article: SECTION 1. SHORT TITLE. This Act may be cited as the ``National Cheese Exchange Oversight and Improvement Act of 1997''. SEC. 2. FINDINGS. The Congress finds that the operation of the National Cheese Exchange and other cash markets is of national concern and in need of Federal oversight because of the following: (1) The National Cheese Exchange, located in Green Bay, Wisconsin, is the dominant cash market for bulk cheese in the United States. (2) While less than 1 percent of the cheese produced in the United States is sold on the National Cheese Exchange, the price determined by the National Cheese Exchange acts as a reference price for as much as 95 percent of the commercial cheese transactions conducted in the United States. (3) A 3-year federally funded investigation into the activities of the National Cheese Exchange determined that the National Cheese Exchange is very thinly traded, highly concentrated, completely unregulated, and subject to manipulation. (4) The Coffee, Sugar, and Cocoa Exchange in New York, an exchange regulated by the Commodity Futures Trading Commission, trades futures contracts for cheese. (5) The low volume in trading of cheese futures contracts on the Coffee, Sugar, and Cocoa Exchange is partially related to concerns about the lack of viability, and potential for manipulation, in the dominant cash market for cheese, the National Cheese Exchange. (6) The National Cheese Exchange is completely unregulated by any Federal or State agency. (7) The Commodity Futures Trading Commission claims a lack of authority to regulate or oversee the National Cheese Exchange and similar cash markets. SEC. 3. COMMODITY FUTURES TRADING COMMISSION REGULATION OF NATIONAL CHEESE EXCHANGE AND SIMILAR CASH MARKETS. The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by inserting after section 20 (7 U.S.C. 24) the following new section: ``SEC. 21. COMMISSION REGULATION OF NATIONAL CHEESE EXCHANGE AND SIMILAR CASH MARKETS. ``(a) Definition of Concentrated Cash Market.--In this section, the term `concentrated cash market' means-- ``(1) the National Cheese Exchange located in Green Bay, Wisconsin; and ``(2) a cash market for a commodity if the Commission determines that-- ``(A) the cash market is geographically centralized in the form of a market or exchange; ``(B) the cash market is very thinly traded or highly illiquid; ``(C) the price established by the cash market functions as a reference price for a majority of commercial transactions off the cash market for the commodity being traded; ``(D) trading in the cash market is concentrated among relatively few buyers and sellers; ``(E) the cash market is substantially unregulated by any other regulatory structure (including State regulation or self-regulation); ``(F) a futures market regulated under this Act also exists for the commodity that is being traded on the cash market; and ``(G) the instability, illiquidity, or potential for manipulation for on the cash market could be a deterrent to the use of the futures market for that commodity. ``(b) Regulation of Concentrated Cash Markets.--In consultation with the Secretary of Agriculture, the Commission shall regulate a concentrated cash market under this Act until such time as the Commission determines that the concentrated cash market is not functioning as a reference price for a majority of commercial transactions off the cash market for the commodity being traded on the concentrated cash market. ``(c) Submission and Review of Operating Rules.--The Commission shall require a cash market that is subject to this section to-- ``(1) Submission required.--The Commission shall require a concentrated cash market subject to regulation under subsection (b) to submit to the Commission for approval a set of rules governing the operation of the concentrated cash market; and ``(2) Time for submission.--In the case of the National Cheese Exchange, the operating rules required under this subsection shall be submitted not later than 90 days after the date of enactment of this section. In the case of other concentrated cash markets, the operating rules shall be submitted not later than 90 days after the date on which the Commission notifies the concentrated cash market that it is subject to regulation under this section. ``(3) Notification of commission action.--The Commission shall promptly review operating rules submitted by a concentrated cash market under this subsection to determine whether the rules are sufficient to govern the operation of the concentrated cash market. Not later than 60 days after receiving the rules from a concentrated cash market, the Commission shall notify the concentrated cash market of the result of the review, including whether the rules are approved or disapproved. If disapproved, the Commission shall provide such recommendations regarding changes to the rules as the Commission considers necessary to secure approval and provide a schedule for resubmission of the rules. ``(4) Subsequent rule changes.--A concentrated cash market may not change approved operating rules unless the proposed change is also submitted to the Commission for review and the Commission approves the change in the manner provided in paragraph (3). ``(d) Effect of Failure To Submit or Receive Approval of Rules.-- Beginning 1 year after the date of the enactment of this section, the National Cheese Exchange may operate only in accordance with rules approved by the Commission under subsection (c). In the case of other concentrated cash markets, beginning 1 year after the date on which the concentrated cash market is notified that it is subject to regulation under this section, the concentrated cash market may operate only in accordance with rules approved by the Commission under subsection (c).''.
summary: National Cheese Exchange Oversight and Improvement Act of 1997 - Amends the Commodity Exchange Act to direct the Commodity Futures Trading Commission to regulate a concentrated cash market (as defined by this Act), including the National Cheese Exchange in Green Bay, Wisconsin, until the Commission determines that the market is not functioning as a reference price for off-market transactions of the commodity being traded on such market.