[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 7USC7]
TITLE 7--AGRICULTURE
CHAPTER 1--COMMODITY EXCHANGES
Sec. 7. Designation of boards of trade as contract markets
(a) Applications
A board of trade applying to the Commission for designation as a
contract market shall submit an application to the Commission that
includes any relevant materials and records the Commission may require
consistent with this chapter.
(b) Criteria for designation
(1) In general
To be designated as a contract market, the board of trade shall
demonstrate to the Commission that the board of trade meets the
criteria specified in this subsection.
(2) Prevention of market manipulation
The board of trade shall have the capacity to prevent market
manipulation through market surveillance, compliance, and
enforcement practices and procedures, including methods for
conducting real-time monitoring of trading and comprehensive and
accurate trade reconstructions.
(3) Fair and equitable trading
The board of trade shall establish and enforce trading rules to
ensure fair and equitable trading through the facilities of the
contract market, and the capacity to detect, investigate, and
discipline any person that violates the rules. The rules may
authorize--
(A) transfer trades or office trades;
(B) an exchange of--
(i) futures in connection with a cash commodity
transaction;
(ii) futures for cash commodities; or
(iii) futures for swaps; or
(C) a futures commission merchant, acting as principal or
agent, to enter into or confirm the execution of a contract for
the purchase or sale of a commodity for future delivery if the
contract is reported, recorded, or cleared in accordance with
the rules of the contract market or a derivatives clearing
organization.
(4) Trade execution facility
The board of trade shall--
(A) establish and enforce rules defining, or specifications
detailing, the manner of operation of the trade execution
facility maintained by the board of trade, including rules or
specifications describing the operation of any electronic
matching platform; and
(B) demonstrate that the trade execution facility operates
in accordance with the rules or specifications.
(5) Financial integrity of transactions
The board of trade shall establish and enforce rules and
procedures for ensuring the financial integrity of transactions
entered into by or through the facilities of the contract market,
including the clearance and settlement of the transactions with a
derivatives clearing organization.
(6) Disciplinary procedures
The board of trade shall establish and enforce disciplinary
procedures that authorize the board of trade to discipline, suspend,
or expel members or market participants that violate the rules of
the board of trade, or similar methods for performing the same
functions, including delegation of the functions to third parties.
(7) Public access
The board of trade shall provide the public with access to the
rules, regulations, and contract specifications of the board of
trade.
(8) Ability to obtain information
The board of trade shall establish and enforce rules that will
allow the board of trade to obtain any necessary information to
perform any of the functions described in this subsection, including
the capacity to carry out such international information-sharing
agreements as the Commission may require.
(c) Existing contract markets
A board of trade that is designated as a contract market on December
21, 2000, shall be considered to be a designated contract market under
this section.
(d) Core principles for contract markets
(1) In general
To maintain the designation of a board of trade as a contract
market, the board of trade shall comply with the core principles
specified in this subsection. The board of trade shall have
reasonable discretion in establishing the manner in which it
complies with the core principles.
(2) Compliance with rules
The board of trade shall monitor and enforce compliance with the
rules of the contract market, including the terms and conditions of
any contracts to be traded and any limitations on access to the
contract market.
(3) Contracts not readily subject to manipulation
The board of trade shall list on the contract market only
contracts that are not readily susceptible to manipulation.
(4) Monitoring of trading
The board of trade shall monitor trading to prevent
manipulation, price distortion, and disruptions of the delivery or
cash-settlement process.
(5) Position limitations or accountability
To reduce the potential threat of market manipulation or
congestion, especially during trading in the delivery month, the
board of trade shall adopt position limitations or position
accountability for speculators, where necessary and appropriate.
(6) Emergency authority
The board of trade shall adopt rules to provide for the exercise
of emergency authority, in consultation or cooperation with the
Commission, where necessary and appropriate, including the authority
to--
(A) liquidate or transfer open positions in any contract;
(B) suspend or curtail trading in any contract; and
(C) require market participants in any contract to meet
special margin requirements.
(7) Availability of general information
The board of trade shall make available to market authorities,
market participants, and the public information concerning--
(A) the terms and conditions of the contracts of the
contract market; and
(B) the mechanisms for executing transactions on or through
the facilities of the contract market.
(8) Daily publication of trading information
The board of trade shall make public daily information on
settlement prices, volume, open interest, and opening and closing
ranges for actively traded contracts on the contract market.
(9) Execution of transactions
The board of trade shall provide a competitive, open, and
efficient market and mechanism for executing transactions.
(10) Trade information
The board of trade shall maintain rules and procedures to
provide for the recording and safe storage of all identifying trade
information in a manner that enables the contract market to use the
information for purposes of assisting in the prevention of customer
and market abuses and providing evidence of any violations of the
rules of the contract market.
(11) Financial integrity of contracts
The board of trade shall establish and enforce rules providing
for the financial integrity of any contracts traded on the contract
market (including the clearance and settlement of the transactions
with a derivatives clearing organization), and rules to ensure the
financial integrity of any futures commission merchants and
introducing brokers and the protection of customer funds.
(12) Protection of market participants
The board of trade shall establish and enforce rules to protect
market participants from abusive practices committed by any party
acting as an agent for the participants.
(13) Dispute resolution
The board of trade shall establish and enforce rules regarding
and provide facilities for alternative dispute resolution as
appropriate for market participants and any market intermediaries.
(14) Governance fitness standards
The board of trade shall establish and enforce appropriate
fitness standards for directors, members of any disciplinary
committee, members of the contract market, and any other persons
with direct access to the facility (including any parties affiliated
with any of the persons described in this paragraph).
(15) Conflicts of interest
The board of trade shall establish and enforce rules to minimize
conflicts of interest in the decisionmaking process of the contract
market and establish a process for resolving such conflicts of
interest.
(16) Composition of boards of mutually owned contract
markets
In the case of a mutually owned contract market, the board of
trade s
