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U.S. Code as of:
01/03/05
Section 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 shall have exclusive jurisdiction, except to
the extent otherwise provided in subparagraphs (C) and (D) of
this paragraph and subsections (c) through (i) of this section,
with respect to accounts, agreements (including any transaction
which 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"), and
transactions involving contracts of sale of a commodity for
future delivery, traded or executed on a contract market
designated or derivatives transaction execution facility
registered pursuant to section 7 or 7a of this title or any
other board of trade, exchange, or market, and transactions
subject to regulation by the Commission pursuant to section 23
of this title. Except as hereinabove provided, nothing
contained in this section shall (I) supersede or limit the
jurisdiction at any time conferred on the Securities and
Exchange Commission or other regulatory authorities under the
laws of the United States or of any State, or (II) restrict the
Securities and Exchange Commission and such other authorities
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 or any State.
(B) Liability of principal for act of agent
The act, omission, or failure of any official, agent, or
other person acting for any individual, association,
partnership, corporation, or trust within the scope of his
employment or office shall be deemed the act, omission, or
failure of such individual, association, partnership,
corporation, or trust, as well as of such official, agent, or
other person.
(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) This chapter shall not apply to and the Commission
shall have no jurisdiction to designate a board of trade as a
contract market for any transaction whereby any party to such
transaction acquires any put, call, or other option on one or
more securities (as defined in section 77b(1) (!1) of title
15 or section 3(a)(10) of the Securities Exchange Act of 1934
[15 U.S.C. 78c(a)(10)] on January 11, 1983), including any
group or index of such securities, or any interest therein or
based on the value thereof.
(ii) This chapter shall apply to and the Commission 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", "privilege", "indemnity", "bid", "offer", "put",
"call", "advance guaranty", or "decline guaranty") and
transactions involving, and may designate a board of trade as
a contract market in, or register a derivatives transaction
execution facility that trades or executes, contracts of sale
(or options on such contracts) for future delivery of a group
or index of securities (or any interest therein or based upon
the value thereof): Provided, however, That no board of trade
shall be designated as a contract market with respect to any
such contracts of sale (or options on such contracts) for
future delivery, and no derivatives transaction execution
facility shall trade or execute such contracts of sale (or
options on such contracts) for future delivery, unless the
board of trade or the derivatives transaction execution
facility, and the applicable contract, meet the following
minimum requirements:
(I) Settlement of or delivery on such contract (or option
on such contract) shall be effected in cash or by means
other than the transfer or receipt of any security, except
an exempted security under section 77c of title 15 or
section 3(a)(12) of the Securities Exchange Act of 1934 [15
U.S.C. 78c(a)(12)] as in effect on January 11, 1983, (other
than any municipal security, as defined in section 3(a)(29)
of the Securities Exchange Act of 1934 [15 U.S.C.
78c(a)(29)] on January 11, 1983);
(II) Trading in such contract (or option on such
contract) shall not be readily susceptible to manipulation
of the price of such contract (or option on such contract),
nor to causing or being used in the manipulation of the
price of any underlying security, option on such security
or option on a group or index including such securities;
and
(III) Such group or index of securities shall not
constitute a narrow-based security index.
(iii) If, in its discretion, the Commission determines that
a stock index futures contract, notwithstanding its
conformance with the requirements in clause (ii) of this
subparagraph, can reasonably be used as a surrogate for
trading a security (including a security futures product), it
may, by order, require such contract and any option thereon
be traded and regulated as security futures products as
defined in section 3(a)(56) of the Securities Exchange Act of
1934 [15 U.S.C. 78c(a)(56)] and section 1a of this title
subject to all rules and regulations applicable to security
futures products under this chapter and the securities laws
as defined in section 3(a)(47) of the Securities Exchange Act
of 1934 [15 U.S.C. 78c(a)(47)].
(iv) No person shall offer to enter into, enter into, or
confirm the execution of any contract of sale (or option on
such contract) for future delivery of any security, or
interest therein or based on the value thereof, except an
exempted security under or (!2) section 3(a)(12) of the
Securities Exchange Act of 1934 [15 U.S.C. 78c(a)(12)] as in
effect on January 11, 1983 (other than any municipal security
as defined in section 3(a)(29) of the Securities Exchange Act
of 1934 [15 U.S.C. 78c(a)(29)] on January 11, 1983), or
except as provided in clause (ii) of this subparagraph or
subparagraph (D), any group or index of such securities or
any interest therein or based on the value thereof.
(v)(I) Notwithstanding any other provision of this chapter,
any contract market in a stock index futures contract (or
option thereon) other than a security futures product, or any
derivatives transaction execution facility on which such
contract or option is traded, shall file with the Board 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 (or option thereon)
other than security futures products.
(II) The Board may at any time request any contract market
or derivatives transaction execution facility to set the
margin for any stock index futures contract (or option
thereon), other than for any security futures product, at
such levels as the Board in its judgment determines are
appropriate to preserve the financial integrity of the
contract market or derivatives transaction execution
facility, or its clearing system, or to prevent systemic
risk. If the contract market or derivatives transaction
execution facility fails to do so within the time specified
by the Board in its request, the Board may direct the
contract market or derivatives transaction execution facility
to alter or supplement the rules of the contract market or
derivatives transaction execution facility as specified in
the request.
(III) Subject to such conditions as the Board may
determine, the Board may delegate any or all of its
authority, relating to margin for any stock index futures
contract (or option thereon), other than security futures
products, under this clause to the Commission.
(IV) It shall be unlawful for any futures commission
merchant to, directly or indirectly, extend or maintain
credit to or for, or collect margin from any customer on any
security futures product unless such activities comply with
the regulations prescribed pursuant to section 7(c)(2)(B) of
the Securities Exchange Act of 1934 [15 U.S.C. 78g(c)(2)(B)].
(V) Nothing in this clause shall supersede or limit the
authority granted to the Commission in section 12a(9) of this
title to direct a contract market or registered derivatives
transaction execution facility, on finding an emergency to
exist, to raise temporary margin levels on any futures
contract, or option on the contract covered by this clause,
or on any security futures product.
(VI) Any action taken by the Board, or by the Commission
acting under the delegation of authority under subclause
III,(!3) under this clause directing a contract market to
alter or supplement a contract 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 Court of Appeals for the
District of Columbia Circuit. The review shall be based on
the examination of all information before the Board or the
Commission, as the case may be, at the time the determination
was made. The court reviewing the action of the Board or the
Commission shall not enter a stay or order 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 and Exchange Commission shall have jurisdiction and
authority over security futures as defined in section 3(a)(55)
of the Securities Exchange Act of 1934 [15 U.S.C. 78c(a)(55)],
section 77b(a)(16) of title 15, section 80a-2(a)(52) of title
15, and section 80b-2(a)(27) of title 15, options on security
futures, and persons effecting transactions in security futures
and options thereon, and this chapter shall apply to and the
Commission 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",
"privilege", "indemnity", "bid", "offer", "put", "call",
"advance guaranty", or "decline guaranty"), contracts, and
transactions involving, and may designate a board of trade as a
contract market in, or register a derivatives transaction
execution facility that trades or executes, a security futures
product as defined in section 1a of this title: Provided,
however, That, except as provided in clause (vi) of this
subparagraph, no board of trade shall be designated as a
contract market with respect to, or registered as a derivatives
transaction execution facility for, any such contracts of sale
for future delivery unless the board of trade and the
applicable contract meet the following criteria:
(I) Except as otherwise provided in a rule, regulation, or
order issued pursuant to clause (v) of this subparagraph, any
security underlying the security future, including each
component security of a narrow-based security index, is
registered pursuant to section 12 of the Securities Exchange
Act of 1934 [15 U.S.C. 78l].
(II) If the security futures product is not cash settled,
the board of trade on which the security futures product is
traded has arrangements in place with a clearing agency
registered pursuant to section 17A of the Securities Exchange
Act of 1934 [15 U.S.C. 78q-1] for the payment and delivery of
the securities underlying the security futures product.
(III) Except as otherwise provided in a rule, regulation,
or order issued pursuant to clause (v) of this subparagraph,
the security future is based upon common stock and such other
equity securities as the Commission and the Securities and
Exchange Commission jointly determine appropriate.
(IV) The security futures product 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, which permits the security futures
product to be purchased on a designated contract market,
registered derivatives transaction execution facility,
national securities exchange registered under section 6(a) of
the Securities Exchange Act of 1934 [15 U.S.C. 78f(a)], or
national securities association registered pursuant to
section 15A(a) of the Securities Exchange Act of 1934 [15
U.S.C. 78o-3(a)] and offset on another designated contract
market, registered derivatives transaction execution
facility, national securities exchange registered under
section 6(a) of the Securities Exchange Act of 1934, or
national securities association registered pursuant to
section 15A(a) of the Securities Exchange Act of 1934.
(V) Only futures commission merchants, introducing brokers,
commodity trading advisors, commodity pool operators or
associated persons subject to suitability rules comparable to
those of a national securities association registered
pursuant to section 15A(a) of the Securities Exchange Act of
1934 [15 U.S.C. 78o-3(a)] solicit, accept any order for, or
otherwise deal in any transaction in or in connection with
the security futures product.
(VI) The security futures product is subject to a
prohibition against dual trading in section 6j of this title
and the rules and regulations thereunder or the provisions of
section 11(a) of the Securities Exchange Act of 1934 [15
U.S.C. 78k(a)] and the rules and regulations thereunder,
except to the extent otherwise permitted under the Securities
Exchange Act of 1934 [15 U.S.C. 78a et seq.] and the rules
and regulations thereunder.
(VII) Trading in the security futures product is not
readily susceptible to manipulation of the price of such
security futures product, nor to causing or being used in the
manipulation of the price of any underlying security, option
on such security, or option on a group or index including
such securities;
(VIII) The board of trade on which the security futures
product is traded has procedures in place for coordinated
surveillance among such board of trade, any market on which
any security underlying the security futures product is
traded, and other markets on which any related security is
traded to detect manipulation and insider trading, except
that, if the board of trade is an alternative trading system,
a national securities association registered pursuant to
section 15A(a) of the Securities Exchange Act of 1934 [15
U.S.C. 78o-3(a)] or national securities exchange registered
pursuant to section 6(a) of the Securities Exchange Act of
1934 [15 U.S.C. 78f(a)] of which such alternative trading
system is a member has in place such procedures.
(IX) The board of trade on which the security futures
product is traded has in place audit trails necessary or
appropriate to facilitate the coordinated surveillance
required in subclause (VIII), except that, if the board of
trade is an alternative trading system, a national securities
association registered pursuant to section 15A(a) of the
Securities Exchange Act of 1934 [15 U.S.C. 78o-3(a)] or
national securities exchange registered pursuant to section
6(a) of the Securities Exchange Act of 1934 [15 U.S.C.
78f(a)] of which such alternative trading system is a member
has rules to require such audit trails.
(X) The board of trade on which the security futures
product is traded has in place procedures to coordinate
trading halts between such board of trade and markets on
which any security underlying the security futures product is
traded and other markets on which any related security is
traded, except that, if the board of trade is an alternative
trading system, a national securities association registered
pursuant to section 15A(a) of the Securities Exchange Act of
1934 [15 U.S.C. 78o-3(a)] or national securities exchange
registered pursuant to section 6(a) of the Securities
Exchange Act of 1934 [15 U.S.C. 78f(a)] of which such
alternative trading system is a member has rules to require
such coordinated trading halts.
(XI) The margin requirements for a security futures product
comply with the regulations prescribed pursuant to section
7(c)(2)(B) of the Securities Exchange Act of 1934 [15 U.S.C.
78g(c)(2)(B)], except that nothing in this subclause shall be
construed to prevent a board of trade from requiring higher
margin levels for a security futures product when it deems
such action to be necessary or appropriate.
(ii) It shall be unlawful for any person to offer, to enter
into, to execute, to confirm the execution of, or to conduct
any office or business anywhere in the United States, its
territories or possessions, for the purpose of soliciting, or
accepting any order for, or otherwise dealing in, any
transaction in, or in connection with, a security futures
product unless -
(I) the transaction is conducted on or subject to the rules
of a board of trade that -
(aa) has been designated by the Commission as a contract
market in such security futures product; or
(bb) is a registered derivatives transaction execution
facility for the security futures product that has provided
a certification with respect to the security futures
product pursuant to clause (vii);
(II) the contract is executed or consummated by, through,
or with a member of the contract market or registered
derivatives transaction execution facility; and
(III) the security futures product is evidenced by a record
in writing which shows the date, the parties to such security
futures product and their addresses, the property covered,
and its price, and each contract market member or registered
derivatives transaction execution facility member shall keep
the record for a period of 3 years from the date of the
transaction, or for a longer period if the Commission so
directs, which record shall at all times be open to the
inspection of any duly authorized representative of the
Commission.
(iii)(I) Except as provided in subclause (II) but
notwithstanding any other provision of this chapter, no person
shall offer to enter into, enter into, or confirm the execution
of any option on a security future.
(II) After 3 years after December 21, 2000, the Commission
and the Securities and Exchange Commission may by order jointly
determine to permit trading of options on any security future
authorized to be traded under the provisions of this chapter
and the Securities Exchange Act of 1934 [15 U.S.C. 78a et
seq.].
(iv)(I) All relevant records of a futures commission merchant
or introducing broker registered pursuant to section 6f(a)(2)
of this title, floor broker or floor trader exempt from
registration pursuant to section 6f(a)(3) of this title,
associated person exempt from registration pursuant to section
6k(6) (!4) of this title, or board of trade designated as a
contract market in a security futures product pursuant to
section 7b-1 of this title shall be subject to such reasonable
periodic or special examinations by representatives of the
Commission as the Commission 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, before conducting any such examination, shall
give notice to the Securities and Exchange Commission of the
proposed examination and consult with the Securities and
Exchange Commission concerning the feasibility and desirability
of coordinating the examination with examinations conducted by
the Securities and Exchange Commission in order to avoid
unnecessary regulatory duplication or undue regulatory burdens
for the registrant or board of trade.
(II) The Commission shall notify the Securities and Exchange
Commission of any examination conducted of any futures
commission merchant or introducing broker registered pursuant
to section 6f(a)(2) of this title, floor broker or floor trader
exempt from registration pursuant to section 6f(a)(3) of this
title, associated person exempt from registration pursuant to
section 6k(6) (!4) of this title, or board of trade designated
as a contract market in a security futures product pursuant to
section 7b-1 of this title, and, upon request, furnish to the
Securities and Exchange Commission any examination report and
data supplied to or prepared by the Commission in connection
with the examination.
(III) Before conducting an examination under subclause (I),
the Commission shall use the reports of examinations, unless
the information sought is unavailable in the reports, of any
futures commission merchant or introducing broker registered
pursuant to section 6f(a)(2) of this title, floor broker or
floor trader exempt from registration pursuant to section
6f(a)(3) of this title, associated person exempt from
registration pursuant to section 6k(6) (!4) of this title, or
board of trade designated as a contract market in a security
futures product pursuant to section 7b-1 of this title that is
made by the Securities and Exchange Commission, a national
securities association registered pursuant to section 15A(a) of
the Securities Exchange Act of 1934 (15 U.S.C. 78o-3(a)), or a
national securities exchange registered pursuant to section
6(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78f(a)).
(IV) Any records required under this subsection for a futures
commission merchant or introducing broker registered pursuant
to section 6f(a)(2) of this title, floor broker or floor trader
exempt from registration pursuant to section 6f(a)(3) of this
title, associated person exempt from registration pursuant to
section 6k(6) (!4) of this title, or board of trade designated
as a contract market in a security futures product pursuant to
section 7b-1 of this title, shall be limited to records with
respect to accounts, agreements, contracts, and transactions
involving security futures products.
(v)(I) The Commission and the Securities and Exchange
Commission, by rule, regulation, or order, may jointly modify
the criteria specified in subclause (I) or (III) of clause (i),
including the trading of security futures based on securities
other than equity securities, to the extent such modification
fosters the development of fair and orderly markets in security
futures products, is necessary or appropriate in the public
interest, and is consistent with the protection of investors.
(II) The Commission and the Securities and Exchange
Commission, by order, may jointly exempt any person from
compliance with the criterion specified in clause (i)(IV) to
the extent such exemption fosters the development of fair and
orderly markets in security futures products, is necessary or
appropriate in the public interest, and is consistent with the
protection of investors.
(vi)(I) Notwithstanding clauses (i) and (vii), until the
compliance date, a board of trade shall not be required to meet
the criterion specified in clause (i)(IV).
(II) The Commission and the Securities and Exchange
Commission shall jointly publish in the Federal Register a
notice of the compliance date no later than 165 days before the
compliance date.
(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 based on single
equity securities traded on all designated contract markets
and registered derivatives transaction execution facilities
equals or exceeds 10 percent of the average aggregate
comparable share volume of options on single equity
securities traded on all national securities exchanges
registered pursuant to section 6(a) of the Securities
Exchange Act of 1934 [15 U.S.C. 78f(a)] and any national
securities associations registered pursuant to section 15A(a)
of such Act [15 U.S.C. 78o-3(a)]; or
(bb) 2 years after the date on which trading in any
security futures product commences under this chapter.
(vii) It shall be unlawful for a board of trade to trade or
execute a security futures product unless the board of trade
has provided the Commission with a certification that the
specific security futures product and the board of trade, as
applicable, meet the criteria specified in subclauses (I)
through (XI) of clause (i), except as otherwise provided in
clause (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 and the
Securities and Exchange Commission shall jointly issue such
rules, regulations, or orders as are necessary and appropriate
to permit the offer and sale of a security futures product
traded on or subject to the rules of a foreign board of trade
to United States persons.
(ii) The rules, regulations, or orders adopted under clause
(i) shall take into account, as appropriate, the nature and
size of the markets that the securities underlying the security
futures product reflects.
(F) Security futures products traded on foreign boards of trade
(i) Nothing in this chapter is intended to prohibit a futures
commission merchant from carrying security futures products
traded on or subject to the rules of a foreign board of trade
in the accounts of persons located outside of the United
States.
(ii) Nothing in this chapter is intended to prohibit any
eligible contract participant located in the United States from
purchasing or carrying securities futures products traded on or
subject to the rules of a foreign board of trade, exchange, or
market to the same extent such person may be authorized to
purchase or carry other securities traded on a foreign board of
trade, exchange, or market so long as any underlying security
for such security futures products is traded principally on,
by, or through any exchange or market located outside the
United States.
(2) Establishment of Commodity Futures Trading Commission;
composition; terms of Commissioners
(A) There is hereby established, as an independent agency of
the United States Government, a Commodity Futures Trading
Commission. The Commission 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
for appointment, the President shall -
(i) select persons 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 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.
Not more than three of the members of the Commission shall be
members 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 of the Commission 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 is appointed as a Commissioner. The Chairman shall be the
chief administrative officer of the Commission and shall preside
at hearings before the Commission. 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 shall not impair the right of the
remaining Commissioners to exercise all the powers of the
Commission.
(4) General Counsel
The Commission shall have a General Counsel, who shall be
appointed by the Commission and serve at the pleasure of the
Commission. The General Counsel shall report directly to the
Commission and serve as its legal advisor. The Commission shall
appoint such other attorneys as may be necessary, in the opinion
of the Commission, to assist the General Counsel, represent the
Commission in all disciplinary proceedings pending before it,
represent the Commission in courts of law whenever appropriate,
assist the Department of Justice in handling litigation
concerning the Commission in courts of law, and perform such
other legal duties and functions as the Commission may direct.
(5) Executive Director
The Commission shall have an Executive Director, who shall be
appointed by the Commission and serve at the pleasure of the
Commission. The Executive Director shall report directly to the
Commission and perform such functions and duties as the
Commission 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, including functions
of the Commission with respect to the appointment and supervision
of personnel employed under the Commission, the distribution of
business among such personnel and among administrative units of
the Commission, and the use and expenditure of funds, according
to budget categories, plans, programs, and priorities established
and approved by the Commission, 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 and by such regulatory decisions, findings, and
determination as the Commission may by law be authorized to make.
(C) The appointment by the Chairman of the heads of major
administrative units under the Commission shall be subject to the
approval of the Commission.
(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 its functions
with respect to revising budget estimates and with respect to
determining the distribution of appropriated funds 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 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 under this chapter.
(B) Rates of pay
Rates of basic pay for all employees of the Commission may be
set and adjusted by the Commission without regard to chapter 51
or subchapter III of chapter 53 of title 5.
(C) Comparability
(i) In general
The Commission may provide additional compensation and
benefits to employees of the Commission if the same type of
compensation or benefits are provided by any agency referred
to in section 1833b(a) of title 12 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 shall consult
with, and seek to maintain comparability with, the agencies
referred to in section 1833b(a) of title 12.
(8) Conflict of interest
No Commissioner or employee of the Commission shall accept
employment or compensation from any person, exchange, or
clearinghouse subject to regulation by the Commission under this
chapter during his term of office, nor shall he participate,
directly or indirectly, in any registered entity operations or
transactions of a character subject to regulation by the
Commission.
(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 shall, in cooperation with the Secretary of
Agriculture, maintain a liaison between the Commission and the
Department of Agriculture. The Secretary shall take such steps as
may be necessary to enable the Commission to obtain information
and utilize such services and facilities of the Department of
Agriculture as may be necessary in order 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. The Commission shall furnish
such liaison officer appropriate office space within the offices
of the Commission and shall allow such liaison officer to attend
and observe all deliberations and proceedings of the Commission.
(B)(i) The Commission shall maintain communications with the
Department of the Treasury, the Board of Governors of the Federal
Reserve System, and the Securities and Exchange Commission for
the purpose of keeping such agencies fully informed of Commission
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 of sale
of a commodity for future delivery and in securities and
financial instruments under the jurisdiction of such agencies.
(ii) When a board of trade applies for designation or
registration as a contract market or derivatives transaction
execution facility involving transactions for future delivery of
any security issued or guaranteed by the United States or any
agency thereof, the Commission shall promptly deliver a copy of
such application to the Department of the Treasury and the Board
of Governors of the Federal Reserve System. The Commission may
not designate or register a board of trade as a contract market
or derivatives transaction execution facility based on such
application until forty-five days after the date the Commission
delivers the application to such agencies or until the Commission
receives comments from each of such agencies on the application,
whichever period is shorter. Any comments received by the
Commission from such agencies shall be included as part of the
public record of the Commission's designation proceeding. In
designating, registering, or refusing, suspending, or revoking
the designation or registration of, a board of trade as a
contract market or derivatives transaction execution facility
involving transactions for future delivery 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) with respect to such transactions, the
Commission shall take into consideration all comments it receives
from the Department of the Treasury and the Board 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
Government and the continued efficiency and integrity of the
underlying market for government securities.
(iii) The provisions of this subparagraph shall not create any
rights, liabilities, or obligations upon which actions may be
brought against the Commission.
(10) Transmittal of budget requests and legislative
recommendations to congressional committees
(A) Whenever the Commission 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 and the House
Committee on Agriculture and the Senate Committee on Agriculture,
Nutrition, and Forestry.
(B) Whenever the Commission 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 on
Agriculture and the Senate Committee on Agriculture, Nutrition,
and Forestry. No officer or agency of the United States shall
have any authority to require the Commission to submit its
legislative recommendations, or testimony, or comments on
legislation to any officer or agency of the United States for
approval, comments, or review, prior to the submission of such
recommendations, testimony, or comments to the Congress. In
instances in which the Commission voluntarily seeks to obtain the
comments or review of any officer or agency of the United States,
the Commission 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 issues for official publication any
opinion, release, rule, order, interpretation, or other
determination on a matter, the Commission shall provide that any
dissenting, concurring, or separate opinion by any Commissioner
on the matter be published in full along with the Commission
opinion, release, rule, order, interpretation, or determination.
(11) Seal
The Commission shall have an official seal, which shall be
judicially noticed.
(12) Rules and regulations
The Commission 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.
(b) Transaction in interstate commerce
For the purposes of this chapter (but not in any wise limiting
the foregoing definition of interstate commerce) a transaction in
respect to any article shall be considered to be in interstate
commerce if such article is part of that current of commerce usual
in the commodity trade whereby commodities and commodity products
and by-products thereof are sent from one State, 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, or for manufacture within the State and
the shipment outside the State 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" includes Territory, the District of
Columbia, possession of the United States, 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), nothing in this chapter
(other than section 7a (to the extent provided in section 7a(g)
of this title), 7a-1, 7a-3, or 16(e)(2)(B) of this title) governs
or applies to an agreement, contract, or transaction in -
(A) foreign currency;
(B) government securities;
(C) security warrants;
(D) security rights;
(E) resales of installment loan contracts;
(F) repurchase transactions in an excluded commodity; 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 shall have
jurisdiction over, an agreement, contract, or transaction
described in paragraph (1) that is -
(i) a contract of sale of a commodity for future delivery
(or an option on such a contract), or an option on a
commodity (other than foreign currency or a security or a
group or index of securities), that is executed or traded on
an organized exchange; or
(ii) an option on foreign currency executed or traded on an
organized exchange that is not a national securities exchange
registered pursuant to section 6(a) of the Securities
Exchange Act of 1934 [15 U.S.C. 78f(a)].
(B) Agreements, contracts, and transactions in retail foreign
currency
This chapter applies to, and the Commission shall have
jurisdiction over, an agreement, contract, or transaction in
foreign currency that -
(i) is a contract of sale of a commodity for future
delivery (or an option on such a contract) or an option
(other than an option executed or traded on a national
securities exchange registered pursuant to section 6(a) of
the Securities Exchange Act of 1934 [15 U.S.C. 78f(a)]); and
(ii) is offered to, or entered into with, a person that is
not an eligible contract participant, unless the
counterparty, or the person offering to be the counterparty,
of the person is -
(I) a financial institution;
(II) a broker or dealer registered under section 15(b) or
15C of the Securities Exchange Act of 1934 (15 U.S.C.
78o(b), 78o-5) or a futures commission merchant registered
under this chapter;
(III) an associated person of a broker or dealer
registered under section 15(b) or 15C of the Securities
Exchange Act of 1934 (15 U.S.C. 78o(b), 78o-5), or an
affiliated person of a futures commission merchant
registered under this chapter, concerning the financial or
securities activities of which the registered person makes
and keeps records under section 15C(b) or 17(h) of the
Securities Exchange Act of 1934 (15 U.S.C. 78o-5(b),
78q(h)) or section 6f(c)(2)(B) of this title;
(IV) an insurance company described in section
1a(12)(A)(ii) of this title, or a regulated subsidiary or
affiliate of such an insurance company;
(V) a financial holding company (as defined in section
1841 of title 12); or
(VI) an investment bank holding company (as defined in
section 17(i) of the Securities Exchange Act of 1934 [15
U.S.C. 78q(i)]).
(C) Notwithstanding subclauses (II) and (III) of subparagraph
(B)(ii), agreements, contracts, or transactions described in
subparagraph (B) shall be subject to sections 6b, 6c(b), 9, 15,
and 13b (to the extent that sections 9, 15, and 13b of this
title prohibit manipulation of the market price of any
commodity, in interstate commerce, or for future delivery on or
subject to the rules of any market), 13a-1, 13a-2, and 12(a) of
this title if they are entered into by a futures commission
merchant or an affiliate of a futures commission merchant that
is not also an entity described in subparagraph (B)(ii) of this
paragraph.
(d) Excluded derivative transactions
(1) In general
Nothing in this chapter (other than section 7a-1 or 16(e)(2)(B)
of this title (!5) governs or applies to an agreement, contract,
or transaction in an excluded commodity if -
(A) the agreement, contract, or transaction is entered into
only between persons that are eligible contract participants at
the time at which the persons enter into the agreement,
contract, or transaction; and
(B) the agreement, contract, or transaction is not executed
or traded on a trading facility.
(2) Electronic trading facility exclusion
Nothing in this chapter (other than section 7a (to the extent
provided in section 7a(g) of this title), 7a-1, 7a-3, or
16(e)(2)(B) of this title) governs or applies to an agreement,
contract, or transaction in an excluded commodity if -
(A) the agreement, contract, or transaction is entered into
on a principal-to-principal basis between parties trading for
their own accounts or as described in section 1a(12)(B)(ii) of
this title;
(B) the agreement, contract, or transaction is entered into
only between persons that are eligible contract participants
described in subparagraph (A), (B)(ii), or (C) of section
1a(12) of this title) (!6) at the time at which the persons
enter into the agreement, contract, or transaction; and
(C) the agreement, contract, or transaction is executed or
traded on an electronic trading facility.
(e) Excluded electronic trading facilities
(1) In general
Nothing in this chapter (other than section 16(e)(2)(B) of this
title) governs or is applicable to an electronic trading facility
that limits transactions authorized to be conducted on its
facilities to those satisfying the requirements of subsection
(d)(2), (g), or (h)(3) of this section.
(2) Effect on authority to establish and operate
Nothing in this chapter shall prohibit a board of trade
designated by the Commission as a contract market or derivatives
transaction execution facility, or operating as an exempt board
of trade from establishing and operating an electronic trading
facility excluded under this chapter pursuant to paragraph (1).
(3) Effect on transactions
No failure by an electronic trading facility to limit
transactions as required by paragraph (1) of this subsection or
to comply with subsection (h)(5) of this section shall in itself
affect the legality, validity, or enforceability of an agreement,
contract, or transaction entered into or traded on the electronic
trading facility or cause a participant on the system to be in
violation of this chapter.
(4) Special rule
A person or group of persons that would not otherwise
constitute a trading facility shall not be considered to be a
trading facility solely as a result of the submission to a
derivatives clearing organization of transactions executed on or
through the person or group of persons.
(f) Exclusion for qualifying hybrid instruments
(1) In general
Nothing in this chapter (other than section 16(e)(2)(B) of this
title) governs or is applicable to a hybrid instrument that is
predominantly a security.
(2) Predominance
A hybrid instrument shall be considered to be predominantly a
security if -
(A) the issuer of the hybrid instrument receives payment in
full of the purchase price of the hybrid instrument,
substantially contemporaneously with delivery of the hybrid
instrument;
(B) the purchaser or holder of the hybrid instrument is not
required to make any payment to the issuer in addition to the
purchase price paid under subparagraph (A), whether as margin,
settlement payment, or otherwise, during the life of the hybrid
instrument or at maturity;
(C) the issuer of the hybrid instrument is not subject by the
terms of the instrument to mark-to-market margining
requirements; and
(D) the hybrid instrument is not marketed as a contract of
sale of a commodity for future delivery (or option on such a
contract) subject to this chapter.
(3) Mark-to-market margining requirements
For the purposes of paragraph (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) Excluded swap transactions
No provision of this chapter (other than section 7a (to the
extent provided in section 7a(g) of this title), 7a-1, 7a-3, or
16(e)(2) of this title) shall apply to or govern any agreement,
contract, or transaction in a commodity other than an agricultural
commodity if the agreement, contract, or transaction is -
(1) entered into only between persons that are eligible
contract participants at the time they enter into the agreement,
contract, or transaction;
(2) subject to individual negotiation by the parties; and
(3) not executed or traded on a trading facility.
(h) Legal certainty for certain transactions in exempt commodities
(1) Except as provided in paragraph (2), nothing in this chapter
shall apply to a contract, agreement, or transaction in an exempt
commodity which -
(A) is entered into solely between persons that are eligible
contract participants at the time the persons enter into the
agreement, contract, or transaction; and
(B) is not entered into on a trading facility.
(2) An agreement, contract, or transaction described in paragraph
(1) of this subsection shall be subject to -
(A) sections 7a-1 and 16(e)(2)(B) of this title;
(B) sections 6b, 6o, 9, 15, 13b, 13a-1, 13a-2, and 12a of this
title, and the regulations of the Commission pursuant to section
6c(b) of this title proscribing fraud in connection with
commodity option transactions, to the extent the agreement,
contract, or transaction is not between eligible commercial
entities (unless one of the entities is an instrumentality,
department, or agency of a State or local governmental entity)
and would otherwise be subject to such sections and regulations;
and
(C) sections 9, 15, 13b, 13a-1, 13a-2, 12a, and 13(a)(2) of
this title, to the extent such sections prohibit manipulation of
the market price of any commodity in interstate commerce and the
agreement, contract, or transaction would otherwise be subject to
such sections.
(3) Except as provided in paragraph (4), nothing in this chapter
shall apply to an agreement, contract, or transaction in an exempt
commodity which is -
(A) entered into on a principal-to-principal basis solely
between persons that are eligible commercial entities at the time
the persons enter into the agreement, contract, or transaction;
and
(B) executed or traded on an electronic trading facility.
(4) An agreement, contract, or transaction described in paragraph
(3) of this subsection shall be subject to -
(A) sections 7a (to the extent provided in section 7a(g) of
this title), 7a-1, 7a-3, and 16(e)(2)(B) of this title;
(B) sections 6b and 6o of this title and the regulations of the
Commission pursuant to section 6c(b) of this title proscribing
fraud in connection with commodity option transactions to the
extent the agreement, contract, or transaction would otherwise be
subject to such sections and regulations;
(C) sections 9, 15, and 13(a)(2) of this title, to the extent
such sections prohibit manipulation of the market price of any
commodity in interstate commerce and to the extent the agreement,
contract, or transaction would otherwise be subject to such
sections; and
(D) such rules and regulations as the Commission may prescribe
if necessary to ensure timely dissemination by the electronic
trading facility of price, trading volume, and other trading data
to the extent appropriate, if the Commission determines that the
electronic trading facility performs a significant price
discovery function for transactions in the cash market for the
commodity underlying any agreement, contract, or transaction
executed or traded on the electronic trading facility.
(5) An electronic trading facility relying on the exemption
provided in paragraph (3) shall -
(A) notify the Commission of its intention to operate an
electronic trading facility in reliance on the exemption set
forth in paragraph (3), which notice shall include -
(i) the name and address of the facility and a person
designated to receive communications from the Commission;
(ii) the commodity categories that the facility intends to
list or otherwise make available for trading on the facility in
reliance on the exemption set forth in paragraph (3);
(iii) certifications that -
(I) no executive officer or member of the governing board
of, or any holder of a 10 percent or greater equity interest
in, the facility is a person described in any of
subparagraphs (A) through (H) of section 12a(2) of this
title;
(II) the facility will comply with the conditions for
exemption under this paragraph; and
(III) the facility will notify the Commission of any
material change in the information previously provided by the
facility to the Commission pursuant to this paragraph; and
(iv) the identity of any derivatives clearing organization to
which the facility transmits or intends to transmit transaction
data for the purpose of facilitating the clearance and
settlement of transactions conducted on the facility in
reliance on the exemption set forth in paragraph (3);
(B)(i)(I) provide the Commission with access to the facility's
trading protocols and electronic access to the facility with
respect to transactions conducted in reliance on the exemption
set forth in paragraph (3); or
(II) provide such reports to the Commission regarding
transactions executed on the facility in reliance on the
exemption set forth in paragraph (3) as the Commission may from
time to time request to enable the Commission to satisfy its
obligations under this chapter;
(ii) maintain for 5 years, and make available for inspection by
the Commission upon request, records of activities related to its
business as an electronic trading facility exempt under paragraph
(3), including -
(I) information relating to data entry and transaction
details sufficient to enable the Commission to reconstruct
trading activity on the facility conducted in reliance on the
exemption set forth in paragraph (3); and
(II) the name and address of each participant on the facility
authorized to enter into transactions in reliance on the
exemption set forth in paragraph (3); and
(iii) upon special call by the Commission, provide to the
Commission, in a form and manner and within the period specified
in the special call, such information related to its business as
an electronic trading facility exempt under paragraph (3),
including information relating to data entry and transaction
details in respect of transactions entered into in reliance on
the exemption set forth in paragraph (3), as the Commission may
determine appropriate -
(I) to enforce the provisions specified in subparagraphs (B)
and (C) of paragraph (4);
(II) to evaluate a systemic market event; or
(III) to obtain information requested by a Federal financial
regulatory authority in order to enable the regulator to
fulfill its regulatory or supervisory responsibilities;
(C)(i) upon receipt of any subpoena issued by or on behalf of
the Commission to any foreign person who the Commission believes
is conducting or has conducted transactions in reliance on the
exemption set forth in paragraph (3) on or through the electronic
trading facility relating to the transactions, promptly notify
the foreign person of, and transmit to the foreign person, the
subpoena in a manner reasonable under the circumstances, or as
specified by the Commission; and
(ii) if the Commission has reason to believe that a person has
not timely complied with a subpoena issued by or on behalf of the
Commission pursuant to clause (i), and the Commission in writing
has directed that a facility relying on the exemption set forth
in paragraph (3) deny or limit further transactions by the
person, the facility shall deny that person further trading
access to the facility or, as applicable, limit that person's
access to the facility for liquidation trading only;
(D) comply with the requirements of this paragraph applicable
to the facility and require that each participant, as a condition
of trading on the facility in reliance on the exemption set forth
in paragraph (3), agree to comply with all applicable law;
(E) have a reasonable basis for believing that participants
authorized to conduct transactions on the facility in reliance on
the exemption set forth in paragraph (3) are eligible commercial
entities; and
(F) not represent to any person that the facility is registered
with, or designated, recognized, licensed, or approved by the
Commission.
(6) A person named in a subpoena referred to in paragraph (5)(C)
that believes the person is or may be adversely affected or
aggrieved by action taken by the Commission under this section,
shall have the opportunity for a prompt hearing after the
Commission acts under procedures that the Commission shall
establish by rule, regulation, or order.
(i) 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, or transaction that is excluded
from this chapter under subsection (c), (d), (e), (f), or (g) of
this section or title IV of the Commodity Futures Modernization
Act of 2000 [7 U.S.C. 27 to 27f], or exempted under subsection
(h) of this section or section 6(c) of this title; or
(B) any agreement, contract, 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 Futures
Modernization Act of 2000 shall be construed as conferring
jurisdiction on the Commission with respect to any such agreement,
contract, or transaction, except as expressly provided in section
7a of this title (to the extent provided in section 7a(g) of this
title), 7a-1 of this title, or 7a-3 of this title.
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