[Code of Federal Regulations]
[Title 17, Volume 1]
[Revised as of April 1, 2007]
From the U.S. Government Printing Office via GPO Access
[CITE: 17CFR36.3]

[Page 411-413]
 
              TITLE 17--COMMODITY AND SECURITIES EXCHANGES
 
             CHAPTER I--COMMODITY FUTURES TRADING COMMISSION
 
PART 36_EXEMPT MARKETS--Table of Contents
 
Sec.  36.3  Exempt commercial markets.

    (a) Notification. An electronic trading facility relying upon the 
exemption in Section 2(h)(3) of the Act shall notify the Commission of 
its intention to do so. This notification, and subsequent notification 
of any material changes in the information initially provided, shall be 
filed with the Secretary of the Commission at its Washington, DC 
headquarters, in electronic form, shall be labeled as ``Notification of 
Operation as an Exempt Commercial Market,'' and shall include the 
information and certifications specified in Section 2(h)(5)(A) of the 
Act.
    (b) Required information. (1) A facility operating in reliance on 
the exemption in section 2(h)(3) of the Act, initially and on an on-
going basis, must:
    (i) Provide the Commission with access to the facility's trading 
protocols, either electronically or in hard copy form;
    (ii) Identify to the Commission those transactions conducted on the 
facility with respect to which it intends, in good faith, to rely on the 
exemption in section 2(h)(3) of the Act, and which averaged five trades 
per day or more over the most recent calendar quarter, and, with respect 
to such transactions, either:
    (A) Submit to the Commission, in a form and manner acceptable to the 
Commission, a report for each business day, showing for each transaction 
executed on the facility in reliance on the exemption set forth in 
section 2(h)(3) of the Act, and meeting the five trades per day or more 
threshold test of this section, the following information: the 
commodity, the location, the maturity date, whether it is a financially 
settled or physically delivered instrument, the date of execution, the 
time of execution, the price, the quantity, and such other information 
as the Commission may determine, and for an option instrument, in 
addition to the foregoing information, the type of option (call or put) 
and the strike price. Each such report shall be electronically 
transmitted weekly, within such time period as is acceptable to the 
Commission after the end of the week to which the data applies; or
    (B) Provide the Commission, in a form and manner acceptable to the 
Commission, with electronic access to those transactions conducted on 
the facility in reliance on the exemption in section 2(h)(3) of the Act, 
and meeting the five trades per day or more threshold test of this 
section, which access would allow the Commission to compile the 
information described in paragraph (b)(1)(ii)(A) of this section and 
create a permanent record thereof;
    (iii) Maintain a record of allegations or complaints received by the 
trading facility concerning instances of suspected fraud or manipulation 
in trading activity conducted in reliance on the exemption set forth in 
section 2(h)(3) of the Act. The record shall contain the name of the 
complainant, if provided, the date of the complaint, the market 
instrument, the substance of the allegations, and the name of the person 
at the trading facility who received the complaint; and
    (iv) Provide to the Commission, either electronically or in hard 
copy form, a copy of the record of each complaint received pursuant to 
paragraph (b)(1)(iii) of this section that alleges, or relates to, facts 
that would constitute a violation of the Act or Commission regulations. 
Such copy shall be provided to the Commission no later than 30 calendar 
days after the complaint is received. Provided, however, that in the 
case of a complaint alleging, or relating to, facts that would 
constitute an ongoing fraud or market manipulation under the Act or 
Commission regulations, such copy shall be provided to the Commission 
within three business days after the complaint is received.
    (2) The Commission hereby delegates, until the Commission orders 
otherwise, the authority to determine the form and manner of submitting 
reports, the time within which such reports shall be filed, and the form 
and manner of providing electronic access, under paragraph (b)(1) of 
this section, to the Director of the Division of Market Oversight and 
such members of the Commission's staff as the Director may designate. 
The Director may submit to the

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Commission for its consideration any matter that has been delegated by 
this paragraph. Nothing in this paragraph prohibits the Commission, at 
its election, from exercising the authority delegated in this paragraph.
    (3) Special calls. (i) All information required upon special call of 
the Commission under section 2(h)(5)(B)(iii) of the Act shall be 
prepared in the form and manner and in accordance with the instructions, 
and shall be transmitted at the time and to the office of the 
Commission, as may be specified in the call.
    (ii) The Commission hereby delegates, until the Commission orders 
otherwise, the authority to make special calls as set forth in section 
2(h)(5)(B)(iii) of the Act to the Director of the Division of Clearing 
and Intermediary Oversight and to the Director of The Division of Market 
Oversight to be exercised by either Director or by such other employee 
or employees as the Director may designate. The directors may submit to 
the Commission for its consideration any matter that has been delegated 
in this paragraph. Nothing in this paragraph prohibits the Commission, 
at its election, from exercising the authority delegated in this 
paragraph.
    (4) Subpoenas to foreign persons. A foreign person whose access to a 
trading facility is limited or denied at the direction of the Commission 
based on the Commission's belief that the foreign person has failed 
timely to comply with a subpoena as provided under section 
2(h)(5)(C)(ii) of the Act shall have an opportunity for a prompt hearing 
under the procedures provided in Sec. Sec.  21.03(g) and (h) of this 
chapter.
    (c) Additional requirements--(1) Prohibited representation. An 
electronic trading facility relying upon the exemption in section 
2(h)(3) of the Act shall not represent to any person that it is 
registered with, designated, recognized, licensed or approved by the 
Commission.
    (2) Market data dissemination. (i) Criteria for price discovery 
determination. An electronic trading facility operating a market in 
reliance on the exemption in section 2(h)(3) of the Act performs a 
significant price discovery function for transactions in the cash market 
for a commodity underlying any agreement, contract, or transaction 
executed or traded on the electronic trading facility when:
    (A) 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
    (B) The market's prices are routinely disseminated in a widely 
distributed industry publication and are routinely consulted by industry 
participants in pricing cash market transactions.
    (ii) Notification. An electronic trading facility operating in 
reliance on Section 2(h)(3) of the Act shall notify the Commission when:
    (A) It has reason to believe that 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;
    (B) It has reason to believe that the market's prices are routinely 
disseminated in a widely distributed industry publication and are 
routinely consulted by industry participants in pricing cash market 
transactions; or
    (C) The market holds itself out to the public as performing a price 
discovery function for the cash market for the commodity.
    (iii) Price discovery determination. Following receipt of a notice 
under paragraph (c)(2)(ii) of this section, or on its own initiative, 
the Commission may notify an electronic trading facility operating in 
reliance on section 2(h)(3) of the Act that the trading facility appears 
to meet the criteria for performing a significant price discovery 
function under paragraph (c)(2)(i)(A) or (B) of this section. Before 
making a final price discovery determination under this paragraph, the 
Commission shall provide the electronic trading facility with an 
opportunity for a hearing through the submission of written data, views 
and arguments. Any such written data, views and arguments shall be filed 
with the Secretary of the Commission in the form and manner and within 
the time specified by the Commission. After consideration of all 
relevant matters, the Commission shall issue an order containing its 
determination whether the electronic trading facility performs a 
significant price

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discovery function under the criteria of paragraph (c)(2)(i)(A) or (B) 
of this section.
    (iv) Price dissemination. (A) An electronic trading facility that 
the Commission has determined performs a significant price discovery 
function under paragraph (c)(2)(iii) of this section shall disseminate 
publicly and on a daily basis all of the following information with 
respect to transactions executed in reliance on the exemption:
    (1) Contract terms and conditions, or a product description, and 
trading conventions, mechanisms and practices;
    (2) Trading volume by commodity and, if available, open interest; 
and
    (3) The opening and closing prices or price ranges, the daily high 
and low prices, a volume-weighted average price that is representative 
of trading on the trading facility, or such other daily price 
information as proposed by the facility and approved by the Commission.
    (B) The trading facility shall make such information readily 
available to the news media and the general public without charge no 
later than the business day following the day to which the information 
pertains.
    (v) Modification of price discovery determination. A trading 
facility that the Commission has determined performs a significant price 
discovery function under paragraph (c)(2)(iii) of this section may 
petition the Commission at any time to modify or vacate that 
determination. The petition shall contain an appropriate justification 
for the request. The Commission, after notice and opportunity for a 
hearing through the submission of written data, views and arguments, 
shall by order grant, grant subject to conditions, or deny such request.
    (3) Required representation. The facility must represent in the 
notification provided under paragraph (a) of this section that it 
requires, and require, that each participant agree to comply with all 
applicable law and the facility must have a reasonable basis for 
believing that authorized participants are ``eligible commercial 
entities'' as defined in section 1a(11) of the Act.
    (4) Annual Certification. An electronic trading facility operating 
in reliance upon the exemption in Section 2(h)(3) of the Act shall file 
with the Commission annually, no later than the end of each calendar 
year, a notice that includes: (i) A statement that it continues to 
operate under the exemption; and (ii) a certification that the 
information contained in the previous Notification of Operation as an 
Exempt Commercial Market is still correct.

[66 FR 42270, Aug. 10, 2001, as amended at 67 FR 62352, Oct. 7, 2002; 69 
FR 43294, July 20, 2004; 71 FR 1962, Jan. 12, 2006]