S.3268 Stop Excessive Energy Speculation Act of 2008

[LSK]

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

(a) Short Title- This Act may be cited as the `Stop Excessive Energy Speculation Act of 2008'.

(b) Table of Contents- The table of contents of this Act is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. Definition of energy commodity.

Sec. 3. Speculative limits and transparency of off-shore trading.

Sec. 4. Authority of Commodity Futures Trading Commission with respect to certain traders.

Sec. 5. Working group of international regulators.

Sec. 6. Elimination of manipulation and excessive speculation as cause of high oil, gas, and energy prices.

Sec. 7. Large over-the-counter transactions.

Sec. 8. Index traders and swap dealers.

Sec. 9. Disaggregation of index funds and other data in energy markets.

Sec. 10. Additional Commodity Futures Trading Commission employees for improved enforcement.

Sec. 11. Working Group on Energy Markets.

Sec. 12. Study of regulatory framework for energy markets.

Sec. 13. Collection and analysis of information on energy commodities.

Sec. 14. National natural gas market investigation.

Sec. 15. Studies; reports.

Sec. 16. Expedited procedures.

SEC. 2. DEFINITION OF ENERGY COMMODITY.

(a) Definition of Energy Commodity- Section 1a of the Commodity Exchange Act (7 U.S.C. 1a) is amended--

(1) by redesignating paragraphs (13) through (34) as paragraphs (14) through (35), respectively; and

(2) by inserting after paragraph (12) the following:

`(13) ENERGY COMMODITY- The term `energy commodity' means--

`(A) a petroleum product; and

`(B) natural gas.'.

(b) Conforming Amendments-

(1) Section 2(c)(2)(B)(i)(II)(cc) of the Commodity Exchange Act (7 U.S.C. 2(c)(2)(B)(i)(II)(cc)) is amended--

(A) in subitem (AA), by striking `section 1a(20)' and inserting `section 1a(21)'; and

(B) in subitem (BB), by striking `section 1a(20)' and inserting `section 1a(21)'.

(2) Section 13106(b)(1) of the Food, Conservation, and Energy Act of 2008 is amended by striking `section 1a(32)' and inserting `section 1a'.

(3) Section 402 of the Legal Certainty for Bank Products Act of 2000 (7 U.S.C. 27) is amended--

(A) in subsection (a)(7), by striking `section 1a(20)' and inserting `section 1a'; and

(B) in subsection (d)--

(i) in paragraph (1)(B), by striking `section 1a(33)' and inserting `section 1a'; and

(ii) in paragraph (2)(D), by striking `section 1a(13)' and inserting `section 1a'.

SEC. 3. SPECULATIVE LIMITS AND TRANSPARENCY OF OFF-SHORE TRADING.

Section 4 of the Commodity Exchange Act (7 U.S.C. 6) is amended by adding at the end the following:

`(e) Foreign Boards of Trade-

`(1) IN GENERAL- The Commission may not permit a foreign board of trade to provide to the members of the foreign board of trade or other participants located in the United States, or otherwise subject to the jurisdiction of the Commission, direct access to the electronic trading and order matching system of the foreign board of trade with respect to an agreement, contract, or transaction in an energy commodity that settles against any price (including the daily or final settlement price) of 1 or more contracts listed for trading on a registered entity, unless--

`(A) the foreign board of trade--

`(i) makes public daily trading information regarding the agreement, contract, or transaction that is comparable to the daily trading information published by the registered entity for the 1 or more contracts against which the foreign board of trade settles; and

`(ii) promptly notifies the Commission of any change regarding--

`(I) the information that the foreign board of trade will make publicly available;

`(II) the position limits, speculation limits, and position accountability provisions that the foreign board of trade will adopt and enforce;

`(III) the position reductions required to prevent manipulation; and

`(IV) any other area of interest expressed by the Commission to the foreign board of trade; and

`(B) the foreign board of trade (or the foreign futures authority that oversees the foreign board of trade)--

`(i) adopts position limits (including related hedge exemption provisions), speculation limits, or position accountability provisions for speculators for the agreement, contract, or transaction that are comparable to the position limits (including related hedge exemption provisions), speculation limits, or position accountability provisions adopted by the registered entity for the 1 or more contracts against which the foreign board of trade settles;

`(ii) has the authority to require or direct market participants to limit, reduce, or liquidate any position the foreign board of trade (or the foreign futures authority that oversees the foreign board of trade) determines to be necessary to prevent or reduce the threat of price manipulation, excessive speculation, price distortion, or disruption of delivery or the cash settlement process; and

`(iii) provides information to the Commission regarding the extent of legitimate and nonlegitimate hedge trading in the agreement, contract, or transaction that is comparable to the information that the Commission determines to be necessary to publish the commitments of traders report of the Commission for the 1 or more contracts against which the foreign board of trade settles.

`(2) EXISTING FOREIGN BOARDS OF TRADE- Paragraph (1) shall not be effective with respect to any agreement, contract, or transaction in an energy commodity executed on a foreign board of trade to which the Commission had granted direct access permission prior to the date of enactment of this subsection until the date that is 180 days after the date of enactment of this subsection.'.

SEC. 4. AUTHORITY OF COMMODITY FUTURES TRADING COMMISSION WITH RESPECT TO CERTAIN TRADERS.

(a) In General-

(1) RESTRICTION OF FUTURES TRADING TO CONTRACT MARKETS OR DERIVATIVES TRANSACTION EXECUTION FACILITIES- Section 4(b) of the Commodity Exchange Act (7 U.S.C. 6(b)) is amended by inserting after the first sentence the following: `The Commission may adopt rules and regulations requiring the maintenance of books and records by any person that is located within the United States (including the territories and possessions of the United States) or that enters trades directly into the trade matching system of a foreign board of trade from the United States (including the territories and possessions of the United States).'

(2) EXCESSIVE SPECULATION AS A BURDEN ON INTERSTATE COMMERCE- Section 4a of the Commodity Exchange Act (7 U.S.C. 6a) is amended--

(A) in subsection (e), in the second sentence--

(i) by striking `this Act for any person' and inserting `this Act for (1) any person'; and

(ii) by inserting after `to section 5c(c)(1)' the following: `, and (2) any person that is located within the United States (including the territories and possessions of the United States) or that enters trades directly into the trade matching system of a foreign board of trade from the United States (including the territories and possessions of the United States) to violate any bylaw, rule, regulation, or resolution of any foreign board of trade or foreign futures authority fixing limits on the amount of trading that may be carried out or positions that may be held under any contract of sale of an energy commodity for future delivery or under any option on such contract or energy commodity, that settles against any price (including the daily or final settlement price) of 1 or more contracts listed for trading on a registered entity'; and

(B) by adding at the end the following:

`(f) Consultation- Before taking any action under subsection (e), the Commission shall consult with the appropriate--

`(1) foreign board of trade; and

`(2) foreign futures authority.'.

(3) VIOLATIONS- Section 9(a) of the Commodity Exchange Act (7 U.S.C. 13(a)) is amended by inserting `(including any person trading on a foreign board of trade)' after `Any person' each place it appears.

(4) EFFECT- No amendment made by this subsection limits any of the otherwise applicable authorities of the Commodity Futures Trading Commission.

SEC. 5. WORKING GROUP OF INTERNATIONAL REGULATORS.

Section 4a of the Commodity Exchange Act (7 U.S.C. 6a) (as amended by section 4(a)(2)(B)) is amended by adding at the end the following:

`(g) Working Group of International Regulators- Not later than 90 days after the date of enactment of this subsection, the Commission shall convene a working group of international regulators to develop uniform international reporting and regulatory standards to ensure the protection of the energy futures markets from nonlegitimate hedge trading, excessive speculation, manipulation, location shopping, and lowest common dominator regulation, each of which pose systemic risks to all energy futures markets, countries, and consumers.'.

SEC. 6. ELIMINATION OF MANIPULATION AND EXCESSIVE SPECULATION AS CAUSE OF HIGH OIL, GAS, AND ENERGY PRICES.

Section 4a of the Commodity Exchange Act (7 U.S.C. 6a) (as amended by section 5) is amended by adding at the end the following:

`(h) Elimination of Excessive Speculation and Nonlegitimate Hedge Trading as a Cause of High Oil, Gas, and Energy Prices-

`(1) DEFINITION OF LEGITIMATE HEDGE TRADING-

`(A) IN GENERAL- The term `legitimate hedge trading' means the conduct of trading that involves transactions by commercial producers and purchasers of actual physical petroleum and energy commodities for future delivery and the direct counterparties to such trades (regardless of whether the counterparties are commercial producers or purchasers).

`(B) INCLUSION- To the extent a commercial producer or purchaser of an actual physical energy commodity for future delivery trades with an intermediary (referred to in this subparagraph as an `initial trade'), each subsequent trade by the intermediary arising solely due to the initial trade and that directly results from such initial trade (referred to in this subparagraph as a `follow-on trade') shall be considered to be the conduct of `legitimate hedge trading' if each follow-on trade executed by the intermediary is--

`(i) done proximate to the initial trade; and

`(ii) in the aggregate, economically the same in size and substance as the initial trade.

`(2) IDENTIFICATION OF LEGITIMATE HEDGE TRADING- In carrying out this Act, the Commission shall distinguish between--

`(A) legitimate hedge trading; and

`(B) all other trading in energy commodities.

`(3) TYPE OF TRADING- Notwithstanding any other provision of this Act, the Commission shall modify (or delegate any appropriate entity to modify) such definitions, classifications, and data collection under this Act as are necessary to ensure that all direct and indirect parties and counterparties to all trades in the energy commodities market are clearly identified for all purposes as engaging in--

`(A) legitimate hedge trading; or

`(B) any other type of trading.

`(4) ELIMINATION OF EXCESSIVE SPECULATION-

`(A) IN GENERAL- Notwithstanding any other provision of this Act, the Commission shall review all regulations, rules, exemptions, exclusions, guidance, no action letters, orders, and other actions taken by or on behalf of the Commission (including any action or inaction taken pursuant to delegated authority by an exchange, self-regulatory organization, or any other entity) regarding all energy futures market participants or market activity (referred to in this subsection individually as a `prior action') to ensure that--

`(i) legitimate hedge trading is protected and promoted; and

`(ii) excessive speculation is eliminated.

`(B) PRIOR ACTION-

`(i) IN GENERAL- The Commission shall consider modifying or revoking the application after the date of enactment of this subsection of any prior action taken by the Commission (including any prior action taken pursuant to delegated authority by any other entity) with respect to any trade on any market, exchange, foreign board of trade, swap or swap transaction, index or index market participant or trade, hedge fund, pension fund, and any other transaction, trade, trader, or petroleum or energy futures market activity unless the Commission affirmatively determines that such prior action will protect and promote legitimate hedge trading and does not permit or encourage excessive speculation.

`(ii) REVOCATION- In carrying out this subparagraph, the Commission shall consider modifying or revoking the results of each prior action that, in whole or in part, has the direct or indirect affect of limiting, reducing, or eliminating the filing of any report or data regarding any direct or indirect trade or trader, including the filing of large trader reports.

`(C) SPECULATIVE POSITION LIMITS APPLICABLE TO NONLEGITIMATE HEDGE TRADING IN ENERGY COMMODITIES AND DERIVATIVES-

`(i) SPECULATIVE POSITION LIMITS-

`(I) IN GENERAL- Not later than 30 days after the date of enactment of this subsection, the Commission shall impose, by rule, regulation, or order, speculative position limits on trading that is not legitimate hedge trading.

`(II) APPLICATION- The Commission shall apply the limits imposed under subclause (I) to any person who executes accounts, agreements, or transactions involving an energy commodity for the own account of the person and to any person for whom an agent in fact or substance executes accounts, agreements, or transactions involving an energy commodity, on a registered entity or in covered over-the-counter trading.

`(ii) ADVISORY GROUP-

`(I) IN GENERAL- Not later than 30 days after the date of enactment of this subsection, the Commission shall convene an advisory group primarily consisting of commercial producers and purchasers of actual physical energy commodities for future delivery.

`(II) RECOMMENDATIONS- Not later than 60 days after the date on which the advisory group is convened under subclause (I), and annually thereafter, the advisory group shall submit to the Commission recommendations regarding an appropriate level for position limits--

`(aa) that are designed for traders or entities that are not legitimate hedge traders; and

`(bb) to replace the position limits imposed by the Commission under clause (i)(I).

`(III) APPLICABILITY OF FACA- The advisory group shall be subject to the Federal Advisory Committee Act (5 U.S.C. App.).

`(iii) REVIEW OF RECOMMENDATIONS- Not later than 270 days after the date of enactment of this subsection, the Commission shall--

`(I) analyze and review the recommendations submitted by the advisory group under clause (ii)(II); and

`(II) submit to the appropriate committees of Congress a report describing each recommendation (including each modification to the statutory authority of the Commission that the Commission determines to be necessary to effectuate each recommendation).

`(iv) RULEMAKING-

`(I) IN GENERAL- Not later than 18 months after the date of enactment of this subsection, the Commission shall promulgate a final rule that establishes speculative position limits--

`(aa) for any person engaged in nonlegitimate hedge trading of an energy commodity; and

`(bb) that are consistent with this Act.

`(II) EFFECTIVE DATE- The final rule described in subclause (I) shall take effect on the date that is 30 days after the date on which the Commission promulgates the final rule.

`(v) DEVELOPMENT OF METHODOLOGY-

`(I) IN GENERAL- Not later than 180 days after the date of enactment of this subsection, the Commission shall propose a methodology to determine and set aggregate speculative position limits at the control entity level for all nonlegitimate traders of energy commodities--

`(aa) on designated contract markets;

`(bb) on derivatives transaction execution facilities; and

`(cc) in over-the-counter commodity derivatives.

`(II) REPORT- Not later than 180 days after the date of enactment of this subsection, the Commission shall submit to the appropriate committees of Congress a report that contains--

`(aa) any recommendations regarding any additional statutory authority that the Commission determines to be necessary for the imposition of the speculative position limits described in subclause (I); and

`(bb) a description of the resources that the Commission considers to be necessary to implement the speculative position limits.

`(D) MAXIMUM LEVEL OF SPECULATIVE POSITION LIMITS-

`(i) IN GENERAL- In establishing speculative position limits under this section (including subparagraph (C)(iv)), the Commission shall set the limits at the maximum level practicable--

`(I) to ensure sufficient market liquidity for the conduct of legitimate hedging activities;

`(II) to ensure that price discovery is not disrupted;

`(III) to protect and promote legitimate hedge trading;

`(IV) to minimize nonlegitimate hedge trading; and

`(V) to eliminate excess speculation.

`(ii) EFFECT-

`(I) IN GENERAL- Nothing in this subparagraph modifies the spot month position limitation of 3,000 contracts that is designed to prevent a corner or squeeze at the delivery date.

`(II) COMMISSION ACTION- If the Commission sets position limits under clause (i) that are different from the spot month position limit described in subclause (I), the Commission shall include in the report required under subparagraph (C)(v)(II) an analysis describing the reasons for the position limits.'.

More linked: http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=110&session=2&vote=00183

[whistle]

1. Who introduced this bill in the U.S. Congress?

[LSK]

2. Reid

Sponsor: Sen Reid, Harry (introduced 7/15/2008) Cosponsors (16)
Latest Major Action: 7/21/2008 Senate floor actions. Status: Motion to proceed to measure considered in Senate. COSPONSORS(16), ALPHABETICAL : (Sort: by date)


Sen Brown, Sherrod - 7/17/2008
Sen Cardin, Benjamin L. - 7/17/2008
Sen Carper, Thomas R. - 7/16/2008
Sen Casey, Robert P., Jr. - 7/16/2008
Sen Dorgan, Byron L. - 7/15/2008
Sen Durbin, Richard - 7/15/2008
Sen Johnson, Tim - 7/21/2008
Sen Klobuchar, Amy - 7/16/2008
Sen Lautenberg, Frank R. - 7/21/2008
Sen Leahy, Patrick J. - 7/17/2008
Sen Menendez, Robert - 7/17/2008
Sen Mikulski, Barbara A. - 7/16/2008
Sen Murray, Patty - 7/15/2008
Sen Reed, Jack - 7/21/2008
Sen Schumer, Charles E. - 7/15/2008
Sen Wyden, Ron - 7/21/2008

[Zynx]

3. I love when the free-marketeers claim there hasn't been manipulation when oil has fallen $18

a barrel in just two weeks. No one can look at me with a straight face and tell me that fundamentals have changed that much in that period of time.