7 U.S.C. § 7 — Designation of boards of trade as contract markets

(a) Applications A board of trade applying to become a contract market must submit an application with whatever relevant materials and records the Commission requires. (b) Repealed. Congress repealed this subsection in 2010 (Pub. L. 111-203, title VII, § 735(a)). (c) Existing contract markets A board of trade already designated as a contract market on December 21, 2000, keeps that designation under this section. (d) Core principles for contract markets (1) To be designated — and stay designated — as a contract market, a board of trade must follow every core principle in this subsection plus any rule the Commission adds under section 12a(5). Unless the Commission says otherwise, the board of trade has reasonable freedom to decide exactly how it meets each core principle. The core principles are: (2) Compliance with rules. The board of trade must create, monitor, and enforce its own rules — covering who can access the market, the terms of contracts traded there, and bans on abusive trading. It must be able to detect, investigate, and punish rule violations, and its rules must let it get any information it needs to do this, including through international information-sharing deals the Commission requires. (3) Contracts not readily subject to manipulation. It can only list contracts that aren't easily manipulated. (4) Prevention of market disruption. It must be able to prevent manipulation, price distortion, and disruption of delivery or cash settlement — through real-time trade monitoring and accurate trade reconstructions, among other tools. (5) Position limitations or accountability. It must adopt position limits or position-accountability rules for speculators, as needed, to reduce manipulation or congestion risk (especially near delivery). If the Commission has set a position limit for a contract, the board's own limit can't be higher. (6) Emergency authority. Working with the Commission, it must adopt rules for emergency powers — to liquidate or transfer open positions, suspend or limit trading, or impose special margin requirements. (7) Availability of general information. It must give market authorities, participants, and the public accurate information about contract terms and about the rules and systems (including its electronic matching or trade-execution platform) used to execute trades. (8) Daily publication of trading information. It must publish daily settlement prices, volume, open interest, and opening/closing price ranges for actively traded contracts. (9) Execution of transactions. It must run a competitive, open, efficient market that protects price discovery. Its rules may allow, for legitimate business reasons, transfer or office trades; exchanges of futures for cash commodities, swaps, or cash-commodity transactions; and futures commission merchants confirming trades that get reported, recorded, or cleared under the market's or a clearing organization's rules. (10) Trade information. It must keep rules for recording and safely storing all trade-identifying information, so it can help prevent abuse and prove rule violations. (11) Financial integrity of transactions. It must enforce rules ensuring the financial integrity of trades (including clearing and settlement with a derivatives clearing organization) and rules ensuring the financial soundness of futures commission merchants and introducing brokers and the protection of customer funds. (12) Protection of markets and market participants. It must enforce rules protecting the market and its participants from abusive practices — including by anyone acting as an agent — and promoting fair, equitable trading. (13) Disciplinary procedures. It must enforce procedures to discipline, suspend, or expel members or participants who break its rules, or use similar methods, including by delegating this to third parties. (14) Dispute resolution. It must enforce rules and offer facilities for alternative dispute resolution for participants and market intermediaries. (15) Governance fitness standards. It must set fitness standards for directors, disciplinary-committee members, market members, and anyone else with direct access to the facility (including their affiliates). (16) Conflicts of interest. It must enforce rules that minimize conflicts of interest in its decision-making and that create a process for resolving them. (17) Composition of governing boards. Its governance structure must be designed to let market participants' views be considered. (18) Recordkeeping. It must keep records of all its business activities, in a form the Commission accepts, for at least 5 years. (19) Antitrust considerations. Unless necessary for this chapter's purposes, it can't adopt rules or take actions that unreasonably restrain trade or place a material anticompetitive burden on trading. (20) System safeguards. It must run a program to identify and reduce operational risk through controls and reliable, secure, scalable automated systems; keep emergency procedures, backup facilities, and a disaster-recovery plan for timely resumption of operations; and periodically test that backups can keep order processing, trade matching, price reporting, market surveillance, and audit trails running. (21) Financial resources. It must have enough financial, operational, and managerial resources to do its job. Its financial resources count as adequate if they exceed what it would cost to run the market for a full year, calculated on a rolling basis. (22) Diversity of board of directors. If it's a publicly traded company, it must try to recruit board and other decision-making-body members from a broad, culturally diverse pool of qualified candidates. (23) Securities and Exchange Commission. It must keep records relating to swaps defined in section 1a(47)(A)(v) open to SEC inspection. (e) Current agricultural commodities (1) Subject to paragraph (2), a future-delivery contract for an agricultural commodity listed in section 1a(9) that was tradeable on a contract market as of December 21, 2000, can only be traded on a contract market designated under this section. (2) To encourage responsible financial innovation and fair competition, the Commission — after notice, public comment, and a hearing opportunity, on someone's application — can write rules letting these future-delivery contracts (or options on them) be offered and sold on a derivatives transaction execution facility instead.