7 U.S.C. § 1a — Definitions

(1) Alternative trading system — An organization or group of people counts as an "alternative trading system" if it meets all these conditions: it's registered as a broker or dealer under securities law (though not under the specific rule for national securities associations); it does the same job as a stock exchange; it doesn't set rules controlling how its subscribers act outside of trading on the system itself, and it doesn't discipline subscribers except by excluding them from trading; and securities regulators have exempted it from being called an "exchange," on the condition that it follows regulations covering its trading functions. (2) Appropriate Federal banking agency — This term generally means whatever federal bank regulator is named in a specific banking law (title 12, section 1813). For a state bank that isn't federally insured, it means the Federal Reserve Board. For farm credit system institutions, it means the Farm Credit Administration. (3) Associated person of a security-based swap dealer or major security-based swap participant — This term borrows its meaning directly from the Securities Exchange Act of 1934. This law does not define it separately. (4) Associated person of a swap dealer or major swap participant — This is a person connected to a swap dealer or major swap participant as a partner, officer, employee, or agent, or someone in a similar role. It only counts if that person solicits or accepts swaps, or supervises people who do. It does not include someone whose job is purely clerical or administrative — except that this exclusion doesn't apply for one specific rule about business conduct standards (section 6s(b)(6) of this title). (5) Board — "Board" means the Board of Governors of the Federal Reserve System. (6) Board of trade — This means any organized exchange or other trading facility. (7) Cleared swap — A swap counts as "cleared" if it is submitted, directly or indirectly, to a derivatives clearing organization that is registered with the Commission, and that organization clears it. (8) Commission — "Commission" means the Commodity Futures Trading Commission. (9) Commodity — This is a long list. It includes specific farm products: wheat, cotton, rice, corn, oats, barley, rye, flaxseed, grain sorghums, mill feeds, butter, eggs, Irish potatoes, wool, wool tops, various fats and oils (like lard, tallow, cottonseed oil, peanut oil, and soybean oil), cottonseed meal, cottonseed, peanuts, soybeans, soybean meal, livestock, livestock products, and frozen concentrated orange juice. It also includes "all other goods and articles" and "all services, rights, and interests" that people currently or in the future make futures contracts on. Two things are specifically excluded: onions (covered by a separate law) and motion picture box office receipts, along with any index or data based on those receipts. (10) Commodity pool — This is any investment trust, syndicate, or similar business set up to trade "commodity interests." That includes trading commodities for future delivery, security futures products, or swaps; certain agreements described elsewhere in this chapter; commodity options; and leverage transactions. The Commission can add to or subtract from this definition by rule, if doing so serves the purposes of this chapter. (11) Commodity pool operator — This is a person who runs a business like a commodity pool — collecting money, securities, or property from others (directly or through things like stock sales) to trade commodity interests. It also includes anyone registered with the Commission as a commodity pool operator. As with commodity pools, the Commission can adjust this definition by rule. (12) Commodity trading advisor — This generally means someone who is paid to advise others about whether to trade in commodities, swaps, or related contracts — whether the advice comes directly or through publications or electronic media. It also covers people who, for pay, regularly publish analyses about those activities, and anyone registered with the Commission as a commodity trading advisor. But several groups are excluded: banks and trust companies (and their employees); news reporters, columnists, editors, lawyers, accountants, and teachers; floor brokers and futures commission merchants; publishers of general data services and their employees; fiduciaries of certain defined-benefit retirement plans; and contract markets or trading facilities. These exclusions only apply if the advice-giving is solely incidental to that person's main business or profession — not their main line of work. The Commission may also add other advisors to the definition, by rule. (13) Contract of sale — This includes sales, agreements of sale, and agreements to sell, all counted together as "contracts of sale." (14) Cooperative association of producers — This is a cooperative, at least 75% owned or controlled (directly or indirectly) by producers of agricultural products, that otherwise follows two specific sections of this title (291 and 292). It also includes organizations that act on behalf of a group of such cooperatives, if those cooperatives own or control that organization. Business done with the federal government does not count toward or against the 75% test. (15) Derivatives clearing organization — This is a clearinghouse, clearing association, clearing corporation, or similar entity that does at least one of three things for an agreement, contract, or transaction: lets each party swap out the other party's credit risk for the credit of the clearing organization itself (called "novation" or similar substitution); arranges or provides multilateral settlement or netting of obligations among its participants; or otherwise provides clearing services or arrangements that spread or transfer credit risk among its participants. It does NOT count as a derivatives clearing organization just because it arranges or provides: settlement, netting, or novation between only two parties without a central counterparty; settlement or netting of cash payments through an interbank payment system; or settlement, netting, or novation from an ordinary spot-market commodity sale. (16) Electronic trading facility — This is a trading facility that operates by means of an electronic or telecommunications network and maintains an automated audit trail of bids, offers, and matched or executed trades. (17) Eligible commercial entity — With respect to an agreement, contract, or transaction in a commodity, this covers three groups: (A) certain types of "eligible contract participants" (defined in the next entry) who, in their business, can actually deliver or receive the underlying commodity, who take on risks beyond just price risk, or who are dealers regularly providing risk-management, hedging, or market-making services involving that commodity; (B) other eligible contract participants — not individuals, and not state or local government bodies — who regularly trade the commodity or related derivatives, and who either belong to a collective investment vehicle meeting certain asset thresholds (generally $1,000,000,000 in total assets, if the fund includes investors who aren't already qualified/accredited/sophisticated investors) or who individually, or as part of a group under common control, have $100,000,000 in total assets; and (C) any other person the Commission designates appropriate by rule, regulation, or order. (18) Eligible contract participant — This is a long list of sophisticated parties allowed to trade certain contracts. Acting for their own account, it includes: financial institutions; regulated insurance companies (U.S. state-regulated or comparably regulated foreign ones); regulated investment companies, or foreign entities performing a similar role; commodity pools with over $5,000,000 in assets that are run by a regulated operator; corporations, partnerships, trusts, or similar entities with over $10,000,000 in total assets, or whose contracts are guaranteed by such a qualifying entity, or that have over $1,000,000 in net worth and are trading to manage a business-related risk; certain employee benefit plans (including governmental and foreign equivalents) with over $5,000,000 in assets or whose investment decisions are made by a regulated adviser, financial institution, or qualifying insurance company; governmental entities (U.S., state, foreign, or multinational) and their instrumentalities, but only if they also qualify under one of several listed categories, invest at least $50,000,000 on a discretionary basis, or trade through a specifically listed type of entity; regulated brokers or dealers (with extra size conditions for individuals or sole proprietorships), certain associated persons of registered broker-dealers, and investment bank holding companies; regulated futures commission merchants (with similar extra conditions for individuals); floor brokers or floor traders regularly trading through a registered entity or exempt board of trade; and individuals with over $10,000,000 invested on a discretionary basis, or over $5,000,000 if they are managing a risk tied to something they own or owe. The definition also includes certain brokers or investment managers/advisers acting on behalf of the people and entities listed above, as long as they are authorized to commit that person to the transaction. Finally, it includes any other person the Commission decides is eligible based on that person's financial or other qualifications. (19) Excluded commodity — This covers several categories: interest rates, exchange rates, currencies, securities, credit risk measures, debt or equity instruments, and inflation or other macroeconomic indexes or measures; other economic or commercial rates, differentials, indexes, or measures that aren't based mainly on a narrow group of physical commodities, or that are based solely on commodities with no cash market; economic or commercial indexes based on prices, rates, values, or levels outside any single party's control; and occurrences or contingencies (other than a commodity price change) that are beyond the parties' control and tied to a financial, commercial, or economic consequence. (20) Exempt commodity — This is any commodity that is neither an "excluded commodity" (the entry just above) nor an "agricultural commodity." (21) Financial institution — This term covers several kinds of regulated banking entities: "agreement corporations" and "Edge Act corporations" under the Federal Reserve Act; institutions regulated by the Farm Credit Administration; federal or state credit unions; depository institutions; foreign banks or their U.S. branches and agencies; financial holding companies; trust companies; and any similarly regulated subsidiary or affiliate of those entities. (22) Floor broker — This is someone who, while physically present in a trading pit or similar space provided by a contract market, buys or sells commodity futures, security futures products, or commodity options for someone else — or anyone registered with the Commission as a floor broker. The Commission can expand or narrow who counts, by rule. (23) Floor trader — This is the same idea as a floor broker, except the person trades only for their own account, not for others — or anyone registered with the Commission as a floor trader. The Commission can adjust this definition by rule too. (24) Foreign exchange forward — This is a deal that only involves exchanging two different currencies on a specific future date, at a fixed rate agreed to when the deal is made. (25) Foreign exchange swap — This is a deal that only involves two things: exchanging two currencies on a specific date at a fixed rate, and later reversing that exchange at a later date, at another fixed rate — both rates set when the deal is made. (26) Foreign futures authority — This means any foreign government, or any department, agency, body, or organization a foreign government empowers to enforce laws or rules about futures or options — including a body belonging to a political subdivision of a foreign government. (27) Future delivery — This term specifically excludes any sale of a cash commodity meant for deferred shipment or delivery; that kind of sale does not count as "future delivery." (28) Futures commission merchant — This is generally a person or business that solicits or accepts orders to trade commodities for future delivery, security futures products, swaps, certain other described transactions, commodity options, or leverage transactions — or that acts as the counterparty in certain described transactions — and that, in connection with those activities, accepts money, securities, or property (or extends credit instead) to margin, guarantee, or secure the resulting trades. It also includes anyone registered with the Commission as a futures commission merchant. The Commission may expand or narrow this definition by rule. (29) Hybrid instrument — This is a security that has one or more payments tied to the value, level, or rate of one or more commodities, or that requires delivering one or more commodities. (30) Interstate commerce — This means commerce between a state, territory, possession, or Washington D.C. and any place outside it, or commerce between two points within the same state, territory, or possession that passes through some other place, or through a territory or D.C., along the way. (31) Introducing broker — This is a person (other than an individual who is registered as an associated person of a futures commission merchant) who solicits or accepts orders for commodity futures, security futures products, swaps, certain other described transactions, commodity options, or leverage transactions — but who does NOT accept money, securities, or property (or extend credit) to margin, guarantee, or secure the resulting trades. It also includes anyone registered with the Commission as an introducing broker. The Commission may adjust this definition by rule. (32) Major security-based swap participant — This term borrows its meaning directly from the Securities Exchange Act of 1934. (33) Major swap participant — This is someone who is not a swap dealer, and who fits one of three descriptions: they hold a large ("substantial") position in swaps for a major swap category, not counting positions held to hedge or reduce commercial risk, or positions held by certain employee benefit plans mainly to hedge risks tied to running the plan; their outstanding swaps create major counterparty exposure that could seriously harm the stability of the U.S. banking system or financial markets; or they are a highly leveraged financial entity not subject to federal bank capital rules, and they hold a substantial swap position. The Commission must define "substantial position" by rule, at a level it decides is prudent, considering the person's mix of cleared versus uncleared swaps and the quality of collateral held. A person can be designated a major swap participant for one or more categories of swaps without being one for every class of swap. This definition excludes an entity whose main business is providing financing, if it uses derivatives only to hedge interest-rate and currency risk tied to that financing, and 90% or more of that financing helps buy or lease products that are 90% or more made by its own parent company or another subsidiary of that parent. (34) Member of a registered entity; member of a derivatives transaction execution facility — "Member" means an individual, association, partnership, corporation, or trust that either owns or holds membership in a registered entity or derivatives transaction execution facility (or is admitted to represent a member there), or that has trading privileges there. A participant in an alternative trading system that has been designated a contract market under a specific section (7b–1) is treated as a member of that contract market for trading security futures products. (35) Narrow-based security index — An index counts as "narrow-based" if it has 9 or fewer component securities; if one security makes up more than 30% of its weighting; if the five highest-weighted securities together make up more than 60% of its weighting; or if the lowest-weighted securities that together make up 25% of the index have very low average daily trading volume (under $50,000,000, or under $30,000,000 for indexes with 15 or more securities), with tie-breaking rules for equally weighted securities. However, an index is NOT narrow-based, even if it would otherwise qualify, in several situations: if it has at least 9 securities, no security over 30% weighting, and each security is registered under securities law, among the 750 largest by market value, and among the 675 most actively traded; if a board of trade was designated a contract market for a futures contract on the index before December 21, 2000; if a futures contract on the index traded for at least 30 days as a non-narrow-based index and has been narrow-based for no more than 45 business days over 3 consecutive months; if a futures contract on the index trades on a foreign board of trade and meets requirements the Commission and SEC jointly set; if, within 18 months of December 21, 2000, the index was already traded on an approved foreign board of trade under conditions that continue to be met; or if a futures contract on the index trades on a board of trade and meets requirements the Commission and SEC jointly set by rule or order. The Commission and the SEC had one year after December 21, 2000 to jointly adopt the rules described above. An index that is narrow-based only because it crossed the 45-business-day limit is not treated as narrow-based for the following three calendar months. Trading volume and market value are calculated using the preceding six full calendar months, under a method the Commission and SEC jointly specify. (36) Option — This means an agreement, contract, or transaction that has the character of, or is commonly known in the trade as, an "option," "privilege," "indemnity," "bid," "offer," "put," "call," "advance guaranty," or "decline guaranty." (37) Organized exchange — This is a trading facility that either (A) permits trading by people who aren't "eligible contract participants," or trading other than directly between the two parties themselves; or (B) has adopted rules — directly or through another nongovernmental group — that govern participants' conduct beyond just order submission and execution rules, and that include disciplinary penalties beyond simply excluding someone from trading. (38) Person — This word covers both the singular and plural, and includes individuals, associations, partnerships, corporations, and trusts. (39) Prudential regulator — This tells you which federal bank regulator oversees a swap dealer, major swap participant, security-based swap dealer, or major security-based swap participant, depending on what kind of entity it is. The Federal Reserve Board oversees state-chartered Federal Reserve member banks, state-chartered foreign bank branches or agencies, foreign banks without insured U.S. branches, certain Federal Reserve Act entities, bank holding companies and most of their subsidiaries, and, after a specified transfer date, savings and loan holding companies and most of their subsidiaries. The Office of the Comptroller of the Currency oversees national banks, federally chartered foreign bank branches or agencies, and federal savings associations. The Federal Deposit Insurance Corporation oversees state-chartered banks that aren't Federal Reserve members and state savings associations. The Farm Credit Administration oversees institutions chartered under the Farm Credit Act of 1971. The Federal Housing Finance Agency oversees regulated entities as defined under a specific housing finance law (title 12, section 4502). (40) Registered entity — This means: a board of trade designated as a contract market under section 7; a derivatives clearing organization registered under section 7a–1; a board of trade designated as a contract market under section 7b–1; a swap execution facility registered under section 7b–3; a swap data repository registered under section 24a; and, for a contract the Commission decides is a "significant price discovery contract," any electronic trading facility where that contract is executed or traded. (41) Security — This term borrows its meaning from the Securities Act of 1933 or the Securities Exchange Act of 1934. (42) Security-based swap — This term borrows its meaning directly from the Securities Exchange Act of 1934. (43) Security-based swap dealer — This term borrows its meaning directly from the Securities Exchange Act of 1934. (44) Security future — This is a futures contract for a single security or a narrow-based security index, including any interest in it or based on its value. It excludes securities that were exempted under a specific older provision of the Securities Exchange Act (as that provision read on January 11, 1983) — except that municipal securities, as defined under that same older law, are not covered by this exclusion and so can still count as security futures. It also does not include any agreement, contract, or transaction excluded from this chapter under several other specifically listed sections. (45) Security futures product — This means a security future itself, or any put, call, straddle, option, or similar privilege on a security future. (46) Significant price discovery contract — This means an agreement, contract, or transaction covered by section 2(h)(5) of this title. (47) Swap — This is a broad, detailed definition. Generally, a "swap" is an agreement, contract, or transaction that does at least one of these things: it's an option-like deal (a put, call, cap, floor, collar, or similar) for the purchase, sale, or value of interest rates, currencies, commodities, securities, debt instruments, indexes, or similar financial or economic interests or property; it provides for a payment or delivery (other than an ordinary stock dividend) that depends on whether some event or contingency happens, tied to a financial, economic, or commercial consequence; or it's a deal to exchange, on a fixed or contingent basis, future payments based on the value or level of those same kinds of interests, transferring financial risk between the parties without also transferring current or future ownership of the underlying asset or liability — this specifically includes many named deals, such as interest rate swaps, rate floors/caps/collars, cross-currency and basis swaps, currency swaps, foreign exchange swaps, total return swaps, equity and debt index swaps, credit spreads and credit default swaps, weather, energy, metal, agricultural, emissions, and commodity swaps. It also includes any agreement, contract, or transaction commonly known in the trade as a swap (even if not named above); certain security-based swap agreements as defined under the Gramm-Leach-Bliley Act, where a material term depends on the price, yield, value, or volatility of a security or group of securities; and any combination, permutation, or option on any of the deals described above. Several things are excluded from "swap": ordinary futures contracts (or options on them), leverage contracts, security futures products, and certain other specifically described transactions; ordinary deferred-shipment or deferred-delivery sales of a nonfinancial commodity or security meant to be physically settled; puts, calls, straddles, options, or similar privileges on securities, certificates of deposit, or groups of securities that are already regulated under the Securities Act of 1933 and the Securities Exchange Act of 1934; foreign-currency options traded on a registered national securities exchange; fixed-basis securities purchase/sale agreements regulated under those same two securities laws; contingent-basis securities purchase/sale agreements regulated under those same laws, unless the contingency is tied to the creditworthiness of someone other than a party to the deal; notes, bonds, or debt instruments that are themselves securities; agreements based on a security that an issuer enters into (directly or through an underwriter) to raise capital, unless the deal is used to manage a risk tied to that capital raising; agreements where the other party is a Federal Reserve bank, the federal government, or a federal agency backed by the full faith and credit of the United States; and, generally, security-based swaps — except for the "mixed swap" category described below. A master agreement covering multiple deals counts as a "swap" only for the specific parts of it that are themselves swaps under this definition — not for parts that aren't. A "mixed swap" is a security-based swap (as defined under the Securities Exchange Act) that also depends on the value of things like interest rates, currencies, commodities, or debt instruments (other than a single security or a narrow-based security index), or on an event tied to a financial, commercial, or economic consequence. Foreign exchange swaps and forwards count as regulated "swaps" under this definition by default, unless the Secretary of the Treasury makes a written determination that they should not be regulated as swaps and are not being used to evade the Dodd-Frank Act. Any such determination must be sent to the relevant Congressional agriculture committees and is not effective until then. Even with such a determination, all foreign exchange swaps and forwards must still be reported to a swap data repository (or to the Commission, if no repository will accept them), and any swap dealer or major swap participant trading them must still follow the business conduct standards in section 6s(h). Even with a Treasury exemption, a foreign exchange swap or forward that is traded on a designated contract market or swap execution facility, or cleared by a derivatives clearing organization, is never exempt from this chapter's antifraud and antimanipulation rules — and the exemption does not limit the Commission's jurisdiction over retail foreign-currency transactions under section 2(c)(2). (48) Swap data repository — This is any person who collects and keeps records about swap transactions, positions, or terms and conditions for third parties, in order to provide a centralized recordkeeping facility for swaps. (49) Swap dealer — This is generally someone who holds themselves out as a dealer in swaps, makes a market in swaps, regularly enters into swaps with counterparties as an ordinary course of business for their own account, or otherwise engages in activity that makes them commonly known in the trade as a swap dealer or market maker — except that an insured depository institution is never a swap dealer just because it offers a swap to a customer in connection with originating a loan for that customer. A single company can be designated a swap dealer for one type, class, or category of swap or activity, while not being considered one for other types, classes, or categories. The definition excludes someone who enters into swaps for their own account — individually or as a fiduciary — but not as part of a regular business. The Commission must also exempt from swap dealer status any entity that does only a small ("de minimis") amount of swap dealing connected to its customers, and the Commission must write rules setting the factors for making that determination. (50) Swap execution facility — This is a trading system or platform where multiple participants can execute or trade swaps by accepting bids and offers from other participants, using any means of interstate commerce, including any trading facility that facilitates swap trading between people and that is not a designated contract market. (51) Trading facility — This generally means a person or group of persons that runs a physical or electronic facility or system where multiple participants can execute or trade agreements, contracts, or transactions, either by accepting bids or offers open to multiple participants, or through the interaction of multiple bids and offers under a pre-set, non-discretionary automated matching and execution algorithm. It does NOT include: a person or group that merely provides an electronic system letting participants negotiate and enter one-on-one deals through direct communication, rather than through automatic matching of multiple bids and offers; a government securities dealer or broker, to the extent it trades government securities or helps others negotiate, enter, or trade such securities; or a facility where the bids, offers, and acceptances aren't actually binding. Any person, group, dealer, broker, or facility falling into one of these exclusions is automatically excluded from being a "trading facility," without needing prior Commission approval. Also, a person or group that would not otherwise count as a trading facility does not become one merely by submitting already-executed trades to a derivatives clearing organization.