Section

[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: 17CFR40.8]

[Page 452-457]

TITLE 17--COMMODITY AND SECURITIES EXCHANGES

CHAPTER I--COMMODITY FUTURES TRADING COMMISSION

PART 40_PROVISIONS COMMON TO CONTRACT MARKETS, DERIVATIVES TRANSACTION
EXECUTION FACILITIES AND DERIVATIVES CLEARING ORGANIZATIONS--Table of Contents

Sec. 40.8 Availability of public information.

(a) The following sections of all applications to become a
registered entity will be public: transmittal letter, proposed rules,
the applicant's regulatory compliance chart, documents establishing the
applicant's legal status, documents setting forth the applicant's
governance structure, and any other part of the application not covered
by a request for confidential treatment.
(b) Any information required to be made publicly available by a
registered entity under Sections 5(d)(7), 5a(d)(4) and 5b(c)(2)(L) of
the Act, respectively, will be treated as public information by the
Commission at the time an order of designation or registration is issued
by the Commission, a registered entity is deemed to be designated or
registered, or a rule or rule amendment of the registered entity is
approved or deemed to be approved by the Commission or can first be made
effective the day following its certification by the registered entity.

[67 FR 62880, Oct. 9, 2002, as amended at 69 FR 67505, Nov. 18, 2004; 71
FR 1971, Jan. 12, 2006]

Appendix A to Part 40--Guideline No. 1

(a) Application for Designation of Physical Delivery Futures Contracts

A board of trade shall submit:
(1) The rules setting froth the terms and conditions of the futures
contract.
(2) A description of the cash market for the commodity on which the
contract is based.
(i) The description may include, in addition to or in lieu of
materials prepared by the board of trade, existing studies by industry
trade groups, academics, governmental bodies or other entities, reports
of consultants, or other materials which provide a description of the
underlying cash market.
(ii) Where the same, or a closely related commodity, is already
designated as a contract market which and is not dormant, the cash
market description can be confined to those aspects relevant to
particular term(s) or condition(s) which differ from such existing
contract.
(3) A demonstration that the terms and conditions, as a whole, will
result in a deliverable supply such that the contract will not be
conducive to price manipulation or distortion and that the deliverable
supply reasonably can be expected to be available to short traders and
salable by long traders at its market value in normal cash marketing
channels.
For purposes of this demonstration, provide the following
information in chart or narrative form.

Contract Terms and Conditions
----------------------------------------------------------------------------------------------------------------
Explanation as to
Rule number of consistency with,
Exchange identical or reason for
Term or condition proposal approved variance from
provision, if any cash market
\1\ practice
----------------------------------------------------------------------------------------------------------------
1. Commodity characteristics (e.g., grade, quality, ................. ................. .................
weight, class, growth, issuer, origin, maturity,
source, rating, etc.).................................
2. Any quality differentials for nonpar deliveries, or ................. ................. .................
lack thereof..........................................
3. Delivery points/region.............................. ................. ................. .................
4. Any locational differentials for nonpar deliveries, ................. ................. .................
or lack thereof.......................................
5. Delivery facilities (type, number, capacity, ................. ................. .................
ownership)............................................
6. Contract size and/or trading unit................... ................. ................. .................
7. Delivery pack or composition of delivery units...... ................. ................. .................
8. Delivery instrument (e.g., warehouse receipt, ................. ................. .................
shipping certificate, bill of lading).................
9. Transportation terms (e.g., FOB, CIF, prepay freight ................. ................. .................
to destination).......................................
10. Delivery procedures................................ ................. ................. .................
11. Delivery months.................................... ................. ................. .................
12. Delivery period and last trading day............... ................. ................. .................
13. Inspection/certification procedures (verification ................. ................. .................
of delivery eligibility, any discounts applied for
age)..................................................
14. Minimum price change (tick) equal to or less than ................. ................. .................
cash market minimum price increment...................

[[Page 453]]

15. Daily price limit provisions (note relationship to ................. ................. .................
cash market price movements)..........................
----------------------------------------------------------------------------------------------------------------
DELIVERABLE SUPPLIES \2\--ESTIMATE OF DELIVERABLE
SUPPLIES FOR TRADING MONTH(S) WITH LOWEST SUPPLIES
ESTIMATION METHODOLOGY................................. ................. ................. .................
----------------------------------------------------------------------------------------------------------------
\1\ If an identical provision has been approved for a nondormant contract in the same commodity, there is no
need to provide an explanation in the next column.
\2\ No estimate of deliverable supply is needed if a previously designated nondormant contract is trading. Also,
no justification of the spot month limit is needed if the limit is the same as that approved by the Commission
for an identical contract in that commodity (relative to the quantity or value of the identical contract).
Where more than one contract is based on the same underlying commodity or instrument, positions should be
combined for purposes of applying speculative limits.

Terms and Conditions Related to Speculative Limits
----------------------------------------------------------------------------------------------------------------
Level (exchange
Speculative limit Standard rule)
----------------------------------------------------------------------------------------------------------------
1. Spot month.................................. No greater than one-fourth of estimated .................
deliverable supply.
2. Nonspot individual month or all months 5,000 contract.............................. .................
combined (financial and energy contract).
3. Nonspot individual month or all months 1,000 contracts............................. .................
combined (tangible commodity contracts).
4. Reporting level............................. Equal to or less than levels specified in .................
CFTC rule 15.03.
5. Aggregation rule............................ Same as CFTC rule 150.5(g) or previously .................
approved language.
----------------------------------------------------------------------------------------------------------------

(4) As specifically requested, such additional evidence, information
or data relating to whether the contract meets, initially or on a
continuing basis, any of the specific requirements of the Act, including
the public interest standard contained in Section 5(7) of the Act, and
whether the contract reasonably can be expected to be, or has been, used
for hedging and/or price basing on more than an occasional basis, or any
other requirement for designation under the Act or Commission rules and
policies.

(b) Application for Cash Settled Futures Contracts

A board of trade shall submit:
(1) The rules setting forth the terms and conditions of the proposed
futures contract.
(2) A description of the cash market for the commodity on which the
contract is based.
(i) The description may include, in addition to or in lieu of
materials prepared by the board of trade, existing studies by industry
trade groups, academics, governmental bodies or other entities, reports
of consultants, or other materials which provide a description of the
underlying cash market.
(ii) Where the same, or a closely related commodity, is already
designated as a contract market which is not dormant, the cash market
description can be confined to those aspects relevant to particular
term(s) or conditions(s) which differ from such existing contract.
(3) A demonstration that cash settlement of the contract is at a
price reflecting the underlying cash market, will not be subject to
manipulation or distortion, and is based on a cash price series that is
reliable, acceptable, publicly available and timely.
For purposes of this demonstration, provide the following
information in chart or narrative form.

[[Page 454]]

2. Delivery months, noting any cyclical variations in ................. ................. .................
trading activity that may affect the potential for
manipulating the cash settlement price................
3. Last trading day.................................... ................. ................. .................
4. Contract size....................................... ................. ................. .................
5. Minimum price change (tick)......................... ................. ................. .................
6. Daily price limit provisions, relative to cash
market price movements................................
----------------------------------------------------------------------------------------------------------------
\1\ If an identical provision has been approved for a nondormant contract in the same commodity, there is not
need to provide an explanation in the next column.

Terms and Conditions Related to Cash Settlement Price Series
------------------------------------------------------------------------
Rule number of
identical Explanation or
Requirement approved justification
provision
------------------------------------------------------------------------
1. Where an independent third ................. .................
party calculate the cash
settlement price series, evidence
that the third party does not
object to its use and provides
safeguards against susceptibility
to manipulation..................
2. Where board of trade generates ................. .................
cash settlement rice series,
specifications of calculation
procedure and safeguards in cash
settlement process to protect
against susceptibility to
manipulation (e.g., if self-
generated survey, polling sample
representative of cash market,
but with a minimum of 4
nontrading entities or 8 entities
that trade for own account)......
3. Procedure for, and timeliness ................. .................
of, dissemination to public......
4. Evidence that price is reliable ................. .................
indicator of cash market values
and acceptable for hedging.......
------------------------------------------------------------------------

Terms and Conditions Related to Speculative Limits
----------------------------------------------------------------------------------------------------------------
Level (exchange
Speculative limit Standard rule)
----------------------------------------------------------------------------------------------------------------
1. Spot month.................................. Must be no greater than necessary to .................
minimize the potential for manipulation or
distortion of the contract's or the
underlying commodity's price.
2. Nonspot individual month or all months 5,000 contracts............................. .................
combined (financial and energy contracts).
3. Nonspot individual month or all months 1,000 contracts............................. .................
combined (tangible commodity contracts).
4. Reporting level............................. Equal to or less than levels specified in .................
CFTC rule 15.03.
5. Aggregation rule............................ Same as CFTC rule 150.5(g) or previously .................
approved language.
----------------------------------------------------------------------------------------------------------------

A board of trade shall submit:
(1) The rules setting forth the terms and conditions of the proposed
option contract.
(2)(i) For options on futures contracts, the terms and conditions of
the proposed or existing underlying futures contract.
(2)(ii) For options on physical commodities:
(A) A description of the cash market for the commodity on which the
contract is based.
(1) The description may include, in addition to or in lieu of
material prepared by the board of trade: existing studies by industry
trade groups, academics, governmental bodies or other entities;
promotional or marketing materials prepared by or for the

[[Page 455]]

board of trade; reports of consultants; or other materials which provide
a description of the underlying cash market.
(2) Where the same, or a closely related commodity, is already
designated and is not dormant, the cash market description can be
confined to those aspects relevant to particular term(s) or condition(s)
which differ from such existing contract.
(B) Depending on the method of settling the option, the relevant
chart for either a physical delivery or cash settled futures contract.
(3) The following completed chart.

Terms and Conditions
----------------------------------------------------------------------------------------------------------------
Justification for
not meeting
Applicable CFTC Met by exchange standard, or rule
Criterion Rule (17 CFR) Standard rule number number of
identical
approved rule
----------------------------------------------------------------------------------------------------------------
1. Speculative limits.......... 150.5............ Combined net position ................. .................
in futures and
options on a futures-
equivalent basis at
the futures position
levels, with inter-
month spread
exemptions that are
consistent with those
of the futures
contracts or
consistent with
Commission Rule
150.5(e) for
underlying future.
2. Aggregation rule............ 150.4............ Same as Rule 150.5(g) ................. .................
or previously
approved language.
3. Reporting level............. 15.00(b)(2)...... 50 contracts or fewer. ................. .................
4. Strike prices (number listed 33.4(b)(1)....... Procedures for routine ................. .................
& increments). listing of strikes
are specified and
automatic, provisions
for listing
discretionary strikes
are specified.
5. Option expiration & last 33.4(b)(2)....... Except for options on ................. .................
trading day. cash-settled futures
contracts, expiration
is not less than one
business day before
the earlier of the
last trading day or
the first notice day
of the underlying
future.
6. Minimum tick................ 33.4(d).......... Equal to, or less ................. .................
than, the underlying
futures tick.
7. Daily price limit, if 33.4(d).......... Equal to, or greater ................. .................
specified. than, the underlying
futures price limit.
----------------------------------------------------------------------------------------------------------------

(4) As specifically requested, such additional evidence, information
or data relating to whether the contract meets, initially or on a
continuing basis, any of the specific requirements of the Act, including
the public interest standard contained in Section 5(7) of the Act, or
any other requirement for designation under the Act or Commission rules
and policies.

[64 FR 29221, June 1, 1999. Redesignated at 66 FR 42287, Aug. 10, 2001]

Appendix B to Part 40--Schedule of Fees

(a) Applications for product approval. Each application for product
approval under Sec. 40.3 must be accompanied by a check or money order
made payable to the Commodity Futures Trading Commission in an amount to
be determined annually by the Commission and published in the Federal
Register.
(b) Checks and applications should be sent to the attention of the
Office of the Secretariat, Commodity Futures Trading Commission, Three
Lafayette Centre, 1155 21st Street, NW., Washington, DC 20581. No checks
or money orders may be accepted by personnel other than those in the
Office of the Secretariat.
(c) Failure to submit the fee with an application for product
approval will result in return of the application. Fees will not be
returned after receipt.

Appendix C to Part 40 [Reserved]

Appendix D to Part 40--Submission Cover Sheet and Instructions

A properly completed submission cover sheet must accompany all rule
submissions submitted electronically by a designated contract market,
registered derivatives transaction execution facility, or registered
derivatives clearing organization to the Secretary of the Commodity
Futures Trading Commission, at submissions@cftc.gov in a format
specified by the Secretary of the Commission. Each submission should
include the following:
1. Identifier Code (optional)--If applicable, the exchange or
clearing organization Identifier Code at the top of the cover sheet.
Such

[[Page 456]]

codes are commonly generated by the exchanges or clearing organizations
to provide an identifier that is unique to each filing (e.g., NYMEX
Submission 03-116).
2. Date--The date of the filing.
3. Organization--The name of the organization filing the submission
(e.g., CBOT).
4. Filing as a--Check the appropriate box for a designated contract
market (DCM), derivatives clearing organization (DCO), or derivatives
transaction execution facility (DTEF).
5. Type of Filing--Indicate whether the filing is a rule amendment
or new product and the applicable category under that heading.
6. Rule Numbers--For rule filings only, identify rule number(s)
being adopted or modified in the case of rule amendment filings.
7. Description--For rule or rule amendment filings only, enter a
brief description of the new rule or rule amendment. This narrative
should describe the substance of the submission with enough specificity
to characterize all essential aspects of the filing.
8. Other Requirements--Comply with all filing requirements for the
underlying proposed rule or rule amendment. The filing of the submission
cover sheet does not obviate the responsibility to comply with any
applicable filing requirement (e.g., rules submitted for Commission
approval under Sec. 40.5 must be accompanied by an explanation of the
purpose and effect of the proposed rule along with a description of any
substantive opposing views).
A sample of the required submission cover sheet follows.

[[Page 457]]

[GRAPHIC] [TIFF OMITTED] TR18NO04.000

[69 FR 67505, Nov. 18, 2004, as amended at 71 FR 1971, Jan. 12, 2006]