[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[H.R. 594 Introduced in House (IH)]
110th CONGRESS
1st Session
H. R. 594
To regulate over-the-counter trading of energy derivatives.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
January 19, 2007
Mr. Stupak (for himself, Mr. Dingell, Mr. Larson of Connecticut, Mr.
Hinchey, Mr. Allen, Mrs. Capps, Mr. DeFazio, Ms. Schakowsky, Mr.
Conyers, Mr. Pascrell, Mr. Grijalva, Ms. Jackson-Lee of Texas, Mr.
Tierney, Mr. Kildee, Ms. Schwartz, Mr. Chandler, Mr. Michaud, Mrs.
Davis of California, and Mr. Baird) introduced the following bill;
which was referred to the Committee on Agriculture
_______________________________________________________________________
A BILL
To regulate over-the-counter trading of energy derivatives.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Prevent Unfair Manipulation of
Prices Act of 2007''.
SEC. 2. OVER-THE-COUNTER TRANSACTIONS IN ENERGY COMMODITIES.
(a) Definitions.--Section 1a of the Commodity Exchange Act (7
U.S.C. 1a) is amended by adding at the end the following:
``(34) Included energy transaction.--The term `included
energy transaction' means a contract, agreement, or transaction
in an energy commodity that is--
``(A)(i) executed or traded on an electronic
trading facility; and
``(ii) 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; or
``(B)(i) executed or traded not on or through a
trading facility; and
``(ii) entered into solely between persons that are
eligible contract participants at the time the persons
enter into the agreement, contract, or transaction,
regardless of the means of execution of the agreement,
contract, or transaction.
``(35) Energy commodity.--
``(A) In general.--The term `energy commodity'
means a commodity (other than an excluded commodity, a
metal, or an agricultural commodity) that is used as a
source of energy.
``(B) Inclusions.--The term `energy commodity'
includes--
``(i) coal;
``(ii) crude oil, gasoline, diesel fuel,
heating oil, and propane;
``(iii) electricity; and
``(iv) natural gas.
``(36) Electronic energy trading facility.--The term
`electronic energy trading facility' means an electronic
trading facility on or through which included energy
transactions are traded or executed.''.
(b) Off-Exchange Transactions in Energy Commodities.--Section 2(g)
of the Commodity Exchange Act (7 U.S.C. 2(g)) is amended--
(1) by inserting ``or an energy commodity'' after
``agricultural commodity'';
(2) by redesignating paragraphs (1) through (3) as
subparagraphs (A) through (C), respectively;
(3) by striking ``No provision'' and inserting the
following:
``(1) In general.--No provision''; and
(4) by adding at the end the following:
``(2) Transactions in energy commodities.--
``(A) In general.--Except as provided in
subparagraphs (B) and (C) and subsection (h)(7),
nothing in this Act applies to an included energy
transaction.
``(B) Prohibited conduct.--
``(i) In general.--An included energy
transaction shall be subject to--
``(I) sections 5b, 12(e)(2)(B), and
22(a)(4); and
``(II) the prohibitions in sections
4b, 4c(a), 4c(b), 4o, 6(c), 6(d), 6c,
6d, 8a, and 9(a)(2).
``(ii) Transactions exempted by commission
action.--Notwithstanding any exemption by the
Commission under section 4(c), an included
energy transaction shall be subject to the
sections specified in clause (i) of this
subparagraph, subparagraph (C), and subsection
(h)(7).
``(C) Reporting and recordkeeping requirements.--
``(i) In general.--An eligible contract
participant that enters into or executes an
included energy transaction that performs, or
together with other such transactions performs,
a significant price discovery function in the
cash market for an energy commodity or in any
other market for agreements, contracts, or
transactions relating to an energy commodity,
and an eligible commercial entity that enters
into or executes an included energy transaction
described in section 1a(34)(A) shall--
``(I) provide to the Commission on
a timely basis the information required
under clause (ii); and
``(II)(aa) consistent with section
4i, maintain books and records relating
to each included energy transaction,
for a period of at least 5 years after
the date of the transaction, in such
form as the Commission shall require;
and
``(bb) keep the books and records
open to inspection by any
representative of the Commission or the
Attorney General.
``(ii) Required information.--
``(I) In general.--The Commission
shall require that such information
regarding included energy transactions
be provided to the Commission as the
Commission considers necessary to
assist in detecting and preventing
price manipulation.
``(II) Information to be
included.--Such information shall
include information regarding large
trading positions obtained through 1 or
more included energy transactions that
involve--
``(aa) substantial
quantities of the commodity in
the cash market; or
``(bb) substantial
positions, investments, or
trades in agreements or
contracts related to energy
commodities.
``(III) Manner of compliance.--The
Commission shall specify when and how
such information shall be provided and
maintained by eligible contract
participants and eligible commercial
entities.
``(IV) Price discovery
transactions.--
``(aa) In general.--In
specifying the information to
be provided under this
paragraph, the Commission shall
identify the transactions or
class of transactions that the
Commission considers to perform
a significant price discovery
function.
``(bb) Considerations.--In
determining which included
energy transactions perform a
significant price discovery
function, the Commission shall
consider the extent to which--
``(AA) standardized
agreements are used to
execute the
transactions;
``(BB) the
transactions involve
standardized types or
measures of a
commodity;
``(CC) the prices
of the transactions are
reported to third
parties, published, or
disseminated;
``(DD) the prices
of the transactions are
referenced in other
transactions; and
``(EE) other
factors considered
appropriate by the
Commission.
``(V) Persons filing.--
``(aa) In general.--The
Commission, in its discretion,
may allow large trader position
reports required to be provided
by an eligible commercial
entity to be provided by an
electronic energy trading
facility if the eligible
commercial entity authorizes
the facility to provide such
information on its behalf.
``(bb) Information and
enforcement.--Nothing in an
authorization under item (aa)
shall impair the ability of the
Commission to obtain
information from an eligible
commercial entity or otherwise
enforce this Act.
``(VI) Regulations.--Not later than
180 days after the date of enactment of
this paragraph, the Commission shall
issue a notice of proposed rulemaking,
and not later than 1 year after the
date of enactment of this paragraph,
the Commission shall promulgate final
regulations, specifying the information
to be provided and maintained under
this subparagraph.''.
SEC. 3. ELECTRONIC TRADING FACILITIES FOR ENERGY COMMODITIES.
Section 2(h) of the Commodity Exchange Act (7 U.S.C. 2(h)) is
amended--
(1) in paragraph (1), by inserting after ``an exempt
commodity'' the following: ``, other than an energy
commodity,'';
(2) in paragraph (3), by inserting after ``an exempt
commodity'' the following: ``, other than an energy
commodity,''; and
(3) by adding at the end the following:
``(7) Energy transactions.--
``(A) In general.--To the extent that the
Commission determines to be appropriate under
subparagraph (C), an electronic energy trading facility
shall--
``(i) be subject to the requirements of
section 5a, to the extent provided in sections
5a(g) and 5d;
``(ii)(I) consistent with section 4i,
maintain books and records relating to the
business of the electronic energy trading
facility, including books and records relating
to each transaction in such form as the
Commission may require; and
``(II) make the books and records required
under this section available to representatives
of the Commission and the Attorney General for
inspection for a period of at least 5 years
after the date of each included energy
transaction;
``(iii) make available to the public
information on trading volumes, settlement
prices, open interest (where applicable), and
opening and closing ranges (or daily highs and
lows, as appropriate) for included energy
transactions; and
``(iv) provide the information to the
Commission in such form and at such times as
the Commission may require.
``(B) Applicability of other provisions.--
``(i) Paragraph (5).--An electronic energy
trading facility shall comply with paragraph
(5).
``(ii) Paragraph (6).--Paragraph (6) shall
apply with respect to a subpoena issued to any
foreign person that the Commission believes is
conducting or has conducted transactions on or
through an electronic energy trading facility.
``(C) Regulations.--Not later than 180 days after
the date of enactment of this paragraph, the Commission
shall issue a notice of proposed rulemaking, and not
later than 1 year after the date of enactment of this
paragraph, the Commission shall promulgate final
regulations, specifying the information to be provided,
maintained, or made available to the public under
subparagraphs (A) and (B).
``(8) Nondisclosure of proprietary information.--In
carrying out paragraph (7) and subsection (g)(2), the
Commission shall not--
``(A) require the real-time publication of
proprietary information;
``(B) prohibit the commercial sale or licensing of
real-time proprietary information; or
``(C) publicly disclose information regarding
market positions, business transactions, trade secrets,
or names of customers, except as provided in section
8.''.
SEC. 4. NO EFFECT ON OTHER AUTHORITY.
(a) No Effect on FERC Authority.--Nothing contained in this title
shall affect the jurisdiction of the Federal Energy Regulatory
Commission with respect to the authority of the Federal Energy
Regulatory Commission under the Federal Power Act (16 U.S.C. 791a et
seq.), the Natural Gas Act (15 U.S.C. 717 et seq.), or other law to
obtain information or otherwise carry out the responsibilities of the
Federal Energy Regulatory Commission.
(b) No Effect on Excluded Commodities.--The amendments made by this
title have no effect on the regulation of excluded commodities under
the Commodity Exchange Act (7 U.S.C. 1a et seq.).
(c) No Effect on Metals.--The amendments made by this title have no
effect on the regulation of metals under the Commodity Exchange Act (7
U.S.C. 1a et seq.).
SEC. 5. PROHIBITION OF FRAUDULENT TRANSACTIONS.
Section 4b of the Commodity Exchange Act (7 U.S.C. 6b) is amended
by striking subsection (a) and inserting the following:
``(a) Prohibitions.--
``(1) In general.--It shall be unlawful (A) for any person,
in or in connection with any order to make, or the making of,
any contract of sale of any commodity for future delivery or in
interstate commerce, that is made, or to be made, on or subject
to the rules of a designated contract market, for or on behalf
of any other person, or (B) for any person, in or in connection
with any order to make, or the making of, any contract of sale
of any commodity for future delivery or other agreement,
contract or transaction subject to paragraphs (1) and (2) of
section 5a(g), that is made, or to be made, for or on behalf of
or with, any other person, other than on or subject to the
rules of a designated contract market--
``(i) to cheat or defraud or attempt to cheat or
defraud the other person;
``(ii) willfully to make or cause to be made to
such other person any false report or statement or
willfully to enter or cause to be entered for the other
person any false record;
``(iii) willfully to deceive or attempt to deceive
the other person by any means whatsoever in regard to
any order or contract or the disposition or execution
of any order or contract, or in regard to any act of
agency performed, with respect to any order or contract
for (or, in the case of a contract described in
subparagraph (B), with the other person) such person;
or
``(iv)(I) to bucket an order represented by the
person as an order to be executed, for or on behalf of
the other person, on an organized exchange; or
``(II) to--
``(aa) fill an order by offset against the
order or orders of the other person; or
``(bb) willfully and knowingly and without
the prior consent of the other person, to--
``(AA) become the buyer in respect
to any selling order of the other
person; or
``(BB) become the seller in respect
to any buying order of the other
person,
if the order is to be executed on or subject to the
rules of a designated contract market.
``(2) Limitation.--This subsection does not obligate any
person, in connection with a transaction in a contract of sale
of a commodity for future delivery with another person, to
disclose to any other person nonpublic information that may be
material to the market price of the commodity or transaction,
except as necessary to make any statement made to the other
person in connection with the transaction not misleading in any
material respect.''.
SEC. 6. CRIMINAL AND CIVIL PENALTIES.
(a) Enforcement Powers of Commission.--Section 6(c) of the
Commodity Exchange Act (7 U.S.C. 9, 15) is amended in clause (3) of the
tenth sentence--
(1) by inserting ``(A)'' after ``assess such person''; and
(2) by inserting after ``each such violation'' the
following: ``, or (B) in any case of manipulation of, or
attempt to manipulate, the price of any commodity, a civil
penalty of not more than the greater of $1,000,000 or triple
the monetary gain to such person for each such violation,''.
(b) Manipulations and Other Violations.--Section 6(d) of the
Commodity Exchange Act (7 U.S.C. 13b) is amended in the first
sentence--
(1) by striking ``paragraph (a) or (b) of section 9 of this
Act'' and inserting ``subsection (a), (b), or (f) of section
9''; and
(2) by striking ``said paragraph 9(a) or 9(b)'' and
inserting ``subsection (a), (b), or (f) of section 9''.
(c) Nonenforcement of Rules of Government or Other Violations.--
Section 6b of the Commodity Exchange Act (7 U.S.C. 13a) is amended--
(1) in the first sentence, by inserting before the period
at the end the following: ``, or, in any case of manipulation
of, or an attempt to manipulate, the price of any commodity, a
civil penalty of not more than $1,000,000 for each such
violation''; and
(2) in the second sentence, by inserting before the period
at the end the following: ``, except that if the failure or
refusal to obey or comply with the order involved any offense
under section 9(f), the registered entity, director, officer,
agent, or employee shall be guilty of a felony and, on
conviction, shall be subject to penalties under section 9(f)''.
(d) Action to Enjoin or Restrain Violations.--Section 6c(d) of the
Commodity Exchange Act (7 U.S.C. 13a-1(d)) is amended by striking
``(d)'' and all that follows through the end of paragraph (1) and
inserting the following:
``(d) Civil Penalties.--(1) In any action brought under this
section, the Commission may seek and the court shall have jurisdiction
to impose, on a proper showing, on any person found in the action to
have committed any violation--
``(A) a civil penalty in the amount of not more than the
greater of $100,000 or triple the monetary gain to the person
for each violation; or
``(B) in any case of manipulation of, or an attempt to
manipulate, the price of any commodity, a civil penalty in the
amount of not more than the greater of $1,000,000 or triple the
monetary gain to the person for each violation.''.
(e) Violations Generally.--Section 9(a) of the Commodity Exchange
Act (7 U.S.C. 13) is amended--
(1) by striking ``(or $500,000 in the case of a person who
is an individual)'';
(2) by striking ``five years'' and inserting ``10 years'';
and
(3) in paragraph (2), by striking ``false or misleading or
knowingly inaccurate reports'' and inserting ``knowingly false,
misleading, or inaccurate reports''.
SEC. 7. CONFORMING AMENDMENTS.
(a) Section 2 of the Commodity Exchange Act (7 U.S.C. 2) is
amended--
(1) in subsection (d)(1), by striking ``section 5b'' and
inserting ``section 5a(g), 5b,'';
(2) in subsection (e)(1), by inserting ``(1)'' after
``(g)''; and
(3) in subsection (i)--
(A) in paragraph (1)--
(i) by striking ``No provision'' and
inserting ``In general.--Subject to subsections
(g)(2) and (h)(7), no provision''; and
(ii) in subparagraph (A), by inserting
``(1)'' after ``2(g)''; and
(B) in paragraph (2), by striking ``No provision''
and inserting ``In general.--Subject to subsections
(g)(2) and (h)(7), no provision''.
(b) Section 4i of the Commodity Exchange Act (7 U.S.C. 6i) is
amended in the first sentence by inserting ``, or pursuant to an
exemption under section 4(c)'' after ``transaction execution
facility''.
(c) Section 8a(9) of the Commodity Exchange Act (7 U.S.C. 12a(9))
is amended--
(1) by inserting ``or an electronic energy trading
facility'' after ``direct the contract market'';
(2) by inserting after ``liquidation of any futures
contract'' the following: ``or included energy transaction'';
and
(3) by inserting ``or an electronic energy trading
facility'' after ``given by a contract market''.
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