Rules and Rule Amendments

Implementation of Registered Entity Rules and Rule Amendments

Designated contract markets (DCMs) and registered derivatives clearing organizations (DCOs) generally may implement new rules or rule amendments by filing with the Commission a certification that the new rule or rule amendment complies with the Commodity Exchange Act (CEA) and the Commission’s regulations and/or by requesting CFTC approval of such rules and amendments.

To meet its statutory mission of ensuring market integrity and customer protection with respect to rules and rule amendments implemented under self-certification procedures, the CFTC places greater reliance on its oversight authorities, including market surveillance, rule enforcement reviews, review of new rules and rule amendments, reviews of contract terms, dialogue with the regulated entities, and enforcement actions. For rules and amendments adopted under self-certification procedures, regulated entities are expected to assume primary responsibility for ensuring that the rules and rule amendments meet, on a continuing basis, the applicable statutory and regulatory requirements.

Designated Contract Market Submission of Rules and Rule Amendments

Derivatives Clearing Organization Submission of Rules and Rule Amendments

Registered derivatives transaction execution facilities (DTEFs), as provided in CFTC Regulation 37.7(b), need not certify rules or rule amendments and must only notify the CFTC prior to placing into effect or amending their rules, including trading protocols.

Rules and Amendments Not Required to be Certified

Designated contract markets and derivatives clearing organizations may place certain rules or rule amendments into effect without a self-certification. A DCM or DCO need only provide a weekly notification of all rule changes involving:

nonmaterial revisions (e.g., renumbering);
delivery standards set by third parties;
routine changes in index products (e.g., composition or computation) made by independent third parties; and
changes to option contract terms relating to strike prices (e.g., strike price intervals).

Certain other rules may be implemented without either self-certification or notice to the CFTC, provided only that the DCM or DCO maintain documentation of all rule changes. Rules subject to this procedure include those that govern:

transfer of ownership or membership;
administrative procedures (e.g., organization of boards and committees);
administration (e.g., direction of employees, declaration of holidays); and
standards of decorum.

Rules and Rule Amendments That Must Obtain Prior CFTC Approval

The only designated contract market rules and rule amendments not eligible for self-certification are those that materially change a term or condition of a contract for future delivery of an enumerated agricultural commodity as listed in Section 1a(4) of the CEA, 7 USC § 1a(4), or an option on such a contract or commodity, in a delivery month having open interest. Under CFTC Regulation 40.4, such rules or rule amendments must be submitted to the CFTC for prior approval under the procedures of CFTC Regulation 40.5. A DCM may elect to submit any such new rule or rule amendment to the CFTC under the ten-day review procedure of CFTC Regulation 40.4 for a determination as to whether such rule must be submitted for prior approval.

However, CFTC Regulation 40.4 specifies that certain categories of new rules and rule amendments affecting a term or condition of a futures contract on an enumerated agricultural commodity are deemed not to be material and thus do not require prior CFTC approval. DCMs, therefore, may implement any new rule or rule change falling within these categories pursuant to self-certification provisions.

The categories of new rules and rule amendments deemed to be not material for this purpose are:

changes in trading hours;
changes in lists of delivery facilities pursuant to previously set standards or criteria;
changes in option contracts other than those relating to last trading day, expiration date, strike price de-listings, and speculative position limits;
reductions in the minimum price tick;
changes required by a court, or by a regulation of the CFTC or another Federal agency;
fees or fee changes of less than $1.00 per contract;
fees or fee changes of $1.00 or more that are established by an independent third party or are unrelated to delivery, trading, clearing, or dispute resolution.

Last Updated: August 2, 2007