-II-aa), [(bb)](#c-2-C-iii-II-bb), (ee),[^1] or (ff) of [subparagraph (B)(i)(II)](#c-2-B-i-II);
          - (bb) any such [person](/usc/7/1a.md?p=38)’s associated [persons](/usc/7/1a.md?p=38); or
          - (cc) any [person](/usc/7/1a.md?p=38) who would be exempt from registration if engaging in the same activities in connection with transactions conducted on or subject to the rules of a [contract](/usc/7/518.md?p=4) market or a derivatives transaction execution facility.
        - (III) The [Commission](/usc/7/1a.md?p=8) may make, promulgate, and enforce such rules and regulations as, in the judgment of the [Commission](/usc/7/1a.md?p=8), are reasonably necessary to effectuate any of the provisions of, or to accomplish any of the purposes of, this chapter in connection with the activities of [persons](/usc/7/1a.md?p=38) subject to [subclause (I)](#c-2-C-iii-I).
        - (IV) Subclause (III) of this clause shall not apply to—
          - (aa) any [person](/usc/7/1a.md?p=38) described in [item (aa) through (ff)](#c-2-B-i-II-aa..c-2-B-i-II-ff) of subparagraph (B)(i)(II);
          - (bb) any such [person](/usc/7/1a.md?p=38)’s associated [persons](/usc/7/1a.md?p=38); or
          - (cc) any [person](/usc/7/1a.md?p=38) who would be exempt from registration if engaging in the same activities in connection with transactions conducted on or subject to the rules of a [contract](/usc/7/518.md?p=4) market or a derivatives transaction execution facility.
      - (iv) Sections [6(b)](/usc/7/6.md?p=b) and [6b](/usc/7/6b.md) of this title shall apply to any agreement, [contract](/usc/7/518.md?p=4), or transaction described in clause (i) of this subparagraph as if the agreement, [contract](/usc/7/518.md?p=4), or transaction were a [contract of sale](/usc/7/1a.md?p=13) of a [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27).
      - (v) This subparagraph shall not be construed to limit any jurisdiction that the [Commission](/usc/7/1a.md?p=8) may otherwise have under any other provision of this chapter over an agreement, [contract](/usc/7/518.md?p=4), or transaction that is a [contract of sale](/usc/7/1a.md?p=13) of a [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27).
      - (vi) This subparagraph shall not be construed to limit any jurisdiction that the [Commission](/usc/7/1a.md?p=8) or the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8) may otherwise have under any other provision of this chapter with respect to [security futures products](/usc/7/1a.md?p=45) and [persons](/usc/7/1a.md?p=38) effecting transactions in [security futures products](/usc/7/1a.md?p=45).
      - (vii) This chapter applies to, and the [Commission](/usc/7/1a.md?p=8) shall have jurisdiction over, an account or pooled investment vehicle that is offered for the purpose of trading, or that trades, any agreement, [contract](/usc/7/518.md?p=4), or transaction in foreign currency described in [clause (i)](#c-2-C-i).
    - (D) **Retail commodity transactions—**
      - (i) **Applicability—** Except as provided in [clause (ii)](#c-2-D-ii), this subparagraph shall apply to any agreement, [contract](/usc/7/518.md?p=4), or transaction in any [commodity](/usc/7/1a.md?p=9) that is—
        - (I) entered into with, or offered to (even if not entered into with), a [person](/usc/7/1a.md?p=38) that is not an [eligible contract participant](/usc/7/1a.md?p=18) or [eligible commercial entity](/usc/7/1a.md?p=17); 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](/usc/7/1a.md?p=38) acting in concert with the offeror or counterparty on a similar basis.
      - (ii) **Exceptions—** This subparagraph shall not apply to—
        - (I) an agreement, [contract](/usc/7/518.md?p=4), or transaction described in [paragraph (1)](#c-1) or subparagraphs[^7] (A), (B), or (C), including any agreement, [contract](/usc/7/518.md?p=4), or transaction specifically excluded from subparagraph [(A)](#c-2-A), [(B)](#c-2-B), or [(C)](#c-2-C);
        - (II) any [security](/usc/7/1a.md?p=41);
        - (III) a [contract of sale](/usc/7/1a.md?p=13) that—
          - (aa) results in actual delivery within 28 days or such other longer period as the [Commission](/usc/7/1a.md?p=8) may determine by rule or regulation based upon the typical commercial practice in cash or spot markets for the [commodity](/usc/7/1a.md?p=9) 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 the line of business of the seller and buyer; or
        - (IV) an agreement, [contract](/usc/7/518.md?p=4), or transaction that is listed on a national [securities](/usc/7/1a.md?p=41) [exchange](/usc/7/1a.md?p=1-D) registered under section 6(a) of the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 ([15 U.S.C. 78f(a)](/usc/15/78f.md?p=a)); or
        - (V) an [identified banking product](/usc/7/27.md?p=b), as defined in [section 27(b) of this title](/usc/7/27.md?p=b).
      - (iii) **Enforcement—** Sections [6(a)](/usc/7/6.md?p=a), [6(b)](/usc/7/6.md?p=b), and [6b](/usc/7/6b.md) of this title apply to any agreement, [contract](/usc/7/518.md?p=4), or transaction described in [clause (i)](#c-2-D-i), as if the agreement, [contract](/usc/7/518.md?p=4), or transaction was a [contract of sale](/usc/7/1a.md?p=13) of a [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27).
      - (iv) **Eligible commercial entity—** For purposes of this subparagraph, an agricultural [producer](/usc/7/6802.md?p=4-A-iii-III-bb), [packer](/usc/7/198.md?p=2), or [handler](/usc/7/2302.md?p=3-B) shall be considered to be an [eligible commercial entity](/usc/7/1a.md?p=17) for any agreement, [contract](/usc/7/518.md?p=4), or transaction for a [commodity](/usc/7/1a.md?p=9) in connection with the line of business of the agricultural [producer](/usc/7/6802.md?p=4-A-iii-III-bb), [packer](/usc/7/198.md?p=2), or [handler](/usc/7/2302.md?p=3-B).
    - (E) **Prohibition—**
      - (i) **Definition of Federal regulatory agency—** In this subparagraph, the term “Federal regulatory agency” means—
        - (I) the [Commission](/usc/7/1a.md?p=8);
        - (II) the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8);
        - (III) an [appropriate Federal banking agency](/usc/7/1a.md?p=2);
        - (IV) the National Credit Union Association; and
        - (V) the Farm Credit Administration.
      - (ii) **Prohibition—**
        - (I) **In general—** Except as provided in [subclause (II)](#c-2-E-ii-II), a [person](/usc/7/1a.md?p=38) described in [subparagraph (B)(i)(II)](#c-2-B-i-II) for which there is a [Federal regulatory agency](#c-2-E-i) shall not [offer](/usc/7/1a.md?p=36) to, or enter into with, a [person](/usc/7/1a.md?p=38) that is not an [eligible contract participant](/usc/7/1a.md?p=18), any agreement, [contract](/usc/7/518.md?p=4), or transaction in foreign currency described in [subparagraph (B)(i)(I)](#c-2-B-i-I) except pursuant to a rule or regulation of a [Federal regulatory agency](#c-2-E-i) allowing the agreement, [contract](/usc/7/518.md?p=4), or transaction under such terms and conditions as the [Federal regulatory agency](#c-2-E-i) shall prescribe.
        - (II) **Effective date—** With regard to [persons](/usc/7/1a.md?p=38) described in [subparagraph (B)(i)(II)](#c-2-B-i-II) for which a [Federal regulatory agency](#c-2-E-i) has issued a proposed rule concerning agreements, [contracts](/usc/7/518.md?p=4), or transactions in foreign currency described in [subparagraph (B)(i)(I)](#c-2-B-i-I) prior to July 21, 2010, [subclause (I)](#c-2-E-ii-I) shall take effect 90 days after July 21, 2010.
      - (iii) **Requirements of rules and regulations—**
        - (I) **In general—** The rules and regulations described in [clause (ii)](#c-2-E-ii) shall prescribe appropriate requirements with respect to—
          - (aa) disclosure;
          - (bb) recordkeeping;
          - (cc) capital and margin;
          - (dd) reporting;
          - (ee) business conduct;
          - (ff) documentation; and
          - (gg) such other standards or requirements as the [Federal regulatory agency](#c-2-E-i) shall determine to be necessary.
        - (II) **Treatment—** The rules or regulations described in [clause (ii)](#c-2-E-ii) shall treat all agreements, [contracts](/usc/7/518.md?p=4), and transactions in foreign currency described in [subparagraph (B)(i)(I)](#c-2-B-i-I), and all agreements, [contracts](/usc/7/518.md?p=4), and transactions in foreign currency that are functionally or economically similar to agreements, [contracts](/usc/7/518.md?p=4), or transactions described in [subparagraph (B)(i)(I)](#c-2-B-i-I), similarly.
- (d) **Swaps—** Nothing in this chapter (other than subparagraphs [(A)](#a-1-A), [(B)](#a-1-B), [(C)](#a-1-C), [(D)](#a-1-D), [(G)](#a-1-G), and [(H)](#a-1-H) of subsection (a)(1), subsections [(f)](#f) and [(g)](#g), sections [1a](/usc/7/1a.md), [2(a)(13)](#a-13), [2(c)(2)(A)(ii)](#c-2-A-ii), [2(e)](#e), [2(h)](#h), [6(c)](/usc/7/6.md?p=c), [6a](/usc/7/6a.md), [6b](/usc/7/6b.md), and [6b–1](/usc/7/6b–1.md) of this title, subsections (a), (b), and (g) of [section 6c of this title](/usc/7/6c.md), sections [6d](/usc/7/6d.md), [6e](/usc/7/6e.md), [6f](/usc/7/6f.md), [6g](/usc/7/6g.md), [6h](/usc/7/6h.md), [6i](/usc/7/6i.md), [6j](/usc/7/6j.md), [6k](/usc/7/6k.md), [6l](/usc/7/6l.md), [6m](/usc/7/6m.md), [6n](/usc/7/6n.md), [6o](/usc/7/6o.md), [6p](/usc/7/6p.md), [6r](/usc/7/6r.md), [6s](/usc/7/6s.md), [6t](/usc/7/6t.md), [7](/usc/7/7.md), [7a–1](/usc/7/7a–1.md), [7a–2](/usc/7/7a–2.md), [7b](/usc/7/7b.md), and [7b–3](/usc/7/7b–3.md) of this title, sections [9](/usc/7/9.md) and [13b](/usc/7/13b.md) of this title, sections [13a–1](/usc/7/13a–1.md), [13a–2](/usc/7/13a–2.md), [12](/usc/7/12.md), [12a](/usc/7/12a.md), and [13](/usc/7/13.md) of this title, subsections (e)(2), (f), and (h) of [section 16 of this title](/usc/7/16.md), subsections (a) and (b) of [section 13c of this title](/usc/7/13c.md), sections [21](/usc/7/21.md), [24](/usc/7/24.md), [24a](/usc/7/24a.md), and [25(a)(4)](/usc/7/25.md?p=a-4) of this title, and any other provision of this chapter that is applicable to [registered entities](/usc/7/1a.md?p=40) or [Commission](/usc/7/1a.md?p=8) registrants) governs or applies to a [swap](/usc/7/1a.md?p=47-A).
- (e) **Limitation on participation—** It shall be unlawful for any [person](/usc/7/1a.md?p=38), other than an [eligible contract participant](/usc/7/1a.md?p=18), to enter into a [swap](/usc/7/1a.md?p=47-A) unless the [swap](/usc/7/1a.md?p=47-A) is entered into on, or subject to the rules of, a [board of trade](/usc/7/1a.md?p=6) designated as a [contract](/usc/7/518.md?p=4) market under [section 7 of this title](/usc/7/7.md).
- (f) **Exclusion for qualifying hybrid instruments—**
  - (1) **In general—** Nothing in this chapter (other than [section 16(e)(2)(B) of this title](/usc/7/16.md?p=e-2-B)) governs or is applicable to a [hybrid instrument](/usc/7/1a.md?p=29) that is predominantly a [security](/usc/7/1a.md?p=41).
  - (2) **Predominance—** A [hybrid instrument](/usc/7/1a.md?p=29) shall be considered to be predominantly a [security](/usc/7/1a.md?p=41) if—
    - (A) the issuer of the [hybrid instrument](/usc/7/1a.md?p=29) receives payment in full of the purchase price of the [hybrid instrument](/usc/7/1a.md?p=29), substantially contemporaneously with delivery of the [hybrid instrument](/usc/7/1a.md?p=29);
    - (B) the purchaser or holder of the [hybrid instrument](/usc/7/1a.md?p=29) is not required to make any payment to the issuer in addition to the purchase price paid under [subparagraph (A)](#f-2-A), whether as margin, settlement payment, or otherwise, during the life of the [hybrid instrument](/usc/7/1a.md?p=29) or at maturity;
    - (C) the issuer of the [hybrid instrument](/usc/7/1a.md?p=29) is not subject by the terms of the instrument to mark-to-market margining requirements; and
    - (D) the [hybrid instrument](/usc/7/1a.md?p=29) is not marketed as a [contract of sale](/usc/7/1a.md?p=13) of a [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27) (or [option](/usc/7/1a.md?p=36) on such a [contract](/usc/7/518.md?p=4)) subject to this chapter.
  - (3) **Mark-to-market margining requirements—** For the purposes of [paragraph (2)(C)](#f-2-C), mark-to-market margining requirements do not include the obligation of an issuer of a secured debt instrument to increase the amount of collateral held in pledge for the benefit of the purchaser of the secured debt instrument to secure the repayment obligations of the issuer under the secured debt instrument.
- (g) **Application of commodity futures laws—**
  - (1) No provision of this chapter shall be construed as implying or creating any presumption that—
    - (A) any agreement, [contract](/usc/7/518.md?p=4), or transaction that is excluded from this chapter under subsection [(c)](#c), [(d)](#d), [(e)](#e), [(f)](#f), or [(g)](#g) of this section or title IV of the [Commodity](/usc/7/1a.md?p=9) Futures Modernization Act of 2000 [[7 U.S.C. 27](/usc/7/27.md) to 27f], or exempted under [subsection (h)](#h) of this section or [section 6(c) of this title](/usc/7/6.md?p=c); or
    - (B) any agreement, [contract](/usc/7/518.md?p=4), or transaction, not otherwise subject to this chapter, that is not so excluded or exempted,

    is or would otherwise be subject to this chapter.

  - (2) No provision of, or amendment made by, the [Commodity](/usc/7/1a.md?p=9) Futures Modernization Act of 2000 shall be construed as conferring jurisdiction on the [Commission](/usc/7/1a.md?p=8) with respect to any such agreement, [contract](/usc/7/518.md?p=4), or transaction, except as expressly provided in [section 7a–1 of this title](/usc/7/7a–1.md).
- (h) **Clearing requirement—**
  - (1) **In general—**
    - (A) **Standard for clearing—** It shall be unlawful for any [person](/usc/7/1a.md?p=38) to engage in a [swap](/usc/7/1a.md?p=47-A) unless that [person](/usc/7/1a.md?p=38) submits such [swap](/usc/7/1a.md?p=47-A) for clearing to a [derivatives clearing organization](/usc/7/1a.md?p=15-A) that is registered under this chapter or a [derivatives clearing organization](/usc/7/1a.md?p=15-A) that is exempt from registration under this chapter if the [swap](/usc/7/1a.md?p=47-A) is required to be cleared.
    - (B) **Open access—** The rules of a [derivatives clearing organization](/usc/7/1a.md?p=15-A) described in [subparagraph (A)](#h-1-A) shall—
      - (i) prescribe that all [swaps](/usc/7/1a.md?p=47-A) (but not [contracts](/usc/7/518.md?p=4) of sale of a [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27) or [options](/usc/7/1a.md?p=36) on such [contracts](/usc/7/518.md?p=4)) submitted to the [derivatives clearing organization](/usc/7/1a.md?p=15-A) with the same terms and conditions are economically equivalent within the [derivatives clearing organization](/usc/7/1a.md?p=15-A) and may be offset with each other within the [derivatives clearing organization](/usc/7/1a.md?p=15-A); and
      - (ii) provide for non-discriminatory clearing of a [swap](/usc/7/1a.md?p=47-A) (but not a [contract of sale](/usc/7/1a.md?p=13) of a [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27) or [option](/usc/7/1a.md?p=36) on such [contract](/usc/7/518.md?p=4)) executed bilaterally or on or through the rules of an unaffiliated designated [contract](/usc/7/518.md?p=4) market or [swap execution facility](/usc/7/1a.md?p=50).
  - (2) **Commission review—**
    - (A) **Commission-initiated review—**
      - (i) The [Commission](/usc/7/1a.md?p=8) on an ongoing basis shall review each [swap](/usc/7/1a.md?p=47-A), or any group, category, type, or class of [swaps](/usc/7/1a.md?p=47-A) to make a determination as to whether the [swap](/usc/7/1a.md?p=47-A) or group, category, type, or class of [swaps](/usc/7/1a.md?p=47-A) should be required to be cleared.
      - (ii) The [Commission](/usc/7/1a.md?p=8) shall provide at least a 30-day public comment period regarding any determination made under [clause (i)](#h-2-A-i).
    - (B) **Swap submissions—**
      - (i) A [derivatives clearing organization](/usc/7/1a.md?p=15-A) shall submit to the [Commission](/usc/7/1a.md?p=8) each [swap](/usc/7/1a.md?p=47-A), or any group, category, type, or class of [swaps](/usc/7/1a.md?p=47-A) that it plans to accept for clearing, and provide notice to its [members](/usc/7/1a.md?p=34) (in a manner to be determined by the [Commission](/usc/7/1a.md?p=8)) of the submission.
      - (ii) Any [swap](/usc/7/1a.md?p=47-A) or group, category, type, or class of [swaps](/usc/7/1a.md?p=47-A) listed for clearing by a derivative clearing organization as of July 21, 2010, shall be considered submitted to the [Commission](/usc/7/1a.md?p=8).
      - (iii) The [Commission](/usc/7/1a.md?p=8) shall—
        - (I) make available to the public submissions received under clauses [(i)](#h-2-B-i) and [(ii)](#h-2-B-ii);
        - (II) review each submission made under clauses [(i)](#h-2-B-i) and [(ii)](#h-2-B-ii), and determine whether the [swap](/usc/7/1a.md?p=47-A), or group, category, type, or class of [swaps](/usc/7/1a.md?p=47-A) described in the submission is required to be cleared; and
        - (III) provide at least a 30-day public comment period regarding its determination as to whether the clearing requirement under [paragraph (1)(A)](#h-1-A) shall apply to the submission.
    - (C) **Deadline—** The [Commission](/usc/7/1a.md?p=8) shall make its determination under [subparagraph (B)(iii)](#h-2-B-iii) not later than 90 days after receiving a submission made under subparagraphs [(B)(i)](#h-2-B-i) and [(B)(ii)](#h-2-B-ii), unless the submitting [derivatives clearing organization](/usc/7/1a.md?p=15-A) agrees to an [extension](/usc/7/5801.md?p=b-5) for the time limitation established under this subparagraph.
    - (D) **Determination—**
      - (i) In reviewing a submission made under [subparagraph (B)](#h-2-B), the [Commission](/usc/7/1a.md?p=8) shall review whether the submission is consistent with [section 7a–1(c)(2) of this title](/usc/7/7a–1.md?p=c-2).
      - (ii) In reviewing a [swap](/usc/7/1a.md?p=47-A), group of [swaps](/usc/7/1a.md?p=47-A), or class of [swaps](/usc/7/1a.md?p=47-A) pursuant to [subparagraph (A)](#h-2-A) or a submission made under [subparagraph (B)](#h-2-B), the [Commission](/usc/7/1a.md?p=8) shall take into account the following factors:
        - (I) The existence of significant outstanding notional exposures, trading liquidity, and adequate pricing data.
        - (II) The availability of rule framework, capacity, operational expertise and resources, and credit support infrastructure to clear the [contract](/usc/7/518.md?p=4) on terms that are consistent with the material terms and trading conventions on which the [contract](/usc/7/518.md?p=4) is then traded.
        - (III) The effect on the mitigation of systemic risk, taking into account the size of the market for such [contract](/usc/7/518.md?p=4) and the resources of the [derivatives clearing organization](/usc/7/1a.md?p=15-A) available to clear the [contract](/usc/7/518.md?p=4).
        - (IV) The effect on competition, including appropriate fees and charges applied to clearing.
        - (V) The existence of reasonable legal certainty in the event of the insolvency of the relevant [derivatives clearing organization](/usc/7/1a.md?p=15-A) or 1 or more of its clearing [members](/usc/7/1a.md?p=34) with regard to the treatment of customer and [swap](/usc/7/1a.md?p=47-A) counterparty positions, [funds](/usc/7/4531.md?p=5), and property.
      - (iii) In making a determination under subparagraph [(A)](#h-2-A) or [(B)(iii)](#h-2-B-iii) that the clearing requirement shall apply, the [Commission](/usc/7/1a.md?p=8) may require such terms and conditions to the requirement as the [Commission](/usc/7/1a.md?p=8) determines to be appropriate.
    - (E) **Rules—** Not later than 1 year after July 21, 2010, the [Commission](/usc/7/1a.md?p=8) shall adopt rules for a [derivatives clearing organization](/usc/7/1a.md?p=15-A)’s submission for review, pursuant to this paragraph, of a [swap](/usc/7/1a.md?p=47-A), or a group, category, type, or class of [swaps](/usc/7/1a.md?p=47-A), that it seeks to accept for clearing. Nothing in this subparagraph limits the [Commission](/usc/7/1a.md?p=8) from making a determination under [subparagraph (B)(iii)](#h-2-B-iii) for [swaps](/usc/7/1a.md?p=47-A) described in [subparagraph (B)(ii)](#h-2-B-ii).
  - (3) **Stay of clearing requirement—**
    - (A) **In general—** After making a determination pursuant to [paragraph (2)(B)](#h-2-B), the [Commission](/usc/7/1a.md?p=8), on application of a counterparty to a [swap](/usc/7/1a.md?p=47-A) or on its own initiative, may stay the clearing requirement of [paragraph (1)](#h-1) until the [Commission](/usc/7/1a.md?p=8) completes a review of the terms of the [swap](/usc/7/1a.md?p=47-A) (or the group, category, type, or class of [swaps](/usc/7/1a.md?p=47-A)) and the clearing arrangement.
    - (B) **Deadline—** The [Commission](/usc/7/1a.md?p=8) shall complete a review undertaken pursuant to [subparagraph (A)](#h-3-A) not later than 90 days after issuance of the stay, unless the [derivatives clearing organization](/usc/7/1a.md?p=15-A) that clears the [swap](/usc/7/1a.md?p=47-A), or group, category, type, or class of [swaps](/usc/7/1a.md?p=47-A) agrees to an [extension](/usc/7/5801.md?p=b-5) of the time limitation established under this subparagraph.
    - (C) **Determination—** Upon completion of the review undertaken pursuant to [subparagraph (A)](#h-3-A), the [Commission](/usc/7/1a.md?p=8) may—
      - (i) determine, unconditionally or subject to such terms and conditions as the [Commission](/usc/7/1a.md?p=8) determines to be appropriate, that the [swap](/usc/7/1a.md?p=47-A), or group, category, type, or class of [swaps](/usc/7/1a.md?p=47-A) must be cleared pursuant to this subsection if it finds that such clearing is consistent with [paragraph (2)(D)](#h-2-D); or
      - (ii) determine that the clearing requirement of [paragraph (1)](#h-1) shall not apply to the [swap](/usc/7/1a.md?p=47-A), or group, category, type, or class of [swaps](/usc/7/1a.md?p=47-A).
    - (D) **Rules—** Not later than 1 year after July 21, 2010, the [Commission](/usc/7/1a.md?p=8) shall adopt rules for reviewing, pursuant to this paragraph, a [derivatives clearing organization](/usc/7/1a.md?p=15-A)’s clearing of a [swap](/usc/7/1a.md?p=47-A), or a group, category, type, or class of [swaps](/usc/7/1a.md?p=47-A), that it has accepted for clearing.
  - (4) **Prevention of evasion—**
    - (A) **In general—** The [Commission](/usc/7/1a.md?p=8) shall prescribe rules under this subsection (and issue interpretations of rules prescribed under this subsection) as determined by the [Commission](/usc/7/1a.md?p=8) to be necessary to prevent evasions of the mandatory clearing requirements under this chapter.
    - (B) **Duty of Commission to investigate and take certain actions—** To the extent the [Commission](/usc/7/1a.md?p=8) finds that a particular [swap](/usc/7/1a.md?p=47-A), group, category, type, or class of [swaps](/usc/7/1a.md?p=47-A) would otherwise be subject to mandatory clearing but no [derivatives clearing organization](/usc/7/1a.md?p=15-A) has listed the [swap](/usc/7/1a.md?p=47-A), group, category, type, or class of [swaps](/usc/7/1a.md?p=47-A) for clearing, the [Commission](/usc/7/1a.md?p=8) shall—
      - (i) investigate the relevant facts and circumstances;
      - (ii) within 30 days issue a public report containing the results of the investigation; and
      - (iii) take such actions as the [Commission](/usc/7/1a.md?p=8) determines to be necessary and in the public interest, which may include requiring the retaining of adequate margin or capital by parties to the [swap](/usc/7/1a.md?p=47-A), group, category, type, or class of [swaps](/usc/7/1a.md?p=47-A).
    - (C) **Effect on authority—** Nothing in this paragraph—
      - (i) authorizes the [Commission](/usc/7/1a.md?p=8) to adopt rules requiring a [derivatives clearing organization](/usc/7/1a.md?p=15-A) to list for clearing a [swap](/usc/7/1a.md?p=47-A), group, category, type, or class of [swaps](/usc/7/1a.md?p=47-A) if the clearing of the [swap](/usc/7/1a.md?p=47-A), group, category, type, or class of [swaps](/usc/7/1a.md?p=47-A) would threaten the financial integrity of the [derivatives clearing organization](/usc/7/1a.md?p=15-A); and
      - (ii) affects the [authority](/usc/7/2009aa.md?p=1) of the [Commission](/usc/7/1a.md?p=8) to enforce the open access provisions of [paragraph (1)(B)](#h-1-B) with respect to a [swap](/usc/7/1a.md?p=47-A), group, category, type, or class of [swaps](/usc/7/1a.md?p=47-A) that is listed for clearing by a [derivatives clearing organization](/usc/7/1a.md?p=15-A).
  - (5) **Reporting transition rules—** Rules adopted by the [Commission](/usc/7/1a.md?p=8) under this section shall provide for the reporting of data, as follows:
    - (A) [Swaps](/usc/7/1a.md?p=47-A) entered into before July 21, 2010, shall be reported to a registered [swap data repository](/usc/7/1a.md?p=48) or the [Commission](/usc/7/1a.md?p=8) no later than 180 days after the effective date of this subsection.
    - (B) [Swaps](/usc/7/1a.md?p=47-A) entered into on or after July 21, 2010, shall be reported to a registered [swap data repository](/usc/7/1a.md?p=48) or the [Commission](/usc/7/1a.md?p=8) no later than the later of—
      - (i) 90 days after such effective date; or
      - (ii) such other time after entering into the [swap](/usc/7/1a.md?p=47-A) as the [Commission](/usc/7/1a.md?p=8) may prescribe by rule or regulation.
  - (6) **Clearing transition rules—**
    - (A) [Swaps](/usc/7/1a.md?p=47-A) entered into before July 21, 2010, are exempt from the clearing requirements of this subsection if reported pursuant to [paragraph (5)(A)](#h-5-A).
    - (B) [Swaps](/usc/7/1a.md?p=47-A) entered into before application of the clearing requirement pursuant to this subsection are exempt from the clearing requirements of this subsection if reported pursuant to [paragraph (5)(B)](#h-5-B).
  - (7) **Exceptions—**
    - (A) **In general—** The requirements of [paragraph (1)(A)](#h-1-A) shall not apply to a [swap](/usc/7/1a.md?p=47-A) if 1 of the counterparties to the [swap](/usc/7/1a.md?p=47-A)—
      - (i) is not a [financial entity](#h-7-C-i);
      - (ii) is using [swaps](/usc/7/1a.md?p=47-A) to hedge or mitigate commercial risk; and
      - (iii) notifies the [Commission](/usc/7/1a.md?p=8), in a manner set forth by the [Commission](/usc/7/1a.md?p=8), how it generally meets its financial obligations associated with entering into non-[cleared swaps](/usc/7/1a.md?p=7).
    - (B) **Option to clear—** The application of the clearing exception in [subparagraph (A)](#h-7-A) is solely at the discretion of the counterparty to the [swap](/usc/7/1a.md?p=47-A) that meets the conditions of [clauses (i) through (iii)](#h-7-A-i..h-7-A-iii) of subparagraph (A).
    - (C) **Financial entity definition—**
      - (i) **In general—** For the purposes of this paragraph, the term “financial entity” means—
        - (I) a [swap dealer](/usc/7/1a.md?p=49-A);
        - (II) a [security-based swap dealer](/usc/7/1a.md?p=43);
        - (III) a [major swap participant](/usc/7/1a.md?p=33-A);
        - (IV) a [major security-based swap participant](/usc/7/1a.md?p=32);
        - (V) a [commodity pool](/usc/7/1a.md?p=10-A);
        - (VI) a private [fund](/usc/7/4531.md?p=5) as defined in [section 80b–2(a) of title 15](/usc/15/80b–2.md?p=a);
        - (VII) an employee benefit plan as defined in paragraphs (3) and (32) of [section 1002 of title 29](/usc/29/1002.md);
        - (VIII) a [person](/usc/7/1a.md?p=38) predominantly engaged in activities that are in the business of banking, or in activities that are financial in nature, as defined in [section 1843(k) of title 12](/usc/12/1843.md?p=k).
      - (ii) **Exclusion—** The [Commission](/usc/7/1a.md?p=8) shall consider whether to exempt small [banks](/usc/7/27.md?p=a), savings associations, farm credit system institutions, and credit unions, including—
        - (I) depository institutions with total assets of $10,000,000,000 or less;
        - (II) farm credit system institutions with total assets of $10,000,000,000 or less; or
        - (III) credit unions with total assets of $10,000,000,000 or less.
      - (iii) **Limitation—** Such definition shall not include an entity whose primary business is providing financing, and 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.
    - (D) **Treatment of affiliates—**
      - (i) **In general—** An affiliate of a [person](/usc/7/1a.md?p=38) that qualifies for an exception under [subparagraph (A)](#h-7-A) (including affiliate entities predominantly engaged in providing financing for the purchase of the merchandise or manufactured goods of the [person](/usc/7/1a.md?p=38)) may qualify for the exception only if the affiliate—
        - (I) enters into the [swap](/usc/7/1a.md?p=47-A) to hedge or mitigate the commercial risk of the [person](/usc/7/1a.md?p=38) or other affiliate of the [person](/usc/7/1a.md?p=38) that is not a [financial entity](#h-7-C-i), and the commercial risk that the affiliate is hedging or mitigating has been transferred to the affiliate;
        - (II) is directly and wholly-owned by another affiliate qualified for the exception under this subparagraph or an entity that is not a [financial entity](#h-7-C-i);
        - (III) is not indirectly majority-owned by a [financial entity](#h-7-C-i);
        - (IV) is not ultimately owned by a parent company that is a [financial entity](#h-7-C-i); and
        - (V) does not provide any services, financial or otherwise, to any affiliate that is a nonbank financial company supervised by the [Board](/usc/7/1a.md?p=5) of Governors (as defined under [section 5311 of title 12](/usc/12/5311.md)).
      - (ii) **Limitation on qualifying affiliates—** The exception in [clause (i)](#h-7-D-i) shall not apply if the affiliate is—
        - (I) a [swap dealer](/usc/7/1a.md?p=49-A);
        - (II) a [security-based swap dealer](/usc/7/1a.md?p=43);
        - (III) a [major swap participant](/usc/7/1a.md?p=33-A);
        - (IV) a [major security-based swap participant](/usc/7/1a.md?p=32);
        - (V) a [commodity pool](/usc/7/1a.md?p=10-A);
        - (VI) a [bank](/usc/7/27.md?p=a) holding company;
        - (VII) a private [fund](/usc/7/4531.md?p=5), as defined in [section 80b–2(a) of title 15](/usc/15/80b–2.md?p=a);
        - (VIII) an employee benefit plan or government[^8] plan, as defined in paragraphs (3) and (32) of [section 1002 of title 29](/usc/29/1002.md);
        - (IX) an insured depository institution;
        - (X) a farm credit system institution;
        - (XI) a credit union;
        - (XII) a nonbank financial company supervised by the [Board](/usc/7/1a.md?p=5) of Governors (as defined under [section 5311 of title 12](/usc/12/5311.md)); or
        - (XIII) an entity engaged in the business of insurance and subject to capital requirements established by an insurance governmental [authority](/usc/7/2009aa.md?p=1) of a [State](/usc/7/1359aa.md?p=5), a territory of the [United States](/usc/7/6402.md?p=8), the District of Columbia, a country other than the [United States](/usc/7/6402.md?p=8), or a political subdivision of a country other than the [United States](/usc/7/6402.md?p=8) that is engaged in the supervision of insurance companies under insurance law.
      - (iii) **Limitation on affiliates’ affiliates—** Unless the [Commission](/usc/7/1a.md?p=8) determines, by [order](/usc/7/2902.md?p=10), rule, or regulation, that it is in the public interest, the exception in [clause (i)](#h-7-D-i) shall not apply with respect to an affiliate if the affiliate is itself affiliated with—
        - (I) a [major security-based swap participant](/usc/7/1a.md?p=32);
        - (II) a [security-based swap dealer](/usc/7/1a.md?p=43);
        - (III) a [major swap participant](/usc/7/1a.md?p=33-A); or
        - (IV) a [swap dealer](/usc/7/1a.md?p=49-A).
      - (iv) **Conditions on transactions—** With respect to an affiliate that qualifies for the exception in [clause (i)](#h-7-D-i)—
        - (I) the affiliate may not enter into any [swap](/usc/7/1a.md?p=47-A) other than for the purpose of hedging or mitigating commercial risk; and
        - (II) neither the affiliate nor any [person](/usc/7/1a.md?p=38) affiliated with the affiliate that is not a [financial entity](#h-7-C-i) may enter into a [swap](/usc/7/1a.md?p=47-A) with or on behalf of any affiliate that is a [financial entity](#h-7-C-i) or otherwise assume, net, combine, or consolidate the risk of [swaps](/usc/7/1a.md?p=47-A) entered into by any such [financial entity](#h-7-C-i), except one that is an affiliate that qualifies for the exception under [clause (i)](#h-7-D-i).
      - (v) **Transition rule for affiliates—** An affiliate, subsidiary, or a wholly owned entity of a [person](/usc/7/1a.md?p=38) that qualifies for an exception under [subparagraph (A)](#h-7-A) and is predominantly engaged in providing financing for the purchase or lease of merchandise or manufactured goods of the [person](/usc/7/1a.md?p=38) shall be exempt from the margin requirement described in [section 6s(e) of this title](/usc/7/6s.md?p=e) and the clearing requirement described in [paragraph (1)](#h-1) with regard to [swaps](/usc/7/1a.md?p=47-A) entered into to mitigate the risk of the financing activities for not less than a 2-year period beginning on July 21, 2010.
      - (vi) **Risk management program—** Any [swap](/usc/7/1a.md?p=47-A) entered into by an affiliate that qualifies for the exception in [clause (i)](#h-7-D-i) shall be subject to a centralized risk management program of the affiliate, which is reasonably designed both to monitor and manage the risks associated with the [swap](/usc/7/1a.md?p=47-A) and to identify each of the affiliates on whose behalf a [swap](/usc/7/1a.md?p=47-A) was entered into.
    - (E) **Election of counterparty—**
      - (i) **Swaps required to be cleared—** With respect to any [swap](/usc/7/1a.md?p=47-A) that is subject to the mandatory clearing requirement under this subsection and entered into by a [swap dealer](/usc/7/1a.md?p=49-A) or a [major swap participant](/usc/7/1a.md?p=33-A) with a counterparty that is not a [swap dealer](/usc/7/1a.md?p=49-A), [major swap participant](/usc/7/1a.md?p=33-A), [security-based swap dealer](/usc/7/1a.md?p=43), or [major security-based swap participant](/usc/7/1a.md?p=32), the counterparty shall have the sole right to select the [derivatives clearing organization](/usc/7/1a.md?p=15-A) at which the [swap](/usc/7/1a.md?p=47-A) will be cleared.
      - (ii) **Swaps not required to be cleared—** With respect to any [swap](/usc/7/1a.md?p=47-A) that is not subject to the mandatory clearing requirement under this subsection and entered into by a [swap dealer](/usc/7/1a.md?p=49-A) or a [major swap participant](/usc/7/1a.md?p=33-A) with a counterparty that is not a [swap dealer](/usc/7/1a.md?p=49-A), [major swap participant](/usc/7/1a.md?p=33-A), [security-based swap dealer](/usc/7/1a.md?p=43), or [major security-based swap participant](/usc/7/1a.md?p=32), the counterparty—
        - (I) may elect to require clearing of the [swap](/usc/7/1a.md?p=47-A); and
        - (II) shall have the sole right to select the [derivatives clearing organization](/usc/7/1a.md?p=15-A) at which the [swap](/usc/7/1a.md?p=47-A) will be cleared.
    - (F) **Abuse of exception—** The [Commission](/usc/7/1a.md?p=8) may prescribe such rules or issue interpretations of the rules as the [Commission](/usc/7/1a.md?p=8) determines to be necessary to prevent abuse of the exceptions described in this paragraph. The [Commission](/usc/7/1a.md?p=8) may also request information from those [persons](/usc/7/1a.md?p=38) claiming the clearing exception as necessary to prevent abuse of the exceptions described in this paragraph.
  - (8) **Trade execution—**
    - (A) **In general—** With respect to transactions involving [swaps](/usc/7/1a.md?p=47-A) subject to the clearing requirement of [paragraph (1)](#h-1), counterparties shall—
      - (i) execute the transaction on a [board of trade](/usc/7/1a.md?p=6) designated as a [contract](/usc/7/518.md?p=4) market under [section 7 of this title](/usc/7/7.md); or
      - (ii) execute the transaction on a [swap execution facility](/usc/7/1a.md?p=50) registered under 7b–3[^9] of this title or a [swap execution facility](/usc/7/1a.md?p=50) that is exempt from registration under [section 7b–3(f) of this title](/usc/7/7b–3.md?p=f).
    - (B) **Exception—** The requirements of clauses [(i)](#h-8-A-i) and [(ii)](#h-8-A-ii) of subparagraph (A) shall not apply if no [board of trade](/usc/7/1a.md?p=6) or [swap execution facility](/usc/7/1a.md?p=50) makes the [swap](/usc/7/1a.md?p=47-A) available to trade or for [swap](/usc/7/1a.md?p=47-A) transactions subject to the clearing exception under [paragraph (7)](#h-7).
- (i) **Applicability—** The provisions of this chapter relating to [swaps](/usc/7/1a.md?p=47-A) that were enacted by the Wall Street Transparency and Accountability Act of 2010 (including any rule prescribed or regulation promulgated under that Act), shall not apply to activities outside the [United States](/usc/7/6402.md?p=8) unless those activities—
  - (1) have a direct and significant connection with activities in, or effect on, commerce of the [United States](/usc/7/6402.md?p=8); or
  - (2) contravene such rules or regulations as the [Commission](/usc/7/1a.md?p=8) may prescribe or promulgate as are necessary or appropriate to prevent the evasion of any provision of this chapter that was enacted by the Wall Street Transparency and Accountability Act of 2010.
- (j) **Committee approval by Board—** Exemptions from the requirements of [subsection (h)(1)](#h-1) to clear a [swap](/usc/7/1a.md?p=47-A) and [subsection (h)(8)](#h-8) to execute a [swap](/usc/7/1a.md?p=47-A) through a [board of trade](/usc/7/1a.md?p=6) or [swap execution facility](/usc/7/1a.md?p=50) shall be available to a counterparty that is an issuer of [securities](/usc/7/1a.md?p=41) that are registered under section 12 of the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 ([15 U.S.C. 78l](/usc/15/78l.md)) or that is required to file reports pursuant to section 15(d) of the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 ([15 U.S.C. 78o](/usc/15/78o.md)[d]) only if an appropriate [committee](/usc/7/2132.md?p=n) of the issuer’s [board](/usc/7/1a.md?p=5) or governing body has reviewed and approved its decision to enter into [swaps](/usc/7/1a.md?p=47-A) that are subject to such exemptions.

# [§§2a to 4a. Transferred — transferred]



# §5. Findings and purpose

- (a) **Findings—** The transactions subject to this chapter are entered into regularly in interstate and international commerce and are affected with a national public interest by providing a means for managing and assuming price risks, discovering prices, or disseminating pricing information through trading in liquid, fair and financially secure [trading facilities](/usc/7/1a.md?p=51-A).
- (b) **Purpose—** It is the purpose of this chapter to serve the public interests described in [subsection (a)](#a) through a system of effective self-regulation of [trading facilities](/usc/7/1a.md?p=51-A), clearing systems, market participants and market professionals under the oversight of the [Commission](/usc/7/1a.md?p=8). To foster these public interests, it is further the purpose of this chapter to deter and prevent price manipulation or any other disruptions to market integrity; to ensure the financial integrity of all transactions subject to this chapter and the avoidance of systemic risk; to protect all market participants from fraudulent or other abusive sales practices and misuses of customer assets; and to promote responsible innovation and fair competition among [boards](/usc/7/1a.md?p=5) of trade, other markets and market participants.

# §6. Regulation of futures trading and foreign transactions

- (a) **Restriction on futures trading—** Unless exempted by the [Commission](/usc/7/1a.md?p=8) pursuant to [subsection (c)](#c) or by [subsection (e)](#e), it shall be unlawful for any [person](/usc/7/1a.md?p=38) to [offer](/usc/7/1a.md?p=36) to enter into, to enter into, to execute, to confirm the execution of, or to conduct any office or business anywhere in the [United States](/usc/7/6402.md?p=8), its territories or possessions, for the purpose of soliciting or accepting any [order](/usc/7/2902.md?p=10) for, or otherwise dealing in, any transaction in, or in connection with, a [contract](/usc/7/518.md?p=4) for the purchase or sale of a [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27) (other than a [contract](/usc/7/518.md?p=4) which is made on or subject to the rules of a [board of trade](/usc/7/1a.md?p=6), [exchange](/usc/7/1a.md?p=1-D), or market located outside the [United States](/usc/7/6402.md?p=8), its territories or possessions) unless—
  - (1) such transaction is conducted on or subject to the rules of a [board of trade](/usc/7/1a.md?p=6) which has been designated or registered by the [Commission](/usc/7/1a.md?p=8) as a [contract](/usc/7/518.md?p=4) market or derivatives transaction execution facility for such [commodity](/usc/7/1a.md?p=9);
  - (2) such [contract](/usc/7/518.md?p=4) is executed or consummated by or through a [contract](/usc/7/518.md?p=4) market; and
  - (3) such [contract](/usc/7/518.md?p=4) is evidenced by a record in writing which shows the date, the parties to such [contract](/usc/7/518.md?p=4) and their addresses, the property covered and its price, and the terms of delivery: Provided, That each [contract](/usc/7/518.md?p=4) market or derivatives transaction execution facility [member](/usc/7/1a.md?p=34) shall keep such record for a period of three years from the date thereof, or for a longer period if the [Commission](/usc/7/1a.md?p=8) shall so direct, which record shall at all times be open to the inspection of any representative of the [Commission](/usc/7/1a.md?p=8) or the Department of Justice.
- (b) **Regulation of foreign transactions by United States persons—**
  - (1) **Foreign boards of trade—**
    - (A) **Registration—** The [Commission](/usc/7/1a.md?p=8) may adopt rules and regulations requiring registration with the [Commission](/usc/7/1a.md?p=8) for a foreign [board of trade](/usc/7/1a.md?p=6) that provides the [members](/usc/7/1a.md?p=34) of the foreign [board of trade](/usc/7/1a.md?p=6) or other participants located in the [United States](/usc/7/6402.md?p=8) with direct access to the electronic trading and [order](/usc/7/2902.md?p=10) matching system of the foreign [board of trade](/usc/7/1a.md?p=6), including rules and regulations prescribing procedures and requirements applicable to the registration of such foreign [boards](/usc/7/1a.md?p=5) of trade. For purposes of this paragraph, “direct access” refers to an explicit grant of [authority](/usc/7/2009aa.md?p=1) by a foreign [board of trade](/usc/7/1a.md?p=6) to an identified [member](/usc/7/1a.md?p=34) or other participant located in the [United States](/usc/7/6402.md?p=8) to enter trades directly into the trade matching system of the foreign [board of trade](/usc/7/1a.md?p=6). In adopting such rules and regulations, the [commission](/usc/7/1a.md?p=8)[^1] shall consider—
      - (i) whether any such foreign [board of trade](/usc/7/1a.md?p=6) is subject to comparable, comprehensive supervision and regulation by the appropriate governmental [authorities](/usc/7/2009aa.md?p=1) in the foreign [board of trade](/usc/7/1a.md?p=6)’s home country; and
      - (ii) any previous [commission](/usc/7/1a.md?p=8)[^1] findings that the foreign [board of trade](/usc/7/1a.md?p=6) is subject to comparable comprehensive supervision and regulation by the appropriate government [authorities](/usc/7/2009aa.md?p=1) in the foreign [board of trade](/usc/7/1a.md?p=6)’s home country.
    - (B) **Linked contracts—** The [Commission](/usc/7/1a.md?p=8) may not permit a foreign [board of trade](/usc/7/1a.md?p=6) to provide to the [members](/usc/7/1a.md?p=34) of the foreign [board of trade](/usc/7/1a.md?p=6) or other participants located in the [United States](/usc/7/6402.md?p=8) direct access to the electronic trading and [order](/usc/7/2902.md?p=10)-matching system of the foreign [board of trade](/usc/7/1a.md?p=6) with respect to an agreement, [contract](/usc/7/518.md?p=4), or transaction that settles against any price (including the daily or final settlement price) of 1 or more [contracts](/usc/7/518.md?p=4) listed for trading on a [registered entity](/usc/7/1a.md?p=40), unless the [Commission](/usc/7/1a.md?p=8) determines that—
      - (i) the foreign [board of trade](/usc/7/1a.md?p=6) makes public daily trading information regarding the agreement, [contract](/usc/7/518.md?p=4), or transaction that is comparable to the daily trading information published by the [registered entity](/usc/7/1a.md?p=40) for the 1 or more [contracts](/usc/7/518.md?p=4) against which the agreement, [contract](/usc/7/518.md?p=4), or transaction traded on the foreign [board of trade](/usc/7/1a.md?p=6) settles; and
      - (ii) the foreign [board of trade](/usc/7/1a.md?p=6) (or the [foreign futures authority](/usc/7/1a.md?p=26) that oversees the foreign [board of trade](/usc/7/1a.md?p=6))—
        - (I) adopts position limits (including related hedge exemption provisions) for the agreement, [contract](/usc/7/518.md?p=4), or transaction that are comparable to the position limits (including related hedge exemption provisions) adopted by the [registered entity](/usc/7/1a.md?p=40) for the 1 or more [contracts](/usc/7/518.md?p=4) against which the agreement, [contract](/usc/7/518.md?p=4), or transaction traded on the foreign [board of trade](/usc/7/1a.md?p=6) settles;
        - (II) has the [authority](/usc/7/2009aa.md?p=1) to require or direct market participants to limit, reduce, or liquidate any position the foreign [board of trade](/usc/7/1a.md?p=6) (or the [foreign futures authority](/usc/7/1a.md?p=26) that oversees the foreign [board of trade](/usc/7/1a.md?p=6)) determines to be necessary to prevent or reduce the threat of price manipulation, excessive speculation as described in [section 6a of this title](/usc/7/6a.md), price distortion, or disruption of delivery or the cash settlement process;
        - (III) agrees to promptly notify the [Commission](/usc/7/1a.md?p=8), with regard to the agreement, [contract](/usc/7/518.md?p=4), or transaction that settles against any price (including the daily or final settlement price) of 1 or more [contracts](/usc/7/518.md?p=4) listed for trading on a [registered entity](/usc/7/1a.md?p=40), of any change regarding—
          - (aa) the information that the foreign [board of trade](/usc/7/1a.md?p=6) will make publicly available;
          - (bb) the position limits that the foreign [board of trade](/usc/7/1a.md?p=6) or [foreign futures authority](/usc/7/1a.md?p=26) will adopt and enforce;
          - (cc) the position reductions required to prevent manipulation, excessive speculation as described in [section 6a of this title](/usc/7/6a.md), price distortion, or disruption of delivery or the cash settlement process; and
          - (dd) any other [area](/usc/7/1471.md?p=5) of interest expressed by the [Commission](/usc/7/1a.md?p=8) to the foreign [board of trade](/usc/7/1a.md?p=6) or [foreign futures authority](/usc/7/1a.md?p=26);
        - (IV) provides information to the [Commission](/usc/7/1a.md?p=8) regarding large trader positions in the agreement, [contract](/usc/7/518.md?p=4), or transaction that is comparable to the large trader position information collected by the [Commission](/usc/7/1a.md?p=8) for the 1 or more [contracts](/usc/7/518.md?p=4) against which the agreement, [contract](/usc/7/518.md?p=4), or transaction traded on the foreign [board of trade](/usc/7/1a.md?p=6) settles; and
        - (V) provides the [Commission](/usc/7/1a.md?p=8) such information as is necessary to publish reports on aggregate trader positions for the agreement, [contract](/usc/7/518.md?p=4), or transaction traded on the foreign [board of trade](/usc/7/1a.md?p=6) that are comparable to such reports on aggregate trader positions for the 1 or more [contracts](/usc/7/518.md?p=4) against which the agreement, [contract](/usc/7/518.md?p=4), or transaction traded on the foreign [board of trade](/usc/7/1a.md?p=6) settles.
    - (C) **Existing foreign boards of trade—** Subparagraphs [(A)](#b-1-A) and [(B)](#b-1-B) shall not be effective with respect to any foreign [board of trade](/usc/7/1a.md?p=6) to which, prior to July 21, 2010, the [Commission](/usc/7/1a.md?p=8) granted direct access permission until the date that is 180 days after July 21, 2010.
  - (2) **Persons located in the United States—**
    - (A) **In general—** The [Commission](/usc/7/1a.md?p=8) may adopt rules and regulations proscribing fraud and requiring minimum financial standards, the disclosure of risk, the filing of reports, the keeping of books and records, the safeguarding of customers’ [funds](/usc/7/4531.md?p=5), and registration with the [Commission](/usc/7/1a.md?p=8) by any [person](/usc/7/1a.md?p=38) located in the [United States](/usc/7/6402.md?p=8), its territories or possessions, who engages in the [offer](/usc/7/1a.md?p=36) or sale of any [contract of sale](/usc/7/1a.md?p=13) of a [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27) that is made or to be made on or subject to the rules of a [board of trade](/usc/7/1a.md?p=6), [exchange](/usc/7/1a.md?p=1-D), or market located outside the [United States](/usc/7/6402.md?p=8), its territories or possessions.
    - (B) **Different requirements—** Rules and regulations described in [subparagraph (A)](#b-2-A) may impose different requirements for such [persons](/usc/7/1a.md?p=38) depending upon the particular foreign [board of trade](/usc/7/1a.md?p=6), [exchange](/usc/7/1a.md?p=1-D), or market involved.
    - (C) **Prohibition—** Except as provided in paragraphs [(1)](#b-1) and [(2)](#b-2), no rule or regulation may be adopted by the [Commission](/usc/7/1a.md?p=8) under this subsection that—
      - (i) requires [Commission](/usc/7/1a.md?p=8) approval of any [contract](/usc/7/518.md?p=4), rule, regulation, or action of any foreign [board of trade](/usc/7/1a.md?p=6), [exchange](/usc/7/1a.md?p=1-D), or market, or clearinghouse for such [board of trade](/usc/7/1a.md?p=6), [exchange](/usc/7/1a.md?p=1-D), or market; or
      - (ii) governs in any way any rule or [contract](/usc/7/518.md?p=4) term or action of any foreign [board of trade](/usc/7/1a.md?p=6), [exchange](/usc/7/1a.md?p=1-D), or market, or clearinghouse for such [board of trade](/usc/7/1a.md?p=6), [exchange](/usc/7/1a.md?p=1-D), or market.
- (c) **Public interest exemptions—**
  - (1) In [order](/usc/7/2902.md?p=10) to promote responsible economic or financial innovation and fair competition, the [Commission](/usc/7/1a.md?p=8) by rule, regulation, or [order](/usc/7/2902.md?p=10), after notice and opportunity for hearing, may (on its own initiative or on application of any [person](/usc/7/1a.md?p=38), including any [board of trade](/usc/7/1a.md?p=6) designated or registered as a [contract](/usc/7/518.md?p=4) market or derivatives transaction execution facility for transactions for [future delivery](/usc/7/1a.md?p=27) in any [commodity](/usc/7/1a.md?p=9) under [section 7 of this title](/usc/7/7.md)) exempt any agreement, [contract](/usc/7/518.md?p=4), or transaction (or class thereof) that is otherwise subject to [subsection (a)](#a) (including any [person](/usc/7/1a.md?p=38) or class of [persons](/usc/7/1a.md?p=38) offering, entering into, rendering advice or rendering other services with respect to, the agreement, [contract](/usc/7/518.md?p=4), or transaction), either unconditionally or on stated terms or conditions or for stated periods and either retroactively or prospectively, or both, from any of the requirements of [subsection (a)](#a), or from any other provision of this chapter (except subparagraphs (C)(ii) and (D) of [section 2(a)(1) of this title](/usc/7/2.md?p=a-1),[^2] except that—
    - (A) unless the [Commission](/usc/7/1a.md?p=8) is expressly authorized by any provision described in this subparagraph to grant exemptions, with respect to amendments made by subtitle A of the Wall Street Transparency and Accountability Act of 2010—
      - (i) with respect to—
        - (I) paragraphs [(2)](#c-2), [(3)](#c-3), [(4)](#c-4), [(5)](#c-5), and (7), paragraph (18)(A)(vii)(III), paragraphs (23), (24), (31), (32), (38), (39), (41), (42), (46), (47), (48), and (49) of [section 1a of this title](/usc/7/1a.md), and sections 2(a)(13), 2(c)(1)(D), 6a(a), 6a(b), 6d(c), 6d(d), 6r, 6s, 7a–1(a), 7a–1(b), 7(d), 7(g), 7(h),[^3] 7a–1(c), 7a–1(i), 12(e),[^4] and 24a of this title; and
        - (II) [section 206(e)](/usc/7/206.md)[^5] of the Gramm-Leach-Bliley Act (Public Law 106–102; [15 U.S.C. 78c](/usc/15/78c.md) note); and
      - (ii) in sections 721(c) and 742 of the Dodd-Frank Wall Street Reform and Consumer Protection Act; and
    - (B) the [Commission](/usc/7/1a.md?p=8) and the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8) may by rule, regulation, or [order](/usc/7/2902.md?p=10) jointly exclude any agreement, [contract](/usc/7/518.md?p=4), or transaction from [section 2(a)(1)(D) of this title](/usc/7/2.md?p=a-1-D))[^6] if the [Commissions](/usc/7/1a.md?p=8) determine that the exemption would be consistent with the public interest.
  - (2) The [Commission](/usc/7/1a.md?p=8) shall not grant any exemption under [paragraph (1)](#c-1) from any of the requirements of [subsection (a)](#a) unless the [Commission](/usc/7/1a.md?p=8) determines that—
    - (A) the requirement should not be applied to the agreement, [contract](/usc/7/518.md?p=4), or transaction for which the exemption is sought and that the exemption would be consistent with the public interest and the purposes of this chapter; and
    - (B) the agreement, [contract](/usc/7/518.md?p=4), or transaction—
      - (i) will be entered into solely between [appropriate persons](#c-3); and
      - (ii) will not have a material adverse effect on the ability of the [Commission](/usc/7/1a.md?p=8) or any [contract](/usc/7/518.md?p=4) market or derivatives transaction execution facility to discharge its regulatory or self-regulatory duties under this chapter.
  - (3) For purposes of this subsection, the term “appropriate person” shall be limited to the following [persons](/usc/7/1a.md?p=38) or classes thereof:
    - (A) A [bank](/usc/7/27.md?p=a) or trust company (acting in an individual or fiduciary capacity).
    - (B) A savings association.
    - (C) An insurance company.
    - (D) An investment company subject to regulation under the Investment Company Act of 1940 ([15 U.S.C. 80a–1](/usc/15/80a–1.md) et seq.).
    - (E) A [commodity pool](/usc/7/1a.md?p=10-A) formed or operated by a [person](/usc/7/1a.md?p=38) subject to regulation under this chapter.
    - (F) A [corporation](/usc/7/1502.md?p=b-5), partnership, proprietorship, organization, trust, or other business entity with a net worth exceeding $1,000,000 or total assets exceeding $5,000,000, or the obligations of which under the agreement, [contract](/usc/7/518.md?p=4) or transaction are guaranteed or otherwise supported by a letter of credit or keepwell, support, or other agreement by any such entity or by an entity referred to in subparagraph (A), (B), (C), (H), (I), or (K) of this paragraph.
    - (G) An employee benefit plan with assets exceeding $1,000,000, or whose investment decisions are made by a [bank](/usc/7/27.md?p=a), trust company, insurance company, investment adviser registered under the Investment Advisers Act of 1940 [[15 U.S.C. 80b–1](/usc/15/80b–1.md) et seq.], or a [commodity trading advisor](/usc/7/1a.md?p=12-B) subject to regulation under this chapter.
    - (H) Any governmental entity (including the [United States](/usc/7/6402.md?p=8), any [state](/usc/7/1359aa.md?p=5),[^7] or any foreign government) or political subdivision thereof, or any multinational or supranational entity or any instrumentality, agency, or department of any of the foregoing.
    - (I) A broker-dealer subject to regulation under the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 ([15 U.S.C. 78a](/usc/15/78a.md) et seq.) acting on its own behalf or on behalf of another [appropriate person](#c-3).
    - (J) A [futures commission merchant](/usc/7/1a.md?p=28-A), [floor broker](/usc/7/1a.md?p=22-A), or [floor trader](/usc/7/1a.md?p=23-A) subject to regulation under this chapter acting on its own behalf or on behalf of another [appropriate person](#c-3).
    - (K) Such other [persons](/usc/7/1a.md?p=38) that the [Commission](/usc/7/1a.md?p=8) determines to be appropriate in light of their financial or other qualifications, or the applicability of appropriate regulatory protections.
  - (4) During the pendency of an application for an [order](/usc/7/2902.md?p=10) granting an exemption under [paragraph (1)](#c-1), the [Commission](/usc/7/1a.md?p=8) may limit the public availability of any information received from the applicant if the applicant submits a written request to limit disclosure contemporaneous with the application, and the [Commission](/usc/7/1a.md?p=8) determines that—
    - (A) the information sought to be restricted constitutes a trade secret; or
    - (B) public disclosure of the information would result in material competitive harm to the applicant.
  - (5) The [Commission](/usc/7/1a.md?p=8) may—
    - (A) promptly following October 28, 1992, or upon application by any [person](/usc/7/1a.md?p=38), exercise the exemptive [authority](/usc/7/2009aa.md?p=1) granted under [paragraph (1)](#c-1) with respect to classes of [hybrid instruments](/usc/7/1a.md?p=29) that are predominantly [securities](/usc/7/1a.md?p=41) or depository instruments, to the extent that such instruments may be regarded as subject to the provisions of this chapter; or
    - (B) promptly following October 28, 1992, or upon application by any [person](/usc/7/1a.md?p=38), exercise the exemptive [authority](/usc/7/2009aa.md?p=1) granted under [paragraph (1)](#c-1) effective as of October 23, 1974, with respect to classes of [swap](/usc/7/1a.md?p=47-A) agreements (as defined in [section 101 of title 11](/usc/11/101.md)) that are not part of a fungible class of agreements that are standardized as to their material economic terms, to the extent that such agreements may be regarded as subject to the provisions of this chapter.

    Any exemption pursuant to this paragraph shall be subject to such terms and conditions as the [Commission](/usc/7/1a.md?p=8) shall determine to be appropriate pursuant to [paragraph (1)](#c-1).

  - (6) If the [Commission](/usc/7/1a.md?p=8) determines that the exemption would be consistent with the public interest and the purposes of this chapter, the [Commission](/usc/7/1a.md?p=8) shall, in accordance with paragraphs [(1)](#c-1) and [(2)](#c-2), exempt from the requirements of this chapter an agreement, [contract](/usc/7/518.md?p=4), or transaction that is entered into—
    - (A) pursuant to a tariff or rate schedule approved or permitted to take effect by the Federal Energy Regulatory [Commission](/usc/7/1a.md?p=8);
    - (B) pursuant to a tariff or rate schedule establishing rates or charges for, or protocols governing, the sale of electric energy approved or permitted to take effect by the regulatory [authority](/usc/7/2009aa.md?p=1) of the [State](/usc/7/1359aa.md?p=5) or municipality having jurisdiction to regulate rates and charges for the sale of electric energy within the [State](/usc/7/1359aa.md?p=5) or municipality; or
    - (C) between entities described in [section 824(f) of title 16](/usc/16/824.md?p=f).
- (d) **Effect of exemption on investigative authority of Commission—** The granting of an exemption under this section shall not affect the [authority](/usc/7/2009aa.md?p=1) of the [Commission](/usc/7/1a.md?p=8) under any other provision of this chapter to conduct investigations in [order](/usc/7/2902.md?p=10) to determine compliance with the requirements or conditions of such exemption or to take enforcement action for any violation of any provision of this chapter or any rule, regulation or [order](/usc/7/2902.md?p=10) thereunder caused by the failure to comply with or satisfy such conditions or requirements.
- (e) **Liability of registered persons trading on a foreign board of trade—**
  - (1) **In general—** A [person](/usc/7/1a.md?p=38) registered with the [Commission](/usc/7/1a.md?p=8), or exempt from registration by the [Commission](/usc/7/1a.md?p=8), under this chapter may not be found to have violated [subsection (a)](#a) with respect to a transaction in, or in connection with, a [contract of sale](/usc/7/1a.md?p=13) of a [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27) if the [person](/usc/7/1a.md?p=38)—
    - (A) has reason to believe that the transaction and the [contract](/usc/7/518.md?p=4) is made on or subject to the rules of a foreign [board of trade](/usc/7/1a.md?p=6) that is—
      - (i) legally organized under the laws of a foreign country;
      - (ii) authorized to act as a [board of trade](/usc/7/1a.md?p=6) by a [foreign futures authority](/usc/7/1a.md?p=26); and
      - (iii) subject to regulation by the [foreign futures authority](/usc/7/1a.md?p=26); and
    - (B) has not been determined by the [Commission](/usc/7/1a.md?p=8) to be operating in violation of [subsection (a)](#a).
  - (2) **Rule of construction—** Nothing in this subsection shall be construed as implying or creating any presumption that a [board of trade](/usc/7/1a.md?p=6), [exchange](/usc/7/1a.md?p=1-D), or market is located outside the [United States](/usc/7/6402.md?p=8), or its territories or possessions, for purposes of [subsection (a)](#a).

# §6a. Excessive speculation

- (a) **Burden on interstate commerce; trading or position limits—**
  - (1) **In general—** Excessive speculation in any [commodity](/usc/7/1a.md?p=9) under [contracts](/usc/7/518.md?p=4) of sale of such [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27) made on or subject to the rules of [contract](/usc/7/518.md?p=4) markets or derivatives transaction execution facilities, or [swaps](/usc/7/1a.md?p=47-A) that perform or affect a significant price discovery function with respect to [registered entities](/usc/7/1a.md?p=40) causing sudden or unreasonable fluctuations or unwarranted changes in the price of such [commodity](/usc/7/1a.md?p=9), is an undue and unnecessary burden on [interstate commerce](/usc/7/1a.md?p=30) in such [commodity](/usc/7/1a.md?p=9). For the purpose of diminishing, eliminating, or preventing such burden, the [Commission](/usc/7/1a.md?p=8) shall, from time to time, after due notice and opportunity for hearing, by rule, regulation, or [order](/usc/7/2902.md?p=10), proclaim and fix such limits on the amounts of trading which may be done or positions which may be held by any [person](/usc/7/1a.md?p=38), including any group or class of traders, under [contracts](/usc/7/518.md?p=4) of sale of such [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27) on or subject to the rules of any [contract](/usc/7/518.md?p=4) market or derivatives transaction execution facility, or [swaps](/usc/7/1a.md?p=47-A) traded on or subject to the rules of a designated [contract](/usc/7/518.md?p=4) market or a [swap execution facility](/usc/7/1a.md?p=50), or [swaps](/usc/7/1a.md?p=47-A) not traded on or subject to the rules of a designated [contract](/usc/7/518.md?p=4) market or a [swap execution facility](/usc/7/1a.md?p=50) that performs a significant price discovery function with respect to a [registered entity](/usc/7/1a.md?p=40), as the [Commission](/usc/7/1a.md?p=8) finds are necessary to diminish, eliminate, or prevent such burden. In determining whether any [person](/usc/7/1a.md?p=38) has exceeded such limits, the positions held and trading done by any [persons](/usc/7/1a.md?p=38) directly or indirectly controlled by such [person](/usc/7/1a.md?p=38) shall be included with the positions held and trading done by such [person](/usc/7/1a.md?p=38); and further, such limits upon positions and trading shall apply to positions held by, and trading done by, two or more [persons](/usc/7/1a.md?p=38) acting pursuant to an expressed or implied agreement or understanding, the same as if the positions were held by, or the trading were done by, a single [person](/usc/7/1a.md?p=38). Nothing in this section shall be construed to prohibit the [Commission](/usc/7/1a.md?p=8) from fixing different trading or position limits for different [commodities](/usc/7/1a.md?p=9), markets, futures, or delivery months, or for different number of days remaining until the last day of trading in a [contract](/usc/7/518.md?p=4), or different trading limits for buying and selling operations, or different limits for the purposes of paragraphs [(1)](#b-1) and [(2)](#b-2) of subsection (b) of this section, or from exempting transactions normally known to the trade as “spreads” or “straddles” or “arbitrage” or from fixing limits applying to such transactions or positions different from limits fixed for other transactions or positions. The word “arbitrage” in domestic markets shall be defined to mean the same as “spread” or “straddle”. The [Commission](/usc/7/1a.md?p=8) is authorized to define the term “international arbitrage”.
  - (2) **Establishment of limitations—**
    - (A) **In general—** In accordance with the standards set forth in paragraph (1) of this subsection and consistent with the good faith exception cited in [subsection (b)(2)](#b-2), with respect to physical [commodities](/usc/7/1a.md?p=9) other than [excluded commodities](/usc/7/1a.md?p=19) as defined by the [Commission](/usc/7/1a.md?p=8), the [Commission](/usc/7/1a.md?p=8) shall by rule, regulation, or [order](/usc/7/2902.md?p=10) establish limits on the amount of positions, as appropriate, other than bona fide hedge positions, that may be held by any [person](/usc/7/1a.md?p=38) with respect to [contracts](/usc/7/518.md?p=4) of sale for [future delivery](/usc/7/1a.md?p=27) or with respect to [options](/usc/7/1a.md?p=36) on the [contracts](/usc/7/518.md?p=4) or [commodities](/usc/7/1a.md?p=9) traded on or subject to the rules of a designated [contract](/usc/7/518.md?p=4) market.
    - (B) **Timing—**
      - (i) **Exempt commodities—** For [exempt commodities](/usc/7/1a.md?p=20), the limits required under [subparagraph (A)](#a-2-A) shall be established within 180 days after July 21, 2010.
      - (ii) **Agricultural commodities—** For [agricultural commodities](/usc/7/5602.md?p=1), the limits required under [subparagraph (A)](#a-2-A) shall be established within 270 days after July 21, 2010.
    - (C) **Goal—** In establishing the limits required under [subparagraph (A)](#a-2-A), the [Commission](/usc/7/1a.md?p=8) shall strive to ensure that trading on foreign [boards](/usc/7/1a.md?p=5) of trade in the same [commodity](/usc/7/1a.md?p=9) will be subject to comparable limits and that any limits to be imposed by the [Commission](/usc/7/1a.md?p=8) will not cause price discovery in the [commodity](/usc/7/1a.md?p=9) to shift to trading on the foreign [boards](/usc/7/1a.md?p=5) of trade.
  - (3) **Specific limitations—** In establishing the limits required in [paragraph (2)](#a-2), the [Commission](/usc/7/1a.md?p=8), as appropriate, shall set limits—
    - (A) on the number of positions that may be held by any [person](/usc/7/1a.md?p=38) for the spot month, each other month, and the aggregate number of positions that may be held by any [person](/usc/7/1a.md?p=38) for all months; and
    - (B) to the maximum extent practicable, in its discretion—
      - (i) to diminish, eliminate, or prevent excessive speculation as described under this section;
      - (ii) to deter and prevent market manipulation, squeezes, and corners;
      - (iii) to ensure sufficient market liquidity for bona fide hedgers; and
      - (iv) to ensure that the price discovery function of the underlying market is not disrupted.
  - (4) **Significant price discovery function—** In making a determination whether a [swap](/usc/7/1a.md?p=47-A) performs or affects a significant price discovery function with respect to regulated markets, the [Commission](/usc/7/1a.md?p=8) shall consider, as appropriate:
    - (A) **Price linkage—** The extent to which the [swap](/usc/7/1a.md?p=47-A) uses or otherwise relies on a daily or final settlement price, or other major price parameter, of another [contract](/usc/7/518.md?p=4) traded on a regulated market based upon the same underlying [commodity](/usc/7/1a.md?p=9), 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](/usc/7/1a.md?p=47-A) is sufficiently related to the price of another [contract](/usc/7/518.md?p=4) traded on a regulated market based upon the same underlying [commodity](/usc/7/1a.md?p=9) so as to permit market participants to effectively [arbitrage](#a-1) between the markets by simultaneously maintaining positions or executing trades in the [swaps](/usc/7/1a.md?p=47-A) on a frequent and recurring basis.
    - (C) **Material price reference—** The extent to which, on a frequent and recurring basis, [bids](/usc/7/1a.md?p=36), [offers](/usc/7/1a.md?p=36), or transactions in a [contract](/usc/7/518.md?p=4) traded on a regulated market are directly based on, or are determined by referencing, the price generated by the [swap](/usc/7/1a.md?p=47-A).
    - (D) **Material liquidity—** The extent to which the volume of [swaps](/usc/7/1a.md?p=47-A) being traded in the [commodity](/usc/7/1a.md?p=9) is sufficient to have a material effect on another [contract](/usc/7/518.md?p=4) traded on a regulated market.
    - (E) **Other material factors—** Such other material factors as the [Commission](/usc/7/1a.md?p=8) specifies by rule or regulation as relevant to determine whether a [swap](/usc/7/1a.md?p=47-A) serves a significant price discovery function with respect to a regulated market.
  - (5) **Economically equivalent contracts—**
    - (A) Notwithstanding any other provision of this section, the [Commission](/usc/7/1a.md?p=8) shall establish limits on the amount of positions, including aggregate position limits, as appropriate, other than bona fide hedge positions, that may be held by any [person](/usc/7/1a.md?p=38) with respect to [swaps](/usc/7/1a.md?p=47-A) that are economically equivalent to [contracts](/usc/7/518.md?p=4) of sale for [future delivery](/usc/7/1a.md?p=27) or to [options](/usc/7/1a.md?p=36) on the [contracts](/usc/7/518.md?p=4) or [commodities](/usc/7/1a.md?p=9) traded on or subject to the rules of a designated [contract](/usc/7/518.md?p=4) market subject to [paragraph (2)](#a-2).
    - (B) In establishing limits pursuant to [subparagraph (A)](#a-5-A), the [Commission](/usc/7/1a.md?p=8) shall—
      - (i) develop the limits concurrently with limits established under [paragraph (2)](#a-2), and the limits shall have similar requirements as under [paragraph (3)(B)](#a-3-B); and
      - (ii) establish the limits simultaneously with limits established under [paragraph (2)](#a-2).
  - (6) **Aggregate position limits—** The [Commission](/usc/7/1a.md?p=8) shall, by rule or regulation, establish limits (including related hedge exemption provisions) on the aggregate number or amount of positions in [contracts](/usc/7/518.md?p=4) based upon the same underlying [commodity](/usc/7/1a.md?p=9) (as defined by the [Commission](/usc/7/1a.md?p=8)) that may be held by any [person](/usc/7/1a.md?p=38), including any group or class of traders, for each month across—
    - (A) [contracts](/usc/7/518.md?p=4) listed by designated [contract](/usc/7/518.md?p=4) markets;
    - (B) with respect to an agreement [contract](/usc/7/518.md?p=4), or transaction that settles against any price (including the daily or final settlement price) of 1 or more [contracts](/usc/7/518.md?p=4) listed for trading on a [registered entity](/usc/7/1a.md?p=40), [contracts](/usc/7/518.md?p=4) traded on a foreign [board of trade](/usc/7/1a.md?p=6) that provides [members](/usc/7/1a.md?p=34) or other participants located in the [United States](/usc/7/6402.md?p=8) with direct access to its electronic trading and [order](/usc/7/2902.md?p=10) matching system; and
    - (C) [swap](/usc/7/1a.md?p=47-A) [contracts](/usc/7/518.md?p=4) that perform or affect a significant price discovery function with respect to regulated entities.
  - (7) **Exemptions—** The [Commission](/usc/7/1a.md?p=8), by rule, regulation, or [order](/usc/7/2902.md?p=10), may exempt, conditionally or unconditionally, any [person](/usc/7/1a.md?p=38) or class of [persons](/usc/7/1a.md?p=38), any [swap](/usc/7/1a.md?p=47-A) or class of [swaps](/usc/7/1a.md?p=47-A), any [contract of sale](/usc/7/1a.md?p=13) of a [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27) or class of such [contracts](/usc/7/518.md?p=4), any [option](/usc/7/1a.md?p=36) or class of [options](/usc/7/1a.md?p=36), or any transaction or class of transactions from any requirement it may establish under this section with respect to position limits.
- (b) **Prohibition on trading or positions in excess of limits fixed by Commission—** The [Commission](/usc/7/1a.md?p=8) shall, in such rule, regulation, or [order](/usc/7/2902.md?p=10), fix a reasonable time (not to exceed ten days) after the promulgation of the rule, regulation, or [order](/usc/7/2902.md?p=10); after which, and until such rule, regulation, or [order](/usc/7/2902.md?p=10) is suspended, modified, or revoked, it shall be unlawful for any [person](/usc/7/1a.md?p=38)—
  - (1) directly or indirectly to buy or sell, or agree to buy or sell, under [contracts](/usc/7/518.md?p=4) of sale of such [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27) on or subject to the rules of the [contract](/usc/7/518.md?p=4) market or markets, or [swap execution facility](/usc/7/1a.md?p=50) or facilities with respect to a [significant price discovery contract](/usc/7/1a.md?p=46), to which the rule, regulation, or [order](/usc/7/2902.md?p=10) applies, any amount of such [commodity](/usc/7/1a.md?p=9) during any one business day in excess of any trading limit fixed for one business day by the [Commission](/usc/7/1a.md?p=8) in such rule, regulation, or [order](/usc/7/2902.md?p=10) for or with respect to such [commodity](/usc/7/1a.md?p=9); or
  - (2) directly or indirectly to hold or control a net long or a net short position in any [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27) on or subject to the rules of any [contract](/usc/7/518.md?p=4) market or [swap execution facility](/usc/7/1a.md?p=50) with respect to a [significant price discovery contract](/usc/7/1a.md?p=46) in excess of any position limit fixed by the [Commission](/usc/7/1a.md?p=8) for or with respect to such [commodity](/usc/7/1a.md?p=9): Provided, That such position limit shall not apply to a position acquired in good faith prior to the effective date of such rule, regulation, or [order](/usc/7/2902.md?p=10).
- (c) **Applicability to bona fide hedging transactions or positions—**
  - (1) No rule, regulation, or [order](/usc/7/2902.md?p=10) issued under [subsection (a)](#a) of this section shall apply to transactions or positions which are shown to be bona fide hedging transactions or positions as such terms shall be defined by the [Commission](/usc/7/1a.md?p=8) by rule, regulation, or [order](/usc/7/2902.md?p=10) consistent with the purposes of this chapter. Such terms may be defined to permit [producers](/usc/7/6802.md?p=4-A-iii-III-bb), purchasers, sellers, middlemen, and users of a [commodity](/usc/7/1a.md?p=9) or a product derived therefrom to hedge their legitimate anticipated business needs for that period of time into the future for which an appropriate futures [contract](/usc/7/518.md?p=4) is open and available on an [exchange](/usc/7/1a.md?p=1-D). To determine the adequacy of this chapter and the powers of the [Commission](/usc/7/1a.md?p=8) acting thereunder to prevent unwarranted price pressures by large hedgers, the [Commission](/usc/7/1a.md?p=8) shall monitor and analyze the trading activities of the largest hedgers, as determined by the [Commission](/usc/7/1a.md?p=8), operating in the cattle, hog, or pork belly markets and shall report its findings and recommendations to the Senate [Committee](/usc/7/2132.md?p=n) on Agriculture, Nutrition, and Forestry and the House [Committee](/usc/7/2132.md?p=n) on Agriculture in its annual reports for at least two years following January 11, 1983.
  - (2) For the purposes of implementation of [subsection (a)(2)](#a-2) for [contracts](/usc/7/518.md?p=4) of sale for [future delivery](/usc/7/1a.md?p=27) or [options](/usc/7/1a.md?p=36) on the [contracts](/usc/7/518.md?p=4) or [commodities](/usc/7/1a.md?p=9), the [Commission](/usc/7/1a.md?p=8) shall define what constitutes a bona fide hedging transaction or position as a transaction or position that—
    - (A)
      - (i) represents a substitute for transactions made or to be made or positions taken or to be taken at a later time in a physical marketing channel;
      - (ii) is economically appropriate to the reduction of risks in the conduct and management of a commercial enterprise; and
      - (iii) arises from the potential change in the value of—
        - (I) assets that a [person](/usc/7/1a.md?p=38) owns, produces, manufactures, processes, or merchandises or anticipates owning, producing, manufacturing, processing, or merchandising;
        - (II) liabilities that a [person](/usc/7/1a.md?p=38) owns or anticipates incurring; or
        - (III) services that a [person](/usc/7/1a.md?p=38) provides, purchases, or anticipates providing or purchasing; or
    - (B) reduces risks attendant to a position resulting from a [swap](/usc/7/1a.md?p=47-A) that—
      - (i) was executed opposite a counterparty for which the transaction would qualify as a bona fide hedging transaction pursuant to [subparagraph (A)](#c-2-A); or
      - (ii) meets the requirements of [subparagraph (A)](#c-2-A).
- (d) **Persons subject to regulation; applicability to transactions made by or on behalf of United States—** This section shall apply to a [person](/usc/7/1a.md?p=38) that is registered as a [futures commission merchant](/usc/7/1a.md?p=28-A), an [introducing broker](/usc/7/1a.md?p=31-A), or a [floor broker](/usc/7/1a.md?p=22-A) under [authority](/usc/7/2009aa.md?p=1) of this chapter only to the extent that transactions made by such [person](/usc/7/1a.md?p=38) are made on behalf of or for the account or benefit of such [person](/usc/7/1a.md?p=38). This section shall not apply to transactions made by, or on behalf of, or at the direction of, the [United States](/usc/7/6402.md?p=8), or a duly authorized agency thereof.
- (e) **Rulemaking power and penalties for violation—** Nothing in this section shall prohibit or impair the adoption by any [contract](/usc/7/518.md?p=4) market, derivatives transaction execution facility, or by any other [board of trade](/usc/7/1a.md?p=6) licensed, designated, or registered by the [Commission](/usc/7/1a.md?p=8) or by any [electronic trading facility](/usc/7/1a.md?p=16) of any bylaw, rule, regulation, or resolution fixing limits on the amount of trading which may be done or positions which may be held by any [person](/usc/7/1a.md?p=38) under [contracts](/usc/7/518.md?p=4) of sale of any [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27) traded on or subject to the rules of such [contract](/usc/7/518.md?p=4) market or derivatives transaction execution facility or on an [electronic trading facility](/usc/7/1a.md?p=16), or under [options](/usc/7/1a.md?p=36) on such [contracts](/usc/7/518.md?p=4) or [commodities](/usc/7/1a.md?p=9) traded on or subject to the rules of such [contract](/usc/7/518.md?p=4) market, derivatives transaction execution facility, or [electronic trading facility](/usc/7/1a.md?p=16) or such [board of trade](/usc/7/1a.md?p=6): Provided, That if the [Commission](/usc/7/1a.md?p=8) shall have fixed limits under this section for any [contract](/usc/7/518.md?p=4) or under [section 6c of this title](/usc/7/6c.md) for any [commodity](/usc/7/1a.md?p=9) [option](/usc/7/1a.md?p=36), then the limits fixed by the bylaws, rules, regulations, and resolutions adopted by such [contract](/usc/7/518.md?p=4) market, derivatives transaction execution facility, or [electronic trading facility](/usc/7/1a.md?p=16) or such [board of trade](/usc/7/1a.md?p=6) shall not be higher than the limits fixed by the [Commission](/usc/7/1a.md?p=8). It shall be a violation of this chapter for any [person](/usc/7/1a.md?p=38) to violate any bylaw, rule, regulation, or resolution of any [contract](/usc/7/518.md?p=4) market, derivatives transaction execution facility, or other [board of trade](/usc/7/1a.md?p=6) licensed, designated, or registered by the [Commission](/usc/7/1a.md?p=8) or [electronic trading facility](/usc/7/1a.md?p=16) with respect to a [significant price discovery contract](/usc/7/1a.md?p=46) fixing limits on the amount of trading which may be done or positions which may be held by any [person](/usc/7/1a.md?p=38) under [contracts](/usc/7/518.md?p=4) of sale of any [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27) or under [options](/usc/7/1a.md?p=36) on such [contracts](/usc/7/518.md?p=4) or [commodities](/usc/7/1a.md?p=9), if such bylaw, rule, regulation, or resolution has been approved by the [Commission](/usc/7/1a.md?p=8) or certified by a [registered entity](/usc/7/1a.md?p=40) pursuant to [section 7a–2(c)(1) of this title](/usc/7/7a–2.md?p=c-1): Provided, That the provisions of [section 13(a)(5) of this title](/usc/7/13.md?p=a-5) shall apply only to those who knowingly violate such limits.

# §6b. Contracts designed to defraud or mislead

- (a) **Unlawful actions—** It shall be unlawful—
  - (1) for any [person](/usc/7/1a.md?p=38), in or in connection with any [order](/usc/7/2902.md?p=10) to make, or the making of, any [contract of sale](/usc/7/1a.md?p=13) of any [commodity](/usc/7/1a.md?p=9) in [interstate commerce](/usc/7/1a.md?p=30) or for [future delivery](/usc/7/1a.md?p=27) that is made, or to be made, on or subject to the rules of a designated [contract](/usc/7/518.md?p=4) market, for or on behalf of any other [person](/usc/7/1a.md?p=38); or
  - (2) for any [person](/usc/7/1a.md?p=38), in or in connection with any [order](/usc/7/2902.md?p=10) to make, or the making of, any [contract of sale](/usc/7/1a.md?p=13) of any [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27), or [swap](/usc/7/1a.md?p=47-A), that is made, or to be made, for or on behalf of, or with, any other [person](/usc/7/1a.md?p=38), other than on or subject to the rules of a designated [contract](/usc/7/518.md?p=4) market—
    - (A) to cheat or defraud or attempt to cheat or defraud the other [person](/usc/7/1a.md?p=38);
    - (B) willfully to make or cause to be made to the other [person](/usc/7/1a.md?p=38) any false report or statement or willfully to enter or cause to be entered for the other [person](/usc/7/1a.md?p=38) any false record;
    - (C) willfully to deceive or attempt to deceive the other [person](/usc/7/1a.md?p=38) by any means whatsoever in regard to any [order](/usc/7/2902.md?p=10) or [contract](/usc/7/518.md?p=4) or the disposition or execution of any [order](/usc/7/2902.md?p=10) or [contract](/usc/7/518.md?p=4), or in regard to any act of agency performed, with respect to any [order](/usc/7/2902.md?p=10) or [contract](/usc/7/518.md?p=4) for or, in the case of [paragraph (2)](#a-2), with the other [person](/usc/7/1a.md?p=38); or
    - (D)
      - (i) to bucket an [order](/usc/7/2902.md?p=10) if the [order](/usc/7/2902.md?p=10) is either represented by the [person](/usc/7/1a.md?p=38) as an [order](/usc/7/2902.md?p=10) to be executed, or is required to be executed, on or subject to the rules of a designated [contract](/usc/7/518.md?p=4) market; or
      - (ii) to fill an [order](/usc/7/2902.md?p=10) by offset against the [order](/usc/7/2902.md?p=10) or [orders](/usc/7/2902.md?p=10) of any other [person](/usc/7/1a.md?p=38), or willfully and knowingly and without the prior consent of the other [person](/usc/7/1a.md?p=38) to become the buyer in respect to any selling [order](/usc/7/2902.md?p=10) of the other [person](/usc/7/1a.md?p=38), or become the seller in respect to any buying [order](/usc/7/2902.md?p=10) of the other [person](/usc/7/1a.md?p=38), if the [order](/usc/7/2902.md?p=10) is either represented by the [person](/usc/7/1a.md?p=38) as an [order](/usc/7/2902.md?p=10) to be executed, or is required to be executed, on or subject to the rules of a designated [contract](/usc/7/518.md?p=4) market unless the [order](/usc/7/2902.md?p=10) is executed in accordance with the rules of the designated [contract](/usc/7/518.md?p=4) market.
- (b) **Clarification—** [Subsection (a)(2)](#a-2) of this section shall not obligate any [person](/usc/7/1a.md?p=38), in or in connection with a transaction in a [contract of sale](/usc/7/1a.md?p=13) of a [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27), or [swap](/usc/7/1a.md?p=47-A), with another [person](/usc/7/1a.md?p=38), to disclose to the other [person](/usc/7/1a.md?p=38) nonpublic information that may be material to the market price, rate, or level of the [commodity](/usc/7/1a.md?p=9) or transaction, except as necessary to make any statement made to the other [person](/usc/7/1a.md?p=38) in or in connection with the transaction not misleading in any material respect.
- (c) **Buying and selling orders for commodity—** Nothing in this section or in any other section of this chapter shall be construed to prevent a [futures commission merchant](/usc/7/1a.md?p=28-A) or [floor broker](/usc/7/1a.md?p=22-A) who shall have in hand, simultaneously, buying and selling [orders](/usc/7/2902.md?p=10) at the market for different principals for a like quantity of a [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27) in the same month executing such buying and selling [orders](/usc/7/2902.md?p=10) at the market price: Provided, That any such execution shall take place on the floor of the [exchange](/usc/7/1a.md?p=1-D) where such [orders](/usc/7/2902.md?p=10) are to be executed at public outcry across the ring and shall be duly reported, recorded, and cleared in the same manner as other [orders](/usc/7/2902.md?p=10) executed on such [exchange](/usc/7/1a.md?p=1-D): And provided further, That such transactions shall be made in accordance with such rules and regulations as the [Commission](/usc/7/1a.md?p=8) may promulgate regarding the manner of the execution of such transactions.
- (d) **Inapplicability to transactions on foreign exchanges—** Nothing in this section shall apply to any activity that occurs on a [board of trade](/usc/7/1a.md?p=6), [exchange](/usc/7/1a.md?p=1-D), or market, or clearinghouse for such [board of trade](/usc/7/1a.md?p=6), [exchange](/usc/7/1a.md?p=1-D), or market, located outside the [United States](/usc/7/6402.md?p=8), or territories or possessions of the [United States](/usc/7/6402.md?p=8), involving any [contract of sale](/usc/7/1a.md?p=13) of a [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27) that is made, or to be made, on or subject to the rules of such [board of trade](/usc/7/1a.md?p=6), [exchange](/usc/7/1a.md?p=1-D), or market.
- (e) **Contracts of sale on group or index of securities—** It shall be unlawful for any [person](/usc/7/1a.md?p=38), directly or indirectly, by the use of any means or instrumentality of [interstate commerce](/usc/7/1a.md?p=30), or of the mails, or of any facility of any [registered entity](/usc/7/1a.md?p=40), in or in connection with any [order](/usc/7/2902.md?p=10) to make, or the making of, any [contract of sale](/usc/7/1a.md?p=13) of any [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27) (or [option](/usc/7/1a.md?p=36) on such a [contract](/usc/7/518.md?p=4)), or any [swap](/usc/7/1a.md?p=47-A), on a group or index of [securities](/usc/7/1a.md?p=41) (or any interest therein or based on the value thereof)—
  - (1) to employ any device, scheme, or artifice to defraud;
  - (2) to make any untrue statement of a material fact or to omit to [state](/usc/7/1359aa.md?p=5) a material fact necessary in [order](/usc/7/2902.md?p=10) to make the statements made, in the light of the circumstances under which they were made, not misleading; or
  - (3) to engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any [person](/usc/7/1a.md?p=38).

# §6b–1. Enforcement authority

- (a) **Commodity Futures Trading Commission—** Except as provided in subsections [(b)](#b), [(c)](#c), and [(d)](#d), the [Commission](/usc/7/1a.md?p=8) shall have exclusive [authority](/usc/7/2009aa.md?p=1) to enforce the provisions of subtitle A of the Wall Street Transparency and Accountability Act of 2010 with respect to any [person](/usc/7/1a.md?p=38).
- (b) **Prudential regulators—** The [prudential regulators](/usc/7/1a.md?p=39) shall have exclusive [authority](/usc/7/2009aa.md?p=1) to enforce the provisions of [section 6s(e) of this title](/usc/7/6s.md?p=e) with respect to [swap dealers](/usc/7/1a.md?p=49-A) or [major swap participants](/usc/7/1a.md?p=33-A) for which they are the [prudential regulator](/usc/7/1a.md?p=39).
- (c) **Referrals—**
  - (1) **Prudential regulators—** If the [prudential regulator](/usc/7/1a.md?p=39) for a [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A) has cause to believe that the [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A), or any affiliate or division of the [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A), may have engaged in conduct that constitutes a violation of the nonprudential requirements of this chapter (including [section 6s of this title](/usc/7/6s.md) or rules adopted by the [Commission](/usc/7/1a.md?p=8) under that section), the [prudential regulator](/usc/7/1a.md?p=39) may promptly notify the [Commission](/usc/7/1a.md?p=8) in a written report that includes—
    - (A) a request that the [Commission](/usc/7/1a.md?p=8) initiate an enforcement proceeding under this chapter; and
    - (B) an explanation of the facts and circumstances that led to the preparation of the written report.
  - (2) **Commission—** If the [Commission](/usc/7/1a.md?p=8) has cause to believe that a [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A) that has a [prudential regulator](/usc/7/1a.md?p=39) may have engaged in conduct that constitutes a violation of any prudential requirement of [section 6s of this title](/usc/7/6s.md) or rules adopted by the [Commission](/usc/7/1a.md?p=8) under that section, the [Commission](/usc/7/1a.md?p=8) may notify the [prudential regulator](/usc/7/1a.md?p=39) of the conduct in a written report that includes—
    - (A) a request that the [prudential regulator](/usc/7/1a.md?p=39) initiate an enforcement proceeding under this chapter or any other Federal law (including regulations); and
    - (B) an explanation of the concerns of the [Commission](/usc/7/1a.md?p=8), and a description of the facts and circumstances, that led to the preparation of the written report.
- (d) **Backstop enforcement authority—**
  - (1) **Initiation of enforcement proceeding by prudential regulator—** If the [Commission](/usc/7/1a.md?p=8) does not initiate an enforcement proceeding before the end of the 90-day period beginning on the date on which the [Commission](/usc/7/1a.md?p=8) receives a written report under [subsection (c)(1)](#c-1), the [prudential regulator](/usc/7/1a.md?p=39) may initiate an enforcement proceeding.
  - (2) **Initiation of enforcement proceeding by Commission—** If the [prudential regulator](/usc/7/1a.md?p=39) does not initiate an enforcement proceeding before the end of the 90-day period beginning on the date on which the [prudential regulator](/usc/7/1a.md?p=39) receives a written report under [subsection (c)(2)](#c-2), the [Commission](/usc/7/1a.md?p=8) may initiate an enforcement proceeding.

# §6c. Prohibited transactions

- (a) **In general—**
  - (1) **Prohibition—** It shall be unlawful for any [person](/usc/7/1a.md?p=38) to [offer](/usc/7/1a.md?p=36) to enter into, enter into, or confirm the execution of a transaction described in [paragraph (2)](#a-2) involving the purchase or sale of any [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27) (or any [option](/usc/7/1a.md?p=36) on such a transaction or [option](/usc/7/1a.md?p=36) on a [commodity](/usc/7/1a.md?p=9)) or [swap](/usc/7/1a.md?p=47-A) if the transaction is used or may be used to—
    - (A) hedge any transaction in [interstate commerce](/usc/7/1a.md?p=30) in the [commodity](/usc/7/1a.md?p=9) or the product or byproduct of the [commodity](/usc/7/1a.md?p=9);
    - (B) determine the price basis of any such transaction in [interstate commerce](/usc/7/1a.md?p=30) in the [commodity](/usc/7/1a.md?p=9); or
    - (C) deliver any such [commodity](/usc/7/1a.md?p=9) sold, shipped, or received in [interstate commerce](/usc/7/1a.md?p=30) for the execution of the transaction.
  - (2) **Transaction—** A transaction referred to in [paragraph (1)](#a-1) is a transaction that—
    - (A)
      - (i) is, of the character of, or is commonly known to the trade as, a “wash sale” or “accommodation trade”; or
      - (ii) is a fictitious sale; or
    - (B) is used to cause any price to be reported, registered, or recorded that is not a true and bona fide price.
  - (3) **Contract of sale—** It shall be unlawful for any employee or agent of any department or agency of the Federal Government or any [Member](/usc/7/1a.md?p=34) of Congress or employee of Congress (as such terms are defined under section 2 of the STOCK Act) or any judicial officer or judicial employee (as such terms are defined, respectively, under section 2 of the STOCK Act) who, by virtue of the employment or position of the [Member](/usc/7/1a.md?p=34), officer, employee or agent, acquires information that may affect or tend to affect the price of any [commodity](/usc/7/1a.md?p=9) in [interstate commerce](/usc/7/1a.md?p=30), or for [future delivery](/usc/7/1a.md?p=27), or any [swap](/usc/7/1a.md?p=47-A), and which information has not been disseminated by the department or agency of the Federal Government holding or creating the information or by Congress or by the judiciary in a manner which makes it generally available to the trading public, or disclosed in a criminal, civil, or administrative hearing, or in a congressional, administrative, or Government Accountability Office report, hearing, audit, or investigation, to use the information in his personal capacity and for personal gain to enter into, or [offer](/usc/7/1a.md?p=36) to enter into—
    - (A) a [contract of sale](/usc/7/1a.md?p=13) of a [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27) (or [option](/usc/7/1a.md?p=36) on such a [contract](/usc/7/518.md?p=4));
    - (B) an [option](/usc/7/1a.md?p=36) (other than an [option](/usc/7/1a.md?p=36) executed or traded on a national [securities](/usc/7/1a.md?p=41) [exchange](/usc/7/1a.md?p=1-D) registered pursuant to [section 78f(a) of title 15](/usc/15/78f.md?p=a)); or
    - (C) a [swap](/usc/7/1a.md?p=47-A).
  - (4) **Nonpublic information—**
    - (A) **Imparting of nonpublic information—** It shall be unlawful for any employee or agent of any department or agency of the Federal Government or any [Member](/usc/7/1a.md?p=34) of Congress or employee of Congress or any judicial officer or judicial employee who, by virtue of the employment or position of the [Member](/usc/7/1a.md?p=34), officer, employee or agent, acquires information that may affect or tend to affect the price of any [commodity](/usc/7/1a.md?p=9) in [interstate commerce](/usc/7/1a.md?p=30), or for [future delivery](/usc/7/1a.md?p=27), or any [swap](/usc/7/1a.md?p=47-A), and which information has not been disseminated by the department or agency of the Federal Government holding or creating the information or by Congress or by the judiciary in a manner which makes it generally available to the trading public, or disclosed in a criminal, civil, or administrative hearing, or in a congressional, administrative, or Government Accountability Office report, hearing, audit, or investigation, to impart the information in his personal capacity and for personal gain with intent to assist another [person](/usc/7/1a.md?p=38), directly or indirectly, to use the information to enter into, or [offer](/usc/7/1a.md?p=36) to enter into—
      - (i) a [contract of sale](/usc/7/1a.md?p=13) of a [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27) (or [option](/usc/7/1a.md?p=36) on such a [contract](/usc/7/518.md?p=4));
      - (ii) an [option](/usc/7/1a.md?p=36) (other than an [option](/usc/7/1a.md?p=36) executed or traded on a national [securities](/usc/7/1a.md?p=41) [exchange](/usc/7/1a.md?p=1-D) registered pursuant to [section 78f(a) of title 15](/usc/15/78f.md?p=a)); or
      - (iii) a [swap](/usc/7/1a.md?p=47-A).
    - (B) **Knowing use—** It shall be unlawful for any [person](/usc/7/1a.md?p=38) who receives information imparted by any employee or agent of any department or agency of the Federal Government or any [Member](/usc/7/1a.md?p=34) of Congress or employee of Congress or any judicial officer or judicial employee as described in [subparagraph (A)](#a-4-A) to knowingly use such information to enter into, or [offer](/usc/7/1a.md?p=36) to enter into—
      - (i) a [contract of sale](/usc/7/1a.md?p=13) of a [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27) (or [option](/usc/7/1a.md?p=36) on such a [contract](/usc/7/518.md?p=4));
      - (ii) an [option](/usc/7/1a.md?p=36) (other than an [option](/usc/7/1a.md?p=36) executed or traded on a national [securities](/usc/7/1a.md?p=41) [exchange](/usc/7/1a.md?p=1-D) registered pursuant to [section 78f(a) of title 15](/usc/15/78f.md?p=a)); or
      - (iii) a [swap](/usc/7/1a.md?p=47-A).
    - (C) **Theft of nonpublic information—** It shall be unlawful for any [person](/usc/7/1a.md?p=38) to steal, convert, or misappropriate, by any means whatsoever, information held or created by any department or agency of the Federal Government or by Congress or by the judiciary that may affect or tend to affect the price of any [commodity](/usc/7/1a.md?p=9) in [interstate commerce](/usc/7/1a.md?p=30), or for [future delivery](/usc/7/1a.md?p=27), or any [swap](/usc/7/1a.md?p=47-A), where such [person](/usc/7/1a.md?p=38) knows, or acts in reckless disregard of the fact, that such information has not been disseminated by the department or agency of the Federal Government holding or creating the information or by Congress or by the judiciary in a manner which makes it generally available to the trading public, or disclosed in a criminal, civil, or administrative hearing, or in a congressional, administrative, or Government Accountability Office report, hearing, audit, or investigation, and to use such information, or to impart such information with the intent to assist another [person](/usc/7/1a.md?p=38), directly or indirectly, to use such information to enter into, or [offer](/usc/7/1a.md?p=36) to enter into—
      - (i) a [contract of sale](/usc/7/1a.md?p=13) of a [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27) (or [option](/usc/7/1a.md?p=36) on such a [contract](/usc/7/518.md?p=4));
      - (ii) an [option](/usc/7/1a.md?p=36) (other than an [option](/usc/7/1a.md?p=36) executed or traded on a national [securities](/usc/7/1a.md?p=41) [exchange](/usc/7/1a.md?p=1-D) registered pursuant to [section 78f(a) of title 15](/usc/15/78f.md?p=a)); or
      - (iii) a [swap](/usc/7/1a.md?p=47-A), provided, however, that nothing in this subparagraph shall preclude a [person](/usc/7/1a.md?p=38) that has provided information concerning, or generated by, the [person](/usc/7/1a.md?p=38), its operations or activities, to any employee or agent of any department or agency of the Federal Government, to Congress, any [Member](/usc/7/1a.md?p=34) of Congress, any employee of Congress, any judicial officer, or any judicial employee, voluntarily or as required by law, from using such information to enter into, or [offer](/usc/7/1a.md?p=36) to enter into, a [contract of sale](/usc/7/1a.md?p=13), [option](/usc/7/1a.md?p=36), or [swap](/usc/7/1a.md?p=47-A) described in clauses[^1] (i), (ii), or (iii).
  - (5) **Disruptive practices—** It shall be unlawful for any [person](/usc/7/1a.md?p=38) to engage in any trading, practice, or conduct on or subject to the rules of a [registered entity](/usc/7/1a.md?p=40) that—
    - (A) violates [bids](/usc/7/1a.md?p=36) or [offers](/usc/7/1a.md?p=36);
    - (B) demonstrates intentional or reckless disregard for the orderly execution of transactions during the closing period; or
    - (C) is, is of the character of, or is commonly known to the trade as, “spoofing” (bidding or offering with the intent to cancel the [bid](/usc/7/1a.md?p=36) or [offer](/usc/7/1a.md?p=36) before execution).
  - (6) **Rulemaking authority—** The [Commission](/usc/7/1a.md?p=8) may make and promulgate such rules and regulations as, in the judgment of the [Commission](/usc/7/1a.md?p=8), are reasonably necessary to prohibit the trading practices described in [paragraph (5)](#a-5) and any other trading practice that is disruptive of fair and equitable trading.
  - (7) **Use of swaps to defraud—** It shall be unlawful for any [person](/usc/7/1a.md?p=38) to enter into a [swap](/usc/7/1a.md?p=47-A) knowing, or acting in reckless disregard of the fact, that its counterparty will use the [swap](/usc/7/1a.md?p=47-A) as part of a device, scheme, or artifice to defraud any third party.
- (b) **Regulated option trading—** No [person](/usc/7/1a.md?p=38) shall [offer](/usc/7/1a.md?p=36) to enter into, enter into or confirm the execution of, any transaction involving any [commodity](/usc/7/1a.md?p=9) regulated under this chapter which is of the character of, or is commonly known to the trade as, an “[option](/usc/7/1a.md?p=36)”, “[privilege](/usc/7/1a.md?p=36)”, “[indemnity](/usc/7/1a.md?p=36)”, “[bid](/usc/7/1a.md?p=36)”, “[offer](/usc/7/1a.md?p=36)”, “[put](/usc/7/1a.md?p=36)”, “[call](/usc/7/1a.md?p=36)”, “[advance guaranty](/usc/7/1a.md?p=36)”, or “[decline guaranty](/usc/7/1a.md?p=36)”, contrary to any rule, regulation, or [order](/usc/7/2902.md?p=10) of the [Commission](/usc/7/1a.md?p=8) prohibiting any such transaction or allowing any such transaction under such terms and conditions as the [Commission](/usc/7/1a.md?p=8) shall prescribe. Any such [order](/usc/7/2902.md?p=10), rule, or regulation may be made only after notice and opportunity for hearing, and the [Commission](/usc/7/1a.md?p=8) may set different terms and conditions for different markets.
- (c) **Regulations for elimination of pilot status of commodity option transactions; terms and conditions of options trading—** Not later than 90 days after November 10, 1986, the [Commission](/usc/7/1a.md?p=8) shall issue regulations—
  - (1) to eliminate the pilot status of its program for [commodity](/usc/7/1a.md?p=9) [option](/usc/7/1a.md?p=36) transactions involving the trading of [options](/usc/7/1a.md?p=36) on [contract](/usc/7/518.md?p=4) markets, including any numerical restrictions on the number of [commodities](/usc/7/1a.md?p=9) or [option](/usc/7/1a.md?p=36) [contracts](/usc/7/518.md?p=4) for which a [contract](/usc/7/518.md?p=4) market may be designated; and
  - (2) otherwise to continue to permit the trading of such [commodity](/usc/7/1a.md?p=9) [options](/usc/7/1a.md?p=36) under such terms and conditions that the [Commission](/usc/7/1a.md?p=8) from time to time may prescribe.
- (d) **Dealer options exempt from subsections (b) and (c) prohibitions; requirements—** Notwithstanding the provisions of [subsection (c)](#c) of this section—
  - (1) any [person](/usc/7/1a.md?p=38) domiciled in the [United States](/usc/7/6402.md?p=8) who on May 1, 1978, was in the business of granting an [option](/usc/7/1a.md?p=36) on a physical [commodity](/usc/7/1a.md?p=9), other than a [commodity](/usc/7/1a.md?p=9) specifically set forth in [section 2(a) of this title](/usc/7/2.md?p=a) prior to October 23, 1974, and was in the business of buying, selling, producing, or otherwise using that [commodity](/usc/7/1a.md?p=9), may continue to grant or issue [options](/usc/7/1a.md?p=36) on that [commodity](/usc/7/1a.md?p=9) in accordance with [Commission](/usc/7/1a.md?p=8) regulations in effect on August 17, 1978, until thirty days after the effective date of regulations issued by the [Commission](/usc/7/1a.md?p=8) under clause (2) of this subsection: Provided, That if such [person](/usc/7/1a.md?p=38) files an application for registration under the regulations issued under clause (2) of this subsection within thirty days after the effective date of such regulations, that [person](/usc/7/1a.md?p=38) may continue to grant or issue [options](/usc/7/1a.md?p=36) pending a final determination by the [Commission](/usc/7/1a.md?p=8) on the application; and
  - (2) the [Commission](/usc/7/1a.md?p=8) shall issue regulations that permit grantors and [futures commission merchants](/usc/7/1a.md?p=28-A) to [offer](/usc/7/1a.md?p=36) to enter into, enter into, or confirm the execution of, any [commodity](/usc/7/1a.md?p=9) [option](/usc/7/1a.md?p=36) transaction on a physical [commodity](/usc/7/1a.md?p=9) subject to the provisions of [subsection (b)](#b) of this section, other than a [commodity](/usc/7/1a.md?p=9) specifically set forth in [section 2(a) of this title](/usc/7/2.md?p=a) prior to October 23, 1974, if—
    - (A) the grantor is a [person](/usc/7/1a.md?p=38) domiciled in the [United States](/usc/7/6402.md?p=8) who—
      - (i) is in the business of buying, selling, producing, or otherwise using the underlying [commodity](/usc/7/1a.md?p=9);
      - (ii) at all times has a net worth of at least $5,000,000 certified annually by an independent public accountant using generally accepted accounting principles;
      - (iii) notifies the [Commission](/usc/7/1a.md?p=8) and every [futures commission merchant](/usc/7/1a.md?p=28-A) offering the grantor’s [option](/usc/7/1a.md?p=36) if the grantor knows or has reason to believe that the grantor’s net worth has fallen below $5,000,000;
      - (iv) segregates daily, exclusively for the benefit of purchasers, money, exempted [securities](/usc/7/1a.md?p=41) (within the meaning of [section 78c(a)(12) of title 15](/usc/15/78c.md?p=a-12)), commercial paper, bankers’ acceptances, commercial bills, or unencumbered warehouse receipts, equal to an amount by which the value of each transaction exceeds the amount received or to be received by the grantor for such transaction;
      - (v) provides an identification number for each transaction; and
      - (vi) provides confirmation of all [orders](/usc/7/2902.md?p=10) for such transactions executed, including the execution price and a transaction identification number;
    - (B) the [futures commission merchant](/usc/7/1a.md?p=28-A) is a [person](/usc/7/1a.md?p=38) who—
      - (i) has evidence that the grantor meets the requirements specified in [subclause (A)](#d-2-A) of this clause;
      - (ii) treats and deals with all money, [securities](/usc/7/1a.md?p=41), or property received from its customers as payment of the purchase price in connection with such transactions, as belonging to such customers until the expiration of the term of the [option](/usc/7/1a.md?p=36), or, if the customer exercises the [option](/usc/7/1a.md?p=36), until all rights of the customer under the [commodity](/usc/7/1a.md?p=9) [option](/usc/7/1a.md?p=36) transaction have been fulfilled;
      - (iii) records each transaction in its customer’s name by the transaction identification number provided by the grantor;
      - (iv) provides a disclosure statement to its customers, under regulations of the [Commission](/usc/7/1a.md?p=8), that discloses, among other things, all costs, including any markups or [commissions](/usc/7/1a.md?p=8) involved in such transaction; and
    - (C) the grantor and [futures commission merchant](/usc/7/1a.md?p=28-A) comply with any additional uniform and reasonable terms and conditions the [Commission](/usc/7/1a.md?p=8) may prescribe, including registration with the [Commission](/usc/7/1a.md?p=8).

  The [Commission](/usc/7/1a.md?p=8) may permit [persons](/usc/7/1a.md?p=38) not domiciled in the [United States](/usc/7/6402.md?p=8) to grant [options](/usc/7/1a.md?p=36) under this subsection, other than [options](/usc/7/1a.md?p=36) on a [commodity](/usc/7/1a.md?p=9) specifically set forth in [section 2(a) of this title](/usc/7/2.md?p=a) prior to October 23, 1974, under such additional rules, regulations, and [orders](/usc/7/2902.md?p=10) as the [Commission](/usc/7/1a.md?p=8) may adopt to provide protection to purchasers that are substantially the equivalent of those applicable to grantors domiciled in the [United States](/usc/7/6402.md?p=8). The [Commission](/usc/7/1a.md?p=8) may terminate the right of any [person](/usc/7/1a.md?p=38) to grant, [offer](/usc/7/1a.md?p=36), or sell [options](/usc/7/1a.md?p=36) under this subsection only after a hearing, including a finding that the continuation of such right is contrary to the public interest: Provided, That pending the completion of such termination proceedings, the [Commission](/usc/7/1a.md?p=8) may suspend the right to grant, [offer](/usc/7/1a.md?p=36), or sell [options](/usc/7/1a.md?p=36) of any [person](/usc/7/1a.md?p=38) whose activities in the [Commission](/usc/7/1a.md?p=8)’s judgment present a substantial risk to the public interest.

- (e) **Rules and regulations—** The [Commission](/usc/7/1a.md?p=8) may adopt rules and regulations, after public notice and opportunity for a hearing on the record, prohibiting the granting, issuance, or sale of [options](/usc/7/1a.md?p=36) permitted under [subsection (d)](#d) of this section if the [Commission](/usc/7/1a.md?p=8) determines that such [options](/usc/7/1a.md?p=36) are contrary to the public interest.
- (f) **Nonapplicability to foreign currency options—** Nothing in this chapter shall be deemed to govern or in any way be applicable to any transaction in an [option](/usc/7/1a.md?p=36) on foreign currency traded on a national [securities](/usc/7/1a.md?p=41) [exchange](/usc/7/1a.md?p=1-D).
- (g) **Oral orders—** The [Commission](/usc/7/1a.md?p=8) shall adopt rules requiring that a contemporaneous written record be made, as practicable, of all [orders](/usc/7/2902.md?p=10) for execution on the floor or subject to the rules of each [contract](/usc/7/518.md?p=4) market or derivatives transaction execution facility placed by a [member](/usc/7/1a.md?p=34) of the [contract](/usc/7/518.md?p=4) market or derivatives transaction execution facility who is present on the floor at the time such [order](/usc/7/2902.md?p=10) is placed.

# §6d. Dealing by unregistered futures commission merchants or introducing brokers prohibited; duties in handling customer receipts; conflict-of-interest systems and procedures; Chief Compliance Officer; rules to avoid duplicative regulations; swap requirements; portfolio margining accounts

- (a) **Futures commission merchant registration requirements; duties of merchants in handling customer receipts—** It shall be unlawful for any [person](/usc/7/1a.md?p=38) to be a [futures commission merchant](/usc/7/1a.md?p=28-A) unless—
  - (1) such [person](/usc/7/1a.md?p=38) shall have registered, under this chapter, with the [Commission](/usc/7/1a.md?p=8) as such [futures commission merchant](/usc/7/1a.md?p=28-A) and such registration shall not have expired nor been suspended nor revoked; and
  - (2) such [person](/usc/7/1a.md?p=38) shall, whether a [member](/usc/7/1a.md?p=34) or nonmember of a [contract](/usc/7/518.md?p=4) market or derivatives transaction execution facility, treat and deal with all money, [securities](/usc/7/1a.md?p=41), and property received by such [person](/usc/7/1a.md?p=38) to margin, guarantee, or secure the trades or [contracts](/usc/7/518.md?p=4) of any customer of such [person](/usc/7/1a.md?p=38), or accruing to such customer as the result of such trades or [contracts](/usc/7/518.md?p=4), as belonging to such customer. Such money, [securities](/usc/7/1a.md?p=41), and property shall be separately accounted for and shall not be commingled with the [funds](/usc/7/4531.md?p=5) of such [commission](/usc/7/1a.md?p=8) merchant or be used to margin or guarantee the trades or [contracts](/usc/7/518.md?p=4), or to secure or extend the credit, of any customer or [person](/usc/7/1a.md?p=38) other than the one for whom the same are held: Provided, however, That such money, [securities](/usc/7/1a.md?p=41), and property of the customers of such [futures commission merchant](/usc/7/1a.md?p=28-A) may, for convenience, be commingled and deposited in the same account or accounts with any [bank](/usc/7/27.md?p=a) or trust company or with the clearing house organization of such [contract](/usc/7/518.md?p=4) market or derivatives transaction execution facility, and that such share thereof as in the normal course of business shall be necessary to margin, guarantee, secure, transfer, adjust, or settle the [contracts](/usc/7/518.md?p=4) or trades of such customers, or resulting market positions, with the clearinghouse organization of such [contract](/usc/7/518.md?p=4) market or derivatives transaction execution facility or with any [member](/usc/7/1a.md?p=34) of such [contract](/usc/7/518.md?p=4) market or derivatives transaction execution facility, may be withdrawn and applied to such purposes, including the payment of [commissions](/usc/7/1a.md?p=8), brokerage, interest, taxes, storage, and other charges, lawfully accruing in connection with such [contracts](/usc/7/518.md?p=4) and trades: Provided further, That in accordance with such terms and conditions as the [Commission](/usc/7/1a.md?p=8) may prescribe by rule, regulation, or [order](/usc/7/2902.md?p=10), such money, [securities](/usc/7/1a.md?p=41), and property of the customers of such [futures commission merchant](/usc/7/1a.md?p=28-A) may be commingled and deposited as provided in this section with any other money, [securities](/usc/7/1a.md?p=41), and property received by such [futures commission merchant](/usc/7/1a.md?p=28-A) and required by the [Commission](/usc/7/1a.md?p=8) to be separately accounted for and treated and dealt with as belonging to the customers of such [futures commission merchant](/usc/7/1a.md?p=28-A): Provided further, That such money may be invested in obligations of the [United States](/usc/7/6402.md?p=8), in general obligations of any [State](/usc/7/1359aa.md?p=5) or of any political subdivision thereof, and in obligations fully guaranteed as to principal and interest by the [United States](/usc/7/6402.md?p=8), such investments to be made in accordance with such rules and regulations and subject to such conditions as the [Commission](/usc/7/1a.md?p=8) may prescribe.
- (b) **Duties of clearing agencies, depositories, and others in handling customer receipts—** It shall be unlawful for any [person](/usc/7/1a.md?p=38), including but not limited to any clearing agency of a [contract](/usc/7/518.md?p=4) market or derivatives transaction execution facility and any depository, that has received any money, [securities](/usc/7/1a.md?p=41), or property for deposit in a separate account as provided in paragraph (2) of this section,[^1] to hold, dispose of, or use any such money, [securities](/usc/7/1a.md?p=41), or property as belonging to the depositing [futures commission merchant](/usc/7/1a.md?p=28-A) or any [person](/usc/7/1a.md?p=38) other than the customers of such [futures commission merchant](/usc/7/1a.md?p=28-A).
- (c) **Conflicts of interest—** The [Commission](/usc/7/1a.md?p=8) shall require that [futures commission merchants](/usc/7/1a.md?p=28-A) and [introducing brokers](/usc/7/1a.md?p=31-A) implement conflict-of-interest systems and procedures that—
  - (1) establish structural and institutional safeguards to ensure that the activities of any [person](/usc/7/1a.md?p=38) within the firm relating to research or analysis of the price or market for any [commodity](/usc/7/1a.md?p=9) are separated by appropriate informational partitions within the firm from the review, pressure, or oversight of [persons](/usc/7/1a.md?p=38) whose involvement in trading or clearing activities might potentially bias the judgment or supervision of the [persons](/usc/7/1a.md?p=38); and
  - (2) address such other issues as the [Commission](/usc/7/1a.md?p=8) determines to be appropriate.
- (d) **Designation of Chief Compliance Officer—** Each [futures commission merchant](/usc/7/1a.md?p=28-A) shall designate an individual to serve as its Chief Compliance Officer and perform such duties and responsibilities as shall be set forth in regulations to be adopted by the [Commission](/usc/7/1a.md?p=8) or rules to be adopted by a futures association registered under [section 21 of this title](/usc/7/21.md).
- (e) **Rules to avoid duplicative regulation of dual registrants—** Consistent with this chapter, the [Commission](/usc/7/1a.md?p=8), in consultation with the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8), shall issue such rules, regulations, or [orders](/usc/7/2902.md?p=10) as are necessary to avoid duplicative or conflicting regulations applicable to any [futures commission merchant](/usc/7/1a.md?p=28-A) registered with the [Commission](/usc/7/1a.md?p=8) pursuant to [section 6f(a) of this title](/usc/7/6f.md?p=a) (except [paragraph (2)](#e-2) thereof), that is also registered with the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8) pursuant to [section 78o(b)](/usc/15/78o.md?p=b) of title 15 (except paragraph (11) thereof), involving the application of—
  - (1) section 78h, section 78o(c)(3), and [section 78q of title 15](/usc/15/78q.md) and the rules and regulations thereunder related to the treatment of customer [funds](/usc/7/4531.md?p=5), [securities](/usc/7/1a.md?p=41), or property, maintenance of books and records, financial reporting or other financial responsibility rules (as defined in [section 78c(a)(40) of title 15](/usc/15/78c.md?p=a-40)), involving [security futures products](/usc/7/1a.md?p=45); and
  - (2) similar provisions of this chapter and the rules and regulations thereunder involving [security futures products](/usc/7/1a.md?p=45).
- (f) **Swaps—**
  - (1) **Registration requirement—** It shall be unlawful for any [person](/usc/7/1a.md?p=38) to accept any money, [securities](/usc/7/1a.md?p=41), or property (or to extend any credit in lieu of money, [securities](/usc/7/1a.md?p=41), or property) from, for, or on behalf of a [swaps](/usc/7/1a.md?p=47-A) customer to margin, guarantee, or secure a [swap](/usc/7/1a.md?p=47-A) cleared by or through a [derivatives clearing organization](/usc/7/1a.md?p=15-A) (including money, [securities](/usc/7/1a.md?p=41), or property accruing to the customer as the result of such a [swap](/usc/7/1a.md?p=47-A)), unless the [person](/usc/7/1a.md?p=38) shall have registered under this chapter with the [Commission](/usc/7/1a.md?p=8) as a [futures commission merchant](/usc/7/1a.md?p=28-A), and the registration shall not have expired nor been suspended nor revoked.
  - (2) **Cleared swaps—**
    - (A) **Segregation required—** A [futures commission merchant](/usc/7/1a.md?p=28-A) shall treat and deal with all money, [securities](/usc/7/1a.md?p=41), and property of any [swaps](/usc/7/1a.md?p=47-A) customer received to margin, guarantee, or secure a [swap](/usc/7/1a.md?p=47-A) cleared by or though a [derivatives clearing organization](/usc/7/1a.md?p=15-A) (including money, [securities](/usc/7/1a.md?p=41), or property accruing to the [swaps](/usc/7/1a.md?p=47-A) customer as the result of such a [swap](/usc/7/1a.md?p=47-A)) as belonging to the [swaps](/usc/7/1a.md?p=47-A) customer.
    - (B) **Commingling prohibited—** Money, [securities](/usc/7/1a.md?p=41), and property of a [swaps](/usc/7/1a.md?p=47-A) customer described in [subparagraph (A)](#f-2-A) shall be separately accounted for and shall not be commingled with the [funds](/usc/7/4531.md?p=5) of the [futures commission merchant](/usc/7/1a.md?p=28-A) or be used to margin, secure, or guarantee any trades or [contracts](/usc/7/518.md?p=4) of any [swaps](/usc/7/1a.md?p=47-A) customer or [person](/usc/7/1a.md?p=38) other than the [person](/usc/7/1a.md?p=38) for whom the same are held.
  - (3) **Exceptions—**
    - (A) **Use of funds—**
      - (i) **In general—** Notwithstanding [paragraph (2)](#f-2), money, [securities](/usc/7/1a.md?p=41), and property of [swap](/usc/7/1a.md?p=47-A) customers of a [futures commission merchant](/usc/7/1a.md?p=28-A) described in [paragraph (2)](#f-2) may, for convenience, be commingled and deposited in the same account or accounts with any [bank](/usc/7/27.md?p=a) or trust company or with a [derivatives clearing organization](/usc/7/1a.md?p=15-A).
      - (ii) **Withdrawal—** Notwithstanding [paragraph (2)](#f-2), such share of the money, [securities](/usc/7/1a.md?p=41), and property described in [clause (i)](#f-3-A-i) as in the normal course of business shall be necessary to margin, guarantee, secure, transfer, adjust, or settle a [cleared swap](/usc/7/1a.md?p=7) with a [derivatives clearing organization](/usc/7/1a.md?p=15-A), or with any [member](/usc/7/1a.md?p=34) of the [derivatives clearing organization](/usc/7/1a.md?p=15-A), may be withdrawn and applied to such purposes, including the payment of [commissions](/usc/7/1a.md?p=8), brokerage, interest, taxes, storage, and other charges, lawfully accruing in connection with the [cleared swap](/usc/7/1a.md?p=7).
    - (B) **Commission action—** Notwithstanding [paragraph (2)](#f-2), in accordance with such terms and conditions as the [Commission](/usc/7/1a.md?p=8) may prescribe by rule, regulation, or [order](/usc/7/2902.md?p=10), any money, [securities](/usc/7/1a.md?p=41), or property of the [swaps](/usc/7/1a.md?p=47-A) customers of a [futures commission merchant](/usc/7/1a.md?p=28-A) described in [paragraph (2)](#f-2) may be commingled and deposited in customer accounts with any other money, [securities](/usc/7/1a.md?p=41), or property received by the [futures commission merchant](/usc/7/1a.md?p=28-A) and required by the [Commission](/usc/7/1a.md?p=8) to be separately accounted for and treated and dealt with as belonging to the [swaps](/usc/7/1a.md?p=47-A) customer of the [futures commission merchant](/usc/7/1a.md?p=28-A).
  - (4) **Permitted investments—** Money described in [paragraph (2)](#f-2) may be invested in obligations of the [United States](/usc/7/6402.md?p=8), in general obligations of any [State](/usc/7/1359aa.md?p=5) or of any political subdivision of a [State](/usc/7/1359aa.md?p=5), and in obligations fully guaranteed as to principal and interest by the [United States](/usc/7/6402.md?p=8), or in any other investment that the [Commission](/usc/7/1a.md?p=8) may by rule or regulation prescribe, and such investments shall be made in accordance with such rules and regulations and subject to such conditions as the [Commission](/usc/7/1a.md?p=8) may prescribe.
  - (5) **Commodity contract—** A [swap](/usc/7/1a.md?p=47-A) cleared by or through a [derivatives clearing organization](/usc/7/1a.md?p=15-A) shall be considered to be a [commodity](/usc/7/1a.md?p=9) [contract](/usc/7/518.md?p=4) as such term is defined in [section 761 of title 11](/usc/11/761.md), with regard to all money, [securities](/usc/7/1a.md?p=41), and property of any [swaps](/usc/7/1a.md?p=47-A) customer received by a [futures commission merchant](/usc/7/1a.md?p=28-A) or a [derivatives clearing organization](/usc/7/1a.md?p=15-A) to margin, guarantee, or secure the [swap](/usc/7/1a.md?p=47-A) (including money, [securities](/usc/7/1a.md?p=41), or property accruing to the customer as the result of the [swap](/usc/7/1a.md?p=47-A)).
  - (6) **Prohibition—** It shall be unlawful for any [person](/usc/7/1a.md?p=38), including any [derivatives clearing organization](/usc/7/1a.md?p=15-A) and any depository institution, that has received any money, [securities](/usc/7/1a.md?p=41), or property for deposit in a separate account or accounts as provided in [paragraph (2)](#f-2) to hold, dispose of, or use any such money, [securities](/usc/7/1a.md?p=41), or property as belonging to the depositing [futures commission merchant](/usc/7/1a.md?p=28-A) or any [person](/usc/7/1a.md?p=38) other than the [swaps](/usc/7/1a.md?p=47-A) customer of the [futures commission merchant](/usc/7/1a.md?p=28-A).
- (g) **Introducing broker registration requirements—** It shall be unlawful for any [person](/usc/7/1a.md?p=38) to be an [introducing broker](/usc/7/1a.md?p=31-A) unless such [person](/usc/7/1a.md?p=38) shall have registered under this chapter with the [Commission](/usc/7/1a.md?p=8) as an [introducing broker](/usc/7/1a.md?p=31-A) and such registration shall not have expired nor been suspended nor revoked.
- (h) **Contracts held in portfolio margining accounts—** Notwithstanding [subsection (a)(2)](#a-2) or the rules and regulations thereunder, and pursuant to an exemption granted by the [Commission](/usc/7/1a.md?p=8) under [section 6(c) of this title](/usc/7/6.md?p=c) or pursuant to a rule or regulation, a [futures commission merchant](/usc/7/1a.md?p=28-A) that is registered pursuant to [section 6f(a)(1) of this title](/usc/7/6f.md?p=a-1) and also registered as a broker or dealer pursuant to section 78(o)(b)(1) of title 15 may, pursuant to a portfolio margining program approved by the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8) pursuant to [section 78s(b) of title 15](/usc/15/78s.md?p=b), hold in a portfolio margining account carried as a [securities](/usc/7/1a.md?p=41) account subject to section 78(o)(c)(3) of title 15 and the rules and regulations thereunder, a [contract](/usc/7/518.md?p=4) for the purchase or sale of a [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27) or an [option](/usc/7/1a.md?p=36) on such a [contract](/usc/7/518.md?p=4), and any money, [securities](/usc/7/1a.md?p=41) or other property received from a customer to margin, guarantee or secure such a [contract](/usc/7/518.md?p=4), or accruing to a customer as the result of such a [contract](/usc/7/518.md?p=4). The [Commission](/usc/7/1a.md?p=8) shall consult with the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8) to adopt rules to ensure that such transactions and accounts are subject to comparable requirements to the extent practical for similar products.

# §6e. Dealings by unregistered floor trader or broker prohibited


It shall be unlawful for any [person](/usc/7/1a.md?p=38) to act as [floor trader](/usc/7/1a.md?p=23-A) in executing purchases and sales, or as [floor broker](/usc/7/1a.md?p=22-A) in executing any [orders](/usc/7/2902.md?p=10) for the purchase or sale, of any [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27), or involving any [contracts](/usc/7/518.md?p=4) of sale of any [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27), on or subject to the rules of any [contract](/usc/7/518.md?p=4) market or derivatives transaction execution facility unless such [person](/usc/7/1a.md?p=38) shall have registered, under this chapter, with the [Commission](/usc/7/1a.md?p=8) as such [floor trader](/usc/7/1a.md?p=23-A) or [floor broker](/usc/7/1a.md?p=22-A) and such registration shall not have expired nor been suspended nor revoked.


# §6f. Registration and financial requirements; risk assessment

- (a) **Registration of futures commission merchants, introducing brokers, and floor brokers and traders—**
  - (1) Any [person](/usc/7/1a.md?p=38) desiring to register as a [futures commission merchant](/usc/7/1a.md?p=28-A), [introducing broker](/usc/7/1a.md?p=31-A), [floor broker](/usc/7/1a.md?p=22-A), or [floor trader](/usc/7/1a.md?p=23-A) hereunder shall be registered upon application to the [Commission](/usc/7/1a.md?p=8). The application shall be made in such form and manner as prescribed by the [Commission](/usc/7/1a.md?p=8), giving such information and facts as the [Commission](/usc/7/1a.md?p=8) may deem necessary concerning the business in which the applicant is or will be engaged, including in the case of an application of a [futures commission merchant](/usc/7/1a.md?p=28-A) or an [introducing broker](/usc/7/1a.md?p=31-A), the names and addresses of the managers of all branch offices, and the names of such officers and partners, if a partnership, and of such officers, directors, and stockholders, if a [corporation](/usc/7/1502.md?p=b-5), as the [Commission](/usc/7/1a.md?p=8) may direct. Such [person](/usc/7/1a.md?p=38), when registered hereunder, shall likewise continue to report and furnish to the [Commission](/usc/7/1a.md?p=8) the above-mentioned information and such other information pertaining to such [person](/usc/7/1a.md?p=38)’s business as the [Commission](/usc/7/1a.md?p=8) may require. Each registration shall expire on December 31 of the year for which issued or at such other time, not less than one year from the date of issuance, as the [Commission](/usc/7/1a.md?p=8) may by rule, regulation, or [order](/usc/7/2902.md?p=10) prescribe, and shall be renewed upon application therefor unless the registration has been suspended (and the period of such suspension has not expired) or revoked pursuant to the provisions of this chapter.
  - (2) Notwithstanding [paragraph (1)](#a-1), and except as provided in [paragraph (3)](#a-3), any broker or dealer that is registered with the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8) shall be registered as a [futures commission merchant](/usc/7/1a.md?p=28-A) or [introducing broker](/usc/7/1a.md?p=31-A), as applicable, if—
    - (A) the broker or dealer limits its solicitation of [orders](/usc/7/2902.md?p=10), acceptance of [orders](/usc/7/2902.md?p=10), or execution of [orders](/usc/7/2902.md?p=10), or placing of [orders](/usc/7/2902.md?p=10) on behalf of others involving any [contracts](/usc/7/518.md?p=4) of sale of any [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27), on or subject to the rules of any [contract](/usc/7/518.md?p=4) market or registered derivatives transaction execution facility to [security futures products](/usc/7/1a.md?p=45);
    - (B) the broker or dealer files written notice with the [Commission](/usc/7/1a.md?p=8) in such form as the [Commission](/usc/7/1a.md?p=8), by rule, may prescribe containing such information as the [Commission](/usc/7/1a.md?p=8), by rule, may prescribe as necessary or appropriate in the public interest or for the protection of investors;
    - (C) the registration of the broker or dealer is not suspended pursuant to an [order](/usc/7/2902.md?p=10) of the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8); and
    - (D) the broker or dealer is a [member](/usc/7/1a.md?p=34) of a national [securities](/usc/7/1a.md?p=41) association registered pursuant to [section 78o–3(a)](/usc/15/78o–3.md?p=a) of title 15.

    The registration shall be effective contemporaneously with the submission of notice, in written or electronic form, to the [Commission](/usc/7/1a.md?p=8).

  - (3) A [floor broker](/usc/7/1a.md?p=22-A) or [floor trader](/usc/7/1a.md?p=23-A) shall be exempt from the registration requirements of [section 6e of this title](/usc/7/6e.md) and paragraph (1) of this subsection if—
    - (A) the [floor broker](/usc/7/1a.md?p=22-A) or [floor trader](/usc/7/1a.md?p=23-A) is a broker or dealer registered with the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8);
    - (B) the [floor broker](/usc/7/1a.md?p=22-A) or [floor trader](/usc/7/1a.md?p=23-A) limits its solicitation of [orders](/usc/7/2902.md?p=10), acceptance of [orders](/usc/7/2902.md?p=10), or execution of [orders](/usc/7/2902.md?p=10), or placing of [orders](/usc/7/2902.md?p=10) on behalf of others involving any [contracts](/usc/7/518.md?p=4) of sale of any [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27), on or subject to the rules of any [contract](/usc/7/518.md?p=4) market to [security futures products](/usc/7/1a.md?p=45); and
    - (C) the registration of the [floor broker](/usc/7/1a.md?p=22-A) or [floor trader](/usc/7/1a.md?p=23-A) is not suspended pursuant to an [order](/usc/7/2902.md?p=10) of the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8).
  - (4)
    - (A) A broker or dealer that is registered as a [futures commission merchant](/usc/7/1a.md?p=28-A) or [introducing broker](/usc/7/1a.md?p=31-A) pursuant to [paragraph (2)](#a-2), or that is a [floor broker](/usc/7/1a.md?p=22-A) or [floor trader](/usc/7/1a.md?p=23-A) exempt from registration pursuant to [paragraph (3)](#a-3), shall be exempt from the following provisions of this chapter and the rules thereunder:
      - (i) Subsections (b), (d), (e), and (g) of [section 6c of this title](/usc/7/6c.md).
      - (ii) Sections [6d](/usc/7/6d.md), [6e](/usc/7/6e.md), and [6h](/usc/7/6h.md) of this title.
      - (iii) Subsections [(b)](#b) and [(c)](#c) of this section.
      - (iv) [Section 6j of this title](/usc/7/6j.md).
      - (v) [Section 6k(1) of this title](/usc/7/6k.md?p=1).
      - (vi) [Section 6p of this title](/usc/7/6p.md).
      - (vii) [Section 13a–2 of this title](/usc/7/13a–2.md).
      - (viii) Subsections (d) and (g) of [section 12 of this title](/usc/7/12.md).
      - (ix) [Section 20 of this title](/usc/7/20.md).
    - (B)
      - (i) Except as provided in clause (ii) of this subparagraph, but notwithstanding any other provision of this chapter, the [Commission](/usc/7/1a.md?p=8), by rule, regulation, or [order](/usc/7/2902.md?p=10), may conditionally or unconditionally exempt any broker or dealer subject to the registration requirement of [paragraph (2)](#a-2), or any broker or dealer exempt from registration pursuant to [paragraph (3)](#a-3), from any provision of this chapter or of any rule or regulation thereunder, to the extent the exemption is necessary or appropriate in the public interest and is consistent with the protection of investors.
      - (ii) The [Commission](/usc/7/1a.md?p=8) shall, by rule or regulation, determine the procedures under which an exemptive [order](/usc/7/2902.md?p=10) under this section shall be granted and may, in its sole discretion, decline to entertain any application for an [order](/usc/7/2902.md?p=10) of exemption under this section.
    - (C)
      - (i) A broker or dealer that is registered as a [futures commission merchant](/usc/7/1a.md?p=28-A) or [introducing broker](/usc/7/1a.md?p=31-A) pursuant to [paragraph (2)](#a-2) or an associated [person](/usc/7/1a.md?p=38) thereof, or that is a [floor broker](/usc/7/1a.md?p=22-A) or [floor trader](/usc/7/1a.md?p=23-A) exempt from registration pursuant to [paragraph (3)](#a-3), shall not be required to become a [member](/usc/7/1a.md?p=34) of any futures association registered under [section 21 of this title](/usc/7/21.md).
      - (ii) No futures association registered under [section 21 of this title](/usc/7/21.md) shall limit its [members](/usc/7/1a.md?p=34) from carrying an account, accepting an [order](/usc/7/2902.md?p=10), or transacting business with a broker or dealer that is registered as a [futures commission merchant](/usc/7/1a.md?p=28-A) or [introducing broker](/usc/7/1a.md?p=31-A) pursuant to [paragraph (2)](#a-2) or an associated [person](/usc/7/1a.md?p=38) thereof, or that is a [floor broker](/usc/7/1a.md?p=22-A) or [floor trader](/usc/7/1a.md?p=23-A) exempt from registration pursuant to [paragraph (3)](#a-3).
- (b) **Financial requirements for futures commission merchants and introducing brokers—** Notwithstanding any other provisions of this chapter, no [person](/usc/7/1a.md?p=38) desiring to register as [futures commission merchant](/usc/7/1a.md?p=28-A) or as [introducing broker](/usc/7/1a.md?p=31-A) shall be so registered unless he meets such minimum financial requirements as the [Commission](/usc/7/1a.md?p=8) may by regulation prescribe as necessary to insure his meeting his obligation as a registrant, and each [person](/usc/7/1a.md?p=38) so registered shall at all times continue to meet such prescribed minimum financial requirements: Provided, That such minimum financial requirements will be considered met if the applicant for registration or registrant is a [member](/usc/7/1a.md?p=34) of a [contract](/usc/7/518.md?p=4) market or derivatives transaction execution facility and conforms to minimum financial standards and related reporting requirements set by such [contract](/usc/7/518.md?p=4) market or derivatives transaction execution facility in its bylaws, rules, regulations, or resolutions and approved by the [Commission](/usc/7/1a.md?p=8) as adequate to effectuate the purposes of this subsection.
- (c) **Risk assessment for holding company systems—**
  - (1) As used in this subsection:
    - (i) The term “affiliated person” means any [person](/usc/7/1a.md?p=38) directly or indirectly controlling, controlled by, or under common control with a [futures commission merchant](/usc/7/1a.md?p=28-A), as the [Commission](/usc/7/1a.md?p=8), by rule or regulation, may determine will effectuate the purposes of this subsection.
    - (ii) The term “Federal banking agency” shall have the same meaning as the term “appropriate Federal banking agency” in [section 1813(q) of title 12](/usc/12/1813.md?p=q).
  - (2)
    - (A) Each registered [futures commission merchant](/usc/7/1a.md?p=28-A) shall obtain such information and make and keep such records as the [Commission](/usc/7/1a.md?p=8), by rule or regulation, prescribes concerning the registered [futures commission merchant](/usc/7/1a.md?p=28-A)’s policies, procedures, or systems for monitoring and controlling financial and operational risks to it resulting from the activities of any of its [affiliated persons](#c-1-i), other than a natural [person](/usc/7/1a.md?p=38).
    - (B) The records required under [subparagraph (A)](#c-2-A) shall describe, in the aggregate, each of the futures and other financial activities conducted by, and the customary sources of capital and funding of, those of its [affiliated persons](#c-1-i) whose business activities are reasonably likely to have a material impact on the financial or operational condition of the [futures commission merchant](/usc/7/1a.md?p=28-A), including its adjusted net capital, its liquidity, or its ability to conduct or finance its operations.
    - (C) The [Commission](/usc/7/1a.md?p=8), by rule or regulation, may require summary reports of such information to be filed by the [futures commission merchant](/usc/7/1a.md?p=28-A) with the [Commission](/usc/7/1a.md?p=8) no more frequently than quarterly.
  - (3)
    - (A) ,[^1] If, as a result of adverse market conditions or based on reports provided to the [Commission](/usc/7/1a.md?p=8) pursuant to [paragraph (2)](#c-2) or other available information, the [Commission](/usc/7/1a.md?p=8) reasonably concludes that the [Commission](/usc/7/1a.md?p=8) has concerns regarding the financial or operational condition of any registered [futures commission merchant](/usc/7/1a.md?p=28-A), the [Commission](/usc/7/1a.md?p=8) may require the [futures commission merchant](/usc/7/1a.md?p=28-A) to make reports concerning the futures and other financial activities of any of such [person](/usc/7/1a.md?p=38)’s [affiliated persons](#c-1-i), other than a natural [person](/usc/7/1a.md?p=38), whose business activities are reasonably likely to have a material impact on the financial or operational condition of the [futures commission merchant](/usc/7/1a.md?p=28-A).
    - (B) The [Commission](/usc/7/1a.md?p=8), in requiring reports pursuant to this paragraph, shall specify the information required, the period for which it is required, the time and date on which the information must be furnished, and whether the information is to be furnished directly to the [Commission](/usc/7/1a.md?p=8) or to a [contract](/usc/7/518.md?p=4) market or derivatives transaction execution facility or other self-regulatory organization with primary responsibility for examining the registered [futures commission merchant](/usc/7/1a.md?p=28-A)’s financial and operational condition.
  - (4)
    - (A) in[^2] developing and implementing reporting requirements pursuant to [paragraph (2)](#c-2) with respect to [affiliated persons](#c-1-i) subject to examination by or reporting requirements of a [Federal banking agency](#c-1-ii), the [Commission](/usc/7/1a.md?p=8) shall consult with and consider the views of each such [Federal banking agency](#c-1-ii). If a [Federal banking agency](#c-1-ii) comments in writing on a proposed rule of the [Commission](/usc/7/1a.md?p=8) under this subsection that has been published for comment, the [Commission](/usc/7/1a.md?p=8) shall respond in writing to the written comment before adopting the proposed rule. The [Commission](/usc/7/1a.md?p=8) shall, at the request of the [Federal banking agency](#c-1-ii), publish the comment and response in the Federal Register at the time of publishing the adopted rule.
    - (B)
      - (i) Except as provided in [clause (ii)](#c-4-B-ii), a registered [futures commission merchant](/usc/7/1a.md?p=28-A) shall be considered to have complied with a recordkeeping or reporting requirement adopted pursuant to [paragraph (2)](#c-2) concerning an [affiliated person](#c-1-i) that is subject to examination by, or reporting requirements of, a [Federal banking agency](#c-1-ii) if the [futures commission merchant](/usc/7/1a.md?p=28-A) utilizes for the recordkeeping or reporting requirement copies of reports filed by the [affiliated person](#c-1-i) with the [Federal banking agency](#c-1-ii) pursuant to [section 161 of title 12](/usc/12/161.md), section 9 of the Federal Reserve Act ([12 U.S.C. 321](/usc/12/321.md) et seq.), [section 1817(a) of title 12](/usc/12/1817.md?p=a), [section 1467a(b) of title 12](/usc/12/1467a.md?p=b), or [section 1844 of title 12](/usc/12/1844.md).
      - (ii) The [Commission](/usc/7/1a.md?p=8) may, by rule adopted pursuant to [paragraph (2)](#c-2), require any [futures commission merchant](/usc/7/1a.md?p=28-A) filing the reports with the [Commission](/usc/7/1a.md?p=8) to obtain, maintain, or report supplemental information if the [Commission](/usc/7/1a.md?p=8) makes an explicit finding that the supplemental information is necessary to inform the [Commission](/usc/7/1a.md?p=8) regarding potential risks to the [futures commission merchant](/usc/7/1a.md?p=28-A). Prior to requiring any such supplemental information, the [Commission](/usc/7/1a.md?p=8) shall first request the [Federal banking agency](#c-1-ii) to expand its reporting requirements to include the information.
  - (5) Prior to making a request pursuant to [paragraph (3)](#c-3) for information with respect to an [affiliated person](#c-1-i) that is subject to examination by or reporting requirements of a [Federal banking agency](#c-1-ii), the [Commission](/usc/7/1a.md?p=8) shall—
    - (A) notify the agency of the information required with respect to the [affiliated person](#c-1-i); and
    - (B) consult with the agency to determine whether the information required is available from the agency and for other purposes, unless the [Commission](/usc/7/1a.md?p=8) determines that any delay resulting from the consultation would be inconsistent with ensuring the financial and operational condition of the [futures commission merchant](/usc/7/1a.md?p=28-A) or the stability or integrity of the futures markets.
  - (6) Nothing in this subsection shall be construed to permit the [Commission](/usc/7/1a.md?p=8) to require any [futures commission merchant](/usc/7/1a.md?p=28-A) to obtain, maintain, or furnish any examination report of any [Federal banking agency](#c-1-ii) or any supervisory recommendations or analysis contained in the report.
  - (7) No information provided to or obtained by the [Commission](/usc/7/1a.md?p=8) from any [Federal banking agency](#c-1-ii) pursuant to a request under [paragraph (5)](#c-5) regarding any [affiliated person](#c-1-i) that is subject to examination by or reporting requirements of a [Federal banking agency](#c-1-ii) may be disclosed to any other [person](/usc/7/1a.md?p=38) (other than as provided in [section 12 of this title](/usc/7/12.md) or [section 12a(6) of this title](/usc/7/12a.md?p=6)), without the prior written approval of the [Federal banking agency](#c-1-ii).
  - (8) The [Commission](/usc/7/1a.md?p=8) shall notify a [Federal banking agency](#c-1-ii) of any concerns of the [Commission](/usc/7/1a.md?p=8) regarding significant financial or operational risks resulting from the activities of any [futures commission merchant](/usc/7/1a.md?p=28-A) to any [affiliated person](#c-1-i) thereof that is subject to examination by or reporting requirements of the [Federal banking agency](#c-1-ii).
  - (9) The [Commission](/usc/7/1a.md?p=8), by rule, regulation, or [order](/usc/7/2902.md?p=10), may exempt any [person](/usc/7/1a.md?p=38) or class of [persons](/usc/7/1a.md?p=38) under such terms and conditions and for such periods as the [Commission](/usc/7/1a.md?p=8) shall provide in the rule, regulation, or [order](/usc/7/2902.md?p=10), from this subsection and the rules and regulations issued under this subsection. In granting the exemption, the [Commission](/usc/7/1a.md?p=8) shall consider, among other factors—
    - (A) whether information of the type required under this subsection is available from a supervisory agency (as defined in [section 3401(7) of title 12](/usc/12/3401.md?p=7)), a [State](/usc/7/1359aa.md?p=5) insurance [commission](/usc/7/1a.md?p=8) or similar [State agency](/usc/7/2012.md?p=s), the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8), or a similar foreign regulator;
    - (B) the primary business of any [affiliated person](#c-1-i);
    - (C) the nature and extent of domestic or foreign regulation of the [affiliated person](#c-1-i)’s activities;
    - (D) the nature and extent of the registered [futures commission merchant](/usc/7/1a.md?p=28-A)’s [commodity](/usc/7/1a.md?p=9) futures and [options](/usc/7/1a.md?p=36) activities; and
    - (E) with respect to the registered [futures commission merchant](/usc/7/1a.md?p=28-A) and its [affiliated persons](#c-1-i), on a consolidated basis, the amount and proportion of assets devoted to, and revenues derived from activities in the [United States](/usc/7/6402.md?p=8) futures markets.
  - (10) Information required to be provided pursuant to this subsection shall be subject to [section 12 of this title](/usc/7/12.md). Except as specifically provided in [section 12 of this title](/usc/7/12.md) and notwithstanding any other provision of law, the [Commission](/usc/7/1a.md?p=8) shall not be compelled to disclose any information required to be reported under this subsection, or any information supplied to the [Commission](/usc/7/1a.md?p=8) by any domestic or foreign regulatory agency that relates to the financial or operational condition of any [affiliated person](#c-1-i) of a registered [futures commission merchant](/usc/7/1a.md?p=28-A).
  - (11) Nothing in [paragraphs (1) through (10)](#c-1..c-10) shall be construed to supersede or to limit in any way the [authority](/usc/7/2009aa.md?p=1) or powers of the [Commission](/usc/7/1a.md?p=8) pursuant to any other provision of this chapter or regulations issued under this chapter.

# §6g. Reporting and recordkeeping

- (a) **In general—** Every [person](/usc/7/1a.md?p=38) registered hereunder as [futures commission merchant](/usc/7/1a.md?p=28-A), [introducing broker](/usc/7/1a.md?p=31-A), [floor broker](/usc/7/1a.md?p=22-A), or [floor trader](/usc/7/1a.md?p=23-A) shall make such reports as are required by the [Commission](/usc/7/1a.md?p=8) regarding the transactions and positions of such [person](/usc/7/1a.md?p=38), and the transactions and positions of the customer thereof, in [commodities](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27) on any [board of trade](/usc/7/1a.md?p=6) in the [United States](/usc/7/6402.md?p=8) or elsewhere, and in any [significant price discovery contract](/usc/7/1a.md?p=46) traded or executed on an [electronic trading facility](/usc/7/1a.md?p=16) or any agreement, [contract](/usc/7/518.md?p=4), or transaction that is treated by a [derivatives clearing organization](/usc/7/1a.md?p=15-A), whether registered or not registered, as fungible with a [significant price discovery contract](/usc/7/1a.md?p=46); shall keep books and records pertaining to such transactions and positions in such form and manner and for such period as may be required by the [Commission](/usc/7/1a.md?p=8); and shall keep such books and records open to inspection by any representative of the [Commission](/usc/7/1a.md?p=8) or the [United States](/usc/7/6402.md?p=8) Department of Justice.
- (b) **Daily trading records: registered entities—** Every [registered entity](/usc/7/1a.md?p=40) shall maintain daily trading records. The daily trading records shall include such information as the [Commission](/usc/7/1a.md?p=8) shall prescribe by rule.
- (c) **Daily trading records: floor brokers, introducing brokers, and futures commission merchants—** [Floor brokers](/usc/7/1a.md?p=22-A), [introducing brokers](/usc/7/1a.md?p=31-A), and [futures commission merchants](/usc/7/1a.md?p=28-A) shall maintain daily trading records for each customer in such manner and form as to be identifiable with the trades referred to in [subsection (b)](#b).
- (d) **Daily trading records: form and reports—** Daily trading records shall be maintained in a form suitable to the [Commission](/usc/7/1a.md?p=8) for such period as may be required by the [Commission](/usc/7/1a.md?p=8). Reports shall be made from the records maintained at such times and at such places and in such form as the [Commission](/usc/7/1a.md?p=8) may prescribe by rule, [order](/usc/7/2902.md?p=10), or regulation in [order](/usc/7/2902.md?p=10) to protect the public interest and the interest of [persons](/usc/7/1a.md?p=38) trading in [commodity](/usc/7/1a.md?p=9) futures.
- (e) **Disclosure of information—** Before the beginning of trading each day, the [exchange](/usc/7/1a.md?p=1-D) shall, insofar as is practicable and under terms and conditions specified by the [Commission](/usc/7/1a.md?p=8), make public the volume of trading on each type of [contract](/usc/7/518.md?p=4) for the previous day and such other information as the [Commission](/usc/7/1a.md?p=8) deems necessary in the public interest and prescribes by rule, [order](/usc/7/2902.md?p=10), or regulation.
- (f) **Authority of Commission to make separate determinations unimpaired—** Nothing contained in this section shall be construed to prohibit the [Commission](/usc/7/1a.md?p=8) from making separate determinations for different [registered entities](/usc/7/1a.md?p=40) when such determinations are warranted in the judgment of the [Commission](/usc/7/1a.md?p=8).

# §6h. False self-representation as registered entity member prohibited


It shall be unlawful for any [person](/usc/7/1a.md?p=38) falsely to represent such [person](/usc/7/1a.md?p=38) to be a [member](/usc/7/1a.md?p=34) of a [registered entity](/usc/7/1a.md?p=40) or the representative or agent of such [member](/usc/7/1a.md?p=34), or to be a registrant under this chapter or the representative or agent of any registrant, in soliciting or handling any [order](/usc/7/2902.md?p=10) or [contract](/usc/7/518.md?p=4) for the purchase or sale of any [commodity](/usc/7/1a.md?p=9) in [interstate commerce](/usc/7/1a.md?p=30) or for [future delivery](/usc/7/1a.md?p=27), or falsely to represent in connection with the handling of any such [order](/usc/7/2902.md?p=10) or [contract](/usc/7/518.md?p=4) that the same is to be or has been executed on, or by or through a [member](/usc/7/1a.md?p=34) of, any [registered entity](/usc/7/1a.md?p=40).


# §6i. Reports of deals equal to or in excess of trading limits; books and records; cash and controlled transactions


It shall be unlawful for any [person](/usc/7/1a.md?p=38) to make any [contract](/usc/7/518.md?p=4) for the purchase or sale of any [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27) on or subject to the rules of any [contract](/usc/7/518.md?p=4) market or derivatives transaction execution facility, or any [significant price discovery contract](/usc/7/1a.md?p=46) traded or executed on an [electronic trading facility](/usc/7/1a.md?p=16) or any agreement, [contract](/usc/7/518.md?p=4), or transaction that is treated by a [derivatives clearing organization](/usc/7/1a.md?p=15-A), whether registered or not registered, as fungible with a [significant price discovery contract](/usc/7/1a.md?p=46)—

- (1) if such [person](/usc/7/1a.md?p=38) shall directly or indirectly make such [contracts](/usc/7/518.md?p=4) with respect to any [commodity](/usc/7/1a.md?p=9) or any future of such [commodity](/usc/7/1a.md?p=9) during any one day in an amount equal to or in excess of such amount as shall be fixed from time to time by the [Commission](/usc/7/1a.md?p=8), and
- (2) if such [person](/usc/7/1a.md?p=38) shall directly or indirectly have or obtain a long or short position in any [commodity](/usc/7/1a.md?p=9) or any future of such [commodity](/usc/7/1a.md?p=9) equal to or in excess of such amount as shall be fixed from time to time by the [Commission](/usc/7/1a.md?p=8),

unless such [person](/usc/7/1a.md?p=38) files or causes to be filed with the properly designated officer of the [Commission](/usc/7/1a.md?p=8) such reports regarding any transactions or positions described in clauses [(1)](#1) and [(2)](#2) hereof as the [Commission](/usc/7/1a.md?p=8) may by rule or regulation require and unless, in accordance with rules and regulations of the [Commission](/usc/7/1a.md?p=8), such [person](/usc/7/1a.md?p=38) shall keep books and records of all such transactions and positions and transactions and positions in any such [commodity](/usc/7/1a.md?p=9) traded on or subject to the rules of any other [board of trade](/usc/7/1a.md?p=6) or [electronic trading facility](/usc/7/1a.md?p=16), and of cash or spot transactions in, and inventories and purchase and sale commitments of such [commodity](/usc/7/1a.md?p=9). Such books and records shall show complete details concerning all such transactions, positions, inventories, and commitments, including the names and addresses of all [persons](/usc/7/1a.md?p=38) having any interest therein, and shall be open at all times to inspection by any representative of the [Commission](/usc/7/1a.md?p=8) or the Department of Justice. For the purposes of this section, the futures and cash or spot transactions and positions of any [person](/usc/7/1a.md?p=38) shall include such transactions and positions of any [persons](/usc/7/1a.md?p=38) directly or indirectly controlled by such [person](/usc/7/1a.md?p=38).


# §6j. Restrictions on dual trading in security futures products on designated contract markets and registered derivatives transaction execution facilities

- (a) **Issuance of regulations—** The [Commission](/usc/7/1a.md?p=8) shall issue regulations to prohibit the [privilege](/usc/7/1a.md?p=36) of [dual trading](#b) in [security futures products](/usc/7/1a.md?p=45) on each [contract](/usc/7/518.md?p=4) market and registered derivatives transaction execution facility. The regulations issued by the [Commission](/usc/7/1a.md?p=8) under this section—
  - (1) shall provide that the prohibition of [dual trading](#b) thereunder shall take effect upon issuance of the regulations; and
  - (2) shall provide exceptions, as the [Commission](/usc/7/1a.md?p=8) determines appropriate, to ensure fairness and orderly trading in [security futures product](/usc/7/1a.md?p=45) markets, including—
    - (A) exceptions for spread transactions and the correction of trading errors;
    - (B) allowance for a customer to designate in writing not less than once annually a named [floor broker](/usc/7/1a.md?p=22-A) to execute [orders](/usc/7/2902.md?p=10) for such customer, notwithstanding the regulations to prohibit the [privilege](/usc/7/1a.md?p=36) of [dual trading](#b) required under this section; and
    - (C) other measures reasonably designed to accommodate unique or special characteristics of individual [boards](/usc/7/1a.md?p=5) of trade or [contract](/usc/7/518.md?p=4) markets, to address emergency or unusual market conditions, or otherwise to further the public interest consistent with the promotion of market efficiency, innovation, and expansion of investment opportunities, the protection of investors, and with the purposes of this section.
- (b) **“Dual trading” defined—** As used in this section, the term “dual trading” means the execution of customer [orders](/usc/7/2902.md?p=10) by a [floor broker](/usc/7/1a.md?p=22-A) during the same trading session in which the [floor broker](/usc/7/1a.md?p=22-A) executes any trade in the same [contract](/usc/7/518.md?p=4) market or registered derivatives transaction execution facility for—
  - (1) the account of such [floor broker](/usc/7/1a.md?p=22-A);
  - (2) an account for which such [floor broker](/usc/7/1a.md?p=22-A) has trading discretion; or
  - (3) an account controlled by a [person](/usc/7/1a.md?p=38) with whom such [floor broker](/usc/7/1a.md?p=22-A) has a relationship through membership in a [broker association](#c).
- (c) **“Broker association” defined—** As used in this section, the term “broker association” shall include two or more [contract](/usc/7/518.md?p=4) market [members](/usc/7/1a.md?p=34) or registered derivatives transaction execution facility [members](/usc/7/1a.md?p=34) with floor trading [privileges](/usc/7/1a.md?p=36) of whom at least one is acting as a [floor broker](/usc/7/1a.md?p=22-A), who—
  - (1) engage in floor brokerage activity on behalf of the same employer,
  - (2) have an employer and employee relationship which relates to floor brokerage activity,
  - (3) share profits and losses associated with their brokerage or trading activity, or
  - (4) regularly share a deck of [orders](/usc/7/2902.md?p=10).

# §6k. Registration of associates of futures commission merchants, commodity pool operators, and commodity trading advisors; required disclosure of disqualifications; exemptions for associated persons

- (1) It shall be unlawful for any [person](/usc/7/1a.md?p=38) to be associated with a [futures commission merchant](/usc/7/1a.md?p=28-A) as a partner, officer, or employee, or to be associated with an [introducing broker](/usc/7/1a.md?p=31-A) as a partner, officer, employee, or agent (or any [person](/usc/7/1a.md?p=38) occupying a similar status or performing similar functions), in any capacity that involves (i) the solicitation or acceptance of customers’ [orders](/usc/7/2902.md?p=10) (other than in a clerical capacity) or (ii) the supervision of any [person](/usc/7/1a.md?p=38) or [persons](/usc/7/1a.md?p=38) so engaged, unless such [person](/usc/7/1a.md?p=38) is registered with the [Commission](/usc/7/1a.md?p=8) under this chapter as an associated [person](/usc/7/1a.md?p=38) of such [futures commission merchant](/usc/7/1a.md?p=28-A) or of such [introducing broker](/usc/7/1a.md?p=31-A) and such registration shall not have expired, been suspended (and the period of suspension has not expired), or been revoked. It shall be unlawful for a [futures commission merchant](/usc/7/1a.md?p=28-A) or [introducing broker](/usc/7/1a.md?p=31-A) to permit such a [person](/usc/7/1a.md?p=38) to become or remain associated with the [futures commission merchant](/usc/7/1a.md?p=28-A) or [introducing broker](/usc/7/1a.md?p=31-A) in any such capacity if such [futures commission merchant](/usc/7/1a.md?p=28-A) or [introducing broker](/usc/7/1a.md?p=31-A) knew or should have known that such [person](/usc/7/1a.md?p=38) was not so registered or that such registration had expired, been suspended (and the period of suspension has not expired), or been revoked. Any individual who is registered as a [floor broker](/usc/7/1a.md?p=22-A), [futures commission merchant](/usc/7/1a.md?p=28-A), or [introducing broker](/usc/7/1a.md?p=31-A) (and such registration is not suspended or revoked) need not also register under this paragraph.
- (2) It shall be unlawful for any [person](/usc/7/1a.md?p=38) to be associated with a [commodity pool operator](/usc/7/1a.md?p=11-A) as a partner, officer, employee, consultant, or agent (or any [person](/usc/7/1a.md?p=38) occupying a similar status or performing similar functions), in any capacity that involves (i) the solicitation of [funds](/usc/7/4531.md?p=5), [securities](/usc/7/1a.md?p=41), or property for a participation in a [commodity pool](/usc/7/1a.md?p=10-A) or (ii) the supervision of any [person](/usc/7/1a.md?p=38) or [persons](/usc/7/1a.md?p=38) so engaged, unless such [person](/usc/7/1a.md?p=38) is registered with the [Commission](/usc/7/1a.md?p=8) under this chapter as an associated [person](/usc/7/1a.md?p=38) of such [commodity pool operator](/usc/7/1a.md?p=11-A) and such registration shall not have expired, been suspended (and the period of suspension has not expired), or been revoked. It shall be unlawful for a [commodity pool operator](/usc/7/1a.md?p=11-A) to permit such a [person](/usc/7/1a.md?p=38) to become or remain associated with the [commodity pool operator](/usc/7/1a.md?p=11-A) in any such capacity if the [commodity pool operator](/usc/7/1a.md?p=11-A) knew or should have known that such [person](/usc/7/1a.md?p=38) was not so registered or that such registration had expired, been suspended (and the period of suspension has not expired), or been revoked. Any individual who is registered as a [floor broker](/usc/7/1a.md?p=22-A), [futures commission merchant](/usc/7/1a.md?p=28-A), [introducing broker](/usc/7/1a.md?p=31-A), [commodity pool operator](/usc/7/1a.md?p=11-A), or as an associated [person](/usc/7/1a.md?p=38) of another category of registrant under this section (and such registration is not suspended or revoked) need not also register under this paragraph. The [Commission](/usc/7/1a.md?p=8) may exempt any [person](/usc/7/1a.md?p=38) or class of [persons](/usc/7/1a.md?p=38) from having to register under this paragraph by rule, regulation, or [order](/usc/7/2902.md?p=10).
- (3) It shall be unlawful for any [person](/usc/7/1a.md?p=38) to be associated with a [commodity trading advisor](/usc/7/1a.md?p=12-B) as a partner, officer, employee, consultant, or agent (or any [person](/usc/7/1a.md?p=38) occupying a similar status or performing similar functions), in any capacity which involves (i) the solicitation of a client’s or prospective client’s discretionary account or (ii) the supervision of any [person](/usc/7/1a.md?p=38) or [persons](/usc/7/1a.md?p=38) so engaged, unless such [person](/usc/7/1a.md?p=38) is registered with the [Commission](/usc/7/1a.md?p=8) under this chapter as an associated [person](/usc/7/1a.md?p=38) of such [commodity trading advisor](/usc/7/1a.md?p=12-B) and such registration shall not have expired, been suspended (and the period of suspension has not expired), or been revoked. It shall be unlawful for a [commodity trading advisor](/usc/7/1a.md?p=12-B) to permit such a [person](/usc/7/1a.md?p=38) to become or remain associated with the [commodity trading advisor](/usc/7/1a.md?p=12-B) in any such capacity if the [commodity trading advisor](/usc/7/1a.md?p=12-B) knew or should have known that such [person](/usc/7/1a.md?p=38) was not so registered or that such registration had expired, been suspended (and the period of suspension has not expired), or been revoked. Any individual who is registered as a [floor broker](/usc/7/1a.md?p=22-A), [futures commission merchant](/usc/7/1a.md?p=28-A), [introducing broker](/usc/7/1a.md?p=31-A), [commodity trading advisor](/usc/7/1a.md?p=12-B), or as an associated [person](/usc/7/1a.md?p=38) of another category of registrant under this section (and such registration is not suspended or revoked) need not also register under this paragraph. The [Commission](/usc/7/1a.md?p=8) may exempt any [person](/usc/7/1a.md?p=38) or class of [persons](/usc/7/1a.md?p=38) from having to register under this paragraph by rule, regulation, or [order](/usc/7/2902.md?p=10).
- (4) Any [person](/usc/7/1a.md?p=38) desiring to be registered as an associated [person](/usc/7/1a.md?p=38) of a [futures commission merchant](/usc/7/1a.md?p=28-A), of an [introducing broker](/usc/7/1a.md?p=31-A), of a [commodity pool operator](/usc/7/1a.md?p=11-A), or of a [commodity trading advisor](/usc/7/1a.md?p=12-B) shall make application to the [Commission](/usc/7/1a.md?p=8) in the form and manner prescribed by the [Commission](/usc/7/1a.md?p=8), giving such information and facts as the [Commission](/usc/7/1a.md?p=8) may deem necessary concerning the applicant. Such [person](/usc/7/1a.md?p=38), when registered hereunder, shall likewise continue to report and furnish to the [Commission](/usc/7/1a.md?p=8) such information as the [Commission](/usc/7/1a.md?p=8) may require. Such registration shall expire at such time as the [Commission](/usc/7/1a.md?p=8) may by rule, regulation, or [order](/usc/7/2902.md?p=10) prescribe.
- (5) It shall be unlawful for any registrant to permit a [person](/usc/7/1a.md?p=38) to become or remain an associated [person](/usc/7/1a.md?p=38) of such registrant, if the registrant knew or should have known of facts regarding such associated [person](/usc/7/1a.md?p=38) that are set forth as statutory disqualifications in [section 12a(2) of this title](/usc/7/12a.md?p=2), unless such registrant has notified the [Commission](/usc/7/1a.md?p=8) of such facts and the [Commission](/usc/7/1a.md?p=8) has determined that such [person](/usc/7/1a.md?p=38) should be registered or temporarily licensed.
- (6) Any associated [person](/usc/7/1a.md?p=38) of a broker or dealer that is registered with the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8), and who limits its solicitation of [orders](/usc/7/2902.md?p=10), acceptance of [orders](/usc/7/2902.md?p=10), or execution of [orders](/usc/7/2902.md?p=10), or placing of [orders](/usc/7/2902.md?p=10) on behalf of others involving any [contracts](/usc/7/518.md?p=4) of sale of any [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27) or any [option](/usc/7/1a.md?p=36) on such a [contract](/usc/7/518.md?p=4), on or subject to the rules of any [contract](/usc/7/518.md?p=4) market or registered derivatives transaction execution facility to [security futures products](/usc/7/1a.md?p=45), shall be exempt from the following provisions of this chapter and the rules thereunder:
  - (A) Subsections (b), (d), (e), and (g) of [section 6c of this title](/usc/7/6c.md).
  - (B) Sections [6d](/usc/7/6d.md), [6e](/usc/7/6e.md), and [6h](/usc/7/6h.md) of this title.
  - (C) Subsections (b) and (c) of [section 6f of this title](/usc/7/6f.md).
  - (D) [Section 6j of this title](/usc/7/6j.md).
  - (E) [Paragraph (1)](#1) of this section.
  - (F) [Section 6p of this title](/usc/7/6p.md).
  - (G) [Section 13a–2 of this title](/usc/7/13a–2.md).
  - (H) Subsections (d) and (g) of [section 12 of this title](/usc/7/12.md).
  - (I) [Section 20 of this title](/usc/7/20.md).

# §6l. Commodity trading advisors and commodity pool operators; Congressional finding


It is hereby found that the activities of [commodity trading advisors](/usc/7/1a.md?p=12-B) and [commodity pool operators](/usc/7/1a.md?p=11-A) are affected with a national public interest in that, among other things—

- (1) their advice, counsel, publications, writings, analyses, and reports are furnished and distributed, and their [contracts](/usc/7/518.md?p=4), solicitations, subscriptions, agreements, and other arrangements with clients take place and are negotiated and performed by the use of the mails and other means and instrumentalities of [interstate commerce](/usc/7/1a.md?p=30);
- (2) their advice, counsel, publications, writings, analyses, and reports customarily relate to and their operations are directed toward and cause the purchase and sale of [commodities](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27) on or subject to the rules of [contract](/usc/7/518.md?p=4) markets or derivatives transaction execution facilities; and
- (3) the foregoing transactions occur in such volume as to affect substantially transactions on [contract](/usc/7/518.md?p=4) markets or derivatives transaction execution facilities.

# §6m. Use of mails or other means or instrumentalities of interstate commerce by commodity trading advisors and commodity pool operators; relation to other law

- (1) It shall be unlawful for any [commodity trading advisor](/usc/7/1a.md?p=12-B) or [commodity pool operator](/usc/7/1a.md?p=11-A), unless registered under this chapter, to make use of the mails or any means or instrumentality of [interstate commerce](/usc/7/1a.md?p=30) in connection with his business as such [commodity trading advisor](/usc/7/1a.md?p=12-B) or [commodity pool operator](/usc/7/1a.md?p=11-A): Provided, That the provisions of this section shall not apply to any [commodity trading advisor](/usc/7/1a.md?p=12-B) who, during the course of the preceding twelve months, has not furnished [commodity](/usc/7/1a.md?p=9) trading advice to more than fifteen [persons](/usc/7/1a.md?p=38) and who does not hold himself out generally to the public as a [commodity trading advisor](/usc/7/1a.md?p=12-B). The provisions of this section shall not apply to any [commodity trading advisor](/usc/7/1a.md?p=12-B) who is a (1) dealer, [processor](/usc/7/609.md?p=d-7-D), broker, or seller in cash market transactions of any [commodity](/usc/7/1a.md?p=9) specifically set forth in [section 2(a) of this title](/usc/7/2.md?p=a) prior to October 23, 1974, (or products thereof) or (2) nonprofit, voluntary membership, general farm organization, who provides advice on the sale or purchase of any [commodity](/usc/7/1a.md?p=9) specifically set forth in [section 2(a) of this title](/usc/7/2.md?p=a) prior to October 23, 1974; if the advice by the [person](/usc/7/1a.md?p=38) described in clause [(1)](#1) or [(2)](#2) of this sentence as a [commodity trading advisor](/usc/7/1a.md?p=12-B) is solely incidental to the conduct of that [person](/usc/7/1a.md?p=38)’s business: Provided, That such [person](/usc/7/1a.md?p=38) shall be subject to proceedings under [section 18 of this title](/usc/7/18.md).
- (2) Nothing in this chapter shall relieve any [person](/usc/7/1a.md?p=38) of any obligation or duty, or affect the availability of any right or remedy available to the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8) or any private party arising under the Securities Act of 1933 [[15 U.S.C. 77a](/usc/15/77a.md) et seq.] or the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 [[15 U.S.C. 78a](/usc/15/78a.md) et seq.] governing the issuance, [offer](/usc/7/1a.md?p=36), purchase, or sale of [securities](/usc/7/1a.md?p=41) of a [commodity pool](/usc/7/1a.md?p=10-A), or of [persons](/usc/7/1a.md?p=38) engaged in transactions with respect to such [securities](/usc/7/1a.md?p=41), or reporting by a [commodity pool](/usc/7/1a.md?p=10-A).
- (3) **Exception.—**
  - (A) **In general.—** [Paragraph (1)](#1) shall not apply to any [commodity trading advisor](/usc/7/1a.md?p=12-B) that is registered with the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8) as an investment adviser whose business does not consist primarily of acting as a [commodity trading advisor](/usc/7/1a.md?p=12-B), as defined in [section 1a of this title](/usc/7/1a.md), and that does not act as a [commodity trading advisor](/usc/7/1a.md?p=12-B) to any [commodity pool](/usc/7/1a.md?p=10-A) that is engaged primarily in trading [commodity](/usc/7/1a.md?p=9) interests.
  - (B) **Engaged primarily.—** For purposes of [subparagraph (A)](#3-A), a [commodity trading advisor](/usc/7/1a.md?p=12-B) or a [commodity pool](/usc/7/1a.md?p=10-A) shall be considered to be “engaged primarily” in the business of being a [commodity trading advisor](/usc/7/1a.md?p=12-B) or [commodity pool](/usc/7/1a.md?p=10-A) if it is or holds itself out to the public as being engaged primarily, or proposes to engage primarily, in the business of advising on [commodity](/usc/7/1a.md?p=9) interests or investing, reinvesting, owning, holding, or trading in [commodity](/usc/7/1a.md?p=9) interests, respectively.
  - (C) **Commodity interests.—** For purposes of this paragraph, [commodity](/usc/7/1a.md?p=9) interests shall include [contracts](/usc/7/518.md?p=4) of sale of a [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27), [options](/usc/7/1a.md?p=36) on such [contracts](/usc/7/518.md?p=4), [security futures](/usc/7/1a.md?p=44), [swaps](/usc/7/1a.md?p=47-A), leverage [contracts](/usc/7/518.md?p=4), foreign [exchange](/usc/7/1a.md?p=1-D), spot and forward [contracts](/usc/7/518.md?p=4) on physical [commodities](/usc/7/1a.md?p=9), and any monies held in an account used for trading [commodity](/usc/7/1a.md?p=9) interests.

# §6n. Registration of commodity trading advisors and commodity pool operators; application; expiration and renewal; record keeping and reports; disclosure; statements of account

- (1) Any [commodity trading advisor](/usc/7/1a.md?p=12-B) or [commodity pool operator](/usc/7/1a.md?p=11-A), or any [person](/usc/7/1a.md?p=38) who contemplates becoming a [commodity trading advisor](/usc/7/1a.md?p=12-B) or [commodity pool operator](/usc/7/1a.md?p=11-A), may register under this chapter by filing an application with the [Commission](/usc/7/1a.md?p=8). Such application shall contain such information, in such form and detail, as the [Commission](/usc/7/1a.md?p=8) may, by rules and regulations, prescribe as necessary or appropriate in the public interest, including the following:
  - (A) the name and form of organization, including capital structure, under which the applicant engages or intends to engage in business; the name of the [State](/usc/7/1359aa.md?p=5) under the laws of which he is organized; the location of his principal business office and branch offices, if any; the names and addresses of all partners, officers, directors, and [persons](/usc/7/1a.md?p=38) performing similar functions or, if the applicant be an individual, of such individual; and the number of employees;
  - (B) the education, the business affiliations for the past ten years, and the present business affiliations of the applicant and of his partners, officers, directors, and [persons](/usc/7/1a.md?p=38) performing similar functions and of any controlling [person](/usc/7/1a.md?p=38) thereof;
  - (C) the nature of the business of the applicant, including the manner of giving advice and rendering of analyses or reports;
  - (D) the nature and scope of the [authority](/usc/7/2009aa.md?p=1) of the applicant with respect to clients’ [funds](/usc/7/4531.md?p=5) and accounts;
  - (E) the basis upon which the applicant is or will be compensated; and
  - (F) such other information as the [Commission](/usc/7/1a.md?p=8) may require to determine whether the applicant is qualified for registration.
- (2) Each registration under this section shall expire on the 30th day of June of each year, or at such other time, not less than one year from the effective date thereof, as the [Commission](/usc/7/1a.md?p=8) may by rule, regulation, or [order](/usc/7/2902.md?p=10) prescribe, and shall be renewed upon application therefor subject to the same requirements as in the case of an original application.
- (3)
  - (A) Every [commodity trading advisor](/usc/7/1a.md?p=12-B) and [commodity pool operator](/usc/7/1a.md?p=11-A) registered under this chapter shall maintain books and records and file such reports in such form and manner as may be prescribed by the [Commission](/usc/7/1a.md?p=8). All such books and records shall be kept for a period of at least three years, or longer if the [Commission](/usc/7/1a.md?p=8) so directs, and shall be open to inspection by any representative of the [Commission](/usc/7/1a.md?p=8) or the Department of Justice. Upon the request of the [Commission](/usc/7/1a.md?p=8), a registered [commodity trading advisor](/usc/7/1a.md?p=12-B) or [commodity pool operator](/usc/7/1a.md?p=11-A) shall furnish the name and address of each client, subscriber, or participant, and submit samples or copies of all reports, letters, circulars, memorandums, publications, writings, or other literature or advice distributed to clients, subscribers, or participants, or prospective clients, subscribers, or participants.
  - (B) Unless otherwise authorized by the [Commission](/usc/7/1a.md?p=8) by rule or regulation, all [commodity trading advisors](/usc/7/1a.md?p=12-B) and [commodity pool operators](/usc/7/1a.md?p=11-A) shall make a full and complete disclosure to their subscribers, clients, or participants of all futures market positions taken or held by the individual principals of their organization.
- (4) Every [commodity pool operator](/usc/7/1a.md?p=11-A) shall regularly furnish statements of account to each participant in his operations. Such statements shall be in such form and manner as may be prescribed by the [Commission](/usc/7/1a.md?p=8) and shall include complete information as to the current status of all trading accounts in which such participant has an interest.

# §6o. Fraud and misrepresentation by commodity trading advisors, commodity pool operators, and associated persons

- (1) It shall be unlawful for a [commodity trading advisor](/usc/7/1a.md?p=12-B), associated [person](/usc/7/1a.md?p=38) of a [commodity trading advisor](/usc/7/1a.md?p=12-B), [commodity pool operator](/usc/7/1a.md?p=11-A), or associated [person](/usc/7/1a.md?p=38) of a [commodity pool operator](/usc/7/1a.md?p=11-A), by use of the mails or any means or instrumentality of [interstate commerce](/usc/7/1a.md?p=30), directly or indirectly—
  - (A) to employ any device, scheme, or artifice to defraud any client or participant or prospective client or participant; or
  - (B) to engage in any transaction, practice, or course of business which operates as a fraud or deceit upon any client or participant or prospective client or participant.
- (2) It shall be unlawful for any [commodity trading advisor](/usc/7/1a.md?p=12-B), associated [person](/usc/7/1a.md?p=38) of a [commodity trading advisor](/usc/7/1a.md?p=12-B), [commodity pool operator](/usc/7/1a.md?p=11-A), or associated [person](/usc/7/1a.md?p=38) of a [commodity pool operator](/usc/7/1a.md?p=11-A) registered under this chapter to represent or imply in any manner whatsoever that such [person](/usc/7/1a.md?p=38) has been sponsored, recommended, or approved, or that such [person](/usc/7/1a.md?p=38)’s abilities or qualifications have in any respect been passed upon, by the [United States](/usc/7/6402.md?p=8) or any agency or officer thereof. This section shall not be construed to prohibit a statement that a [person](/usc/7/1a.md?p=38) is registered under this chapter as a [commodity trading advisor](/usc/7/1a.md?p=12-B), associated [person](/usc/7/1a.md?p=38) of a [commodity trading advisor](/usc/7/1a.md?p=12-B), [commodity pool operator](/usc/7/1a.md?p=11-A), or associated [person](/usc/7/1a.md?p=38) of a [commodity pool operator](/usc/7/1a.md?p=11-A), if such statement is true in fact and if the effect of such registration is not misrepresented.

# [§6o–1. Transferred — transferred]



# §6p. Standards and examinations

- (a) The [Commission](/usc/7/1a.md?p=8) may specify by rules and regulations appropriate standards with respect to training, experience, and such other qualifications as the [Commission](/usc/7/1a.md?p=8) finds necessary or desirable to insure the fitness of [persons](/usc/7/1a.md?p=38) required to be registered with the [Commission](/usc/7/1a.md?p=8). In connection therewith, the [Commission](/usc/7/1a.md?p=8) may prescribe by rules and regulations the adoption of written proficiency examinations to be given to applicants for registration and the establishment of reasonable fees to be charged to such applicants to cover the administration of such examinations. The [Commission](/usc/7/1a.md?p=8) may further prescribe by rules and regulations that, in lieu of examinations administered by the [Commission](/usc/7/1a.md?p=8), futures associations registered under [section 21 of this title](/usc/7/21.md), [contract](/usc/7/518.md?p=4) markets, or derivatives transaction execution facilities may adopt written proficiency examinations to be given to applicants for registration and charge reasonable fees to such applicants to cover the administration of such examinations. Notwithstanding any other provision of this section, the [Commission](/usc/7/1a.md?p=8) may specify by rules and regulations such terms and conditions as it deems appropriate to protect the public interest wherein exception to any written proficiency examination shall be made with respect to individuals who have demonstrated, through training and experience, the degree of proficiency and skill necessary to protect the interests of customers, clients, pool participants, or other [members](/usc/7/1a.md?p=34) of the public with whom such individuals deal.
- (b) The [Commission](/usc/7/1a.md?p=8) shall issue regulations to require new registrants, within six months after receiving such registration, to attend a training session, and all other registrants to attend periodic training sessions, to ensure that registrants understand their responsibilities to the public under this chapter, including responsibilities to observe just and equitable principles of trade, any rule or regulation of the [Commission](/usc/7/1a.md?p=8), any rule of any appropriate [contract](/usc/7/518.md?p=4) market, derivatives transaction execution facility, registered futures association, or other self-regulatory organization, or any other applicable Federal or [state](/usc/7/1359aa.md?p=5)[^1] law, rule or regulation.

# §6q. Special procedures to encourage and facilitate bona fide hedging by agricultural producers

- (a) **Authority—** The [Commission](/usc/7/1a.md?p=8) shall consider issuing rules or [orders](/usc/7/2902.md?p=10) which—
  - (1) prescribe procedures under which each [contract](/usc/7/518.md?p=4) market is to provide for orderly delivery, including temporary storage costs, of any [agricultural commodity](/usc/7/5602.md?p=1) enumerated in [section 1a(9) of this title](/usc/7/1a.md?p=9) which is the subject of a [contract](/usc/7/518.md?p=4) for purchase or sale for [future delivery](/usc/7/1a.md?p=27);
  - (2) increase the ease with which domestic agricultural [producers](/usc/7/6802.md?p=4-A-iii-III-bb) may participate in [contract](/usc/7/518.md?p=4) markets, including by addressing cost and margin requirements, so as to better enable the [producers](/usc/7/6802.md?p=4-A-iii-III-bb) to hedge price risk associated with their production;
  - (3) provide flexibility in the minimum quantities of such [agricultural commodities](/usc/7/5602.md?p=1) that may be the subject of a [contract](/usc/7/518.md?p=4) for purchase or sale for [future delivery](/usc/7/1a.md?p=27) that is traded on a [contract](/usc/7/518.md?p=4) market, to better allow domestic agricultural [producers](/usc/7/6802.md?p=4-A-iii-III-bb) to hedge such price risk; and
  - (4) encourage [contract](/usc/7/518.md?p=4) markets to provide information and otherwise facilitate the participation of domestic agricultural [producers](/usc/7/6802.md?p=4-A-iii-III-bb) in [contract](/usc/7/518.md?p=4) markets.
- (b) **Report—** Within 1 year after December 21, 2000, the [Commission](/usc/7/1a.md?p=8) shall submit to the [Committee](/usc/7/2132.md?p=n) on Agriculture of the House of Representatives and the [Committee](/usc/7/2132.md?p=n) on Agriculture, Nutrition, and Forestry of the Senate a report on the steps it has taken to implement this section and on the activities of [contract](/usc/7/518.md?p=4) markets pursuant to this section.

# §6r. Reporting and recordkeeping for uncleared swaps

- (a) **Required reporting of swaps not accepted by any derivatives clearing organization—**
  - (1) **In general—** Each [swap](/usc/7/1a.md?p=47-A) that is not accepted for clearing by any [derivatives clearing organization](/usc/7/1a.md?p=15-A) shall be reported to—
    - (A) a [swap data repository](/usc/7/1a.md?p=48) described in [section 24a of this title](/usc/7/24a.md); or
    - (B) in the case in which there is no [swap data repository](/usc/7/1a.md?p=48) that would accept the [swap](/usc/7/1a.md?p=47-A), to the [Commission](/usc/7/1a.md?p=8) pursuant to this section within such time period as the [Commission](/usc/7/1a.md?p=8) may by rule or regulation prescribe.
  - (2) **Transition rule for preenactment swaps—**
    - (A) **Swaps entered into before July 21, 2010—** Each [swap](/usc/7/1a.md?p=47-A) entered into before July 21, 2010, the terms of which have not expired as of July 21, 2010, shall be reported to a registered [swap data repository](/usc/7/1a.md?p=48) or the [Commission](/usc/7/1a.md?p=8) by a date that is not later than—
      - (i) 30 days after issuance of the interim final rule; or
      - (ii) such other period as the [Commission](/usc/7/1a.md?p=8) determines to be appropriate.
    - (B) **Commission rulemaking—** The [Commission](/usc/7/1a.md?p=8) shall promulgate an interim final rule within 90 days of July 21, 2010, providing for the reporting of each [swap](/usc/7/1a.md?p=47-A) entered into before July 21, 2010.
    - (C) **Effective date—** The reporting provisions described in this section shall be effective upon the enactment of this section.
  - (3) **Reporting obligations—**
    - (A) **Swaps in which only 1 counterparty is a swap dealer or major swap participant—** With respect to a [swap](/usc/7/1a.md?p=47-A) in which only 1 counterparty is a [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A), the [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A) shall report the [swap](/usc/7/1a.md?p=47-A) as required under paragraphs [(1)](#a-1) and [(2)](#a-2).
    - (B) **Swaps in which 1 counterparty is a swap dealer and the other a major swap participant—** With respect to a [swap](/usc/7/1a.md?p=47-A) in which 1 counterparty is a [swap dealer](/usc/7/1a.md?p=49-A) and the other a [major swap participant](/usc/7/1a.md?p=33-A), the [swap dealer](/usc/7/1a.md?p=49-A) shall report the [swap](/usc/7/1a.md?p=47-A) as required under paragraphs [(1)](#a-1) and [(2)](#a-2).
    - (C) **Other swaps—** With respect to any other [swap](/usc/7/1a.md?p=47-A) not described in subparagraph [(A)](#a-3-A) or [(B)](#a-3-B), the counterparties to the [swap](/usc/7/1a.md?p=47-A) shall select a counterparty to report the [swap](/usc/7/1a.md?p=47-A) as required under paragraphs [(1)](#a-1) and [(2)](#a-2).
- (b) **Duties of certain individuals—** Any individual or entity that enters into a [swap](/usc/7/1a.md?p=47-A) shall meet each requirement described in [subsection (c)](#c) if the individual or entity did not—
  - (1) clear the [swap](/usc/7/1a.md?p=47-A) in accordance with [section 2(h)(1) of this title](/usc/7/2.md?p=h-1); or
  - (2) have the data regarding the [swap](/usc/7/1a.md?p=47-A) accepted by a [swap data repository](/usc/7/1a.md?p=48) in accordance with rules (including timeframes) adopted by the [Commission](/usc/7/1a.md?p=8) under [section 24a of this title](/usc/7/24a.md).
- (c) **Requirements—** An individual or entity described in [subsection (b)](#b) shall—
  - (1) upon written request from the [Commission](/usc/7/1a.md?p=8), provide reports regarding the [swaps](/usc/7/1a.md?p=47-A) held by the individual or entity to the [Commission](/usc/7/1a.md?p=8) in such form and in such manner as the [Commission](/usc/7/1a.md?p=8) may request; and
  - (2) maintain books and records pertaining to the [swaps](/usc/7/1a.md?p=47-A) held by the individual or entity in such form, in such manner, and for such period as the [Commission](/usc/7/1a.md?p=8) may require, which shall be open to inspection by—
    - (A) any representative of the [Commission](/usc/7/1a.md?p=8);
    - (B) an appropriate [prudential regulator](/usc/7/1a.md?p=39);
    - (C) the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8);
    - (D) the Financial Stability Oversight [Council](/usc/7/3402.md?p=i); and
    - (E) the Department of Justice.
- (d) **Identical data—** In prescribing rules under this section, the [Commission](/usc/7/1a.md?p=8) shall require individuals and entities described in [subsection (b)](#b) to submit to the [Commission](/usc/7/1a.md?p=8) a report that contains data that is not less comprehensive than the data required to be collected by [swap data repositories](/usc/7/1a.md?p=48) under [section 24a of this title](/usc/7/24a.md).

# §6s. Registration and regulation of swap dealers and major swap participants

- (a) **Registration—**
  - (1) **Swap dealers—** It shall be unlawful for any [person](/usc/7/1a.md?p=38) to act as a [swap dealer](/usc/7/1a.md?p=49-A) unless the [person](/usc/7/1a.md?p=38) is registered as a [swap dealer](/usc/7/1a.md?p=49-A) with the [Commission](/usc/7/1a.md?p=8).
  - (2) **Major swap participants—** It shall be unlawful for any [person](/usc/7/1a.md?p=38) to act as a [major swap participant](/usc/7/1a.md?p=33-A) unless the [person](/usc/7/1a.md?p=38) is registered as a [major swap participant](/usc/7/1a.md?p=33-A) with the [Commission](/usc/7/1a.md?p=8).
- (b) **Requirements—**
  - (1) **In general—** A [person](/usc/7/1a.md?p=38) shall register as a [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A) by filing a registration application with the [Commission](/usc/7/1a.md?p=8).
  - (2) **Contents—**
    - (A) **In general—** The application shall be made in such form and manner as prescribed by the [Commission](/usc/7/1a.md?p=8), and shall contain such information, as the [Commission](/usc/7/1a.md?p=8) considers necessary concerning the business in which the applicant is or will be engaged.
    - (B) **Continual reporting—** A [person](/usc/7/1a.md?p=38) that is registered as a [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A) shall continue to submit to the [Commission](/usc/7/1a.md?p=8) reports that contain such information pertaining to the business of the [person](/usc/7/1a.md?p=38) as the [Commission](/usc/7/1a.md?p=8) may require.
  - (3) **Expiration—** Each registration under this section shall expire at such time as the [Commission](/usc/7/1a.md?p=8) may prescribe by rule or regulation.
  - (4) **Rules—** Except as provided in subsections [(d)](#d) and [(e)](#e), the [Commission](/usc/7/1a.md?p=8) may prescribe rules applicable to [swap dealers](/usc/7/1a.md?p=49-A) and [major swap participants](/usc/7/1a.md?p=33-A), including rules that limit the activities of [swap dealers](/usc/7/1a.md?p=49-A) and [major swap participants](/usc/7/1a.md?p=33-A).
  - (5) **Transition—** Rules under this section shall provide for the registration of [swap dealers](/usc/7/1a.md?p=49-A) and [major swap participants](/usc/7/1a.md?p=33-A) not later than 1 year after July 21, 2010.
  - (6) **Statutory disqualification—** Except to the extent otherwise specifically provided by rule, regulation, or [order](/usc/7/2902.md?p=10), it shall be unlawful for a [swap dealer](/usc/7/1a.md?p=49-A) or a [major swap participant](/usc/7/1a.md?p=33-A) to permit any [person](/usc/7/1a.md?p=38) associated with a [swap dealer](/usc/7/1a.md?p=49-A) or a [major swap participant](/usc/7/1a.md?p=33-A) who is subject to a statutory disqualification to effect or be involved in effecting [swaps](/usc/7/1a.md?p=47-A) on behalf of the [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A), if the [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A) knew, or in the exercise of reasonable care should have known, of the statutory disqualification.
- (c) **Dual registration—**
  - (1) **Swap dealer—** Any [person](/usc/7/1a.md?p=38) that is required to be registered as a [swap dealer](/usc/7/1a.md?p=49-A) under this section shall register with the [Commission](/usc/7/1a.md?p=8) regardless of whether the [person](/usc/7/1a.md?p=38) also is a depository institution or is registered with the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8) as a [security-based swap dealer](/usc/7/1a.md?p=43).
  - (2) **Major swap participant—** Any [person](/usc/7/1a.md?p=38) that is required to be registered as a [major swap participant](/usc/7/1a.md?p=33-A) under this section shall register with the [Commission](/usc/7/1a.md?p=8) regardless of whether the [person](/usc/7/1a.md?p=38) also is a depository institution or is registered with the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8) as a [major security-based swap participant](/usc/7/1a.md?p=32).
- (d) **Rulemakings—**
  - (1) **In general—** The [Commission](/usc/7/1a.md?p=8) shall adopt rules for [persons](/usc/7/1a.md?p=38) that are registered as [swap dealers](/usc/7/1a.md?p=49-A) or [major swap participants](/usc/7/1a.md?p=33-A) under this section.
  - (2) **Exception for prudential requirements—**
    - (A) **In general—** The [Commission](/usc/7/1a.md?p=8) may not prescribe rules imposing prudential requirements on [swap dealers](/usc/7/1a.md?p=49-A) or [major swap participants](/usc/7/1a.md?p=33-A) for which there is a [prudential regulator](/usc/7/1a.md?p=39).
    - (B) **Applicability—** [Subparagraph (A)](#d-2-A) does not limit the [authority](/usc/7/2009aa.md?p=1) of the [Commission](/usc/7/1a.md?p=8) to prescribe rules as directed under this section.
- (e) **Capital and margin requirements—**
  - (1) **In general—**
    - (A) **Swap dealers and major swap participants that are banks—** Each registered [swap dealer](/usc/7/1a.md?p=49-A) and [major swap participant](/usc/7/1a.md?p=33-A) for which there is a [prudential regulator](/usc/7/1a.md?p=39) shall meet such minimum capital requirements and minimum initial and variation margin requirements as the [prudential regulator](/usc/7/1a.md?p=39) shall by rule or regulation prescribe under [paragraph (2)(A)](#e-2-A).
    - (B) **Swap dealers and major swap participants that are not banks—** Each registered [swap dealer](/usc/7/1a.md?p=49-A) and [major swap participant](/usc/7/1a.md?p=33-A) for which there is not a [prudential regulator](/usc/7/1a.md?p=39) shall meet such minimum capital requirements and minimum initial and variation margin requirements as the [Commission](/usc/7/1a.md?p=8) shall by rule or regulation prescribe under [paragraph (2)(B)](#e-2-B).
  - (2) **Rules—**
    - (A) **Swap dealers and major swap participants that are banks—** The [prudential regulators](/usc/7/1a.md?p=39), in consultation with the [Commission](/usc/7/1a.md?p=8) and the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8), shall jointly adopt rules for [swap dealers](/usc/7/1a.md?p=49-A) and [major swap participants](/usc/7/1a.md?p=33-A), with respect to their activities as a [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A), for which there is a [prudential regulator](/usc/7/1a.md?p=39) imposing—
      - (i) capital requirements; and
      - (ii) both initial and variation margin requirements on all [swaps](/usc/7/1a.md?p=47-A) that are not cleared by a registered [derivatives clearing organization](/usc/7/1a.md?p=15-A).
    - (B) **Swap dealers and major swap participants that are not banks—** The [Commission](/usc/7/1a.md?p=8) shall adopt rules for [swap dealers](/usc/7/1a.md?p=49-A) and [major swap participants](/usc/7/1a.md?p=33-A), with respect to their activities as a [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A), for which there is not a [prudential regulator](/usc/7/1a.md?p=39) imposing—
      - (i) capital requirements; and
      - (ii) both initial and variation margin requirements on all [swaps](/usc/7/1a.md?p=47-A) that are not cleared by a registered [derivatives clearing organization](/usc/7/1a.md?p=15-A).
    - (C) **Capital—** In setting capital requirements for a [person](/usc/7/1a.md?p=38) that is designated as a [swap dealer](/usc/7/1a.md?p=49-A) or a [major swap participant](/usc/7/1a.md?p=33-A) for a single type or single class or category of [swap](/usc/7/1a.md?p=47-A) or activities, the [prudential regulator](/usc/7/1a.md?p=39) and the [Commission](/usc/7/1a.md?p=8) shall take into account the risks associated with other types of [swaps](/usc/7/1a.md?p=47-A) or classes of [swaps](/usc/7/1a.md?p=47-A) or categories of [swaps](/usc/7/1a.md?p=47-A) engaged in and the other activities conducted by that [person](/usc/7/1a.md?p=38) that are not otherwise subject to regulation applicable to that [person](/usc/7/1a.md?p=38) by virtue of the status of the [person](/usc/7/1a.md?p=38) as a [swap dealer](/usc/7/1a.md?p=49-A) or a [major swap participant](/usc/7/1a.md?p=33-A).
  - (3) **Standards for capital and margin—**
    - (A) **In general—** To offset the greater risk to the [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A) and the financial system arising from the use of [swaps](/usc/7/1a.md?p=47-A) that are not cleared, the requirements imposed under [paragraph (2)](#e-2) shall—
      - (i) help ensure the safety and soundness of the [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A); and
      - (ii) be appropriate for the risk associated with the non-[cleared swaps](/usc/7/1a.md?p=7) held as a [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A).
    - (B) **Rule of construction—**
      - (i) **In general—** Nothing in this section shall limit, or be construed to limit, the [authority](/usc/7/2009aa.md?p=1)—
        - (I) of the [Commission](/usc/7/1a.md?p=8) to set financial responsibility rules for a [futures commission merchant](/usc/7/1a.md?p=28-A) or [introducing broker](/usc/7/1a.md?p=31-A) registered pursuant to [section 6f(a) of this title](/usc/7/6f.md?p=a) (except for [section 6f(a)(3) of this title](/usc/7/6f.md?p=a-3)) in accordance with [section 6f(b) of this title](/usc/7/6f.md?p=b); or
        - (II) of the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8) to set financial responsibility rules for a broker or dealer registered pursuant to section 15(b) of the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 ([15 U.S.C. 78o(b)](/usc/15/78o.md?p=b)) (except for [section 15(b)(11)](/usc/7/15.md) of that Act ([15 U.S.C. 78o(b)(11)](/usc/15/78o.md?p=b-11))[^1] in accordance with section 15(c)(3) of the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 ([15 U.S.C. 78o(c)(3)](/usc/15/78o.md?p=c-3)).
      - (ii) **Futures commission merchants and other dealers—** A [futures commission merchant](/usc/7/1a.md?p=28-A), [introducing broker](/usc/7/1a.md?p=31-A), broker, or dealer shall maintain sufficient capital to comply with the stricter of any applicable capital requirements to which such [futures commission merchant](/usc/7/1a.md?p=28-A), [introducing broker](/usc/7/1a.md?p=31-A), broker, or dealer is subject to under this chapter or the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 ([15 U.S.C. 78a](/usc/15/78a.md) et seq.).
    - (C) **Margin requirements—** In prescribing margin requirements under this subsection, the [prudential regulator](/usc/7/1a.md?p=39) with respect to [swap dealers](/usc/7/1a.md?p=49-A) and [major swap participants](/usc/7/1a.md?p=33-A) for which it is the [prudential regulator](/usc/7/1a.md?p=39) and the [Commission](/usc/7/1a.md?p=8) with respect to [swap dealers](/usc/7/1a.md?p=49-A) and [major swap participants](/usc/7/1a.md?p=33-A) for which there is no [prudential regulator](/usc/7/1a.md?p=39) shall permit the use of noncash collateral, as the regulator or the [Commission](/usc/7/1a.md?p=8) determines to be consistent with—
      - (i) preserving the financial integrity of markets trading [swaps](/usc/7/1a.md?p=47-A); and
      - (ii) preserving the stability of the [United States](/usc/7/6402.md?p=8) financial system.
    - (D) **Comparability of capital and margin requirements—**
      - (i) **In general—** The [prudential regulators](/usc/7/1a.md?p=39), the [Commission](/usc/7/1a.md?p=8), and the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8) shall periodically (but not less frequently than annually) consult on minimum capital requirements and minimum initial and variation margin requirements.
      - (ii) **Comparability—** The entities described in [clause (i)](#e-3-D-i) shall, to the maximum extent practicable, establish and maintain comparable minimum capital requirements and minimum initial and variation margin requirements, including the use of non cash collateral, for—
        - (I) [swap dealers](/usc/7/1a.md?p=49-A); and
        - (II) [major swap participants](/usc/7/1a.md?p=33-A).
  - (4) **Applicability with respect to counterparties—** The requirements of paragraphs [(2)(A)(ii)](#e-2-A-ii) and [(2)(B)(ii)](#e-2-B-ii), including the initial and variation margin requirements imposed by rules adopted pursuant to paragraphs [(2)(A)(ii)](#e-2-A-ii) and [(2)(B)(ii)](#e-2-B-ii), shall not apply to a [swap](/usc/7/1a.md?p=47-A) in which a counterparty qualifies for an exception under [section 2(h)(7)(A) of this title](/usc/7/2.md?p=h-7-A), or an exemption issued under [section 6(c)(1) of this title](/usc/7/6.md?p=c-1) from the requirements of [section 2(h)(1)(A) of this title](/usc/7/2.md?p=h-1-A) for cooperative entities as defined in such exemption, or satisfies the criteria in [section 2(h)(7)(D) of this title](/usc/7/2.md?p=h-7-D).
- (f) **Reporting and recordkeeping—**
  - (1) **In general—** Each registered [swap dealer](/usc/7/1a.md?p=49-A) and [major swap participant](/usc/7/1a.md?p=33-A)—
    - (A) shall make such reports as are required by the [Commission](/usc/7/1a.md?p=8) by rule or regulation regarding the transactions and positions and financial condition of the registered [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A);
    - (B)
      - (i) for which there is a [prudential regulator](/usc/7/1a.md?p=39), shall keep books and records of all activities related to the business as a [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A) in such form and manner and for such period as may be prescribed by the [Commission](/usc/7/1a.md?p=8) by rule or regulation; and
      - (ii) for which there is no [prudential regulator](/usc/7/1a.md?p=39), shall keep books and records in such form and manner and for such period as may be prescribed by the [Commission](/usc/7/1a.md?p=8) by rule or regulation;
    - (C) shall keep books and records described in [subparagraph (B)](#f-1-B) open to inspection and examination by any representative of the [Commission](/usc/7/1a.md?p=8); and
    - (D) shall keep any such books and records relating to [swaps](/usc/7/1a.md?p=47-A) defined in [section 1a(47)(A)(v) of this title](/usc/7/1a.md?p=47-A-v) open to inspection and examination by the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8).
  - (2) **Rules—** The [Commission](/usc/7/1a.md?p=8) shall adopt rules governing reporting and recordkeeping for [swap dealers](/usc/7/1a.md?p=49-A) and [major swap participants](/usc/7/1a.md?p=33-A).
- (g) **Daily trading records—**
  - (1) **In general—** Each registered [swap dealer](/usc/7/1a.md?p=49-A) and [major swap participant](/usc/7/1a.md?p=33-A) shall maintain daily trading records of the [swaps](/usc/7/1a.md?p=47-A) of the registered [swap dealer](/usc/7/1a.md?p=49-A) and [major swap participant](/usc/7/1a.md?p=33-A) and all related records (including related cash or forward transactions) and recorded communications, including electronic mail, instant messages, and recordings of telephone [calls](/usc/7/1a.md?p=36), for such period as may be required by the [Commission](/usc/7/1a.md?p=8) by rule or regulation.
  - (2) **Information requirements—** The daily trading records shall include such information as the [Commission](/usc/7/1a.md?p=8) shall require by rule or regulation.
  - (3) **Counterparty records—** Each registered [swap dealer](/usc/7/1a.md?p=49-A) and [major swap participant](/usc/7/1a.md?p=33-A) shall maintain daily trading records for each counterparty in a manner and form that is identifiable with each [swap](/usc/7/1a.md?p=47-A) transaction.
  - (4) **Audit trail—** Each registered [swap dealer](/usc/7/1a.md?p=49-A) and [major swap participant](/usc/7/1a.md?p=33-A) shall maintain a complete audit trail for conducting comprehensive and accurate trade reconstructions.
  - (5) **Rules—** The [Commission](/usc/7/1a.md?p=8) shall adopt rules governing daily trading records for [swap dealers](/usc/7/1a.md?p=49-A) and [major swap participants](/usc/7/1a.md?p=33-A).
- (h) **Business conduct standards—**
  - (1) **In general—** Each registered [swap dealer](/usc/7/1a.md?p=49-A) and [major swap participant](/usc/7/1a.md?p=33-A) shall conform with such business conduct standards as prescribed in [paragraph (3)](#h-3) and as may be prescribed by the [Commission](/usc/7/1a.md?p=8) by rule or regulation that relate to—
    - (A) fraud, manipulation, and other abusive practices involving [swaps](/usc/7/1a.md?p=47-A) (including [swaps](/usc/7/1a.md?p=47-A) that are offered but not entered into);
    - (B) diligent supervision of the business of the registered [swap dealer](/usc/7/1a.md?p=49-A) and [major swap participant](/usc/7/1a.md?p=33-A);
    - (C) adherence to all applicable position limits; and
    - (D) such other matters as the [Commission](/usc/7/1a.md?p=8) determines to be appropriate.
  - (2) **Responsibilities with respect to special entities—**
    - (A) **Advising special entities—** A [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A) that acts as an advisor to a [special entity](#h-2-C) regarding a [swap](/usc/7/1a.md?p=47-A) shall comply with the requirements of [subparagraph (4)](#h-4) with respect to such [Special Entity](#h-2-C).
    - (B) **Entering of swaps with respect to special entities—** A [swap dealer](/usc/7/1a.md?p=49-A) that enters into or [offers](/usc/7/1a.md?p=36) to enter into [swap](/usc/7/1a.md?p=47-A)[^2] with a [Special Entity](#h-2-C) shall comply with the requirements of [subparagraph (5)](#h-5) with respect to such [Special Entity](#h-2-C).
    - (C) **Special entity defined—** For purposes of this subsection, the term “special entity” means—
      - (i) a Federal agency;
      - (ii) a [State](/usc/7/1359aa.md?p=5), [State agency](/usc/7/2012.md?p=s), city, county, municipality, or other political subdivision of a [State](/usc/7/1359aa.md?p=5);
      - (iii) any employee benefit plan, as defined in section 3 of the Employee Retirement Income Security Act of 1974 ([29 U.S.C. 1002](/usc/29/1002.md));
      - (iv) any governmental plan, as defined in section 3 of the Employee Retirement Income Security Act of 1974 ([29 U.S.C. 1002](/usc/29/1002.md)); or
      - (v) any endowment, including an endowment that is an organization described in [section 501(c)(3) of title 26](/usc/26/501.md?p=c-3).
  - (3) **Business conduct requirements—** Business conduct requirements adopted by the [Commission](/usc/7/1a.md?p=8) shall—
    - (A) establish a duty for a [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A) to verify that any counterparty meets the eligibility standards for an [eligible contract participant](/usc/7/1a.md?p=18);
    - (B) require disclosure by the [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A) to any counterparty to the transaction (other than a [swap dealer](/usc/7/1a.md?p=49-A), [major swap participant](/usc/7/1a.md?p=33-A), [security-based swap dealer](/usc/7/1a.md?p=43), or [major security-based swap participant](/usc/7/1a.md?p=32)) of—
      - (i) information about the material risks and characteristics of the [swap](/usc/7/1a.md?p=47-A);
      - (ii) any material incentives or conflicts of interest that the [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A) may have in connection with the [swap](/usc/7/1a.md?p=47-A); and
      - (iii)
        - (I) for [cleared swaps](/usc/7/1a.md?p=7), upon the request of the counterparty, receipt of the daily mark of the transaction from the appropriate [derivatives clearing organization](/usc/7/1a.md?p=15-A); and
        - (II) for uncleared swaps, receipt of the daily mark of the transaction from the [swap dealer](/usc/7/1a.md?p=49-A) or the [major swap participant](/usc/7/1a.md?p=33-A);
    - (C) establish a duty for a [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A) to communicate in a fair and balanced manner based on principles of fair dealing and good faith; and
    - (D) establish such other standards and requirements as the [Commission](/usc/7/1a.md?p=8) may determine are appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of this chapter.
  - (4) **Special requirements for swap dealers acting as advisors—**
    - (A) **In general—** It shall be unlawful for a [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A)—
      - (i) to employ any device, scheme, or artifice to defraud any [Special Entity](#h-2-C) or prospective customer who is a [Special Entity](#h-2-C);
      - (ii) to engage in any transaction, practice, or course of business that operates as a fraud or deceit on any [Special Entity](#h-2-C) or prospective customer who is a [Special Entity](#h-2-C); or
      - (iii) to engage in any act, practice, or course of business that is fraudulent, deceptive or manipulative.
    - (B) **Duty—** Any [swap dealer](/usc/7/1a.md?p=49-A) that acts as an advisor to a [Special Entity](#h-2-C) shall have a duty to act in the best interests of the [Special Entity](#h-2-C).
    - (C) **Reasonable efforts—** Any [swap dealer](/usc/7/1a.md?p=49-A) that acts as an advisor to a [Special Entity](#h-2-C) shall make reasonable efforts to obtain such information as is necessary to make a reasonable determination that any [swap](/usc/7/1a.md?p=47-A) recommended by the [swap dealer](/usc/7/1a.md?p=49-A) is in the best interests of the [Special Entity](#h-2-C), including information relating to—
      - (i) the financial status of the [Special Entity](#h-2-C);
      - (ii) the tax status of the [Special Entity](#h-2-C);
      - (iii) the investment or financing objectives of the [Special Entity](#h-2-C); and
      - (iv) any other information that the [Commission](/usc/7/1a.md?p=8) may prescribe by rule or regulation.
  - (5) **Special requirements for swap dealers as counterparties to special entities—**
    - (A) Any [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A) that [offers](/usc/7/1a.md?p=36) to enter or enters into a [swap](/usc/7/1a.md?p=47-A) with a [Special Entity](#h-2-C) shall—
      - (i) comply with any duty established by the [Commission](/usc/7/1a.md?p=8) for a [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A), with respect to a counterparty that is an [eligible contract participant](/usc/7/1a.md?p=18) within the meaning of subclause (I) or (II) of clause (vii) of [section 1a(18)](/usc/7/1a.md?p=18)[^3] of this title, that requires the [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A) to have a reasonable basis to believe that the counterparty that is a [Special Entity](#h-2-C) 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 [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A);
        - (IV) undertakes a duty to act in the best interests of the counterparty it represents;
        - (V) makes appropriate disclosures;
        - (VI) will provide written representations to the [Special Entity](#h-2-C) regarding fair pricing and the appropriateness of the transaction; and
        - (VII) in the case of employee benefit plans subject to the Employee Retirement Income Security act[^4] of 1974 [[29 U.S.C. 1001](/usc/29/1001.md) et seq.], is a fiduciary as defined in [section 3](/usc/29/3.md) of that Act ([29 U.S.C. 1002](/usc/29/1002.md)); and
      - (ii) before the initiation of the transaction, disclose to the [Special Entity](#h-2-C) in writing the capacity in which the [swap dealer](/usc/7/1a.md?p=49-A) is acting; and
    - (B) the [Commission](/usc/7/1a.md?p=8) may establish such other standards and requirements as the [Commission](/usc/7/1a.md?p=8) may determine are appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of this chapter.
  - (6) **Rules—** The [Commission](/usc/7/1a.md?p=8) shall prescribe rules under this subsection governing business conduct standards for [swap dealers](/usc/7/1a.md?p=49-A) and [major swap participants](/usc/7/1a.md?p=33-A).
  - (7) **Applicability—** This section shall not apply with respect to a transaction that is—
    - (A) initiated by a [Special Entity](#h-2-C) on an [exchange](/usc/7/1a.md?p=1-D) or [swap execution facility](/usc/7/1a.md?p=50); and
    - (B) one in which the [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A) does not know the identity of the counterparty to the transaction.
- (i) **Documentation standards—**
  - (1) **In general—** Each registered [swap dealer](/usc/7/1a.md?p=49-A) and [major swap participant](/usc/7/1a.md?p=33-A) shall conform with such standards as may be prescribed by the [Commission](/usc/7/1a.md?p=8) by rule or regulation that relate to timely and accurate confirmation, processing, netting, documentation, and valuation of all [swaps](/usc/7/1a.md?p=47-A).
  - (2) **Rules—** The [Commission](/usc/7/1a.md?p=8) shall adopt rules governing documentation standards for [swap dealers](/usc/7/1a.md?p=49-A) and [major swap participants](/usc/7/1a.md?p=33-A).
- (j) **Duties—** Each registered [swap dealer](/usc/7/1a.md?p=49-A) and [major swap participant](/usc/7/1a.md?p=33-A) at all times shall comply with the following requirements:
  - (1) **Monitoring of trading—** The [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A) shall monitor its trading in [swaps](/usc/7/1a.md?p=47-A) to prevent violations of applicable position limits.
  - (2) **Risk management procedures—** The [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A) shall establish robust and professional risk management systems adequate for managing the day-to-day business of the [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A).
  - (3) **Disclosure of general information—** The [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A) shall disclose to the [Commission](/usc/7/1a.md?p=8) and to the [prudential regulator](/usc/7/1a.md?p=39) for the [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A), as applicable, information concerning—
    - (A) terms and conditions of its [swaps](/usc/7/1a.md?p=47-A);
    - (B) [swap](/usc/7/1a.md?p=47-A) trading operations, mechanisms, and practices;
    - (C) financial integrity protections relating to [swaps](/usc/7/1a.md?p=47-A); and
    - (D) other information relevant to its trading in [swaps](/usc/7/1a.md?p=47-A).
  - (4) **Ability to obtain information—** The [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A) 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](/usc/7/1a.md?p=8) and to the [prudential regulator](/usc/7/1a.md?p=39) for the [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A), as applicable, on request.
  - (5) **Conflicts of interest—** The [swap dealer](/usc/7/1a.md?p=49-A) and [major swap participant](/usc/7/1a.md?p=33-A) shall implement conflict-of-interest systems and procedures that—
    - (A) establish structural and institutional safeguards to ensure that the activities of any [person](/usc/7/1a.md?p=38) within the firm relating to research or analysis of the price or market for any [commodity](/usc/7/1a.md?p=9) or [swap](/usc/7/1a.md?p=47-A) or acting in a role of providing clearing activities or making determinations as to accepting clearing customers are separated by appropriate informational partitions within the firm from the review, pressure, or oversight of [persons](/usc/7/1a.md?p=38) whose involvement in pricing, trading, or clearing activities might potentially bias their judgment or supervision and contravene the core principles of open access and the business conduct standards described in this chapter; and
    - (B) address such other issues as the [Commission](/usc/7/1a.md?p=8) determines to be appropriate.
  - (6) **Antitrust considerations—** Unless necessary or appropriate to achieve the purposes of this chapter, a [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A) shall not—
    - (A) adopt any process or take any action that results in any unreasonable restraint of trade; or
    - (B) impose any material anticompetitive burden on trading or clearing.
  - (7) **Rules—** The [Commission](/usc/7/1a.md?p=8) shall prescribe rules under this subsection governing duties of [swap dealers](/usc/7/1a.md?p=49-A) and [major swap participants](/usc/7/1a.md?p=33-A).
- (k) **Designation of chief compliance officer—**
  - (1) **In general—** Each [swap dealer](/usc/7/1a.md?p=49-A) and [major swap participant](/usc/7/1a.md?p=33-A) shall designate an individual to serve as a chief compliance officer.
  - (2) **Duties—** The chief compliance officer shall—
    - (A) report directly to the [board](/usc/7/1a.md?p=5) or to the senior officer of the [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A);
    - (B) review the compliance of the [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A) with respect to the [swap dealer](/usc/7/1a.md?p=49-A) and [major swap participant](/usc/7/1a.md?p=33-A) requirements described in this section;
    - (C) in consultation with the [board](/usc/7/1a.md?p=5) of directors, a body performing a function similar to the [board](/usc/7/1a.md?p=5), or the senior officer of the organization, resolve any conflicts of interest that may arise;
    - (D) be responsible for administering each policy and procedure that is required to be established pursuant to this section;
    - (E) ensure compliance with this chapter (including regulations) relating to [swaps](/usc/7/1a.md?p=47-A), including each rule prescribed by the [Commission](/usc/7/1a.md?p=8) under this section;
    - (F) establish procedures for the remediation of noncompliance issues identified by the chief compliance officer through any—
      - (i) compliance office review;
      - (ii) look-back;
      - (iii) internal or external audit finding;
      - (iv) self-reported error; or
      - (v) validated complaint; and
    - (G) establish and follow appropriate procedures for the handling, management response, remediation, retesting, and closing of noncompliance issues.
  - (3) **Annual reports—**
    - (A) **In general—** In accordance with rules prescribed by the [Commission](/usc/7/1a.md?p=8), the chief compliance officer shall annually prepare and sign a report that contains a description of—
      - (i) the compliance of the [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A) with respect to this chapter (including regulations); and
      - (ii) each policy and procedure of the [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A) of the chief compliance officer (including the code of ethics and conflict of interest policies).
    - (B) **Requirements—** A compliance report under [subparagraph (A)](#k-3-A) shall—
      - (i) accompany each appropriate financial report of the [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A) that is required to be furnished to the [Commission](/usc/7/1a.md?p=8) pursuant to this section; and
      - (ii) include a certification that, under penalty of law, the compliance report is accurate and complete.
- (l) **Segregation requirements—**
  - (1) **Segregation of assets held as collateral in uncleared swap transactions—**
    - (A) **Notification—** A [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A) shall be required to notify the counterparty of the [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A) at the beginning of a [swap](/usc/7/1a.md?p=47-A) transaction that the counterparty has the right to require segregation of the [funds](/usc/7/4531.md?p=5) or other property supplied to margin, guarantee, or secure the obligations of the counterparty.
    - (B) **Segregation and maintenance of funds—** At the request of a counterparty to a [swap](/usc/7/1a.md?p=47-A) that provides [funds](/usc/7/4531.md?p=5) or other property to a [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A) to margin, guarantee, or secure the obligations of the counterparty, the [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A) shall—
      - (i) segregate the [funds](/usc/7/4531.md?p=5) or other property for the benefit of the counterparty; and
      - (ii) in accordance with such rules and regulations as the [Commission](/usc/7/1a.md?p=8) may promulgate, maintain the [funds](/usc/7/4531.md?p=5) or other property in a segregated account separate from the assets and other interests of the [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A).
  - (2) **Applicability—** The requirements described in [paragraph (1)](#l-1) shall—
    - (A) apply only to a [swap](/usc/7/1a.md?p=47-A) between a counterparty and a [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A) that is not submitted for clearing to a [derivatives clearing organization](/usc/7/1a.md?p=15-A); and
    - (B)
      - (i) not apply to variation margin payments; or
      - (ii) not preclude any commercial arrangement regarding—
        - (I) the investment of segregated [funds](/usc/7/4531.md?p=5) or other property that may only be invested in such investments as the [Commission](/usc/7/1a.md?p=8) may permit by rule or regulation; and
        - (II) the related allocation of gains and losses resulting from any investment of the segregated [funds](/usc/7/4531.md?p=5) or other property.
  - (3) **Use of independent third-party custodians—** The segregated account described in [paragraph (1)](#l-1) shall be—
    - (A) carried by an independent third-party custodian; and
    - (B) designated as a segregated account for and on behalf of the counterparty.
  - (4) **Reporting requirement—** If the counterparty does not choose to require segregation of the [funds](/usc/7/4531.md?p=5) or other property supplied to margin, guarantee, or secure the obligations of the counterparty, the [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A) shall report to the counterparty of the [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A) on a quarterly basis that the back office procedures of the [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A) relating to margin and collateral requirements are in compliance with the agreement of the counterparties.

# §6t. Large swap trader reporting

- (a) **Prohibition—**
  - (1) **In general—** Except as provided in [paragraph (2)](#a-2), it shall be unlawful for any [person](/usc/7/1a.md?p=38) to enter into any [swap](/usc/7/1a.md?p=47-A) that the [Commission](/usc/7/1a.md?p=8) determines to perform a significant price discovery function with respect to [registered entities](/usc/7/1a.md?p=40) if—
    - (A) the [person](/usc/7/1a.md?p=38) directly or indirectly enters into the [swap](/usc/7/1a.md?p=47-A) during any 1 day in an amount equal to or in excess of such amount as shall be established periodically by the [Commission](/usc/7/1a.md?p=8); and
    - (B) the [person](/usc/7/1a.md?p=38) directly or indirectly has or obtains a position in the [swap](/usc/7/1a.md?p=47-A) equal to or in excess of such amount as shall be established periodically by the [Commission](/usc/7/1a.md?p=8).
  - (2) **Exception—** [Paragraph (1)](#a-1) shall not apply if—
    - (A) the [person](/usc/7/1a.md?p=38) files or causes to be filed with the properly designated officer of the [Commission](/usc/7/1a.md?p=8) such reports regarding any transactions or positions described in subparagraphs [(A)](#a-1-A) and [(B)](#a-1-B) of paragraph (1) as the [Commission](/usc/7/1a.md?p=8) may require by rule or regulation; and
    - (B) in accordance with the rules and regulations of the [Commission](/usc/7/1a.md?p=8), the [person](/usc/7/1a.md?p=38) keeps books and records of all such [swaps](/usc/7/1a.md?p=47-A) and any transactions and positions in any related [commodity](/usc/7/1a.md?p=9) traded on or subject to the rules of any designated [contract](/usc/7/518.md?p=4) market or [swap execution facility](/usc/7/1a.md?p=50), and of cash or spot transactions in, inventories of, and purchase and sale commitments of, such a [commodity](/usc/7/1a.md?p=9).
- (b) **Requirements—**
  - (1) **In general—** Books and records described in [subsection (a)(2)(B)](#a-2-B) shall—
    - (A) show such complete details concerning all transactions and positions as the [Commission](/usc/7/1a.md?p=8) may prescribe by rule or regulation;
    - (B) be open at all times to inspection and examination by any representative of the [Commission](/usc/7/1a.md?p=8); and
    - (C) be open at all times to inspection and examination by the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8), to the extent such books and records relate to transactions in [swaps](/usc/7/1a.md?p=47-A) (as that term is defined in [section 1a(47)(A)(v) of this title](/usc/7/1a.md?p=47-A-v)), and consistent with the confidentiality and disclosure requirements of [section 12 of this title](/usc/7/12.md).
  - (2) **Jurisdiction—** Nothing in [paragraph (1)](#b-1) shall affect the exclusive jurisdiction of the [Commission](/usc/7/1a.md?p=8) to prescribe recordkeeping and reporting requirements for large [swap](/usc/7/1a.md?p=47-A) traders under this section.
- (c) **Applicability—** For purposes of this section, the [swaps](/usc/7/1a.md?p=47-A), futures, and cash or spot transactions and positions of any [person](/usc/7/1a.md?p=38) shall include the [swaps](/usc/7/1a.md?p=47-A), futures, and cash or spot transactions and positions of any [persons](/usc/7/1a.md?p=38) directly or indirectly controlled by the [person](/usc/7/1a.md?p=38).
- (d) **Significant price discovery function—** In making a determination as to whether a [swap](/usc/7/1a.md?p=47-A) performs or affects a significant price discovery function with respect to [registered entities](/usc/7/1a.md?p=40), the [Commission](/usc/7/1a.md?p=8) shall consider the factors described in [section 6a(a)(3) of this title](/usc/7/6a.md?p=a-3).

# §7. Designation of boards of trade as contract markets

- (a) **Applications—** A [board of trade](/usc/7/1a.md?p=6) applying to the [Commission](/usc/7/1a.md?p=8) for designation as a [contract](/usc/7/518.md?p=4) market shall submit an application to the [Commission](/usc/7/1a.md?p=8) that includes any relevant materials and records the [Commission](/usc/7/1a.md?p=8) may require consistent with this chapter.
- (b) **Repealed. Pub. L. 111–203, title VII, § 735(a), July 21, 2010, 124 Stat. 1718—**
- (c) **Existing contract markets—** A [board of trade](/usc/7/1a.md?p=6) that is designated as a [contract](/usc/7/518.md?p=4) market on December 21, 2000, shall be considered to be a designated [contract](/usc/7/518.md?p=4) market under this section.
- (d) **Core principles for contract markets—**
  - (1) **Designation as contract market—**
    - (A) **In general—** To be designated, and maintain a designation, as a [contract](/usc/7/518.md?p=4) market, a [board of trade](/usc/7/1a.md?p=6) shall comply with—
      - (i) any core principle described in this subsection; and
      - (ii) any requirement that the [Commission](/usc/7/1a.md?p=8) may impose by rule or regulation pursuant to [section 12a(5) of this title](/usc/7/12a.md?p=5).
    - (B) **Reasonable discretion of contract market—** Unless otherwise determined by the [Commission](/usc/7/1a.md?p=8) by rule or regulation, a [board of trade](/usc/7/1a.md?p=6) described in [subparagraph (A)](#d-1-A) shall have reasonable discretion in establishing the manner in which the [board of trade](/usc/7/1a.md?p=6) complies with the core principles described in this subsection.
  - (2) **Compliance with rules—**
    - (A) **In general—** The [board of trade](/usc/7/1a.md?p=6) shall establish, monitor, and enforce compliance with the rules of the [contract](/usc/7/518.md?p=4) market, including—
      - (i) access requirements;
      - (ii) the terms and conditions of any [contracts](/usc/7/518.md?p=4) to be traded on the [contract](/usc/7/518.md?p=4) market; and
      - (iii) rules prohibiting abusive trade practices on the [contract](/usc/7/518.md?p=4) market.
    - (B) **Capacity of contract market—** The [board of trade](/usc/7/1a.md?p=6) shall have the capacity to detect, investigate, and apply appropriate sanctions to any [person](/usc/7/1a.md?p=38) that violates any rule of the [contract](/usc/7/518.md?p=4) market.
    - (C) **Requirement of rules—** The rules of the [contract](/usc/7/518.md?p=4) market shall provide the [board of trade](/usc/7/1a.md?p=6) with the ability and [authority](/usc/7/2009aa.md?p=1) to obtain any necessary information to perform any function described in this subsection, including the capacity to carry out such international information-sharing agreements as the [Commission](/usc/7/1a.md?p=8) may require.
  - (3) **Contracts not readily subject to manipulation—** The [board of trade](/usc/7/1a.md?p=6) shall list on the [contract](/usc/7/518.md?p=4) market only [contracts](/usc/7/518.md?p=4) that are not readily susceptible to manipulation.
  - (4) **Prevention of market disruption—** The [board of trade](/usc/7/1a.md?p=6) shall have the capacity and responsibility to prevent manipulation, price distortion, and disruptions of the delivery or cash-settlement process through market surveillance, compliance, and enforcement practices and procedures, including—
    - (A) methods for conducting real-time monitoring of trading; and
    - (B) comprehensive and accurate trade reconstructions.
  - (5) **Position limitations or accountability—**
    - (A) **In general—** To reduce the potential threat of market manipulation or congestion (especially during trading in the delivery month), the [board of trade](/usc/7/1a.md?p=6) shall adopt for each [contract](/usc/7/518.md?p=4) of the [board of trade](/usc/7/1a.md?p=6), as is necessary and appropriate, position limitations or position accountability for speculators.
    - (B) **Maximum allowable position limitation—** For any [contract](/usc/7/518.md?p=4) that is subject to a position limitation established by the [Commission](/usc/7/1a.md?p=8) pursuant to [section 6a(a) of this title](/usc/7/6a.md?p=a), the [board of trade](/usc/7/1a.md?p=6) shall set the position limitation of the [board of trade](/usc/7/1a.md?p=6) at a level not higher than the position limitation established by the [Commission](/usc/7/1a.md?p=8).
  - (6) **Emergency authority—** The [board of trade](/usc/7/1a.md?p=6), in consultation or cooperation with the [Commission](/usc/7/1a.md?p=8), shall adopt rules to provide for the exercise of emergency [authority](/usc/7/2009aa.md?p=1), as is necessary and appropriate, including the [authority](/usc/7/2009aa.md?p=1)—
    - (A) to liquidate or transfer open positions in any [contract](/usc/7/518.md?p=4);
    - (B) to suspend or curtail trading in any [contract](/usc/7/518.md?p=4); and
    - (C) to require market participants in any [contract](/usc/7/518.md?p=4) to meet special margin requirements.
  - (7) **Availability of general information—** The [board of trade](/usc/7/1a.md?p=6) shall make available to market [authorities](/usc/7/2009aa.md?p=1), market participants, and the public accurate information concerning—
    - (A) the terms and conditions of the [contracts](/usc/7/518.md?p=4) of the [contract](/usc/7/518.md?p=4) market; and
    - (B)
      - (i) the rules, regulations, and mechanisms for executing transactions on or through the facilities of the [contract](/usc/7/518.md?p=4) market; and
      - (ii) the rules and specifications describing the operation of the [contract](/usc/7/518.md?p=4) market’s—
        - (I) electronic matching platform; or
        - (II) trade execution facility.
  - (8) **Daily publication of trading information—** The [board of trade](/usc/7/1a.md?p=6) shall make public daily information on settlement prices, volume, open interest, and opening and closing ranges for actively traded [contracts](/usc/7/518.md?p=4) on the [contract](/usc/7/518.md?p=4) market.
  - (9) **Execution of transactions—**
    - (A) **In general—** The [board of trade](/usc/7/1a.md?p=6) shall provide a competitive, open, and efficient market and mechanism for executing transactions that protects the price discovery process of trading in the centralized market of the [board of trade](/usc/7/1a.md?p=6).
    - (B) **Rules—** The rules of the [board of trade](/usc/7/1a.md?p=6) may authorize, for bona fide business purposes—
      - (i) transfer trades or office trades;
      - (ii) an [exchange](/usc/7/1a.md?p=1-D) of—
        - (I) futures in connection with a cash [commodity](/usc/7/1a.md?p=9) transaction;
        - (II) futures for cash [commodities](/usc/7/1a.md?p=9); or
        - (III) futures for [swaps](/usc/7/1a.md?p=47-A); or
      - (iii) a [futures commission merchant](/usc/7/1a.md?p=28-A), acting as principal or agent, to enter into or confirm the execution of a [contract](/usc/7/518.md?p=4) for the purchase or sale of a [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27) if the [contract](/usc/7/518.md?p=4) is reported, recorded, or cleared in accordance with the rules of the [contract](/usc/7/518.md?p=4) market or a [derivatives clearing organization](/usc/7/1a.md?p=15-A).
  - (10) **Trade information—** The [board of trade](/usc/7/1a.md?p=6) shall maintain rules and procedures to provide for the recording and safe storage of all identifying trade information in a manner that enables the [contract](/usc/7/518.md?p=4) market to use the information—
    - (A) to assist in the prevention of customer and market abuses; and
    - (B) to provide evidence of any violations of the rules of the [contract](/usc/7/518.md?p=4) market.
  - (11) **Financial integrity of transactions—** The [board of trade](/usc/7/1a.md?p=6) shall establish and enforce—
    - (A) rules and procedures for ensuring the financial integrity of transactions entered into on or through the facilities of the [contract](/usc/7/518.md?p=4) market (including the clearance and settlement of the transactions with a [derivatives clearing organization](/usc/7/1a.md?p=15-A)); and
    - (B) rules to ensure—
      - (i) the financial integrity of any—
        - (I) [futures commission merchant](/usc/7/1a.md?p=28-A); and
        - (II) [introducing broker](/usc/7/1a.md?p=31-A); and
      - (ii) the protection of customer [funds](/usc/7/4531.md?p=5).
  - (12) **Protection of markets and market participants—** The [board of trade](/usc/7/1a.md?p=6) shall establish and enforce rules—
    - (A) to protect markets and market participants from abusive practices committed by any party, including abusive practices committed by a party acting as an agent for a participant; and
    - (B) to promote fair and equitable trading on the [contract](/usc/7/518.md?p=4) market.
  - (13) **Disciplinary procedures—** The [board of trade](/usc/7/1a.md?p=6) shall establish and enforce disciplinary procedures that authorize the [board of trade](/usc/7/1a.md?p=6) to discipline, suspend, or expel [members](/usc/7/1a.md?p=34) or market participants that violate the rules of the [board of trade](/usc/7/1a.md?p=6), or similar methods for performing the same functions, including delegation of the functions to third parties.
  - (14) **Dispute resolution—** The [board of trade](/usc/7/1a.md?p=6) shall establish and enforce rules regarding, and provide facilities for alternative dispute resolution as appropriate for, market participants and any market intermediaries.
  - (15) **Governance fitness standards—** The [board of trade](/usc/7/1a.md?p=6) shall establish and enforce appropriate fitness standards for directors, [members](/usc/7/1a.md?p=34) of any disciplinary [committee](/usc/7/2132.md?p=n), [members](/usc/7/1a.md?p=34) of the [contract](/usc/7/518.md?p=4) market, and any other [person](/usc/7/1a.md?p=38) with direct access to the facility (including any party affiliated with any [person](/usc/7/1a.md?p=38) described in this paragraph).
  - (16) **Conflicts of interest—** The [board of trade](/usc/7/1a.md?p=6) shall establish and enforce rules—
    - (A) to minimize conflicts of interest in the decision-making process of the [contract](/usc/7/518.md?p=4) market; and
    - (B) to establish a process for resolving conflicts of interest described in [subparagraph (A)](#d-16-A).
  - (17) **Composition of governing boards of contract markets—** The governance arrangements of the [board of trade](/usc/7/1a.md?p=6) shall be designed to permit consideration of the views of market participants.
  - (18) **Recordkeeping—** The [board of trade](/usc/7/1a.md?p=6) shall maintain records of all activities relating to the business of the [contract](/usc/7/518.md?p=4) market—
    - (A) in a form and manner that is acceptable to the [Commission](/usc/7/1a.md?p=8); and
    - (B) for a period of at least 5 years.
  - (19) **Antitrust considerations—** Unless necessary or appropriate to achieve the purposes of this chapter, the [board of trade](/usc/7/1a.md?p=6) shall not—
    - (A) adopt any rule or taking[^1] any action that results in any unreasonable restraint of trade; or
    - (B) impose any material anticompetitive burden on trading on the [contract](/usc/7/518.md?p=4) market.
  - (20) **System safeguards—** The [board of trade](/usc/7/1a.md?p=6) 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 have 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 responsibilities and obligations of the [board of trade](/usc/7/1a.md?p=6); and
    - (C) periodically conduct tests to verify that backup resources are sufficient to ensure continued [order](/usc/7/2902.md?p=10) processing and trade matching, price reporting, market surveillance, and maintenance of a comprehensive and accurate audit trail.
  - (21) **Financial resources—**
    - (A) **In general—** The [board of trade](/usc/7/1a.md?p=6) shall have adequate financial, operational, and managerial resources to discharge each responsibility of the [board of trade](/usc/7/1a.md?p=6).
    - (B) **Determination of adequacy—** The financial resources of the [board of trade](/usc/7/1a.md?p=6) shall be considered to be adequate if the value of the financial resources exceeds the total amount that would enable the [contract](/usc/7/518.md?p=4) market to cover the operating costs of the [contract](/usc/7/518.md?p=4) market for a 1-year period, as calculated on a rolling basis.
  - (22) **Diversity of board of directors—** The [board of trade](/usc/7/1a.md?p=6), if a publicly traded company, shall endeavor to recruit individuals to serve on the [board](/usc/7/1a.md?p=5) of directors and the other decision-making bodies (as determined by the [Commission](/usc/7/1a.md?p=8)) of the [board of trade](/usc/7/1a.md?p=6) from among, and to have the composition of the bodies reflect, a broad and culturally diverse pool of qualified candidates.
  - (23) **Securities and Exchange Commission—** The [board of trade](/usc/7/1a.md?p=6) shall keep any such records relating to [swaps](/usc/7/1a.md?p=47-A) defined in [section 1a(47)(A)(v) of this title](/usc/7/1a.md?p=47-A-v) open to inspection and examination by the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8).
- (e) **Current agricultural commodities—**
  - (1) Subject to paragraph (2) of this subsection, a [contract](/usc/7/518.md?p=4) for purchase or sale for [future delivery](/usc/7/1a.md?p=27) of an [agricultural commodity](/usc/7/5602.md?p=1) enumerated in [section 1a(9) of this title](/usc/7/1a.md?p=9) that is available for trade on a [contract](/usc/7/518.md?p=4) market, as of December 21, 2000, may be traded only on a [contract](/usc/7/518.md?p=4) market designated under this section.
  - (2) In [order](/usc/7/2902.md?p=10) to promote responsible economic or financial innovation and fair competition, the [Commission](/usc/7/1a.md?p=8), on application by any [person](/usc/7/1a.md?p=38), after notice and public comment and opportunity for hearing, may prescribe rules and regulations to provide for the [offer](/usc/7/1a.md?p=36) and sale of [contracts](/usc/7/518.md?p=4) for [future delivery](/usc/7/1a.md?p=27) or [options](/usc/7/1a.md?p=36) on such [contracts](/usc/7/518.md?p=4) to be conducted on a derivatives transaction execution facility.

# [§7a. Repealed. Pub. L. 111–203, title VII, § 734(a), July 21, 2010, 124 Stat. 1718 — repealed]



# §7a–1. Derivatives clearing organizations

- (a) **Registration requirement—**
  - (1) **In general—** Except as provided in [paragraph (2)](#a-2), it shall be unlawful for a [derivatives clearing organization](/usc/7/1a.md?p=15-A), directly or indirectly, to make use of the mails or any means or instrumentality of [interstate commerce](/usc/7/1a.md?p=30) to perform the functions of a [derivatives clearing organization](/usc/7/1a.md?p=15-A) with respect to—
    - (A) a [contract of sale](/usc/7/1a.md?p=13) of a [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27) (or an [option](/usc/7/1a.md?p=36) on the [contract of sale](/usc/7/1a.md?p=13)) or [option](/usc/7/1a.md?p=36) on a [commodity](/usc/7/1a.md?p=9), in each case, unless the [contract](/usc/7/518.md?p=4) or [option](/usc/7/1a.md?p=36) is—
      - (i) excluded from this chapter by subsection (a)(1)(C)(i), (c), or (f) of [section 2 of this title](/usc/7/2.md); or
      - (ii) a [security futures product](/usc/7/1a.md?p=45) cleared by a clearing agency registered with the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8) under the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 ([15 U.S.C. 78a](/usc/15/78a.md) et seq.); or
    - (B) a [swap](/usc/7/1a.md?p=47-A).
  - (2) **Exception—** [Paragraph (1)](#a-1) shall not apply to a [derivatives clearing organization](/usc/7/1a.md?p=15-A) that is registered with the [Commission](/usc/7/1a.md?p=8).
- (b) **Voluntary registration—** A [person](/usc/7/1a.md?p=38) that clears 1 or more agreements, [contracts](/usc/7/518.md?p=4), or transactions that are not required to be cleared under this chapter may register with the [Commission](/usc/7/1a.md?p=8) as a [derivatives clearing organization](/usc/7/1a.md?p=15-A).
- (c) **Registration of derivatives clearing organizations—**
  - (1) **Application—** A [person](/usc/7/1a.md?p=38) desiring to register as a [derivatives clearing organization](/usc/7/1a.md?p=15-A) shall submit to the [Commission](/usc/7/1a.md?p=8) an application in such form and containing such information as the [Commission](/usc/7/1a.md?p=8) may require for the purpose of making the determinations required for approval under [paragraph (2)](#c-2).
  - (2) **Core principles for derivatives clearing organizations—**
    - (A) **Compliance—**
      - (i) **In general—** To be registered and to maintain registration as a [derivatives clearing organization](/usc/7/1a.md?p=15-A), a [derivatives clearing organization](/usc/7/1a.md?p=15-A) shall comply with each core principle described in this paragraph and any requirement that the [Commission](/usc/7/1a.md?p=8) may impose by rule or regulation pursuant to [section 12a(5) of this title](/usc/7/12a.md?p=5).
      - (ii) **Discretion of derivatives clearing organization—** Subject to any rule or regulation prescribed by the [Commission](/usc/7/1a.md?p=8), a [derivatives clearing organization](/usc/7/1a.md?p=15-A) shall have reasonable discretion in establishing the manner by which the [derivatives clearing organization](/usc/7/1a.md?p=15-A) complies with each core principle described in this paragraph.
    - (B) **Financial resources—**
      - (i) **In general—** Each [derivatives clearing organization](/usc/7/1a.md?p=15-A) shall have adequate financial, operational, and managerial resources, as determined by the [Commission](/usc/7/1a.md?p=8), to discharge each responsibility of the [derivatives clearing organization](/usc/7/1a.md?p=15-A).
      - (ii) **Minimum amount of financial resources—** Each [derivatives clearing organization](/usc/7/1a.md?p=15-A) shall possess financial resources that, at a minimum, exceed the total amount that would—
        - (I) enable the organization to meet its financial obligations to its [members](/usc/7/1a.md?p=34) and participants notwithstanding a default by the [member](/usc/7/1a.md?p=34) or participant creating the largest financial exposure for that organization in extreme but plausible market conditions; and
        - (II) enable the [derivatives clearing organization](/usc/7/1a.md?p=15-A) to cover the operating costs of the [derivatives clearing organization](/usc/7/1a.md?p=15-A) for a period of 1 year (as calculated on a rolling basis).
    - (C) **Participant and product eligibility—**
      - (i) **In general—** Each [derivatives clearing organization](/usc/7/1a.md?p=15-A) 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](/usc/7/1a.md?p=15-A)) for [members](/usc/7/1a.md?p=34) of, and participants in, the [derivatives clearing organization](/usc/7/1a.md?p=15-A); and
        - (II) appropriate standards for determining the eligibility of agreements, [contracts](/usc/7/518.md?p=4), or transactions submitted to the [derivatives clearing organization](/usc/7/1a.md?p=15-A) for clearing.
      - (ii) **Required procedures—** Each [derivatives clearing organization](/usc/7/1a.md?p=15-A) shall establish and implement procedures to verify, on an ongoing basis, the compliance of each participation and membership requirement of the [derivatives clearing organization](/usc/7/1a.md?p=15-A).
      - (iii) **Requirements—** The participation and membership requirements of each [derivatives clearing organization](/usc/7/1a.md?p=15-A) shall—
        - (I) be objective;
        - (II) be publicly disclosed; and
        - (III) permit fair and open access.
    - (D) **Risk management—**
      - (i) **In general—** Each [derivatives clearing organization](/usc/7/1a.md?p=15-A) shall ensure that the [derivatives clearing organization](/usc/7/1a.md?p=15-A) possesses the ability to manage the risks associated with discharging the responsibilities of the [derivatives clearing organization](/usc/7/1a.md?p=15-A) through the use of appropriate tools and procedures.
      - (ii) **Measurement of credit exposure—** Each [derivatives clearing organization](/usc/7/1a.md?p=15-A) shall—
        - (I) not less than once during each business day of the [derivatives clearing organization](/usc/7/1a.md?p=15-A), measure the credit exposures of the [derivatives clearing organization](/usc/7/1a.md?p=15-A) to each [member](/usc/7/1a.md?p=34) and participant of the [derivatives clearing organization](/usc/7/1a.md?p=15-A); and
        - (II) monitor each exposure described in [subclause (I)](#c-2-D-ii-I) periodically during the business day of the [derivatives clearing organization](/usc/7/1a.md?p=15-A).
      - (iii) **Limitation of exposure to potential losses from defaults—** Each [derivatives clearing organization](/usc/7/1a.md?p=15-A), through margin requirements and other risk control mechanisms, shall limit the exposure of the [derivatives clearing organization](/usc/7/1a.md?p=15-A) to potential losses from defaults by [members](/usc/7/1a.md?p=34) and participants of the [derivatives clearing organization](/usc/7/1a.md?p=15-A) to ensure that—
        - (I) the operations of the [derivatives clearing organization](/usc/7/1a.md?p=15-A) would not be disrupted; and
        - (II) nondefaulting [members](/usc/7/1a.md?p=34) or participants would not be exposed to losses that nondefaulting [members](/usc/7/1a.md?p=34) or participants cannot anticipate or control.
      - (iv) **Margin requirements—** The margin required from each [member](/usc/7/1a.md?p=34) and participant of a [derivatives clearing organization](/usc/7/1a.md?p=15-A) shall be sufficient to cover potential exposures in normal market conditions.
      - (v) **Requirements regarding models and parameters—** Each model and parameter used in setting margin requirements under [clause (iv)](#c-2-D-iv) shall be—
        - (I) risk-based; and
        - (II) reviewed on a regular basis.
    - (E) **Settlement procedures—** Each [derivatives clearing organization](/usc/7/1a.md?p=15-A) shall—
      - (i) complete money settlements on a timely basis (but not less frequently than once each business day);
      - (ii) employ money settlement arrangements to eliminate or strictly limit the exposure of the [derivatives clearing organization](/usc/7/1a.md?p=15-A) to settlement [bank](/usc/7/27.md?p=a) risks (including credit and liquidity risks from the use of [banks](/usc/7/27.md?p=a) to effect money settlements);
      - (iii) ensure that money settlements are final when effected;
      - (iv) maintain an accurate record of the flow of [funds](/usc/7/4531.md?p=5) associated with each money settlement;
      - (v) possess the ability to comply with each term and condition of any permitted netting or offset arrangement with any other clearing organization;
      - (vi) regarding physical settlements, establish rules that clearly [state](/usc/7/1359aa.md?p=5) each obligation of the [derivatives clearing organization](/usc/7/1a.md?p=15-A) with respect to physical deliveries; and
      - (vii) ensure that each risk arising from an obligation described in [clause (vi)](#c-2-E-vi) is identified and managed.
    - (F) **Treatment of funds—**
      - (i) **Required standards and procedures—** Each [derivatives clearing organization](/usc/7/1a.md?p=15-A) shall establish standards and procedures that are designed to protect and ensure the safety of [member](/usc/7/1a.md?p=34) and participant [funds](/usc/7/4531.md?p=5) and assets.
      - (ii) **Holding of funds and assets—** Each [derivatives clearing organization](/usc/7/1a.md?p=15-A) shall hold [member](/usc/7/1a.md?p=34) and participant [funds](/usc/7/4531.md?p=5) and assets in a manner by which to minimize the risk of loss or of delay in the access by the [derivatives clearing organization](/usc/7/1a.md?p=15-A) to the assets and [funds](/usc/7/4531.md?p=5).
      - (iii) **Permissible investments—** [Funds](/usc/7/4531.md?p=5) and assets invested by a [derivatives clearing organization](/usc/7/1a.md?p=15-A) shall be held in instruments with minimal credit, market, and liquidity risks.
    - (G) **Default rules and procedures—**
      - (i) **In general—** Each [derivatives clearing organization](/usc/7/1a.md?p=15-A) shall have rules and procedures designed to allow for the efficient, fair, and safe management of events during which [members](/usc/7/1a.md?p=34) or participants—
        - (I) become insolvent; or
        - (II) otherwise default on the obligations of the [members](/usc/7/1a.md?p=34) or participants to the [derivatives clearing organization](/usc/7/1a.md?p=15-A).
      - (ii) **Default procedures—** Each [derivatives clearing organization](/usc/7/1a.md?p=15-A) shall—
        - (I) clearly [state](/usc/7/1359aa.md?p=5) the default procedures of the [derivatives clearing organization](/usc/7/1a.md?p=15-A);
        - (II) make publicly available the default rules of the [derivatives clearing organization](/usc/7/1a.md?p=15-A); and
        - (III) ensure that the [derivatives clearing organization](/usc/7/1a.md?p=15-A) may take timely action—
          - (aa) to contain losses and liquidity pressures; and
          - (bb) to continue meeting each obligation of the [derivatives clearing organization](/usc/7/1a.md?p=15-A).
    - (H) **Rule enforcement—** Each [derivatives clearing organization](/usc/7/1a.md?p=15-A) shall—
      - (i) maintain adequate arrangements and resources for—
        - (I) the effective monitoring and enforcement of compliance with the rules of the [derivatives clearing organization](/usc/7/1a.md?p=15-A); and
        - (II) the resolution of disputes;
      - (ii) have the [authority](/usc/7/2009aa.md?p=1) and ability to discipline, limit, suspend, or terminate the activities of a [member](/usc/7/1a.md?p=34) or participant due to a violation by the [member](/usc/7/1a.md?p=34) or participant of any rule of the [derivatives clearing organization](/usc/7/1a.md?p=15-A); and
      - (iii) report to the [Commission](/usc/7/1a.md?p=8) regarding rule enforcement activities and sanctions imposed against [members](/usc/7/1a.md?p=34) and participants as provided in [clause (ii)](#c-2-H-ii).
    - (I) **System safeguards—** Each [derivatives clearing organization](/usc/7/1a.md?p=15-A) 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 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—
        - (I) the timely recovery and resumption of operations of the [derivatives clearing organization](/usc/7/1a.md?p=15-A); and
        - (II) the fulfillment of each obligation and responsibility of the [derivatives clearing organization](/usc/7/1a.md?p=15-A); and
      - (iii) periodically conduct tests to verify that the backup resources of the [derivatives clearing organization](/usc/7/1a.md?p=15-A) are sufficient to ensure daily processing, clearing, and settlement.
    - (J) **Reporting—** Each [derivatives clearing organization](/usc/7/1a.md?p=15-A) shall provide to the [Commission](/usc/7/1a.md?p=8) all information that the [Commission](/usc/7/1a.md?p=8) determines to be necessary to conduct oversight of the [derivatives clearing organization](/usc/7/1a.md?p=15-A).
    - (K) **Recordkeeping—** Each [derivatives clearing organization](/usc/7/1a.md?p=15-A) shall maintain records of all activities related to the business of the [derivatives clearing organization](/usc/7/1a.md?p=15-A) as a [derivatives clearing organization](/usc/7/1a.md?p=15-A)—
      - (i) in a form and manner that is acceptable to the [Commission](/usc/7/1a.md?p=8); and
      - (ii) for a period of not less than 5 years.
    - (L) **Public information—**
      - (i) **In general—** Each [derivatives clearing organization](/usc/7/1a.md?p=15-A) shall provide to market participants sufficient information to enable the market participants to identify and evaluate accurately the risks and costs associated with using the services of the [derivatives clearing organization](/usc/7/1a.md?p=15-A).
      - (ii) **Availability of information—** Each [derivatives clearing organization](/usc/7/1a.md?p=15-A) shall make information concerning the rules and operating and default procedures governing the clearing and settlement systems of the [derivatives clearing organization](/usc/7/1a.md?p=15-A) available to market participants.
      - (iii) **Public disclosure—** Each [derivatives clearing organization](/usc/7/1a.md?p=15-A) shall disclose publicly and to the [Commission](/usc/7/1a.md?p=8) information concerning—
        - (I) the terms and conditions of each [contract](/usc/7/518.md?p=4), agreement, and transaction cleared and settled by the [derivatives clearing organization](/usc/7/1a.md?p=15-A);
        - (II) each clearing and other fee that the [derivatives clearing organization](/usc/7/1a.md?p=15-A) charges the [members](/usc/7/1a.md?p=34) and participants of the [derivatives clearing organization](/usc/7/1a.md?p=15-A);
        - (III) the margin-setting methodology, and the size and composition, of the financial resource package of the [derivatives clearing organization](/usc/7/1a.md?p=15-A);
        - (IV) daily settlement prices, volume, and open interest for each [contract](/usc/7/518.md?p=4) settled or cleared by the [derivatives clearing organization](/usc/7/1a.md?p=15-A); and
        - (V) any other matter relevant to participation in the settlement and clearing activities of the [derivatives clearing organization](/usc/7/1a.md?p=15-A).
    - (M) **Information-sharing—** Each [derivatives clearing organization](/usc/7/1a.md?p=15-A) shall—
      - (i) enter into, and abide by the terms of, each appropriate and applicable domestic and international information-sharing agreement; and
      - (ii) use relevant information obtained from each agreement described in [clause (i)](#c-2-M-i) in carrying out the risk management program of the [derivatives clearing organization](/usc/7/1a.md?p=15-A).
    - (N) **Antitrust considerations—** Unless necessary or appropriate to achieve the purposes of this chapter, a [derivatives clearing organization](/usc/7/1a.md?p=15-A) shall not—
      - (i) adopt any rule or take any action that results in any unreasonable restraint of trade; or
      - (ii) impose any material anticompetitive burden.
    - (O) **Governance fitness standards—**
      - (i) **Governance arrangements—** Each [derivatives clearing organization](/usc/7/1a.md?p=15-A) shall establish governance arrangements that are transparent—
        - (I) to fulfill public interest requirements; and
        - (II) to permit the consideration of the views of owners and participants.
      - (ii) **Fitness standards—** Each [derivatives clearing organization](/usc/7/1a.md?p=15-A) shall establish and enforce appropriate fitness standards for—
        - (I) directors;
        - (II) [members](/usc/7/1a.md?p=34) of any disciplinary [committee](/usc/7/2132.md?p=n);
        - (III) [members](/usc/7/1a.md?p=34) of the [derivatives clearing organization](/usc/7/1a.md?p=15-A);
        - (IV) any other individual or entity with direct access to the settlement or clearing activities of the [derivatives clearing organization](/usc/7/1a.md?p=15-A); and
        - (V) any party affiliated with any individual or entity described in this clause.
    - (P) **Conflicts of interest—** Each [derivatives clearing organization](/usc/7/1a.md?p=15-A) shall—
      - (i) establish and enforce rules to minimize conflicts of interest in the decision-making process of the [derivatives clearing organization](/usc/7/1a.md?p=15-A); and
      - (ii) establish a process for resolving conflicts of interest described in [clause (i)](#c-2-P-i).
    - (Q) **Composition of governing boards—** Each [derivatives clearing organization](/usc/7/1a.md?p=15-A) shall ensure that the composition of the governing [board](/usc/7/1a.md?p=5) or [committee](/usc/7/2132.md?p=n) of the [derivatives clearing organization](/usc/7/1a.md?p=15-A) includes market participants.
    - (R) **Legal risk—** Each [derivatives clearing organization](/usc/7/1a.md?p=15-A) shall have a well-founded, transparent, and enforceable legal framework for each aspect of the activities of the [derivatives clearing organization](/usc/7/1a.md?p=15-A).
  - (3) **Orders concerning competition—** A [derivatives clearing organization](/usc/7/1a.md?p=15-A) may request the [Commission](/usc/7/1a.md?p=8) to issue an [order](/usc/7/2902.md?p=10) concerning whether a rule or practice of the applicant is the least anticompetitive means of achieving the objectives, purposes, and policies of this chapter.
- (d) **Existing derivatives clearing organizations—** A [derivatives clearing organization](/usc/7/1a.md?p=15-A) shall be deemed to be registered under this section to the extent that the [derivatives clearing organization](/usc/7/1a.md?p=15-A) clears agreements, [contracts](/usc/7/518.md?p=4), or transactions for a [board of trade](/usc/7/1a.md?p=6) that has been designated by the [Commission](/usc/7/1a.md?p=8) as a [contract](/usc/7/518.md?p=4) market for such agreements, [contracts](/usc/7/518.md?p=4), or transactions before December 21, 2000.
- (e) **Appointment of trustee—**
  - (1) **In general—** If a proceeding under [section 7b of this title](/usc/7/7b.md) results in the suspension or revocation of the registration of a [derivatives clearing organization](/usc/7/1a.md?p=15-A), or if a [derivatives clearing organization](/usc/7/1a.md?p=15-A) withdraws from registration, the [Commission](/usc/7/1a.md?p=8), on notice to the [derivatives clearing organization](/usc/7/1a.md?p=15-A), may apply to the appropriate [United States](/usc/7/6402.md?p=8) district court where the [derivatives clearing organization](/usc/7/1a.md?p=15-A) is located for the appointment of a trustee.
  - (2) **Assumption of jurisdiction—** If the [Commission](/usc/7/1a.md?p=8) applies for appointment of a trustee under [paragraph (1)](#e-1)—
    - (A) the court may take exclusive jurisdiction over the [derivatives clearing organization](/usc/7/1a.md?p=15-A) and the records and assets of the [derivatives clearing organization](/usc/7/1a.md?p=15-A), wherever located; and
    - (B) if the court takes jurisdiction under [subparagraph (A)](#e-2-A), the court shall appoint the [Commission](/usc/7/1a.md?p=8), or a [person](/usc/7/1a.md?p=38) designated by the [Commission](/usc/7/1a.md?p=8), as trustee with power to take possession and continue to operate or terminate the operations of the [derivatives clearing organization](/usc/7/1a.md?p=15-A) in an orderly manner for the protection of participants, subject to such terms and conditions as the court may prescribe.
- (f) **Linking of regulated clearing facilities—**
  - (1) **In general—** The [Commission](/usc/7/1a.md?p=8) shall facilitate the linking or coordination of [derivatives clearing organizations](/usc/7/1a.md?p=15-A) registered under this chapter with other regulated clearance facilities for the coordinated settlement of cleared transactions. In [order](/usc/7/2902.md?p=10) to minimize systemic risk, under no circumstances shall a [derivatives clearing organization](/usc/7/1a.md?p=15-A) be compelled to accept the counterparty credit risk of another clearing organization.
  - (2) **Coordination—** In carrying out [paragraph (1)](#f-1), the [Commission](/usc/7/1a.md?p=8) shall coordinate with the Federal banking agencies and the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8).
- (g) **Existing depository institutions and clearing agencies—**
  - (1) **In general—** A depository institution or clearing agency registered with the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8) under the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 ([15 U.S.C. 78a](/usc/15/78a.md) et seq.) that is required to be registered as a [derivatives clearing organization](/usc/7/1a.md?p=15-A) under this section is deemed to be registered under this section to the extent that, before July 21, 2010—
    - (A) the depository institution [cleared swaps](/usc/7/1a.md?p=7) as a multilateral clearing organization; or
    - (B) the clearing agency [cleared swaps](/usc/7/1a.md?p=7).
  - (2) **Conversion of depository institutions—** A depository institution to which this subsection applies may, by the vote of the shareholders owning not less than 51 percent of the voting interests of the depository institution, be converted into a [State](/usc/7/1359aa.md?p=5) [corporation](/usc/7/1502.md?p=b-5), partnership, limited liability company, or similar legal form pursuant to a plan of conversion, if the conversion is not in contravention of applicable [State](/usc/7/1359aa.md?p=5) law.
  - (3) **Sharing of information—** The [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8) shall make available to the [Commission](/usc/7/1a.md?p=8), upon request, all information determined to be relevant by the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8) regarding a clearing agency deemed to be registered with the [Commission](/usc/7/1a.md?p=8) under [paragraph (1)](#g-1).
- (h) **Exemptions—** The [Commission](/usc/7/1a.md?p=8) may exempt, conditionally or unconditionally, a [derivatives clearing organization](/usc/7/1a.md?p=15-A) from registration under this section for the clearing of [swaps](/usc/7/1a.md?p=47-A) if the [Commission](/usc/7/1a.md?p=8) determines that the [derivatives clearing organization](/usc/7/1a.md?p=15-A) is subject to comparable, comprehensive supervision and regulation by the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8) or the appropriate government [authorities](/usc/7/2009aa.md?p=1) in the home country of the organization. Such conditions may include, but are not limited to, requiring that the [derivatives clearing organization](/usc/7/1a.md?p=15-A) be available for inspection by the [Commission](/usc/7/1a.md?p=8) and make available all information requested by the [Commission](/usc/7/1a.md?p=8).
- (i) **Designation of chief compliance officer—**
  - (1) **In general—** Each [derivatives clearing organization](/usc/7/1a.md?p=15-A) shall designate an individual to serve as a chief compliance officer.
  - (2) **Duties—** The chief compliance officer shall—
    - (A) report directly to the [board](/usc/7/1a.md?p=5) or to the senior officer of the [derivatives clearing organization](/usc/7/1a.md?p=15-A);
    - (B) review the compliance of the [derivatives clearing organization](/usc/7/1a.md?p=15-A) with respect to the core principles described in [subsection (c)(2)](#c-2);
    - (C) in consultation with the [board](/usc/7/1a.md?p=5) of the [derivatives clearing organization](/usc/7/1a.md?p=15-A), a body performing a function similar to the [board](/usc/7/1a.md?p=5) of the [derivatives clearing organization](/usc/7/1a.md?p=15-A), or the senior officer of the [derivatives clearing organization](/usc/7/1a.md?p=15-A), resolve any conflicts of interest that may arise;
    - (D) be responsible for administering each policy and procedure that is required to be established pursuant to this section;
    - (E) ensure compliance with this chapter (including regulations) relating to agreements, [contracts](/usc/7/518.md?p=4), or transactions, including each rule prescribed by the [Commission](/usc/7/1a.md?p=8) under this section;
    - (F) establish procedures for the remediation of noncompliance issues identified by the compliance officer through any—
      - (i) compliance office review;
      - (ii) look-back;
      - (iii) internal or external audit finding;
      - (iv) self-reported error; or
      - (v) validated complaint; and
    - (G) establish and follow appropriate procedures for the handling, management response, remediation, retesting, and closing of noncompliance issues.
  - (3) **Annual reports—**
    - (A) **In general—** In accordance with rules prescribed by the [Commission](/usc/7/1a.md?p=8), the chief compliance officer shall annually prepare and sign a report that contains a description of—
      - (i) the compliance of the [derivatives clearing organization](/usc/7/1a.md?p=15-A) of the compliance officer with respect to this chapter (including regulations); and
      - (ii) each policy and procedure of the [derivatives clearing organization](/usc/7/1a.md?p=15-A) of the compliance officer (including the code of ethics and conflict of interest policies of the [derivatives clearing organization](/usc/7/1a.md?p=15-A)).
    - (B) **Requirements—** A compliance report under [subparagraph (A)](#i-3-A) shall—
      - (i) accompany each appropriate financial report of the [derivatives clearing organization](/usc/7/1a.md?p=15-A) that is required to be furnished to the [Commission](/usc/7/1a.md?p=8) pursuant to this section; and
      - (ii) include a certification that, under penalty of law, the compliance report is accurate and complete.
- (k) **[^1] Reporting requirements—**
  - (1) **Duty of derivatives clearing organizations—** Each [derivatives clearing organization](/usc/7/1a.md?p=15-A) that clears [swaps](/usc/7/1a.md?p=47-A) shall provide to the [Commission](/usc/7/1a.md?p=8) all information that is determined by the [Commission](/usc/7/1a.md?p=8) to be necessary to perform each responsibility of the [Commission](/usc/7/1a.md?p=8) under this chapter.
  - (2) **Data collection and maintenance requirements—** The [Commission](/usc/7/1a.md?p=8) shall adopt data collection and maintenance requirements for [swaps](/usc/7/1a.md?p=47-A) cleared by [derivatives clearing organizations](/usc/7/1a.md?p=15-A) that are comparable to the corresponding requirements for—
    - (A) [swaps](/usc/7/1a.md?p=47-A) data reported to [swap data repositories](/usc/7/1a.md?p=48); and
    - (B) [swaps](/usc/7/1a.md?p=47-A) traded on [swap execution facilities](/usc/7/1a.md?p=50).
  - (3) **Reports on security-based swap agreements to be shared with the Securities and Exchange Commission—**
    - (A) **In general—** A [derivatives clearing organization](/usc/7/1a.md?p=15-A) that clears [security-based swap](/usc/7/1a.md?p=42) agreements (as defined in [section 1a(47)(A)(v) of this title](/usc/7/1a.md?p=47-A-v)) shall, upon request, open to inspection and examination to the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8) all books and records relating to such [security-based swap](/usc/7/1a.md?p=42) agreements, consistent with the confidentiality and disclosure requirements of [section 12 of this title](/usc/7/12.md).
    - (B) **Jurisdiction—** Nothing in this paragraph shall affect the exclusive jurisdiction of the [Commission](/usc/7/1a.md?p=8) to prescribe recordkeeping and reporting requirements for a [derivatives clearing organization](/usc/7/1a.md?p=15-A) that is registered with the [Commission](/usc/7/1a.md?p=8).
  - (4) **Information sharing—** Subject to [section 12 of this title](/usc/7/12.md), and upon request, the [Commission](/usc/7/1a.md?p=8) shall share information collected under [paragraph (2)](#k-2) with—
    - (A) the [Board](/usc/7/1a.md?p=5);
    - (B) the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8);
    - (C) each appropriate [prudential regulator](/usc/7/1a.md?p=39);
    - (D) the Financial Stability Oversight [Council](/usc/7/3402.md?p=i);
    - (E) the Department of Justice; and
    - (F) any other [person](/usc/7/1a.md?p=38) that the [Commission](/usc/7/1a.md?p=8) determines to be appropriate, including—
      - (i) foreign financial supervisors (including [foreign futures authorities](/usc/7/1a.md?p=26));
      - (ii) foreign central [banks](/usc/7/27.md?p=a); and
      - (iii) foreign ministries.
  - (5) **Confidentiality agreement—** Before the [Commission](/usc/7/1a.md?p=8) may share information with any entity described in [paragraph (4)](#k-4), the [Commission](/usc/7/1a.md?p=8) shall receive a written agreement from each entity stating that the entity shall abide by the confidentiality requirements described in [section 12 of this title](/usc/7/12.md) relating to the information on [swap](/usc/7/1a.md?p=47-A) transactions that is provided.
  - (6) **Public information—** Each [derivatives clearing organization](/usc/7/1a.md?p=15-A) that clears [swaps](/usc/7/1a.md?p=47-A) shall provide to the [Commission](/usc/7/1a.md?p=8) (including any designee of the [Commission](/usc/7/1a.md?p=8)) information under [paragraph (2)](#k-2) in such form and at such frequency as is required by the [Commission](/usc/7/1a.md?p=8) to comply with the public reporting requirements contained in [section 2(a)(13) of this title](/usc/7/2.md?p=a-13).

# §7a–2. Common provisions applicable to registered entities

- (a) **Acceptable business practices under core principles—**
  - (1) **In general—** Consistent with the purposes of this chapter, the [Commission](/usc/7/1a.md?p=8) may issue interpretations, or approve interpretations submitted to the [Commission](/usc/7/1a.md?p=8), of sections [7(d)](/usc/7/7.md?p=d) and [7a–1(c)(2)](/usc/7/7a–1.md?p=c-2) of this title, to describe what would constitute an acceptable business practice under such sections.
  - (2) **Effect of interpretation—** An interpretation issued under [paragraph (1)](#a-1) may provide the exclusive means for complying with each section described in [paragraph (1)](#a-1).
- (b) **Delegation of functions under core principles—**
  - (1) **In general—** A [contract](/usc/7/518.md?p=4) market, derivatives transaction execution facility, or [electronic trading facility](/usc/7/1a.md?p=16) with respect to a [significant price discovery contract](/usc/7/1a.md?p=46) may comply with any applicable core principle through delegation of any relevant function to a registered futures association or a [registered entity](/usc/7/1a.md?p=40) that is not an [electronic trading facility](/usc/7/1a.md?p=16).
  - (2) **Responsibility—** A [contract](/usc/7/518.md?p=4) market, derivatives transaction execution facility, or [electronic trading facility](/usc/7/1a.md?p=16) that delegates a function under [paragraph (1)](#b-1) shall remain responsible for carrying out the function.
  - (3) **Noncompliance—** If a [contract](/usc/7/518.md?p=4) market, derivatives transaction execution facility, or [electronic trading facility](/usc/7/1a.md?p=16) that delegates a function under [paragraph (1)](#b-1) becomes aware that a delegated function is not being performed as required under this chapter, the [contract](/usc/7/518.md?p=4) market, derivatives transaction execution facility, or [electronic trading facility](/usc/7/1a.md?p=16) shall promptly take steps to address the noncompliance.
- (c) **New contracts, new rules, and rule amendments—**
  - (1) **In general—** A [registered entity](/usc/7/1a.md?p=40) may elect to list for trading or accept for clearing any new [contract](/usc/7/518.md?p=4), or other instrument, or may elect to approve and implement any new rule or rule amendment, by providing to the [Commission](/usc/7/1a.md?p=8) (and the Secretary of the Treasury, in the case of a [contract of sale](/usc/7/1a.md?p=13) of a government [security](/usc/7/1a.md?p=41) for [future delivery](/usc/7/1a.md?p=27) (or [option](/usc/7/1a.md?p=36) on such a [contract](/usc/7/518.md?p=4)) or a rule or rule amendment specifically related to such a [contract](/usc/7/518.md?p=4)) a written certification that the new [contract](/usc/7/518.md?p=4) or instrument or clearing of the new [contract](/usc/7/518.md?p=4) or instrument, new rule, or rule amendment complies with this chapter (including regulations under this chapter).
  - (2) **Rule review—** The new rule or rule amendment described in [paragraph (1)](#c-1) shall become effective, pursuant to the certification of the [registered entity](/usc/7/1a.md?p=40) and notice of such certification to its [members](/usc/7/1a.md?p=34) (in a manner to be determined by the [Commission](/usc/7/1a.md?p=8)), on the date that is 10 business days after the date on which the [Commission](/usc/7/1a.md?p=8) receives the certification (or such shorter period as determined by the [Commission](/usc/7/1a.md?p=8) by rule or regulation) unless the [Commission](/usc/7/1a.md?p=8) notifies the [registered entity](/usc/7/1a.md?p=40) within such time that it 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](/usc/7/1a.md?p=40), or a potential inconsistency with this chapter (including regulations under this chapter).
  - (3) **Stay of certification for rules—**
    - (A) A notification by the [Commission](/usc/7/1a.md?p=8) pursuant to [paragraph (2)](#c-2) shall stay the certification of the new rule or rule amendment for up to an additional 90 days from the date of the notification.
    - (B) A rule or rule amendment subject to a stay pursuant to [subparagraph (A)](#c-3-A) shall become effective, pursuant to the certification of the [registered entity](/usc/7/1a.md?p=40), at the expiration of the period described in [subparagraph (A)](#c-3-A) unless the [Commission](/usc/7/1a.md?p=8)—
      - (i) withdraws the stay prior to that time; or
      - (ii) notifies the [registered entity](/usc/7/1a.md?p=40) during such period that it objects to the proposed certification on the grounds that it is inconsistent with this chapter (including regulations under this chapter).
    - (C) The [Commission](/usc/7/1a.md?p=8) shall provide a not less than 30-day public comment period, within the 90-day period in which the stay is in effect as described in [subparagraph (A)](#c-3-A), whenever the [Commission](/usc/7/1a.md?p=8) reviews a rule or rule amendment pursuant to a notification by the [Commission](/usc/7/1a.md?p=8) under this paragraph.
  - (4) **Prior approval—**
    - (A) **In general—** A [registered entity](/usc/7/1a.md?p=40) may request that the [Commission](/usc/7/1a.md?p=8) grant prior approval to any new [contract](/usc/7/518.md?p=4) or other instrument, new rule, or rule amendment.
    - (B) **Prior approval required—** Notwithstanding any other provision of this section, a designated [contract](/usc/7/518.md?p=4) market shall submit to the [Commission](/usc/7/1a.md?p=8) for prior approval each rule amendment that materially changes the terms and conditions, as determined by the [Commission](/usc/7/1a.md?p=8), in any [contract of sale](/usc/7/1a.md?p=13) for [future delivery](/usc/7/1a.md?p=27) of a [commodity](/usc/7/1a.md?p=9) specifically enumerated in [section 1a(10)](/usc/7/1a.md?p=10)[^1] of this title (or any [option](/usc/7/1a.md?p=36) thereon) traded through its facilities if the rule amendment applies to [contracts](/usc/7/518.md?p=4) and delivery months which have already been listed for trading and have open interest.
    - (C) **Deadline—** If prior approval is requested under [subparagraph (A)](#c-4-A), the [Commission](/usc/7/1a.md?p=8) shall take final action on the request not later than 90 days after submission of the request, unless the [person](/usc/7/1a.md?p=38) submitting the request agrees to an [extension](/usc/7/5801.md?p=b-5) of the time limitation established under this subparagraph.
  - (5) **Approval—**
    - (A) **Rules—** The [Commission](/usc/7/1a.md?p=8) shall approve a new rule, or rule amendment, of a [registered entity](/usc/7/1a.md?p=40) unless the [Commission](/usc/7/1a.md?p=8) finds that the new rule, or rule amendment, is inconsistent with this chapter (including regulations).
    - (B) **Contracts and instruments—** The [Commission](/usc/7/1a.md?p=8) shall approve a new [contract](/usc/7/518.md?p=4) or other instrument unless the [Commission](/usc/7/1a.md?p=8) finds that the new [contract](/usc/7/518.md?p=4) or other instrument would violate this chapter (including regulations).
    - (C) **Special rule for review and approval of event contracts and swaps contracts—**
      - (i) **Event contracts—** In connection with the listing of agreements, [contracts](/usc/7/518.md?p=4), transactions, or [swaps](/usc/7/1a.md?p=47-A) in [excluded commodities](/usc/7/1a.md?p=19) that are based upon the occurrence, extent of an occurrence, or contingency (other than a change in the price, rate, value, or levels of a [commodity](/usc/7/1a.md?p=9) described in [section 1a(2)(i)](/usc/7/1a.md)[^2] of this title), by a designated [contract](/usc/7/518.md?p=4) market or [swap execution facility](/usc/7/1a.md?p=50), the [Commission](/usc/7/1a.md?p=8) may determine that such agreements, [contracts](/usc/7/518.md?p=4), or transactions are contrary to the public interest if the agreements, [contracts](/usc/7/518.md?p=4), or transactions involve—
        - (I) activity that is unlawful under any Federal or [State](/usc/7/1359aa.md?p=5) law;
        - (II) terrorism;
        - (III) assassination;
        - (IV) war;
        - (V) gaming; or
        - (VI) other similar activity determined by the [Commission](/usc/7/1a.md?p=8), by rule or regulation, to be contrary to the public interest.
      - (ii) **Prohibition—** No agreement, [contract](/usc/7/518.md?p=4), or transaction determined by the [Commission](/usc/7/1a.md?p=8) to be contrary to the public interest under [clause (i)](#c-5-C-i) may be listed or made available for clearing or trading on or through a [registered entity](/usc/7/1a.md?p=40).
      - (iii) **Swaps contracts—**
        - (I) **In general—** In connection with the listing of a [swap](/usc/7/1a.md?p=47-A) for clearing by a [derivatives clearing organization](/usc/7/1a.md?p=15-A), the [Commission](/usc/7/1a.md?p=8) shall determine, upon request or on its own motion, the initial eligibility, or the continuing qualification, of a [derivatives clearing organization](/usc/7/1a.md?p=15-A) to clear such a [swap](/usc/7/1a.md?p=47-A) under those criteria, conditions, or rules that the [Commission](/usc/7/1a.md?p=8), in its discretion, determines.
        - (II) **Requirements—** Any such criteria, conditions, or rules shall consider—
          - (aa) the financial integrity of the [derivatives clearing organization](/usc/7/1a.md?p=15-A); and
          - (bb) any other factors which the [Commission](/usc/7/1a.md?p=8) determines may be appropriate.
      - (iv) **Deadline—** The [Commission](/usc/7/1a.md?p=8) shall take final action under clauses [(i)](#c-5-C-i) and [(ii)](#c-5-C-ii) in not later than 90 days from the commencement of its review unless the party seeking to [offer](/usc/7/1a.md?p=36) the [contract](/usc/7/518.md?p=4) or [swap](/usc/7/1a.md?p=47-A) agrees to an [extension](/usc/7/5801.md?p=b-5) of this time limitation.
- (d) **Repealed. Pub. L. 111–203, title VII, § 745(c), July 21, 2010, 124 Stat. 1737—**
- (e) **Reservation of emergency authority—** Nothing in this section shall limit or in any way affect the emergency powers of the [Commission](/usc/7/1a.md?p=8) provided in [section 12a(9) of this title](/usc/7/12a.md?p=9).
- (f) **Rules to avoid duplicative regulation of dual registrants—** Consistent with this chapter, each designated [contract](/usc/7/518.md?p=4) market and registered derivatives transaction execution facility shall issue such rules as are necessary to avoid duplicative or conflicting rules applicable to any [futures commission merchant](/usc/7/1a.md?p=28-A) registered with the [Commission](/usc/7/1a.md?p=8) pursuant to [section 6f(a) of this title](/usc/7/6f.md?p=a) (except [paragraph (2)](#f-2) thereof), that is also registered with the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8) pursuant to [section 78o(b)](/usc/15/78o.md?p=b) of title 15 (except paragraph (11) thereof) with respect to the application of—
  - (1) rules of such designated [contract](/usc/7/518.md?p=4) market or registered derivatives transaction execution facility of the type specified in [section 6d(e) of this title](/usc/7/6d.md?p=e) involving [security futures products](/usc/7/1a.md?p=45); and
  - (2) similar rules of national [securities](/usc/7/1a.md?p=41) associations registered pursuant to [section 78o–3(a)](/usc/15/78o–3.md?p=a) of title 15 and national [securities](/usc/7/1a.md?p=41) [exchanges](/usc/7/1a.md?p=1-D) registered pursuant to [section 78f(g) of title 15](/usc/15/78f.md?p=g) involving [security futures products](/usc/7/1a.md?p=45).

# [§7a–3. Repealed. Pub. L. 111–203, title VII, § 734(a), July 21, 2010, 124 Stat. 1718 — repealed]



# §7b. Suspension or revocation of designation as registered entity


The failure of a [registered entity](/usc/7/1a.md?p=40) to comply with any provision of this chapter, or any regulation or [order](/usc/7/2902.md?p=10) of the [Commission](/usc/7/1a.md?p=8) under this chapter, shall be cause for the suspension of the [registered entity](/usc/7/1a.md?p=40) for a period not to exceed 180 days, or revocation of designation as a [registered entity](/usc/7/1a.md?p=40), in accordance with the procedures and subject to the judicial review provided in [section 8(b) of this title](/usc/7/8.md?p=b).


# §7b–1. Designation of securities exchanges and associations as contract markets

- (a) Any [board of trade](/usc/7/1a.md?p=6) that is registered with the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8) as a national [securities](/usc/7/1a.md?p=41) [exchange](/usc/7/1a.md?p=1-D), is a national [securities](/usc/7/1a.md?p=41) association registered pursuant to [section 78o–3(a)](/usc/15/78o–3.md?p=a) of title 15, or is an [alternative trading system](/usc/7/1a.md?p=1) shall be a designated [contract](/usc/7/518.md?p=4) market in [security futures products](/usc/7/1a.md?p=45) if—
  - (1) such national [securities](/usc/7/1a.md?p=41) [exchange](/usc/7/1a.md?p=1-D), national [securities](/usc/7/1a.md?p=41) association, or [alternative trading system](/usc/7/1a.md?p=1) lists or trades no other [contracts](/usc/7/518.md?p=4) of sale for [future delivery](/usc/7/1a.md?p=27), except for [security futures products](/usc/7/1a.md?p=45);
  - (2) such national [securities](/usc/7/1a.md?p=41) [exchange](/usc/7/1a.md?p=1-D), national [securities](/usc/7/1a.md?p=41) association, or [alternative trading system](/usc/7/1a.md?p=1) files written notice with the [Commission](/usc/7/1a.md?p=8) in such form as the [Commission](/usc/7/1a.md?p=8), by rule, may prescribe containing such information as the [Commission](/usc/7/1a.md?p=8), by rule, may prescribe as necessary or appropriate in the public interest or for the protection of customers; and
  - (3) the registration of such national [securities](/usc/7/1a.md?p=41) [exchange](/usc/7/1a.md?p=1-D), national [securities](/usc/7/1a.md?p=41) association, or [alternative trading system](/usc/7/1a.md?p=1) is not suspended pursuant to an [order](/usc/7/2902.md?p=10) by the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8).

  Such designation shall be effective contemporaneously with the submission of notice, in written or electronic form, to the [Commission](/usc/7/1a.md?p=8).

- (b)
  - (1) A national [securities](/usc/7/1a.md?p=41) [exchange](/usc/7/1a.md?p=1-D), national [securities](/usc/7/1a.md?p=41) association, or [alternative trading system](/usc/7/1a.md?p=1) that is designated as a [contract](/usc/7/518.md?p=4) market pursuant to this section shall be exempt from the following provisions of this chapter and the rules thereunder:
    - (A) Subsections (c), (e), and (g) of [section 6c of this title](/usc/7/6c.md).
    - (B) [Section 6j of this title](/usc/7/6j.md).
    - (C) [Section 7 of this title](/usc/7/7.md).
    - (D) [Section 7a–2 of this title](/usc/7/7a–2.md).
    - (E) [Section 10a of this title](/usc/7/10a.md).
    - (F) [Section 12(d) of this title](/usc/7/12.md?p=d).
    - (G) [Section 13(f)](/usc/7/13.md)[^1] of this title.
    - (H) [Section 20 of this title](/usc/7/20.md).
  - (2) An [alternative trading system](/usc/7/1a.md?p=1) that is a designated [contract](/usc/7/518.md?p=4) market under this section shall be required to be a [member](/usc/7/1a.md?p=34) of a futures association registered under [section 21 of this title](/usc/7/21.md) and shall be exempt from any provision of this chapter that would require such [alternative trading system](/usc/7/1a.md?p=1) to—
    - (A) set rules governing the conduct of subscribers other than the conduct of such subscribers’ trading on such [alternative trading system](/usc/7/1a.md?p=1); or
    - (B) discipline subscribers other than by exclusion from trading.
  - (3) To the extent that an [alternative trading system](/usc/7/1a.md?p=1) is exempt from any provision of this chapter pursuant to paragraph (2) of this subsection, the futures association registered under [section 21 of this title](/usc/7/21.md) of which the [alternative trading system](/usc/7/1a.md?p=1) is a [member](/usc/7/1a.md?p=34) shall set rules governing the conduct of subscribers to the [alternative trading system](/usc/7/1a.md?p=1) and discipline the subscribers.
  - (4)
    - (A) Except as provided in [subparagraph (B)](#b-4-B), but notwithstanding any other provision of this chapter, the [Commission](/usc/7/1a.md?p=8), by rule, regulation, or [order](/usc/7/2902.md?p=10), may conditionally or unconditionally exempt any designated [contract](/usc/7/518.md?p=4) market in [security futures](/usc/7/1a.md?p=44) subject to the designation requirement of this section from any provision of this chapter or of any rule or regulation thereunder, to the extent such exemption is necessary or appropriate in the public interest and is consistent with the protection of investors.
    - (B) The [Commission](/usc/7/1a.md?p=8) shall, by rule or regulation, determine the procedures under which an exemptive [order](/usc/7/2902.md?p=10) under this section is granted and may, in its sole discretion, decline to entertain any application for an [order](/usc/7/2902.md?p=10) of exemption under this section.
    - (C) An [alternative trading system](/usc/7/1a.md?p=1) shall not be deemed to be an [exchange](/usc/7/1a.md?p=1-D) for any purpose as a result of the designation of such [alternative trading system](/usc/7/1a.md?p=1) as a [contract](/usc/7/518.md?p=4) market under this section.

# §7b–2. Privacy

- (a) **Treatment as financial institutions—** Notwithstanding [section 509(3)(B)](/usc/7/509.md) of the Gramm-Leach-Bliley Act [[15 U.S.C. 6809(3)(B)](/usc/15/6809.md?p=3-B)], any [futures commission merchant](/usc/7/1a.md?p=28-A), [commodity trading advisor](/usc/7/1a.md?p=12-B), [commodity pool operator](/usc/7/1a.md?p=11-A), or [introducing broker](/usc/7/1a.md?p=31-A) that is subject to the jurisdiction of the [Commission](/usc/7/1a.md?p=8) under this chapter with respect to any financial activity shall be treated as a [financial institution](/usc/7/1a.md?p=21) for purposes of title V of such Act [[15 U.S.C. 6801](/usc/15/6801.md) et seq.] with respect to such financial activity.
- (b) **Treatment of CFTC as Federal functional regulator—** For purposes of title V of such Act [[15 U.S.C. 6801](/usc/15/6801.md) et seq.], the [Commission](/usc/7/1a.md?p=8) shall be treated as a Federal functional regulator within the meaning of [section 509(2)](/usc/7/509.md) of such Act [[15 U.S.C. 6809(2)](/usc/15/6809.md?p=2)] and shall prescribe regulations under such title within 6 months after December 21, 2000.

# §7b–3. Swap execution facilities

- (a) **Registration—**
  - (1) **In general—** No [person](/usc/7/1a.md?p=38) may operate a facility for the trading or processing of [swaps](/usc/7/1a.md?p=47-A) unless the facility is registered as a [swap execution facility](/usc/7/1a.md?p=50) or as a designated [contract](/usc/7/518.md?p=4) market under this section.
  - (2) **Dual registration—** Any [person](/usc/7/1a.md?p=38) that is registered as a [swap execution facility](/usc/7/1a.md?p=50) under this section shall register with the [Commission](/usc/7/1a.md?p=8) regardless of whether the [person](/usc/7/1a.md?p=38) also is registered with the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8) as a [swap execution facility](/usc/7/1a.md?p=50).
- (b) **Trading and trade processing—**
  - (1) **In general—** Except as specified in [paragraph (2)](#b-2), a [swap execution facility](/usc/7/1a.md?p=50) that is registered under [subsection (a)](#a) may—
    - (A) make available for trading any [swap](/usc/7/1a.md?p=47-A); and
    - (B) facilitate trade processing of any [swap](/usc/7/1a.md?p=47-A).
  - (2) **Agricultural swaps—** A [swap execution facility](/usc/7/1a.md?p=50) may not list for trading or confirm the execution of any [swap](/usc/7/1a.md?p=47-A) in an [agricultural commodity](/usc/7/5602.md?p=1) (as defined by the [Commission](/usc/7/1a.md?p=8)) except pursuant to a rule or regulation of the [Commission](/usc/7/1a.md?p=8) allowing the [swap](/usc/7/1a.md?p=47-A) under such terms and conditions as the [Commission](/usc/7/1a.md?p=8) shall prescribe.
- (c) **Identification of facility used to trade swaps by contract markets—** A [board of trade](/usc/7/1a.md?p=6) that operates a [contract](/usc/7/518.md?p=4) market shall, to the extent that the [board of trade](/usc/7/1a.md?p=6) also operates a [swap execution facility](/usc/7/1a.md?p=50) and uses the same electronic trade execution system for listing and executing trades of [swaps](/usc/7/1a.md?p=47-A) on or through the [contract](/usc/7/518.md?p=4) market and the [swap execution facility](/usc/7/1a.md?p=50), identify whether the electronic trading of such [swaps](/usc/7/1a.md?p=47-A) is taking place on or through the [contract](/usc/7/518.md?p=4) market or the [swap execution facility](/usc/7/1a.md?p=50).
- (d) **Rule-writing—**
  - (1) The [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8) and [Commodity](/usc/7/1a.md?p=9) Futures Trading [Commission](/usc/7/1a.md?p=8) may promulgate rules defining the universe of [swaps](/usc/7/1a.md?p=47-A) that can be executed on a [swap execution facility](/usc/7/1a.md?p=50). These rules shall take into account the price and nonprice requirements of the counterparties to a [swap](/usc/7/1a.md?p=47-A) and the goal of this section as set forth in [subsection (e)](#e).
  - (2) For all [swaps](/usc/7/1a.md?p=47-A) that are not required to be executed through a [swap execution facility](/usc/7/1a.md?p=50) as defined in [paragraph (1)](#d-1), such trades may be executed through any other available means of [interstate commerce](/usc/7/1a.md?p=30).
  - (3) The [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8) and [Commodity](/usc/7/1a.md?p=9) Futures Trading [Commission](/usc/7/1a.md?p=8) shall update these rules as necessary to account for technological and other innovation.
- (e) **Rule of construction—** The goal of this section is to promote the trading of [swaps](/usc/7/1a.md?p=47-A) on [swap execution facilities](/usc/7/1a.md?p=50) and to promote pre-trade price transparency in the [swaps](/usc/7/1a.md?p=47-A) market.
- (f) **Core principles for swap execution facilities—**
  - (1) **Compliance with core principles—**
    - (A) **In general—** To be registered, and maintain registration, as a [swap execution facility](/usc/7/1a.md?p=50), the [swap execution facility](/usc/7/1a.md?p=50) shall comply with—
      - (i) the core principles described in this subsection; and
      - (ii) any requirement that the [Commission](/usc/7/1a.md?p=8) may impose by rule or regulation pursuant to [section 12a(5) of this title](/usc/7/12a.md?p=5).
    - (B) **Reasonable discretion of swap execution facility—** Unless otherwise determined by the [Commission](/usc/7/1a.md?p=8) by rule or regulation, a [swap execution facility](/usc/7/1a.md?p=50) described in [subparagraph (A)](#f-1-A) shall have reasonable discretion in establishing the manner in which the [swap execution facility](/usc/7/1a.md?p=50) complies with the core principles described in this subsection.
  - (2) **Compliance with rules—** A [swap execution facility](/usc/7/1a.md?p=50) shall—
    - (A) establish and enforce compliance with any rule of the [swap execution facility](/usc/7/1a.md?p=50), including—
      - (i) the terms and conditions of the [swaps](/usc/7/1a.md?p=47-A) traded or processed on or through the [swap execution facility](/usc/7/1a.md?p=50); and
      - (ii) any limitation on access to the [swap execution facility](/usc/7/1a.md?p=50);
    - (B) establish and enforce trading, trade processing, and participation rules that will deter abuses and have the capacity to detect, investigate, and enforce those rules, including means—
      - (i) to provide market participants with impartial access to the market; and
      - (ii) to capture information that may be used in establishing whether rule violations have occurred;
    - (C) establish rules governing the operation of the facility, including rules specifying trading procedures to be used in entering and executing [orders](/usc/7/2902.md?p=10) traded or posted on the facility, including block trades; and
    - (D) provide by its rules that when a [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A) enters into or facilitates a [swap](/usc/7/1a.md?p=47-A) that is subject to the mandatory clearing requirement of [section 2(h) of this title](/usc/7/2.md?p=h), the [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A) shall be responsible for compliance with the mandatory trading requirement under [section 2(h)(8) of this title](/usc/7/2.md?p=h-8).
  - (3) **Swaps not readily susceptible to manipulation—** The [swap execution facility](/usc/7/1a.md?p=50) shall permit trading only in [swaps](/usc/7/1a.md?p=47-A) that are not readily susceptible to manipulation.
  - (4) **Monitoring of trading and trade processing—** The [swap execution facility](/usc/7/1a.md?p=50) shall—
    - (A) establish and enforce rules or terms and conditions defining, or specifications detailing—
      - (i) trading procedures to be used in entering and executing [orders](/usc/7/2902.md?p=10) traded on or through the facilities of the [swap execution facility](/usc/7/1a.md?p=50); and
      - (ii) procedures for trade processing of [swaps](/usc/7/1a.md?p=47-A) on or through the facilities of the [swap execution facility](/usc/7/1a.md?p=50); and
    - (B) monitor trading in [swaps](/usc/7/1a.md?p=47-A) 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—** The [swap execution facility](/usc/7/1a.md?p=50) 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 section;
    - (B) provide the information to the [Commission](/usc/7/1a.md?p=8) on request; and
    - (C) have the capacity to carry out such international information-sharing agreements as the [Commission](/usc/7/1a.md?p=8) 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, a [swap execution facility](/usc/7/1a.md?p=50) that is a [trading facility](/usc/7/1a.md?p=51-A) shall adopt for each of the [contracts](/usc/7/518.md?p=4) of the facility, as is necessary and appropriate, position limitations or position accountability for speculators.
    - (B) **Position limits—** For any [contract](/usc/7/518.md?p=4) that is subject to a position limitation established by the [Commission](/usc/7/1a.md?p=8) pursuant to [section 6a(a) of this title](/usc/7/6a.md?p=a), the [swap execution facility](/usc/7/1a.md?p=50) shall—
      - (i) set its position limitation at a level no higher than the [Commission](/usc/7/1a.md?p=8) limitation; and
      - (ii) monitor positions established on or through the [swap execution facility](/usc/7/1a.md?p=50) for compliance with the limit set by the [Commission](/usc/7/1a.md?p=8) and the limit, if any, set by the [swap execution facility](/usc/7/1a.md?p=50).
  - (7) **Financial integrity of transactions—** The [swap execution facility](/usc/7/1a.md?p=50) shall establish and enforce rules and procedures for ensuring the financial integrity of [swaps](/usc/7/1a.md?p=47-A) entered on or through the facilities of the [swap execution facility](/usc/7/1a.md?p=50), including the clearance and settlement of the [swaps](/usc/7/1a.md?p=47-A) pursuant to [section 2(h)(1) of this title](/usc/7/2.md?p=h-1).
  - (8) **Emergency authority—** The [swap execution facility](/usc/7/1a.md?p=50) shall adopt rules to provide for the exercise of emergency [authority](/usc/7/2009aa.md?p=1), in consultation or cooperation with the [Commission](/usc/7/1a.md?p=8), as is necessary and appropriate, including the [authority](/usc/7/2009aa.md?p=1) to liquidate or transfer open positions in any [swap](/usc/7/1a.md?p=47-A) or to suspend or curtail trading in a [swap](/usc/7/1a.md?p=47-A).
  - (9) **Timely publication of trading information—**
    - (A) **In general—** The [swap execution facility](/usc/7/1a.md?p=50) shall make public timely information on price, trading volume, and other trading data on [swaps](/usc/7/1a.md?p=47-A) to the extent prescribed by the [Commission](/usc/7/1a.md?p=8).
    - (B) **Capacity of swap execution facility—** The [swap execution facility](/usc/7/1a.md?p=50) shall be required to have the capacity to electronically capture and transmit trade information with respect to transactions executed on the facility.
  - (10) **Recordkeeping and reporting—**
    - (A) **In general—** A [swap execution facility](/usc/7/1a.md?p=50) shall—
      - (i) maintain records of all activities relating to the business of the facility, including a complete audit trail, in a form and manner acceptable to the [Commission](/usc/7/1a.md?p=8) for a period of 5 years;
      - (ii) report to the [Commission](/usc/7/1a.md?p=8), in a form and manner acceptable to the [Commission](/usc/7/1a.md?p=8), such information as the [Commission](/usc/7/1a.md?p=8) determines to be necessary or appropriate for the [Commission](/usc/7/1a.md?p=8) to perform the duties of the [Commission](/usc/7/1a.md?p=8) under this chapter; and
      - (iii) shall keep any such records relating to [swaps](/usc/7/1a.md?p=47-A) defined in [section 1a(47)(A)(v) of this title](/usc/7/1a.md?p=47-A-v) open to inspection and examination by the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8).”[^1]
    - (B) **Requirements—** The [Commission](/usc/7/1a.md?p=8) shall adopt data collection and reporting requirements for [swap execution facilities](/usc/7/1a.md?p=50) that are comparable to corresponding requirements for [derivatives clearing organizations](/usc/7/1a.md?p=15-A) and [swap data repositories](/usc/7/1a.md?p=48).
  - (11) **Antitrust considerations—** Unless necessary or appropriate to achieve the purposes of this chapter, the [swap execution facility](/usc/7/1a.md?p=50) shall not—
    - (A) adopt any rules or taking[^2] any actions that result in any unreasonable restraint of trade; or
    - (B) impose any material anticompetitive burden on trading or clearing.
  - (12) **Conflicts of interest—** The [swap execution facility](/usc/7/1a.md?p=50) shall—
    - (A) establish and enforce rules to minimize conflicts of interest in its decision-making process; and
    - (B) establish a process for resolving the conflicts of interest.
  - (13) **Financial resources—**
    - (A) **In general—** The [swap execution facility](/usc/7/1a.md?p=50) shall have adequate financial, operational, and managerial resources to discharge each responsibility of the [swap execution facility](/usc/7/1a.md?p=50).
    - (B) **Determination of resource adequacy—** The financial resources of a [swap execution facility](/usc/7/1a.md?p=50) shall be considered to be adequate if the value of the financial resources exceeds the total amount that would enable the [swap execution facility](/usc/7/1a.md?p=50) to cover the operating costs of the [swap execution facility](/usc/7/1a.md?p=50) for a 1-year period, as calculated on a rolling basis.
  - (14) **System safeguards—** The [swap execution facility](/usc/7/1a.md?p=50) 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 automated systems, that—
      - (i) are reliable and secure; and
      - (ii) have adequate scalable capacity;
    - (B) establish and maintain emergency procedures, backup facilities, and a plan for disaster recovery that allow for—
      - (i) the timely recovery and resumption of operations; and
      - (ii) the fulfillment of the responsibilities and obligations of the [swap execution facility](/usc/7/1a.md?p=50); and
    - (C) periodically conduct tests to verify that the backup resources of the [swap execution facility](/usc/7/1a.md?p=50) are sufficient to ensure continued—
      - (i) [order](/usc/7/2902.md?p=10) processing and trade matching;
      - (ii) price reporting;
      - (iii) market surveillance and
      - (iv) maintenance of a comprehensive and accurate audit trail.
  - (15) **Designation of chief compliance officer—**
    - (A) **In general—** Each [swap execution facility](/usc/7/1a.md?p=50) shall designate an individual to serve as a chief compliance officer.
    - (B) **Duties—** The chief compliance officer shall—
      - (i) report directly to the [board](/usc/7/1a.md?p=5) or to the senior officer of the facility;
      - (ii) review compliance with the core principles in this subsection;
      - (iii) in consultation with the [board](/usc/7/1a.md?p=5) of the facility, a body performing a function similar to that of a [board](/usc/7/1a.md?p=5), or the senior officer of the facility, resolve any conflicts of interest that may arise;
      - (iv) be responsible for establishing and administering the policies and procedures required to be established pursuant to this section;
      - (v) ensure compliance with this chapter and the rules and regulations issued under this chapter, including rules prescribed by the [Commission](/usc/7/1a.md?p=8) pursuant to this section; and
      - (vi) establish procedures for the remediation of noncompliance issues found during compliance office reviews, look backs, internal or external audit findings, self-reported errors, or through validated complaints.
    - (C) **Requirements for procedures—** In establishing procedures under [subparagraph (B)(vi)](#f-15-B-vi), the chief compliance officer shall design the procedures to establish the handling, management response, remediation, retesting, and closing of noncompliance issues.
    - (D) **Annual reports—**
      - (i) **In general—** In accordance with rules prescribed by the [Commission](/usc/7/1a.md?p=8), the chief compliance officer shall annually prepare and sign a report that contains a description of—
        - (I) the compliance of the [swap execution facility](/usc/7/1a.md?p=50) with this chapter; and
        - (II) the policies and procedures, including the code of ethics and conflict of interest policies, of the [swap execution facility](/usc/7/1a.md?p=50).
      - (ii) **Requirements—** The chief compliance officer shall—
        - (I) submit each report described in [clause (i)](#f-15-D-i) with the appropriate financial report of the [swap execution facility](/usc/7/1a.md?p=50) that is required to be submitted to the [Commission](/usc/7/1a.md?p=8) pursuant to this section; and
        - (II) include in the report a certification that, under penalty of law, the report is accurate and complete.
- (g) **Exemptions—** The [Commission](/usc/7/1a.md?p=8) may exempt, conditionally or unconditionally, a [swap execution facility](/usc/7/1a.md?p=50) from registration under this section if the [Commission](/usc/7/1a.md?p=8) finds that the facility is subject to comparable, comprehensive supervision and regulation on a consolidated basis by the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8), a [prudential regulator](/usc/7/1a.md?p=39), or the appropriate governmental [authorities](/usc/7/2009aa.md?p=1) in the home country of the facility.
- (h) **Rules—** The [Commission](/usc/7/1a.md?p=8) shall prescribe rules governing the regulation of alternative [swap execution facilities](/usc/7/1a.md?p=50) under this section.

# §8. Application for designation as contract market or derivatives transaction execution facility; time; suspension or revocation of designation; hearing; review by court of appeals

- (a) Any [person](/usc/7/1a.md?p=38) desiring to be designated or registered as a [contract](/usc/7/518.md?p=4) market or derivatives transaction execution facility shall make application to the [Commission](/usc/7/1a.md?p=8) for the designation or registration and accompany the same with a showing that it complies with the conditions set forth in this chapter, and with a sufficient assurance that it will continue to comply with the the[^1] requirements of this chapter. The [Commission](/usc/7/1a.md?p=8) shall approve or deny an application for designation or registration as a [contract](/usc/7/518.md?p=4) market or derivatives transaction execution facility within 180 days of the filing of the application. If the [Commission](/usc/7/1a.md?p=8) notifies the [person](/usc/7/1a.md?p=38) that its application is materially incomplete and specifies the deficiencies in the application, the running of the 180-day period shall be stayed from the time of such notification until the application is resubmitted in completed form: Provided, That the [Commission](/usc/7/1a.md?p=8) shall have not less than sixty days to approve or deny the application from the time the application is resubmitted in completed form. If the [Commission](/usc/7/1a.md?p=8) denies an application, it shall specify the grounds for the denial. In the event of a refusal to designate or register as a [contract](/usc/7/518.md?p=4) market or derivatives transaction execution facility any [person](/usc/7/1a.md?p=38) that has made application therefor, the [person](/usc/7/1a.md?p=38) shall be afforded an opportunity for a hearing on the record before the [Commission](/usc/7/1a.md?p=8), with the right to appeal an adverse decision after such hearing to the court of appeals as provided for in other cases in [subsection (b)](#b) of this section.
- (b) The [Commission](/usc/7/1a.md?p=8) is authorized to suspend for a period not to exceed 6 months or to revoke the designation or registration of any [contract](/usc/7/518.md?p=4) market or derivatives transaction execution facility on a showing that the [contract](/usc/7/518.md?p=4) market or derivatives transaction execution facility is not enforcing or has not enforced its rules of government, made a condition of its designation or registration as set forth in [sections 7 through 7a–1](/usc/7/7..7a–1.md) of this title or [section 7b–1 of this title](/usc/7/7b–1.md), or that the [contract](/usc/7/518.md?p=4) market or derivatives transaction execution facility or [electronic trading facility](/usc/7/1a.md?p=16), or any director, officer, agent, or employee thereof, otherwise is violating or has violated any of the provisions of this chapter or any of the rules, regulations, or [orders](/usc/7/2902.md?p=10) of the [Commission](/usc/7/1a.md?p=8) thereunder. Such suspension or revocation shall only be made after a notice to the officers of the [contract](/usc/7/518.md?p=4) market or derivatives transaction execution facility or [electronic trading facility](/usc/7/1a.md?p=16) affected and upon a hearing on the record: Provided, That such suspension or revocation shall be final and conclusive, unless within fifteen days after such suspension or revocation by the [Commission](/usc/7/1a.md?p=8) such [person](/usc/7/1a.md?p=38) appeals to the court of appeals for the circuit in which it has its principal place of business, by filing with the clerk of such court a written petition praying that the [order](/usc/7/2902.md?p=10) of the [Commission](/usc/7/1a.md?p=8) be set aside or modified in the manner stated in the petition, together with a bond in such sum as the court may determine, conditioned that such [person](/usc/7/1a.md?p=38) will pay the costs of the proceedings if the court so directs. The clerk of the court in which such a petition is filed shall immediately cause a copy thereof to be delivered to the [Commission](/usc/7/1a.md?p=8) and file in the court the record in such proceedings, as provided in [section 2112 of title 28](/usc/28/2112.md). The testimony and evidence taken or submitted before the [Commission](/usc/7/1a.md?p=8), duly filed as aforesaid as a part of the record, shall be considered by the court of appeals as the evidence in the case. Such a court may affirm or set aside the [order](/usc/7/2902.md?p=10) of the [Commission](/usc/7/1a.md?p=8) or may direct it to modify its [order](/usc/7/2902.md?p=10). No such [order](/usc/7/2902.md?p=10) of the [Commission](/usc/7/1a.md?p=8) shall be modified or set aside by the court of appeals unless it is shown by the [person](/usc/7/1a.md?p=38) that the [order](/usc/7/2902.md?p=10) is unsupported by the weight of the evidence or was issued without due notice and a reasonable opportunity having been afforded to such [person](/usc/7/1a.md?p=38) for a hearing, or infringes the Constitution of the [United States](/usc/7/6402.md?p=8), or is beyond the jurisdiction of the [Commission](/usc/7/1a.md?p=8).

# §9. Prohibition regarding manipulation and false information

- (1) **Prohibition against manipulation—** It shall be unlawful for any [person](/usc/7/1a.md?p=38), directly or indirectly, to use or employ, or attempt to use or employ, in connection with any [swap](/usc/7/1a.md?p=47-A), or a [contract of sale](/usc/7/1a.md?p=13) of any [commodity](/usc/7/1a.md?p=9) in [interstate commerce](/usc/7/1a.md?p=30), or for [future delivery](/usc/7/1a.md?p=27) on or subject to the rules of any [registered entity](/usc/7/1a.md?p=40), any manipulative or deceptive device or contrivance, in contravention of such rules and regulations as the [Commission](/usc/7/1a.md?p=8) shall promulgate by not later than 1 year after July 21, 2010, provided no rule or regulation promulgated by the [Commission](/usc/7/1a.md?p=8) shall require any [person](/usc/7/1a.md?p=38) to disclose to another [person](/usc/7/1a.md?p=38) nonpublic information that may be material to the market price, rate, or level of the [commodity](/usc/7/1a.md?p=9) transaction, except as necessary to make any statement made to the other [person](/usc/7/1a.md?p=38) in or in connection with the transaction not misleading in any material respect.
  - (A) **Special provision for manipulation by false reporting—** Unlawful manipulation for purposes of this paragraph shall include, but not be limited to, delivering, or causing to be delivered for transmission through the mails or [interstate commerce](/usc/7/1a.md?p=30), by any means of communication whatsoever, a false or misleading or inaccurate report concerning crop or market information or conditions that affect or tend to affect the price of any [commodity](/usc/7/1a.md?p=9) in [interstate commerce](/usc/7/1a.md?p=30), knowing, or acting in reckless disregard of the fact that such report is false, misleading or inaccurate.
  - (B) **Effect on other law—** Nothing in this paragraph shall affect, or be construed to affect, the applicability of [section 13(a)(2) of this title](/usc/7/13.md?p=a-2).
  - (C) **Good faith mistakes—** Mistakenly transmitting, in good faith, false or misleading or inaccurate information to a price reporting service would not be sufficient to violate [paragraph (1)(A)](#1-A).
- (2) **Prohibition regarding false information—** It shall be unlawful for any [person](/usc/7/1a.md?p=38) to make any false or misleading statement of a material fact to the [Commission](/usc/7/1a.md?p=8), including in any registration application or any report filed with the [Commission](/usc/7/1a.md?p=8) under this chapter, or any other information relating to a [swap](/usc/7/1a.md?p=47-A), or a [contract of sale](/usc/7/1a.md?p=13) of a [commodity](/usc/7/1a.md?p=9), in [interstate commerce](/usc/7/1a.md?p=30), or for [future delivery](/usc/7/1a.md?p=27) on or subject to the rules of any [registered entity](/usc/7/1a.md?p=40), or to omit to [state](/usc/7/1359aa.md?p=5) in any such statement any material fact that is necessary to make any statement of a material fact made not misleading in any material respect, if the [person](/usc/7/1a.md?p=38) knew, or reasonably should have known, the statement to be false or misleading.
- (3) **Other manipulation—** In addition to the prohibition in [paragraph (1)](#1), it shall be unlawful for any [person](/usc/7/1a.md?p=38), directly or indirectly, to manipulate or attempt to manipulate the price of any [swap](/usc/7/1a.md?p=47-A), or of any [commodity](/usc/7/1a.md?p=9) in [interstate commerce](/usc/7/1a.md?p=30), or for [future delivery](/usc/7/1a.md?p=27) on or subject to the rules of any [registered entity](/usc/7/1a.md?p=40).
- (4) **Enforcement—**
  - (A) **Authority of Commission—** If the [Commission](/usc/7/1a.md?p=8) has reason to believe that any [person](/usc/7/1a.md?p=38) (other than a [registered entity](/usc/7/1a.md?p=40)) is violating or has violated this section, or any other provision of this chapter (including any rule, regulation, or [order](/usc/7/2902.md?p=10) of the [Commission](/usc/7/1a.md?p=8) promulgated in accordance with this section or any other provision of this chapter), the [Commission](/usc/7/1a.md?p=8) may serve upon the [person](/usc/7/1a.md?p=38) a complaint.
  - (B) **Contents of complaint—** A complaint under [subparagraph (A)](#4-A) shall—
    - (i) contain a description of the charges against the [person](/usc/7/1a.md?p=38) that is the subject of the complaint; and
    - (ii) have attached or contain a notice of hearing that specifies the date and location of the hearing regarding the complaint.
  - (C) **Hearing—** A hearing described in [subparagraph (B)(ii)](#4-B-ii)—
    - (i) shall be held not later than 3 days after service of the complaint described in [subparagraph (A)](#4-A);
    - (ii) shall require the [person](/usc/7/1a.md?p=38) to show cause regarding why—
      - (I) an [order](/usc/7/2902.md?p=10) should not be made—
        - (aa) to prohibit the [person](/usc/7/1a.md?p=38) from trading on, or subject to the rules of, any [registered entity](/usc/7/1a.md?p=40); and
        - (bb) to direct all [registered entities](/usc/7/1a.md?p=40) to refuse all [privileges](/usc/7/1a.md?p=36) to the [person](/usc/7/1a.md?p=38) until further notice of the [Commission](/usc/7/1a.md?p=8); and
      - (II) the registration of the [person](/usc/7/1a.md?p=38), if registered with the [Commission](/usc/7/1a.md?p=8) in any capacity, should not be suspended or revoked; and
    - (iii) may be held before—
      - (I) the [Commission](/usc/7/1a.md?p=8); or
      - (II) an administrative law judge designated by the [Commission](/usc/7/1a.md?p=8), under which the administrative law judge shall ensure that all evidence is recorded in written form and submitted to the [Commission](/usc/7/1a.md?p=8).
- (5) **Subpoena—** For the purpose of securing effective enforcement of the provisions of this chapter, for the purpose of any investigation or proceeding under this chapter, and for the purpose of any action taken under [section 16(f) of this title](/usc/7/16.md?p=f), any [member](/usc/7/1a.md?p=34) of the [Commission](/usc/7/1a.md?p=8) or any Administrative Law Judge or other officer designated by the [Commission](/usc/7/1a.md?p=8) (except as provided in [paragraph (7)](#7)) may administer oaths and affirmations, subpoena witnesses, compel their attendance, take evidence, and require the production of any books, papers, correspondence, memoranda, or other records that the [Commission](/usc/7/1a.md?p=8) deems relevant or material to the inquiry.
- (6) **Witnesses—** The attendance of witnesses and the production of any such records may be required from any place in the [United States](/usc/7/6402.md?p=8), any [State](/usc/7/1359aa.md?p=5), or any foreign country or jurisdiction at any designated place of hearing.
- (7) **Service—** A subpoena issued under this section[^1] may be served upon any [person](/usc/7/1a.md?p=38) who is not to be found within the territorial jurisdiction of any court of the [United States](/usc/7/6402.md?p=8) in such manner as the Federal Rules of Civil Procedure prescribe for service of process in a foreign country, except that a subpoena to be served on a [person](/usc/7/1a.md?p=38) who is not to be found within the territorial jurisdiction of any court of the [United States](/usc/7/6402.md?p=8) may be issued only on the prior approval of the [Commission](/usc/7/1a.md?p=8).
- (8) **Refusal to obey—** In case of contumacy by, or refusal to obey a subpoena issued to, any [person](/usc/7/1a.md?p=38), the [Commission](/usc/7/1a.md?p=8) may invoke the aid of any court of the [United States](/usc/7/6402.md?p=8) within the jurisdiction in which the investigation or proceeding is conducted, or where such [person](/usc/7/1a.md?p=38) resides or transacts business, in requiring the attendance and testimony of witnesses and the production of books, papers, correspondence, memoranda, and other records. Such court may issue an [order](/usc/7/2902.md?p=10) requiring such [person](/usc/7/1a.md?p=38) to appear before the [Commission](/usc/7/1a.md?p=8) or [member](/usc/7/1a.md?p=34) or Administrative Law Judge or other officer designated by the [Commission](/usc/7/1a.md?p=8), there to produce records, if so ordered, or to give testimony touching the matter under investigation or in question.
- (9) **Failure to obey—** Any failure to obey such [order](/usc/7/2902.md?p=10) of the court may be punished by the court as a contempt thereof. All process in any such case may be served in the judicial district wherein such [person](/usc/7/1a.md?p=38) is an inhabitant or transacts business or wherever such [person](/usc/7/1a.md?p=38) may be found.
- (10) **Evidence—** On the receipt of evidence under [paragraph (4)(C)(iii)](#4-C-iii), the [Commission](/usc/7/1a.md?p=8) may—
  - (A) prohibit the [person](/usc/7/1a.md?p=38) that is the subject of the hearing from trading on, or subject to the rules of, any [registered entity](/usc/7/1a.md?p=40) and require all [registered entities](/usc/7/1a.md?p=40) to refuse the [person](/usc/7/1a.md?p=38) all [privileges](/usc/7/1a.md?p=36) on the [registered entities](/usc/7/1a.md?p=40) for such period as the [Commission](/usc/7/1a.md?p=8) may require in the [order](/usc/7/2902.md?p=10);
  - (B) if the [person](/usc/7/1a.md?p=38) is registered with the [Commission](/usc/7/1a.md?p=8) in any capacity, suspend, for a period not to exceed 180 days, or revoke, the registration of the [person](/usc/7/1a.md?p=38);
  - (C) assess such [person](/usc/7/1a.md?p=38)—
    - (i) a civil penalty of not more than an amount equal to the greater of—
      - (I) $140,000; or
      - (II) triple the monetary gain to such [person](/usc/7/1a.md?p=38) for each such violation; or
    - (ii) in any case of manipulation or attempted manipulation in violation of this section or [section 13(a)(2) of this title](/usc/7/13.md?p=a-2), a civil penalty of not more than an amount equal to the greater of—
      - (I) $1,000,000; or
      - (II) triple the monetary gain to the [person](/usc/7/1a.md?p=38) for each such violation; and
  - (D) require restitution to customers of damages proximately caused by violations of the [person](/usc/7/1a.md?p=38).
- (11) **Orders—**
  - (A) **Notice—** The [Commission](/usc/7/1a.md?p=8) shall provide to a [person](/usc/7/1a.md?p=38) described in [paragraph (10)](#10) and the appropriate governing [board](/usc/7/1a.md?p=5) of the [registered entity](/usc/7/1a.md?p=40) notice of the [order](/usc/7/2902.md?p=10) described in [paragraph (10)](#10) by—
    - (i) registered mail;
    - (ii) certified mail; or
    - (iii) personal delivery.
  - (B) **Review—**
    - (i) **In general—** A [person](/usc/7/1a.md?p=38) described in [paragraph (10)](#10) may obtain a review of the [order](/usc/7/2902.md?p=10) or such other equitable relief as determined to be appropriate by a court described in [clause (ii)](#11-B-ii).
    - (ii) **Petition—** To obtain a review or other relief under [clause (i)](#11-B-i), a [person](/usc/7/1a.md?p=38) may, not later than 15 days after notice is given to the [person](/usc/7/1a.md?p=38) under [clause (i)](#11-B-i), file a written petition to set aside the [order](/usc/7/2902.md?p=10) with the [United States](/usc/7/6402.md?p=8) Court of Appeals—
      - (I) for the circuit in which the petitioner carries out the business of the petitioner; or
      - (II) in the case of an [order](/usc/7/2902.md?p=10) denying registration, the circuit in which the principal place of business of the petitioner is located, as listed on the application for registration of the petitioner.
  - (C) **Procedure—**
    - (i) **Duty of clerk of appropriate court—** The clerk of the appropriate court under [subparagraph (B)(ii)](#11-B-ii) shall transmit to the [Commission](/usc/7/1a.md?p=8) a copy of a petition filed under [subparagraph (B)(ii)](#11-B-ii).
    - (ii) **Duty of Commission—** In accordance with [section 2112 of title 28](/usc/28/2112.md), the [Commission](/usc/7/1a.md?p=8) shall file in the appropriate court described in [subparagraph (B)(ii)](#11-B-ii) the record theretofore made.
    - (iii) **Jurisdiction of appropriate court—** Upon the filing of a petition under [subparagraph (B)(ii)](#11-B-ii), the appropriate court described in [subparagraph (B)(ii)](#11-B-ii) may affirm, set aside, or modify the [order](/usc/7/2902.md?p=10) of the [Commission](/usc/7/1a.md?p=8).

# §9a. Assessment of money penalties

- (1) In determining the amount of the money penalty assessed under [section 9 of this title](/usc/7/9.md), the [Commission](/usc/7/1a.md?p=8) shall consider the appropriateness of such penalty to the gravity of the violation.
- (2) Unless the [person](/usc/7/1a.md?p=38) against whom a money penalty is assessed under [section 9 of this title](/usc/7/9.md) shows to the satisfaction of the [Commission](/usc/7/1a.md?p=8) within fifteen days from the expiration of the period allowed for payment of such penalty that either an appeal as authorized by [section 9 of this title](/usc/7/9.md) has been taken or payment of the full amount of the penalty then due has been made, at the end of such fifteen-day period and until such [person](/usc/7/1a.md?p=38) shows to the satisfaction of the [Commission](/usc/7/1a.md?p=8) that payment of such amount with interest thereon to date of payment has been made—
  - (A) such [person](/usc/7/1a.md?p=38) shall be prohibited automatically from the [privileges](/usc/7/1a.md?p=36) of all [registered entities](/usc/7/1a.md?p=40); and
  - (B) if such [person](/usc/7/1a.md?p=38) is registered with the [Commission](/usc/7/1a.md?p=8), such registration shall be suspended automatically.
- (3) If a [person](/usc/7/1a.md?p=38) against whom a money penalty is assessed under [section 9 of this title](/usc/7/9.md) takes an appeal and if the [Commission](/usc/7/1a.md?p=8) prevails or the appeal is dismissed, unless such [person](/usc/7/1a.md?p=38) shows to the satisfaction of the [Commission](/usc/7/1a.md?p=8) that payment of the full amount of the penalty then due has been made by the end of thirty days from the date of entry of judgment on the appeal—
  - (A) such [person](/usc/7/1a.md?p=38) shall be prohibited automatically from the [privileges](/usc/7/1a.md?p=36) of all [registered entities](/usc/7/1a.md?p=40); and
  - (B) if such [person](/usc/7/1a.md?p=38) is registered with the [Commission](/usc/7/1a.md?p=8), such registration shall be suspended automatically.

  If the [person](/usc/7/1a.md?p=38) against whom the money penalty is assessed fails to pay such penalty after the lapse of the period allowed for appeal or after the affirmance of such penalty, the [Commission](/usc/7/1a.md?p=8) may refer the matter to the Attorney General who shall recover such penalty by action in the appropriate [United States](/usc/7/6402.md?p=8) district court.

- (4) Any designated clearing organization that knowingly or recklessly evades or participates in or facilitates an evasion of the requirements of [section 2(h) of this title](/usc/7/2.md?p=h) shall be liable for a civil money penalty in twice the amount otherwise available for a violation of [section 2(h) of this title](/usc/7/2.md?p=h).
- (5) Any [swap dealer](/usc/7/1a.md?p=49-A) or [major swap participant](/usc/7/1a.md?p=33-A) that knowingly or recklessly evades or participates in or facilitates an evasion of the requirements of [section 2(h) of this title](/usc/7/2.md?p=h) shall be liable for a civil money penalty in twice the amount otherwise available for a violation of [section 2(h) of this title](/usc/7/2.md?p=h).

# §9b. Rules prohibiting deceptive and other abusive telemarketing acts or practices

- (1) Except as provided in [paragraph (2)](#2), not later than six months after the effective date of rules promulgated by the Federal Trade [Commission](/usc/7/1a.md?p=8) under [section 6102(a) of title 15](/usc/15/6102.md?p=a), the [Commission](/usc/7/1a.md?p=8) shall promulgate, or require each registered futures association to promulgate, rules substantially similar to such rules to prohibit deceptive and other abusive telemarketing acts or practices by any [person](/usc/7/1a.md?p=38) registered or exempt from registration under this chapter in connection with such [person](/usc/7/1a.md?p=38)’s business as a [futures commission merchant](/usc/7/1a.md?p=28-A), [introducing broker](/usc/7/1a.md?p=31-A), [commodity trading advisor](/usc/7/1a.md?p=12-B), [commodity pool operator](/usc/7/1a.md?p=11-A), leverage transaction merchant, [floor broker](/usc/7/1a.md?p=22-A), or [floor trader](/usc/7/1a.md?p=23-A), or a [person](/usc/7/1a.md?p=38) associated with any such [person](/usc/7/1a.md?p=38).
- (2) The [Commission](/usc/7/1a.md?p=8) is not required to promulgate rules under [paragraph (1)](#1) if it determines that—
  - (A) rules adopted by the [Commission](/usc/7/1a.md?p=8) under this chapter provide protection from deceptive and abusive telemarketing by [persons](/usc/7/1a.md?p=38) described under [paragraph (1)](#1) substantially similar to that provided by rules promulgated by the Federal Trade [Commission](/usc/7/1a.md?p=8) under [section 6102(a) of title 15](/usc/15/6102.md?p=a); or
  - (B) such a rule promulgated by the [Commission](/usc/7/1a.md?p=8) is not necessary or appropriate in the public interest, or for the protection of customers in the futures and [options](/usc/7/1a.md?p=36) markets, or would be inconsistent with the maintenance of fair and orderly markets.

  If the [Commission](/usc/7/1a.md?p=8) determines that an exception described in subparagraph [(A)](#2-A) or [(B)](#2-B) applies, the [Commission](/usc/7/1a.md?p=8) shall publish in the Federal Register its determination with the reasons for it.


# §9c. Notice of investigations and enforcement actions


The [Commission](/usc/7/1a.md?p=8) shall provide the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8) with notice of the commencement of any proceeding and a copy of any [order](/usc/7/2902.md?p=10) entered by the [Commission](/usc/7/1a.md?p=8) pursuant to section [9](/usc/7/9.md) and [13b](/usc/7/13b.md) of this title against any [futures commission merchant](/usc/7/1a.md?p=28-A) or [introducing broker](/usc/7/1a.md?p=31-A) registered pursuant to [section 6f(a)(2) of this title](/usc/7/6f.md?p=a-2), any [floor broker](/usc/7/1a.md?p=22-A) or [floor trader](/usc/7/1a.md?p=23-A) exempt from registration pursuant to [section 6f(a)(3) of this title](/usc/7/6f.md?p=a-3), any associated [person](/usc/7/1a.md?p=38) exempt from registration pursuant to [section 6k(6) of this title](/usc/7/6k.md?p=6), or any [board of trade](/usc/7/1a.md?p=6) designated as a [contract](/usc/7/518.md?p=4) market pursuant to [section 7b–1 of this title](/usc/7/7b–1.md).


# [§10. Repealed. June 25, 1948, ch. 646, § 39, 62 Stat. 992, eff. Sept. 1, 1948 — repealed]



# §10a. Cooperative associations and corporations, exclusion from board of trade; rules of board inapplicable to payment of compensation by association

- (a) No [board of trade](/usc/7/1a.md?p=6) which has been designated or registered as a [contract](/usc/7/518.md?p=4) market or a derivatives transaction execution facility exclude[^1] from membership in, and all [privileges](/usc/7/1a.md?p=36) on, such [board of trade](/usc/7/1a.md?p=6), any association or [corporation](/usc/7/1502.md?p=b-5) engaged in cash [commodity](/usc/7/1a.md?p=9) business having adequate financial responsibility which is organized under the cooperative laws of any [State](/usc/7/1359aa.md?p=5), or which has been recognized as a [cooperative association of producers](/usc/7/1a.md?p=14) by the [United States](/usc/7/6402.md?p=8) Government or by any agency thereof, if such association or [corporation](/usc/7/1502.md?p=b-5) complies and agrees to comply with such terms and conditions as are or may be imposed lawfully upon other [members](/usc/7/1a.md?p=34) of such [board](/usc/7/1a.md?p=5), and as are or may be imposed lawfully upon a [cooperative association of producers](/usc/7/1a.md?p=14) engaged in cash [commodity](/usc/7/1a.md?p=9) business, unless such [board of trade](/usc/7/1a.md?p=6) is authorized by the [commission](/usc/7/1a.md?p=8) to exclude such association or [corporation](/usc/7/1502.md?p=b-5) from membership and [privileges](/usc/7/1a.md?p=36) after hearing held upon at least three days’ notice subsequent to the filing of complaint by the [board of trade](/usc/7/1a.md?p=6): Provided, however, That if any such association or [corporation](/usc/7/1502.md?p=b-5) shall fail to meet its obligations with any established clearing house or clearing agency of any [contract](/usc/7/518.md?p=4) market, such association or [corporation](/usc/7/1502.md?p=b-5) shall be ipso facto debarred from further trading on such [contract](/usc/7/518.md?p=4) market, except such trading as may be necessary to close open trades and to discharge existing [contracts](/usc/7/518.md?p=4) in accordance with the rules of such [contract](/usc/7/518.md?p=4) market applicable in such cases. Such [commission](/usc/7/1a.md?p=8) may prescribe that such association or [corporation](/usc/7/1502.md?p=b-5) shall have and retain membership and [privileges](/usc/7/1a.md?p=36), with or without imposing conditions, or it may permit such [board of trade](/usc/7/1a.md?p=6) immediately to bar such association or [corporation](/usc/7/1502.md?p=b-5) from membership and [privileges](/usc/7/1a.md?p=36). Any [order](/usc/7/2902.md?p=10) of said [commission](/usc/7/1a.md?p=8) entered hereunder shall be reviewable by the court of appeals for the circuit in which such association or [corporation](/usc/7/1502.md?p=b-5), or such [board of trade](/usc/7/1a.md?p=6), has its principal place of business, on written petition either of such association or [corporation](/usc/7/1502.md?p=b-5), or of such [board of trade](/usc/7/1a.md?p=6), under the procedure provided in [section 8(b) of this title](/usc/7/8.md?p=b), but such [order](/usc/7/2902.md?p=10) shall not be stayed by the court pending review.
- (b) No rule of any [board of trade](/usc/7/1a.md?p=6) designated or registered as a [contract](/usc/7/518.md?p=4) market or a derivatives transaction execution facility shall forbid or be construed to forbid the payment of compensation on a [commodity](/usc/7/1a.md?p=9)-unit basis, or otherwise, by any federated cooperative association to its regional [member](/usc/7/1a.md?p=34)-associations for services rendered or to be rendered in connection with any organization work, educational activity, or procurement of patronage, provided no part of any such compensation is returned to patrons (whether [members](/usc/7/1a.md?p=34) or nonmembers) of such cooperative association, or of its regional or local [member](/usc/7/1a.md?p=34)-associations, otherwise than as a dividend on capital stock or as a patronage dividend out of the net earnings or surplus of such federated cooperative association.

# §11. Vacation on request of designation or registration as “registered entity”; redesignation or reregistration


Any [person](/usc/7/1a.md?p=38) that has been designated or registered a [registered entity](/usc/7/1a.md?p=40) in the manner provided in this chapter may have such designation or registration vacated and set aside by giving notice in writing to the [Commission](/usc/7/1a.md?p=8) requesting that its designation or registration as a [registered entity](/usc/7/1a.md?p=40) be vacated, which notice shall be served at least ninety days prior to the date named therein as the date when the vacation of designation or registration shall take effect. Upon receipt of such notice the [Commission](/usc/7/1a.md?p=8) shall forthwith [order](/usc/7/2902.md?p=10) the vacation of the designation or registration of the [registered entity](/usc/7/1a.md?p=40), effective upon the day named in the notice, and shall forthwith send a copy of the notice and its [order](/usc/7/2902.md?p=10) to all other [registered entities](/usc/7/1a.md?p=40). From and after the date upon which the vacation became effective the said [person](/usc/7/1a.md?p=38) can thereafter be designated or registered again a [registered entity](/usc/7/1a.md?p=40) by making application to the [Commission](/usc/7/1a.md?p=8) in the manner in this chapter provided for an original application.


# §12. Public disclosure

- (a) **Investigations respecting operations of boards of trade and others subject to this chapter; publication of results; restrictions; information received from foreign futures authorities; undercover operations; notice of investigations and enforcement actions—**
  - (1) For the efficient execution of the provisions of this chapter, and in [order](/usc/7/2902.md?p=10) to provide information for the use of Congress, the [Commission](/usc/7/1a.md?p=8) may make such investigations as it deems necessary to ascertain the facts regarding the operations of [boards](/usc/7/1a.md?p=5) of trade and other [persons](/usc/7/1a.md?p=38) subject to the provisions of this chapter. The [Commission](/usc/7/1a.md?p=8) may publish from time to time the results of any such investigation and such general statistical information gathered therefrom as it deems of interest to the public: Provided, That except as otherwise specifically authorized in this chapter, the [Commission](/usc/7/1a.md?p=8) may not publish data and information that would separately disclose the business transactions or market positions of any [person](/usc/7/1a.md?p=38) and trade secrets or names of customers: Provided further, That the [Commission](/usc/7/1a.md?p=8) may withhold from public disclosure any data or information concerning or obtained in connection with any pending investigation of any [person](/usc/7/1a.md?p=38). The [Commission](/usc/7/1a.md?p=8) shall not be compelled to disclose any information or data obtained from a [foreign futures authority](/usc/7/1a.md?p=26) if—
    - (A) the [foreign futures authority](/usc/7/1a.md?p=26) has in good faith determined and represented to the [Commission](/usc/7/1a.md?p=8) that disclosure of such information or data by that [foreign futures authority](/usc/7/1a.md?p=26) would violate the laws applicable to that [foreign futures authority](/usc/7/1a.md?p=26); and
    - (B) the [Commission](/usc/7/1a.md?p=8) obtains such information pursuant to—
      - (i) such procedure as the [Commission](/usc/7/1a.md?p=8) may authorize for use in connection with the administration or enforcement of this chapter; or
      - (ii) a memorandum of understanding with that [foreign futures authority](/usc/7/1a.md?p=26);

    except that nothing in this subsection shall prevent the [Commission](/usc/7/1a.md?p=8) from disclosing publicly any information or data obtained by the [Commission](/usc/7/1a.md?p=8) from a [foreign futures authority](/usc/7/1a.md?p=26) when such disclosure is made in connection with a congressional proceeding, an administrative or judicial proceeding commenced by the [United States](/usc/7/6402.md?p=8) or the [Commission](/usc/7/1a.md?p=8), in any receivership proceeding involving a receiver appointed in a judicial proceeding commenced by the [United States](/usc/7/6402.md?p=8) or the [Commission](/usc/7/1a.md?p=8), or in any proceeding under [title 11](/usc/11.md) in which the [Commission](/usc/7/1a.md?p=8) has intervened or in which the [Commission](/usc/7/1a.md?p=8) has the right to appear and be heard. Nothing in this subsection shall be construed to authorize the [Commission](/usc/7/1a.md?p=8) to withhold information or data from Congress. For purposes of [section 552 of title 5](/usc/5/552.md), this subsection shall be considered a statute described in [subsection (b)(3)(B)](/usc/5/552.md?p=b-3-B) of section 552.

  - (2) In conducting investigations authorized under this subsection or any other provision of this chapter, the [Commission](/usc/7/1a.md?p=8) shall continue, as the [Commission](/usc/7/1a.md?p=8) determines necessary, to request the assistance of and cooperate with the appropriate Federal agencies in the conduct of such investigations, including undercover operations by such agencies. The [Commission](/usc/7/1a.md?p=8) and the Department of Justice shall assess the effectiveness of such undercover operations and, within two years of October 28, 1992, shall recommend to Congress any additional undercover or other [authority](/usc/7/2009aa.md?p=1) for the [Commission](/usc/7/1a.md?p=8) that the [Commission](/usc/7/1a.md?p=8) or the Department of Justice believes to be necessary.
  - (3) The [Commission](/usc/7/1a.md?p=8) shall provide the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8) with notice of the commencement of any proceeding and a copy of any [order](/usc/7/2902.md?p=10) entered by the [Commission](/usc/7/1a.md?p=8) against any [futures commission merchant](/usc/7/1a.md?p=28-A) or [introducing broker](/usc/7/1a.md?p=31-A) registered pursuant to [section 6f(a)(2) of this title](/usc/7/6f.md?p=a-2), any [floor broker](/usc/7/1a.md?p=22-A) or [floor trader](/usc/7/1a.md?p=23-A) exempt from registration pursuant to [section 6f(a)(3) of this title](/usc/7/6f.md?p=a-3), any associated [person](/usc/7/1a.md?p=38) exempt from registration pursuant to [section 6k(6) of this title](/usc/7/6k.md?p=6), or any [board of trade](/usc/7/1a.md?p=6) designated as a [contract](/usc/7/518.md?p=4) market pursuant to [section 7b–1 of this title](/usc/7/7b–1.md).
- (b) **Business matters; congressional, administrative, judicial, and bankruptcy proceedings—** The [Commission](/usc/7/1a.md?p=8) may disclose publicly any data or information that would separately disclose the market positions, business transactions, trade secrets, or names of customers of any [person](/usc/7/1a.md?p=38) when such disclosure is made in connection with a congressional proceeding, in an administrative or judicial proceeding brought under this chapter, in any receivership proceeding involving a receiver appointed in a judicial proceeding brought under this chapter, or in any bankruptcy proceeding in which the [Commission](/usc/7/1a.md?p=8) has intervened or in which the [Commission](/usc/7/1a.md?p=8) has the right to appear and be heard under [title 11](/usc/11.md). This subsection shall not apply to the disclosure of data or information obtained by the [Commission](/usc/7/1a.md?p=8) from a [foreign futures authority](/usc/7/1a.md?p=26).
- (c) **Reports respecting conduct of registered entities or transactions of violators; contents—** The [Commission](/usc/7/1a.md?p=8) may make or issue such reports as it deems necessary, or such opinions or [orders](/usc/7/2902.md?p=10) as may be required under other provisions of law, relative to the conduct of any [registered entity](/usc/7/1a.md?p=40) or to the transactions of any [person](/usc/7/1a.md?p=38) found guilty of violating the provisions of this chapter or the rules, regulations, or [orders](/usc/7/2902.md?p=10) of the [Commission](/usc/7/1a.md?p=8) thereunder in proceedings brought under sections [8](/usc/7/8.md), [9](/usc/7/9.md), [9a](/usc/7/9a.md), [9b](/usc/7/9b.md), [9c](/usc/7/9c.md), and [13b](/usc/7/13b.md) of this title. In any such report or opinion, the [Commission](/usc/7/1a.md?p=8) may set forth the facts as to any actual transaction or any information referred to in [subsection (b)](#b) of this section, if such facts or information have previously been disclosed publicly in connection with a congressional proceeding, or in an administrative or judicial proceeding brought under this chapter.
- (d) **Investigations respecting marketing conditions of commodities and commodity products and byproducts; reports—** The [Commission](/usc/7/1a.md?p=8), upon its own initiative or in cooperation with existing governmental agencies, shall investigate the marketing conditions of [commodities](/usc/7/1a.md?p=9) and [commodity](/usc/7/1a.md?p=9) products and byproducts, including supply and demand for these [commodities](/usc/7/1a.md?p=9), cost to the consumer, and handling and transportation charges. It shall also compile and furnish to [producers](/usc/7/6802.md?p=4-A-iii-III-bb), consumers, and distributors, by means of regular or special reports, or by such other methods as it deems most effective, information respecting the [commodity](/usc/7/1a.md?p=9) markets, together with information on supply, demand, prices, and other conditions in this and other countries that affect the markets.
- (e) **Names and addresses of traders of boards of trade previously disclosed; disclosure to Congress and agencies or departments of States or foreign governments or foreign futures authority—** The [Commission](/usc/7/1a.md?p=8) may disclose and make public, where such information has previously been disclosed publicly in accordance with the provisions of this section, the names and addresses of all traders on the [boards](/usc/7/1a.md?p=5) of trade on the [commodity](/usc/7/1a.md?p=9) markets with respect to whom the [Commission](/usc/7/1a.md?p=8) has information, and any other information in the possession of the [Commission](/usc/7/1a.md?p=8) relating to the amount of [commodities](/usc/7/1a.md?p=9) purchased or sold by each such trader. Upon the request of any [committee](/usc/7/2132.md?p=n) of either House of Congress, acting within the scope of its jurisdiction, the [Commission](/usc/7/1a.md?p=8) shall furnish to such [committee](/usc/7/2132.md?p=n) the names and addresses of all traders on such [boards](/usc/7/1a.md?p=5) of trade with respect to whom the [Commission](/usc/7/1a.md?p=8) has information, and any other information in the possession of the [Commission](/usc/7/1a.md?p=8) relating to the amount of any [commodity](/usc/7/1a.md?p=9) purchased or sold by each such trader. Upon the request of any department or agency of the Government of the [United States](/usc/7/6402.md?p=8), acting within the scope of its jurisdiction, the [Commission](/usc/7/1a.md?p=8) may furnish to such department or agency any information in the possession of the [Commission](/usc/7/1a.md?p=8) obtained in connection with the administration of this chapter. However, any information furnished under this subsection to any Federal department or agency shall not be disclosed by such department or agency except in any action or proceeding under the laws of the [United States](/usc/7/6402.md?p=8) to which it, the [Commission](/usc/7/1a.md?p=8), or the [United States](/usc/7/6402.md?p=8) is a party. Upon the request of any department or agency of any [State](/usc/7/1359aa.md?p=5) or any political subdivision thereof, acting within the scope of its jurisdiction, any [foreign futures authority](/usc/7/1a.md?p=26), or any department or agency of any foreign government or any political subdivision thereof, acting within the scope of its jurisdiction, the [Commission](/usc/7/1a.md?p=8) may furnish to such [foreign futures authority](/usc/7/1a.md?p=26), department or agency any information in the possession of the [Commission](/usc/7/1a.md?p=8) obtained in connection with the administration of this chapter. Any information furnished to any department or agency of any [State](/usc/7/1359aa.md?p=5) or political subdivision thereof shall not be disclosed by such department or agency except in connection with an adjudicatory action or proceeding brought under this chapter or the laws of such [State](/usc/7/1359aa.md?p=5) or political subdivision to which such [State](/usc/7/1359aa.md?p=5) or political subdivision or any department or agency thereof is a party. The [Commission](/usc/7/1a.md?p=8) shall not furnish any information to a [foreign futures authority](/usc/7/1a.md?p=26) or to a department, central [bank](/usc/7/27.md?p=a) and ministries, or agency of a foreign government or political subdivision thereof unless the [Commission](/usc/7/1a.md?p=8) is satisfied that the information will not be disclosed by such [foreign futures authority](/usc/7/1a.md?p=26), department, central [bank](/usc/7/27.md?p=a) and ministries, or agency except in connection with an adjudicatory action or proceeding brought under the laws of such foreign government or political subdivision to which such foreign government or political subdivision or any department, central [bank](/usc/7/27.md?p=a) and ministries, or agency thereof, or [foreign futures authority](/usc/7/1a.md?p=26), is a party.
- (f) **Compliance with subpoena after notice to informant; congressional subpoenas and requests for information excepted—** The [Commission](/usc/7/1a.md?p=8) shall disclose information in its possession pursuant to a subpoena or summons only if—
  - (1) a copy of the subpoena or summons has been mailed to the last known home or business address of the [person](/usc/7/1a.md?p=38) who submitted the information that is the subject of the subpoena or summons, if the address is known to the [Commission](/usc/7/1a.md?p=8), or, if such mailing would be unduly burdensome, the [Commission](/usc/7/1a.md?p=8) provides other appropriate notice of the subpoena or summons to such [person](/usc/7/1a.md?p=38), and
  - (2) at least fourteen days have expired from the date of such mailing of the subpoena or summons, or such other notice.

  This subsection shall not apply to congressional subpoenas or congressional requests for information.

- (g) **Requests for information by State agencies or subdivisions; volunteering of information by Commission—** The [Commission](/usc/7/1a.md?p=8) shall provide any registration information maintained by the [Commission](/usc/7/1a.md?p=8) on any registrant upon reasonable request made by any department or agency of any [State](/usc/7/1359aa.md?p=5) or any political subdivision thereof. Whenever the [Commission](/usc/7/1a.md?p=8) determines that such information may be appropriate for use by any department or agency of a [State](/usc/7/1359aa.md?p=5) or political subdivision thereof, the [Commission](/usc/7/1a.md?p=8) shall provide such information without request.
- (h) **Omitted—**
- (i) **Review and audits by Comptroller General—** The Comptroller General of the [United States](/usc/7/6402.md?p=8) shall conduct reviews and audits of the [Commission](/usc/7/1a.md?p=8) and make reports thereon. For the purpose of conducting such reviews and audits, the Comptroller General shall be furnished such information regarding the powers, duties, organizations, transactions, operations, and activities of the [Commission](/usc/7/1a.md?p=8) as the Comptroller General may require and the Comptroller General and the duly authorized representatives of the Comptroller General shall, for the purpose of securing such information, have access to and the right to examine any books, documents, papers, or records of the [Commission](/usc/7/1a.md?p=8), except that in reports the Comptroller General shall not include data and information that would separately disclose the business transactions of any [person](/usc/7/1a.md?p=38) and trade secrets or names of customers, although such data shall be provided upon request by any [committee](/usc/7/2132.md?p=n) of either House of Congress acting within the scope of its jurisdiction.

# [§§12–1 to 12–3. Omitted — omitted]



# §12a. Registration of commodity dealers and associated persons; regulation of registered entities


The [Commission](/usc/7/1a.md?p=8) is authorized—

- (1) to register [futures commission merchants](/usc/7/1a.md?p=28-A), associated [persons](/usc/7/1a.md?p=38) of [futures commission merchants](/usc/7/1a.md?p=28-A), [introducing brokers](/usc/7/1a.md?p=31-A), associated [persons](/usc/7/1a.md?p=38) of [introducing brokers](/usc/7/1a.md?p=31-A), [commodity trading advisors](/usc/7/1a.md?p=12-B), associated [persons](/usc/7/1a.md?p=38) of [commodity trading advisors](/usc/7/1a.md?p=12-B), [commodity pool operators](/usc/7/1a.md?p=11-A), associated [persons](/usc/7/1a.md?p=38) of [commodity pool operators](/usc/7/1a.md?p=11-A), [floor brokers](/usc/7/1a.md?p=22-A), and [floor traders](/usc/7/1a.md?p=23-A) upon application in accordance with rules and regulations and in the form and manner to be prescribed by the [Commission](/usc/7/1a.md?p=8), which may require the applicant, and such [persons](/usc/7/1a.md?p=38) associated with the applicant as the [Commission](/usc/7/1a.md?p=8) may specify, to be fingerprinted and to submit, or cause to be submitted, such fingerprints to the Attorney General for identification and appropriate processing, and in connection therewith to fix and establish from time to time reasonable fees and charges for registrations and renewals thereof: Provided, That notwithstanding any provision of this chapter, the [Commission](/usc/7/1a.md?p=8) may grant a temporary [license](/usc/7/2009cc.md?p=6) to any applicant for registration with the [Commission](/usc/7/1a.md?p=8) pursuant to such rules, regulations, or [orders](/usc/7/2902.md?p=10) as the [Commission](/usc/7/1a.md?p=8) may adopt, except that the term of any such temporary [license](/usc/7/2009cc.md?p=6) shall not exceed six months from the date of its issuance;
- (2) upon notice, but without a hearing and pursuant to such rules, regulations, or [orders](/usc/7/2902.md?p=10) as the [Commission](/usc/7/1a.md?p=8) may adopt, to refuse to register, to register conditionally, or to suspend or place restrictions upon the registration of, any [person](/usc/7/1a.md?p=38) and with such a hearing as may be appropriate to revoke the registration of any [person](/usc/7/1a.md?p=38)—
  - (A) if a prior registration of such [person](/usc/7/1a.md?p=38) in any capacity has been suspended (and the period of such suspension has not expired) or has been revoked;
  - (B) if registration of such [person](/usc/7/1a.md?p=38) in any capacity has been refused under the provisions of [paragraph (3)](#3) of this section within five years preceding the filing of the application for registration or at any time thereafter;
  - (C) if such [person](/usc/7/1a.md?p=38) is permanently or temporarily enjoined by [order](/usc/7/2902.md?p=10), judgment, or decree of any court of competent jurisdiction (except that registration may not be revoked solely on the basis of such temporary [order](/usc/7/2902.md?p=10), judgment, or decree), including an [order](/usc/7/2902.md?p=10) entered pursuant to an agreement of settlement to which the [Commission](/usc/7/1a.md?p=8) or any Federal or [State agency](/usc/7/2012.md?p=s) or other governmental body is a party, from (i) acting as a [futures commission merchant](/usc/7/1a.md?p=28-A), [introducing broker](/usc/7/1a.md?p=31-A), [floor broker](/usc/7/1a.md?p=22-A), [floor trader](/usc/7/1a.md?p=23-A), [commodity trading advisor](/usc/7/1a.md?p=12-B), [commodity pool operator](/usc/7/1a.md?p=11-A), associated [person](/usc/7/1a.md?p=38) of any registrant under this chapter, [securities](/usc/7/1a.md?p=41) broker, [securities](/usc/7/1a.md?p=41) dealer, municipal [securities](/usc/7/1a.md?p=41) broker, municipal [securities](/usc/7/1a.md?p=41) dealer, transfer agent, clearing agency, [securities](/usc/7/1a.md?p=41) information [processor](/usc/7/609.md?p=d-7-D), investment adviser, investment company, or affiliated [person](/usc/7/1a.md?p=38) or employee of any of the foregoing or (ii) engaging in or continuing any activity where such activity involves embezzlement, theft, extortion, fraud, fraudulent conversion, misappropriation of [funds](/usc/7/4531.md?p=5), [securities](/usc/7/1a.md?p=41) or property, forgery, counterfeiting, false pretenses, bribery, gambling, or any transaction in or advice concerning [contracts](/usc/7/518.md?p=4) of sale of a [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27), concerning matters subject to [Commission](/usc/7/1a.md?p=8) regulation under section [6c](/usc/7/6c.md) or [23](/usc/7/23.md) of this title, or concerning [securities](/usc/7/1a.md?p=41);
  - (D) if such [person](/usc/7/1a.md?p=38) has been convicted within ten years preceding the filing of the application for registration or at any time thereafter of any felony that (i) involves any transactions or advice concerning any [contract of sale](/usc/7/1a.md?p=13) of a [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27), or any activity subject to [Commission](/usc/7/1a.md?p=8) regulation under section [6c](/usc/7/6c.md) or [23](/usc/7/23.md) of this title, or concerning a [security](/usc/7/1a.md?p=41), (ii) arises out of the conduct of the business of a [futures commission merchant](/usc/7/1a.md?p=28-A), [introducing broker](/usc/7/1a.md?p=31-A), [floor broker](/usc/7/1a.md?p=22-A), [floor trader](/usc/7/1a.md?p=23-A), [commodity trading advisor](/usc/7/1a.md?p=12-B), [commodity pool operator](/usc/7/1a.md?p=11-A), associated [person](/usc/7/1a.md?p=38) of any registrant under this chapter, [securities](/usc/7/1a.md?p=41) broker, [securities](/usc/7/1a.md?p=41) dealer, municipal [securities](/usc/7/1a.md?p=41) broker, municipal [securities](/usc/7/1a.md?p=41) dealer, transfer agent, clearing agency, [securities](/usc/7/1a.md?p=41) information [processor](/usc/7/609.md?p=d-7-D), investment adviser, investment company, or an affiliated [person](/usc/7/1a.md?p=38) or employee of any of the foregoing, (iii) involves embezzlement, theft, extortion, fraud, fraudulent conversion, misappropriation of [funds](/usc/7/4531.md?p=5), [securities](/usc/7/1a.md?p=41) or property, forgery, counterfeiting, false pretenses, bribery, or gambling, or (iv) involves the violation of section 152, 1001, [1341](/usc/7/1341.md), [1342](/usc/7/1342.md), [1343](/usc/7/1343.md), [1503](/usc/7/1503.md), [1623](/usc/7/1623.md), [1961](/usc/7/1961.md), [1962](/usc/7/1962.md), [1963](/usc/7/1963.md), or 2314, or chapter [25](/usc/18/chptI-ch25.md), [47](/usc/18/chptI-ch47.md), [95](/usc/18/chptI-ch95.md), or [96](/usc/18/chptI-ch96.md) of title 18, or section [7201](/usc/26/7201.md) or [7206](/usc/26/7206.md) of title 26;
  - (E) if such [person](/usc/7/1a.md?p=38), within ten years preceding the filing of the application or at any time thereafter, has been found in a proceeding brought by the [Commission](/usc/7/1a.md?p=8) or any Federal or [State agency](/usc/7/2012.md?p=s) or other governmental body, or by agreement of settlement to which the [Commission](/usc/7/1a.md?p=8) or any Federal or [State agency](/usc/7/2012.md?p=s) or other governmental body is a party, (i) to have violated any provision of this chapter, the Securities Act of 1933 [[15 U.S.C. 77a](/usc/15/77a.md) et seq.], the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 [[15 U.S.C. 78a](/usc/15/78a.md) et seq.], the Public Utility Holding Company Act of 1935,[^1] the Trust Indenture Act of 1939 [[15 U.S.C. 77aaa](/usc/15/77aaa.md) et seq.], the Investment Advisers Act of 1940 [[15 U.S.C. 80b–1](/usc/15/80b–1.md) et seq.], the Investment Company Act of 1940 [[15 U.S.C. 80a–1](/usc/15/80a–1.md) et seq.], the [Securities](/usc/7/1a.md?p=41) Investors[^2] Protection Act of 1970 [[15 U.S.C. 78aaa](/usc/15/78aaa.md) et seq.], the Foreign Corrupt Practices Act of 1977, [chapter 96](/usc/18/chptI-ch96.md) of title 18, or any similar statute of a [State](/usc/7/1359aa.md?p=5) or foreign jurisdiction, or any rule, regulation, or [order](/usc/7/2902.md?p=10) under any such statutes, or the rules of the Municipal [Securities](/usc/7/1a.md?p=41) Rulemaking [Board](/usc/7/1a.md?p=5) where such violation involves embezzlement, theft, extortion, fraud, fraudulent conversion, misappropriation of [funds](/usc/7/4531.md?p=5), [securities](/usc/7/1a.md?p=41) or property, forgery, counterfeiting, false pretenses, bribery, or gambling, or (ii) to have willfully aided, abetted, counseled, commanded, induced, or procured such violation by any other [person](/usc/7/1a.md?p=38);
  - (F) if such [person](/usc/7/1a.md?p=38) is subject to an outstanding [order](/usc/7/2902.md?p=10) of the [Commission](/usc/7/1a.md?p=8) denying [privileges](/usc/7/1a.md?p=36) on any [registered entity](/usc/7/1a.md?p=40) to such [person](/usc/7/1a.md?p=38), denying, suspending, or revoking such [person](/usc/7/1a.md?p=38)’s membership in any [registered entity](/usc/7/1a.md?p=40) or registered futures association, or barring or suspending such [person](/usc/7/1a.md?p=38) from being associated with a registrant under this chapter or with a [member](/usc/7/1a.md?p=34) of a [registered entity](/usc/7/1a.md?p=40) or with a [member](/usc/7/1a.md?p=34) of a registered futures association;
  - (G) if, as to any of the matters set forth in this paragraph and [paragraph (3)](#3), such [person](/usc/7/1a.md?p=38) willfully made any materially false or misleading statement or omitted to [state](/usc/7/1359aa.md?p=5) any material fact in such [person](/usc/7/1a.md?p=38)’s application or any update thereto; or
  - (H) if refusal, suspension, or revocation of the registration of any principal of such [person](/usc/7/1a.md?p=38) would be warranted because of a statutory disqualification listed in this paragraph:
- (3) to refuse to register or to register conditionally any [person](/usc/7/1a.md?p=38), if it is found, after opportunity for hearing, that—
  - (A) such [person](/usc/7/1a.md?p=38) has been found by the [Commission](/usc/7/1a.md?p=8) or by any court of competent jurisdiction to have violated, or has consented to findings of a violation of, any provision of this chapter, or any rule, regulation, or [order](/usc/7/2902.md?p=10) thereunder (other than a violation set forth in [paragraph (2)](#2) of this section), or to have willfully aided, abetted, counseled, commanded, induced, or procured the violation by any other [person](/usc/7/1a.md?p=38) of any such provision;
  - (B) such [person](/usc/7/1a.md?p=38) has been found by any court of competent jurisdiction or by any Federal or [State agency](/usc/7/2012.md?p=s) or other governmental body, or by agreement of settlement to which any Federal or [State agency](/usc/7/2012.md?p=s) or other governmental body is a party, (i) to have violated any provision of the Securities Act of 1933 [[15 U.S.C. 77a](/usc/15/77a.md) et seq.], the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 [[15 U.S.C. 78a](/usc/15/78a.md) et seq.], the Public Utility Holding Company Act of 1935,[^1] the Trust Indenture Act of 1939 [[15 U.S.C. 77aaa](/usc/15/77aaa.md) et seq.], the Investment Advisers Act of 1940 [[15 U.S.C. 80b–1](/usc/15/80b–1.md) et seq.], the Investment Company Act of 1940 [[15 U.S.C. 80a–1](/usc/15/80a–1.md) et seq.], the [Securities](/usc/7/1a.md?p=41) Investors[^2] Protection Act of 1970 [[15 U.S.C. 78aaa](/usc/15/78aaa.md) et seq.], the Foreign Corrupt Practices Act of 1977, or any similar statute of a [State](/usc/7/1359aa.md?p=5) or foreign jurisdiction, or any rule, regulation, or [order](/usc/7/2902.md?p=10) under any such statutes, or the rules of the Municipal [Securities](/usc/7/1a.md?p=41) Rulemaking [Board](/usc/7/1a.md?p=5) or (ii) to have willfully aided, abetted, counseled, commanded, induced, or procured such violation by any other [person](/usc/7/1a.md?p=38);
  - (C) such [person](/usc/7/1a.md?p=38) failed reasonably to supervise another [person](/usc/7/1a.md?p=38), who is subject to such [person](/usc/7/1a.md?p=38)’s supervision, with a view to preventing violations of this chapter, or of any of the statutes set forth in subparagraph (B) of this paragraph, or of any of the rules, regulations, or [orders](/usc/7/2902.md?p=10) thereunder, and the [person](/usc/7/1a.md?p=38) subject to supervision committed such a violation: Provided, That no [person](/usc/7/1a.md?p=38) shall be deemed to have failed reasonably to supervise another [person](/usc/7/1a.md?p=38), within the meaning of this subparagraph if (i) there have been established procedures, and a system for applying such procedures, which would reasonably be expected to prevent and detect, insofar as practicable, any such violation by such other [person](/usc/7/1a.md?p=38) and (ii) such [person](/usc/7/1a.md?p=38) has reasonably discharged the duties and obligations incumbent upon that [person](/usc/7/1a.md?p=38), as supervisor, by reason of such procedures and system, without reasonable cause to believe that such procedures and system were not being complied with;
  - (D) such [person](/usc/7/1a.md?p=38) pleaded guilty to or was convicted of a felony other than a felony of the type specified in [paragraph (2)(D)](#2-D) of this section, or was convicted of a felony of the type specified in [paragraph (2)(D)](#2-D) of this section more than ten years preceding the filing of the application;
  - (E) such [person](/usc/7/1a.md?p=38) pleaded guilty to or was convicted of any misdemeanor which (i) involves any transaction or advice concerning any [contract of sale](/usc/7/1a.md?p=13) of a [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27) or any activity subject to [Commission](/usc/7/1a.md?p=8) regulation under section [6c](/usc/7/6c.md) or [23](/usc/7/23.md) of this title or concerning a [security](/usc/7/1a.md?p=41), (ii) arises out of the conduct of the business of a [futures commission merchant](/usc/7/1a.md?p=28-A), [introducing broker](/usc/7/1a.md?p=31-A), [floor broker](/usc/7/1a.md?p=22-A), [floor trader](/usc/7/1a.md?p=23-A), [commodity trading advisor](/usc/7/1a.md?p=12-B), [commodity pool operator](/usc/7/1a.md?p=11-A), associated [person](/usc/7/1a.md?p=38) of any registrant under this chapter, [securities](/usc/7/1a.md?p=41) broker, [securities](/usc/7/1a.md?p=41) dealer, municipal [securities](/usc/7/1a.md?p=41) broker, municipal [securities](/usc/7/1a.md?p=41) dealer, transfer agent, clearing agency, [securities](/usc/7/1a.md?p=41) information [processor](/usc/7/609.md?p=d-7-D), investment adviser, investment company, or an affiliated [person](/usc/7/1a.md?p=38) or employee of any of the foregoing, (iii) involves embezzlement, theft, extortion, fraud, fraudulent conversion, misappropriation of [funds](/usc/7/4531.md?p=5), [securities](/usc/7/1a.md?p=41) or property, forgery, counterfeiting, false pretenses, bribery, or gambling, (iv) involves the violation of section 152, [1341](/usc/7/1341.md), [1342](/usc/7/1342.md), or [1343](/usc/7/1343.md) or chapter [25](/usc/18/chptI-ch25.md), [47](/usc/18/chptI-ch47.md), [95](/usc/18/chptI-ch95.md), or [96](/usc/18/chptI-ch96.md) of title 18, or section [7203](/usc/26/7203.md), [7204](/usc/26/7204.md), [7205](/usc/26/7205.md), or [7207](/usc/26/7207.md) of title 26;
  - (F) such [person](/usc/7/1a.md?p=38) was debarred by any agency of the [United States](/usc/7/6402.md?p=8) from contracting with the [United States](/usc/7/6402.md?p=8);
  - (G) such [person](/usc/7/1a.md?p=38) willfully made any materially false or misleading statement or willfully omitted to [state](/usc/7/1359aa.md?p=5) any material fact in such [person](/usc/7/1a.md?p=38)’s application or any update thereto, in any report required to be filed with the [Commission](/usc/7/1a.md?p=8) by this chapter or the regulations thereunder, in any proceeding before the [Commission](/usc/7/1a.md?p=8) or in any registration disqualification proceeding;
  - (H) such [person](/usc/7/1a.md?p=38) has pleaded nolo contendere to criminal charges of felonious conduct, or has been convicted in a [State](/usc/7/1359aa.md?p=5) court, in a [United States](/usc/7/6402.md?p=8) military court, or in a foreign court of conduct which would constitute a felony under Federal law if the offense had been committed under Federal jurisdiction;
  - (I) in the case of an applicant for registration in any capacity for which there are minimum financial requirements prescribed under this chapter or under the rules or regulations of the [Commission](/usc/7/1a.md?p=8), such [person](/usc/7/1a.md?p=38) has not established that such [person](/usc/7/1a.md?p=38) meets such minimum financial requirements;
  - (J) such [person](/usc/7/1a.md?p=38) is subject to an outstanding [order](/usc/7/2902.md?p=10) denying, suspending, or expelling such [person](/usc/7/1a.md?p=38) from membership in a [registered entity](/usc/7/1a.md?p=40), a registered futures association, any other self-regulatory organization, or any foreign regulatory body that the [Commission](/usc/7/1a.md?p=8) recognizes as having a comparable regulatory program or barring or suspending such [person](/usc/7/1a.md?p=38) from being associated with any [member](/usc/7/1a.md?p=34) or [members](/usc/7/1a.md?p=34) of such [registered entity](/usc/7/1a.md?p=40), association, self-regulatory organization, or foreign regulatory body;
  - (K) such [person](/usc/7/1a.md?p=38) has been found by any court of competent jurisdiction or by any Federal or [State agency](/usc/7/2012.md?p=s) or other governmental body, or by agreement of settlement to which any Federal or [State agency](/usc/7/2012.md?p=s) or other governmental body is a party, (i) to have violated any statute or any rule, regulation, or [order](/usc/7/2902.md?p=10) thereunder which involves embezzlement, theft, extortion, fraud, fraudulent conversion, misappropriation of [funds](/usc/7/4531.md?p=5), [securities](/usc/7/1a.md?p=41) or property, forgery, counterfeiting, false pretenses, bribery, or gambling or (ii) to have willfully aided, abetted, counseled, commanded, induced or procured such violation by any other [person](/usc/7/1a.md?p=38);
  - (L) such [person](/usc/7/1a.md?p=38) has associated with such [person](/usc/7/1a.md?p=38) any other [person](/usc/7/1a.md?p=38) and knows, or in the exercise of reasonable care should know, of facts regarding such other [person](/usc/7/1a.md?p=38) that are set forth as statutory disqualifications in [paragraph (2)](#2) of this section, unless such [person](/usc/7/1a.md?p=38) has notified the [Commission](/usc/7/1a.md?p=8) of such facts and the [Commission](/usc/7/1a.md?p=8) has determined that such other [person](/usc/7/1a.md?p=38) should be registered or temporarily licensed;
  - (M) there is other good cause; or
  - (N) any principal, as defined in [paragraph (2)](#2) of this section, of such [person](/usc/7/1a.md?p=38) has been or could be refused registration:
- (4) in accordance with the procedure provided for in [section 9 of this title](/usc/7/9.md), to suspend, revoke, or place restrictions upon the registration of any [person](/usc/7/1a.md?p=38) registered under this chapter if cause exists under [paragraph (3)](#3) of this section which would warrant a refusal of registration of such [person](/usc/7/1a.md?p=38), and to suspend or revoke the registration of any [futures commission merchant](/usc/7/1a.md?p=28-A) or [introducing broker](/usc/7/1a.md?p=31-A) who shall knowingly accept any [order](/usc/7/2902.md?p=10) for the purchase or sale of any [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27) on or subject to the rules of any [registered entity](/usc/7/1a.md?p=40) from any [person](/usc/7/1a.md?p=38) if such [person](/usc/7/1a.md?p=38) has been denied trading [privileges](/usc/7/1a.md?p=36) on any [registered entity](/usc/7/1a.md?p=40) by [order](/usc/7/2902.md?p=10) of the [Commission](/usc/7/1a.md?p=8) under [section 9 of this title](/usc/7/9.md) and the period of denial specified in such [order](/usc/7/2902.md?p=10) shall not have expired: Provided, That such [person](/usc/7/1a.md?p=38) may appeal from a decision to suspend, revoke, or place restrictions upon registration made pursuant to this paragraph in the manner provided in [section 9 of this title](/usc/7/9.md);
- (5) to make and promulgate such rules and regulations as, in the judgment of the [Commission](/usc/7/1a.md?p=8), are reasonably necessary to effectuate any of the provisions or to accomplish any of the purposes of this chapter;
- (6) to communicate to the proper [committee](/usc/7/2132.md?p=n) or officer of any [registered entity](/usc/7/1a.md?p=40), registered futures association, or self-regulatory organization as defined in section 3(a)(26) of the [Securities](/usc/7/1a.md?p=41) Exchange Act of 1934 [[15 U.S.C. 78c(a)(26)](/usc/15/78c.md?p=a-26)], notwithstanding the provisions of [section 12 of this title](/usc/7/12.md), the full facts concerning any transaction or market operation, including the names of parties thereto, which in the judgment of the [Commission](/usc/7/1a.md?p=8) disrupts or tends to disrupt any market or is otherwise harmful or against the best interests of [producers](/usc/7/6802.md?p=4-A-iii-III-bb), consumers, or investors, or which is necessary or appropriate to effectuate the purposes of this chapter: Provided, That any information furnished by the [Commission](/usc/7/1a.md?p=8) under this paragraph shall not be disclosed by such [registered entity](/usc/7/1a.md?p=40), registered futures association, or self-regulatory organization except in any self-regulatory action or proceeding;
- (7) to alter or supplement the rules of a [registered entity](/usc/7/1a.md?p=40) insofar as necessary or appropriate by rule or regulation or by [order](/usc/7/2902.md?p=10), if after making the appropriate request in writing to a [registered entity](/usc/7/1a.md?p=40) that such [registered entity](/usc/7/1a.md?p=40) effect on its own behalf specified changes in its rules and practices, and after appropriate notice and opportunity for hearing, the [Commission](/usc/7/1a.md?p=8) determines that such [registered entity](/usc/7/1a.md?p=40) has not made the changes so required, and that such changes are necessary or appropriate for the protection of [persons](/usc/7/1a.md?p=38) producing, handling, processing, or consuming any [commodity](/usc/7/1a.md?p=9) traded for [future delivery](/usc/7/1a.md?p=27) on such [registered entity](/usc/7/1a.md?p=40), or the product or byproduct thereof, or for the protection of traders or to insure fair dealing in [commodities](/usc/7/1a.md?p=9) traded for [future delivery](/usc/7/1a.md?p=27) on such [registered entity](/usc/7/1a.md?p=40). Such rules, regulations, or [orders](/usc/7/2902.md?p=10) may specify changes with respect to such matters as—
  - (A) terms or conditions in [contracts](/usc/7/518.md?p=4) of sale to be executed on or subject to the rules of such [registered entity](/usc/7/1a.md?p=40);
  - (B) the form or manner of execution of purchases and sales for [future delivery](/usc/7/1a.md?p=27);
  - (C) other trading requirements;
  - (D) margin requirements, provided that the rules, regulations, or [orders](/usc/7/2902.md?p=10) shall—
    - (i) be limited to protecting the financial integrity of the [derivatives clearing organization](/usc/7/1a.md?p=15-A);
    - (ii) be designed for risk management purposes to protect the financial integrity of transactions; and
    - (iii) not set specific margin amounts;
  - (E) safeguards with respect to the financial responsibility of [members](/usc/7/1a.md?p=34);
  - (F) the manner, method, and place of soliciting business, including the content of such solicitations; and
  - (G) the form and manner of handling, recording, and accounting for customers’ [orders](/usc/7/2902.md?p=10), transactions, and accounts;
- (8) to make and promulgate such rules and regulations with respect to those [persons](/usc/7/1a.md?p=38) registered under this chapter, who are not [members](/usc/7/1a.md?p=34) of a [registered entity](/usc/7/1a.md?p=40), as in the judgment of the [Commission](/usc/7/1a.md?p=8) are reasonably necessary to protect the public interest and promote just and equitable principles of trade, including but not limited to the manner, method, and place of soliciting business, including the content of such solicitation;
- (9) to direct the [registered entity](/usc/7/1a.md?p=40), whenever it has reason to believe that an emergency exists, to take such action as in the [Commission](/usc/7/1a.md?p=8)’s judgment is necessary to maintain or restore orderly trading in or liquidation of any futures [contract](/usc/7/518.md?p=4), including, but not limited to, the setting of temporary emergency margin levels on any futures [contract](/usc/7/518.md?p=4), and the fixing of limits that may apply to a market position acquired in good faith prior to the effective date of the [Commission](/usc/7/1a.md?p=8)’s action. The term “emergency” as used herein shall mean, in addition to threatened or actual market manipulations and corners, any act of the [United States](/usc/7/6402.md?p=8) or a foreign government affecting a [commodity](/usc/7/1a.md?p=9) or any other major market disturbance which prevents the market from accurately reflecting the forces of supply and demand for such [commodity](/usc/7/1a.md?p=9). Any action taken by the [Commission](/usc/7/1a.md?p=8) under this paragraph shall be subject to review only in the [United States](/usc/7/6402.md?p=8) Court of Appeals for the circuit in which the party seeking review resides or has its principal place of business, or in the [United States](/usc/7/6402.md?p=8) Court of Appeals for the District of Columbia Circuit. Such review shall be based upon an examination of all the information before the [Commission](/usc/7/1a.md?p=8) at the time the determination was made. The court reviewing the [Commission](/usc/7/1a.md?p=8)’s action shall not enter a stay or [order](/usc/7/2902.md?p=10) of mandamus unless it has determined, after notice and hearing before a panel of the court, that the agency action complained of was arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. Nothing herein shall be deemed to limit the meaning or interpretation given by a [registered entity](/usc/7/1a.md?p=40) to the terms “market emergency”, “emergency”, or equivalent language in its own bylaws, rules, regulations, or resolutions;
- (10) to authorize any [person](/usc/7/1a.md?p=38) to perform any portion of the registration functions under this chapter, in accordance with rules, notwithstanding any other provision of law, adopted by such [person](/usc/7/1a.md?p=38) and submitted to the [Commission](/usc/7/1a.md?p=8) for approval or, if applicable, for review pursuant to [section 21(j) of this title](/usc/7/21.md?p=j), and subject to the provisions of this chapter applicable to registrations granted by the [Commission](/usc/7/1a.md?p=8); and
- (11)
  - (A) by written notice served on the [person](/usc/7/1a.md?p=38) and pursuant to such rules, regulations, and [orders](/usc/7/2902.md?p=10) as the [Commission](/usc/7/1a.md?p=8) may adopt, to suspend or modify the registration of any [person](/usc/7/1a.md?p=38) registered under this chapter who is charged (in any information, indictment, or complaint authorized by a [United States](/usc/7/6402.md?p=8) attorney or an appropriate official of any [State](/usc/7/1359aa.md?p=5)) with the [commission](/usc/7/1a.md?p=8) of or participation in a crime involving a violation of this chapter, or a violation of any other provision of Federal or [State](/usc/7/1359aa.md?p=5) law that would reflect on the honesty or the fitness of the [person](/usc/7/1a.md?p=38) to act as a fiduciary (including an offense specified in subparagraph [(D)](#2-D) or [(E)](#2-E) of paragraph (2)) that is punishable by imprisonment for a term exceeding one year, if the [Commission](/usc/7/1a.md?p=8) determines that continued registration of the [person](/usc/7/1a.md?p=38) may pose a threat to the public interest or may threaten to impair public confidence in any market regulated by the [Commission](/usc/7/1a.md?p=8).
  - (B) Prior to the suspension or modification of the registration of a [person](/usc/7/1a.md?p=38) under this paragraph, the [person](/usc/7/1a.md?p=38) shall be afforded an opportunity for a hearing at which the [Commission](/usc/7/1a.md?p=8) shall have the burden of showing that the continued registration of the [person](/usc/7/1a.md?p=38) does, or is likely to, pose a threat to the public interest or threaten to impair public confidence in any market regulated by the [Commission](/usc/7/1a.md?p=8).
  - (C) Any notice of suspension or modification issued under this paragraph shall remain in effect until such information, indictment, or complaint is disposed of or until terminated by the [Commission](/usc/7/1a.md?p=8).
  - (D) On disposition of such information, indictment, or complaint, the [Commission](/usc/7/1a.md?p=8) may issue and serve on such [person](/usc/7/1a.md?p=38) an [order](/usc/7/2902.md?p=10) pursuant to paragraph [(2)](#2) or [(4)](#4) to suspend, restrict, or revoke the registration of such [person](/usc/7/1a.md?p=38).
  - (E) A finding of not guilty or other disposition of the charge shall not preclude the [Commission](/usc/7/1a.md?p=8) from thereafter instituting any other proceedings under this chapter.
  - (F) A [person](/usc/7/1a.md?p=38) aggrieved by an [order](/usc/7/2902.md?p=10) issued under this paragraph may obtain review of such [order](/usc/7/2902.md?p=10) in the same manner and on the same terms and conditions as are provided in [section 8(b) of this title](/usc/7/8.md?p=b).

# §12b. Trading ban violations; prohibition


It shall be unlawful for any [person](/usc/7/1a.md?p=38), against whom there is outstanding any [order](/usc/7/2902.md?p=10) of the [Commission](/usc/7/1a.md?p=8) prohibiting him from trading on or subject to the rules of any [registered entity](/usc/7/1a.md?p=40), to make or cause to be made in contravention of such [order](/usc/7/2902.md?p=10), any [contract](/usc/7/518.md?p=4) for [future delivery](/usc/7/1a.md?p=27) of any [commodity](/usc/7/1a.md?p=9), on or subject to the rules of any [registered entity](/usc/7/1a.md?p=40).


# §12c. Disciplinary actions

- (a) **Action taken; written notice of reasons for action—**
  - (1) Any [exchange](/usc/7/1a.md?p=1-D) or the [Commission](/usc/7/1a.md?p=8) if the [exchange](/usc/7/1a.md?p=1-D) fails to act, may suspend, expel, or otherwise discipline any [person](/usc/7/1a.md?p=38) who is a [member](/usc/7/1a.md?p=34) of that [exchange](/usc/7/1a.md?p=1-D), or deny any [person](/usc/7/1a.md?p=38) access to the [exchange](/usc/7/1a.md?p=1-D). Any such action shall be taken solely in accordance with the rules of that [exchange](/usc/7/1a.md?p=1-D).
  - (2) Any suspension, expulsion, disciplinary, or access denial procedure established by an [exchange](/usc/7/1a.md?p=1-D) rule shall provide for written notice to the [Commission](/usc/7/1a.md?p=8) and to the [person](/usc/7/1a.md?p=38) who is suspended, expelled, or disciplined, or denied access, within thirty days, which includes the reasons for the [exchange](/usc/7/1a.md?p=1-D) action in the form and manner the [Commission](/usc/7/1a.md?p=8) prescribes. An [exchange](/usc/7/1a.md?p=1-D) shall make public its findings and the reasons for the [exchange](/usc/7/1a.md?p=1-D) action in any such proceeding, including the action taken or the penalty imposed, but shall not disclose the evidence therefor, except to the [person](/usc/7/1a.md?p=38) who is suspended, expelled, or disciplined, or denied access, and to the [Commission](/usc/7/1a.md?p=8).
- (b) **Review by Commission—** The [Commission](/usc/7/1a.md?p=8) may, in its discretion and in accordance with such standards and procedures as it deems appropriate, review any decision by an [exchange](/usc/7/1a.md?p=1-D) whereby a [person](/usc/7/1a.md?p=38) is suspended, expelled, otherwise disciplined, or denied access to the [exchange](/usc/7/1a.md?p=1-D). In addition, the [Commission](/usc/7/1a.md?p=8) may, in its discretion and upon application of any [person](/usc/7/1a.md?p=38) who is adversely affected by any other [exchange](/usc/7/1a.md?p=1-D) action, review such action.
- (c) **Affirmance, modification, set aside, or remand of action—** The [Commission](/usc/7/1a.md?p=8) may affirm, modify, set aside, or remand any [exchange](/usc/7/1a.md?p=1-D) decision it reviews pursuant to [subsection (b)](#b), after a determination on the record whether the action of the [exchange](/usc/7/1a.md?p=1-D) was in accordance with the policies of this chapter. Subject to judicial review, any [order](/usc/7/2902.md?p=10) of the [Commission](/usc/7/1a.md?p=8) entered pursuant to [subsection (b)](#b) shall govern the [exchange](/usc/7/1a.md?p=1-D) in its further treatment of the matter.
- (d) **Stay of action—** The [Commission](/usc/7/1a.md?p=8), in its discretion, may [order](/usc/7/2902.md?p=10) a stay of any action taken pursuant to [subsection (a)](#a) pending review thereof.
- (e) **Major disciplinary rule violations—**
  - (1) The [Commission](/usc/7/1a.md?p=8) shall issue regulations requiring each [registered entity](/usc/7/1a.md?p=40) to establish and make available to the public a schedule of major violations of any rule within the disciplinary jurisdiction of such [registered entity](/usc/7/1a.md?p=40).
  - (2) The regulations issued by the [Commission](/usc/7/1a.md?p=8) pursuant to this subsection shall prohibit, for a period of time to be determined by the [Commission](/usc/7/1a.md?p=8), any individual who is found to have committed any major violation from service on the governing [board](/usc/7/1a.md?p=5) of any [registered entity](/usc/7/1a.md?p=40) or registered futures association, or on any disciplinary [committee](/usc/7/2132.md?p=n) thereof.

# §12d. Commission action for noncompliance with export sales reporting requirements


The [Commission](/usc/7/1a.md?p=8) may, in accordance with the procedures provided for in this chapter, refuse to register, register conditionally, or suspend, place restrictions upon, or revoke the registration of, any [person](/usc/7/1a.md?p=38), and may bar for any period as it deems appropriate any [person](/usc/7/1a.md?p=38) from using or participating in any manner in any market regulated by the [Commission](/usc/7/1a.md?p=8), if such [person](/usc/7/1a.md?p=38) is subject to a final decision or [order](/usc/7/2902.md?p=10) of any court of competent jurisdiction or agency of the [United States](/usc/7/6402.md?p=8) finding such [person](/usc/7/1a.md?p=38) to have knowingly violated any provision of the export sales reporting requirements of [section 612c–3](/usc/7/612c–3.md)[^1] of this title, or of any regulation issued thereunder.


# [§12e. Repealed. Pub. L. 106–554, § 1(a)(5) [title I, § 123(a)(21)], Dec. 21, 2000, 114 Stat. 2763, 2763A–410 — repealed]



# §13. Violations generally; punishment; costs of prosecution

- (a) **Felonies generally—** It shall be a felony punishable by a fine of not more than $1,000,000 or imprisonment for not more than 10 years, or both, together with the costs of prosecution, for:
  - (1) Any [person](/usc/7/1a.md?p=38) registered or required to be registered under this chapter, or any employee or agent thereof, to embezzle, steal, purloin, or with criminal intent convert to such [person](/usc/7/1a.md?p=38)’s use or to the use of another, any money, [securities](/usc/7/1a.md?p=41), or property having a value in excess of $100, which was received by such [person](/usc/7/1a.md?p=38) or any employee or agent thereof to margin, guarantee, or secure the trades or [contracts](/usc/7/518.md?p=4) of any customer or accruing to such customer as a result of such trades or [contracts](/usc/7/518.md?p=4) or which otherwise was received from any customer, client, or pool participant in connection with the business of such [person](/usc/7/1a.md?p=38). The word “value” as used in this paragraph means face, par, or market value, or cost price, either wholesale or retail, whichever is greater.
  - (2) Any [person](/usc/7/1a.md?p=38) to manipulate or attempt to manipulate the price of any [commodity](/usc/7/1a.md?p=9) in [interstate commerce](/usc/7/1a.md?p=30), or for [future delivery](/usc/7/1a.md?p=27) on or subject to the rules of any [registered entity](/usc/7/1a.md?p=40), or of any [swap](/usc/7/1a.md?p=47-A), or to corner or attempt to corner any such [commodity](/usc/7/1a.md?p=9) or knowingly to deliver or cause to be delivered for transmission through the mails or [interstate commerce](/usc/7/1a.md?p=30) by telegraph, telephone, wireless, or other means of communication false or misleading or knowingly inaccurate reports concerning crop or market information or conditions that affect or tend to affect the price of any [commodity](/usc/7/1a.md?p=9) in [interstate commerce](/usc/7/1a.md?p=30), or knowingly to violate the provisions of [section 6](/usc/7/6.md), [section 6b](/usc/7/6b.md), [subsections (a) through (e)](#a..e) of subsection[^1] 6c, [section 6h](/usc/7/6h.md), [section 6o(1)](/usc/7/6o.md?p=1), or [section 23 of this title](/usc/7/23.md).
  - (3) Any [person](/usc/7/1a.md?p=38) knowingly to make, or cause to be made, any statement in any application, report, or document required to be filed under this chapter or any rule or regulation thereunder or any undertaking contained in a registration statement required under this chapter, or by any [registered entity](/usc/7/1a.md?p=40) or registered futures association in connection with an application for membership or participation therein or to become associated with a [member](/usc/7/1a.md?p=34) thereof, which statement was false or misleading with respect to any material fact, or knowingly to omit any material fact required to be stated therein or necessary to make the statements therein not misleading.
  - (4) Any [person](/usc/7/1a.md?p=38) willfully to falsify, conceal, or cover up by any trick, scheme, or artifice a material fact, make any false, fictitious, or fraudulent statements or representations, or make or use any false writing or document knowing the same to contain any false, fictitious, or fraudulent statement or entry to a [registered entity](/usc/7/1a.md?p=40), [board of trade](/usc/7/1a.md?p=6), [swap data repository](/usc/7/1a.md?p=48), or futures association designated or registered under this chapter acting in furtherance of its official duties under this chapter.
  - (5) Any [person](/usc/7/1a.md?p=38) willfully to violate any other provision of this chapter, or any rule or regulation thereunder, the violation of which is made unlawful or the observance of which is required under the terms of this chapter, but no [person](/usc/7/1a.md?p=38) shall be subject to imprisonment under this paragraph for the violation of any rule or regulation if such [person](/usc/7/1a.md?p=38) proves that he had no knowledge of such rule or regulation.
  - (6) Any [person](/usc/7/1a.md?p=38) to abuse the end user clearing exemption under [section 2(h)(4) of this title](/usc/7/2.md?p=h-4), as determined by the [Commission](/usc/7/1a.md?p=8).
- (b) **Suspension of convicted felons—** Any [person](/usc/7/1a.md?p=38) convicted of a felony under this section shall be suspended from registration under this chapter and shall be denied registration or reregistration for five years or such longer period as the [Commission](/usc/7/1a.md?p=8) may determine, and barred from using, or participating in any manner in, any market regulated by the [Commission](/usc/7/1a.md?p=8) for five years or such longer period as the [Commission](/usc/7/1a.md?p=8) shall determine, on such terms and conditions as the [Commission](/usc/7/1a.md?p=8) may prescribe, unless the [Commission](/usc/7/1a.md?p=8) determines that the imposition of such suspension, denial of registration or reregistration, or market bar is not required to protect the public interest. The [Commission](/usc/7/1a.md?p=8) may upon petition later review such disqualification and market bar and for good cause shown reduce the period thereof.
- (c) **Transactions by Commissioners and Commission employees prohibited—** It shall be a felony punishable by a fine of not more than $500,000 or imprisonment for not more than five years, or both, together with the costs of prosecution, for any Commissioner of the [Commission](/usc/7/1a.md?p=8) or any employee or agent thereof, to participate, directly or indirectly, in any transaction in [commodity](/usc/7/1a.md?p=9) futures or any transaction of the character of or which is commonly known to the trade as an “[option](/usc/7/1a.md?p=36)”, “[privilege](/usc/7/1a.md?p=36)”, “[indemnity](/usc/7/1a.md?p=36)”, “[bid](/usc/7/1a.md?p=36)”, “[offer](/usc/7/1a.md?p=36)”, “[put](/usc/7/1a.md?p=36)”, “[call](/usc/7/1a.md?p=36)”, “[advance guaranty](/usc/7/1a.md?p=36)”, or “[decline guaranty](/usc/7/1a.md?p=36)”, or any transaction for the delivery of any [commodity](/usc/7/1a.md?p=9) under a standardized [contract](/usc/7/518.md?p=4) commonly known to the trade as a margin account, margin [contract](/usc/7/518.md?p=4), leverage account, or leverage [contract](/usc/7/518.md?p=4), or under any [contract](/usc/7/518.md?p=4), account, arrangement, scheme, or device that the [Commission](/usc/7/1a.md?p=8) determines serves the same function or functions as such a standardized [contract](/usc/7/518.md?p=4), or is marketed or managed in substantially the same manner as such a standardized [contract](/usc/7/518.md?p=4), or for any such [person](/usc/7/1a.md?p=38) to participate, directly or indirectly, in any investment transaction in an actual [commodity](/usc/7/1a.md?p=9) if nonpublic information is used in the investment transaction, if the investment transaction is prohibited by rule or regulation of the [Commission](/usc/7/1a.md?p=8), or if the investment transaction is effected by means of any instrument regulated by the [Commission](/usc/7/1a.md?p=8). The foregoing prohibitions shall not apply to any transaction or class of transactions that the [Commission](/usc/7/1a.md?p=8), by rule or regulation, has determined would not be contrary to the public interest or otherwise inconsistent with the purposes of this subsection.
- (d) **Use of information by Commissioners and Commission employees prohibited—** It shall be a felony punishable by a fine of not more than $500,000 or imprisonment for not more than five years, or both, together with the costs of prosecution—(1) for any Commissioner of the [Commission](/usc/7/1a.md?p=8) or any employee or agent thereof who, by virtue of his employment or position, acquires information which may affect or tend to affect the price of any [commodity](/usc/7/1a.md?p=9) futures or [commodity](/usc/7/1a.md?p=9) and which information has not been made public to impart such information with intent to assist another [person](/usc/7/1a.md?p=38), directly or indirectly, to participate in any transaction in [commodity](/usc/7/1a.md?p=9) futures, any transaction in an actual [commodity](/usc/7/1a.md?p=9), or in any transaction of the character of or which is commonly known to the trade as an “[option](/usc/7/1a.md?p=36)”, “[privilege](/usc/7/1a.md?p=36)”, “[indemnity](/usc/7/1a.md?p=36)”, “[bid](/usc/7/1a.md?p=36)”, “[offer](/usc/7/1a.md?p=36)”, “[put](/usc/7/1a.md?p=36)”, “[call](/usc/7/1a.md?p=36)”, “[advance guaranty](/usc/7/1a.md?p=36)”, or “[decline guaranty](/usc/7/1a.md?p=36)”, or in any transaction for the delivery of any [commodity](/usc/7/1a.md?p=9) under a standardized [contract](/usc/7/518.md?p=4) commonly known to the trade as a margin account, margin [contract](/usc/7/518.md?p=4), leverage account, or leverage [contract](/usc/7/518.md?p=4), or under any [contract](/usc/7/518.md?p=4), account, arrangement, scheme, or device that the [Commission](/usc/7/1a.md?p=8) determines serves the same function or functions as such a standardized [contract](/usc/7/518.md?p=4), or is marketed or managed in substantially the same manner as such a standardized [contract](/usc/7/518.md?p=4); and (2) for any [person](/usc/7/1a.md?p=38) to acquire such information from any Commissioner of the [Commission](/usc/7/1a.md?p=8) or any employee or agent thereof and to use such information in any transaction in [commodity](/usc/7/1a.md?p=9) futures, any transaction in an actual [commodity](/usc/7/1a.md?p=9), or in any transaction of the character of or which is commonly known to the trade as an “[option](/usc/7/1a.md?p=36)”, “[privilege](/usc/7/1a.md?p=36)”, “[indemnity](/usc/7/1a.md?p=36)”, “[bid](/usc/7/1a.md?p=36)”, “[offer](/usc/7/1a.md?p=36)”, “[put](/usc/7/1a.md?p=36)”, “[call](/usc/7/1a.md?p=36)”, “[advance guaranty](/usc/7/1a.md?p=36)”, or “[decline guaranty](/usc/7/1a.md?p=36)”, or in any transaction for the delivery of any [commodity](/usc/7/1a.md?p=9) under a standardized [contract](/usc/7/518.md?p=4) commonly known to the trade as a margin account, margin [contract](/usc/7/518.md?p=4), leverage account, or leverage [contract](/usc/7/518.md?p=4), or under any [contract](/usc/7/518.md?p=4), account, arrangement, scheme, or device that the [Commission](/usc/7/1a.md?p=8) determines serves the same function or functions as such a standardized [contract](/usc/7/518.md?p=4), or is marketed or managed in substantially the same manner as such a standardized [contract](/usc/7/518.md?p=4).
- (e) **Insider trading prohibited—** It shall be a felony for any [person](/usc/7/1a.md?p=38)—
  - (1) who is an employee, [member](/usc/7/1a.md?p=34) of the governing [board](/usc/7/1a.md?p=5), or [member](/usc/7/1a.md?p=34) of any [committee](/usc/7/2132.md?p=n) of a [board of trade](/usc/7/1a.md?p=6), [registered entity](/usc/7/1a.md?p=40), [swap data repository](/usc/7/1a.md?p=48), or registered futures association, in violation of a regulation issued by the [Commission](/usc/7/1a.md?p=8), willfully and knowingly to trade for such [person](/usc/7/1a.md?p=38)’s own account, or for or on behalf of any other account, in [contracts](/usc/7/518.md?p=4) for [future delivery](/usc/7/1a.md?p=27) or [options](/usc/7/1a.md?p=36) thereon, or [swaps](/usc/7/1a.md?p=47-A), on the basis of, or willfully and knowingly to disclose for any purpose inconsistent with the performance of such [person](/usc/7/1a.md?p=38)’s official duties as an employee or [member](/usc/7/1a.md?p=34), any material nonpublic information obtained through special access related to the performance of such duties; or
  - (2) willfully and knowingly to trade for such [person](/usc/7/1a.md?p=38)’s own account, or for or on behalf of any other account, in [contracts](/usc/7/518.md?p=4) for [future delivery](/usc/7/1a.md?p=27) or [options](/usc/7/1a.md?p=36) thereon on the basis of any material nonpublic information that such [person](/usc/7/1a.md?p=38) knows was obtained in violation of [paragraph (1)](#e-1) from an employee, [member](/usc/7/1a.md?p=34) of the governing [board](/usc/7/1a.md?p=5), or [member](/usc/7/1a.md?p=34) of any [committee](/usc/7/2132.md?p=n) of a [board of trade](/usc/7/1a.md?p=6), [registered entity](/usc/7/1a.md?p=40), or registered futures association.

  Such felony shall be punishable by a fine of not more than $500,000, plus the amount of any profits realized from such trading or disclosure made in violation of this subsection, or imprisonment for not more than five years, or both, together with the costs of prosecution.


# §13–1. Violations, prohibition against dealings in motion picture box office receipts or onion futures; punishment

- (a) No [contract](/usc/7/518.md?p=4) for the sale of motion picture box office receipts (or any index, measure, value, or data related to such receipts) or onions for [future delivery](/usc/7/1a.md?p=27) shall be made on or subject to the rules of any [board of trade](/usc/7/1a.md?p=6) in the [United States](/usc/7/6402.md?p=8). The terms used in this section shall have the same meaning as when used in the [Commodity](/usc/7/1a.md?p=9) Exchange Act [[7 U.S.C. 1](/usc/7/1.md) et seq.].
- (b) Any [person](/usc/7/1a.md?p=38) who shall violate the provisions of this section shall be deemed guilty of a misdemeanor and upon conviction thereof be fined not more than $5,000.

# §13a. Nonenforcement of rules of government or other violations; cease and desist orders; fines and penalties; imprisonment; misdemeanor; separate offenses


If any [registered entity](/usc/7/1a.md?p=40) is not enforcing or has not enforced its rules of government made a condition of its designation or registration as set forth in [sections 7 through 7a–2](/usc/7/7..7a–2.md) of this title, or if any [registered entity](/usc/7/1a.md?p=40), or any director, officer, agent, or employee of any [registered entity](/usc/7/1a.md?p=40) otherwise is violating or has violated any of the provisions of this chapter or any of the rules, regulations, or [orders](/usc/7/2902.md?p=10) of the [Commission](/usc/7/1a.md?p=8) thereunder, the [Commission](/usc/7/1a.md?p=8) may, upon notice and hearing on the record and subject to appeal as in other cases provided for in [section 8(b) of this title](/usc/7/8.md?p=b), make and enter an [order](/usc/7/2902.md?p=10) directing that such [registered entity](/usc/7/1a.md?p=40), director, officer, agent, or employee shall cease and desist from such violation, and assess a civil penalty of not more than $500,000 for each such violation, or, in any case of manipulation or attempted manipulation in violation of section [9](/usc/7/9.md), [15](/usc/7/15.md), [13b](/usc/7/13b.md), or [13(a)(2)](/usc/7/13.md?p=a-2) of this title, a civil penalty of not more than $1,000,000 for each such violation. If such [registered entity](/usc/7/1a.md?p=40), director, officer, agent, or employee, after the entry of such a cease and desist [order](/usc/7/2902.md?p=10) and the lapse of the period allowed for appeal of such [order](/usc/7/2902.md?p=10) or after the affirmance of such [order](/usc/7/2902.md?p=10), shall fail or refuse to obey or comply with such [order](/usc/7/2902.md?p=10), such [registered entity](/usc/7/1a.md?p=40), director, officer, agent, or employee shall be guilty of a misdemeanor and, upon conviction thereof, shall be fined not more than $500,000 or imprisoned for not less than six months nor more than one year, or both, except that if the failure or refusal to obey or comply with the [order](/usc/7/2902.md?p=10) involved any offense under [section 13(a)(2) of this title](/usc/7/13.md?p=a-2), the [registered entity](/usc/7/1a.md?p=40), director, officer, agent, or employee shall be guilty of a felony and, on conviction, shall be subject to penalties under [section 13(a)(2) of this title](/usc/7/13.md?p=a-2). Each day during which such failure or refusal to obey such cease and desist [order](/usc/7/2902.md?p=10) continues shall be deemed a separate offense. If the offending [registered entity](/usc/7/1a.md?p=40) or other [person](/usc/7/1a.md?p=38) upon whom such penalty is imposed, after the lapse of the period allowed for appeal or after the affirmance of such penalty, shall fail to pay such penalty, the [Commission](/usc/7/1a.md?p=8) shall refer the matter to the Attorney General who shall recover such penalty by action in the appropriate [United States](/usc/7/6402.md?p=8) district court. In determining the amount of the money penalty assessed under this section, the [Commission](/usc/7/1a.md?p=8) shall consider the gravity of the offense, and in the case of a [registered entity](/usc/7/1a.md?p=40) shall further consider whether the amount of the penalty will materially impair the ability of the [registered entity](/usc/7/1a.md?p=40) to carry on its operations and duties.


# §13a–1. Enjoining or restraining violations

- (a) **Action to enjoin or restrain violations—** Whenever it shall appear to the [Commission](/usc/7/1a.md?p=8) that any [registered entity](/usc/7/1a.md?p=40) or other [person](/usc/7/1a.md?p=38) has engaged, is engaging, or is about to engage in any act or practice constituting a violation of any provision of this chapter or any rule, regulation, or [order](/usc/7/2902.md?p=10) thereunder, or is restraining trading in any [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27) or any [swap](/usc/7/1a.md?p=47-A), the [Commission](/usc/7/1a.md?p=8) may bring an action in the proper district court of the [United States](/usc/7/6402.md?p=8) or the proper [United States](/usc/7/6402.md?p=8) court of any territory or other place subject to the jurisdiction of the [United States](/usc/7/6402.md?p=8), to enjoin such act or practice, or to enforce compliance with this chapter, or any rule, regulation or [order](/usc/7/2902.md?p=10) thereunder, and said courts shall have jurisdiction to entertain such actions: Provided, That no restraining [order](/usc/7/2902.md?p=10) (other than a restraining [order](/usc/7/2902.md?p=10) which prohibits any [person](/usc/7/1a.md?p=38) from destroying, altering or disposing of, or refusing to permit authorized representatives of the [Commission](/usc/7/1a.md?p=8) to inspect, when and as requested, any books and records or other documents or which prohibits any [person](/usc/7/1a.md?p=38) from withdrawing, transferring, removing, dissipating, or disposing of any [funds](/usc/7/4531.md?p=5), assets, or other property, and other than an [order](/usc/7/2902.md?p=10) appointing a temporary receiver to administer such restraining [order](/usc/7/2902.md?p=10) and to perform such other duties as the court may consider appropriate) or injunction for violation of the provisions of this chapter shall be issued ex parte by said court.
- (b) **Injunction or restraining order—** Upon a proper showing, a permanent or temporary injunction or restraining [order](/usc/7/2902.md?p=10) shall be granted without bond.
- (c) **Writs or other orders—** Upon application of the [Commission](/usc/7/1a.md?p=8), the district courts of the [United States](/usc/7/6402.md?p=8) and the [United States](/usc/7/6402.md?p=8) courts of any territory or other place subject to the jurisdiction of the [United States](/usc/7/6402.md?p=8) shall also have jurisdiction to issue writs of mandamus, or [orders](/usc/7/2902.md?p=10) affording like relief, commanding any [person](/usc/7/1a.md?p=38) to comply with the provisions of this chapter or any rule, regulation, or [order](/usc/7/2902.md?p=10) of the [Commission](/usc/7/1a.md?p=8) thereunder, including the requirement that such [person](/usc/7/1a.md?p=38) take such action as is necessary to remove the danger of violation of this chapter or any such rule, regulation, or [order](/usc/7/2902.md?p=10): Provided, That no such writ of mandamus, or [order](/usc/7/2902.md?p=10) affording like relief, shall be issued ex parte.
- (d) **Civil penalties—**
  - (1) **In general.—** In any action brought under this section, the [Commission](/usc/7/1a.md?p=8) may seek and the court shall have jurisdiction to impose, on a proper showing, on any [person](/usc/7/1a.md?p=38) found in the action to have committed any violation—
    - (A) a civil penalty in the amount of not more than the greater of $100,000 or triple the monetary gain to the [person](/usc/7/1a.md?p=38) for each violation; or
    - (B) in any case of manipulation or attempted manipulation in violation of section [9](/usc/7/9.md), [15](/usc/7/15.md), [13b](/usc/7/13b.md), or [13(a)(2)](/usc/7/13.md?p=a-2) of this title, a civil penalty in the amount of not more than the greater of $1,000,000 or triple the monetary gain to the [person](/usc/7/1a.md?p=38) for each violation.
  - (2) If a [person](/usc/7/1a.md?p=38) on whom such a penalty is imposed fails to pay the penalty within the time prescribed in the court’s [order](/usc/7/2902.md?p=10), the [Commission](/usc/7/1a.md?p=8) may refer the matter to the Attorney General who shall recover the penalty by action in the appropriate [United States](/usc/7/6402.md?p=8) district court.
  - (3) **Equitable remedies.—** In any action brought under this section, the [Commission](/usc/7/1a.md?p=8) may seek, and the court may impose, on a proper showing, on any [person](/usc/7/1a.md?p=38) found in the action to have committed any violation, equitable remedies including—
    - (A) restitution to [persons](/usc/7/1a.md?p=38) who have sustained losses proximately caused by such violation (in the amount of such losses); and
    - (B) disgorgement of gains received in connection with such violation.
- (e) **Venue and process—** Any action under this section may be brought in the district wherein the defendant is found or is an inhabitant or transacts business or in the district where the act or practice occurred, is occurring, or is about to occur, and process in such cases may be served in any district in which the defendant is an inhabitant or wherever the defendant may be found.
- (f) **Action by Attorney General—** In lieu of bringing actions itself pursuant to this section, the [Commission](/usc/7/1a.md?p=8) may request the Attorney General to bring the action.
- (g) **Notice to Attorney General of action brought by Commission—** Where the [Commission](/usc/7/1a.md?p=8) elects to bring the action, it shall inform the Attorney General of such suit and advise him of subsequent developments.
- (h) **Notice of investigations and enforcement actions—** The [Commission](/usc/7/1a.md?p=8) shall provide the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8) with notice of the commencement of any proceeding and a copy of any [order](/usc/7/2902.md?p=10) entered by the [Commission](/usc/7/1a.md?p=8) against any [futures commission merchant](/usc/7/1a.md?p=28-A) or [introducing broker](/usc/7/1a.md?p=31-A) registered pursuant to [section 6f(a)(2) of this title](/usc/7/6f.md?p=a-2), any [floor broker](/usc/7/1a.md?p=22-A) or [floor trader](/usc/7/1a.md?p=23-A) exempt from registration pursuant to [section 6f(a)(3) of this title](/usc/7/6f.md?p=a-3), any associated [person](/usc/7/1a.md?p=38) exempt from registration pursuant to [section 6k(6) of this title](/usc/7/6k.md?p=6), or any [board of trade](/usc/7/1a.md?p=6) designated as a [contract](/usc/7/518.md?p=4) market pursuant to [section 7b–1 of this title](/usc/7/7b–1.md).

# §13a–2. Jurisdiction of States

- (1) Whenever it shall appear to the attorney general of any [State](/usc/7/1359aa.md?p=5), the administrator of the [securities](/usc/7/1a.md?p=41) laws of any [State](/usc/7/1359aa.md?p=5), or such other official as a [State](/usc/7/1359aa.md?p=5) may designate, that the interests of the residents of that [State](/usc/7/1359aa.md?p=5) have been, are being, or may be threatened or adversely affected because any [person](/usc/7/1a.md?p=38) (other than a [contract](/usc/7/518.md?p=4) market, derivatives transaction execution facility, clearinghouse, [floor broker](/usc/7/1a.md?p=22-A), or [floor trader](/usc/7/1a.md?p=23-A)) has engaged in, is engaging or is about to engage in, any act or practice constituting a violation of any provision of this chapter or any rule, regulation, or [order](/usc/7/2902.md?p=10) of the [Commission](/usc/7/1a.md?p=8) thereunder, the [State](/usc/7/1359aa.md?p=5) may bring a suit in equity or an action at law on behalf of its residents to enjoin such act or practice, to enforce compliance with this chapter, or any rule, regulation, or [order](/usc/7/2902.md?p=10) of the [Commission](/usc/7/1a.md?p=8) thereunder, to obtain damages on behalf of their residents, or to obtain such further and other relief as the court may deem appropriate.
- (2) The district courts of the [United States](/usc/7/6402.md?p=8), the [United States](/usc/7/6402.md?p=8) courts of any territory, and the District Court of the [United States](/usc/7/6402.md?p=8) for the District of Columbia, shall have jurisdiction of all suits in equity and actions at law brought under this section to enforce any liability or duty created by this chapter or any rule, regulation, or [order](/usc/7/2902.md?p=10) of the [Commission](/usc/7/1a.md?p=8) thereunder, or to obtain damages or other relief with respect thereto. Upon proper application, such courts shall also have jurisdiction to issue writs of mandamus, or [orders](/usc/7/2902.md?p=10) affording like relief, commanding the defendant to comply with the provisions of this chapter or any rule, regulation, or [order](/usc/7/2902.md?p=10) of the [Commission](/usc/7/1a.md?p=8) thereunder, including the requirement that the defendant take such action as is necessary to remove the danger of violation of this chapter or of any such rule, regulation, or [order](/usc/7/2902.md?p=10). Upon a proper showing, a permanent or temporary injunction or restraining [order](/usc/7/2902.md?p=10) shall be granted without bond.
- (3) Immediately upon instituting any such suit or action, the [State](/usc/7/1359aa.md?p=5) shall serve written notice thereof upon the [Commission](/usc/7/1a.md?p=8) and provide the [Commission](/usc/7/1a.md?p=8) with a copy of its complaint, and the [Commission](/usc/7/1a.md?p=8) shall have the right to (A) intervene in the suit or action and, upon doing so, shall be heard on all matters arising therein, and (B) file petitions for appeal.
- (4) Any suit or action brought under this section in a district court of the [United States](/usc/7/6402.md?p=8) may be brought in the district wherein the defendant is found or is an inhabitant or transacts business or wherein the act or practice occurred, is occurring, or is about to occur, and process in such cases may be served in any district in which the defendant is an inhabitant or wherever the defendant may be found.
- (5) For purposes of bringing any suit or action under this section, nothing in this chapter shall prevent the attorney general, the administrator of the [State](/usc/7/1359aa.md?p=5) [securities](/usc/7/1a.md?p=41) laws, or other duly authorized [State](/usc/7/1359aa.md?p=5) officials from exercising the powers conferred on them by the laws of such [State](/usc/7/1359aa.md?p=5) to conduct investigations or to administer oaths or affirmations or to compel the attendance of witnesses or the production of documentary and other evidence.
- (6) For purposes of this section, “[State](/usc/7/1359aa.md?p=5)” means any [State](/usc/7/1359aa.md?p=5) of the [United States](/usc/7/6402.md?p=8), the District of Columbia, the Commonwealth of Puerto Rico, or any territory or possession of the [United States](/usc/7/6402.md?p=8).
- (7) Nothing contained in this section shall prohibit an authorized [State](/usc/7/1359aa.md?p=5) official from proceeding in [State](/usc/7/1359aa.md?p=5) court on the basis of an alleged violation of any general civil or criminal antifraud statute of such [State](/usc/7/1359aa.md?p=5).
- (8)
  - (A) Nothing in this chapter shall prohibit an authorized [State](/usc/7/1359aa.md?p=5) official from proceeding in a [State](/usc/7/1359aa.md?p=5) court against any [person](/usc/7/1a.md?p=38) registered under this chapter (other than a [floor broker](/usc/7/1a.md?p=22-A), [floor trader](/usc/7/1a.md?p=23-A), or registered futures association) for an alleged violation of any antifraud provision of this chapter or any antifraud rule, regulation, or [order](/usc/7/2902.md?p=10) issued pursuant to the chapter.
  - (B) The [State](/usc/7/1359aa.md?p=5) shall give the [Commission](/usc/7/1a.md?p=8) prior written notice of its intent to proceed before instituting a proceeding in [State](/usc/7/1359aa.md?p=5) court as described in this subsection and shall furnish the [Commission](/usc/7/1a.md?p=8) with a copy of its complaint immediately upon instituting any such proceeding. The [Commission](/usc/7/1a.md?p=8) shall have the right to (i) intervene in the proceeding and, upon doing so, shall be heard on all matters arising therein, and (ii) file a petition for appeal. The [Commission](/usc/7/1a.md?p=8) or the defendant may remove such proceeding to the district court of the [United States](/usc/7/6402.md?p=8) for the proper district by following the procedure for removal otherwise provided by law, except that the petition for removal shall be filed within sixty days after service of the summons and complaint upon the defendant. The [Commission](/usc/7/1a.md?p=8) shall have the right to appear as amicus curiae in any such proceeding.

# §13b. Manipulations or other violations; cease and desist orders against persons other than registered entities; punishment


If any [person](/usc/7/1a.md?p=38) (other than a [registered entity](/usc/7/1a.md?p=40)), is violating or has violated [section 9 of this title](/usc/7/9.md) or any other provisions of this chapter or of the rules, regulations, or [orders](/usc/7/2902.md?p=10) of the [Commission](/usc/7/1a.md?p=8) thereunder, the [Commission](/usc/7/1a.md?p=8) may, upon notice and hearing, and subject to appeal as in other cases provided for in [section 9 of this title](/usc/7/9.md), make and enter an [order](/usc/7/2902.md?p=10) directing that such [person](/usc/7/1a.md?p=38) shall cease and desist therefrom and, if such [person](/usc/7/1a.md?p=38) thereafter and after the lapse of the period allowed for appeal of such [order](/usc/7/2902.md?p=10) or after the affirmance of such [order](/usc/7/2902.md?p=10), shall knowingly fail or refuse to obey or comply with such [order](/usc/7/2902.md?p=10), such [person](/usc/7/1a.md?p=38), upon conviction thereof, shall be fined not more than the higher of $140,000 or triple the monetary gain to such [person](/usc/7/1a.md?p=38), or imprisoned for not more than 1 year, or both, except that if such knowing failure or refusal to obey or comply with such [order](/usc/7/2902.md?p=10) involves any offense within subsection (a) or (b) of [section 13 of this title](/usc/7/13.md), such [person](/usc/7/1a.md?p=38), upon conviction thereof, shall be subject to the penalties of said subsection (a) or (b): Provided, That any such cease and desist [order](/usc/7/2902.md?p=10) under this section against any respondent in any case of manipulation shall be issued only in conjunction with an [order](/usc/7/2902.md?p=10) issued against such respondent under [section 9 of this title](/usc/7/9.md).


# §13c. Responsibility as principal; minor violations

- (a) Any [person](/usc/7/1a.md?p=38) who commits, or who willfully aids, abets, counsels, commands, induces, or procures the [commission](/usc/7/1a.md?p=8) of, a violation of any of the provisions of this chapter, or any of the rules, regulations, or [orders](/usc/7/2902.md?p=10) issued pursuant to this chapter, or who acts in combination or concert with any other [person](/usc/7/1a.md?p=38) in any such violation, or who willfully causes an act to be done or omitted which if directly performed or omitted by him or another would be a violation of the provisions of this chapter or any of such rules, regulations, or [orders](/usc/7/2902.md?p=10) may be held responsible for such violation as a principal.
- (b) Any [person](/usc/7/1a.md?p=38) who, directly or indirectly, controls any [person](/usc/7/1a.md?p=38) who has violated any provision of this chapter or any of the rules, regulations, or [orders](/usc/7/2902.md?p=10) issued pursuant to this chapter may be held liable for such violation in any action brought by the [Commission](/usc/7/1a.md?p=8) to the same extent as such controlled [person](/usc/7/1a.md?p=38). In such action, the [Commission](/usc/7/1a.md?p=8) has the burden of proving that the controlling [person](/usc/7/1a.md?p=38) did not act in good faith or knowingly induced, directly or indirectly, the act or acts constituting the violation.
- (c) Nothing in this chapter shall be construed as requiring the [Commission](/usc/7/1a.md?p=8) or the [Commission](/usc/7/1a.md?p=8)[^1] to report minor violations of this chapter for prosecution, whenever it appears that the public interest does not require such action.

# [§14. Repealed. Pub. L. 99–641, title I, § 110(5), Nov. 10, 1986, 100 Stat. 3561 — repealed]



# [§15. Omitted — omitted]



# [§15a. Repealed. Pub. L. 95–405, § 24, Sept. 30, 1978, 92 Stat. 877 — repealed]



# §15b. Cotton futures contracts

- (a) **Short title—** This section may be cited as the “[United States](/usc/7/6402.md?p=8) Cotton Futures Act”.
- (b) **Omitted—**
- (c) **Definitions—** For purposes of this section—
  - (1) **Cotton futures contract—** The term “cotton futures contract” means any contract of sale of cotton for [future delivery](#c-2) made at, on, or in any [exchange](/usc/7/1a.md?p=1-D), [board of trade](/usc/7/1a.md?p=6), or similar institution or place of business which has been designated a “[contract](/usc/7/518.md?p=4) market” by the [Commodity](/usc/7/1a.md?p=9) Futures Trading [Commission](/usc/7/1a.md?p=8) pursuant to the [Commodity](/usc/7/1a.md?p=9) Exchange Act [[7 U.S.C. 1](/usc/7/1.md) et seq.] and the term “contract of sale” as so used shall be held to include sales, agreements of sale, and agreements to sell, except that—
    - (A) any [cotton futures contract](#c-1) that, by its terms, is settled in cash is excluded from the coverage of this paragraph and section; and
    - (B) any [cotton futures contract](#c-1) that permits tender of cotton grown outside of the [United States](/usc/7/6402.md?p=8) is excluded from the coverage of this paragraph and section to the extent that the cotton grown outside of the [United States](/usc/7/6402.md?p=8) is tendered for delivery under the [cotton futures contract](#c-1).
  - (2) **Future delivery—** The term “future delivery” shall not include any cash sale of cotton for deferred shipment or delivery.
  - (3) **Person—** The term “person” includes an individual, trust, estate, partnership, association, company, or [corporation](/usc/7/1502.md?p=b-5).
  - (4) **Secretary—** The term “Secretary” means the Secretary of Agriculture of the [United States](/usc/7/6402.md?p=8).
  - (5) **Standards—** The term “standards” means the official cotton standards of the [United States](/usc/7/6402.md?p=8) established by the [Secretary](#c-4) pursuant to the [United States](/usc/7/6402.md?p=8) Cotton Standards Act, as amended [[7 U.S.C. 51](/usc/7/51.md) et seq.].
- (d) **Bona fide spot markets and commercial differences—**
  - (1) **Definition—** For purposes of this section, the only markets which shall be considered bona fide spot markets shall be those which the [Secretary](#c-4) shall, from time to time, after investigation, determine and designate to be such, and of which he shall give public notice.
  - (2) **Determination—** In determining, pursuant to the provisions of this section, what markets are bona fide spot markets, the [Secretary](#c-4) is directed to consider only markets in which spot cotton is sold in such volume and under such conditions as customarily to reflect accurately the value of middling cotton and the differences between the prices or values of middling cotton and of other grades of cotton for which [standards](#c-5) shall have been established by the [Secretary](#c-4); except that if there are not sufficient places, in the markets of which are made bona fide sales of spot cotton of grades for which [standards](#c-5) are established by the [Secretary](#c-4), to enable him to designate at least five spot markets in accordance with [subsection (f)(3)](#f-3), he shall, from data as to spot sales collected by him, make rules and regulations for determining the actual commercial differences in the value of spot cotton of the grades established by him as reflected by bona fide sales of spot cotton, of the same or different grades, in the market selected and designated by him, from time to time, for that purpose, and in that event differences in value of cotton of various grades involved in [contracts](/usc/7/518.md?p=4) made pursuant to subsection [(f)(1)](#f-1) and [(2)](#f-2) shall be determined in compliance with such rules and regulations. It shall be the duty of any [person](#c-3) engaged in the business of dealing in cotton, when requested by the [Secretary](#c-4) or any agent acting under his instructions, to answer correctly to the best of his knowledge, under oath or otherwise, all questions touching his knowledge of the number of bales, the classification, the price or bona fide price offered, and other terms of purchase or sale, of any cotton involved in any transaction participated in by him, or to produce all books, letters, papers, or documents in his possession or under his control relating to such matter. A [person](#c-3) complying with the preceding sentence shall not be liable for any loss or damage arising or resulting from such compliance.
  - (3) **Withholding information—** Any [person](#c-3) engaged in the business of dealing in cotton who shall, within a reasonable time prescribed by the [Secretary](#c-4) or any agent acting under his instructions, willfully fail or refuse to answer questions or to produce books, letters, papers, or documents, as required under paragraph (2) of this subsection, or who shall willfully give any answer that is false or misleading, shall, upon conviction thereof, be fined not more than $500.
- (e) **Form and validity of cotton futures contracts—** Each [cotton futures contract](#c-1) shall be a basis grade [contract](/usc/7/518.md?p=4), or a tendered grade [contract](/usc/7/518.md?p=4), or a specific grade [contract](/usc/7/518.md?p=4) as specified in subsections [(f)](#f), [(g)](#g), or [(h)](#h) and shall be in writing plainly stating, or evidenced by written memorandum showing, the terms of such [contract](/usc/7/518.md?p=4), including the quantity of the cotton involved and the names and addresses of the seller and buyer in such [contract](/usc/7/518.md?p=4), and shall be signed by the party to be charged, or by his agent in his behalf. No [cotton futures contract](#c-1) which does not conform to such requirements shall be enforceable by, or on behalf of, any party to such [contract](/usc/7/518.md?p=4) or his privies.
- (f) **Basis grade contracts—**
  - (1) **Conditions—** Each basis grade [cotton futures contract](#c-1) shall comply with each of the following conditions:
    - (A) **Conformity with regulations—** Conform to the regulations made pursuant to this section.
    - (B) **Specification of grade, price, and dates of sale and settlement—** Specify the basis grade for the cotton involved in the [contract](/usc/7/518.md?p=4), which shall be one of the grades for which [standards](#c-5) are established by the [Secretary](#c-4), except grades prohibited from being delivered on a [contract](/usc/7/518.md?p=4) made under this subsection by [subparagraph (E)](#f-1-E), the price per pound at which the cotton of such basis grade is contracted to be bought or sold, the date when the purchase or sale was made, and the month or months in which the [contract](/usc/7/518.md?p=4) is to be fulfilled or settled; except that middling shall be deemed the basis grade incorporated into the [contract](/usc/7/518.md?p=4) if no other basis grade be specified either in the [contract](/usc/7/518.md?p=4) or in the memorandum evidencing the same.
    - (C) **Provision for delivery of standard grades only—** Provide that the cotton dealt with therein or delivered thereunder shall be of or within the grades for which [standards](#c-5) are established by the [Secretary](#c-4) except grades prohibited from being delivered on a [contract](/usc/7/518.md?p=4) made under this subsection by [subparagraph (E)](#f-1-E) and no other grade or grades.
    - (D) **Provision for settlement on basis of actual commercial differences—** Provide that in case cotton of grade other than the basis grade be tendered or delivered in settlement of such [contract](/usc/7/518.md?p=4), the differences above or below the [contract](/usc/7/518.md?p=4) price which the receiver shall pay for such grades other than the basis grade shall be the actual commercial differences, determined as hereinafter provided.
    - (E) **Prohibition of delivery of inferior cotton—** Provide that cotton that, because of the presence of extraneous matter of any character, or irregularities or defects, is reduced in value below that of low middling, or cotton that is below the grade of low middling, or, if tinged, cotton that is below the grade of strict middling, or, if yellow stained, cotton that is below the grade of good middling, the grades mentioned being of the official cotton [standards](#c-5) of the [United States](/usc/7/6402.md?p=8), or cotton that is less than seven-eighths of an inch in length of staple, or cotton of perished staple, or of immature staple, or cotton that is “gin cut” or reginned, or cotton that is “repacked” or “false packed” or “mixed packed” or “water packed”, shall not be delivered on, under, or in settlement of such [contract](/usc/7/518.md?p=4).
    - (F) **Provisions for tender in full, notice of delivery date, and certificate of grade—** Provide that all tenders of cotton under such [contract](/usc/7/518.md?p=4) shall be the full number of bales involved therein, except that such variations of the number of bales may be permitted as is necessary to bring the total weight of the cotton tendered within the provisions of the [contract](/usc/7/518.md?p=4) as to weight; that, on the fifth business day prior to delivery, the [person](#c-3) making the tender shall give to the [person](#c-3) receiving the same written notice of the date of delivery, and that, on or prior to the date so fixed for delivery, and in advance of final settlement of the [contract](/usc/7/518.md?p=4), the [person](#c-3) making the tender shall furnish to the [person](#c-3) receiving the same a written notice or certificate stating the grade of each individual bale to be delivered and, by means of marks or numbers, identifying each bale with its grade.
    - (G) **Provision for tender and settlement in accordance with Government classification—** Provide that all tenders of cotton and settlements therefor under such [contract](/usc/7/518.md?p=4) shall be in accordance with the classification thereof made under the regulations of the [Secretary](#c-4) by such officer or officers of the Government as shall be designated for the purpose, and the costs of such classification shall be fixed, assessed, collected, and paid as provided in such regulations and shall be credited to the account referred to in [section 55 of this title](/usc/7/55.md). The [Secretary](#c-4) may provide by regulation conditions under which cotton samples submitted or used in the performance of services authorized by this act shall become the property of the [United States](/usc/7/6402.md?p=8) and may be sold and the proceeds credited to the foregoing account: Provided, That such cotton samples shall not be subject to the provisions of [chapters 1 to 11](/usc/40/ch1..11.md) of title 40 and division C (except sections 3302, 3307(e), [3501(b)](/usc/7/3501.md?p=b), 3509, 3906, 4710, and 4711) of subtitle I of [title 41](/usc/41.md). The [Secretary](#c-4) is authorized to prescribe regulations for carrying out the purposes of this subparagraph and the certificates of the officers of the Government as to the classification of any cotton for the purposes of this subparagraph shall be accepted in the courts of the [United States](/usc/7/6402.md?p=8) in all suits between the parties to such [contract](/usc/7/518.md?p=4), or their privies, as prima facie evidence of the true classification of the cotton involved.
  - (2) **Incorporation of conditions in contracts—** The provisions of paragraphs [(1)(C)](#f-1-C), [(D)](#f-1-D), [(E)](#f-1-E), [(F)](#f-1-F), and [(G)](#f-1-G) shall be deemed fully incorporated into any such [contract](/usc/7/518.md?p=4) if there be written or printed thereon, or on the memorandums evidencing the same, at or prior to the time the same is signed, the phrase “Subject to [United States](/usc/7/6402.md?p=8) Cotton Futures Act, [subsection (f)](#f).”
  - (3) **Delivery allowances—** For the purpose of this subsection, the differences above or below the [contract](/usc/7/518.md?p=4) price which the receiver shall pay for cotton of grades above or below the basic[^1] grade in the settlement of a [contract of sale](#c-1) for the [future delivery](#c-2) of cotton shall be determined by the actual commercial differences in value thereof upon the sixth business day prior to the day fixed, in accordance with [paragraph (1)(F)](#f-1-F), for the delivery of cotton on the [contract](/usc/7/518.md?p=4), established by the sale of spot cotton in the spot markets of not less than five places designated for the purpose from time to time by the [Secretary](#c-4), as such values were established by the sales of spot cotton, in such designated five or more markets. For purposes of this paragraph, such values in the such spot markets shall be based upon the [standards](#c-5) for grades of cotton established by the [Secretary](#c-4). Whenever the value of one grade is to be determined from the sale or sales of spot cotton of another grade or grades, such value shall be fixed in accordance with rules and regulations which shall be prescribed for the purpose by the [Secretary](#c-4).
- (g) **Tendered grade contracts—**
  - (1) **Conditions—** Each tendered grade cotton future [contract](/usc/7/518.md?p=4) shall comply with each of the following conditions:
    - (A) **Compliance with subsection (f)—** Comply with all the terms and conditions of [subsection (f)](#f) not inconsistent with this subsection; and
    - (B) **Provision for contingent specific performance—** Provide that, in case cotton of grade or grades other than the basis grade specified in the [contract](/usc/7/518.md?p=4) shall be tendered in performance of the [contract](/usc/7/518.md?p=4), the parties to such [contract](/usc/7/518.md?p=4) may agree, at the time of the tender, as to the price of the grade or grades so tendered, and that if they shall not then agree as to such price, then, and in that event, the buyer of said [contract](/usc/7/518.md?p=4) shall have the right to demand the specific fulfillment of such [contract](/usc/7/518.md?p=4) by the actual delivery of cotton of the basis grade named therein and at the price specified for such basis grade in said [contract](/usc/7/518.md?p=4).
  - (2) **Incorporation of conditions in contract—** [Contracts](/usc/7/518.md?p=4) made in compliance with this subsection shall be known as “[subsection (g)](#g) [Contracts](/usc/7/518.md?p=4)”. The provisions of this subsection shall be deemed fully incorporated into any such [contract](/usc/7/518.md?p=4) if there be written or printed thereon, or on the memorandum evidencing the same, at or prior to the time the same is signed, the phrase “Subject to [United States](/usc/7/6402.md?p=8) Cotton Futures Act, [subsection (g)](#g)”.
  - (3) **Application of subsection—** Nothing in this subsection shall be so construed as to authorize any [contract](/usc/7/518.md?p=4) in which, or in the settlement of or in respect to which, any device or arrangement whatever is resorted to, or any agreement is made, for the determination or adjustment of the price of the grade or grades tendered other than the basis grade specified in the [contract](/usc/7/518.md?p=4) by any “fixed difference” system, or by arbitration, or by any other method not provided for by this section.
- (h) **Specific grade contracts—**
  - (1) **Conditions—** Each specific grade [cotton futures contract](#c-1) shall comply with each of the following conditions:
    - (A) **Conformity with rules and regulations—** Conform to the rules and regulations made pursuant to this section.
    - (B) **Specification of grade, price, dates of sale and delivery—** Specify the grade, type, sample, or description of the cotton involved in the [contract](/usc/7/518.md?p=4), the price per pound at which such cotton is contracted to be bought or sold, the date of the purchase or sale, and the time when shipment or delivery of such cotton is to be made.
    - (C) **Prohibition of delivery of other than specified grade—** Provide that cotton of or within the grade or of the type, or according to the sample or description, specified in the [contract](/usc/7/518.md?p=4) shall be delivered thereunder, and that no cotton which does not conform to the type, sample, or description, or which is not of or within the grade specified in the [contract](/usc/7/518.md?p=4) shall be tendered or delivered thereunder.
    - (D) **Provision for specific performance—** Provide that the delivery of cotton under the [contract](/usc/7/518.md?p=4) shall not be effected by means of “setoff” or “ring” settlement, but only by the actual transfer of the specified cotton mentioned in the [contract](/usc/7/518.md?p=4).
  - (2) **Incorporation of conditions in contract—** The provisions of paragraphs [(1)(A)](#h-1-A), [(C)](#h-1-C), and [(D)](#h-1-D) shall be deemed fully incorporated into any such [contract](/usc/7/518.md?p=4) if there be written or printed thereon, or on the document or memorandum evidencing the same, at or prior to the time the same is entered into, the words “Subject to [United States](/usc/7/6402.md?p=8) Cotton Futures Act, [subsection (h)](#h)”.
  - (3) **Application of subsection—** This subsection shall not be construed to apply to any [contract of sale](#c-1) made in compliance with subsection [(f)](#f) or [(g)](#g).
- (i) **Liability of principal for acts of agent—** When construing and enforcing the provisions of this section, the act, omission, or failure of any official, agent, or other [person](#c-3) acting for or employed by any association, partnership, or [corporation](/usc/7/1502.md?p=b-5) within the scope of his employment or office shall, in every case, also be deemed the act, omission, or failure of such association, partnership, or [corporation](/usc/7/1502.md?p=b-5), as well as that of the [person](#c-3).
- (j) **Regulations—** The [Secretary](#c-4) is authorized to make such regulations with the force and effect of law as he determines may be necessary to carry out the provisions of this section and the powers vested in him by this section.
- (k) **Violations—** Any [person](#c-3) who knowingly violates any regulation made in pursuance of this section, shall, upon conviction thereof, be fined not less than $100 nor more than $500, for each violation thereof, in the discretion of the court, and, in case of natural [persons](#c-3), may, in addition be punished by imprisonment for not less than 30 days nor more than 90 days, for each violation, in the discretion of the court except that this subsection shall not apply to violations subject to [subsection (d)(3)](#d-3).
- (l) **Applicability to contracts prior to effective date—** The provisions of this section shall not apply to any [cotton futures contract](#c-1) entered into prior to the effective date of this section or to any act or failure to act by any [person](#c-3) prior to such effective date and all such prior [contracts](/usc/7/518.md?p=4), acts or failure to act shall continue to be governed by the applicable provisions of the Internal Revenue Code of 1954[^2] as in effect prior to the enactment of this section. All designations of bona fide spot markets and all rules and regulations issued by the [Secretary](#c-4) pursuant to the applicable provisions of the Internal Revenue Code of 1954[^2] which were in effect on the effective date of this section, shall remain fully effective as designations and regulations under this section until superseded, amended, or terminated by the [Secretary](#c-4).
- (m) **Authorization—** There are authorized to be appropriated such sums as may be necessary to carry out this section.

# §16. Commission operations

- (a) **Cooperation with other agencies—** The [Commission](/usc/7/1a.md?p=8) may cooperate with any Department or agency of the Government, any [State](/usc/7/1359aa.md?p=5), territory, district, or possession, or department, agency, or political subdivision thereof, any [foreign futures authority](/usc/7/1a.md?p=26), any department or agency of a foreign government or political subdivision thereof, or any [person](/usc/7/1a.md?p=38).
- (b) **Employment of investigators, experts, Administrative Law Judges, consultants, clerks, and other personnel; contracts—**
  - (1) The [Commission](/usc/7/1a.md?p=8) shall have the [authority](/usc/7/2009aa.md?p=1) to employ such investigators, special experts, Administrative Law Judges, clerks, and other employees as it may from time to time find necessary for the proper performance of its duties and as may be from time to time appropriated for by Congress.
  - (2) The [Commission](/usc/7/1a.md?p=8) may employ experts and consultants in accordance with [section 3109 of title 5](/usc/5/3109.md), and compensate such [persons](/usc/7/1a.md?p=38) at rates not in excess of the maximum daily rate prescribed for GS–18 under [section 5332 of title 5](/usc/5/5332.md).
  - (3) The [Commission](/usc/7/1a.md?p=8) shall also have [authority](/usc/7/2009aa.md?p=1) to make and enter into [contracts](/usc/7/518.md?p=4) with respect to all matters which in the judgment of the [Commission](/usc/7/1a.md?p=8) are necessary and appropriate to effectuate the purposes and provisions of this chapter, including, but not limited to, the rental of necessary space at the seat of Government and elsewhere.
  - (4) The [Commission](/usc/7/1a.md?p=8) may request (in accordance with the procedures set forth in subchapter II of [chapter 31](/usc/5/chptIII-sptB-ch31.md) of title 5) and the Office of Personnel Management shall authorize pursuant to the request, eight positions in the Senior Executive Service in addition to the number of such positions authorized for the [Commission](/usc/7/1a.md?p=8) on October 28, 1992.
- (c) **Expenses—** All of the expenses of the Commissioners, including all necessary expenses for transportation incurred by them while on official business of the [Commission](/usc/7/1a.md?p=8), shall be allowed and paid on the presentation of itemized vouchers therefor approved by the [Commission](/usc/7/1a.md?p=8).
- (d) **Authorization of appropriations—** There are authorized to be appropriated such sums as are necessary to carry out this chapter for each of the fiscal years 2008 through 2013.
- (e) **Relation to other law, departments, or agencies—**
  - (1) Nothing in this chapter shall supersede or preempt—
    - (A) criminal prosecution under any Federal criminal statute;
    - (B) the application of any Federal or [State](/usc/7/1359aa.md?p=5) statute (except as provided in [paragraph (2)](#e-2)), including any rule or regulation thereunder, to any transaction in or involving any [commodity](/usc/7/1a.md?p=9), product, right, service, or interest—
      - (i) that is not conducted on or subject to the rules of a [registered entity](/usc/7/1a.md?p=40) or exempt [board of trade](/usc/7/1a.md?p=6);
      - (ii) (except as otherwise specified by the [Commission](/usc/7/1a.md?p=8) by rule or regulation) that is not conducted on or subject to the rules of any [board of trade](/usc/7/1a.md?p=6), [exchange](/usc/7/1a.md?p=1-D), or market located outside the [United States](/usc/7/6402.md?p=8), its territories or possessions; or
      - (iii) that is not subject to regulation by the [Commission](/usc/7/1a.md?p=8) under section [6c](/usc/7/6c.md) or [23](/usc/7/23.md) of this title; or
    - (C) the application of any Federal or [State](/usc/7/1359aa.md?p=5) statute, including any rule or regulation thereunder, to any [person](/usc/7/1a.md?p=38) required to be registered or designated under this chapter who shall fail or refuse to obtain such registration or designation.
  - (2) This chapter shall supersede and preempt the application of any [State](/usc/7/1359aa.md?p=5) or local law that prohibits or regulates gaming or the operation of bucket shops (other than antifraud provisions of general applicability) in the case of—
    - (A) an [electronic trading facility](/usc/7/1a.md?p=16) excluded under [section 2(e)](/usc/7/2.md?p=e)[^1] of this title; and
    - (B) an agreement, [contract](/usc/7/518.md?p=4), or transaction that is excluded from this chapter under section [2(c)](/usc/7/2.md?p=c) or [2(f)](/usc/7/2.md?p=f) of this title or [sections 27 to 27f](/usc/7/27..27f.md) of this title, or exempted under [section 6(c) of this title](/usc/7/6.md?p=c) (regardless of whether any such agreement, [contract](/usc/7/518.md?p=4), or transaction is otherwise subject to this chapter).
- (f) **Investigative assistance to foreign futures authorities—**
  - (1) On request from a [foreign futures authority](/usc/7/1a.md?p=26), the [Commission](/usc/7/1a.md?p=8) may, in its discretion, provide assistance in accordance with this section if the requesting [authority](/usc/7/2009aa.md?p=1) [states](/usc/7/1359aa.md?p=5) that the requesting [authority](/usc/7/2009aa.md?p=1) is conducting an investigation which it deems necessary to determine whether any [person](/usc/7/1a.md?p=38) has violated, is violating, or is about to violate any laws, rules or regulations relating to futures or [options](/usc/7/1a.md?p=36) matters that the requesting [authority](/usc/7/2009aa.md?p=1) administers or enforces. The [Commission](/usc/7/1a.md?p=8) may conduct such investigation as the [Commission](/usc/7/1a.md?p=8) deems necessary to collect information and evidence pertinent to the request for assistance. Such assistance may be provided without regard to whether the facts stated in the request would also constitute a violation of the laws of the [United States](/usc/7/6402.md?p=8).
  - (2) In deciding whether to provide assistance under this subsection, the [Commission](/usc/7/1a.md?p=8) shall consider whether—
    - (A) the requesting [authority](/usc/7/2009aa.md?p=1) has agreed to provide reciprocal assistance to the [Commission](/usc/7/1a.md?p=8) in futures and [options](/usc/7/1a.md?p=36) matters; and
    - (B) compliance with the request would prejudice the public interest of the [United States](/usc/7/6402.md?p=8).
  - (3) Notwithstanding any other provision of law, the [Commission](/usc/7/1a.md?p=8) may accept payment and reimbursement, in cash or in kind, from a [foreign futures authority](/usc/7/1a.md?p=26), or made on behalf of such [authority](/usc/7/2009aa.md?p=1), for necessary expenses incurred by the [Commission](/usc/7/1a.md?p=8), its [members](/usc/7/1a.md?p=34), and employees in carrying out any investigation, or in providing any other assistance to a [foreign futures authority](/usc/7/1a.md?p=26), pursuant to this section. Any payment or reimbursement accepted shall be considered a reimbursement to the appropriated [funds](/usc/7/4531.md?p=5) of the [Commission](/usc/7/1a.md?p=8).
- (g) **Computerized futures trading—** Consistent with its responsibilities under [section 22 of this title](/usc/7/22.md), the [Commission](/usc/7/1a.md?p=8) is directed to facilitate the development and operation of computerized trading as an adjunct to the open outcry auction system. The [Commission](/usc/7/1a.md?p=8) is further directed to cooperate with the Office of the [United States](/usc/7/6402.md?p=8) Trade Representative, the Department of the Treasury, the Department of Commerce, and the Department of State in [order](/usc/7/2902.md?p=10) to remove any trade barriers that may be imposed by a foreign nation on the international use of electronic trading systems.
- (h) **Regulation of swaps as insurance under State law—** A [swap](/usc/7/1a.md?p=47-A)—
  - (1) shall not be considered to be insurance; and
  - (2) may not be regulated as an insurance [contract](/usc/7/518.md?p=4) under the law of any [State](/usc/7/1359aa.md?p=5).

# §16a. Service fees and National Futures Association study

- (a) **Development and implementation of plan for user fees; report to and approval by Congressional committees—** Notwithstanding any other provision of law, the [Commodity](/usc/7/1a.md?p=9) Futures Trading [Commission](/usc/7/1a.md?p=8) may develop and implement a plan to charge and collect reasonable fees to cover the estimated cost of regulating transactions under the jurisdiction of the [Commission](/usc/7/1a.md?p=8). However, prior to implementing such a plan, the [Commission](/usc/7/1a.md?p=8) shall report its intention to do so to the House [Committee](/usc/7/2132.md?p=n) on Agriculture and the Senate [Committee](/usc/7/2132.md?p=n) on Agriculture, Nutrition, and Forestry. The [Commission](/usc/7/1a.md?p=8) shall include in its report the feasibility and desirability of collecting such fees. Any plan developed under this section shall not be implemented until approved by the House [Committee](/usc/7/2132.md?p=n) on Agriculture and the Senate [Committee](/usc/7/2132.md?p=n) on Agriculture, Nutrition, and Forestry. Fees collected under any plan approved under this section shall be deposited in the Treasury of the [United States](/usc/7/6402.md?p=8) as miscellaneous receipts.
- (b) **National Futures Association regulatory experience; report; contents—** The [Commodity](/usc/7/1a.md?p=9) Futures Trading [Commission](/usc/7/1a.md?p=8) shall submit to Congress a report containing the results of a study of the regulatory experience of the National Futures Association for the period beginning January 1, 1983 and ending September 30, 1985. The report shall be submitted not later than January 1, 1986. The report shall include (but not to be limited to) the following—
  - (1) the extent to which the National Futures Association has fully implemented the program provided in the rules approved by the [Commission](/usc/7/1a.md?p=8) under section 17(p) and (q) of the [Commodity](/usc/7/1a.md?p=9) Exchange Act [[7 U.S.C. 21(p)](/usc/7/21.md?p=p), (q)] and the effectiveness of the operation of such program;
  - (2) the actual and projected cost savings to the Federal Government, if any, resulting from operations of the National Futures Association;
  - (3) the actual and projected costs which the [Commission](/usc/7/1a.md?p=8) and the public would have incurred if the Association had not undertaken self-regulatory responsibility for certain [areas](/usc/7/1471.md?p=5) under the [Commission](/usc/7/1a.md?p=8)’s jurisdiction;
  - (4) problem [areas](/usc/7/1471.md?p=5), if any, encountered by the Association;
  - (5) the nature of the working relationship between the Association and the [Commission](/usc/7/1a.md?p=8);
  - (6) an assessment of the actual and projected efficiencies the [Commission](/usc/7/1a.md?p=8) has achieved or expects to be achieved as a result of the continuing regulatory activities of the Association; and
  - (7) the immediate and projected capabilities of the [Commission](/usc/7/1a.md?p=8) at the time of submission of the study to turn its attention to more immediate problems of regulation, as a result of the activities of the Association.
- (c) **Schedule of fees for services, activities and functions; notice and hearing; actual cost standard—** Nothing in this section shall limit the [authority](/usc/7/2009aa.md?p=1) of the [Commission](/usc/7/1a.md?p=8) to promulgate, after notice and opportunity for hearing, a schedule of appropriate fees to be charged for services rendered and activities and functions performed by the [Commission](/usc/7/1a.md?p=8) in conjunction with its administration and enforcement of the [Commodity](/usc/7/1a.md?p=9) Exchange Act [[7 U.S.C. 1](/usc/7/1.md) et seq.]: Provided, That the fees for any specified service or activity or function shall not exceed the actual cost thereof to the [Commission](/usc/7/1a.md?p=8).

# §17. Separability


If any provision of this chapter or the application thereof to any [person](/usc/7/1a.md?p=38) or circumstances is held invalid, the validity of the remainder of the chapter and of the application of such provision to other [persons](/usc/7/1a.md?p=38) and circumstances shall not be affected thereby.


# §17a. Separability of 1936 amendment


If any provision of the act of June 15, 1936, ch. 545, 49 Stat. 1491, which amends this chapter, or the application thereof to any [person](/usc/7/1a.md?p=38) or circumstances is held invalid, the provisions of the section of this chapter which is amended by such provision of said act shall apply to such [person](/usc/7/1a.md?p=38) or circumstances. No proceeding shall be abated by reason of any amendment to this chapter made by said act but shall be disposed of pursuant to said act.


# §17b. Separability of 1968 amendment


If any provision of this Act or the application thereof to any [person](/usc/7/1a.md?p=38) or circumstances is held invalid, the validity of the remainder of the Act and the application of such provision to other [persons](/usc/7/1a.md?p=38) or circumstances shall not be affected thereby, and the provisions of the section of this chapter which is amended by such provision of this Act shall apply to such [person](/usc/7/1a.md?p=38) or circumstances. Pending proceedings shall not be abated by reason of any provision of this Act but shall be disposed of pursuant to the provisions of this chapter, in effect prior to the effective date of this Act.


# §18. Complaints against registered persons

- (a) **Petition for actual damages—**
  - (1) Any [person](/usc/7/1a.md?p=38) complaining of any violation of any provision of this chapter, or any rule, regulation, or [order](/usc/7/2902.md?p=10) issued pursuant to this chapter, by any [person](/usc/7/1a.md?p=38) who is registered under this chapter may, at any time within two years after the cause of action accrues, apply to the [Commission](/usc/7/1a.md?p=8) for an [order](/usc/7/2902.md?p=10) awarding—
    - (A) actual damages proximately caused by such violation. If an award of actual damages is made against a [floor broker](/usc/7/1a.md?p=22-A) in connection with the execution of a customer [order](/usc/7/2902.md?p=10), and the [futures commission merchant](/usc/7/1a.md?p=28-A) which selected the [floor broker](/usc/7/1a.md?p=22-A) for the execution of the customer [order](/usc/7/2902.md?p=10) is held to be responsible under [section 2(a)(1) of this title](/usc/7/2.md?p=a-1) for the [floor broker](/usc/7/1a.md?p=22-A)’s violation, such [futures commission merchant](/usc/7/1a.md?p=28-A) may be required to satisfy such award; and
    - (B) in the case of any action arising from a willful and intentional violation in the execution of an [order](/usc/7/2902.md?p=10) on the floor of a [registered entity](/usc/7/1a.md?p=40), punitive or exemplary damages equal to no more than two times the amount of such actual damages. If an award of punitive or exemplary damages is made against a [floor broker](/usc/7/1a.md?p=22-A) in connection with the execution of a customer [order](/usc/7/2902.md?p=10), and the [futures commission merchant](/usc/7/1a.md?p=28-A) which selected the [floor broker](/usc/7/1a.md?p=22-A) for the execution of the customer [order](/usc/7/2902.md?p=10) is held to be responsible under [section 2(a)(1) of this title](/usc/7/2.md?p=a-1) for the [floor broker](/usc/7/1a.md?p=22-A)’s violation, such [futures commission merchant](/usc/7/1a.md?p=28-A) may be required to satisfy such award if the [floor broker](/usc/7/1a.md?p=22-A) fails to do so, except that such requirement shall apply to the [futures commission merchant](/usc/7/1a.md?p=28-A) only if it willfully and intentionally selected the [floor broker](/usc/7/1a.md?p=22-A) with the intent to assist or facilitate the [floor broker](/usc/7/1a.md?p=22-A)’s violation.
  - (2)
    - (A) An action may be brought under this subsection by any one or more [persons](/usc/7/1a.md?p=38) described in this subsection for and in behalf of such [person](/usc/7/1a.md?p=38) or [persons](/usc/7/1a.md?p=38) and other [persons](/usc/7/1a.md?p=38) similarly situated, if the [Commission](/usc/7/1a.md?p=8) permits such actions pursuant to a final rule issued by the [Commission](/usc/7/1a.md?p=8).
    - (B) Not later than two hundred and seventy days after October 28, 1992, the [Commission](/usc/7/1a.md?p=8) shall propose and publish for public comment such rules as are necessary to carry out [subparagraph (A)](#a-2-A). In developing such rules, the [Commission](/usc/7/1a.md?p=8) shall consider the potential impact of such actions on resources available to the reparations system established under this chapter and the relative merits of bringing such actions in Federal court.
- (b) **Rules and regulations; control over right of appeal—** The [Commission](/usc/7/1a.md?p=8) may promulgate such rules, regulations, and [orders](/usc/7/2902.md?p=10) as it deems necessary or appropriate for the efficient and expeditious administration of this section. Notwithstanding any other provision of law, such rules, regulations, and [orders](/usc/7/2902.md?p=10) may prescribe, or otherwise condition, without limitation, the form, filing, and service of pleadings or [orders](/usc/7/2902.md?p=10), the nature and scope of discovery, counterclaims, motion practice (including the grounds for dismissal of any claim or counterclaim), hearings (including the waiver thereof, which may relate to the amount in controversy), rights of appeal, if any, and all other matters governing proceedings before the [Commission](/usc/7/1a.md?p=8) under this section.
- (c) **Bond requirement when complainant is nonresident; waiver—** In case a complaint is made by a nonresident of the [United States](/usc/7/6402.md?p=8), the complainant shall be required, before any formal action is taken on his complaint, to furnish a bond in double the amount of the claim conditioned upon the payment of costs, including a reasonable attorney’s fee for the respondent if the respondent shall prevail, and any reparation award that may be issued by the [Commission](/usc/7/1a.md?p=8) against the complainant on any counterclaim by respondent: Provided, That the [Commission](/usc/7/1a.md?p=8) shall have [authority](/usc/7/2009aa.md?p=1) to waive the furnishing of a bond by a complainant who is a resident of a country which permits the filing of a complaint by a resident of the [United States](/usc/7/6402.md?p=8) without the furnishing of a bond.
- (d) **Enforcement of reparation award—**
  - (1) If any [person](/usc/7/1a.md?p=38) against whom an award has been made does not pay the reparation award within the time specified in the [Commission](/usc/7/1a.md?p=8)’s [order](/usc/7/2902.md?p=10), the complainant, or any [person](/usc/7/1a.md?p=38) for whose benefit such [order](/usc/7/2902.md?p=10) was made, within three years of the date of the [order](/usc/7/2902.md?p=10), may file a certified copy of the [order](/usc/7/2902.md?p=10) of the [Commission](/usc/7/1a.md?p=8), in the district court of the [United States](/usc/7/6402.md?p=8) for the district in which he resides or in which is located the principal place of business of the respondent, for enforcement of such reparation award by appropriate [orders](/usc/7/2902.md?p=10). The [orders](/usc/7/2902.md?p=10), writs, and processes of such district court may in such case run, be served, and be returnable anywhere in the [United States](/usc/7/6402.md?p=8). The petitioner shall not be liable for costs in the district court, nor for costs at any subsequent [state](/usc/7/1359aa.md?p=5) of the proceedings, unless they accrue upon his appeal. If the petitioner finally prevails, he shall be allowed a reasonable attorney’s fee, to be taxed and collected as a part of the costs of the suit. Subject to the right of appeal under [subsection (e)](#e) of this section, an [order](/usc/7/2902.md?p=10) of the [Commission](/usc/7/1a.md?p=8) awarding reparations shall be final and conclusive.
  - (2) A reparation award shall be directly enforceable in district court as if it were a judgment pursuant to [section 1963 of title 28](/usc/28/1963.md). This paragraph shall operate retroactively from the effective date of its enactment, and shall apply to all reparation awards for which a proceeding described in [paragraph (1)](#d-1) is commenced within 3 years of the date of the [Commission](/usc/7/1a.md?p=8)’s [order](/usc/7/2902.md?p=10).
- (e) **Review—** Any [order](/usc/7/2902.md?p=10) of the [Commission](/usc/7/1a.md?p=8) entered hereunder shall be reviewable on petition of any party aggrieved thereby, by the [United States](/usc/7/6402.md?p=8) Court of Appeals for any circuit in which a hearing was held, or if no hearing was held, any circuit in which the appellee is located, under the procedure provided in [section 9 of this title](/usc/7/9.md). Such appeal shall not be effective unless within 30 days from and after the date of the reparation [order](/usc/7/2902.md?p=10) the appellant also files with the clerk of the court a bond in double the amount of the reparation awarded against the appellant conditioned upon the payment of the judgment entered by the court, plus interest and costs, including a reasonable attorney’s fee for the appellee, if the appellee shall prevail. Such bond shall be in the form of cash, negotiable [securities](/usc/7/1a.md?p=41) having a market value at least equivalent to the amount of bond prescribed, or the undertaking of a surety company on the approved list of sureties issued by the Treasury Department of the [United States](/usc/7/6402.md?p=8). The appellee shall not be liable for costs in said court. If the appellee prevails, he shall be allowed a reasonable attorney’s fee to be taxed and collected as a part of his costs.
- (f) **Automatic bar from trading and suspension for noncompliance; effect of appeal—** Unless the party against whom a reparation [order](/usc/7/2902.md?p=10) has been issued shows to the satisfaction of the [Commission](/usc/7/1a.md?p=8) within fifteen days from the expiration of the period allowed for compliance with such [order](/usc/7/2902.md?p=10) that either an appeal as herein authorized has been taken or payment of the full amount of the [order](/usc/7/2902.md?p=10) (or any agreed settlement thereof) has been made, such party shall be prohibited automatically from trading on all [registered entities](/usc/7/1a.md?p=40) and, if the party is registered with the [Commission](/usc/7/1a.md?p=8), such registration shall be suspended automatically at the expiration of such fifteen-day period until such party shows to the satisfaction of the [Commission](/usc/7/1a.md?p=8) that payment of such amount with interest thereon to date of payment has been made: Provided, That if on appeal the appellee prevails or if the appeal is dismissed, the automatic prohibition against trading and suspension of registration shall become effective at the expiration of thirty days from the date of judgment on the appeal, but if the judgment is stayed by a court of competent jurisdiction, the suspension shall become effective ten days after the expiration of such stay, unless prior thereto the judgment of the court has been satisfied.
- (g) **Predispute resolution agreements for institutional customers—** Nothing in this section prohibits a registered [futures commission merchant](/usc/7/1a.md?p=28-A) from requiring a customer that is an [eligible contract participant](/usc/7/1a.md?p=18), as a condition to the [commission](/usc/7/1a.md?p=8) merchant’s conducting a transaction for the customer, to enter into an agreement waiving the right to file a claim under this section.

# §19. Consideration of costs and benefits and antitrust laws

- (a) **Costs and benefits—**
  - (1) **In general—** Before promulgating a regulation under this chapter or issuing an [order](/usc/7/2902.md?p=10) (except as provided in [paragraph (3)](#a-3)), the [Commission](/usc/7/1a.md?p=8) shall consider the costs and benefits of the action of the [Commission](/usc/7/1a.md?p=8).
  - (2) **Considerations—** The costs and benefits of the proposed [Commission](/usc/7/1a.md?p=8) action shall be evaluated in light of—
    - (A) considerations of protection of market participants and the public;
    - (B) considerations of the efficiency, competitiveness, and financial integrity of futures markets;
    - (C) considerations of price discovery;
    - (D) considerations of sound risk management practices; and
    - (E) other public interest considerations.
  - (3) **Applicability—** This subsection does not apply to the following actions of the [Commission](/usc/7/1a.md?p=8):
    - (A) An [order](/usc/7/2902.md?p=10) that initiates, is part of, or is the result of an adjudicatory or investigative process of the [Commission](/usc/7/1a.md?p=8).
    - (B) An emergency action.
    - (C) A finding of fact regarding compliance with a requirement of the [Commission](/usc/7/1a.md?p=8).
- (b) **Antitrust laws—** The [Commission](/usc/7/1a.md?p=8) shall take into consideration the public interest to be protected by the antitrust laws and endeavor to take the least anticompetitive means of achieving the objectives of this chapter, as well as the policies and purposes of this chapter, in issuing any [order](/usc/7/2902.md?p=10) or adopting any [Commission](/usc/7/1a.md?p=8) rule or regulation (including any exemption under section [6(c)](/usc/7/6.md?p=c) or [6c(b)](/usc/7/6c.md?p=b) of this title), or in requiring or approving any bylaw, rule, or regulation of a [contract](/usc/7/518.md?p=4) market or registered futures association established pursuant to [section 21 of this title](/usc/7/21.md).

# §20. Market reports

- (a) **Information—** The [Commission](/usc/7/1a.md?p=8) may conduct regular investigations of the markets for goods, articles, services, rights, and interests which are the subject of futures [contracts](/usc/7/518.md?p=4), and furnish reports of the findings of these investigations to the public on a regular basis. These market reports shall, where appropriate, include information on the supply, demand, prices, and other conditions in the [United States](/usc/7/6402.md?p=8) and other countries with respect to such goods, articles, services, rights, interests, and information respecting the futures markets.
- (b) **Avoidance of duplication—** The [Commission](/usc/7/1a.md?p=8) shall cooperate with the Department of Agriculture and any other Department or Federal agency which makes market investigations to avoid unnecessary duplication of information-gathering activities.
- (c) **Furnishing of information; confidentiality—** The Department of Agriculture and any other Department or Federal agency which has market information sought by the [Commission](/usc/7/1a.md?p=8) shall furnish it to the [Commission](/usc/7/1a.md?p=8) upon the request of any authorized employee of the [Commission](/usc/7/1a.md?p=8). The [Commission](/usc/7/1a.md?p=8) shall abide by any rules of confidentiality applying to such information.
- (d) **Disclosure of business transactions, market positions, trade secrets, or names of customers—** The [Commission](/usc/7/1a.md?p=8) shall not disclose in such reports data and information which would separately disclose the business transactions or market positions of any [person](/usc/7/1a.md?p=38) and trade secrets or names of customers except as provided in [section 12 of this title](/usc/7/12.md).
- (e) **Application—** This section shall not apply to investigations involving any [security](/usc/7/1a.md?p=41) underlying a [security futures product](/usc/7/1a.md?p=45).

# §21. Registered futures associations

- (a) **Registration statement—** Any association of [persons](/usc/7/1a.md?p=38) may be registered with the [Commission](/usc/7/1a.md?p=8) as a registered futures association pursuant to [subsection (b)](#b) of this section, under the terms and conditions hereinafter provided in this section, by filing with the [Commission](/usc/7/1a.md?p=8) for review and approval a registration statement in such form as the [Commission](/usc/7/1a.md?p=8) may prescribe, setting forth the information, and accompanied by the documents, below specified:
  - (1) Data as to its organization, membership, and rules of procedure, and such other information as the [Commission](/usc/7/1a.md?p=8) may by rules and regulations require as necessary or appropriate in the public interest; and
  - (2) Copies of its constitution, charter, or articles of incorporation or association, with all amendments thereto, and of its bylaws, and of any rules or instruments corresponding to the foregoing, whatever the name, hereinafter in this section collectively referred to as the “rules of the association”.
- (b) **Standards for registration; Commission findings—** An applicant association shall not be registered as a futures association unless the [Commission](/usc/7/1a.md?p=8) finds, under standards established by the [Commission](/usc/7/1a.md?p=8), that—
  - (1) such association is in the public interest and that it will be able to comply with the provisions of this section and the rules and regulations thereunder and to carry out the purposes of this section;
  - (2) the rules of the association provide that any [person](/usc/7/1a.md?p=38) registered under this chapter, [registered entity](/usc/7/1a.md?p=40), or any other [person](/usc/7/1a.md?p=38) designated pursuant to the rules of the [Commission](/usc/7/1a.md?p=8) as eligible for membership may become a [member](/usc/7/1a.md?p=34) of such association, except such as are excluded pursuant to paragraph (3) or (4) of this subsection, or a rule of the association permitted under this subparagraph. The rules of the association may restrict membership in such association on such specified basis relating to the type of business done by its [members](/usc/7/1a.md?p=34), or on such other specified and appropriate basis, as appears to the [Commission](/usc/7/1a.md?p=8) to be necessary or appropriate in the public interest and to carryout the purpose of this section. Rules adopted by the association may provide that the association may, unless the [Commission](/usc/7/1a.md?p=8) directs otherwise in cases in which the [Commission](/usc/7/1a.md?p=8) finds it appropriate in the public interest so to direct, deny admission to, or refuse to continue in such association any [person](/usc/7/1a.md?p=38) if (i) such [person](/usc/7/1a.md?p=38), whether prior or subsequent to becoming registered as such, or (ii) any [person](/usc/7/1a.md?p=38) associated within the meaning of “associated [person](/usc/7/1a.md?p=38)” as set forth in [section 6k of this title](/usc/7/6k.md), whether prior or subsequent to becoming so associated, has been and is suspended or expelled from a [registered entity](/usc/7/1a.md?p=40) or has been and is barred or suspended from being associated with all [members](/usc/7/1a.md?p=34) of such [registered entity](/usc/7/1a.md?p=40), for violation of any rule of such [registered entity](/usc/7/1a.md?p=40);
  - (3) the rules of the association provide that, except with the approval or at the direction of the [Commission](/usc/7/1a.md?p=8) in cases in which the [Commission](/usc/7/1a.md?p=8) finds it appropriate in the public interest so to approve or direct, no [person](/usc/7/1a.md?p=38) shall be admitted to or continued in membership in such association, if such [person](/usc/7/1a.md?p=38)—
    - (A) has been and is suspended or expelled from a registered futures association or from a [registered entity](/usc/7/1a.md?p=40) or has been and is barred or suspended from being associated with all [members](/usc/7/1a.md?p=34) of such association or from being associated with all [members](/usc/7/1a.md?p=34) of such [registered entity](/usc/7/1a.md?p=40), for violation of any rule of such association or [registered entity](/usc/7/1a.md?p=40) which prohibits any act or transaction constituting conduct inconsistent with just and equitable principles of trade, or requires any act the omission of which constitutes conduct inconsistent with just and equitable principles of trade;
    - (B) is subject to an [order](/usc/7/2902.md?p=10) of the [Commission](/usc/7/1a.md?p=8) denying, suspending, or revoking his registration pursuant to [section 9 of this title](/usc/7/9.md), or expelling or suspending him from membership in a registered futures association or a [registered entity](/usc/7/1a.md?p=40), or barring or suspending him from being associated with a [futures commission merchant](/usc/7/1a.md?p=28-A);
    - (C) whether prior or subsequent to becoming a [member](/usc/7/1a.md?p=34), by his conduct while associated with a [member](/usc/7/1a.md?p=34), was a cause of any suspension, expulsion, or [order](/usc/7/2902.md?p=10) of the character described in clause [(A)](#b-3-A) or [(B)](#b-3-B) which is in effect with respect to such [member](/usc/7/1a.md?p=34), and in entering such a suspension, expulsion, or [order](/usc/7/2902.md?p=10), the [Commission](/usc/7/1a.md?p=8) or any such [registered entity](/usc/7/1a.md?p=40) or association shall have jurisdiction to determine whether or not any [person](/usc/7/1a.md?p=38) was a cause thereof; or
    - (D) has associated with him any [person](/usc/7/1a.md?p=38) who is known, or in the exercise of reasonable care should be known, to him to be a [person](/usc/7/1a.md?p=38) who would be ineligible for admission to or continuance in membership under clause (A), (B), or (C) of this paragraph;
  - (4) the rules of the association provide that, except with the approval or at the direction of the [Commission](/usc/7/1a.md?p=8) in cases in which the [Commission](/usc/7/1a.md?p=8) finds it appropriate in the public interest so to approve or direct, no [person](/usc/7/1a.md?p=38) shall become a [member](/usc/7/1a.md?p=34) and no natural [person](/usc/7/1a.md?p=38) shall become a [person](/usc/7/1a.md?p=38) associated with a [member](/usc/7/1a.md?p=34), unless such [person](/usc/7/1a.md?p=38) is qualified to become a [member](/usc/7/1a.md?p=34) or a [person](/usc/7/1a.md?p=38) associated with a [member](/usc/7/1a.md?p=34) in conformity with specified and appropriate standards with respect to the training, experience, and such other qualifications of such [person](/usc/7/1a.md?p=38) as the association finds necessary or desirable, and in the case of a [member](/usc/7/1a.md?p=34), the financial responsibility of such a [member](/usc/7/1a.md?p=34). For the purpose of defining such standards and the application thereof, such rules may—
    - (A) appropriately classify prospective [members](/usc/7/1a.md?p=34) (taking into account relevant matters, including type or nature of business done) and [persons](/usc/7/1a.md?p=38) proposed to be associated with [members](/usc/7/1a.md?p=34);
    - (B) specify that all or any portion of such standard shall be applicable to any such class;
    - (C) require [persons](/usc/7/1a.md?p=38) in any such class to pass examinations prescribed in accordance with such rules;
    - (D) provide that [persons](/usc/7/1a.md?p=38) in any such class other than prospective [members](/usc/7/1a.md?p=34) and partners, officers and supervisory employees (which latter term may be defined by such rules and as so defined shall include branch managers of [members](/usc/7/1a.md?p=34)) of [members](/usc/7/1a.md?p=34), may be qualified solely on the basis of compliance with specified standards of training and such other qualifications as the association finds appropriate;
    - (E) provide that applications to become a [member](/usc/7/1a.md?p=34) or a [person](/usc/7/1a.md?p=38) associated with a [member](/usc/7/1a.md?p=34) shall set forth such facts as the association may prescribe as to the training, experience, and other qualifications (including, in the case of an applicant for membership, financial responsibility) of the applicant and that the association shall adopt procedures for verification of qualifications of the applicant, which may require the applicant to be fingerprinted and to submit, or cause to be submitted, such fingerprints to the Attorney General for identification and appropriate processing. Notwithstanding any other provision of law, such an association may receive from the Attorney General all the results of such identification and processing; and
    - (F) require any class of [persons](/usc/7/1a.md?p=38) associated with a [member](/usc/7/1a.md?p=34) to be registered with the association in accordance with procedures specified by such rules (and any application or document supplemental thereto required by such rules of a [person](/usc/7/1a.md?p=38) seeking to be registered with such association shall, for the purposes of [section 9 of this title](/usc/7/9.md), be deemed an application required to be filed under this section);
  - (5) the rules of the association assure a fair representation of its [members](/usc/7/1a.md?p=34) in the adoption of any rule of the association or amendment thereto, the selection of its officers and directors, and in all other phases of the administration of its affairs;
  - (6) the rules of the association provide for the equitable allocation of dues among its [members](/usc/7/1a.md?p=34), to defray reasonable expenses of administration;
  - (7) the rules of the association are designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, in general, to protect the public interest, and to remove impediments to and perfect the mechanism of free and open futures trading;
  - (8) the rules of the association provide that its [members](/usc/7/1a.md?p=34) and [persons](/usc/7/1a.md?p=38) associated with its [members](/usc/7/1a.md?p=34) shall be appropriately disciplined, by expulsion, suspension, fine, censure, or being suspended or barred from being associated with all [members](/usc/7/1a.md?p=34), or any other fitting penalty, for any violation of its rules;
  - (9) the rules of the association provide a fair and orderly procedure with respect to the disciplining of [members](/usc/7/1a.md?p=34) and [persons](/usc/7/1a.md?p=38) associated with [members](/usc/7/1a.md?p=34) and the denial of membership to any [person](/usc/7/1a.md?p=38) seeking membership therein or the barring of any [person](/usc/7/1a.md?p=38) from being associated with a [member](/usc/7/1a.md?p=34). In any proceeding to determine whether any [member](/usc/7/1a.md?p=34) or other [person](/usc/7/1a.md?p=38) shall be disciplined, such rules shall require that specific charges be brought; that such [member](/usc/7/1a.md?p=34) or [person](/usc/7/1a.md?p=38) shall be notified of, and be given an opportunity to defend against, such charges; that a record shall be kept; and that the determination shall include—
    - (A) a statement setting forth any act or practice in which such [member](/usc/7/1a.md?p=34) or other [person](/usc/7/1a.md?p=38) may be found to have engaged, or which such [member](/usc/7/1a.md?p=34) or other [person](/usc/7/1a.md?p=38) may be found to have omitted;
    - (B) a statement setting forth the specific rule or rules of the association of which any such act or practice, or omission to act, is deemed to be in violation;
    - (C) a statement whether the acts or practices prohibited by such rule or rules, or the omission of any act required thereby, are deemed to constitute conduct inconsistent with just and equitable principles of trade; and
    - (D) a statement setting forth the penalty imposed;[^1]

    In any proceeding to determine whether a [person](/usc/7/1a.md?p=38) shall be denied membership or whether any [person](/usc/7/1a.md?p=38) shall be barred from being associated with a [member](/usc/7/1a.md?p=34), such rules shall provide that the [person](/usc/7/1a.md?p=38) shall be notified of, and be given an opportunity to be heard upon, the specific grounds for denial or bar which are under consideration; that a record shall be kept; and that the determination shall set forth the specific grounds upon which the denial or bar is based;

  - (10) the rules of the association provide a fair, equitable, and expeditious procedure through arbitration or otherwise for the settlement of customers’ claims and grievances against any [member](/usc/7/1a.md?p=34) or employee thereof: Provided, That (A) the use of such procedure by a customer shall be voluntary, (B) the term “customer” as used in this paragraph shall not include another [member](/usc/7/1a.md?p=34) of the association, and (C) in the case of a claim arising from a violation in the execution of an [order](/usc/7/2902.md?p=10) on the floor of a [registered entity](/usc/7/1a.md?p=40), such procedure shall provide, to the extent appropriate—
    - (i) for payment of actual damages proximately caused by such violation. If an award of actual damages is made against a [floor broker](/usc/7/1a.md?p=22-A) in connection with the execution of a [customer](#b-10) [order](/usc/7/2902.md?p=10), and the [futures commission merchant](/usc/7/1a.md?p=28-A) which selected the [floor broker](/usc/7/1a.md?p=22-A) for the execution of the [customer](#b-10) [order](/usc/7/2902.md?p=10) is held to be responsible under [section 2(a)(1) of this title](/usc/7/2.md?p=a-1) for the [floor broker](/usc/7/1a.md?p=22-A)’s violation, such [futures commission merchant](/usc/7/1a.md?p=28-A) may be required to satisfy such award; and
    - (ii) where the violation is willful and intentional, for payment to the [customer](#b-10) of punitive or exemplary damages, in addition to losses proximately caused by the violation, in an amount equal to no more than two times the amount of such losses. If punitive or exemplary damages are awarded against a [floor broker](/usc/7/1a.md?p=22-A) in connection with the execution of a [customer](#b-10) [order](/usc/7/2902.md?p=10), and the [futures commission merchant](/usc/7/1a.md?p=28-A) which selected the [floor broker](/usc/7/1a.md?p=22-A) for the execution of such [order](/usc/7/2902.md?p=10) is held to be responsible under [section 2(a)(1) of this title](/usc/7/2.md?p=a-1) for the [floor broker](/usc/7/1a.md?p=22-A)’s violation, such [futures commission merchant](/usc/7/1a.md?p=28-A) may be required to satisfy the award of punitive or exemplary damages if the [floor broker](/usc/7/1a.md?p=22-A) fails to do so, except that such requirement shall apply to the [futures commission merchant](/usc/7/1a.md?p=28-A) only if it willfully and intentionally selected the [floor broker](/usc/7/1a.md?p=22-A) with the intent to assist or facilitate the [floor broker](/usc/7/1a.md?p=22-A)’s violation; and[^2]
  - (11) such association provides for meaningful representation on the governing [board](/usc/7/1a.md?p=5) of such association of a diversity of membership interests and provides that no less than 20 percent of the regular voting [members](/usc/7/1a.md?p=34) of such [board](/usc/7/1a.md?p=5) be comprised of qualified nonmembers of or [persons](/usc/7/1a.md?p=38) who are not regulated by such association.[^3]
  - (12)
    - (A) [^4] such association provides on all major disciplinary [committees](/usc/7/2132.md?p=n) for a diversity of membership sufficient to ensure fairness and to prevent special treatment or preference for any [person](/usc/7/1a.md?p=38) in the conduct of disciplinary proceedings and the assessment of penalties.[^5]
  - (13) A[^6] major disciplinary [committee](/usc/7/2132.md?p=n) hearing a disciplinary matter shall include—
    - (A) qualified [persons](/usc/7/1a.md?p=38) representing segments of the association membership other than that of the subject of the proceeding; and
    - (B) where appropriate to carry out the purposes of this paragraph, qualified [persons](/usc/7/1a.md?p=38) who are not [members](/usc/7/1a.md?p=34) of the association.
- (c) **Suspension of registration—** The [Commission](/usc/7/1a.md?p=8) may, after notice and opportunity for hearing, suspend the registration of any futures association if it finds that the rules thereof do not conform to the requirements of the [Commission](/usc/7/1a.md?p=8), and any such suspension shall remain in effect until the [Commission](/usc/7/1a.md?p=8) issues an [order](/usc/7/2902.md?p=10) determining that such rules have been modified to conform with such requirements.
- (d) **Fees and charges—** In addition to the fees and charges authorized by [section 12a(1) of this title](/usc/7/12a.md?p=1), each [person](/usc/7/1a.md?p=38) registered under this chapter, who is not a [member](/usc/7/1a.md?p=34) of a futures association registered pursuant to this section, shall pay to the [Commission](/usc/7/1a.md?p=8) such reasonable fees and charges as may be necessary to defray the costs of additional regulatory duties required to be performed by the [Commission](/usc/7/1a.md?p=8) because such [person](/usc/7/1a.md?p=38) is not a [member](/usc/7/1a.md?p=34) of a registered futures association. The [Commission](/usc/7/1a.md?p=8) shall establish such additional fees and charges by rules and regulations.
- (e) **Registered persons not members of registered associations—** Any [person](/usc/7/1a.md?p=38) registered under this chapter, who is not a [member](/usc/7/1a.md?p=34) of a futures association registered pursuant to this section, in addition to the other requirements and obligations of this chapter and the regulations thereunder shall be subject to such other rules and regulations as the [Commission](/usc/7/1a.md?p=8) may find necessary to protect the public interest and promote just and equitable principles of trade.
- (f) **Denial of registration—** Upon filing of an application for registration pursuant to [subsection (a)](#a), the [Commission](/usc/7/1a.md?p=8) may by [order](/usc/7/2902.md?p=10) grant such registration if the requirements of this section are satisfied. If, after appropriate notice and opportunity for hearing, it appears to the [Commission](/usc/7/1a.md?p=8) that any requirement of this section is not satisfied, the [Commission](/usc/7/1a.md?p=8) shall by [order](/usc/7/2902.md?p=10) deny such registration.
- (g) **Withdrawal from registration; notice of with­drawal—** A registered futures association may, upon such reasonable notice as the [Commission](/usc/7/1a.md?p=8) may deem necessary in the public interest, withdraw from registration by filing with the [Commission](/usc/7/1a.md?p=8) a written notice of withdrawal in such form as the [Commission](/usc/7/1a.md?p=8) may by rules and regulations prescribe.
- (h) **Commission review of disciplinary actions taken by registered futures associations—**
  - (1) If any registered futures association takes any final disciplinary action against a [member](/usc/7/1a.md?p=34) of the association or a [person](/usc/7/1a.md?p=38) associated with a [member](/usc/7/1a.md?p=34), denies admission to any [person](/usc/7/1a.md?p=38) seeking membership therein, or bars any [person](/usc/7/1a.md?p=38) from being associated with a [member](/usc/7/1a.md?p=34), the association promptly shall give notice thereof to such [member](/usc/7/1a.md?p=34) or [person](/usc/7/1a.md?p=38) and file notice thereof with the [Commission](/usc/7/1a.md?p=8). The notice shall be in such form and contain such information as the [Commission](/usc/7/1a.md?p=8), by rule or regulation, may prescribe as necessary or appropriate to carry out the purposes of this chapter.
  - (2) Any action with respect to which a registered futures association is required by [paragraph (1)](#h-1) to file notice shall be subject to review by the [Commission](/usc/7/1a.md?p=8) on its motion, or on application by any [person](/usc/7/1a.md?p=38) aggrieved by the action. Such application shall be filed within 30 days after the date such notice is filed with the [Commission](/usc/7/1a.md?p=8) and received by the aggrieved [person](/usc/7/1a.md?p=38), or within such longer period as the [Commission](/usc/7/1a.md?p=8) may determine.
  - (3)
    - (A) Application to the [Commission](/usc/7/1a.md?p=8) for review, or the institution of review by the [Commission](/usc/7/1a.md?p=8) on its own motion, shall not operate as a stay of such action unless the [Commission](/usc/7/1a.md?p=8) otherwise [orders](/usc/7/2902.md?p=10), summarily or after notice and opportunity for hearing on the question of a stay (which hearing may consist solely of the submission of affidavits or presentation of oral arguments).
    - (B) The [Commission](/usc/7/1a.md?p=8) shall establish procedures for expedited consideration and determination of the question of a stay.
- (i) **Notice; hearing; findings; cancellation, reduction, or remission of penalties; review by court of appeals—**
  - (1) In a proceeding to review a final disciplinary action taken by a registered futures association against a [member](/usc/7/1a.md?p=34) thereof or a [person](/usc/7/1a.md?p=38) associated with a [member](/usc/7/1a.md?p=34), after appropriate notice and opportunity for a hearing (which hearing may consist solely of consideration of the record before the association and opportunity for the presentation of supporting reasons to affirm, modify, or set aside the sanction imposed by the association)—
    - (A) if the [Commission](/usc/7/1a.md?p=8) finds that—
      - (i) the [member](/usc/7/1a.md?p=34) or [person](/usc/7/1a.md?p=38) associated with a [member](/usc/7/1a.md?p=34) has engaged in the acts or practices, or has omitted the acts, that the association has found the [member](/usc/7/1a.md?p=34) or [person](/usc/7/1a.md?p=38) to have engaged in or omitted;
      - (ii) the acts or practices, or omissions to act, are in violation of the rules of the association specified in the determination of the association; and
      - (iii) such rules are, and were applied in a manner, consistent with the purposes of this chapter,

      the [Commission](/usc/7/1a.md?p=8), by [order](/usc/7/2902.md?p=10), shall so declare and, as appropriate, affirm the sanction imposed by the association, modify the sanction in accordance with [paragraph (2)](#i-2), or remand the case to the association for further proceedings; or

    - (B) if the [Commission](/usc/7/1a.md?p=8) does not make any such finding, the [Commission](/usc/7/1a.md?p=8), by [order](/usc/7/2902.md?p=10), shall set aside the sanction imposed by the association and, if appropriate, remand the case to the association for further proceedings.
  - (2) If, after a proceeding under [paragraph (1)](#i-1), the [Commission](/usc/7/1a.md?p=8) finds that any penalty imposed on a [member](/usc/7/1a.md?p=34) or [person](/usc/7/1a.md?p=38) associated with a [member](/usc/7/1a.md?p=34) is excessive or oppressive, having due regard for the public interest, the [Commission](/usc/7/1a.md?p=8), by [order](/usc/7/2902.md?p=10), shall cancel, reduce, or require the remission of the penalty.
  - (3) In a proceeding to review the denial of membership in a registered futures association or the barring of any [person](/usc/7/1a.md?p=38) from being associated with a [member](/usc/7/1a.md?p=34), after appropriate notice and opportunity for a hearing (which hearing may consist solely of consideration of the record before the association and opportunity for the presentation of supporting reasons to affirm, modify, or set aside the action of the association)—
    - (A) if the [Commission](/usc/7/1a.md?p=8) finds that—
      - (i) the specific grounds on which the denial or bar is based exist in fact;
      - (ii) the denial or bar is in accordance with the rules of the association; and
      - (iii) such rules are, and were applied in a manner, consistent with the purposes of this chapter,

      the [Commission](/usc/7/1a.md?p=8), by [order](/usc/7/2902.md?p=10), shall so declare and, as appropriate, affirm or modify the action of the association, or remand the case to the association for further proceedings; or

    - (B) if the [Commission](/usc/7/1a.md?p=8) does not make any such finding, the [Commission](/usc/7/1a.md?p=8), by [order](/usc/7/2902.md?p=10), shall set aside the action of the association and require the association to admit the applicant to membership or permit the [person](/usc/7/1a.md?p=38) to be associated with a [member](/usc/7/1a.md?p=34), or, as appropriate, remand the case to the association for further proceedings.
  - (4) Any [person](/usc/7/1a.md?p=38) aggrieved by a final [order](/usc/7/2902.md?p=10) of the [Commission](/usc/7/1a.md?p=8) entered under this subsection may file a petition for review with a [United States](/usc/7/6402.md?p=8) court of appeals in the same manner as provided in [section 9 of this title](/usc/7/9.md).
- (j) **Changes or additions to association rules—** Every registered futures association shall file with the [Commission](/usc/7/1a.md?p=8) in accordance with such rules and regulations as the [Commission](/usc/7/1a.md?p=8) may prescribe as necessary or appropriate in the public interest, copies of any changes in or additions to the rules of the association, and such other information and documents as the [Commission](/usc/7/1a.md?p=8) may require to keep current or to supplement the registration statement and documents filed pursuant to [subsection (a)](#a) of this section. A registered futures association shall submit to the [Commission](/usc/7/1a.md?p=8) any change in or addition to its rules and may make such rules effective ten days after receipt of such submission by the [Commission](/usc/7/1a.md?p=8) unless, within the ten-day period, the registered futures association requests review and approval thereof by the [Commission](/usc/7/1a.md?p=8) or the [Commission](/usc/7/1a.md?p=8) notifies such registered futures association in writing of its determination to review such rules for approval. The [Commission](/usc/7/1a.md?p=8) shall approve such rules if such rules are determined by the [Commission](/usc/7/1a.md?p=8) to be consistent with the requirements of this section and not otherwise in violation of this chapter or the regulations issued pursuant to this chapter, and the [Commission](/usc/7/1a.md?p=8) shall disapprove, after appropriate notice and opportunity for hearing, any such rule which the [Commission](/usc/7/1a.md?p=8) determines at any time to be inconsistent with the requirements of this section or in violation of this chapter or the regulations issued pursuant to this chapter. If the [Commission](/usc/7/1a.md?p=8) does not approve or [institute](/usc/7/4531.md?p=6) disapproval proceedings with respect to any rule within one hundred and eighty days after receipt or within such longer period of time as the registered futures association may agree to, or if the [Commission](/usc/7/1a.md?p=8) does not conclude a disapproval proceeding with respect to any rule within one year after receipt or within such longer period as the registered futures association may agree to, such rule may be made effective by the registered futures association until such time as the [Commission](/usc/7/1a.md?p=8) disapproves such rule in accordance with this subsection.
- (k) **Abrogation of association rules; requests to associations by Commission to alter or supplement rules—**
  - (1) The [Commission](/usc/7/1a.md?p=8) is authorized by [order](/usc/7/2902.md?p=10) to abrogate any rule of a registered futures association, if after appropriate notice and opportunity for hearing, it appears to the [Commission](/usc/7/1a.md?p=8) that such abrogation is necessary or appropriate to assure fair dealing by the [members](/usc/7/1a.md?p=34) of such association, to assure a fair representation of its [members](/usc/7/1a.md?p=34) in the administration of its affairs or effectuate the purposes of this section.
  - (2) The [Commission](/usc/7/1a.md?p=8) may in writing request any registered futures association to adopt any specified alteration or supplement to its rules with respect to any of the matters hereinafter enumerated. If such association fails to adopt such alteration or supplement within a reasonable time, the [Commission](/usc/7/1a.md?p=8) is authorized by [order](/usc/7/2902.md?p=10) to alter or supplement the rules of such association in the manner theretofore requested, or with such modifications of such alteration or supplement as it deems necessary if, after appropriate notice and opportunity for hearing, it appears to the [Commission](/usc/7/1a.md?p=8) that such alteration or supplement is necessary or appropriate in the public interest or to effectuate the purposes of this section, with respect to—
    - (A) the basis for, and procedure in connection with, the denial of membership or the barring from being associated with a [member](/usc/7/1a.md?p=34) or the disciplining of [members](/usc/7/1a.md?p=34) or [persons](/usc/7/1a.md?p=38) associated with [members](/usc/7/1a.md?p=34), or the qualifications required for [members](/usc/7/1a.md?p=34) or natural [persons](/usc/7/1a.md?p=38) associated with [members](/usc/7/1a.md?p=34) or any class thereof;
    - (B) the method for adoption of any change in or addition to the rules of the association;
    - (C) the method of choosing officers and directors.
- (l) **Suspension and revocation of registration; expulsion of members; removal of association officers or directors—** The [Commission](/usc/7/1a.md?p=8) is authorized, if such action appears to it to be necessary or appropriate in the public interest or to carry out the purposes of this section—
  - (1) after appropriate notice and opportunity for hearing, by [order](/usc/7/2902.md?p=10) to suspend for a period not exceeding twelve months or to revoke the registration of a registered futures association, if the [Commission](/usc/7/1a.md?p=8) finds that such association has violated any provisions of this chapter or any rule or regulation thereunder, or has failed to enforce compliance with its own rules, or has engaged in any other activity tending to defeat the purposes of this chapter;
  - (2) after appropriate notice and opportunity for hearing, by [order](/usc/7/2902.md?p=10) to suspend for a period not exceeding twelve months or to expel from a registered futures association any [member](/usc/7/1a.md?p=34) thereof, or to suspend for a period not exceeding twelve months or to bar any [person](/usc/7/1a.md?p=38) from being associated with a [member](/usc/7/1a.md?p=34) thereof, if the [Commission](/usc/7/1a.md?p=8) finds that such [member](/usc/7/1a.md?p=34) or [person](/usc/7/1a.md?p=38)—
    - (A) has violated any provision of this chapter or any rule or regulation thereunder, or has effected any transaction for any other [person](/usc/7/1a.md?p=38) who, he had reason to believe, was violating with respect to such transaction any provision of this chapter or any rule or regulation thereunder; or
    - (B) has willfully violated any provision of this chapter, or of any rule, regulation, or [order](/usc/7/2902.md?p=10) thereunder, or has effected any transaction for any other [person](/usc/7/1a.md?p=38) who, he had reason to believe, was willfully violating with respect to such transaction any provision of this chapter or rule, regulation, or [order](/usc/7/2902.md?p=10); and
  - (3) after appropriate notice and opportunity for hearing, by [order](/usc/7/2902.md?p=10) to remove from office any officer or director of a registered futures association who, the [Commission](/usc/7/1a.md?p=8) finds, has willfully failed to enforce the rules of the association, or has willfully abused his [authority](/usc/7/2009aa.md?p=1).
- (m) **Rules requiring membership in associations—** Notwithstanding any other provision of law, the [Commission](/usc/7/1a.md?p=8) may approve rules of futures associations that, directly or indirectly, require [persons](/usc/7/1a.md?p=38) eligible for membership in such associations to become [members](/usc/7/1a.md?p=34) of at least one such association, upon a determination by the [Commission](/usc/7/1a.md?p=8) that such rules are necessary or appropriate to achieve the purposes and objectives of this chapter.
- (n) **Reports to Congress—** The [Commission](/usc/7/1a.md?p=8) shall include in its annual reports to Congress information concerning any futures associations registered pursuant to this section and the effectiveness of such associations in regulating the practices of the [members](/usc/7/1a.md?p=34).
- (o) **Delegation to futures associations of registrative functions; discretionary review by Commission; judicial appeal—**
  - (1) The [Commission](/usc/7/1a.md?p=8) may require any futures association registered pursuant to this section to perform any portion of the registration functions under this chapter with respect to each [member](/usc/7/1a.md?p=34) of the association other than a [registered entity](/usc/7/1a.md?p=40) and with respect to each associated [person](/usc/7/1a.md?p=38) of such [member](/usc/7/1a.md?p=34), in accordance with rules, notwithstanding any other provision of law, adopted by such futures association and submitted to the [Commission](/usc/7/1a.md?p=8) pursuant to [subsection (j)](#j), and subject to the provisions of this chapter applicable to registrations granted by the [Commission](/usc/7/1a.md?p=8).
  - (2) In performing any [Commission](/usc/7/1a.md?p=8) registration function authorized by the [Commission](/usc/7/1a.md?p=8) under [section 12a(10) of this title](/usc/7/12a.md?p=10), this section, or any other applicable provisions of this chapter, a futures association may issue [orders](/usc/7/2902.md?p=10) (A) to refuse to register any [person](/usc/7/1a.md?p=38), (B) to register conditionally any [person](/usc/7/1a.md?p=38), (C) to suspend the registration of any [person](/usc/7/1a.md?p=38), (D) to place restrictions on the registration of any [person](/usc/7/1a.md?p=38), or (E) to revoke the registration of any [person](/usc/7/1a.md?p=38). If such an [order](/usc/7/2902.md?p=10) is the final decision of the futures association, any [person](/usc/7/1a.md?p=38) against whom the [order](/usc/7/2902.md?p=10) has been issued may petition the [Commission](/usc/7/1a.md?p=8) to review the decision. The [Commission](/usc/7/1a.md?p=8) may on its own initiative or upon petition decline review or grant review and affirm, set aside, or modify such an [order](/usc/7/2902.md?p=10) of the futures association; and the findings of the futures association as to the facts, if supported by the weight of the evidence, shall be conclusive. Unless the [Commission](/usc/7/1a.md?p=8) grants review under this section of an [order](/usc/7/2902.md?p=10) concerning registration issued by a futures association, the [order](/usc/7/2902.md?p=10) of the futures association shall be considered to be an [order](/usc/7/2902.md?p=10) issued by the [Commission](/usc/7/1a.md?p=8).
  - (3) Nothing in this section shall affect the [Commission](/usc/7/1a.md?p=8)’s [authority](/usc/7/2009aa.md?p=1) to review the granting of a registration application by a registered futures association that is performing any [Commission](/usc/7/1a.md?p=8) registration function authorized by the [Commission](/usc/7/1a.md?p=8) under [section 12a(10) of this title](/usc/7/12a.md?p=10), this section, or any other applicable provision of this chapter.
  - (4) If a [person](/usc/7/1a.md?p=38) against whom a futures association has issued a registration [order](/usc/7/2902.md?p=10) under this subsection petitions the [Commission](/usc/7/1a.md?p=8) to review that [order](/usc/7/2902.md?p=10) and the [Commission](/usc/7/1a.md?p=8) declines to take review, such [person](/usc/7/1a.md?p=38) may file a petition for review with a [United States](/usc/7/6402.md?p=8) court of appeals, in accordance with [section 9 of this title](/usc/7/9.md).
- (p) **Establishment of rules for futures associations; approval by Commission—** Notwithstanding any other provision of this section, each futures association registered under this section on January 11, 1983, shall adopt and submit for [Commission](/usc/7/1a.md?p=8) approval not later than ninety days after such date, and each futures association that applies for registration after such date shall adopt and include with its application for registration, rules of the association that require the association to—
  - (1) establish training standards and proficiency testing for [persons](/usc/7/1a.md?p=38) involved in the solicitation of transactions subject to the provisions of this chapter, supervisors of such [persons](/usc/7/1a.md?p=38), and all [persons](/usc/7/1a.md?p=38) for which it has registration responsibilities, and a program to audit and enforce compliance with such standards;
  - (2) establish minimum capital, segregation, and other financial requirements applicable to its [members](/usc/7/1a.md?p=34) for which such requirements are imposed by the [Commission](/usc/7/1a.md?p=8) and implement a program to audit and enforce compliance with such requirements, except that such requirements may not be less stringent than those imposed on such firms by this chapter or by [Commission](/usc/7/1a.md?p=8) regulation;
  - (3) establish minimum standards governing the sales practices of its [members](/usc/7/1a.md?p=34) and [persons](/usc/7/1a.md?p=38) associated therewith for transactions subject to the provisions of this chapter; and
  - (4) establish special supervisory guidelines to protect the public interest relating to the solicitation by telephone of new futures or [options](/usc/7/1a.md?p=36) accounts and make such guidelines applicable to those [members](/usc/7/1a.md?p=34) determined to require such guidelines in accordance with standards established by the [Commission](/usc/7/1a.md?p=8) consistent with this chapter. Such guidelines may include a requirement that, with respect to a customer with no previous futures or [commodity](/usc/7/1a.md?p=9) [options](/usc/7/1a.md?p=36) trading experience, the [member](/usc/7/1a.md?p=34) may not enter an [order](/usc/7/2902.md?p=10) for the account of such customer for a period of three days following opening of the account and receipt of a signed acknowledgment by the customer of receipt of a risk disclosure statement.
- (q) **[^7] Major disciplinary rule violations—**
  - (1) The [Commission](/usc/7/1a.md?p=8) shall issue regulations requiring each registered futures association to establish and make available to the public a schedule of major violations of any rule within the disciplinary jurisdiction of such registered futures association.
  - (2) The regulations issued by the [Commission](/usc/7/1a.md?p=8) pursuant to this subsection shall prohibit, for a period of time to be determined by the [Commission](/usc/7/1a.md?p=8), any [member](/usc/7/1a.md?p=34) of a registered futures association who is found to have committed any major violation from service on the governing [board](/usc/7/1a.md?p=5) of any registered futures association or [registered entity](/usc/7/1a.md?p=40), or on any disciplinary [committee](/usc/7/2132.md?p=n) thereof.
- (q) **[^7] Program for implementation of rules—** Each futures association registered under this section shall develop a comprehensive program that fully implements the rules approved by the [Commission](/usc/7/1a.md?p=8) under this section as soon as practicable but not later than September 30, 1985, in the case of any futures association registered on January 11, 1983, and not later than two and one-half years after the date of registration in the case of any other futures association registered under this section.
- (r) **Rules to avoid duplicative regulation of dual registrants—** Consistent with this chapter, each futures association registered under this section shall issue such rules as are necessary to avoid duplicative or conflicting rules applicable to any [futures commission merchant](/usc/7/1a.md?p=28-A) registered with the [Commission](/usc/7/1a.md?p=8) pursuant to [section 6f(a) of this title](/usc/7/6f.md?p=a) (except [paragraph (2)](#r-2) thereof), that is also registered with the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8) pursuant to [section 78o(b)](/usc/15/78o.md?p=b) of title 15 (except paragraph (11) thereof), with respect to the application of—
  - (1) rules of such futures association of the type specified in [section 6d(e) of this title](/usc/7/6d.md?p=e) involving [security futures products](/usc/7/1a.md?p=45); and
  - (2) similar rules of national [securities](/usc/7/1a.md?p=41) associations registered pursuant to [section 78o–3(a)](/usc/15/78o–3.md?p=a) of title 15 involving [security futures products](/usc/7/1a.md?p=45).

# §22. Research and information programs; reports to Congress

- (a) The [Commission](/usc/7/1a.md?p=8) shall establish and maintain, as part of its ongoing operations, research and information programs to (1) determine the feasibility of trading by computer, and the expanded use of modern information system technology, electronic data processing, and modern communication systems by [commodity](/usc/7/1a.md?p=9) [exchanges](/usc/7/1a.md?p=1-D), [boards](/usc/7/1a.md?p=5) of trade, and by the [Commission](/usc/7/1a.md?p=8) itself for purposes of improving, strengthening, facilitating, or regulating futures trading operations; (2) assist in the development of educational and other informational materials regarding futures trading for dissemination and use among [producers](/usc/7/6802.md?p=4-A-iii-III-bb), market users, and the general public; and (3) carry out the general purposes of this chapter.
- (b) The [Commission](/usc/7/1a.md?p=8) shall include in its annual reports to Congress plans and findings with respect to implementing this section.

# §23. Standardized contracts for certain commodities

- (a) **Margin accounts or contracts and leverage accounts or contracts prohibited except as authorized—** Except as authorized under [subsection (b)](#b), no [person](/usc/7/1a.md?p=38) shall [offer](/usc/7/1a.md?p=36) to enter into, enter into, or confirm the execution of, any transaction for the delivery of any [commodity](/usc/7/1a.md?p=9) under a standardized [contract](/usc/7/518.md?p=4) commonly known to the trade as a margin account, margin [contract](/usc/7/518.md?p=4), leverage account, or leverage [contract](/usc/7/518.md?p=4), or under any [contract](/usc/7/518.md?p=4), account, arrangement, scheme, or device that the [Commission](/usc/7/1a.md?p=8) determines serves the same function or functions as such a standardized [contract](/usc/7/518.md?p=4), or is marketed or managed in substantially the same manner as such a standardized [contract](/usc/7/518.md?p=4).
- (b) **Permission to enter into contracts for delivery of silver or gold bullion, bulk silver or gold coins, or platinum; rules and regulations—**
  - (1) Subject to [paragraph (2)](#b-2), no [person](/usc/7/1a.md?p=38) shall [offer](/usc/7/1a.md?p=36) to enter into, enter into, or confirm the execution of, any transaction for the delivery of silver bullion, gold bullion, bulk silver coins, bulk gold coins, or platinum under a standardized [contract](/usc/7/518.md?p=4) described in [subsection (a)](#a), contrary to the terms of any rule, regulation, or [order](/usc/7/2902.md?p=10) that the [Commission](/usc/7/1a.md?p=8) shall prescribe, which may include terms designed to ensure the financial solvency of the transaction or prevent manipulation or fraud. Such rule, regulation, or [order](/usc/7/2902.md?p=10) may be made only after notice and opportunity for hearing. The [Commission](/usc/7/1a.md?p=8) may set different terms and conditions for transactions involving different [commodities](/usc/7/1a.md?p=9).
  - (2) No [person](/usc/7/1a.md?p=38) may engage in any activity described in [paragraph (1)](#b-1) who is not permitted to engage in such activity, by the rules, regulations, and [orders](/usc/7/2902.md?p=10) of the [Commission](/usc/7/1a.md?p=8) in effect on November 10, 1986, until the [Commission](/usc/7/1a.md?p=8) permits such [person](/usc/7/1a.md?p=38) to engage in such activity in accordance with regulations issued in accordance with [subsection (c)(2)](#c-2).
- (c) **Survey of persons interested in engaging in transactions of silver and gold, etc.; assistance of futures association; regulations—**
  - (1)
    - (A) Not later than 2 years after November 10, 1986, the [Commission](/usc/7/1a.md?p=8) shall—
      - (i) with the assistance of a futures association registered under this chapter, conduct a survey concerning the [persons](/usc/7/1a.md?p=38) interested in engaging in the business of offering to enter into, entering into, or confirming the execution of, the transactions described in [subsection (b)(1)](#b-1); and
      - (ii) transmit a report of the results of the survey to the [Committee](/usc/7/2132.md?p=n) on Agriculture of the House of Representatives and the [Committee](/usc/7/2132.md?p=n) on Agriculture, Nutrition, and Forestry of the Senate.
    - (B) Notwithstanding any other provision of law, for purposes of completing such report the [Commission](/usc/7/1a.md?p=8) may direct, by rule, regulation, or [order](/usc/7/2902.md?p=10), a futures association registered under this chapter to render such assistance as the [Commission](/usc/7/1a.md?p=8) shall specify.
    - (C) Such report shall include the findings and any recommendations of the [Commission](/usc/7/1a.md?p=8) concerning—
      - (i) whether such transactions serve an economic purpose;
      - (ii) the most efficient manner, consistent with the public interest, to permit additional [persons](/usc/7/1a.md?p=38) to engage in the business of offering to enter into, entering into, and confirming the execution of such transactions; and
      - (iii) the appropriate regulatory scheme to govern such transactions to ensure the financial solvency of such transactions and to prevent manipulation or fraud.
  - (2) The report shall also include [Commission](/usc/7/1a.md?p=8) regulations governing such transactions. The regulations shall provide for permitting additional [persons](/usc/7/1a.md?p=38) to engage in such transactions. The regulations shall become effective on the expiration of 90 calendar days on which either House of Congress is in session after the date of the transmittal of the report to Congress. The regulations—
    - (A) may authorize or require, notwithstanding any other provision of law, a futures association registered under this chapter to perform such responsibilities in connection with such transactions as the [Commission](/usc/7/1a.md?p=8) may specify; and
    - (B) may require that permission for additional [persons](/usc/7/1a.md?p=38) to engage in such business be given on a gradual basis, so as not to place an undue burden on the resources of the [Commission](/usc/7/1a.md?p=8).
- (d) **Savings provision—** This section shall not affect any rights or obligations arising out of any transaction subject to this section, as in effect before November 10, 1986, that was entered into, or the execution of which was confirmed, before November 10, 1986.

# §24. Customer property with respect to commodity broker debtors; definitions

- (a) **Regulations respecting commodity broker debtors—** Notwithstanding [title 11](/usc/11.md), the [Commission](/usc/7/1a.md?p=8) may provide, with respect to a [commodity broker](#b) that is a debtor under [chapter 7](/usc/11/ch7.md) of title 11, by rule or regulation—
  - (1) that certain cash, [securities](#b), other property, or [commodity contracts](#b) are to be included in or excluded from [customer property](#b) or [member property](#b);
  - (2) that certain cash, [securities](#b), other property, or [commodity contracts](#b) are to be specifically identifiable to a particular [customer](#b) in a specific capacity;
  - (3) the method by which the business of such [commodity broker](#b) is to be conducted or liquidated after the date of the filing of the petition under such chapter, including the payment and allocation of margin with respect to [commodity contracts](#b) not specifically identifiable to a particular [customer](#b) pending their orderly liquidation;
  - (4) any [persons](/usc/7/1a.md?p=38) to which [customer property](#b) and [commodity contracts](#b) may be transferred under [section 766 of title 11](/usc/11/766.md); and
  - (5) how the [net equity](#b) of a [customer](#b) is to be determined.
- (b) **Definitions—** As used in this section, the terms “commodity broker”, “commodity contract”, “customer”, “customer property”, “member property”, “net equity”, and “security” have the meanings assigned such terms for the purposes of subchapter IV of [chapter 7](/usc/11/ch7.md) of title 11.
- (c) **Portfolio margining accounts—** The [Commission](/usc/7/1a.md?p=8) shall exercise its [authority](/usc/7/2009aa.md?p=1) to ensure that [securities](#b) held in a portfolio margining account carried as a futures account are [customer property](#b) and the owners of those accounts are [customers](#b) for the purposes of subchapter IV of [chapter 7](/usc/11/ch7.md) of title 11.

# §24a. Swap data repositories

- (a) **Registration requirement—**
  - (1) **Requirement; authority of derivatives clearing organization—**
    - (A) **In general—** It shall be unlawful for any [person](/usc/7/1a.md?p=38), unless registered with the [Commission](/usc/7/1a.md?p=8), directly or indirectly to make use of the mails or any means or instrumentality of [interstate commerce](/usc/7/1a.md?p=30) to perform the functions of a [swap data repository](/usc/7/1a.md?p=48).
    - (B) **Registration of derivatives clearing organizations—** A [derivatives clearing organization](/usc/7/1a.md?p=15-A) may register as a [swap data repository](/usc/7/1a.md?p=48).
  - (2) **Inspection and examination—** Each registered [swap data repository](/usc/7/1a.md?p=48) shall be subject to inspection and examination by any representative of the [Commission](/usc/7/1a.md?p=8).
  - (3) **Compliance with core principles—**
    - (A) **In general—** To be registered, and maintain registration, as a [swap data repository](/usc/7/1a.md?p=48), the [swap data repository](/usc/7/1a.md?p=48) shall comply with—
      - (i) the requirements and core principles described in this section; and
      - (ii) any requirement that the [Commission](/usc/7/1a.md?p=8) may impose by rule or regulation pursuant to [section 12a(5) of this title](/usc/7/12a.md?p=5).
    - (B) **Reasonable discretion of swap data repository—** Unless otherwise determined by the [Commission](/usc/7/1a.md?p=8) by rule or regulation, a [swap data repository](/usc/7/1a.md?p=48) described in [subparagraph (A)](#a-3-A) shall have reasonable discretion in establishing the manner in which the [swap data repository](/usc/7/1a.md?p=48) complies with the core principles described in this section.
- (b) **Standard setting—**
  - (1) **Data identification—**
    - (A) **In general—** In accordance with [subparagraph (B)](#b-1-B), the [Commission](/usc/7/1a.md?p=8) shall prescribe standards that specify the data elements for each [swap](/usc/7/1a.md?p=47-A) that shall be collected and maintained by each registered [swap data repository](/usc/7/1a.md?p=48).
    - (B) **Requirement—** In carrying out [subparagraph (A)](#b-1-A), the [Commission](/usc/7/1a.md?p=8) shall prescribe consistent data element standards applicable to [registered entities](/usc/7/1a.md?p=40) and reporting counterparties.
  - (2) **Data collection and maintenance—** The [Commission](/usc/7/1a.md?p=8) shall prescribe data collection and data maintenance standards for [swap data repositories](/usc/7/1a.md?p=48).
  - (3) **Comparability—** The standards prescribed by the [Commission](/usc/7/1a.md?p=8) under this subsection shall be comparable to the data standards imposed by the [Commission](/usc/7/1a.md?p=8) on [derivatives clearing organizations](/usc/7/1a.md?p=15-A) in connection with their clearing of [swaps](/usc/7/1a.md?p=47-A).
- (c) **Duties—** A [swap data repository](/usc/7/1a.md?p=48) shall—
  - (1) accept data prescribed by the [Commission](/usc/7/1a.md?p=8) for each [swap](/usc/7/1a.md?p=47-A) under [subsection (b)](#b);
  - (2) confirm with both counterparties to the [swap](/usc/7/1a.md?p=47-A) the accuracy of the data that was submitted;
  - (3) maintain the data described in [paragraph (1)](#c-1) in such form, in such manner, and for such period as may be required by the [Commission](/usc/7/1a.md?p=8);
  - (4)
    - (A) provide direct electronic access to the [Commission](/usc/7/1a.md?p=8) (or any designee of the [Commission](/usc/7/1a.md?p=8), including another [registered entity](/usc/7/1a.md?p=40)); and
    - (B) provide the information described in [paragraph (1)](#c-1) in such form and at such frequency as the [Commission](/usc/7/1a.md?p=8) may require to comply with the public reporting requirements contained in [section 2(a)(13) of this title](/usc/7/2.md?p=a-13);
  - (5) at the direction of the [Commission](/usc/7/1a.md?p=8), establish automated systems for monitoring, screening, and analyzing [swap](/usc/7/1a.md?p=47-A) data, including compliance and frequency of end user clearing exemption claims by individual and affiliated entities;
  - (6) maintain the privacy of any and all [swap](/usc/7/1a.md?p=47-A) transaction information that the [swap data repository](/usc/7/1a.md?p=48) receives from a [swap dealer](/usc/7/1a.md?p=49-A), counterparty, or any other [registered entity](/usc/7/1a.md?p=40); and
  - (7) on a confidential basis pursuant to [section 12 of this title](/usc/7/12.md), upon request, and after notifying the [Commission](/usc/7/1a.md?p=8) of the request, make available [swap](/usc/7/1a.md?p=47-A) data obtained by the [swap data repository](/usc/7/1a.md?p=48), including individual counterparty trade and position data, to—
    - (A) each appropriate [prudential regulator](/usc/7/1a.md?p=39);
    - (B) the Financial Stability Oversight [Council](/usc/7/3402.md?p=i);
    - (C) the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8);
    - (D) the Department of Justice; and
    - (E) any other [person](/usc/7/1a.md?p=38) that the [Commission](/usc/7/1a.md?p=8) determines to be appropriate, including—
      - (i) foreign financial supervisors (including [foreign futures authorities](/usc/7/1a.md?p=26));
      - (ii) foreign central [banks](/usc/7/27.md?p=a);
      - (iii) foreign ministries; and
      - (iv) other foreign [authorities](/usc/7/2009aa.md?p=1); and
  - (8) 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.
- (d) **Confidentiality agreement—** Before the [swap data repository](/usc/7/1a.md?p=48) may share information with any entity described in [subsection (c)(7)](#c-7), the [swap data repository](/usc/7/1a.md?p=48) shall receive a written agreement from each entity stating that the entity shall abide by the confidentiality requirements described in [section 12 of this title](/usc/7/12.md) relating to the information on [swap](/usc/7/1a.md?p=47-A) transactions that is provided.
- (e) **Designation of chief compliance officer—**
  - (1) **In general—** Each [swap data repository](/usc/7/1a.md?p=48) shall designate an individual to serve as a chief compliance officer.
  - (2) **Duties—** The chief compliance officer shall—
    - (A) report directly to the [board](/usc/7/1a.md?p=5) or to the senior officer of the [swap data repository](/usc/7/1a.md?p=48);
    - (B) review the compliance of the [swap data repository](/usc/7/1a.md?p=48) with respect to the requirements and core principles described in this section;
    - (C) in consultation with the [board](/usc/7/1a.md?p=5) of the [swap data repository](/usc/7/1a.md?p=48), a body performing a function similar to the [board](/usc/7/1a.md?p=5) of the [swap data repository](/usc/7/1a.md?p=48), or the senior officer of the [swap data repository](/usc/7/1a.md?p=48), resolve any conflicts of interest that may arise;
    - (D) be responsible for administering each policy and procedure that is required to be established pursuant to this section;
    - (E) ensure compliance with this chapter (including regulations) relating to agreements, [contracts](/usc/7/518.md?p=4), or transactions, including each rule prescribed by the [Commission](/usc/7/1a.md?p=8) under this section;
    - (F) establish procedures for the remediation of noncompliance issues identified by the chief compliance officer through any—
      - (i) compliance office review;
      - (ii) look-back;
      - (iii) internal or external audit finding;
      - (iv) self-reported error; or
      - (v) validated complaint; and
    - (G) establish and follow appropriate procedures for the handling, management response, remediation, retesting, and closing of noncompliance issues.
  - (3) **Annual reports—**
    - (A) **In general—** In accordance with rules prescribed by the [Commission](/usc/7/1a.md?p=8), the chief compliance officer shall annually prepare and sign a report that contains a description of—
      - (i) the compliance of the [swap data repository](/usc/7/1a.md?p=48) of the chief compliance officer with respect to this chapter (including regulations); and
      - (ii) each policy and procedure of the [swap data repository](/usc/7/1a.md?p=48) of the chief compliance officer (including the code of ethics and conflict of interest policies of the [swap data repository](/usc/7/1a.md?p=48)).
    - (B) **Requirements—** A compliance report under [subparagraph (A)](#e-3-A) shall—
      - (i) accompany each appropriate financial report of the [swap data repository](/usc/7/1a.md?p=48) that is required to be furnished to the [Commission](/usc/7/1a.md?p=8) pursuant to this section; and
      - (ii) include a certification that, under penalty of law, the compliance report is accurate and complete.
- (f) **Core principles applicable to swap data repositories—**
  - (1) **Antitrust considerations—** Unless necessary or appropriate to achieve the purposes of this chapter, a [swap data repository](/usc/7/1a.md?p=48) shall not—
    - (A) adopt any rule or take any action that results in any unreasonable restraint of trade; or
    - (B) impose any material anticompetitive burden on the trading, clearing, or reporting of transactions.
  - (2) **Governance arrangements—** Each [swap data repository](/usc/7/1a.md?p=48) shall establish governance arrangements that are transparent—
    - (A) to fulfill public interest requirements; and
    - (B) to support the objectives of the Federal Government, owners, and participants.
  - (3) **Conflicts of interest—** Each [swap data repository](/usc/7/1a.md?p=48) shall—
    - (A) establish and enforce rules to minimize conflicts of interest in the decision-making process of the [swap data repository](/usc/7/1a.md?p=48); and
    - (B) establish a process for resolving conflicts of interest described in [subparagraph (A)](#f-3-A).
  - (4) **Additional duties developed by Commission—**
    - (A) **In general—** The [Commission](/usc/7/1a.md?p=8) may develop 1 or more additional duties applicable to [swap data repositories](/usc/7/1a.md?p=48).
    - (B) **Consideration of evolving standards—** In developing additional duties under [subparagraph (A)](#f-4-A), the [Commission](/usc/7/1a.md?p=8) may take into consideration any evolving standard of the [United States](/usc/7/6402.md?p=8) or the international community.
    - (C) **Additional duties for Commission designees—** The [Commission](/usc/7/1a.md?p=8) shall establish additional duties for any registrant described in [section 1a(48) of this title](/usc/7/1a.md?p=48) in [order](/usc/7/2902.md?p=10) to minimize conflicts of interest, protect data, ensure compliance, and guarantee the safety and [security](/usc/7/1a.md?p=41) of the [swap data repository](/usc/7/1a.md?p=48).
- (g) **Required registration for swap data repositories—** Any [person](/usc/7/1a.md?p=38) that is required to be registered as a [swap data repository](/usc/7/1a.md?p=48) under this section shall register with the [Commission](/usc/7/1a.md?p=8) regardless of whether that [person](/usc/7/1a.md?p=38) is also licensed as a [bank](/usc/7/27.md?p=a) or registered with the [Securities](/usc/7/1a.md?p=41) and [Exchange](/usc/7/1a.md?p=1-D) [Commission](/usc/7/1a.md?p=8) as a [swap data repository](/usc/7/1a.md?p=48).
- (h) **Rules—** The [Commission](/usc/7/1a.md?p=8) shall adopt rules governing [persons](/usc/7/1a.md?p=38) that are registered under this section.

# §25. Private rights of action

- (a) **Actual damages; actionable transactions; exclusive remedy—**
  - (1) Any [person](/usc/7/1a.md?p=38) (other than a [registered entity](/usc/7/1a.md?p=40) or registered futures association) who violates this chapter or who willfully aids, abets, counsels, induces, or procures the [commission](/usc/7/1a.md?p=8) of a violation of this chapter shall be liable for actual damages resulting from one or more of the transactions referred to in [subparagraphs (A) through (D)](#a-A..a-D) of this paragraph and caused by such violation to any other [person](/usc/7/1a.md?p=38)—
    - (A) who received trading advice from such [person](/usc/7/1a.md?p=38) for a fee;
    - (B) who made through such [person](/usc/7/1a.md?p=38) any [contract of sale](/usc/7/1a.md?p=13) of any [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27) (or [option](/usc/7/1a.md?p=36) on such [contract](/usc/7/518.md?p=4) or any [commodity](/usc/7/1a.md?p=9)) or any [swap](/usc/7/1a.md?p=47-A); or who deposited with or paid to such [person](/usc/7/1a.md?p=38) money, [securities](/usc/7/1a.md?p=41), or property (or incurred debt in lieu thereof) in connection with any [order](/usc/7/2902.md?p=10) to make such [contract](/usc/7/518.md?p=4) or any [swap](/usc/7/1a.md?p=47-A);
    - (C) who purchased from or sold to such [person](/usc/7/1a.md?p=38) or placed through such [person](/usc/7/1a.md?p=38) an [order](/usc/7/2902.md?p=10) for the purchase or sale of—
      - (i) an [option](/usc/7/1a.md?p=36) subject to [section 6c of this title](/usc/7/6c.md) (other than an [option](/usc/7/1a.md?p=36) purchased or sold on a [registered entity](/usc/7/1a.md?p=40) or other [board of trade](/usc/7/1a.md?p=6));
      - (ii) a [contract](/usc/7/518.md?p=4) subject to [section 23 of this title](/usc/7/23.md); or[^1]
      - (iii) an interest or participation in a [commodity pool](/usc/7/1a.md?p=10-A); or
      - (iv) a [swap](/usc/7/1a.md?p=47-A); or
    - (D) who purchased or sold a [contract](/usc/7/518.md?p=4) referred to in [subparagraph (B)](#a-1-B) hereof or [swap](/usc/7/1a.md?p=47-A) if the violation constitutes—
      - (i) the use or employment of, or an attempt to use or employ, in connection with a [swap](/usc/7/1a.md?p=47-A), or a [contract of sale](/usc/7/1a.md?p=13) of a [commodity](/usc/7/1a.md?p=9), in [interstate commerce](/usc/7/1a.md?p=30), or for [future delivery](/usc/7/1a.md?p=27) on or subject to the rules of any [registered entity](/usc/7/1a.md?p=40), any manipulative device or contrivance in contravention of such rules and regulations as the [Commission](/usc/7/1a.md?p=8) shall promulgate by not later than 1 year after July 21, 2010; or
      - (ii) a manipulation of the price of any such [contract](/usc/7/518.md?p=4) or [swap](/usc/7/1a.md?p=47-A) or the price of the [commodity](/usc/7/1a.md?p=9) underlying such [contract](/usc/7/518.md?p=4) or [swap](/usc/7/1a.md?p=47-A).
  - (2) Except as provided in [subsection (b)](#b), the rights of action authorized by this subsection and by sections [7(d)(13)](/usc/7/7.md?p=d-13), [7a–1(c)(2)(H)](/usc/7/7a–1.md?p=c-2-H), and [21(b)(10)](/usc/7/21.md?p=b-10) of this title shall be the exclusive remedies under this chapter available to any [person](/usc/7/1a.md?p=38) who sustains loss as a result of any alleged violation of this chapter. Nothing in this subsection shall limit or abridge the rights of the parties to agree in advance of a dispute upon any forum for resolving claims under this section, including arbitration.
  - (3) In any action arising from a violation in the execution of an [order](/usc/7/2902.md?p=10) on the floor of a [registered entity](/usc/7/1a.md?p=40), the [person](/usc/7/1a.md?p=38) referred to in [paragraph (1)](#a-1) shall be liable for—
    - (A) actual damages proximately caused by such violation. If an award of actual damages is made against a [floor broker](/usc/7/1a.md?p=22-A) in connection with the execution of a customer [order](/usc/7/2902.md?p=10), and the [futures commission merchant](/usc/7/1a.md?p=28-A) which selected the [floor broker](/usc/7/1a.md?p=22-A) for the execution of the customer [order](/usc/7/2902.md?p=10) is held to be responsible under [section 2(a)(1) of this title](/usc/7/2.md?p=a-1) for the [floor broker](/usc/7/1a.md?p=22-A)’s violation, such [futures commission merchant](/usc/7/1a.md?p=28-A) may be required to satisfy such award; and
    - (B) where the violation is willful and intentional, punitive or exemplary damages equal to no more than two times the amount of such actual damages. If an award of punitive or exemplary damages is made against a [floor broker](/usc/7/1a.md?p=22-A) in connection with the execution of a customer [order](/usc/7/2902.md?p=10), and the [futures commission merchant](/usc/7/1a.md?p=28-A) which selected the [floor broker](/usc/7/1a.md?p=22-A) for the execution of the customer [order](/usc/7/2902.md?p=10) is held to be responsible under [section 2(a)(1) of this title](/usc/7/2.md?p=a-1) for the [floor broker](/usc/7/1a.md?p=22-A)’s violation, such [futures commission merchant](/usc/7/1a.md?p=28-A) may be required to satisfy such award if the [floor broker](/usc/7/1a.md?p=22-A) fails to do so, except that such requirement shall apply to the [futures commission merchant](/usc/7/1a.md?p=28-A) only if it willfully and intentionally selected the [floor broker](/usc/7/1a.md?p=22-A) with the intent to assist or facilitate the [floor broker](/usc/7/1a.md?p=22-A)’s violation.
  - (4) **Contract enforcement between eligible counterparties.—**
    - (A) **In general.—** No [hybrid instrument](/usc/7/1a.md?p=29) sold to any investor shall be void, voidable, or unenforceable, and no party to a [hybrid instrument](/usc/7/1a.md?p=29) shall be entitled to rescind, or recover any payment made with respect to, the [hybrid instrument](/usc/7/1a.md?p=29) under this section or any other provision of Federal or [State](/usc/7/1359aa.md?p=5) law, based solely on the failure of the [hybrid instrument](/usc/7/1a.md?p=29) to comply with the terms or conditions of [section 2(f) of this title](/usc/7/2.md?p=f) or regulations of the [Commission](/usc/7/1a.md?p=8).
    - (B) **Swaps.—** No agreement, [contract](/usc/7/518.md?p=4), or transaction between [eligible contract participants](/usc/7/1a.md?p=18) or [persons](/usc/7/1a.md?p=38) reasonably believed to be [eligible contract participants](/usc/7/1a.md?p=18) shall be void, voidable, or unenforceable, and no party to such agreement, [contract](/usc/7/518.md?p=4), or transaction shall be entitled to rescind, or recover any payment made with respect to, the agreement, [contract](/usc/7/518.md?p=4), or transaction under this section or any other provision of Federal or [State](/usc/7/1359aa.md?p=5) law, based solely on the failure of the agreement, [contract](/usc/7/518.md?p=4), or transaction—
      - (i) to meet the definition of a [swap](/usc/7/1a.md?p=47-A) under [section 1a of this title](/usc/7/1a.md); or
      - (ii) to be cleared in accordance with [section 2(h)(1) of this title](/usc/7/2.md?p=h-1).
  - (5) **Legal certainty for long-term swaps entered into before July 21, 2010.—**
    - (A) **Effect on swaps.—** Unless specifically reserved in the applicable [swap](/usc/7/1a.md?p=47-A), neither the enactment of the Wall Street Transparency and Accountability Act of 2010, nor any requirement under that Act or an amendment made by that Act, shall constitute a termination event, force majeure, illegality, increased costs, regulatory change, or similar event under a [swap](/usc/7/1a.md?p=47-A) (including any related credit support arrangement) that would permit a party to terminate, renegotiate, modify, amend, or supplement 1 or more transactions under the [swap](/usc/7/1a.md?p=47-A).
    - (B) **Position limits.—** Any position limit established under the Wall Street Transparency and Accountability Act of 2010 shall not apply to a position acquired in good faith prior to the effective date of any rule, regulation, or [order](/usc/7/2902.md?p=10) under the Act that establishes the position limit; provided, however, that such positions shall be attributed to the trader if the trader’s position is increased after the effective date of such position limit rule, regulation, or [order](/usc/7/2902.md?p=10).
  - (6) **Contract enforcement for foreign futures contracts.—** A [contract of sale](/usc/7/1a.md?p=13) of a [commodity](/usc/7/1a.md?p=9) for [future delivery](/usc/7/1a.md?p=27) traded or executed on or through the facilities of a [board of trade](/usc/7/1a.md?p=6), [exchange](/usc/7/1a.md?p=1-D), or market located outside the [United States](/usc/7/6402.md?p=8) for purposes of [section 6(a) of this title](/usc/7/6.md?p=a) shall not be void, voidable, or unenforceable, and a party to such a [contract](/usc/7/518.md?p=4) shall not be entitled to rescind or recover any payment made with respect to the [contract](/usc/7/518.md?p=4), based on the failure of the foreign [board of trade](/usc/7/1a.md?p=6) to comply with any provision of this chapter.
- (b) **Liabilities of organizations and individuals; bad faith requirement; exclusive remedy—**
  - (1)
    - (A) A [registered entity](/usc/7/1a.md?p=40) that fails to enforce any bylaw, rule, regulation, or resolution that it is required to enforce by section [7](/usc/7/7.md), [7a–1](/usc/7/7a–1.md), [7a–2](/usc/7/7a–2.md), [7b–3](/usc/7/7b–3.md), or [24a](/usc/7/24a.md) of this title, (B) a licensed [board of trade](/usc/7/1a.md?p=6) that fails to enforce any bylaw, rule, regulation, or resolution that it is required to enforce by the [Commission](/usc/7/1a.md?p=8), or (C) any [registered entity](/usc/7/1a.md?p=40) that in enforcing any such bylaw, rule, regulation, or resolution violates this chapter or any [Commission](/usc/7/1a.md?p=8) rule, regulation, or [order](/usc/7/2902.md?p=10), shall be liable for actual damages sustained by a [person](/usc/7/1a.md?p=38) who engaged in any transaction on or subject to the rules of such [registered entity](/usc/7/1a.md?p=40) to the extent of such [person](/usc/7/1a.md?p=38)’s actual losses that resulted from such transaction and were caused by such failure to enforce or enforcement of such bylaws, rules, regulations, or resolutions.
  - (2) A registered futures association that fails to enforce any bylaw or rule that is required under [section 21 of this title](/usc/7/21.md) or in enforcing any such bylaw or rule violates this chapter or any [Commission](/usc/7/1a.md?p=8) rule, regulation, or [order](/usc/7/2902.md?p=10) shall be liable for actual damages sustained by a [person](/usc/7/1a.md?p=38) that engaged in any transaction specified in [subsection (a)](#a) of this section to the extent of such [person](/usc/7/1a.md?p=38)’s actual losses that resulted from such transaction and were caused by such failure to enforce or enforcement of such bylaw or rule.
  - (3) Any individual who, in the capacity as an officer, director, governor, [committee](/usc/7/2132.md?p=n) [member](/usc/7/1a.md?p=34), or employee of registered[^2] entity or a registered futures association willfully aids, abets, counsels, induces, or procures any failure by any such entity to enforce (or any violation of the chapter in enforcing) any bylaw, rule, regulation, or resolution referred to in paragraph (1) or (2) of this subsection, shall be liable for actual damages sustained by a [person](/usc/7/1a.md?p=38) who engaged in any transaction specified in [subsection (a)](#a) of this section on, or subject to the rules of, such [registered entity](/usc/7/1a.md?p=40) or, in the case of an officer, director, governor, [committee](/usc/7/2132.md?p=n) [member](/usc/7/1a.md?p=34), or employee of a registered futures association, any transaction specified in [subsection (a)](#a) of this section, in either case to the extent of such [person](/usc/7/1a.md?p=38)’s actual losses that resulted from such transaction and were caused by such failure or violation.
  - (4) A [person](/usc/7/1a.md?p=38) seeking to enforce liability under this section must establish that the [registered entity](/usc/7/1a.md?p=40)[^3] registered futures association, officer, director, governor, [committee](/usc/7/2132.md?p=n) [member](/usc/7/1a.md?p=34), or employee acted in bad faith in failing to take action or in taking such action as was taken, and that such failure or action caused the loss.
  - (5) The rights of action authorized by this subsection shall be the exclusive remedy under this chapter available to any [person](/usc/7/1a.md?p=38) who sustains a loss as a result of (A) the alleged failure by a [registered entity](/usc/7/1a.md?p=40) or registered futures association or by any officer, director, governor, [committee](/usc/7/2132.md?p=n) [member](/usc/7/1a.md?p=34), or employee to enforce any bylaw, rule, regulation, or resolution referred to in paragraph (1) or (2) of this subsection, or (B) the taking of action in enforcing any bylaw, rule, regulation, or resolution referred to in this subsection that is alleged to have violated this chapter, or any [Commission](/usc/7/1a.md?p=8) rule, regulation, or [order](/usc/7/2902.md?p=10).
- (c) **Jurisdiction; statute of limitations; venue; process—** The [United States](/usc/7/6402.md?p=8) district courts shall have exclusive jurisdiction of actions brought under this section. Any such action shall be brought not later than two years after the date the cause of action arises. Any action brought under [subsection (a)](#a) of this section may be brought in any judicial district wherein the defendant is found, resides, or transacts business, or in the judicial district wherein any act or transaction constituting the violation occurs. Process in such action may be served in any judicial district of which the defendant is an inhabitant or wherever the defendant may be found.
- (d) **Dates of application to actions—** The provisions of this section shall become effective with respect to causes of action accruing on or after the date of enactment of the Futures Trading Act of 1982 [January 11, 1983]: Provided, That the enactment of the Futures Trading Act of 1982 shall not affect any right of any parties which may exist with respect to causes of action accruing prior to such date.