7 USC § 6c - Prohibited transactions
(a)
In general
(1)
Prohibition
It shall be unlawful for any person to offer to enter into, enter into, or confirm the execution of a transaction described in paragraph (2) involving the purchase or sale of any commodity for future delivery (or any option on such a transaction or option on a commodity) or swap if the transaction is used or may be used to—
(2)
Transaction
A transaction referred to in paragraph (1) is a transaction that—
(3)
Contract of sale
It shall be unlawful for any employee or agent of any department or agency of the Federal Government or any Member of Congress or employee of Congress (as such terms are defined under section 2 of the STOCK Act) or any judicial officer or judicial employee (as such terms are defined, respectively, under section 2 of the STOCK Act) who, by virtue of the employment or position of the Member, officer, employee or agent, acquires information that may affect or tend to affect the price of any commodity in interstate commerce, or for future delivery, or any swap, and which information has not been disseminated by the department or agency of the Federal Government holding or creating the information or by Congress or by the judiciary in a manner which makes it generally available to the trading public, or disclosed in a criminal, civil, or administrative hearing, or in a congressional, administrative, or Government Accountability Office report, hearing, audit, or investigation, to use the information in his personal capacity and for personal gain to enter into, or offer to enter into—
(4)
Nonpublic information
(A)
Imparting of nonpublic information
It shall be unlawful for any employee or agent of any department or agency of the Federal Government or any Member of Congress or employee of Congress or any judicial officer or judicial employee who, by virtue of the employment or position of the Member, officer, employee or agent, acquires information that may affect or tend to affect the price of any commodity in interstate commerce, or for future delivery, or any swap, and which information has not been disseminated by the department or agency of the Federal Government holding or creating the information or by Congress or by the judiciary in a manner which makes it generally available to the trading public, or disclosed in a criminal, civil, or administrative hearing, or in a congressional, administrative, or Government Accountability Office report, hearing, audit, or investigation, to impart the information in his personal capacity and for personal gain with intent to assist another person, directly or indirectly, to use the information to enter into, or offer to enter into—
(B)
Knowing use
It shall be unlawful for any person who receives information imparted by any employee or agent of any department or agency of the Federal Government or any Member of Congress or employee of Congress or any judicial officer or judicial employee as described in subparagraph (A) to knowingly use such information to enter into, or offer to enter into—
(C)
Theft of nonpublic information
It shall be unlawful for any person to steal, convert, or misappropriate, by any means whatsoever, information held or created by any department or agency of the Federal Government or by Congress or by the judiciary that may affect or tend to affect the price of any commodity in interstate commerce, or for future delivery, or any swap, where such person knows, or acts in reckless disregard of the fact, that such information has not been disseminated by the department or agency of the Federal Government holding or creating the information or by Congress or by the judiciary in a manner which makes it generally available to the trading public, or disclosed in a criminal, civil, or administrative hearing, or in a congressional, administrative, or Government Accountability Office report, hearing, audit, or investigation, and to use such information, or to impart such information with the intent to assist another person, directly or indirectly, to use such information to enter into, or offer to enter into—
(ii)
an option (other than an option executed or traded on a national securities exchange registered pursuant to section
78f
(a) of title
15); or
(iii)
a swap, provided, however, that nothing in this subparagraph shall preclude a person that has provided information concerning, or generated by, the person, its operations or activities, to any employee or agent of any department or agency of the Federal Government, to Congress, any Member of Congress, any employee of Congress, any judicial officer, or any judicial employee, voluntarily or as required by law, from using such information to enter into, or offer to enter into, a contract of sale, option, or swap described in clauses
[1]
(i), (ii), or (iii).
(5)
Disruptive practices
It shall be unlawful for any person to engage in any trading, practice, or conduct on or subject to the rules of a registered entity that—
(b)
Regulated option trading
No person shall offer to enter into, enter into or confirm the execution of, any transaction involving any commodity regulated under this chapter which is of the character of, or is commonly known to the trade as, an “option”, “privilege”, “indemnity”, “bid”, “offer”, “put”, “call”, “advance guaranty”, or “decline guaranty”, contrary to any rule, regulation, or order of the Commission prohibiting any such transaction or allowing any such transaction under such terms and conditions as the Commission shall prescribe. Any such order, rule, or regulation may be made only after notice and opportunity for hearing, and the Commission may set different terms and conditions for different markets.
(c)
Regulations for elimination of pilot status of commodity option transactions; terms and conditions of options trading
Not later than 90 days after November 10, 1986, the Commission shall issue regulations—
(d)
Dealer options exempt from subsections (b) and (c) prohibitions; requirements
Notwithstanding the provisions of subsection (c) of this section—
(1)
any person domiciled in the United States who on May 1, 1978, was in the business of granting an option on a physical commodity, other than a commodity specifically set forth in section
2
(a) of this title prior to October 23, 1974, and was in the business of buying, selling, producing, or otherwise using that commodity, may continue to grant or issue options on that commodity in accordance with Commission regulations in effect on August 17, 1978, until thirty days after the effective date of regulations issued by the Commission under clause (2) of this subsection: Provided, That if such person files an application for registration under the regulations issued under clause (2) of this subsection within thirty days after the effective date of such regulations, that person may continue to grant or issue options pending a final determination by the Commission on the application; and
(2)
the Commission shall issue regulations that permit grantors and futures commission merchants to offer to enter into, enter into, or confirm the execution of, any commodity option transaction on a physical commodity subject to the provisions of subsection (b) of this section, other than a commodity specifically set forth in section
2
(a) of this title prior to October 23, 1974, if—
(A)
the grantor is a person domiciled in the United States who—
(ii)
at all times has a net worth of at least $5,000,000 certified annually by an independent public accountant using generally accepted accounting principles;
(iii)
notifies the Commission and every futures commission merchant offering the grantor’s option if the grantor knows or has reason to believe that the grantor’s net worth has fallen below $5,000,000;
(iv)
segregates daily, exclusively for the benefit of purchasers, money, exempted securities (within the meaning of section
78c
(a)(12) of title
15), commercial paper, bankers’ acceptances, commercial bills, or unencumbered warehouse receipts, equal to an amount by which the value of each transaction exceeds the amount received or to be received by the grantor for such transaction;
(B)
the futures commission merchant is a person who—
(ii)
treats and deals with all money, securities, or property received from its customers as payment of the purchase price in connection with such transactions, as belonging to such customers until the expiration of the term of the option, or, if the customer exercises the option, until all rights of the customer under the commodity option transaction have been fulfilled;
(C)
the grantor and futures commission merchant comply with any additional uniform and reasonable terms and conditions the Commission may prescribe, including registration with the Commission.
The Commission may permit persons not domiciled in the United States to grant options under this subsection, other than options on a commodity specifically set forth in section
2
(a) of this title prior to October 23, 1974, under such additional rules, regulations, and orders as the Commission may adopt to provide protection to purchasers that are substantially the equivalent of those applicable to grantors domiciled in the United States. The Commission may terminate the right of any person to grant, offer, or sell options under this subsection only after a hearing, including a finding that the continuation of such right is contrary to the public interest: Provided, That pending the completion of such termination proceedings, the Commission may suspend the right to grant, offer, or sell options of any person whose activities in the Commission’s judgment present a substantial risk to the public interest.
(e)
Rules and regulations
The Commission may adopt rules and regulations, after public notice and opportunity for a hearing on the record, prohibiting the granting, issuance, or sale of options permitted under subsection (d) of this section if the Commission determines that such options are contrary to the public interest.
(f)
Nonapplicability to foreign currency options
Nothing in this chapter shall be deemed to govern or in any way be applicable to any transaction in an option on foreign currency traded on a national securities exchange.
(g)
Oral orders
The Commission shall adopt rules requiring that a contemporaneous written record be made, as practicable, of all orders for execution on the floor or subject to the rules of each contract market or derivatives transaction execution facility placed by a member of the contract market or derivatives transaction execution facility who is present on the floor at the time such order is placed.
[1] So in original. Probably should be “clause”.
(a)
In general
(1)
Prohibition
It shall be unlawful for any person to offer to enter into, enter into, or confirm the execution of a transaction described in paragraph (2) involving the purchase or sale of any commodity for future delivery (or any option on such a transaction or option on a commodity) or swap if the transaction is used or may be used to—
(2)
Transaction
A transaction referred to in paragraph (1) is a transaction that—
(3)
Contract of sale
It shall be unlawful for any employee or agent of any department or agency of the Federal Government who, by virtue of the employment or position of the employee or agent, acquires information that may affect or tend to affect the price of any commodity in interstate commerce, or for future delivery, or any swap, and which information has not been disseminated by the department or agency of the Federal Government holding or creating the information in a manner which makes it generally available to the trading public, or disclosed in a criminal, civil, or administrative hearing, or in a congressional, administrative, or Government Accountability Office report, hearing, audit, or investigation, to use the information in his personal capacity and for personal gain to enter into, or offer to enter into—
(4)
Nonpublic information
(A)
Imparting of nonpublic information
It shall be unlawful for any employee or agent of any department or agency of the Federal Government who, by virtue of the employment or position of the employee or agent, acquires information that may affect or tend to affect the price of any commodity in interstate commerce, or for future delivery, or any swap, and which information has not been disseminated by the department or agency of the Federal Government holding or creating the information in a manner which makes it generally available to the trading public, or disclosed in a criminal, civil, or administrative hearing, or in a congressional, administrative, or Government Accountability Office report, hearing, audit, or investigation, to impart the information in his personal capacity and for personal gain with intent to assist another person, directly or indirectly, to use the information to enter into, or offer to enter into—
(B)
Knowing use
It shall be unlawful for any person who receives information imparted by any employee or agent of any department or agency of the Federal Government as described in subparagraph (A) to knowingly use such information to enter into, or offer to enter into—
(C)
Theft of nonpublic information
It shall be unlawful for any person to steal, convert, or misappropriate, by any means whatsoever, information held or created by any department or agency of the Federal Government that may affect or tend to affect the price of any commodity in interstate commerce, or for future delivery, or any swap, where such person knows, or acts in reckless disregard of the fact, that such information has not been disseminated by the department or agency of the Federal Government holding or creating the information in a manner which makes it generally available to the trading public, or disclosed in a criminal, civil, or administrative hearing, or in a congressional, administrative, or Government Accountability Office report, hearing, audit, or investigation, and to use such information, or to impart such information with the intent to assist another person, directly or indirectly, to use such information to enter into, or offer to enter into—
(ii)
an option (other than an option executed or traded on a national securities exchange registered pursuant to section
78f
(a) of title
15); or
(iii)
a swap, provided, however, that nothing in this subparagraph shall preclude a person that has provided information concerning, or generated by, the person, its operations or activities, to any employee or agent of any department or agency of the Federal Government, voluntarily or as required by law, from using such information to enter into, or offer to enter into, a contract of sale, option, or swap described in clauses
[1]
(i), (ii), or (iii).
(5)
Disruptive practices
It shall be unlawful for any person to engage in any trading, practice, or conduct on or subject to the rules of a registered entity that—
(b)
Regulated option trading
No person shall offer to enter into, enter into or confirm the execution of, any transaction involving any commodity regulated under this chapter which is of the character of, or is commonly known to the trade as, an “option”, “privilege”, “indemnity”, “bid”, “offer”, “put”, “call”, “advance guaranty”, or “decline guaranty”, contrary to any rule, regulation, or order of the Commission prohibiting any such transaction or allowing any such transaction under such terms and conditions as the Commission shall prescribe. Any such order, rule, or regulation may be made only after notice and opportunity for hearing, and the Commission may set different terms and conditions for different markets.
(c)
Regulations for elimination of pilot status of commodity option transactions; terms and conditions of options trading
Not later than 90 days after November 10, 1986, the Commission shall issue regulations—
(d)
Dealer options exempt from subsections (b) and (c) prohibitions; requirements
Notwithstanding the provisions of subsection (c) of this section—
(1)
any person domiciled in the United States who on May 1, 1978, was in the business of granting an option on a physical commodity, other than a commodity specifically set forth in section
2
(a) of this title prior to October 23, 1974, and was in the business of buying, selling, producing, or otherwise using that commodity, may continue to grant or issue options on that commodity in accordance with Commission regulations in effect on August 17, 1978, until thirty days after the effective date of regulations issued by the Commission under clause (2) of this subsection: Provided, That if such person files an application for registration under the regulations issued under clause (2) of this subsection within thirty days after the effective date of such regulations, that person may continue to grant or issue options pending a final determination by the Commission on the application; and
(2)
the Commission shall issue regulations that permit grantors and futures commission merchants to offer to enter into, enter into, or confirm the execution of, any commodity option transaction on a physical commodity subject to the provisions of subsection (b) of this section, other than a commodity specifically set forth in section
2
(a) of this title prior to October 23, 1974, if—
(A)
the grantor is a person domiciled in the United States who—
(ii)
at all times has a net worth of at least $5,000,000 certified annually by an independent public accountant using generally accepted accounting principles;
(iii)
notifies the Commission and every futures commission merchant offering the grantor’s option if the grantor knows or has reason to believe that the grantor’s net worth has fallen below $5,000,000;
(iv)
segregates daily, exclusively for the benefit of purchasers, money, exempted securities (within the meaning of section
78c
(a)(12) of title
15), commercial paper, bankers’ acceptances, commercial bills, or unencumbered warehouse receipts, equal to an amount by which the value of each transaction exceeds the amount received or to be received by the grantor for such transaction;
(B)
the futures commission merchant is a person who—
(ii)
treats and deals with all money, securities, or property received from its customers as payment of the purchase price in connection with such transactions, as belonging to such customers until the expiration of the term of the option, or, if the customer exercises the option, until all rights of the customer under the commodity option transaction have been fulfilled;
(C)
the grantor and futures commission merchant comply with any additional uniform and reasonable terms and conditions the Commission may prescribe, including registration with the Commission.
The Commission may permit persons not domiciled in the United States to grant options under this subsection, other than options on a commodity specifically set forth in section
2
(a) of this title prior to October 23, 1974, under such additional rules, regulations, and orders as the Commission may adopt to provide protection to purchasers that are substantially the equivalent of those applicable to grantors domiciled in the United States. The Commission may terminate the right of any person to grant, offer, or sell options under this subsection only after a hearing, including a finding that the continuation of such right is contrary to the public interest: Provided, That pending the completion of such termination proceedings, the Commission may suspend the right to grant, offer, or sell options of any person whose activities in the Commission’s judgment present a substantial risk to the public interest.
(e)
Rules and regulations
The Commission may adopt rules and regulations, after public notice and opportunity for a hearing on the record, prohibiting the granting, issuance, or sale of options permitted under subsection (d) of this section if the Commission determines that such options are contrary to the public interest.
(f)
Nonapplicability to foreign currency options
Nothing in this chapter shall be deemed to govern or in any way be applicable to any transaction in an option on foreign currency traded on a national securities exchange.
(g)
Oral orders
The Commission shall adopt rules requiring that a contemporaneous written record be made, as practicable, of all orders for execution on the floor or subject to the rules of each contract market or derivatives transaction execution facility placed by a member of the contract market or derivatives transaction execution facility who is present on the floor at the time such order is placed.
[1] So in original. Probably should be “clause”.
Source
(Sept. 21, 1922, ch. 369, § 4c, as added June 15, 1936, ch. 545, § 5,49 Stat. 1494; amended Pub. L. 93–463, title I, § 103(a), title IV, § 402,Oct. 23, 1974, 88 Stat. 1392, 1412; Pub. L. 95–405, § 3,Sept. 30, 1978, 92 Stat. 867; Pub. L. 97–444, title I, § 102, title II, § 206,Jan. 11, 1983, 96 Stat. 2296, 2301; Pub. L. 99–641, title I, § 102,Nov. 10, 1986, 100 Stat. 3557; Pub. L. 102–546, title II, § 203(a), title IV, § 402(4),Oct. 28, 1992, 106 Stat. 3600, 3624; Pub. L. 106–554, § 1(a)(5) [title I, §§ 109,
123
(a)(6)], Dec. 21, 2000, 114 Stat. 2763, 2763A–383, 2763A–407; Pub. L. 111–203, title VII, §§ 741(b)(2),
746,
747,July 21, 2010, 124 Stat. 1731, 1737, 1739.)
Amendments
2010—Subsec. (a)(1). Pub. L. 111–203, § 741(b)(2), inserted “or swap” before “if the transaction is used or may be used”.
Subsec. (a)(3), (4). Pub. L. 111–203, § 746, added pars. (3) and (4).
Subsec. (a)(5) to (7). Pub. L. 111–203, § 747, added pars. (5) to (7).
2000—Pub. L. 106–554, § 1(a)(5) [title I, § 109], inserted section catchline.
Subsec. (a). Pub. L. 106–554, § 1(a)(5) [title I, § 109], added subsec. (a) and struck out former subsec. (a) which read as follows: “It shall be unlawful for any person to offer to enter into, enter into, or confirm the execution of, any transaction involving any commodity, which is or may be used for (1) hedging any transaction in interstate commerce in such commodity or the products or byproducts thereof, or (2) determining the price basis of any such transaction in interstate commerce in such commodity, or (3) delivering any such commodity sold, shipped, or received in interstate commerce for the fulfillment thereof—
“(A) if such transaction is, is of the character of, or is commonly known to the trade as, a ‘wash sale,’ ‘cross trade,’ or ‘accommodation trade,’ or is a fictitious sale; or
“(B) if such transaction is used to cause any price to be reported, registered, or recorded which is not a true and bona fide price.
Nothing in this section shall be construed to prevent the exchange of futures in connection with cash commodity transactions or of futures for cash commodities, or of transfer trades or office trades if made in accordance with board of trade rules applying to such transactions and such rules shall have been approved by the Commission.”
Subsec. (g). Pub. L. 106–554, § 1(a)(5) [title I, § 123(a)(6)], inserted “or derivatives transaction execution facility” after “contract market” in two places.
1992—Subsec. (d)(2). Pub. L. 102–546, § 402(4), made technical amendments to references to section
78c
(a)(12) of title
15 in subpar. (A)(iv) and to section
2
(a) of this title in concluding provisions.
Subsec. (g). Pub. L. 102–546, § 203(a), added subsec. (g).
1986—Subsec. (c). Pub. L. 99–641, amended subsec. (c) generally, substituting provisions relating to regulations to eliminate pilot status of program for commodity option transactions for provisions relating to commodity option transactions, pilot program and permanent authorization, conditions ending prohibition, and excepted persons.
1983—Subsec. (a)(B), (C). Pub. L. 97–444, § 206(1), redesignated par. (C) as (B). Former par. (B), relating to transactions involving any commodity specifically set forth in section
2
(a) of this title, prior to October 23, 1974, if such transactions were of the character of, or were commonly known to the trade as, an “option”, “privilege”, “indemnity”, “bid”, “offer”, “put”, “call”, “advance guaranty”, or “decline guaranty”, was struck out.
Subsec. (b). Pub. L. 97–444, § 206(2), in revising section generally, struck out references to any transaction subject to provisions of subsection (a) of this section and to any commodity not specifically set forth in section
2
(a) of this title, prior to October 23, 1974, and struck out “within one year after the effective date of the Commodity Futures Trading Commission Act of 1974 unless the Commission determines and notifies the Senate Committee on Agriculture, Nutrition, and Forestry and the House Committee on Agriculture that it is unable to prescribe such terms and conditions within such period of time:” after “such terms and conditions as the Commission shall prescribe”.
Subsec. (c). Pub. L. 97–444, § 206(3), inserted “With respect to any commodity regulated under this chapter and specifically set forth in section
2
(a) of this title prior to October 23, 1974, the Commission may, pursuant to the procedures set forth in this subsection, establish a pilot program for a period not to exceed three years to permit such commodity option transactions. The Commission may authorize commodity option transactions during the pilot program in as many commodities as will provide an adequate test of the trading of such option transactions. After completion of the pilot program, the Commission may authorize commodity option transactions without regard to the restrictions in the pilot program after the Commission transmits to the House Committee on Agriculture and the Senate Committee on Agriculture, Nutrition, and Forestry the documentation required under clause (1) of the first sentence of this subsection and the expiration of thirty calendar days of continuous session of Congress after the date of such transmittal.”
Subsec. (d)(1). Pub. L. 97–444, § 206(4)(A), inserted “, other than a commodity specifically set forth in section
2
(a) of this title prior to October 23, 1974,” after “physical commodity”.
Subsec. (d)(2). Pub. L. 97–444, § 206(4)(B), inserted “, other than a commodity specifically set forth in section
2
(a) of this title prior to October 23, 1974,” after “subsection (b) of this section” in provisions preceding subpar. (A).
Pub. L. 97–444, § 206(4)(C), inserted “, other than options on a commodity specifically set forth in section
2
(a) of this title prior to October 23, 1974,” after “The Commission may permit persons not domiciled in the United States to grant options under this subsection” in provisions following par. (2).
Subsec. (f). Pub. L. 97–444, § 102, added subsec. (f).
1978—Subsec. (a). Pub. L. 95–405, § 3(1), in provisions following par. (C) substituted “have been approved” for “not have been disapproved”.
Subsec. (b). Pub. L. 95–405, § 3(2), substituted “Senate Committee on Agriculture, Nutrition, and Forestry” for “Senate Committee on Agriculture and Forestry”.
Subsecs. (c) to (e). Pub. L. 95–405, § 3(3), added subsecs. (c) to (e).
1974—Subsec. (a). Pub. L. 93–463, §§ 103(a),
402
(a), (b), (d), designated existing provisions as subsec. (a), in par. (B) of subsec. (a) as so designated inserted “if such transaction involves any commodity specifically set forth in section
2
(a) of this title, prior to the enactment of the Commodity Futures Trading Commission Act of 1974, and” and “option”, and in provisions following par. (C), struck out provisions prohibiting a construction of this section or section
6b of this title which would impair any State law applicable to any transaction enumerated or described in this section or section
6b of this title and substituted “Commission” for “Secretary of Agriculture”.
Subsec. (b). Pub. L. 93–463, § 402(c), added subsec. (b).
Effective Date of 2010 Amendment
Amendment by Pub. L. 111–203effective on the later of 360 days after July 21, 2010, or, to the extent a provision of subtitle A (§§ 711–754) of title VII of Pub. L. 111–203requires a rulemaking, not less than 60 days after publication of the final rule or regulation implementing such provision of subtitle A, see section 754 ofPub. L. 111–203, set out as a note under section
1a of this title.
Effective Date of 1992 Amendment
Section 203(b) ofPub. L. 102–546provided that: “The Commission shall adopt the rules required by the amendment made under subsection (a) [amending this section] within two hundred and seventy days after the date of enactment of this Act [Oct. 28, 1992].”
Effective Date of 1983 Amendment
Amendment by Pub. L. 97–444effective Jan. 11, 1983, see section 239 ofPub. L. 97–444, set out as a note under section
2 of this title.
Effective Date of 1978 Amendment
Amendment by Pub. L. 95–405effective Oct. 1, 1978, see section 28 ofPub. L. 95–405, set out as a note under section
2 of this title.
Effective Date of 1974 Amendment
For effective date of amendment by Pub. L. 93–463, see section 418 ofPub. L. 93–463, set out as a note under section
2 of this title.
Effective Date
For effective date of section, see section 13 of act June 15, 1936, set out as an Effective Date of 1936 Amendment note under section
1 of this title.
The table below lists the classification updates, since Jan. 3, 2012, for this section. Updates to a broader range of sections may be found at the update page for containing chapter, title, etc.
The most recent Classification Table update that we have noticed was Wednesday, May 29, 2013
An empty table indicates that we see no relevant changes listed in the classification tables. If you suspect that our system may be missing something, please double-check with the Office of the Law Revision Counsel.
| 7 USC | Description of Change | Session Year | Public Law | Statutes at Large |
|---|---|---|---|---|
| § 6c | 2012 | 112-105 [Sec.] 5 | 126 Stat. 293 |
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