[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: 17CFR37.3]

[Page 412-413]
 
              TITLE 17--COMMODITY AND SECURITIES EXCHANGES
 
             CHAPTER I--COMMODITY FUTURES TRADING COMMISSION
 
PART 37_DERIVATIVES TRANSACTION EXECUTION FACILITIES--Table of Contents
 
Sec.  37.3  Requirements for underlying commodities.

    (a) Trading facilities limited to eligible traders. Trading 
facilities limited to eligible traders as defined by section 5a(b)(3) of 
the Act, may trade any contract of sale of a commodity for future

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delivery (or option on such a contract) on any of the following 
underlying commodities:
    (1) Commodities having--
    (i) A nearly inexhaustible deliverable supply;
    (ii) A deliverable supply that is sufficiently large that the 
contract is highly unlikely to be susceptible to the threat of 
manipulation; or
    (iii) No cash market;
    (2) Commodities that are a security futures product, and the 
registered derivatives transaction execution facility is a national 
securities exchange registered under the Securities Exchange Act of 
1934;
    (3) Commodities for which the Commission has determined, based on 
the market characteristics and surveillance history, and the self-
regulatory record and capacity of the facility, that trading in the 
contract (or option) based on that commodity is highly unlikely to be 
susceptible to the threat of manipulation; or
    (4) Commodities that are agricultural commodities enumerated in 
section 1a(4) of the Act that have been so approved by the Commission 
under the procedures of paragraph (c) of this section.
    (b) The commodities that meet the criteria of paragraph (a)(1) of 
this section are the commodities defined in section 1a(13) of the Act as 
``excluded commodities.''
    (c) The Commission may make the determination described in paragraph 
(a)(3) of this section by rule, regulation or order, after notice and an 
opportunity for a hearing through submission of written data, views and 
arguments. A registered derivatives transaction execution facility may 
request that the Commission make such an individualized determination by 
filing with the Secretary of the Commission at its Washington, DC 
headquarters a petition that includes:
    (1) The terms and conditions of the product to be listed; and
    (2) A demonstration, supported by data, that the underlying 
commodity has a sufficiently liquid and deep cash market and a 
surveillance history based on actual trading experience and in light of 
any self-regulatory undertakings of the facility, to provide assurance 
that the contract or product is highly unlikely to be manipulated. The 
demonstration should address the following specific factors to the 
extent that the factor is not self-evident:
    (i) A high level of cash-market liquidity;
    (ii) Cash-market bid-ask spreads that are narrow relative to traded 
values;
    (iii) Relatively frequent cash market transactions involving 
participants that represent major segments of the industry;
    (iv) The absence of material impediments to participation in the 
cash market by commercial entities;
    (v) Transfer of ownership of the cash commodity that is easily and 
readily accomplished at minimal cost;
    (vi) A pattern of cash market pricing that exhibits continuity and 
the absence of frequent, sharp price changes such that a person cannot 
readily move materially the price of the product in normal cash market 
channels;
    (vii) A history of actual trading experience that the contract or 
product's terms and conditions provide for a deliverable supply, or a 
reliable and acceptable cash-settlement procedure, that is adequate to 
minimize the threat of market abuses such as price manipulation and 
distortions, congestion, and defaults; and
    (viii) Procedures to effectively oversee the market, including a 
large trader reporting system, as well as a history of active 
surveillance to prevent or mitigate market problems.
    (d) Trading facilities limited to eligible commercial entities. Any 
commodity, other than the agricultural commodities enumerated in section 
1a(4) of the Act, is eligible under section 5a(b)(2)(F) of the Act to be 
traded on a derivatives transaction execution facility that limits 
participants on the facility to eligible commercial entities as defined 
by Sec.  37.1(b) trading for their own account. Provided, however, an 
agricultural commodity enumerated in section 1a(4) of the Act may be so 
approved by the Commission under the procedures of paragraph (c) of this 
section.
    (e) Enumerated agricultural commodities. [Reserved]

[66 FR 42271, Aug. 10, 2001, as amended at 71 FR 1963, Jan. 12, 2006]

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