[Code of Federal Regulations]
[Title 17, Volume 1]
[Revised as of April 1, 2006]
From the U.S. Government Printing Office via GPO Access
[CITE: 17CFR31.6]

[Page 352-354]
 
              TITLE 17--COMMODITY AND SECURITIES EXCHANGES
 
             CHAPTER I--COMMODITY FUTURES TRADING COMMISSION
 
PART 31_LEVERAGE TRANSACTIONS--Table of Contents
 
Sec.  31.6  Registration of leverage commodities.

    (a) Registration of leverage commodities. Each leverage commodity 
upon which a leverage contract is offered for sale or purchase or is 
sold or purchased by a particular leverage transaction merchant must be 
separately registered with the Commission. Registration will be granted 
only when the following conditions are, and continue to be, met:
    (1) The person requesting registration of a leverage commodity is a 
registered leverage transaction merchant;
    (2) The commodity to be registered is a leverage commodity as 
defined in Sec.  31.4(g);
    (3) There exists a widely accepted and broadly disseminated 
commercial or retail cash price series for the commodity;
    (4) The commodity can be readily purchased or sold in normal 
commercial or retail channels by leverage customers making or taking 
delivery on a leverage contract;
    (5) The terms and conditions of the leverage contracts based on the 
leverage commodity are consistent with the Act and the regulations 
thereunder, and are not contrary to the public interest; and
    (6) The terms and conditions of the leverage contracts based on the 
leverage commodity do not include substantial characteristics of other 
interests,

[[Page 353]]

such as options, certificates of deposit, or other regulated 
instruments.
    (b) Application for registration. Applications to register leverage 
commodities should be filed with the Commission at its Washington, DC 
headquarters. Attn: Secretariat. Three copies of each such submission 
should be filed. The Commission may return any application which does 
not comply with the form and content requirements of this section. Each 
applicant must:
    (1) Provide evidence that the person applying for registration of 
the leverage commodity is registered or has applied to the National 
Futures Association for registration as a leverage transaction merchant;
    (2) Provide an explanation of the distinguishing characteristics of 
the leverage commodity for which registration is sought, including a 
complete description of the cash market for the leverage commodity, and 
for the spot, forward, and futures markets for the generic commodity;
    (3) Specify a commercial or retail cash price series including 
prevailing premiums or discounts governing cash market transactions in 
the quantities specified by the leverage contract and justify the use of 
such price series with respect to the particular leverage commodity for 
which registration is sought;
    (4) Provide evidence and a complete evaluation of how the 
distinguishing characteristics of the leverage commodity would be 
expected to affect the ability of leverage customers electing to make or 
take delivery of the commodity at an economic price in normal cash 
market channels;
    (5) Include a description of the commodity inspection and/or 
certification procedures typically required for commercial or retail 
sales of the specified commodity. Such description must be accompanied 
by information regarding the availability of any normally required 
certification or inspection service at the delivery points including 
those of the leverage transaction merchant; and
    (6) Include copies of all leverage contracts which are to be offered 
by the leverage transaction merchant on the leverage commodity.
    (c) Continuing registration of leverage commodities. A registered 
leverage transaction merchant must submit to the Commission for its 
review, at least forty-five (45) days before their effective date, any 
proposed changes in the specifications of the leverage commodity and the 
terms and conditions of the leverage contract from those submitted as 
part of the registration application unless such contract specifically 
provides that such terms and conditions are subject to change. Three 
copies of each such submission must be furnished to the Commission at 
its Washington, DC headquarters. Attn: Secretariat. The Commission may 
return any submission which does not comply with the form and content 
requirements of this section. Each such submission must, in the 
following order:
    (1) Explain how any such changes might affect the ability of 
leverage customers to realize the leverage commodity's economic value 
and how such amendments might affect the ability of leverage customers 
making or taking delivery to buy or sell the leverage commodity;
    (2) Explain the effect of such changes upon the continued 
appropriateness of the commercial or retail cash price series submitted 
pursuant to paragraph (b)(3) of this section, or, as an alternative, 
submit a new price series and a justification of its use; and
    (3) Indicate whether, if such changes are applied to existing 
leverage commodities, there will be a change in the economic value of 
such commodities and, if so, quantify the extent of such changes.
    (d) Authority to disapprove amendments. The Commission may 
disapprove, alter, or amend changes to the distinguishing 
characteristics of the registered leverage commodity, or to the terms 
and conditions of the leverage contracts offered thereon, after 
appropriate notice and opportunity for hearing, when the Commission 
determines that such a change is in violation of any of the provisions 
of the Act or any of the regulations thereunder, or that it is necessary 
or appropriate to ensure the financial solvency of leverage transactions 
or prevent manipulation or fraud. Upon notification by

[[Page 354]]

the Commission of its determination to disapprove, alter or amend such 
changes, the proposed changes will not become effective pending a final 
determination by the Commission to disapprove, alter, or amend such 
changes.
    (e) Authority to alter or amend specifications of the registered 
leverage commodity or the terms and conditions of leverage contract. The 
Commission may alter or amend specific distinguishing characteristics of 
the registered leverage commodity or the terms and conditions of 
leverage contracts after appropriate notice and opportunity for hearing 
when the Commission determines that, in light of intervening events, 
such alterations or amendments would be necessary or appropriate to 
ensure the financial solvency of leverage transactions or prevent 
manipulation or fraud.
    (f)(1) The Commission hereby delegates to the Director of the 
Division of Market Oversight until such time as the Commission orders 
otherwise, all functions reserved to the Commission in paragraphs (b) 
and (c) of this section.
    (2) The Director of the Division of Market Oversight may submit any 
matter which has been delegated to the Director under paragraph (f)(1) 
of this section to the Commission for its consideration.

(Secs. 8a(5) and 19 of the Commodity Exchange Act, as amended 7 U.S.C. 
12a(5) and 23 (1982))

[49 FR 5529, Feb. 13, 1984, as amended at 50 FR 27, Jan. 2, 1985; 50 FR 
2283, Jan. 16, 1985; 54 FR 41079, Oct. 5, 1989; 67 FR 62352, Oct. 7, 
2002]