[Federal Register: November 18, 2004 (Volume 69, Number 222)]
[Rules and Regulations]
[Page 67503-67508]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18no04-2]
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COMMODITY FUTURES TRADING COMMISSION
17 CFR Parts 40, 41, and 145
Confidential Information and Commission Records and Information
AGENCY: Commodity Futures Trading Commission.
ACTION: Final rules.
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SUMMARY: The Commodity Futures Trading Commission is amending its
regulations to specify which portions of an application for
registration as a derivatives transaction execution facility (DTEF) or
derivatives clearing organization (DCO), or for designation as a
contract market (DCM), will be public. The amendments also implement a
procedure requiring registered entities to submit a cover sheet for all
rule submissions. Additionally, the Commission is updating its
regulations under the Freedom of Information Act (FOIA) to implement
expedited processing and increased time limits; revise the schedule of
fees for FOIA requests; and correct certain provisions concerning
publicly available records.
DATES: Effective December 20, 2004.
ADDRESSES: You may submit comments by any of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Mail/Hand Deliver: Jean A. Webb, Secretary of the
Commission, Commodity Futures Trading Commission, Three Lafayette
Centre, 1155 21st Street, NW., Washington, DC 20581.
E-mail: secretary@cftc.gov.
FOR FURTHER INFORMATION CONTACT: Eileen A. Donovan, Assistant Secretary
to the Commission for FOIA Matters, (202) 418-5096, electronic mail:
edonovan@cftc.gov, or David Steinberg, Attorney Advisor, (202) 418-
5102, electronic mail: dsteinberg@cftc.gov, Office of the Secretariat,
Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st
Street, NW., Washington, DC 20581.
SUPPLEMENTARY INFORMATION:
I. Background
A. Public Availability of Applications Submitted by DTEFs, DCOs, and
DCMs
On July 28, 2004, the Commission requested comment from the public
regarding its proposal to specify that the following portions of DTEF,
DCO, and DCM applications are publicly available:\1\ transmittal
letter, proposed rules, the applicant's regulatory compliance chart,
documents establishing the applicant's legal status (e.g., corporate
charters), and documents setting forth the applicant's governance
structure.\2\ The proposed change to Sec. 40.8 addresses the absence
in the Commission's regulations of any guidance to applicants or the
public about the availability of the applications.
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\1\ 69 FR 44981.
\2\ The rule proposal indicated that the identical sections of
applications seeking designation or registration as a DCM or DTEF
under section 6(a) of the CEA would be publicly available.
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In response to this proposal, the Commission received comment
letters from the Chicago Mercantile Exchange (``CME'') and the Chicago
Board of Trade (``CBOT'') (collectively, ``exchanges''). Both exchanges
noted strong support for the rule proposal, but requested that the
Commission expand the proposal to make additional information public as
a matter of course. The Commission has carefully considered the
comments from the exchanges and does not believe the proposal should be
expanded at this time. First, the exchanges contend that the Commission
should ensure the public has the opportunity to comment meaningfully on
the salient operational features of the proposed exchange, as well as
any proposed plans that could adversely impact market integrity, such
as payment for order flow or internalization plans. The CBOT also
believes that applicant plans to allow or encourage trading off the
centralized market should be public. The Commission understands the
importance of interested parties being able to comment meaningfully on
this information. The Commission notes that applicant plans regarding
payment for order flow or internalization plans are either submitted in
the rules section of the proposed application or may be part of the
applicant's future plans filed separately from the application.
Applicant plans for trading off the centralized market are also
submitted in the rules section of the proposal. Rules are defined in
Sec. 40.1 and are already generally considered public information.
Consequently, the Commission does not believe it is necessary to
separately list this information in Sec. 40.8(a).
Second, both exchanges assert that information concerning
outsourcing arrangements upon which the applicant tends to rely should
be made public. The CME notes that to the extent that an applicant
proposes to outsource any of its operational, self-regulatory, or
clearing functions, the public cannot provide the Commission with
useful comments regarding the applicant's proposed compliance with the
Commodity Exchange Act's core principles or designation criteria unless
the key provisions are made public. Again, the Commission recognizes
the importance of interested parties being able to comment on a
proposed application, but must balance this with the intent of the
applicant to protect commercially sensitive information. Outsourcing
arrangements often include compliance and surveillance techniques and
the public release of this information could cause competitive harm to
the applicant. The Commission notes that Sec. 40.8(a) is not intended
to limit which applicant information will be released, but to specify
the portions of an application that are automatically public and
therefore would not be granted confidential treatment under any
circumstances. Therefore, even though the Commission does not specify
outsourcing information in Sec. 40.8(a), portions of this material in
a redacted form could still be made public if requested under the
Freedom of Information Act. The Commission also notes that the rule
states that any portion of the application not covered by a request for
confidential treatment will also be made public. The Commission is
committed to providing transparency in the application process and will
continue to evaluate whether additional information should be included
in Sec. 40.8(a).
B. Appendix D--Submission Cover Sheet and Instructions and Public
Availability of Rule Submissions
The Commission proposed to amend the part 40 and 41 regulations
requiring DTEFs, DCOs, and DTEFs to attach a Commission-generated
submission cover sheet with all self-certified rules,\3\ self-certified
products,\4\ rules submitted for Commission approval,\5\ products
submitted for Commission approval,\6\ notifications of rule
amendments,\7\ and
[[Page 67504]]
non-material agricultural rule changes.\8\ This cover sheet will assist
Commission staff in preparing and maintaining the accuracy of the
submissions being published on the Commission's website. The Commission
also proposed adding appendix D to part 40 to include a copy of the
submission cover sheet along with step-by-step instructions for
completing and returning the form to the Commission. Although the
Commission did not receive any public comments regarding this proposal,
the Commission is amending the instructions in appendix D by adding an
instruction to ensure that registered entities are fully aware that
completing and returning the cover sheet to the Commission does not
obviate the responsibility to comply with the other filing requirements
for the underlying rule or rule amendment. The Commission has observed,
during the past year of requesting the cover sheet, that some rule
submissions have not been accompanied by all of the required components
of the rule filing.
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\3\ Commission Regulations 40.6(a) and 41.24.
\4\ Commission Regulations 40.2 and 41.23.
\5\ Commission Regulations 40.4(a) and 40.5.
\6\ Commission Regulation 40.3.
\7\ Commission Regulation 40.6(c).
\8\ Commission Regulation 40.4(b).
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C. Freedom of Information Act Amendments
The Commission did not receive any comments regarding the proposed
amendments to 17 CFR part 145. Therefore, all of the proposed
amendments are being adopted in the final rules.
II. Related Matters
A. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq. (2000),
requires that agencies, in proposing regulations, consider the impact
of those regulations on small entities. The regulations discussed
herein would affect contract markets and other registered entities. The
Commission has previously established certain definitions of ``small
entities'' to be used by the Commission in evaluating the impact of its
regulations in accordance with the RFA.\9\ In its previous
determinations, the Commission has concluded that DCMs, DTEFs, and DCOs
are not small entities for purposes of the RFA.\10\
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\9\ 47 FR 18618-18621 (Apr. 30, 1982).
\10\ 47 FR 18618, 18619 (April 30, 1982) (discussing contract
markets); 66 FR 42256, 42268 (August 10, 2001) (discussing DTEFs);
66 FR 45605, 45609 (August 29, 2001) (discussing DCOs).
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The Commission has previously determined, pursuant to 5 U.S.C.
605(b), that part 145 regulations do not have a significant economic
impact on a substantial number of small entities. Because they do not
impose regulatory obligations on commodity professionals and small
commodity firms and because the changes will improve public access to
Commission records and information, the Commission does not expect the
regulations to have a significant economic impact on a substantial
number of small entities.
In the proposed rules, the Commission solicited comment on whether
the rules as proposed would have a significant impact on a substantial
number of small entities. The Commission received no comments in
response to this request. The Commission hereby determines that the
rules, as adopted herein, will not have a significant impact on a
substantial number of small entities. Therefore, the Chairman, on
behalf of the Commission, hereby certifies, pursuant to 5 U.S.C.
605(b), that the amendments will not have a significant impact on a
substantial number of small entities.
B. Paperwork Reduction Act
As required by the Paperwork Reduction Act of 1995,\11\ the
Commission submitted a copy of the proposed rule amendments to the
Office of Management and Budget for its review. The Commission did not
receive any public comments relative to its analysis of paperwork
burdens associated with this rulemaking.
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\11\ Pub. L. 104-13 (May 13, 1995).
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C. Cost-Benefit Analysis
Section 15(a) of the Act, as amended by section 119 of the CFMA,
requires the Commission to consider the costs and benefits of its
action before issuing a new regulation under the Act. By its terms,
section 15(a) as amended does not require the Commission to quantify
the costs and benefits of a new regulation or to determine whether the
benefits of the regulation outweigh its costs. Rather, section 15(a)
simply requires the Commission to ``consider the costs and benefits''
of its action.
Section 15(a) of the Act further specifies that costs and benefits
shall be evaluated in light of five broad areas of market and public
concern: Protection of market participants and the public; efficiency,
competitiveness, and financial integrity of futures markets; price
discovery; sound risk management practices; and other public interest
considerations. Accordingly, the Commission could in its discretion
give greater weight to any one of the five enumerated areas and could
in its discretion determine that, notwithstanding its costs, a
particular rule was necessary or appropriate to protect the public
interest or to effectuate any of the provisions or to accomplish any of
the purposes of the Act.
The Commission published an analysis of costs and benefits when it
proposed the rule amendments that have now been adopted.\12\ It did not
receive any public comments pertaining to the analysis.
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\12\ 69 FR 44981 at 44984 (July 28, 2004).
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List of Subjects
17 CFR Part 40
Commodity futures, Contract markets, Designation application,
Reporting and recordkeeping requirements.
17 CFR Part 41
Security futures.
17 CFR Part 145
Freedom of information.
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For the reasons stated in the preamble, the Commodity Futures Trading
Commission amends 17 CFR parts 40, 41, and 145 as follows:
PART 40--PROVISIONS COMMON TO CONTRACT MARKETS, DERIVATIVES
TRANSACTION EXECUTION FACILITIES AND DERIVATIVES CLEARING
ORGANIZATIONS
0
1. The authority for part 40 continues to read as follows:
Authority: 7 U.S.C. 1a, 2, 5, 6, 6c, 7, 7a, 8 and 12a, as
amended by appendix E of Pub. L. 106-554, 114 Stat. 2763A-365.
0
2. Section 40.2 is revised to read as follows:
Sec. 40.2 Listing products for trading by certification.
To list a new product for trading, to list a product for trading
that has become dormant, or to accept for clearing a product (not
traded on a designated contract market or a registered derivatives
transaction execution facility), a registered entity must file with the
Secretary of the Commission at its Washington, DC, headquarters no
later than the close of business of the business day preceding the
product's listing or acceptance for clearing, either in electronic or
hard copy form, a copy of the submission cover sheet in accordance with
the instructions in appendix D to this part, a copy of the product's
rules, including its terms and conditions, or the rules establishing
the terms and conditions of products that make them acceptable for
clearing, and a certification by the registered entity that the trading
product or other instrument, or the clearing of the trading product or
other instrument, including any rules establishing the
[[Page 67505]]
terms and conditions of products that make them acceptable for
clearing, complies with the Act and regulations thereunder.
0
3. Section 40.3 is amended by revising paragraphs (a)(4) and (a)(5) and
by adding paragraph (a)(6) to read as follows:
Sec. 40.3 Voluntary submission of new products for Commission review
and approval.
(a) * * *
(4) The submission identifies with particularity information in the
submission (except for the product's terms and conditions which are
made publicly available at the time of submission) that will be subject
to a request for confidential treatment and supports that request for
confidential treatment with reasonable justification;
(5) The submission includes the fee required under appendix B to
this part; and
(6) The submission includes a copy of the submission cover sheet in
accordance with the instructions in appendix D to this part.
* * * * *
0
4. Section 40.5 is amended by revising paragraphs (a)(1)(vi) and
(a)(1)(vii) and by adding paragraph (a)(1)(viii) to read as follows:
Sec. 40.5 Voluntary submission of rules for Commission review and
approval.
(a) * * *
(1) * * *
(vi) Identify any Commission regulation that the Commission may
need to amend, or sections of the Act or Commission regulations that
the Commission may need to interpret in order to approve the proposed
rule. To the extent that such an amendment or interpretation is
necessary to accommodate a proposed rule, the submission should include
a reasoned analysis supporting the amendment to the Commission
regulation or the interpretation;
(vii) Identify with particularity information in the submission
(except for a product's terms and conditions, which are made publicly
available at the time of submission) that will be subject to a request
for confidential treatment and support that request for confidential
treatment with reasonable justification; and
(viii) Include a copy of the submission cover sheet in accordance
with the instructions in appendix D to this part.
* * * * *
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5. Section 40.6 is amended by revising paragraphs (a)(3)(iv) and
(a)(3)(v) and adding paragraph (a)(3)(vi) to read as follows:
Sec. 40.6 Self-certification of rules by designated contract markets
and registered derivatives clearing organizations.
(a) * * *
(3) * * *
(iv) A brief explanation of any substantive opposing views not
incorporated into the rule;
(v) A certification by the entity that the rule complies with the
Act and regulations thereunder; and
(vi) A copy of the submission cover sheet in accordance with the
instructions in appendix D to this part.
* * * * *
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6. Section 40.8 is amended by redesignating the current paragraph as
paragraph (b) and by adding new paragraph (a) to read as follows:
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.
* * * * *
Appendix C to Part 40 [Added and Reserved]
0
6a. Appendix C to part 40 is added and reserved.
0
7. Appendix D is added to read as follows:
Appendix D to Part 40--Submission Cover Sheet and Instructions
A properly completed submission cover sheet must accompany all
rule submissions submitted by a designated contract market,
registered derivatives clearing organization, or registered
derivatives transaction execution facility and forwarded either in
hard copy form or electronically to the Secretary of the Commodity
Futures Trading Commission, Three Lafayette Centre, 1155 21st Street
NW, Washington, DC 20581 or electronically to 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 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.
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[GRAPHIC] [TIFF OMITTED] TR18NO04.000
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PART 41--SECURITY FUTURES PRODUCTS
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8. The authority citation for part 41 continues to read as follows:
Authority: Sections 206, 251 and 252, Pub. L. 106-554, 114 Stat.
2763, 7 U.S.C. 1a, 2, 6f, 6j, 7a-2, 12a; 15 U.S.C. 78g(c)(2).
0
9. Section 41.23 is amended by revising paragraphs (a)(4) and (a)(5)
and by adding paragraph (a)(6) to read as follows:
Sec. 41.23 Listing of security futures products for trading.
(a) * * *
(4) Includes a certification that the terms and conditions of the
contract comply with the additional conditions for trading of Sec.
41.25;
(5) If the board of trade is a designated contract market pursuant
to section 5 of the Act or a registered derivatives transaction
execution facility pursuant to section 5a of the Act, it includes a
certification that the security futures product complies with the Act
and rules thereunder; and
(6) Includes a copy of the submission cover sheet in accordance
with the instructions in appendix D of part 40.
* * * * *
0
10. Section 41.24 is amended by revising paragraphs (a)(3) and (a)(4)
and by adding paragraph (a)(5) to read as follows:
Sec. 41.24 Rule amendments to security futures products.
(a) * * *
(3) Includes a certification that the designated contract market or
registered derivatives clearing organization has filed the rule or rule
amendment with the Securities and Exchange Commission, if such a filing
is required;
(4) If the board of trade is a designated contract market pursuant
to section 5 of the Act or is a registered derivatives clearing
organization pursuant to section 5b of the Act, it includes the
documents and certifications required to be filed with the Commission
pursuant to Sec. 40.6 of this chapter, including a certification that
the security futures product complies with the Act and rules
thereunder; and
(5) Includes a copy of the submission cover sheet in accordance
with the instructions in appendix D of part 40.
* * * * *
PART 145--COMMISSION RECORDS AND INFORMATION
0
11. The authority citation for part 145 continues to read as follows:
Authority: Pub. L. 99-570, 100 Stat. 3207, Pub. L. 89-554, 80
Stat. 383, Pub. L. 90-23, 81 Stat. 54, Pub. L. 93-502, 88 Stat.
1561-1564 (5 U.S.C. 552); Sec. 101(a), Pub. L. 93-463, 88 Stat. 1389
(5 U.S.C. 4a(j)); unless otherwise noted.
0
12. Section 145.7 is amended by revising the first sentence of
paragraph (h)(3), by redesignating paragraph (j) as paragraph (i)(7),
and by adding a new paragraph (j) to read as follows:
Sec. 145.7 Requests for Commission records and copies thereof.
* * * * *
(h) * * *
(3) The Assistant Secretary, or his or her designee, will issue an
initial determination with respect to a FOIA request within twenty
business days after receipt by the Assistant Secretary. * * *
* * * * *
(j) Expedited processing. A request may be given expedited
processing if the requester demonstrates a compelling need for the
requested records. For purposes of this provision, the term
``compelling need'' means: That a failure to obtain requested records
on an expedited basis could reasonably be expected to pose an imminent
threat to the life or physical safety of an individual; or with respect
to a request made by a person primarily engaged in disseminating
information, urgency to inform the public concerning actual or alleged
federal government activity. A requester who seeks expedited processing
must demonstrate a compelling need by submitting a statement that is
certified by the requester to be true and correct to the best of that
person's knowledge and belief. The Assistant Secretary, or his or her
designee, will determine whether to provide expedited processing, and
notice of the determination will be provided to the requester, within
ten days after the date of the request. If the request for expedited
processing is denied, the requester may file an appeal with the Office
of General Counsel within ten days of the date of the denial by the
Assistant Secretary. The Office of General Counsel will respond to the
appeal within ten days after the date of the appeal.
0
13. Section 145.9 is amended by revising paragraph (e)(2) to read as
follows:
Sec. 145.9 Petition for confidential treatment of information
submitted to the Commission.
* * * * *
(e) * * *
(2) The period for filing a detailed written justification may be
extended upon request and for good cause shown.
* * * * *
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14. Appendix A is amended by revising paragraph (a)(2), the heading of
paragraph (b), paragraphs (b)(2) and (b)(3), and adding paragraph
(b)(13) to read as follows:
Appendix A to Part 145--Compilation of Commission Records Available to
the Public
* * * * *
(a) * * *
(2) Weekly Advisory (solely available on the Commission's Web
site at http://www.cftc.gov/cftc/cftcpressoffice.htm).
* * * * *
(b) Office of the Secretariat (Public reading area with copying
facilities available). * * *
(2) Terms and conditions of proposed contracts.
(3) Registered entity filings relating to rules as defined in
Sec. 40.1 of this chapter, unless covered by a request for
confidential treatment.
* * * * *
(13) Publicly available portions of applications to become a
registered entity including the transmittal letter, proposed rules,
proposed bylaws, corporate documents, any overview or similar
summary provided by the applicant, any documents pertaining to the
applicant's legal status and governance structure, including
governance fitness information, and any other part of the
application not covered by a request for confidential treatment.
* * * * *
0
15. Appendix B is amended by revising paragraphs (a)(1), (a)(2),
(a)(3), (a)(5), (a)(6) and (b) to read as follows:
Appendix B to Part 145--Schedule of Fees
(a) * * *
(1) $4.75 for each quarter hour spent by clerical personnel in
searching for or reviewing records.
(2) When a search or review cannot be performed by clerical
personnel, $10.25 for each quarter hour spent by professional
personnel in searching or reviewing records.
(3) When searches require the expertise of a computer
specialist, staff time for programming and performing searches will
be charged at $10.25 per quarter hour. For searches of records
stored on personal computers used as workstations by Commission
staff and shared access network servers, the computer processing
time is included in the search time for the staff member using the
workstation as set forth in paragraph (a) of this appendix.
* * * * *
(5) For copies of materials other than paper records, the
requester will be charged the actual cost of materials and
reproduction, including the time of clerical personnel at a rate of
$4.75 per quarter hour.
(6) When a request has been made and granted to examine
Commission records at an office of the Commission other than the
office in which the records are routinely maintained, the requester:
(i) Will reimburse the Commission for the actual cost of
transporting the records; and
[[Page 67508]]
(ii) Will be charged at a rate of $4.75 for each quarter hour
spent by clerical personnel in preparing the records for transit.
* * * * *
(b) Waiver or reduction of fees. Fees will be waived or reduced
by the Commission if:
(1) The fee is less than or equal to $10.00, the approximate
cost to the Commission of collecting the fee; or,
(2) If the Commission determines that the disclosure of the
information is likely to contribute significantly to public
understanding of the operations or activities of the government and
is not primarily in the commercial interest of the requester.
* * * * *
Appendix D [Removed]
0
16. Appendix D is removed.
Issued in Washington, DC, on November 12, 2004, by the
Commission.
Jean A. Webb,
Secretary of the Commission.
[FR Doc. 04-25613 Filed 11-17-04; 8:45 am]
BILLING CODE 6351-01-P