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7 U.S.C. §§ 7–7a–1

3 sections in range

§7. Designation of boards of trade as contract markets

7 U.S.C. § 7

(a)
Applications— A board of trade applying to the Commission for designation as a contract market shall submit an application to the Commission that includes any relevant materials and records the Commission 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Repealed.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 that is designated as a contract market on December 21, 2000, shall be considered to be a designated contract 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 market, a board of trade shall comply with—
(i)
any core principle described in this subsection; and
(ii)
any requirement that the Commission may impose by rule or regulation pursuant to section 12a(5) of this title.
(B)
Reasonable discretion of contract market— Unless otherwise determined by the Commission by rule or regulation, a board of trade described in subparagraph (A) shall have reasonable discretion in establishing the manner in which the board of trade complies with the core principles described in this subsection.
(2)
Compliance with rules—
(A)
In general— The board of trade shall establish, monitor, and enforce compliance with the rules of the contract market, including—
(i)
access requirements;
(ii)
the terms and conditions of any contracts to be traded on the contract market; and
(iii)
rules prohibiting abusive trade practices on the contract market.
(B)
Capacity of contract market— The board of trade shall have the capacity to detect, investigate, and apply appropriate sanctions to any person that violates any rule of the contract market.
(C)
Requirement of rules— The rules of the contract market shall provide the board of trade with the ability and authority 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 may require.
(3)
Contracts not readily subject to manipulation— The board of trade shall list on the contract market only contracts that are not readily susceptible to manipulation.
(4)
Prevention of market disruption— The board of trade 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 shall adopt for each contract of the board of trade, as is necessary and appropriate, position limitations or position accountability for speculators.
(B)
Maximum allowable position limitation— For any contract that is subject to a position limitation established by the Commission pursuant to section 6a(a) of this title, the board of trade shall set the position limitation of the board of trade at a level not higher than the position limitation established by the Commission.
(6)
Emergency authority— The board of trade, in consultation or cooperation with the Commission, shall adopt rules to provide for the exercise of emergency authority, as is necessary and appropriate, including the authority—
(A)
to liquidate or transfer open positions in any contract;
(B)
to suspend or curtail trading in any contract; and
(C)
to require market participants in any contract to meet special margin requirements.
(7)
Availability of general information— The board of trade shall make available to market authorities, market participants, and the public accurate information concerning—
(A)
the terms and conditions of the contracts of the contract market; and
(B)
(i)
the rules, regulations, and mechanisms for executing transactions on or through the facilities of the contract market; and
(ii)
the rules and specifications describing the operation of the contract market’s—
(I)
electronic matching platform; or
(II)
trade execution facility.
(8)
Daily publication of trading information— The board of trade shall make public daily information on settlement prices, volume, open interest, and opening and closing ranges for actively traded contracts on the contract market.
(9)
Execution of transactions—
(A)
In general— The board of trade 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.
(B)
Rules— The rules of the board of trade may authorize, for bona fide business purposes—
(i)
transfer trades or office trades;
(ii)
an exchange of—
(I)
futures in connection with a cash commodity transaction;
(II)
futures for cash commodities; or
(III)
futures for swaps; or
(iii)
a futures commission merchant, acting as principal or agent, to enter into or confirm the execution of a contract for the purchase or sale of a commodity for future delivery if the contract is reported, recorded, or cleared in accordance with the rules of the contract market or a derivatives clearing organization.
(10)
Trade information— The board of trade 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 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 market.
(11)
Financial integrity of transactions— The board of trade 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 market (including the clearance and settlement of the transactions with a derivatives clearing organization); and
(B)
rules to ensure—
(i)
the financial integrity of any—
(I)
futures commission merchant; and
(II)
introducing broker; and
(ii)
the protection of customer funds.
(12)
Protection of markets and market participants— The board of trade 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 market.
(13)
Disciplinary procedures— The board of trade shall establish and enforce disciplinary procedures that authorize the board of trade to discipline, suspend, or expel members or market participants that violate the rules of the board of trade, or similar methods for performing the same functions, including delegation of the functions to third parties.
(14)
Dispute resolution— The board of trade 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 shall establish and enforce appropriate fitness standards for directors, members of any disciplinary committee, members of the contract market, and any other person with direct access to the facility (including any party affiliated with any person described in this paragraph).
(16)
Conflicts of interest— The board of trade shall establish and enforce rules—
(A)
to minimize conflicts of interest in the decision-making process of the contract market; and
(B)
to establish a process for resolving conflicts of interest described in subparagraph (A).
(17)
Composition of governing boards of contract markets— The governance arrangements of the board of trade shall be designed to permit consideration of the views of market participants.
(18)
Recordkeeping— The board of trade shall maintain records of all activities relating to the business of the contract market—
(A)
in a form and manner that is acceptable to the Commission; 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 shall not—
(A)
adopt any rule or taking1 any action that results in any unreasonable restraint of trade; or
(B)
impose any material anticompetitive burden on trading on the contract market.
(20)
System safeguards— The board of trade 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; and
(C)
periodically conduct tests to verify that backup resources are sufficient to ensure continued order 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 shall have adequate financial, operational, and managerial resources to discharge each responsibility of the board of trade.
(B)
Determination of adequacy— The financial resources of the board of trade shall be considered to be adequate if the value of the financial resources exceeds the total amount that would enable the contract market to cover the operating costs of the contract market for a 1-year period, as calculated on a rolling basis.
(22)
Diversity of board of directors— The board of trade, if a publicly traded company, shall endeavor to recruit individuals to serve on the board of directors and the other decision-making bodies (as determined by the Commission) of the board of trade 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 shall keep any such records relating to swaps defined in section 1a(47)(A)(v) of this title open to inspection and examination by the Securities and Exchange Commission.
(e)
Current agricultural commodities—
(1)
Subject to paragraph (2) of this subsection, a contract for purchase or sale for future delivery of an agricultural commodity enumerated in section 1a(9) of this title that is available for trade on a contract market, as of December 21, 2000, may be traded only on a contract market designated under this section.
(2)
In order to promote responsible economic or financial innovation and fair competition, the Commission, on application by any person, after notice and public comment and opportunity for hearing, may prescribe rules and regulations to provide for the offer and sale of contracts for future delivery or options on such contracts to be conducted on a derivatives transaction execution facility.

Footnotes

  1. 1 So in original. Probably should be “take”.
Notes, amendments, and revision history

(Sept. 21, 1922, ch. 369, § 5, as added Pub. L. 106–554, § 1(a)(5) [title I, § 110(2)], Dec. 21, 2000, 114 Stat. 2763, 2763A–384; amended Pub. L. 111–203, title VII, §§ 721(e)(4), 735, July 21, 2010, 124 Stat. 1671, 1718.)

Editorial Notes

Prior Provisions

A prior section 7, acts Sept. 21, 1922, ch. 369, § 5, 42 Stat. 1000; June 15, 1936, ch. 545, §§ 2, 6, 49 Stat. 1491, 1497; Pub. L. 90–258, §§ 10, 11, Feb. 19, 1968, 82 Stat. 29; Pub. L. 93–463, title I, § 103(a), (f), (g), title II, § 207, Oct. 23, 1974, 88 Stat. 1392, 1400; Pub. L. 102–546, title II, §§ 201(c), 209(b)(2), Oct. 28, 1992, 106 Stat. 3597, 3606, related to conditions and requirements for designation of boards of trade as contract markets, prior to repeal by Pub. L. 106–554, § 1(a)(5) [title I, § 110(2)], Dec. 21, 2000, 114 Stat. 2763, 2763A–384.

Amendments

2010—Subsec. (b). Pub. L. 111–203, § 735(a), struck out subsec. (b) which related to criteria for designation as a contract market.

Subsec. (d). Pub. L. 111–203, § 735(b), added subsec. (d) and struck out former subsec. (d) which related to core principles for contract markets.

Subsec. (e)(1). Pub. L. 111–203, § 721(e)(4), substituted “section 1a(9)” for “section 1a(4)”.

Statutory Notes and Related Subsidiaries

Effective Date of 2010 Amendment

Amendment by Pub. L. 111–203 effective on the later of 360 days after July 21, 2010, or, to the extent a provision of subtitle A (§§ 711–754) of title VII of Pub. L. 111–203 requires a rulemaking, not less than 60 days after publication of the final rule or regulation implementing such provision of subtitle A, see section 754 of Pub. L. 111–203, set out as a note under section 1a of this title.

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

7 U.S.C. § 7a

Notes, amendments, and revision history

Section, act Sept. 21, 1922, ch. 369, § 5a, as added Pub. L. 106–554, § 1(a)(5) [title I, § 111], Dec. 21, 2000, 114 Stat. 2763, 2763A–387; amended Pub. L. 110–234, title XIII, § 13203(h), May 22, 2008, 122 Stat. 1440; Pub. L. 110–246, § 4(a), title XIII, § 13203(h), June 18, 2008, 122 Stat. 1664, 2202; Pub. L. 111–203, title VII, § 721(e)(5), July 21, 2010, 124 Stat. 1671, related to derivatives transaction execution facilities.

A prior section 7a, act Sept. 21, 1922, ch. 369, § 5a, as added June 15, 1936, ch. 545, § 7, 49 Stat. 1497; amended Pub. L. 90–258, § 12, Feb. 19, 1968, 82 Stat. 29; Pub. L. 93–463, title I, § 103(a), (e), (f), title II, §§ 208–210, title IV, §§ 406, 407, Oct. 23, 1974, 88 Stat. 1392, 1400, 1401, 1413; Pub. L. 95–405, §§ 11, 12, Sept. 30, 1978, 92 Stat. 870, 871; Pub. L. 97–444, title II, §§ 216, 217(a), Jan. 11, 1983, 96 Stat. 2306, 2307; Pub. L. 99–641, title I, § 110(2), Nov. 10, 1986, 100 Stat. 3561; Pub. L. 102–546, title I, § 103, title II, §§ 201(a), 206(a)(1), 213(a), 217, 222(a), Oct. 28, 1992, 106 Stat. 3594, 3595, 3601, 3609, 3611, 3615, related to duties of contract markets prior to repeal by Pub. L. 106–554, § 1(a)(5) [title I, § 110(2)], Dec. 21, 2000, 114 Stat. 2763, 2763A–384.

Statutory Notes and Related Subsidiaries

Effective Date of Repeal

Repeal effective on the later of 360 days after July 21, 2010, or, to the extent a provision of subtitle A (§§ 711–754) of title VII of Pub. L. 111–203 requires a rulemaking, not less than 60 days after publication of the final rule or regulation implementing such provision of subtitle A, see section 754 of Pub. L. 111–203, set out as an Effective Date of 2010 Amendment note under section 1a of this title.

§7a–1. Derivatives clearing organizations

7 U.S.C. § 7a–1

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

Footnotes

  1. 1 So in original. No subsec. (j) has been enacted.
Notes, amendments, and revision history

(Sept. 21, 1922, ch. 369, § 5b, as added Pub. L. 106–554, § 1(a)(5) [title I, § 112(f)], Dec. 21, 2000, 114 Stat. 2763, 2763A–396; amended Pub. L. 111–203, title VII, §§ 721(e)(6), 725(a)–(c), (e), (h), July 21, 2010, 124 Stat. 1671, 1685–1687, 1693, 1695; Pub. L. 114–94, div. G, title LXXXVI, § 86001(a), Dec. 4, 2015, 129 Stat. 1797.)

Editorial Notes

References in Text

The Securities Exchange Act of 1934, referred to in subsecs. (a)(1)(A)(ii) and (g)(1), is act June 6, 1934, ch. 404, 48 Stat. 881, which is classified principally to chapter 2B (§ 78a et seq.) of Title 15, Commerce and Trade. For complete classification of this Act to the Code, see section 78a of Title 15 and Tables.

Prior Provisions

A prior section 5b of act Sept. 21, 1922, was renumbered section 5e, and is classified to section 7b of this title.

Amendments

2015—Subsec. (k)(5). Pub. L. 114–94 amended par. (5) generally. Prior to amendment, text read as follows: “Before the Commission may share information with any entity described in paragraph (4)—

“(A) the Commission 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 relating to the information on swap transactions that is provided; and

“(B) each entity shall agree to indemnify the Commission for any expenses arising from litigation relating to the information provided under section 12 of this title.”

2010—Subsec. (a). Pub. L. 111–203, § 725(a), added subsec. (a) and struck out former subsec. (a) which related to registration requirement of derivatives clearing organizations.

Pub. L. 111–203, § 721(e)(6), substituted “section 1a” for “section 1a(9)” in introductory provisions.

Subsec. (b). Pub. L. 111–203, § 725(a), added subsec. (b) and struck out former subsec. (b). Prior to amendment, text read as follows: “A derivatives clearing organization that clears agreements, contracts, or transactions excluded from this chapter by section 2(c), 2(d), 2(f), or 2(g) of this title or sections 27 to 27f of this title, or exempted under section 2(h) or 6(c) of this title, or other over-the-counter derivative instruments (as defined in the Federal Deposit Insurance Corporation Improvement Act of 1991) may register with the Commission as a derivatives clearing organization.”

Subsec. (c)(2). Pub. L. 111–203, § 725(c), added par. (2) and struck out former par. (2) which related to core principles for derivatives clearing organizations.

Subsec. (f)(1). Pub. L. 111–203, § 725(h), inserted at end “In order to minimize systemic risk, under no circumstances shall a derivatives clearing organization be compelled to accept the counterparty credit risk of another clearing organization.”

Subsecs. (g) to (i). Pub. L. 111–203, § 725(b), added subsecs. (g) to (i).

Subsec. (k). Pub. L. 111–203, § 725(e), added subsec. (k).

Statutory Notes and Related Subsidiaries

Effective Date of 2015 Amendment

Pub. L. 114–94, div. G, title LXXXVI, § 86001(d), Dec. 4, 2015, 129 Stat. 1798, provided that: “The amendments made by this section [amending this section, section 24a of this title, and section 78m of Title 15, Commerce and Trade] shall take effect as if enacted as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Public Law 111–203).”

Effective Date of 2010 Amendment

Amendment by Pub. L. 111–203 effective on the later of 360 days after July 21, 2010, or, to the extent a provision of subtitle A (§§ 711–754) of title VII of Pub. L. 111–203 requires a rulemaking, not less than 60 days after publication of the final rule or regulation implementing such provision of subtitle A, see section 754 of Pub. L. 111–203, set out as a note under section 1a of this title.

Conflicts of Interest

Pub. L. 111–203, title VII, § 725(d), July 21, 2010, 124 Stat. 1692, provided that: “The Commodity Futures Trading Commission shall adopt rules mitigating conflicts of interest in connection with the conduct of business by a swap dealer or a major swap participant with a derivatives clearing organization, board of trade, or a swap execution facility that clears or trades swaps in which the swap dealer or major swap participant has a material debt or material equity investment.”

[For definitions of terms used in section 725(d) of Pub. L. 111–203, set out above, see section 5301 of Title 12, Banks and Banking.]