SIGNIFICANT PRICE DISCOVERY CONTRACTS.

SEC. 13201. SIGNIFICANT PRICE DISCOVERY CONTRACTS.(a) Definitions.—Section la of the Commodity Exchange Act (7 U.S.C. la) is amended—(1) by redesignating paragraph (33) as paragraph (34); and(2) by inserting after paragraph (32) the following:“(33) Significant price discovery contract.—The term ‘significant price discovery contract’ means an agreement, contract, or transaction subject to section 2(h)(7).”.122 STAT. 1436(b) Standards Applicable to Significant Price Discovery Contracts.—Section 2(h) of such Act (7 U.S.C. 2(h)) is amended by adding at the end the following:“(7) Significant price discovery contracts.—“(A) In general.—An agreement, contract, or transaction conducted in reliance on the exemption in paragraph (3) shall be subject to the provisions of subparagraphs (B) through (D), under such rules and regulations as the Commission shall promulgate, provided that the Commission determines, in its discretion, that the agreement, contract, or transaction performs a significant price discovery function as described in subparagraph (B).“(B) Significant price discovery determination.—In making a determination whether an agreement, contract, or transaction performs a significant price discovery function, the Commission shall consider, as appropriate:“(i) Price linkage.—The extent to which the agreement, contract, or transaction uses or otherwise relies on a daily or final settlement price, or other major price parameter, of a contract or contracts listed for trading on or subject to the rules of a designated contract market or a derivatives transaction execution facility, or a significant price discovery contract traded on an electronic trading facility, to value a position, transfer or convert a position, cash or financially settle a position, or close out a position.“(ii) Arbitrage.—The extent to which the price for the agreement, contract, or transaction is sufficiently related to the price of a contract or contracts listed for trading on or subject to the rules of a designated contract market or derivatives transaction execution facility, or a significant price discovery contract or contracts trading on or subject to the rules of an electronic trading facility, so as to permit market participants to effectively arbitrage between the markets by simultaneously maintaining positions or executing trades in the contracts on a frequent and recurring basis.“(iii) Material price reference.—The extent to which, on a frequent and recurring basis, bids, offers, or transactions in a commodity are directly based on, or are determined by referencing, the prices generated by agreements, contracts, or transactions being traded or executed on the electronic trading facility.“(iv) Material liquidity.—The extent to which the volume of agreements, contracts, or transactions in the commodity being traded on the electronic trading facility is sufficient to have a material effect on other agreements, contracts, or transactions listed for trading on or subject to the rules of a designated contract market, a derivatives transaction execution facility, or an electronic trading facility operating in reliance on the exemption in paragraph (3).“(v) Other material factors.—Such other material factors as the Commission specifies by rule as relevant to determine whether an agreement, contract, 122 STAT. 1437 or transaction serves a significant price discovery function.“(C) Core principles applicable to significant price discovery contracts.—“(i) In general.—An electronic trading facility on which significant price discovery contracts are traded or executed shall, with respect to those contracts, comply with the core principles specified in this subparagraph.“(ii) Core principles.—The electronic trading facility shall have reasonable discretion (including discretion to account for differences between cleared and uncleared significant price discovery contracts) in establishing the manner in which it complies with the following core principles:“(I) Contracts not readily susceptible to manipulation.—The electronic trading facility shall list only significant price discovery contracts that are not readily susceptible to manipulation.“(II) Monitoring of trading.—The electronic trading facility shall monitor trading in significant price discovery contracts to prevent market manipulation, price distortion, and disruptions of the delivery or cash-settlement process through market surveillance, compliance, and disciplinary practices and procedures, including methods for conducting real-time monitoring of trading and comprehensive and accurate trade reconstructions.“(III) Ability to obtain information.—The electronic trading facility shall—“(aa) establish and enforce rules that will allow the electronic trading facility to obtain any necessary information to perform any of the functions described in this subparagraph;“(bb) provide the information to the Commission upon request; and“(cc) have the capacity to carry out such international information-sharing agreements as the Commission may require.“(IV) Position limitations or accountability.—The electronic trading facility shall adopt, where necessary and appropriate, position limitations or position accountability for speculators in significant price discovery contracts, taking into account positions in other agreements, contracts, and transactions that are treated by a derivatives clearing organization, whether registered or not registered, as fungible with such significant price discovery contracts to reduce the potential threat of market manipulation or congestion, especially during trading in the delivery month.“(V) Emergency authority.—The electronic trading facility shall adopt rules to provide for the exercise of emergency authority, in consultation or cooperation with the Commission, where 122 STAT. 1438 necessary and appropriate, including the authority—“(aa) to liquidate open positions in a significant price discovery contract; and“(bb) to suspend or curtail trading in a significant price discovery contract.“(VI) Daily publication of trading information.—The electronic trading facility shall make public daily information on price, trading volume, and other trading data to the extent appropriate for significant price discovery contracts“(VII) Compliance with rules.—The electronic trading facility shall monitor and enforce compliance with any rules of the electronic trading facility applicable to significant price discovery contracts, including the terms and conditions of the contracts and any limitations on access to the electronic trading facility with respect to the contracts.“(VIII) Conflict of interest.—The electronic trading facility, with respect to significant price discovery contracts, shall—“(aa) establish and enforce rules to minimize conflicts of interest in its decision-making process; and“(bb) establish a process for resolving the conflicts of interest.“(IX) Antitrust considerations.—Unless necessary or appropriate to achieve the purposes of this Act, the electronic trading facility, with respect to significant price discovery contracts, shall endeavor to avoid—“(aa) adopting any rules or taking any actions that result in any unreasonable restraints of trade; or“(bb) imposing any material anticompetitive burden on trading on the electronic trading facility.“(D) Implementation.—“(i) Clearing.—The Commission shall take into consideration differences between cleared and uncleared significant price discovery contracts when reviewing the implementation of the core principles by an electronic trading facility.“(ii) Review.—As part of the Commission’s continual monitoring and surveillance activities, the Commission shall, not less frequently than annually, evaluate, as appropriate, all the agreements, contracts, or transactions conducted on an electronic trading facility in reliance on the exemption provided in paragraph (3) to determine whether they serve a significant price discovery function as described in subparagraph (B) of this paragraph.”.