---
kind: "range"
citation: "7 U.S.C. §§ 7–7a–1"
title: "7"
from: "7"
to: "7a–1"
count: 3
release: "119-102"
url: "https://uscodex.org/usc/7/7..7a-1"
---

# §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- (b) **Repealed.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).