[Federal Register: July 3, 2006 (Volume 71, Number 127)]
[Rules and Regulations]
[Page 37809-37822]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr03jy06-1]
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Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
Prices of new books are listed in the first FEDERAL REGISTER issue of each
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[[Page 37809]]
COMMODITY FUTURES TRADING COMMISSION
17 CFR Parts 1, 15, 16, 17, 18, 19, 21, and 37
RIN 3038-AC22
Market and Large Trader Reporting
AGENCY: Commodity Futures Trading Commission.
ACTION: Final rules.
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SUMMARY: The Commodity Futures Trading Commission is adopting new and
amended market and large trader reporting rules. The final rules
accomplish the following: Codify a reporting level for contracts based
on 3-Year U.S. Treasury Notes; clarify the reporting obligations of
registered derivatives transaction execution facilities and their
market participants; require designated contract markets to publicly
disseminate integrated volume data for each contract that separately
identifies the volume generated from block trades; establish a
reporting framework for exclusively self-cleared contracts; and
implement a number of conforming, clarifying, and technical amendments.
DATES: Effective July 3, 2006.
FOR FURTHER INFORMATION CONTACT: Gary Martinaitis, Associate Deputy
Director for Market Information, Market Surveillance Section (telephone
202.418.5209, e-mail gmartinaitis@cftc.gov), or Bruce Fekrat, Special
Counsel, Office of the Director (telephone 202.418.5578, e-mail
bfekrat@cftc.gov), Division of Market Oversight, Commodity Futures
Trading Commission, Three Lafayette Centre, 1155 21st Street, NW.,
Washington, DC 20581.
SUPPLEMENTARY INFORMATION:
I. Market and Large Trader Reporting Rules
The market and large trader reporting rules (reporting rules) are
contained in parts 15 through 21 of the Commission's regulations.\1\
Collectively, the reporting rules effectuate the Commission's market
and financial surveillance programs.\2\ The market surveillance
programs analyze market data to detect and prevent market disruptions
and enforce speculative position limits. The financial surveillance
programs use market data to measure the financial risks that large
contract positions may pose to Commission registrants and clearing
organizations.
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\1\ 17 CFR parts 15 to 21.
\2\ See 69 FR 76392 (December 21, 2004).
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The Commission's reporting rules are implemented partly pursuant to
the authority of sections 4a, 4c(b), 4g, and 4i of the Commodity
Exchange Act (Act or CEA).\3\ Section 4a of the Act permits the
Commission to set, approve exchange-set, and enforce speculative
position limits.\4\ Section 4c(b) of the Act gives the Commission
plenary authority to regulate transactions involving commodity
options.\5\ Section 4g of the Act imposes reporting and recordkeeping
obligations on registered entities, and obligates futures commission
merchants (FCMs), introducing brokers, floor brokers, and floor traders
to file such reports as the Commission may require on proprietary and
customer positions executed on any board of trade.\6\ Lastly, section
4i of the Act requires the filing of such reports as the Commission may
require when positions made or obtained on designated contract markets
or registered derivatives transaction execution facilities (DTEFs)
equal or exceed Commission-set levels.\7\
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\3\ 7 U.S.C. 1 et seq.
\4\ 7 U.S.C. 6a.
\5\ 7 U.S.C. 6c(b).
\6\ 7 U.S.C. 6g.
\7\ 7 U.S.C. 6i. In addition, CEA section 8a(5) is an enabling
provision that grants to the Commission the authority to adopt rules
that in its judgment are reasonably necessary to accomplish any of
the purposes of the Act. 7 U.S.C. 12a(5). Pursuant to CEA section
3(b), the Act seeks to ensure the financial integrity of regulated
transactions and prevent price manipulation and other disruptions to
market integrity. 7 U.S.C. 5(b). Together, these purposes warrant
the maintenance of an effective and vigorous system of market and
financial surveillance.
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II. Procedural Background
A. The Proposed Rules
On December 15, 2005, the Commission published a notice of proposed
rulemaking in the Federal Register for public comment.\8\ In that
notice, the Commission proposed new and amended reporting rules that
addressed recent market developments and clarified the application of
the reporting rules to transactions executed on DTEFs. The Commission
received one comment letter from the Chicago Mercantile Exchange
(CME).\9\ In its comment letter, the CME expressed general support for
the Commission's proposed rules. With two minor exceptions (a technical
amendment to Commission rule 37.2 and a revised definition of an
exclusively self-cleared contract), the Commission is adopting the new
and amended reporting rules as proposed. For this reason, the CME's
comments are discussed below in tandem with an overview of the final
reporting rules.
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\8\ 70 FR 74246.
\9\ Letter from Craig S. Donohue, Chief Executive Officer,
Chicago Mercantile Exchange, to Jean A. Webb, Secretary of the
Commission (February 13, 2006)(on file with the Commission),
available at http://www.cftc.gov/foia/comment05/foi05_009_1.htm.
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B. Overview of the Final Reporting Rules and CME Comments
The final rules effectuate several substantive changes to the
Commission's reporting rules. First, the final rules codify a reporting
level for 3-Year U.S. Treasury Note futures and option contracts (3-
Year T-Notes). The codification in Commission rule 15.03(b) is in
response to a designated contract market's listing of 3-Year T-Notes
and the possibility that other designated contract markets will seek to
offer 3-Year T-Notes for trading.
Second, the final rules clarify the application of the reporting
rules to transactions executed on DTEFs. In the interest of regulatory
clarity, the final rules define DTEFs directly into the reporting rules
and emphasize the Commission's discretion to exempt DTEFs and their
market participants from the reporting rules when necessary and
appropriate. In its comment letter, the CME stated that defining DTEFs
directly into the reporting rules would ``avert any ambiguity
regarding'' the application of the reporting rules to
[[Page 37810]]
DTEFs. The CME remarked that the lack of regulatory ambiguity would
discourage attempts to engage in regulatory arbitrage.
Third, the final reporting rules amend the public dissemination
requirement of Commission rule 16.01. The final reporting rules require
designated contract markets to present publicly disseminated market
information, when required to do so by rule 16.01, in a format that
readily enables the consideration of the data. The final reporting
rules also require designated contract markets to publicly disseminate,
for each contract, integrated volume data that separately identifies
the volume generated from block trades. In its comment letter, the CME
noted that integrated volume data that separately identifies the volume
generated from block trades improves the ability of market participants
to assess material variables such as a market's liquidity and the
utility of contracts as vehicles for hedging and price basing.
Lastly, the final rules establish a specific reporting framework
for contracts that are exclusively self-cleared. The final rules
address certain aspects of the reporting rules that do not comport well
with un-intermediated market structures. The final rules accomplish
this by placing the exchange in the regulatory position of large
traders with respect to any obligation to report under part 17 of the
Commission's regulations. In its comment letter, the CME emphasized the
relevance of large trader data to the protection of market integrity.
Furthermore, the CME stated that the Commission's reporting framework
struck an appropriate balance between relieving technical compliance
burdens and requiring the timely submission of vital trading data.
III. Establishing a Contract Reporting for Level 3-Year U.S. Treasury
Notes
The Commission's reporting rules require FCMs, foreign brokers, and
clearing members (collectively reporting firms) to identify and provide
daily position reports on customer and proprietary accounts that
maintain reportable positions.\10\ Positions in commodity futures and
option contracts become reportable when they equal or exceed the
reporting levels codified in Commission rule 15.03(b).\11\ Rule
15.03(b) establishes reporting levels for all contracts that are
subject to the Commission's reporting rules. Rule 15.03(b) applies
specified reporting levels to certain contracts and a standard default
reporting level of 25 to all other contracts.\12\ Since the default
contract reporting level is strictly set at 25, its application to some
newly listed contracts is (on occasion) inefficient from a regulatory
surveillance perspective.
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\10\ See 17 CFR part 17.
\11\ See 17 CFR 15.00 and 15.03. The firms that carry accounts
that become reportable are required to identify those accounts on
Form 102 and report positions in the accounts to the Commission. See
17 CFR 17.00 and 17.01. When necessary, the Commission separately
calls upon persons that own or control reportable positions (large
traders) to verify and supplement the submitted data in accordance
with part 18 of the Commission's regulations. See 17 CFR part 18.
\12\ With respect to liquid contracts, the Commission typically
calibrates contract reporting levels to ensure that the aggregate of
all positions reported to the Commission represents approximately 70
to 90 percent of the open interest in any given contract. The
Commission analyzes factors such as the terms and conditions of a
contract, its trading volume, its level of open interest, its
typical open position size, and the Commission's regulatory
experience with similar contracts prior to revising or codifying new
contract reporting levels in Commission rule 15.03(b). See 69 FR
76392, 76393 (December 21, 2004).
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U.S. Futures Exchange, LLC listed 3-Year T-Notes for trading in
January of 2005. As discussed in the proposed rules, rule 15.03(b) did
not at that time specify a reporting level for 3-Year T-Notes. In order
to employ regulatory resources more efficiently and lessen any undue
burden associated with the obligation to report, staff in the Division
of Market Oversight (DMO staff) granted no-action relief to reporting
firms and traders holding or controlling positions in 3-Year T-Notes
that, for the purpose of complying with the Commission's reporting
rules, adhered to a reporting level of 750 contracts instead of the
otherwise applicable default reporting level of 25.\13\ DMO staff
premised its grant of relief primarily on the conclusion that
historical trading in 2-Year T-Notes served as precedent for trading in
3-Year T-Notes.\14\ Based on the Commission's surveillance experience
with 2-Year T-Notes, the liquidity of the securities underlying
treasury futures and option contracts, and the securities available for
delivery against 3-Year T-Notes,\15\ the Commission is herein codifying
a reporting level of 750 contracts for 3-Year T-Notes.
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\13\ CFTC Staff Letter 05-03 Comm. Fut. L. Rep. (CCH) ] 30,024
(January 26, 2005).
\14\ Id. The contract reporting level for 2-Year T-Notes is
currently 1,000 contracts. 17 CFR 15.03(b).
\15\ The deliverable supply for the March 2005 3-Year T-Notes
had a value of approximately $95 billion.
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IV. Registered Derivatives Transaction Execution Facilities
A. Authority To Subject DTEFs to the Reporting Rules
As discussed in the proposed rules, the CEA, as amended by the
Commodity Futures Modernization Act of 2000 (CFMA),\16\ gives the
Commission the statutory authority to subject transactions on DTEFs to
the reporting rules.\17\ Section 4c(b) of the Act, regardless of the
venue of trading, gives the Commission plenary authority to regulate
transactions involving commodity options. Sections 4a and 4i of the Act
explicitly reference transactions executed on or subject to the rules
of DTEFs. Lastly, section 4g of the Act imposes reporting and
recordkeeping obligations on registered entities and certain Commission
registrants trading on registered entities and boards of trade. The
term registered entity is defined by CEA section 1a(29) to include
DTEFs.\18\ Likewise, section 1a(2) of the Act defines a board of trade
to include ``any organized exchange or other trading facility.'' \19\
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\16\ CFMA, Appendix E of Public Law 106-554, 114 Stat. 2763.
\17\ Although the Commission has received indications of
interest from potential DTEF applicants, no board of trade has
registered or applied for registration with the Commission as a
DTEF.
\18\ 7 U.S.C. 1a(29).
\19\ 7 U.S.C. 1a(2).
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B. Commission Rule 37.2
In 2001, the Commission adopted a series of DTEF rules in part 37
to effectuate the CFMA.\20\ With the exception of a limited grouping of
reserved rules, the Commission (in rule 37.2) exempted DTEFs and
transactions on DTEFs from all regulations otherwise pertinent to
trading facilities. By including parts 15 to 21 in the limited grouping
of reserved rules, the Commission, acting pursuant to its statutory
authority, unambiguously reserved the applicability of the reporting
rules to transactions executed on DTEFs.\21\ Although unambiguously
reserved, Commission rule 37.2 expressed the applicability of the
reporting rules to DTEFs and their market participants through
incorporation by reference and without substantial clarity. More
specifically, Commission rule 37.2 provided that DTEFs are not, as
applicable to the market, exempt from parts 15 to 21, and further
provided that parts 15 to 21, when applicable to DTEFs, shall be viewed
as though they were set forth in
[[Page 37811]]
rule 37.2 and included specific reference to DTEFs.
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\20\ 66 FR 42256 (August 10, 2001).
\21\ 17 CFR 37.2.
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At the time Commission rule 37.2 was adopted, the incorporation of
the reporting rules by reference was necessary because the expressed
provisions of parts 15 to 21, with the exception of Commission rule
15.05, applied only to contract markets and did not mention DTEFs.\22\
As part of the Commission's continuing effort to better implement the
amendments introduced to the Act by the CFMA, the Commission is herein
defining DTEFs directly into rules 15.00 to 15.04 and parts 16 through
21.\23\ Defining DTEFs directly into the reporting rules clarifies the
application of the rules to transactions executed on DTEFs. The final
rules are not designed to alter the pre-existing reporting obligations
of DTEFs or their market participants in any way.
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\22\ Commission rule 15.05 relates to the appointment of an
agent for service of process for foreign persons. 17 CFR 15.05. Rule
15.05 is self-effectuating and permits the Commission to
expeditiously communicate with foreign persons and entities that
trade on the domestic commodity exchanges. See 45 FR 30426 (May 8,
1980). The rule was amended in 2001 to explicitly apply to
designated contract markets and registered derivatives transaction
execution facilities. See 66 FR 42256 (August 10, 2001).
\23\ The Commission is also implementing technical amendments to
Commission rule 37.2 to reconcile that rule with the new and amended
reporting rules.
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C. Clarification Through the Replacement of Terms
The final reporting rules define DTEFs directly into rules 15.00 to
15.04 and throughout the provisions of parts 16 through 21. The final
rules accomplish this by replacing the term contract market with the
new term reporting market throughout the applicable provisions of the
reporting rules.\24\ New Commission rule 15.00(m) defines reporting
market to mean a designated contract market and, unless determined
otherwise by the Commission with respect to some or all of the
contracts listed by the facility, a DTEF.
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\24\ More specifically, the Commission is replacing the term
contract market with the term reporting market in the rule 15.00
definition of a reportable position, in rules 15.01(a), 16.06,
18.05, and 21.01, and throughout the subparagraphs of rules 16.00,
16.01, 16.07, 17.00, 17.04, 18.00, 21.02, and 21.03. In addition,
the Commission is replacing the term contract market with the term
reporting market in the heading of part 16, part 17, and the heading
of sections 21.02 and 21.03. Other conforming amendments that
reconcile existing rules with the replacement of terms are discussed
in Section VII of this notice of rulemaking.
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The language that defines the term reporting market emphasizes the
Commission's authority to exempt transactions on DTEFs from the
reporting rules when necessary and appropriate. As discussed in the
notice of proposed rulemaking, the discretion embedded within the
definition of reporting market reconciles the Commission's
responsibility to diligently regulate transactions on DTEFs with the
Congressional directive to permit DTEFs to operate more flexibly.\25\
In determining whether to consider DTEFs reporting markets with respect
to particular contracts, the Commission will consider several factors,
including a DTEF's surveillance capabilities and the characteristics of
the commodities that underlie DTEF transactions.\26\ In all cases, the
Commission will remain mindful of the operational flexibility granted
to DTEFs.
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\25\ In comparison with designated contract markets, DTEFs are
required to comply with a less comprehensive set of Core Principles.
Compare 7 U.S.C. 7(d) (Core Principles for designated contract
markets) with 7a(d) (Core Principles for DTEFs). In certain
respects, DTEFs have greater operational flexibility than designated
contract markets. For example, pursuant to section 5(d)(11) of the
Act, transactions on designated contract markets, with the exception
of security futures products, must be cleared through Commission
registered derivatives clearing organizations. See 7 U.S.C. 7(d)(11)
and guidance on Core Principle 11 in Appendix B to 17 CFR part 38.
In contrast, pursuant to section 5a(c)(4) of the Act, transactions
on DTEFs may be cleared through clearing organizations other than
Commission registered clearing organizations. See 7 U.S.C. 7a(c)(4)
and guidance on Registration Criterion 4 in Appendix A to 17 CFR
part 37.
\26\ When the Commission adopted rule 37.2 in August of 2001, it
specifically determined to defer the extension of routine large
trader reporting requirements to DTEF transactions involving
Treasury instruments. See 66 FR 42256, 42261 (August 10, 2001). When
the Commission adopted rule 41.25 in November of 2001, it
specifically determined to require part 16 reports from all DTEFs
listing security futures products. See 66 FR 55078 (November 1,
2001). Under the new and amended reporting rules, the Commission
will, without exception, deem such DTEFs to be part 16 reporting
markets for security futures products.
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D. Market Data
Commission rule 16.01 requires the submission of market data to the
Commission on a daily basis.\27\ Amended rule 16.01 requires reporting
markets, as opposed to contract markets, to submit directly to the
Commission data on trading volume, open interest, futures delivery
notices, exchanges of futures, option deltas, prices, and critical
dates on a daily basis. Unless the Commission exercises the discretion
embedded within the definition of reporting market to determine
otherwise, data associated with contracts on DTEFs is data associated
with contracts on reporting markets and therefore subject to inclusion
in market reports submitted to the Commission.
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\27\ 17 CFR 16.01.
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Commission rule 16.01 also requires the dissemination of market
data to the general public. Section 5(d)(8) of the Act requires
designated contract markets to disseminate a specific set of market
data publicly for all actively traded contracts on a daily basis.\28\
In contrast, section 5a(d)(5) of the Act requires DTEFs to publicly
disseminate the same market data only for contracts that perform a
significant price discovery function for transactions in the cash
market for the commodity underlying the contract.\29\ Because of the
divergent statutory triggers, the Commission believes that designated
contract markets and DTEFs should not of necessity be subject to the
same public dissemination requirement. Therefore, amended rule 16.01
only requires designated contract markets, as opposed to reporting
markets, to publicly disseminate data on trading volume, open interest,
futures delivery notices, exchanges of futures, option deltas, and
prices on a daily basis.
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\28\ 7 U.S.C. 7(d)(8).
\29\ Compare 7 U.S.C. 7(d)(8) (designated contract market Core
Principle 8), with 7 U.S.C. 7a(d)(5) (DTEF Core Principle 5). The
language triggering the DTEF public dissemination requirement is
similar to the language triggering the same requirement for exempt
boards of trade (7 U.S.C. 7a-3(d)) and exempt commercial markets (7
U.S.C. 2(h)(4)(D)). Aside from the requirement to comply with
minimal notice and reporting obligations, exempt boards of trade and
exempt commercial markets are generally not subject to Commission
oversight. See 17 CFR part 36.
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As discussed above, section 5a(d)(5) of the Act requires DTEFs to
publicly disseminate a specific set of market data for contracts that
perform a significant price discovery function for transactions in the
cash market for the commodity underlying the contract.\30\ Since
amended rule 16.01 exempts DTEFs from its public dissemination
requirement, the public dissemination requirement for DTEF transactions
will be set by section 5a(d)(5) of the Act and implemented pursuant to
any regulations adopted thereunder.\31\ New paragraph (e) of rule 16.01
emphasizes this by clarifying that DTEFs, although exempt from the
public dissemination
[[Page 37812]]
requirement of Commission rule 16.01, must nonetheless comply with
section 5a(d)(5) of the Act and any regulation adopted thereunder.
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\30\ 30 The Commission recently applied to DTEFs and exempt
boards of trade the same standard that currently applies to exempt
commercial markets for determining whether a contract performs a
significant price discovery function for transactions in the cash
market for an underlying commodity. 71 FR 1953, 1958 (January 12,
2006). More specifically, in making such a determination with
respect to DTEFs and exempt boards of trades, the Commission will
consider (1) whether cash market bids, offers or transactions are
directly based on, or quoted at a differential to, the prices
generated on the market on a more than occasional basis; or (2)
whether market prices are routinely disseminated in a widely
distributed industry publication and are routinely consulted by
industry participants in pricing cash market transactions. Id.
\31\ See Commission guidance on DTEF Core Principle 5 in
Appendix B to part 37 of the Commission's regulations. 17 CFR part
37 Appendix B.
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V. Block Trade Volume and the Publication of Market Data
The passage of the CFMA facilitated the availability of
transactions, including block trades, that are subject to the rules of
an exchange, but lawfully negotiated and executed away from the
centralized marketplace.\32\ Block trades are typically subject to
exchange rules that establish minimum size thresholds, participant
eligibility requirements, pricing limits, and trade reporting
parameters.\33\ It is generally believed that market participants trade
within the constraints established by block trade rules to counter
potential price and execution risks associated with the execution of
larger sized orders in a centralized market.
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\32\ For example, the CFMA specifically permitted designated
contract markets to establish trading rules that authorize the
exchange of futures for swaps, or allow 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 a designated contract market or DTEF.
See 7 U.S.C. 7(b)(3).
\33\ See 69 FR 39880, 39882 (July 1, 2004).
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Commission rule 1.38(b) currently requires designated contract
markets to separately identify and mark all block trades and other off-
centralized market transactions.\34\ In December of 2004, the
Commission recognized the growing importance and use of off-centralized
market transactions by adopting final rules that required designated
contract markets to separately identify, report, and publish for each
contract the volume generated from exchanges of futures for commodities
or for derivatives positions.\35\ To more comprehensively recognize the
growing importance and use of off-centralized market transactions, the
Commission is now amending rule 16.01 to require designated contract
markets to record and make readily available to the news media and the
general public, as part of the total mix of market data publicly
disseminated for each contract pursuant to rule 16.01, the volume
generated from block trades.
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\34\ 17 CFR 1.38(b).
\35\ 69 FR 76392, 76394 (December 21, 2004).
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As indicated in the proposed rules, several designated contract
markets do disseminate public reports that separately account for the
volume generated from block trades.\36\ The final amendments to rule
16.01 codify this industry practice, and require all designated
contract markets to record the volume generated from block trades for
each contract, and make that information readily available to the news
media and the general public as a part of the total mix of market data
publicly disseminated daily pursuant to rule 16.01.\37\ However, final
rule 16.01 does not separately require designated contract markets to
submit a contract's block trade volume on a daily basis to the
Commission. The Commission has assessed the cost of integrating
separate block trade volume data into its information systems and has
determined that cost to be considerable. The Commission will therefore
independently derive and compile such data as necessary to fulfill its
market and financial surveillance responsibilities.
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\36\ For example, the Chicago Board of Trade publicly
disseminates daily block trade volume data for eligible contracts in
a category of volume termed Wholesale Trades. See CBOT Delayed
Charts, available at http://cbt.com/cbot/pub/page/0
,3181,801,00.html. The CME also disseminates daily volume data
through its Web site that separately accounts for the volume
generated from block trades.
\37\ As previously discussed, the final rules do not subject
DTEFs to the public dissemination requirement of rule 16.01.
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The Commission believes that designated contract markets must
generally satisfy their obligation to publicly disseminate market data
on a daily basis by making such information readily available to the
news media and the general public through the internet and on web pages
that are conveniently accessed and easily navigable. Final rule
16.01(e), through two additional requirements, emphasizes the
obligation to disseminate market data in a manner that is both useful
and accessible. First, final rule 16.01(e) specifically requires
designated contract markets to publish integrated volume data for each
contract. Second, final rule 16.01(e) requires designated contract
markets to present market data in a format that readily enables members
of the news media and the general public to consider the data. The
publication of a contract's total volume of trading, alongside the
volume generated from exchanges of futures and block trades, will
enhance the ability of market participants and the general public to
effectively analyze the determinants of market prices, the depth of
market liquidity, and the utility of contracts as hedging and pricing
tools. The expressed requirement to present market data in a format
that readily enables members of the news media and the general public
to consider the data will make designated contract markets fully aware
of their present obligation to publicly disseminate market data in a
format that is readily accessible and user friendly.
VI. Exclusively Self-Cleared Contracts
A. Market Structure
In February of 2004, the Commission designated HedgeStreet, Inc.
(HedgeStreet or Exchange) as a contract market pursuant to sections 5
and 6(a) of the Act.\38\ HedgeStreet initially offered, and continues
to offer, small sized contracts to retail traders in a market structure
that is substantially different from the structure of other active
designated contract markets.\39\ For example, HedgeStreet offers small
sized and fully collateralized European style binary options on various
commodities in a market structure that permits no intermediary to
handle the orders or funds of traders.\40\
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\38\ 7 U.S.C. 7 and 8(a); Order of Designation as a Contract
Market (February 18, 2004).
\39\ See Order of Registration as a Derivatives Clearing
Organization (February 18, 2004); see also Staff Designation
Memorandum from the Division of Market Oversight (Staff Memorandum)
at 47 (February 10, 2004).
\40\ Staff Memorandum at 29. In December of 2005, the Commission
amended HedgeStreet's Order of Designation to permit the Exchange to
offer larger sized contracts that could be cleared by members of The
Clearing Corporation. See HedgeStreet's Amended Order of Designation
as a Contract Market, paragraph B (December 5, 2005) (on file with
the Commission), available at http://www.cftc.gov/dea/deahedgestreet_submissions_comments.htm
.
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As discussed in the proposed rules and in more detail in the
subsections below, market structures without clearing intermediation,
in certain respects, do not comport well with the reporting rules. The
reporting rules were designed to collect information from markets that
hosted a select group of well-capitalized clearing intermediaries with
direct access to the exchange.\41\ The Commission is therefore
establishing an alternative reporting framework for contracts that are
cleared only by traders to rectify this inconsistency. For ease of
reference, the term exclusively self-cleared contract is used herein to
refer to such contracts, and defined by new Commission rule 15.00(f) to
mean a contract for which no person, other than a reporting market and
its clearing organization, is permitted to accept any money,
securities, or property (or extend credit in lieu thereof) to margin,
guarantee, or secure any trade.
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\41\ See 17 CFR parts 16 to 18.
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In its prior notice of rulemaking, the Commission proposed to
define the term exclusively self-cleared contract as a contract that
did not involve an intermediary's handling of customer
[[Page 37813]]
funds.\42\ Final Commission rule 15.00(f), however, adopts a narrowly
worded definition that focuses only on the absence of certain
intermediaries. More specifically, the definition hinges on the absence
of clearing intermediaries that accept collateral or extend credit in
lieu thereof to secure trades. The final definition clarifies that the
presence of executing intermediaries will have no bearing on whether a
contract comes within the regulatory definition of an exclusively self-
cleared contract.\43\
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\42\ See Proposed Commission rule 15.00(f), 70 FR 74246, 74254
(December 15, 2005).
\43\ The definition of the term exclusively self-cleared
contract is devised for use in parts 15 through 21 only and is not
meant to give meaning to the terms intermediary, intermediation,
principle-to-principle trading, or trading for one's own account (or
any variant of those terms) in any way as used by the Commission, in
the Act, or in Commission regulations promulgated under the Act.
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B. Commission Rules 17.00 and 17.01 and Exclusively Self-Cleared
Contracts
Pursuant to Commission rule 17.00, FCMs, foreign brokers, and
clearing members file daily reports with the Commission particularizing
futures and option positions when the accounts that they carry acquire
positions that are at or above the contract reporting levels delineated
in rule 15.03(b).\44\ An FCM, by definition, is a person that accepts
the property of customers to ``margin, guarantee, or secure'' customer
trades.\45\ Likewise, a foreign broker is a person located outside the
United States or its territories ``who carries an account'' for any
other person.\46\ With respect to transactions in exclusively self-
cleared contracts, there are no intermediaries that secure customer
trades or carry customer accounts and therefore, there are no FCMs or
foreign brokers with reporting obligations under part 17 of the
Commission's regulations. In contrast, the term clearing member is
defined by Commission rule 1.3(c) to include ``any person who is a
member of, or enjoys the privileges of clearing trades in his own name
through, the clearing organization of a contract market.'' \47\ As a
result, all traders of exclusively self-cleared contracts squarely fit
within the regulatory definition of a clearing member, and
consequently, can have routine reporting obligations under part 17 of
the Commission's regulations.
---------------------------------------------------------------------------
\44\ See 17 CFR 15.00, 15.03 and 17.00.
\45\ 7 U.S.C. 1a(20).
\46\ 17 CFR 15.00.
\47\ 17 CFR 1.3(h). The Commission is amending the regulatory
definition of a clearing member in rule 1.3 to explicitly extend the
definition to members of DTEFs.
---------------------------------------------------------------------------
As mentioned previously, the reporting rules were not designed to
impose routine position and identifying reporting obligations on
traders.\48\ In 1981, the Commission explicitly disposed of routine
trader reporting obligations in order to ``substantially decrease
certain paperwork burdens on large traders and on the Commission
itself.'' \49\ Instead, the Commission looked to intermediaries and
well capitalized clearing members to ``facilitate the Commission's
market surveillance efforts'' in the absence of routine trader
reporting.\50\ Since 1981, the design of the reporting rules has been
to place the burden of reporting large position and identifying data in
the first instance on market intermediaries and well capitalized
persons that clear customer or proprietary positions.\51\
---------------------------------------------------------------------------
\48\ See 17 CFR parts 16 to 18.
\49\ 46 FR 59960 (December 8, 1981).
\50\ Id.
\51\ See Id.
---------------------------------------------------------------------------
Intermediaries and clearing members typically are Commission
registrants with vigorous internal controls, substantial resources, and
extensive experience with regulatory compliance. With respect to
exclusively self-cleared contracts, and in particular with respect to
retail oriented exclusively self-cleared contracts, traders in general
may not have the requisite resources or regulatory experience to comply
with part 17 of the Commission's regulations. In order to not place any
daily reporting burden on traders, the Commission is herein adopting
final rules that place reporting markets in the regulatory position of
market participants that trade in exclusively self-cleared
contracts.\52\ As discussed above, all traders in exclusively self-
cleared contracts are effectively clearing members. Pursuant to the
final reporting rules, reporting markets, a term which includes
designated contract markets and DTEFs, with respect to exclusively
self-cleared contracts, are obligated to submit reportable position and
identifying data on behalf of all traders.\53\
---------------------------------------------------------------------------
\52\ The Commission, through an order, applied this reporting
framework to HedgeStreet. See Order of Designation as a Contract
Market, paragraph 5 (February 18, 2004).
\53\ The reporting framework for exclusively self-cleared
contracts is narrowly tailored to be contract specific. In other
words, a reporting market may list both exclusively self-cleared and
other contracts. The alternative reporting approach, however, would
only apply to exclusively self-cleared contracts.
---------------------------------------------------------------------------
The Commission believes that this is a desirable result since
reporting markets, by virtue of their regulated status, substantial
resources, internal controls, and lines of communication with the
Commission, are better able to submit position and identifying data to
the Commission on a daily basis.\54\ Therefore, under final Commission
rules 17.00(i) and 17.01(h), reporting markets listing exclusively
self-cleared contracts must, unless determined otherwise by the
Commission, provide the data required by Commission rules 17.00(a)
through (h) and 17.01(a) through (g), to the Commission on behalf of
all market participants trading in exclusively self-cleared contracts.
Individual traders remain subject to the special call provisions of
part 18 of the Commission's regulations.
---------------------------------------------------------------------------
\54\ The Commission may, at some future date, consider amending
the reporting obligations of clearing members with respect to
contracts with low notional values that are not exclusively self-
cleared. The Commission would consider amending these reporting
obligations when retail market participants that self-clear are
responsible for a substantial proportion of a contract's trading
volume.
---------------------------------------------------------------------------
C. Clearing Member Reports
Designated contract markets, on a daily basis, report each clearing
member's open long and short positions, purchases and sales, exchanges
of futures, and futures delivery notices.\55\ The data is reported
separately by proprietary and customer accounts by futures month and,
for options, by puts and calls by expiration date and strike price.\56\
As previously discussed, all traders holding positions in exclusively
self-cleared contracts on reporting markets are clearing members. In
the absence of regulatory action, reporting markets listing such
contracts would be required by Commission rule 16.00(a) to submit
position data for every single trader on a daily basis regardless of
the number of contracts that individual traders hold.
---------------------------------------------------------------------------
\55\ 17 CFR 16.00(a).
\56\ Id.
---------------------------------------------------------------------------
The Commission generally believes that the submission of voluminous
and disaggregated clearing member reports for transactions in
exclusively self-cleared contracts can place an undue burden on
reporting markets without substantially furthering the Commission's
market or financial surveillance efforts. The Commission typically uses
clearing member reports to spot account aggregation issues and audit
the filings of reporting firms. The submission of clearing member
reports for every trader that takes a position in an exclusively self-
cleared contract will not typically facilitate the Commission's
aggregation of large positions. For exclusively self-cleared contracts,
issuing appropriately worded special calls directly to traders under
part 18 of the Commission's regulations will better facilitate the
Commission's analysis of potential aggregation issues.
[[Page 37814]]
Furthermore, since clearing member and large trader reports for
exclusively self-cleared contracts (in the absence of regulatory
action) would be submitted by the same person, clearing member reports
for exclusively self-cleared contracts would not typically facilitate
the Commission's review of large trader reports. Based upon the
foregoing, final rule 16.00 does not by default require clearing member
reports for contracts that are exclusively self-cleared.
VII. Conforming, Clarifying and Technical Amendments
The Commission is amending several other provisions to reconcile
them with the substantive rules adopted herein, to update and better
organize the layout of the reporting rules, and to correct certain non-
substantive errors. These amendments are categorized below by their
respective parts.
A. Part 1 of the Commission's Regulations
Prior Commission rule 1.3(c) defined clearing member in terms of a
member of a contract market. Prior Commission rule 1.3(d) defined a
clearing organization in terms of an entity associated with a contract
market. In conformity with the intent of this notice of final
rulemaking, the Commission is amending rules 1.3(c) and 1.3(d) to make
specific reference to DTEFs.
B. Part 15 of the Commission's Regulations
The Commission is further amending rule 15.00, the definitional
section for parts 15 through 21, to present the definitions contained
in that section alphabetically. The Commission is also re-ordering the
contract reporting levels and categories delineated in rule 15.03(b),
for certain reporting levels and categories, in alphabetical order. The
Commission is amending final paragraph (a) of rule 15.05 to clarify
that the provisions of that rule apply to all regulated transactions
executed on or subject to the rules of DTEFs.\57\ Since the thrust of
rule 15.05 relates to the appointment of an agent for service of
process on foreign brokers and foreign customers, the term foreign
broker is amended by final rule 15.00(g) to explicitly extend to
transactions on DTEFs.
---------------------------------------------------------------------------
\57\ See note 22, supra.
---------------------------------------------------------------------------
Commission rule 15.01 provides a list of persons that may be
required to report pursuant to parts 15 through 21 of the Commission's
regulations. Final paragraph (a) of rule 15.01 clarifies that both
designated contract markets, and when applicable DTEFs, are required to
provide reports to the Commission pursuant to part 16, and that
pursuant to this final notice of rulemaking, reporting markets may be
required to provide reports under part 17 if they list exclusively
self-cleared contracts. Final paragraph (b) of rule 15.01 clarifies
that part 17 applies to all clearing members and that part 21 may
require reports from introducing brokers and traders in addition to
FCMs, clearing members, and foreign brokers. Final paragraph (b) of
rule 15.01 deletes the reference to part 20 since that part remains
reserved and contains no operative provisions.
C. Part 16 of the Commission's Regulations
The prior heading to part 16 only referenced contract markets. The
final heading to part 16 specifically refers to reporting markets.
Prior rule 16.07(b) incorrectly referenced rule 16.00(d)(1) as a
provision that gives the Commission the authority to approve the form
and manner of filing reports with the Commission. The correct
reference, as provided in final rule 16.07(b), is to Commission rule
16.01(d)(1). Paragraph (a) of prior rule 16.01 referred to the total
quantity of futures exchanged for commodities or for derivatives
positions. Since exchanges of futures generate trading volume, final
rule 16.01(a)(5) now refers to the total volume of futures exchanged
for commodities or for derivatives positions.
D. Part 17 of the Commission's Regulations
The Commission is conforming the capitalization format of rule
17.00(b)(2) and 17.00(g)(2)(iv) with the format used in the other
paragraphs of rule 17.00. The Commission is capitalizing the word form
when used to refer to Form 102 throughout the provisions of rules
17.01, 17.02, and 17.03. Final rule 17.01(f) clarifies that Form 102 is
alternately referred to as a report. Final rules 17.01(a), 17.01(b),
and 17.01(d) provide the appropriate italicization format for each
rule's introductory phrase. The final heading to part 17 and rule 17.02
reflect the possibility that under the alternative reporting approach
for exclusively self-cleared contracts, reporting markets may be
required to file reports with the Commission on behalf of their
clearing members. Final rule 17.01(a) also replaces the second instance
of the term identifier with the term designator. Lastly, the Commission
is amending the introductory text of rule 17.03 to correctly refer to
paragraph (d) of that section.
E. Part 19 of the Commission's Regulations
As a result of the alphabetization of definitions, the Commission
is amending paragraph (a) of rule 19.00 to correctly refer to the re-
ordered sections defining the term reportable position in rule 15.00. A
final amendment to rule 19.00(b) correctly refers to rule 19.01 instead
of rule 19.10, which is inoperative and reserved. Lastly, final
paragraph (a) of rule 19.01 capitalizes the word form when used to
refer to Form 204.
F. Part 21 of the Commission's Regulations
A final amendment to Commission rule 21.01, which was last updated
in 1983, extends the rule's requirement that each FCM and introducing
broker file with the Commission upon special call the names and
addresses of all persons who exercise trading control over a customer's
account in commodity futures to all persons who also exercise trading
control over a customer's account in commodity options. An amendment to
paragraph (d) of rule 21.03 replaces the phrase ``by telex or a
similarly expeditious means of communication'' with the phrase ``by
email or a similarly expeditious means of communication.''
G. Part 37
The limited grouping of reserved rules in rule 37.2 is amended to
indicate that the final rules define DTEFs directly into parts 15
through 21 of the Commission's regulations.
VIII. Related Matters
A. Cost Benefit Analysis
Section 15(a) of the Act requires the Commission to consider the
costs and benefits of its actions before issuing new regulations under
the Act. By its terms, section 15(a) does not require the Commission to
quantify the costs and benefits of new regulations or to determine
whether the benefits of the proposed regulations outweigh their costs.
Rather, section 15(a) requires the Commission to ``consider the cost
and benefits'' of the subject rules. As discussed in the notice of
proposed rulemaking, the new and amended reporting rules tend to reduce
the aggregate burden associated with the reporting requirements of
parts 15 through 21 of the Commissions regulations.\58\ The reporting
level of 750 contracts for 3-Year T-Notes, for example, is
significantly higher than the default reporting level that would be
[[Page 37815]]
applicable in the absence of regulatory action. Contract reporting
levels trigger reporting obligations that permit the Commission to be
aware of significant positions that may affect the integrity and
efficiency of the commodity derivatives markets. The information
collected develops the Commission's understanding of market power, and
gives the Commission the opportunity to prevent the occurrence, and
contain the effects, of financial disturbances. Based upon the
Commission's surveillance experience with 2-Year T-Notes, the liquidity
of the securities underlying treasury futures and option contracts, and
the securities available for delivery against 3-Year T-Notes, the
Commission believes that a reporting level of 750 contracts will allow
it to adequately protect market participants and the integrity of
regulated markets, while limiting the regulatory burden of reporting.
---------------------------------------------------------------------------
\58\ 70 FR 74246, 74251.
---------------------------------------------------------------------------
With respect to transactions executed on or subject to the rules of
DTEFs, the new and amended reporting rules merely clarify the reporting
obligations of registered entities, intermediaries, and traders and are
not designed to alter their pre-existing reporting obligations. The
prior language of Commission rule 37.2 reserved the applicability of
parts 15 to 21 to DTEFs, but did so through incorporation by reference
and without clarity. As part of the Commission's continuing effort to
better implement the amendments introduced to the Act by the CFMA, the
new and amended reporting rules define DTEFs directly into rules 15.00
to 15.04 and parts 16 through 21 of the Commission's regulations. The
Commission believes that the new and amended reporting rules will serve
the public's interest by enhancing regulatory clarity.
The final amendments to Commission rule 16.01 relating to block
trades and contract volume recognize the growing importance and use of
off-centralized market transactions. The new and amended reporting
rules require all reporting markets to record the volume generated from
block trades for each contract, and require designated contract markets
to make that information readily available to the news media and the
general public. In order to emphasize the obligation to disseminate
market data in a manner that is both useful and accessible, the new and
amended reporting rules require designated contract markets to publish
integrated volume data, and present all market data in a format that
would readily enable members of the news media and the general public
to consider the data. The Commission believes that the format
requirement will ensure that designated contract markets are fully
aware of their present obligation to publicly disseminate market data
in a user friendly manner. In addition, the integrated publication of
volume, along with the public dissemination of block trade volume data,
will benefit market participants and the general public by facilitating
their ability to effectively analyze the key determinants of prices and
market depth.
The new and amended reporting rules also establish a distinct
reporting framework for exclusively self-cleared contracts. The new and
amended reporting rules protect market participants and strengthen the
financial integrity of the regulated markets by shifting the reporting
responsibilities of traders onto reporting markets that are able to
comply with routine reporting obligations. The reporting rules, prior
to their amendment by this notice of rulemaking, were designed to
collect information from heavily intermediated markets that permitted
un-intermediated trading and clearing access only to well capitalized
members. Intermediaries and clearing members typically are Commission
registrants with vigorous internal controls, substantial resources, and
extensive experience with regulatory compliance. Traders of exclusively
self-cleared contracts, and in particular traders of retail oriented
exclusively self-cleared contracts, do not in general have the
resources or regulatory experience to comply with routine large trader
reporting obligations. In the absence of Commission action, reporting
obligations for exclusively self-cleared contracts would be placed on
individual traders that do not have the ability to comply with
technical requirements. The Commission's new and amended reporting
rules address this deficiency and ensure that the Commission will
receive the trading data it needs to protect market participants, the
public, and the integrity of registered entities.
The Commission's notice of proposed rulemaking analyzed the
aforementioned costs and benefits and solicited comment thereon.\59\ No
relevant comments were received with respect to the Commission's
analysis. After considering these factors, the Commission has
determined to amend parts 15, 16, 17, 18, 19, 21, and 37 as set forth
below.
---------------------------------------------------------------------------
\59\ Id.
---------------------------------------------------------------------------
B. The Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq.,
requires that agencies consider the impact of their rules on small
businesses. The Commission has previously determined that exchanges,
futures commission merchants and large traders are not ``small
entities'' for the purposes of the RFA.\60\ The requirements related to
the new and amended reporting rules fall mainly on exchanges and FCMs.
Similarly, foreign brokers and traders report only if holding large
positions. In addition, the new and amended reporting rules tend to
relieve regulatory burdens. Accordingly, the Chairman, on behalf of the
Commission, hereby certifies, pursuant to 5 U.S.C. 605(b), that the
actions adopted herein will not have a significant economic impact on a
substantial number of small entities.
---------------------------------------------------------------------------
\60\ 47 FR 18618 (April 30, 1982).
---------------------------------------------------------------------------
C. The Paperwork Reduction Act
When publicizing notices of rulemaking, the Paperwork Reduction Act
(PRA) \61\ imposes certain requirements on Federal agencies, including
the Commission, in connection with conducting or sponsoring any
collection of information as defined by the PRA. An agency may not
conduct or sponsor, and a person is not required to respond to, a
collection of information unless it displays a currently valid control
number. The revision of collections of information contained in this
final notice of rulemaking have been reviewed and approved by the
Office of Management and Budget pursuant to the PRA, under control
numbers 3038-0009 and 3038-0012. In the notice of proposed rulemaking,
the Commission estimated the paperwork burden that would be imposed by
these rules and solicited comments on the estimates. The Commission
received no relevant comments.\62\ The Commission continually invites
comment on the accuracy of burden estimates and suggestions on how to
further reduce these burdens. Comments should be directed to Gary
Martinaitis, Associate Deputy Director for Market Information, Market
Surveillance Section, Division of Market Oversight, Commodity Futures
Trading Commission, Three Lafayette Centre, 1155 21st Street, NW.,
Washington, DC 20581 (telephone 202-418-5209, e-mail
gmartinaitis@cftc.gov).
---------------------------------------------------------------------------
\61\ Public Law 104-13 (May 13, 1995).
\62\ 70 FR 74246, 74253.
---------------------------------------------------------------------------
List of Subjects
17 CFR Part 1
Brokers, Commodities futures, Consumer protection, Reporting and
recordkeeping requirements.
[[Page 37816]]
17 CFR Part 15
Brokers, Commodity futures, Reporting and recordkeeping
requirements.
17 CFR Part 16
Commodity futures, Reporting and recordkeeping requirements.
17 CFR Part 17
Commodity futures, Reporting and recordkeeping requirements.
17 CFR Part 18
Commodity futures, Reporting and recordkeeping requirements.
17 CFR Part 19
Brokers, Commodity futures, Reporting and recordkeeping
requirements.
17 CFR Part 21
Brokers, Commodity futures, Reporting and recordkeeping
requirements.
17 CFR Part 37
Commodity futures, Reporting and recordkeeping requirements.
0
In consideration of the foregoing, and pursuant to the authority
contained in the Act, and, in particular, sections 4a, 4c, 4g, 4i, 5,
5a and 8a of the Act, the Commission hereby amends Chapter I of Title
17 of the Code of Federal Regulations as follows:
PART 1--GENERAL REGULATIONS UNDER THE COMMODITY EXCHANGE ACT
0
1. The authority citation for part 1 continues to read as follows:
Authority: 7 U.S.C. 1a, 2, 5, 6, 6a, 6b, 6c, 6d, 6e, 6f, 6g, 6h,
6i, 6j, 6k, 6l, 6m, 6n, 6o, 6p, 7, 7a, 7b, 8, 9, 12, 12a, 12c, 13a,
13a-1, 16, 16a, 19, 21, 23, and 24, as amended by the Commodity
Futures Modernization Act of 2000, Appendix E of Public Law 106-554,
114 Stat. 2763 (2000).
0
2. Revise paragraphs (c) and (d) of Sec. 1.3 to read as follows:
Sec. 1.3 Definitions
* * * * *
(c) Clearing member. This term means any person who is a member of,
or enjoys the privilege of clearing trades in his own name through, the
clearing organization of a designated contract market or registered
derivatives transaction execution facility.
(d) Clearing organization. This term means the person or
organization which acts as a medium for clearing transactions in
commodities for future delivery or commodity option transactions, or
for effecting settlements of contracts for future delivery or commodity
option transactions, for and between members of any designated contract
market or registered derivatives transaction execution facility.
* * * * *
PART 15--REPORTS--GENERAL PROVISIONS
0
3. The authority citation for part 15 continues to read as follows:
Authority: 7 U.S.C. 2, 5, 6, 6a, 6c, 6f, 6g, 6i, 6k, 6m, 6n, 7,
7a, 9, 12a, 19 and 21, as amended by the Commodity Futures
Modernization Act of 2000, Appendix E of Pub. L. 106-554, 114 Stat.
2763 (2000); 5 U.S.C. 552 and 552(b).
0
4. Revise Sec. 15.00 to read as follows:
Sec. 15.00 Definitions of terms used in parts 15 to 21 of this
chapter.
As used in parts 15 to 21 of this chapter:
(a) Cash or Spot, when used in connection with any commodity, means
the actual commodity as distinguished from a futures or option contract
in such commodity.
(b) Compatible data processing media means data processing media
approved by the Commission or its designee. The Commission hereby
delegates, until the Commission orders otherwise, the authority to
approve data processing media for data submissions to the Executive
Director to be exercised by such Director or by such other employee or
employees of such Director as designated from time to time by the
Director. The Executive Director may submit to the Commission for its
consideration any matter which has been delegated in this paragraph.
Nothing in this paragraph prohibits the Commission, at its election,
from exercising the authority delegated in this paragraph.
(c) Customer means ``customer'' (as defined in Sec. 1.3(k)) and
``option customer'' (as defined in Sec. 1.3(jj)).
(d) Customer trading program means any system of trading offered,
sponsored, promoted, managed or in any other way supported by, or
affiliated with, a futures commission merchant, an introducing broker,
a commodity trading advisor, a commodity pool operator, or other
trader, or any of its officers, partners or employees, and which by
agreement, recommendations, advice or otherwise, directly or indirectly
controls trading done and positions held by any other person. The term
includes, but is not limited to, arrangements where a program
participant enters into an expressed or implied agreement not obtained
from other customers and makes a minimum deposit in excess of that
required of other customers for the purpose of receiving specific
advice or recommendations which are not made available to other
customers. The term includes any program which is of the character of,
or is commonly known to the trade as, a managed account, guided
account, discretionary account, commodity pool or partnership account.
(e) Discretionary account means a commodity futures or commodity
option trading account for which buying or selling orders can be placed
or originated, or for which transactions can be effected, under a
general authorization and without the specific consent of the customer,
whether the general authorization for such orders or transactions is
pursuant to a written agreement, power of attorney, or otherwise.
(f) Exclusively self-cleared contract means a contract for which no
persons, other than a reporting market and its clearing organization,
are permitted to accept any money, securities, or property (or extend
credit in lieu thereof) to margin, guarantee, or secure any trade.
(g) Foreign broker means any person located outside the United
States or its territories that carries an account in commodity futures
or commodity options on any designated contract market or registered
derivatives transaction execution facility for any other person.
(h) Foreign trader means any trader (as defined in paragraph (o) of
this section) who resides or is domiciled outside of the United States,
its territories or possessions.
(i) Guided account program means any customer trading program which
limits trading to the purchase or sale of a particular contract for
future delivery of a commodity or a particular commodity option that is
advised or recommended to the participant in the program.
(j) Managed Account Program means a customer trading program which
includes two or more discretionary accounts traded pursuant to a common
plan, advice or recommendations.
(k) Open contracts means ``open contracts'' (as defined in Sec.
1.3(t)) and commodity option positions held by any person on or subject
to the rules of a designated contract market or registered derivatives
transaction execution facility which have not expired, been exercised,
or offset.
(l) Reportable position means:
(1) For reports specified in parts 17, 18 and Sec. 19.00(a)(2) and
(a)(3) of this chapter any open contract position that at the close of
the market on any
[[Page 37817]]
business day equals or exceeds the quantity specified in Sec. 15.03 of
this part in either:
(i) Any one future of any commodity on any one reporting market,
excluding future contracts against which notices of delivery have been
stopped by a trader or issued by the clearing organization of a
reporting market; or
(ii) Long or short put or call options that exercise into the same
future of any commodity, or long or short put or call options for
options on physicals that have identical expirations and exercise into
the same physical, on any one reporting market.
(2) For the purposes of reports specified in Sec. 19.00(a)(1) of
this chapter, any combined futures and futures-equivalent option open
contract position as defined in part 150 of this chapter in any one
month or in all months combined, either net long or net short in any
commodity on any one reporting market, excluding futures positions
against which notices of delivery have been stopped by a trader or
issued by the clearing organization of a reporting market, which at the
close of the market on the last business day of the week exceeds the
net quantity limit in spot, single or in all-months fixed in Sec.
150.2 of this chapter for the particular commodity and reporting
market.
(m) Reporting market means a designated contract market and, unless
determined otherwise by the Commission with respect to the facility or
a specific contract listed by the facility, a registered derivatives
transaction execution facility.
(n) Special account means any commodity futures or option account
in which there is a reportable position.
(o) Trader means a person who, for his own account or for an
account which he controls, makes transactions in commodity futures or
options, or has such transactions made.
0
5. Revise paragraphs (a) and (b) in Sec. 15.01 to read as follows:
Sec. 15.01 Persons required to report.
* * * * *
(a) Reporting markets--as specified in part 16, 17, and 21 of this
chapter.
(b) Futures commission merchants, clearing members, foreign
brokers, introducing brokers, and traders--as specified in parts 17 and
21 of this chapter.
* * * * *
0
6. Revise paragraph (b) in Sec. 15.03 to read as follows:
Sec. 15.03 Reporting levels.
* * * * *
(b) The quantities for the purpose of reports filed under parts 17
and 18 of this chapter are as follows:
------------------------------------------------------------------------
Number of
Commodity contracts
------------------------------------------------------------------------
Agricultural:
Cocoa............................................... 100
Coffee.............................................. 50
Corn................................................ 250
Cotton.............................................. 100
Feeder Cattle....................................... 50
Frozen Concentrated Orange Juice.................... 50
Lean Hogs........................................... 100
Live Cattle......................................... 100
Milk, Class III..................................... 50
Oats................................................ 60
Rough Rice.......................................... 50
Soybeans............................................ 150
Soybean Meal........................................ 200
Soybean Oil......................................... 200
Sugar No. 11........................................ 500
Sugar No. 14........................................ 100
Wheat............................................... 150
Broad-Based Security Indexes:
Municipal Bond Index................................ 300
S&P 500 Stock Price Index........................... 1,000
Other Broad-Based Securities Indexes................ 200
Financial:
30-Day Fed Funds.................................... 600
3-Month (13-Week) U.S. Treasury Bills............... 150
2-Year U.S. Treasury Notes.......................... 1,000
3-Year U.S. Treasury Notes.......................... 750
5-Year U.S. Treasury Notes.......................... 2,000
10-Year U.S. Treasury Notes......................... 2,000
30-Year U.S. Treasury Bonds......................... 1,500
1-Month LIBOR Rates................................. 600
3-Month Eurodollar Time Deposit Rates............... 3,000
3-Month Euroyen..................................... 100
2-Year German Federal Government Debt............... 500
5-Year German Federal Government Debt............... 800
10-Year German Federal Government Debt.............. 1,000
Goldman Sachs Commodity Index....................... 100
Major Foreign Currencies............................ 400
Other Foreign Currencies............................ 100
U.S. Dollar Index................................... 50
Natural Resources:
Copper.............................................. 100
Crude Oil, Sweet.................................... 350
Crude Oil, Sweet--No. 2 Heating Oil Crack Spread.... 250
Crude Oil, Sweet--Unleaded Gasoline Crack Spread.... 150
Gold................................................ 200
[[Page 37818]]
Natural Gas......................................... 200
No. 2 Heating Oil................................... 250
Platinum............................................ 50
Silver Bullion...................................... 150
Unleaded Gasoline................................... 150
Unleaded Gasoline--No. 2 Heating Oil Spread Swap.... 150
Security Futures Products:
Individual Equity Security.......................... 1,000
Narrow-Based Security Index......................... 200
Hedge Street Products................................... \1\ 125,000
TRAKRS.................................................. \1\ 50,000
All Other Commodities................................... 25
------------------------------------------------------------------------
\1\ For purposes of part 17, positions in HedgeStreet Products and
TRAKRS should be reported by rounding down to the nearest 1,000
contracts and dividing by 1,000.
0
7. Revise paragraphs (a) and (h) in Sec. 15.05 to read as follows:
Sec. 15.05 Designation of agent for foreign brokers, customers of a
foreign broker and foreign traders.
(a) For purposes of this section, the term ``futures contract''
means any contract for the purchase or sale of any commodity for future
delivery traded or executed on or subject to the rules of any
designated contract market or registered derivatives transaction
execution facility; the term ``option contract'' means any contract for
the purchase or sale of a commodity option, or as applicable, any other
instrument subject to the Act pursuant to section 5a(g) of the Act,
traded or executed on or subject to the rules of any designated
contract market or registered derivatives transaction execution
facility; the term ``customer'' means any person for whose benefit a
foreign broker makes or causes to be made any futures contract or
option contract; and the term ``communication'' means any summons,
complaint, order, subpoena, special call, request for information, or
notice, as well as any other written document or correspondence.
* * * * *
(h) The provisions of paragraphs (e), (f) and (g) of this section
shall not apply to a designated contract market or registered
derivatives transaction execution facility on which all transactions of
foreign brokers, their customers or foreign traders in futures or
option contracts are executed through, or the resulting transactions
are maintained in, accounts carried by a registered futures commission
merchant or introduced by a registered introducing broker subject to
the provisions of paragraphs (a), (b), (c) and (d) of this section.
* * * * *
PART 16--REPORTS BY REPORTING MARKETS
0
8. Revise the heading of part 16 as set forth above.
0
9. The authority citation for part 16 is revised to read as follows:
Authority: 7 U.S.C. 6a, 6c, 6g, 6i, 7, 7a and 12a, unless
otherwise noted.
0
10. In Sec. 16.00, revise paragraphs (a) introductory text, (a)(1),
(a)(5), and (b) introductory text; and add paragraph (c) to read as
follows:
Sec. 16.00 Clearing member reports.
(a) Information to be provided. Each reporting market shall submit
to the Commission, in accordance with paragraph (b) of this section, a
report for each business day, showing for each clearing member, by
proprietary and customer account, the following information separately
for futures by commodity and by future, and, for options, by underlying
futures contract for options on futures contracts or by underlying
physical for options on physicals, and by put, by call, by expiration
date and by strike price:
(1) The total of all long open contracts and the total of all short
open contracts carried at the end of the day covered by the report,
excluding from open futures contracts the number of contracts against
which delivery notices have been stopped or against which delivery
notices have been issued by the clearing organization of the reporting
market;
* * * * *
(5) For futures, the quantity of the commodity for which delivery
notices have been issued by the clearing organization of the reporting
market and the quantity for which notices have been stopped during the
day covered by the report.
(b) Form, manner and time of filing reports. Unless otherwise
approved by the Commission or its designee, reporting markets shall
submit the information required by paragraph (a) of this section as
follows:
* * * * *
(c) Exclusively self-cleared contracts. Unless determined otherwise
by the Commission, paragraph (a) of this section shall not apply to
transactions involving exclusively self-cleared contracts.
* * * * *
0
11. In Sec. 16.01 revise paragraphs (a), (b), (c), and (d)
introductory text; and delete the Note to paragraph (a); and add
paragraph (e) to read as follows:
Sec. 16.01 Trading volume, open contracts, prices, and critical
dates.
(a) Trading volume and open contracts. Each reporting market shall
record for each business day the following information separately for
futures by commodity and by future, and, for options, by underlying
futures contract for options on futures contracts or by underlying
physical for options on physicals, and by put, by call, by expiration
date and by strike price:
(1) The option delta, where a delta system is used;
(2) The total gross open contracts, excluding from futures those
contracts against which notices have been stopped;
(3) For futures, open contracts against which delivery notices have
been stopped on that business day;
(4) The total volume of trading, excluding transfer trades or
office trades;
(5) The total volume of futures exchanged for commodities or for
derivatives positions which are included in the total volume of
trading;
(6) The total volume of block trades which are included in the
total volume of trading.
(b) Prices. Each reporting market shall record the following
information separately for futures, by commodity and by future, and,
for options, by underlying futures contract for options
[[Page 37819]]
on futures contracts or by underlying physical for options on
physicals, and by put, by call, by expiration date and by strike price:
(1) For the trading session and for the opening and closing periods
of trading as determined by each reporting market:
(i) The lowest price of a sale or offer, whichever is lower, and
the highest price of a sale or bid, whichever is higher, that the
reporting market reasonably determines accurately reflect market
conditions. If vacated or withdrawn, bids and offers shall not be used
in making this determination. A bid is vacated if followed by a higher
bid or price and an offer is vacated if followed by a lower offer or
price.
(ii) If there are no transactions, bids, or offers during the
opening or closing periods, the reporting market may record as
appropriate:
(A) The first price (in lieu of opening price data) or the last
price (in lieu of closing price data) occurring during the trading
session, clearly indicating that such prices are the first and the last
price; or
(B) Nominal opening or nominal closing prices which the reporting
market reasonably determines accurately reflect market conditions,
clearly indicating that such prices are nominal.
(2) The settlement price established by each reporting market or
its clearing organization.
(3) Additional information. Each reporting market shall record the
following information with respect to transactions in commodity futures
and commodity options on that reporting market:
(i) The method used by the reporting market in determining nominal
prices and settlement prices; and
(ii) If discretion is used by the reporting market in determining
the opening and closing ranges or the settlement prices, an explanation
that certain discretion may be employed by the reporting market and a
description of the manner in which that discretion may be employed.
(c) Critical dates. Each reporting market shall report to the
Commission for each futures contract the first notice date and the last
trading date and for each option contract the expiration date in
accordance with paragraph (d) of this section.
(d) Form, manner and time of filing reports. Unless otherwise
approved by the Commission or its designee, reporting markets shall
submit to the Commission the information specified in paragraphs (a)(1)
through (a)(5), (b) and (c) of this section as follows:
* * * * *
(e) Publication of recorded information. (1) Designated contract
markets shall make the information in paragraph (a) of this section
readily available to the news media and the general public without
charge, in a format that readily enables the consideration of such
data, no later than the business day following the day to which the
information pertains. The information in paragraphs (a)(4) through
(a)(6) of this section shall be made readily available in a format that
presents the information together.
(2) Designated contract markets shall make the information in
paragraphs (b)(1) and (b)(2) of this section readily available to the
news media and the general public, and the information in paragraph
(b)(3) of this section readily available to the general public, in a
format that readily enables the consideration of such data, no later
than the business day following the day to which the information
pertains.
(3) Registered derivatives transaction execution facilities shall
comply with the publication of trading information requirement of
section 5a(d)(5) of the Act and any Commission regulation adopted
thereunder.
* * * * *
0
12. Revise Sec. 16.06 to read as follows:
Sec. 16.06 Errors or omissions.
Unless otherwise approved by the Commission or its designee,
reporting markets shall file corrections to errors or omissions in data
previously filed with the Commission pursuant to Sec. Sec. 16.00 and
16.01 in the format and using the coding structure and electronic data
submission procedures approved in writing by the Commission or its
designee.
0
13. In Sec. 16.07, revise paragraphs (a) and (b) to read as follows:
Sec. 16.07 Delegation of authority to the Director of the Division of
Market Oversight and the Executive Director.
* * * * *
(a) Pursuant to Sec. Sec. 16.00(b) and 16.01(d), as applicable,
the authority to determine whether reporting markets must submit data
in hard copy, and the time that such data may be submitted where the
Director determines that a reporting market is unable to meet the
requirements set forth in the regulations;
(b) Pursuant to Sec. Sec. 16.00(b)(1), 16.01(d)(1), and 16.06, the
authority to approve the format, coding structure and electronic data
transmission procedures used by reporting markets.
PART 17--REPORTS BY REPORTING MARKETS, FUTURES COMMISSION
MERCHANTS, MEMBERS OF REPORTING MARKETS, AND FOREIGN BROKERS
0
14. Revise the heading of part 17 as set forth above.
0
15. The authority citation for part 17 is revised to read as follows:
Authority: 7 U.S.C. 6a, 6c, 6d, 6f, 6g, 6i, 7, 7a and 12a,
unless otherwise noted.
0
16. In Sec. 17.00, revise paragraphs (a)(1), (b)(2), and (g)(2)(iv);
and add paragraph (i) to read as follows:
Sec. 17.00 Information to be furnished by futures commission
merchants, clearing members and foreign brokers.
(a) * * *
(1) Each futures commission merchant, clearing member and foreign
broker shall submit a report to the Commission for each business day
with respect to all special accounts carried by the futures commission
merchant, clearing member or foreign broker, except for accounts
carried on the books of another futures commission merchant on a fully-
disclosed basis. Except as otherwise authorized by the Commission or
its designee, such report shall be made in accordance with the format
and coding provisions set forth in paragraph (g) of this section. The
report shall show each futures position, separately for each reporting
market and for each future, and each put and call options position
separately for each reporting market, expiration and strike price in
each special account as of the close of market on the day covered by
the report and, in addition, the quantity of exchanges of futures for
commodities or for derivatives positions and the number of delivery
notices issued for each such account by the clearing organization of a
reporting market and the number stopped by the account. The report
shall also show all positions in all futures months and option
expirations of that same commodity on the same reporting market for
which the special account is reportable.
* * * * *
(b) * * *
(2) Accounts controlled by two or more persons--Accounts that are
subject to day-to-day trading control by two or more persons shall,
together with other accounts subject to control by exactly the same
persons, be considered a single account.
* * * * *
(g) * * *
(2) * * *
(iv) Report date. The format is YYYYMMDD, where YYYY is the year,
[[Page 37820]]
MM is the month, and DD is the day of the month.
* * * * *
(i) Exclusively self-cleared contracts. Unless determined otherwise
by the Commission, reporting markets that list exclusively self-cleared
contracts shall meet the requirements of paragraphs (a) through (h) of
this section, as they apply to trading in such contracts by all
clearing members, on behalf of all clearing members.
0
17. In Sec. 17.01, revise the introductory text and paragraphs (a),
(b) introductory text, (d), (f) and (g); and add paragraph (h) to read
as follows:
Sec. 17.01 Special account designation and identification.
When a special account is reported for the first time, the futures
commission merchant, clearing member, or foreign broker shall identify
the account to the Commission on Form 102, in the form and manner
specified in Sec. 17.02, showing the information in paragraphs (a)
through (f) of this section.
(a) Special account designator. A unique identifier for the
account, provided, that the same designator is assigned for option and
futures reporting, and the designator is not changed or assigned to
another account without prior approval of the Commission or its
designee.
(b) Special account identification. The name, address, business
phone, and for individuals, the person's job title and employer for the
following:
* * * * *
(d) Commercial use. For futures or options, commodities in which
positions or transactions in the account are associated with a
commercial activity of the account owner in a related cash commodity or
activity (i.e., those considered as hedging, risk-reducing, or
otherwise off-setting with respect to the cash commodity or activity).
* * * * *
(f) Reporting firms. The name and address of the futures commission
merchant, clearing member, or foreign broker carrying the account, and
the name, title and business phone of the authorized representative of
the firm filing the Form 102 and the date of the Form 102. The
authorized representative shall sign the Form 102 or satisfy such other
requirements for authenticating the report as instructed in writing by
the Commission or its designee.
(g) Form 102 updates. If, at the time an account is in special
account status and a Form 102 filed by a futures commission merchant,
clearing member, or foreign broker is then no longer accurate because
there has been a change in the information required under paragraph (b)
of this section since the previous filing, the futures commission
merchant, clearing member, or foreign broker shall file an updated Form
102 with the Commission within three business days after such change
occurs.
(h) Exclusively self-cleared contracts. Unless determined otherwise
by the Commission, reporting markets that list exclusively self-cleared
contracts shall meet the requirements of paragraphs (a) through (g) of
this section, as they apply to trading in such contracts by all
clearing members, on behalf of all clearing members.
0
18. Revise Sec. 17.02 to read as follows:
Sec. 17.02 Form, manner and time of filing reports.
Unless otherwise instructed by the Commission or its designee, the
reports required to be filed by reporting markets, futures commission
merchants, clearing members and foreign brokers under Sec. Sec. 17.00
and 17.01 shall be filed as specified in paragraphs (a) and (b) of this
section.
(a) Section 17.00(a) reports. Reports filed under Sec. 17.00(a)
shall be submitted through electronic data transmission procedures
approved in writing by the Commission or its designee not later than 9
a.m. on the business day following that to which the information
pertains. Unless otherwise specified by the Commission or its designee,
the stated time is eastern time for information concerning markets
located in that time zone, and central time for information concerning
all other markets.
(b) Section 17.01 reports. For data submitted pursuant to Sec.
17.01 on Form 102:
(1) On call by the Commission or its designee, identify the type of
special account specified by items 1(a), 1(b), or 1(c) of Form 102, and
the name and location of the person to be identified in item 1(d) on
the Form 102, and submit such information by facsimile or telephone, in
accordance with instructions by the Commission or its designee, on the
same day that the special account in question is first reported to the
Commission; and
(2) Submit a completed Form 102 within three business days of the
first day that the special account in question is reported to the
Commission in accordance with instructions by the Commission or its
designee.
0
19. In Sec. 17.03, revise the introductory text and paragraph (c) to
read as follows:
Sec. 17.03 Delegation of authority to the Director of the Division of
Market Oversight and to the Executive Director.
The Commission hereby delegates, until the Commission orders
otherwise, the authority set forth in paragraphs (a) and (b) of this
section to the Director of the Division of Market Oversight and the
authority set forth in paragraphs (c) and (d) of this section to the
Executive Director to be exercised by such Director or by such other
employee or employees of such Director as designated from time to time
by the Director. The Director of the Division of Market Oversight or
the Executive Director may submit to the Commission for its
consideration any matter which has been delegated in this paragraph.
Nothing in this paragraph prohibits the Commission, at its election,
from exercising the authority delegated in this paragraph.
* * * * *
(c) Pursuant to Sec. 17.01(f), the authority to determine whether
to permit an authorized representative of a firm filing the Form 102 to
use a means of authenticating the report other than by signing the Form
102 and, if so, to determine the alternative means of authentication
that shall be used.
* * * * *
0
20. In Sec. 17.04, revise paragraphs (a), (b)(1)(i), and (b)(2) to
read as follows:
Sec. 17.04 Reporting omnibus accounts to the carrying futures
commission merchant or foreign broker.
(a) Any futures commission merchant, clearing member or foreign
broker who establishes an omnibus account with another futures
commission merchant or foreign broker shall report to that futures
commission merchant or foreign broker the total open long positions and
the total open short positions in each future of a commodity and, for
commodity options transactions, the total open long put options, the
total open short put options, the total open long call options, and the
total open short call options for each commodity options expiration
date and each strike price in such account at the close of trading each
day. The information required by this section shall be reported in
sufficient time to enable the futures commission merchant or foreign
broker with whom the omnibus account is established to comply with part
17 of these regulations and reporting requirements established by the
reporting markets.
(b) * * *
(1) * * *
(i) The positions represent transactions on a reporting market
which requires long and short positions in the same future or option
held in
[[Page 37821]]
accounts for the same trader to be recorded and reported on a gross
basis; or
* * * * *
(2) Include only the net long or net short positions of the trader
if the positions represent transactions on a reporting market which
does not require long and short positions in the same future or option
held in accounts for the same trader to be recorded and reported on a
gross basis.
* * * * *
PART 18--REPORTS BY TRADERS
0
21. The authority citation for part 18 continues to read as follows:
Authority: 7 U.S.C. 2, 4, 6a, 6c, 6f, 6g, 6i, 6k, 6m, 6n, 12a
and 19; 5 U.S.C. 552 and 552(b), unless otherwise noted.
0
22. In Sec. 18.00 revise the introductory text to read as follows:
Sec. 18.00 Information to be furnished by traders.
Every trader who owns, holds or controls, or has held, owned or
controlled, a reportable futures or options position in a commodity
shall within one business day after a special call upon such trader by
the Commission or its designee file reports to the Commission
concerning transactions and positions in such futures or options.
Reports shall be filed for the period of time that the trader held or
controlled a reportable position and shall be prepared and submitted as
instructed in the call. The report shall show for each day covered by
the report the following information, as specified in the call,
separately for each future or option and for each reporting market:
* * * * *
0
23. Revise Sec. 18.05 to read as follows:
Sec. 18.05 Maintenance of books and records.
Every trader who holds or controls a reportable futures or option
position shall keep books and records showing all details concerning
all positions and transactions for future delivery in the commodity on
all reporting markets, all positions and transactions in the commodity
option, and all positions and transactions in the cash commodity, its
products and byproducts and, in addition, commercial activities that
the trader hedges in the commodity underlying the futures contract in
which the trader is reportable, and shall upon request furnish to the
Commission any pertinent information concerning such positions,
transactions or activities.
(Approved by the Office of Management and Budget under control
number 3038-0007)
PART 19--REPORTS BY PERSONS HOLDING BONA FIDE HEDGE POSITIONS
PURSUANT TO Sec. 1.3(Z) OF THIS CHAPTER AND BY MERCHANTS AND
DEALERS IN COTTON
0
24. The authority citation for part 19 continues to read as follows:
Authority: 7 U.S.C. 6g(a), 6i and 12a(5), unless otherwise
noted.
0
25. In Sec. 19.00, revise paragraphs (a) and (b) introductory text to
read as follows:
Sec. 19.00 General provisions.
(a) Who must file series '04 reports. The following persons are
required to file series '04 reports:
(1) All persons holding or controlling futures and option positions
that are reportable pursuant to Sec. 15.00(l)(2) of this chapter and
any part of which constitute bona fide hedging positions as defined in
Sec. 1.3(z) of this chapter;
(2) Merchants and dealers of cotton holding or controlling
positions for futures delivery in cotton that are reportable pursuant
to Sec. 15.00(l)(1)(i) of this chapter, or
(3) All persons holding or controlling positions for future
delivery that are reportable pursuant to Sec. 15.00(l)(1) of this
chapter who have received a special call for series '04 reports from
the Commission or its designee. Filings in response to a special call
shall be made within one business day of receipt of the special call
unless otherwise specified in the call. For the purposes of this
paragraph, the Commission hereby delegates to the Director of the
Division of Market Oversight, or to such other person designated by the
Director, authority to issue calls for series '04 reports.
(b) Manner of reporting. The manner of reporting the information
required in Sec. 19.01 is subject to the following:
* * * * *
0
26. In Sec. 19.01, revise paragraph (a) introductory text to read as
follows:
Sec. 19.01 Reports on stocks and fixed price purchases and sales
pertaining to futures positions in wheat, corn, oats, soybeans, soybean
oil, soybean meal or cotton.
(a) Information required. Persons required to file '04 reports
under Sec. 19.00(a)(1) or Sec. 19.00(a)(3) of this chapter shall file
CFTC Form 304 reports for cotton and Form 204 reports for other
commodities showing the composition of the fixed price cash position of
each commodity hedged including:
* * * * *
PART 21--SPECIAL CALLS
0
27. The authority for part 21 continues to read as follows:
Authority: 7 U.S.C. 1a, 2, 2a, 4, 6a, 6c, 6f, 6g, 6i, 6k, 6m,
6n, 7, 7a, 12a, 19 and 21; 5 U.S.C. 552 and 552(b), unless otherwise
noted.
0
28. Revise Sec. 21.01 to read as follows:
Sec. 21.01 Special calls for information on controlled accounts from
futures commission merchants and introducing brokers.
Upon call by the Commission, each futures commission merchant and
introducing broker shall file with the Commission the names and
addresses of all persons who, by power of attorney or otherwise,
exercise trading control over any customer's account in commodity
futures or commodity options on any reporting market.
(Approved by the Office of Management and Budget under control
number 3038-0009)
0
29. Revise the heading and introductory text of Sec. 21.02 to read as
follows:
Sec. 21.02 Special calls for information on open contracts in
accounts carried or introduced by futures commission merchants, members
of reporting markets, introducing brokers, and foreign brokers.
Upon special call by the Commission for information relating to
futures or option positions held or introduced on the dates specified
in the call, each futures commission merchant, member of a reporting
market, introducing broker, or foreign broker, and, in addition, for
option information, each reporting market, shall furnish to the
Commission the following information concerning accounts of traders
owning or controlling such futures or option positions, except for
accounts carried on a fully disclosed basis by another futures
commission merchant, as may be specified in the call:
* * * * *
0
30. Revise the heading and paragraphs (c), (d), (e) introductory text,
and (f) of Sec. 21.03 to read as follows:
Sec. 21.03 Selected special calls--duties of foreign brokers,
domestic and foreign traders, futures commission merchants, introducing
brokers, and reporting markets.
* * * * *
(c) Upon a determination by the Commission that information
concerning accounts may be relevant information in enabling the
Commission to determine whether the threat of a market manipulation,
corner, squeeze, or other market disorder exists on any reporting
market, the Commission may issue a call for information from a
[[Page 37822]]
futures commission merchant or customer pursuant to the provisions of
this section.
(d) In the event the call is issued to a foreign broker or foreign
trader, its agent, designated pursuant to Sec. 15.05 of this chapter,
shall, if directed, promptly transmit calls made by the Commission
pursuant to this section by electronic mail or a similarly expeditious
means of communication.
(e) The futures commission merchant, introducing broker, or
customer to whom the special call is issued must provide to the
Commission the information specified below for the commodity, reporting
market and delivery months or option expiration dates named in the
call. Such information shall be filed at the place and within the time
specified by the Commission.
* * * * *
(f) If the Commission has reason to believe that a futures
commission merchant or customer has not responded as required to a call
made pursuant to this section, the Commission in writing may inform the
reporting market specified in the call and that reporting market shall
prohibit the execution of, and no futures commission merchant,
introducing broker, or foreign broker shall accept an order for, trades
on the reporting market and in the months or expiration dates specified
in the call for or on behalf of the futures commission merchant or
customer named in the call, unless such trades offset existing open
contracts of such futures commission merchant or customer.
* * * * *
PART 37--DERIVATIVES TRANSACTION EXECUTION FACILITIES
0
31. The authority for part 37 continues to read as follows:
Authority: 7 U.S.C. 2, 5, 6, 6c, 6(c), 7a and 12a, as amended by
Appendix E of Public Law 106-554, 114 Stat. 2763A-365.
0
32. Revise Sec. 37.2 to read as follows:
Sec. 37.2 Exemption.
Contracts, agreements or transactions traded on a derivatives
transaction execution facility registered as such with the Commission
under section 5a of the Act, the facility and the facility's operator
are exempt from all Commission regulations for such activity, except
for the requirements of this part 37 and:
(a) Parts 15 through 21, part 40 and part 41 of this chapter,
including any related definitions and cross-referenced sections; and
(b) Sections 1.3, 1.31, 1.59(d), 1.60, 1.63(c), 33.10, and part 190
of this chapter, including any related definitions and cross-referenced
sections, which are applicable as though they were set forth in this
part 37 and included specific reference to derivatives transaction
execution facilities.
Issued in Washington, DC, on June 28, 2006, by the Commission.
Eileen A. Donovan,
Acting Secretary of the Commission.
[FR Doc. E6-10383 Filed 6-30-06; 8:45 am]
BILLING CODE 6351-01-P