1 AMENDMENT TO DEFINITION OF "SWAP DEALER" IN TITLE VII

2 [Note: All references in this document are to the Administration's Bill.]

3 On page 8, strike lines 3 through 9 and insert the following:

4 "(39) SWAPDEALER.-The term 'swap dealer' means any person who-

5 "(A) holds itself out as a dealer in swaps;

6 "(B) makes a market in swaps;

7 "(C) regularly engages in the purchase of swaps and their resale to customers in

8 the ordinary course of a business; or

9 "(D) engages in any activity causing it to be commonly known in the trade as a

10 dealer or market maker in swaps.".

11 Strike page 9, line 21 through page 10, line 5 and insert the following:

12 "(44) SECURITY-BASED SWAPDEALER.-The term 'security-based swap dealer' means

13 any person who-

14 "(A) holds itself out as a dealer in security-based swaps;

15 "(B) makes a market in security-based swaps;

16 "(C) regularly engages in the purchase of security-based swaps and their resale to

17 customers in the ordinary course of a business; or

18 "(D) engages in any activity causing it to be commonly known in the trade as a

19 dealer or market maker in security-based swaps.".

20

21

CFTC-CREW-0723
 1 AMENDMENT TO DEFINITION OF

2 "MAJOR SWAP PARTICIPANT" IN TITLE VII

3 On page 8, strike lines 11 through 22 and insert the following:

4 "(40) MAJOR SWAP PARTICIPANT.-The term 'major swap participant' means any

5 person that-

6 "(A) is not a swap dealer and that-

7 "(i) in the most recent 12-month period:

8 "(I) purchased or sold ten or more swaps; or

9 "(II) engaged in transactions in swaps with more than five

10 counterparties; or

11 "(ii) as of the end of the most recent calendar month, maintained

12 more than twenty open positions in swaps;

13 "Provided, however, that a person is not a major swap participant solely

14 by virtue of this subparagraph until one month has elapsed from the time that the

15 person first satisfies any of the conditions in this subparagraph; and

16 "Provided further, that the Commission by rule or regulation may modify

17 any quantitative amount contained in this subparagraph; or

18 "(B) any other person or class of persons so designated by the Commission by

19 rule, regulation, or order in furtherance of the purposes of the Over-the-Counter

20 Derivatives Markets Act of2009.".

21 (11) by adding after paragraph (40) the following:

CFTC-CREW-0724
 1 "(41) MAJOR SECURITY-BASED SWAPPARTICIPANT.-The term 'major security-based

2 swap participant' means any person that-

3 "(A) is not a security-based swap dealer and that-

4 "(i) in the most recent 12-month period:

5 "(I) purchased or sold ten or more security-based swaps; or

6 "(II) engaged in transactions in security-based swaps with

7 more than five counterparties; or

8 "(ii) as of the end of the most recent calendar month, maintained

9 more than twenty open positions in security-based swaps;

10 "Provided, however, that a person is not a major security-based swap

11 participant solely by virtue of this subparagraph until one month has elapsed from

12 the time that the person first satisfies any of the conditions in this subparagraph;

13 and

14 "Provided further, that the Securities and Exchange Commission by rule

15 or regulation may modify any quantitative amount contained in this subparagraph;

16 or

17 "(B) any other person or class of persons so designated by the Securities and

18 Exchange Commission by rule, regulation, or order in furtherance of the purposes of

19 the Over-the-Counter Derivatives Markets Act of 2009.".

20

21

CFTC-CREW-0725
 1 AMENDMENT TO MIXED SWAP PROVISIONS IN TITLE VII

2 BASED ON "PRIMARY" NATURE OF PRODUCT

3 [Explanation: Thefollowing amendments wouldprovide that "security-based swaps" are those

4 swaps that are "primarily" based on a single security (or loan) or narrow-based security index.

5 Thus, if a product is "primarily" based on a broad-based security index or other underlying

6 within CFTCjurisdiction (e.g., commodity, interest rate, etc.), the product would be a "swap"

7 and not a "security-based swap." These amendments also would delete the provisions of Title

8 VII providingfor joint CFTC-SEC regulation ofmixed swaps.]

10 On page 5, line 4, strike ", other than a security-based swap as described in subparagraph 38(C)".

11

12 On page 6, lines 16, 18, and 20: Strike "is based" and insert "is primarily based" in each place.

13

14 On page 7, strike lines 6 through 14, and in line 15 strike "(D)" and insert "(C)".

15

16 On page 14, line 17 strike ", including with respect to a security-based swap as described in

17 subparagraph 38(C) of section 1a of the Commodity Exchange Act".

18

CFTC-CREW-0726
 1 AMENDMENT TO TITLE VII TO REQUIRE

2 EXPEDITED JUDICIAL REVIEW OF JURISDICTIONAL ISSUES

3 Strike page 12, line 3 through page 13, line 21 and insert the following:

4 "(b) EXPEDITED JUDICIAL REVIEW OF REGULATORY AUTHORITY.-

5 "(1) CONSULTATION.-Prior to commencing a rulemaking regarding the

6 regulation of swaps or security-based swaps under the provisions of this Act,' the

7 Commodity Futures Trading Commission and the Securities and Exchange Commission

8 shall consult with the other Commission. In developing and promulgating rules under

9 this subsection, each Commission shall consider the views of the other Commission.

10 "(2) LIMITATION.-

11 "(A) CFTC.-Nothing in this Act shall be construed to confer jurisdiction

12 to the Commodity Futures Trading Commission to issue rules, regulations, or

13 orders providing for oversight or regulation of security-based swaps.

14 "(B) SEC.-Nothing in this Act shall be construed to confer jurisdiction to

15 the Securities and Exchange Commission to issue rules, regulations, or orders

16 providing for oversight or regulation of swaps.

17 "(3) OBJECTION TO COMMISSION REGULATION.-

18 "(A) FILING OF PETITION FOR REVIEw.-If either Commission believes

19 that a final rule, regulation, or order of the other Commission conflicts with

20 provisions of paragraph (2), the complaining Commission may obtain review

21 thereof in the United States Court of Appeals for the District of Columbia Circuit

22 by filing in such court, not later than 60 days after the date of publication of the

1 As used in this proposed amendment reo judicial review, references to the "Act" are references to the proposed
"Over-the-Counter Derivatives Markets Act of 2009."

CFTC-CREW-0727
 1 final rule, regulation, or order a written petition requesting that the rule,

2 regulation, or order be set aside. Any such proceeding shall be expedited by the

3 Court of Appeals.

4 "(B) TRANSMITTAL OF PETITION AND REcORD.-A copy of a petition

5 described in subparagraph (A) shall be transmitted not later than 1 business day

6 after filing by the complaining Commission to the Secretary of the responding

7 Commission. Upon receipt of the petition, the responding Commission shall file

8 with the court the rule, regulation, or order under review and any documents

9 referred to therein, and any other materials prescribed by the court.

10 "(C) STANDARD OF REVIEw.-The court shall determine to affirm or set

11 aside a rule, regulation, or order of the responding Commission under this

12 subsection, based on the determination of the court as to whether the rule,

13 regulation, or order provides for oversight or regulation of swaps or security-

14 based swaps, as applicable, in conflict with paragraph (2), giving deference to the

15 views of neither Commission.

16 "(D) JUDICIAL STAY.-The filing of a petition by the complaining

17 Commission pursuant to subparagraph (A) shall operate as a stay of the rule,

18 regulation, or order, until the date on which the determination of the court is final

19 (including any appeal of such determination).".

20 On page 13, line 22, strike "(d)" and insert "(c)".

21

CFTC-CREW-0728
 1 AMENDMENT TO TITLE VII TO COMBINE REGISTRATION CRITERIA AND

2 CORE PRINCIPLES FOR ASEFs INTO A SINGLE SET OF CORE PRINCIPLES

3 (CONSISTENT WITH CONTRACT MARKETS)

4 Strike page 47, line 7 through page 52, line 4, and insert the following:

5 "(d) CORE PRINCIPLES FOR ALTERNATIVE SWAP EXECUTION FACILITIES.-

6 "(1) IN GENERAL.-To be registered as, and to maintain its registration as, an

7 alternative swap execution facility, the facility shall comply with the core principles

8 specified in this subsection and any requirement that the Commission may impose by rule

9 or regulation pursuant to section 8a(5). Except where the Commission determines

10 otherwise by rule or regulation, the facility shall have reasonable discretion in

11 establishing the manner in which it complies with these core principles.

12 "(2) COMPLIANCE WITH RULES.-The swap execution facility shall-

13 (A) monitor and enforce compliance with any of the rules of the facility,

14 including the terms and conditions of the swaps traded on or through the facility and any

15 limitations on access to the facility; and

16 (B) establish and enforce trading and participation rules that will deter

17 abuses and have the capacity to detect, investigate, and enforce those rules, including

18 means to-

19 "(i) provide market participants with impartial access to the

20 market; and

21 "(ii) capture information that may be used in establishing whether

22 rule violations have occurred.

23 "(3) SWAPS NOT READILY SUSCEPTIBLE TOMANIPULATION.-The swap execution

CFTC-CREW-0729
 1 facility shall permit trading only in swaps that are not readily susceptible to manipulation.

2 "(4) MONITORING OF TRADING.-The swap execution facility shall-

3 (A) establish and enforce rules or terms and conditions defining, or

4 specifications detailing, trading procedures to be used in entering and executing orders

5 traded on or through its facilities; and

6 (B) monitor trading in swaps to prevent manipulation, price distortion, and

7 disruptions of the delivery or cash settlement process through surveillance, compliance,

8 and disciplinary practices and procedures, including methods for conducting real-time

9 monitoring of trading and comprehensive and accurate trade reconstructions.

10 "(5) ABILITY TO OBTAIN INFORMATION.-The swap execution facility shall-

11 "(A) establish and enforce rules that will allow the facility to obtain any

12 necessary information to perform any of the functions described in this section;

13 "(B) provide the information to the Commission upon request; and

14 "(C) have the capacity to carry out such international information-sharing

15 agreements as the Commission may require.

16 "(6) POSITION LIMITS ORACCOUNTABILITY.-

17 "(A) To reduce the potential threat of market manipulation or congestion,

18 especially during trading in the delivery month, and to eliminate or prevent

19 excessive speculation as described in section 4a(a), the swap execution facility

20 shall adopt for each of its contracts, where necessary and appropriate, position

21 limitations or position accountability for speculators.

22 "(B) For any contract that is subject to a position limitation established by

23 the Commission pursuant to section 4a(a), the swap execution facility shall set its

CFTC-CREW-0730
 1 position limitation at a level no higher than the Commission limitation.

2 "(7) FINANCIAL INTEGRITY OF TRANSACTIONS.-The swap execution facility shall

3 establish and enforce rules and procedures for ensuring the financial integrity of swaps

4 entered on or through its facilities, including the clearance and settlement of the swaps

5 pursuant to section 20)(1).

6 "(8) EMERGENCY AUTHORITY.-The swap execution facility shall adopt rules to

7 provide for the exercise of emergency authority, in consultation or cooperation with the

8 Commission, where necessary and appropriate, including the authority to liquidate or

9 transfer open positions in any swap or to suspend or curtail trading in a swap.

10 "(9) TIMELY PUBLICATION OF TRADING INFORMATION.-The swap execution

11 facility shall make public timely information on price, trading volume, and other trading

12 data on swaps to the extent prescribed by the Commission.

13 "(10) RECORDKEEPING AND REPORTING.-The swap execution facility shall

14 maintain records of all activities related to the business of the facility, including a

15 complete audit trail, in a form and manner acceptable to the Commission for a period of 5

16 years, and report to the Commission all information determined by the Commission to be

17 necessary or appropriate for the Commission to perform its responsibilities under this Act

18 in a form and manner acceptable to the Commission. The Commission shall adopt data

19 collection and reporting requirements for alternative swap execution facilities that are

20 comparable to corresponding requirements for derivatives clearing organizations and

21 swap repositories.

22 "(11) ANTITRUST CONSIDERATIONS.-Unless necessary or appropriate to achieve

23 the purposes of this Act, the swap execution facility shall avoid-

CFTC-CREW-0731
 1 "(A) adopting any rules or taking any actions that result in any

2 unreasonable restraint of trade; or

3 "(B) imposing any material anticompetitive burden on trading on the swap

4 execution facility.

5 "(12) CONFLICTS OF INTEREST.-The swap execution facility shall-

6 "(A) establish and enforce rules to minimize conflicts of interest in its

7 decision-making process; and

8 "(B) establish a process for resolving the conflicts of interest.

9 "(12) CONFLICTS OF INTEREST.-The swap execution facility shall-

10 "(A) establish and enforce rules to minimize conflicts of interest in its

11 decision-making process; and

12 "(B) establish a process for resolving the conflicts of interest.

13 "(13) FINANCIAL RESOURCES.-

14 "(A) The swap execution facility shall have adequate financial,

15 operational, and managerial resources to discharge its responsibilities.

16 "(B) The swap execution facility's financial resources shall be considered

17 adequate if their value exceeds the total amount that would enable the facility to

18 cover its operating costs for a period of one year, calculated on a rolling basis.

19 "(14) SYSTEM SAFEGUARDs.-The swap execution facility shall-

20 "(A) establish and maintain a program of risk analysis and oversight to

21 identify and minimize sources of operational risk, through the development of

22 appropriate controls and procedures, and the development of automated systems,

23 that are reliable, secure, and have adequate scalable capacity;

10

CFTC-CREW-0732
 1 "(B) establish and maintain emergency procedures, backup facilities, and a

2 plan for disaster recovery that allow for the timely recovery and resumption of

3 operations and the fulfillment of the swap execution facility's responsibilities and

4 obligation; and

5 "(C) periodically conduct tests to verify that backup resources are

6 sufficient to ensure continued order processing and trade matching, price

7 reporting, market surveillance, and maintenance of a comprehensive and accurate

8 audit trail.

9 "(15) DESIGNATION OF COMPLIANCE OFFICER.-

10 "(A) IN GENERAL.-Each alternative swap execution facility shall

11 designate an individual to serve as a compliance officer.

12 "(B) DUTIEs.-The compliance officer-

13 "(i) shall report directly to the board or to the senior officer of the

14 facility; and

15 "(ii) shall-

16 "(I) review compliance with the core principles in section

17 5h(d).

18 "(II) in consultation with the board of the facility, a body

19 performing a function similar to that of a board, or the senior

20 officer of the facility, resolve any conflicts of interest that may

21 anse;

22 "(III) be responsible for administering the policies and

23 procedures required to be established pursuant to this section; and

11

CFTC-CREW-0733
 1 "(IV) ensure compliance with commodity laws and the

2 rules and regulations issued thereunder, including rules prescribed

3 by the Commission pursuant to this section.

4 "(iii) The compliance officer shall establish procedures for

5 remediation of non-compliance issues found during compliance office

6 reviews, lookbacks, internal or external audit findings, self-reported errors,

7 or through validated complaints. Procedures will establish the handling,

8 management response, remediation, re-testing, and closing of non-

9 compliant issues.

10 "(C) ANNuAL REpORTS REQUIRED.-The compliance officer shall

11 annually prepare and sign a report on the compliance of the facility with the

12 commodity laws and its policies and procedures, including its code of ethics and

13 conflict of interest policies, in accordance with rules prescribed by the

14 Commission. Such compliance report shall accompany the financial reports of

15 the facility that are required to be furnished to the Commission pursuant to this

16 section and shall include a certification that, under penalty of laws, the report is

17 accurate and complete.".

18 On page 52, lines 5 and 10, re-designate subparagraphs (f) and (g), as (e) and (f), respectively.

19

12

CFTC-CREW-0734
1 AMENDMENT TO TITLE VII PROVISIONS RE.

2 MULTILATERAL CLEARING ORGANIZATIONS

3 [The following amendment would implement the section of Chairman Gensler's letter ofAugust

4 17 urging that Sections 408 and 409 ofthe Federal Deposit Insurance Corporation Improvement

5 Act of 1991 (FDICIA), which were added by the CFMA, be repealed}

6 On page 63, strike lines 4 through 12 and insert as follows:

7 Sections 408 and 409 of the Federal Deposit Insurance Corporation Improvement Act of

8 1991 (12 US.c. 4421-4422) are repealed.

13

CFTC-CREW-0735