Title 17—Commodity and Securities Exchanges--Volume 1
PART 40—PROVISIONS COMMON TO REGISTERED ENTITIES
§ 40.1   Definitions.
As used in this part:
Business day means the intraday period of time starting at 8:15 a.m. and ending at 4:45 p.m. Eastern Standard Time or Eastern Daylight Savings Time, whichever is currently in effect in Washington, DC, on all days except Saturdays, Sundays, and Federal holidays in Washington, DC.
Dormant designated contract market means any designated contract market on which no trading has occurred for a period of 365 days; provided, however, no designated contract market shall be considered dormant if its initial and original Commission order of designation was issued within the preceding 1,095 days.
Dormant derivatives clearing organization means any derivatives clearing organization registered pursuant to section 5b of the Act that has not accepted for clearing any agreement, contract or transaction that is required or permitted to be cleared by a derivatives clearing organization under sections 5b(a) and 5b(b) of the Act, respectively, for a period of 365 days; provided, however, no derivatives clearing organization shall be considered dormant if its initial and original Commission order of registration was issued within the preceding 1,095 days.
Dormant swap data repository means any registered swap data repository on which no data has resided for a period of 365 days.
Dormant swap execution facility means any swap execution facility on which no trading has occurred for a period of 365 days; provided, however, no swap execution facility shall be considered dormant if its initial and original Commission order of registration was issued within the preceding 1,095 days.
Emergency means any occurrence or circumstance that, in the opinion of the governing board of a registered entity, or a person or persons duly authorized to issue such an opinion on behalf of the governing board of a registered entity under circumstances and pursuant to procedures that are specified by rule, requires immediate action and threatens or may threaten such things as the fair and orderly trading in, or the liquidation of or delivery pursuant to, any agreements, contracts, swaps or transactions or the timely collection and payment of funds in connection with clearing and settlement by a derivatives clearing organization, including:
(1) Any manipulative or attempted manipulative activity;
(2) Any actual, attempted, or threatened corner, squeeze, congestion, or undue concentration of positions;
(3) Any circumstances which may materially affect the performance of agreements, contracts, swaps or transactions, including failure of the payment system or the bankruptcy or insolvency of any participant;
(4) Any action taken by any governmental body, or any other registered entity, board of trade, market or facility which may have a direct impact on trading or clearing and settlement; and
(5) Any other circumstance which may have a severe, adverse effect upon the functioning of a registered entity.
Rule means any constitutional provision, article of incorporation, bylaw, rule, regulation, resolution, interpretation, stated policy, advisory, terms and conditions, trading protocol, margin methodology, agreement or instrument corresponding thereto, including those that authorize a response or establish standards for responding to a specific emergency, and any amendment or addition thereto or repeal thereof, made or issued by a registered entity or by the governing board thereof or any committee thereof, in whatever form adopted.
Terms and conditions means any definition of the trading unit or the specific commodity underlying a contract for the future delivery of a commodity or commodity option contract, description of the payments to be exchanged under a swap, specification of cash settlement or delivery standards and procedures, and establishment of buyers' and sellers' rights and obligations under the swap or contract. Terms and conditions include provisions relating to the following:
(1) For a contract for the purchase or sale of a commodity for future delivery or an option on such a contract or an option on a commodity (other than a swap):
(i) Quality and other standards that define the commodity or instrument underlying the contract;
(ii) Quantity standards or other provisions related to contract size;
(iii) Any applicable premiums or discounts for delivery of nonpar products;
(iv) Trading hours, trading months and the listing of contracts;
(v) The pricing basis, minimum price fluctuations, and maximum price fluctuations;
(vi) Any price limits, no cancellation ranges, trading halts, or circuit breaker provisions, and procedures for the establishment of daily settlement prices;
(vii) Speculative position limits, position accountability standards, and position reporting requirements, including an indication as to whether the contract meets the definition of a referenced contract as defined in § 150.1 of this chapter, and if so, the name of either the core referenced futures contract or other referenced contract upon which the new referenced contract submitted under this part is based.
(viii) Delivery points and locational price differentials;
(ix) Delivery standards and procedures, including fees related to delivery or the delivery process; alternatives to delivery and applicable penalties or sanctions for failure to perform;
(x) If cash settled; the definition, composition, calculation and revision of the cash settlement price or index;
(xi) [Reserved];
(xii) Option exercise price, if it is constant, and method for calculating the exercise price, if it is variable;
(xiii) Threshold prices for an option contract, the existence of which is contingent upon those prices; and
(xiv) Any restrictions or requirements for exercising an option; and
(2) For a swap:
(i) Identification of the major group, category, type or class in which the swap falls (such as an interest rate, commodity, credit or equity swap) and of any further sub-group, category, type or class that further describes the swap;
(ii) Notional amounts, quantity standards, or other unit size characteristics;
(iii) Any applicable premiums or discounts for delivery of nonpar products;
(iv) Trading hours and the listing of swaps;
(v) Pricing basis for establishing the payment obligations under, and mark-to-market value of, the swap including, as applicable, the accrual start dates, termination or maturity dates, and, for each leg of the swap, the initial cash flow components, spreads, and points, and the relevant indexes, prices, rates, coupons, or other price reference measures;
(vi) Any price limits, trading halts, or circuit breaker provisions, and procedures for the establishment of daily settlement prices;
(vii) Speculative position limits, position accountability standards, and position reporting requirements, including an indication as to whether the contract meets the definition of economically equivalent swap as defined in § 150.1 of this chapter, and, if so, the name of either the core referenced futures contract or referenced contract, as applicable, to which the swap submitted under this part is economically equivalent.
(viii) Payment and reset frequency, day count conventions, business calendars, and accrual features;
(ix) If physical delivery applies, delivery standards and procedures, including fees related to delivery or the delivery process, alternatives to delivery and applicable penalties or sanctions for failure to perform;
(x) If cash settled, the definition, composition, calculation and revision of the cash settlement price, and the settlement currency;
(xi) [Reserved]
(xii) Option exercise price, if it is constant, and method for calculating the exercise price, if it is variable;
(xiii) Threshold prices for an option, the existence of which is contingent upon those prices;
(xiv) Any restrictions or requirements for exercising an option; and
(xv) Life cycle events.
§ 40.2   Listing products for trading by certification.
(a) Submission requirements. A designated contract market or a swap execution facility must comply with the submission requirements of this section prior to listing a product for trading that has not been approved under § 40.3. A submission shall comply with the following conditions:
(1) The designated contract market or the swap execution facility has filed its submission electronically in a format and manner specified by the Commission;
(2) The Commission has received the submission by the open of business on the business day preceding the product's listing; and
(3) The submission includes:
(i) The information required by appendix D to this part;
(ii) A copy of the rules that set forth the contract's terms and conditions;
(iii) The intended listing date;
(iv) A certification by the designated contract market or the swap execution facility that the product to be listed complies with the Act and Commission regulations thereunder;
(v) A concise explanation and analysis that is complete with respect to the product's terms and conditions, the underlying commodity, and the product's compliance with applicable provisions of the Act, including core principles, and the Commission's regulations thereunder. This explanation and analysis shall either be accompanied by the documentation relied upon to establish the basis for compliance with applicable law, or incorporate information contained in such documentation, with appropriate citations to data sources;
(vi) A certification that the registered entity posted a notice of a pending product certification with the Commission and a copy of the submission, concurrent with the filing of a submission with the Commission, on the registered entity's website. Information that the registered entity seeks to keep confidential may be redacted from the documents published on the registered entity's website but must be republished consistent with any determination made pursuant to § 40.8(c)(4); and
(vii) A request for confidential treatment, if appropriate, as permitted under § 40.8.
(b) Additional information. If requested by Commission staff, a registered entity shall provide any additional evidence, information or data that demonstrates that the contract meets, initially or on a continuing basis, the requirements of the Act or the Commission's regulations or policies thereunder.
(c) Stay. The Commission may stay the listing of a contract pursuant to paragraph (a) of this section during the pendency of Commission proceedings for filing a false certification or during the pendency of a petition to alter or amend the contract terms and conditions pursuant to Section 8a(7) of the Act. The decision to stay the listing of a contract in such circumstances shall not be delegable to any employee of the Commission.
(d) Class certification of swaps. (1) A designated contract market or swap execution facility may list or facilitate trading in any swap or number of swaps based upon an “excluded commodity,” as defined in section 1a(19)(i) of the Act, not including any security, security index, and currency other than the United States Dollar and a “major foreign currency,” as defined in § 15.03(a) of this chapter, or an “excluded commodity,” as defined in section 1a(19)(ii)-(iv) of the Act, provided the designated contract market or swap execution facility certifies, under paragraphs (a)(1) and (2) and (a)(3)(i), (iv), and (vi) of this section, the following:
(i) Each particular swap within the certified class of swaps is based upon an excluded commodity specified in paragraph (d)(1) of this section;
(ii) Each particular swap within the certified class of swaps is based upon an excluded commodity with an identical pricing source, formula, procedure, and methodology for calculating reference prices and payment obligations;
(iii) The pricing source, formula, procedure, and methodology for calculating reference prices and payment obligations in each particular swap within the certified class of swaps is identical to a pricing source, formula, procedure, and methodology for calculating reference prices and payment obligations in a product previously submitted to the Commission and certified or approved pursuant to this section or § 40.3; and
(iv) Each particular swap within the certified class of swaps is based upon an excluded commodity involving an identical currency or identical currencies.
(2) The Commission may in its discretion require a registered entity to withdraw its certification under paragraph (d)(1) of this section and to submit each individual swap or certain individual swaps within the submission for Commission review pursuant to this section or § 40.3.
§ 40.3   Voluntary submission of new products for Commission review and approval.
(a) Request for approval. Pursuant to section 5c(c) of the Act, a designated contract market, a swap execution facility, or a derivatives clearing organization may request that the Commission approve a new product prior to listing the product for trading or accepting the product for clearing, or if a product was initially submitted under § 40.2 or § 39.5 of this chapter, subsequent to listing the product for trading or accepting the product for clearing. A submission requesting approval shall:
(1) Be filed electronically in a format and manner specified by the Commission;
(2) Include the information required by appendix D to this part;
(3) Include a copy of the rules that set forth the contract's terms and conditions;
(4) Include an explanation and analysis that is complete with respect to the product's terms and conditions, the underlying commodity, and the product's compliance with applicable provisions of the Act, including core principles, and the Commission's regulations thereunder. This explanation and analysis shall either be accompanied by the documentation relied upon to establish the basis for compliance with the applicable law, or incorporate information contained in such documentation, with appropriate citations to data sources;
(5) Describe any agreements or contracts entered into with other parties that enable the registered entity to carry out its responsibilities;
(6) Include the certifications required in § 41.22 for product approval of a commodity that is a security future or a security futures product as defined in Sections 1a(44) or 1a(45) of the Act, respectively;
(7) Include, if appropriate, a request for confidential treatment as permitted under § 40.8;
(8) Include the filing fee required under appendix A to this part;
(9) Certify that the registered entity posted a notice of its request for Commission approval of the new product and a copy of the submission, concurrent with the filing of a submission with the Commission, on the registered entity's website. Information the registered entity seeks to keep confidential may be redacted from the documents published on the registered entity's website but must be republished consistent with any determination made pursuant to § 40.8(c)(4); and
(10) Include, if requested by Commission staff, additional evidence, information or data demonstrating that the contract meets, initially or on a continuing basis, the requirements of the Act, or other requirement for designation or registration under the Act, or the Commission's regulations or policies thereunder. The registered entity shall submit the requested information by the time specified by Commission staff, or at the conclusion of any extended period agreed to by Commission staff after timely receipt of a written request from the registered entity.
(b) Standard for review and approval. The Commission shall approve a new product unless the terms and conditions of the product violate the Act or the Commission's regulations.
(c) Commission review. (1) All products submitted for Commission approval pursuant to, and in compliance with the submission requirements of, paragraph (a) of this section shall be subject to review by the Commission for a period of 45 days after receipt by the Commission.
(2) The Commission may extend the initial 45-day review period for up to an additional 45 days if the product raises novel or complex issues that require additional time to analyze, the submission is incomplete or the requestor does not respond completely to Commission questions in a timely manner, in which case the Commission shall notify the submitting registered entity within the initial 45-day review period and shall briefly describe the nature of the specific issues for which additional time for review shall be required.
(3) At any time during its review of a proposed product under this section, the Commission may extend the review period for any period of time to which the registered entity agrees in writing.
(4) Any amendment or supplementation made by the registered entity to the submission will be treated as the filing of a new submission under this section and be subject to the initial 45-day review period in accordance with paragraph (c)(1) of this section, unless the amendment or supplementation is requested by the Commission or is made for correction of typographical errors, renumbering or other non-substantive revisions.
(5) If the review period described in paragraph (c)(1) of this section would end on a day that is not a business day, such review period shall instead be extended to end on the next business day.
(d) Commission Determination —(1) Approval. Any product submitted for Commission approval in compliance with paragraph (a) of this section shall be deemed approved by the Commission under section 5c(c) of the Act at the conclusion of the applicable review period under paragraph (c) of this section, unless the Commission issues a notice of non-approval to the registered entity under paragraph (d)(2) of this section within the applicable review period.
(2) Notice of non-approval. Any time during its review under this section, the Commission may notify the registered entity that it will not, or is unable to, approve the new product. This notification will briefly specify the nature of the issues raised and the specific provision of the Act or the Commission's regulations, including the form or content requirements of this section, with which the new product is inconsistent or appears to be inconsistent with the Act or the Commission's regulations.
(e) Effect of non-approval. (1) Notification to a registered entity under paragraph (d)(2) of this section of the Commission's determination not to approve a product does not prevent the entity from subsequently submitting a revised version of the product for Commission approval, or from submitting the product as initially proposed, in a supplemented submission; the revised or supplemented submission will be reviewed without prejudice.
(2) Notification to a registered entity under paragraph (d)(2) of this section of the Commission's determination not to approve a product shall be presumptive evidence that the entity may not truthfully certify under § 40.2 that the same, or substantially the same, product complies with the Act and the Commission's regulations thereunder.
§ 40.4   Amendments to terms or conditions of enumerated agricultural products.
(a) Notwithstanding the provisions of this part, a designated contract market must submit for Commission approval under the procedures of § 40.5, prior to its implementation, any rule that, for a delivery month having open interest, would materially change a product's term or condition, as defined in § 40.1, of a contract for future delivery in an agricultural commodity enumerated in section 1a(9) of the Act, or of an option on such a contract or commodity.
(b) The following rules or rule amendments are not material and are not required by this section to be submitted for Commission approval under the procedures of § 40.5:
(1) Rules or rule amendments that are enumerated in § 40.6(d)(2) may be implemented without prior approval or certification, provided that they are implemented pursuant to the notification procedures of § 40.6(d);
(2) Rules or rule amendments that are enumerated in § 40.6(e)(2) may be implemented without prior approval or certification or notification as permitted pursuant to § 40.6(e);
(3) Rules or rule amendments governing trading hours may be implemented without prior approval, provided that they are implemented pursuant to the procedures of sect; 40.6(a);
(4) Rules or rule amendments that are required to comply with a binding order of a court of competent jurisdiction, or a rule, regulation or order of the Commission or of another Federal regulatory authority, may be implemented without prior approval, provided that they are implemented pursuant to the procedures of § 40.6(a); or
(5) Any rule or rule amendment:
(i) The text of which has been submitted pursuant to the procedures of paragraph (b)(5) of this section and § 40.6(a) at least ten business days prior to its implementation and that has been labeled “Non-Material Agricultural Rule Change;”
(ii) For which the designated contract market has provided an explanation as to why it considers the rule “non-material,” and any other information that may be beneficial to the Commission in analyzing the merits of the entity's claim of non-materiality including, if applicable, a copy of a previously approved rule or rule amendment that is, in substance, the same as the non-material rule or rule amendment; and
(iii) With respect to which the Commission has not notified the contract market during the review period that the rule appears to require or does require prior approval under this section.
§ 40.5   Voluntary submission of rules for Commission review and approval.
(a) Request for approval of rules. Pursuant to section 5c(c) of the Act, a registered entity may request that the Commission approve a new rule or rule amendment prior to implementation of the rule, or if the rule or rule amendment was initially submitted under § 40.2 or 40.6, subsequent to implementation of the rule. A request for approval shall:
(1) Be filed electronically in a format and manner specified by the Commission;
(2) Include the information required by appendix D to this part;
(3) Set forth the text of the rule or rule amendment (in the case of a rule amendment, deletions and additions must be indicated);
(4) Describe the proposed effective date of the rule or rule amendment and any action taken or anticipated to be taken to adopt the proposed rule by the registered entity or by its governing board or by any committee thereof, and cite the rules of the entity that authorize the adoption of the proposed rule;
(5) Provide an explanation and analysis that is complete with respect to the operation, purpose, and effect of the proposed rule or rule amendment and its compliance with applicable provisions of the Act, including core principles, and the Commission's regulations thereunder, including, as applicable, a description of the anticipated benefits to market participants or others, any potential anticompetitive effects on market participants or others, and how the rule fits into the registered entity's framework of self-regulation;
(6) Certify that the registered entity posted a notice of its request for Commission approval of the new rule or rule amendment and a copy of the submission, concurrent with the filing of a submission with the Commission, on the registered entity's website. Information the registered entity seeks to keep confidential may be redacted from the documents published on the registered entity's website but must be republished consistent with any determination made pursuant to § 40.8(c)(4);
(7) Provide additional information which may be beneficial to the Commission in analyzing the new rule or rule amendment. If a proposed rule affects, directly or indirectly, the application of any other rule of the registered entity, the pertinent text of any such rule must be set forth and the anticipated effect described;
(8) Provide a brief explanation of any substantive opposing views expressed to the registered entity by governing board or committee members, members of the entity or market participants that were not incorporated into the rule, or a statement that no such opposing views were expressed;
(9) Identify any Commission regulation that the Commission may need to amend, or sections of the Act or the Commission's regulations that the Commission may need to interpret, in order to approve the new rule or rule amendment. To the extent that such an amendment or interpretation is necessary to accommodate a new rule or rule amendment, the submission should include a reasoned analysis supporting the amendment to the Commission's regulation or the interpretation; and
(10) As appropriate, include a request for confidential treatment as permitted under the procedures of § 40.8.
(b) Standard for review and approval. The Commission shall approve a new rule or rule amendment unless the rule or rule amendment is inconsistent with the Act or the Commission's regulations.
(c) Commission review. (1) Any rule submitted for Commission approval pursuant to, and in compliance with the submission requirements of, paragraph (a) of this section shall be subject to review by the Commission for a period of 45 days after receipt by the Commission.
(2) The Commission may extend the initial 45-day review period for up to an additional 45 days if the proposed rule raises novel or complex issues that require additional time for review or is of major economic significance, the submission is incomplete or the requestor does not respond completely to Commission questions in a timely manner, in which case the Commission shall notify the submitting registered entity within the initial 45-day review period and shall briefly describe the nature of the specific issues for which additional time for review shall be required.
(3) At any time during its review of a proposed rule under this section, the Commission may extend the review period for any period of time to which the registered entity agrees in writing.
(4) Any amendment or supplementation made by the registered entity to the submission will be treated as the filing of a new submission under this section and be subject to the initial 45-day review period in accordance with paragraph (c)(1) of this section, unless the amendment or supplementation is requested by the Commission or is made for correction of typographical errors, renumbering or other non-substantive revisions.
(5) If a rule or rule amendment that is submitted for Commission approval under paragraph (a) of this section is also submitted and labeled as a “Non-Material Agricultural Rule Change” in accordance with § 40.4(b)(5), the Commission shall commence the 45-day review period in paragraph (c)(1) of this section ten business days after receiving the submission.
(6) If the review period described in paragraph (c)(1) of this section would end on a day that is not a business day, such review period shall instead be extended to end on the next business day.
(d) Commission determination —(1) Approval. Any rule submitted for Commission approval in compliance with paragraph (a) of this section shall be deemed approved by the Commission under section 5c(c) of the Act at the conclusion of the applicable review period under paragraph (c) of this section, unless the Commission issues a notice of non-approval to the registered entity under paragraph (d)(3) of this section within the applicable review period.
(2) Expedited approval. Notwithstanding the provisions of paragraph (c) of this section, a proposed rule or rule amendment, including changes to terms and conditions of a product that are consistent with the Act and Commission regulations, may be approved by the Commission at such time and under such conditions as the Commission shall specify in a written notification.
(3) Notice of non-approval. Any time during its review under this section, the Commission may notify the registered entity that it will not, or is unable to, approve the new rule or rule amendment. This notification will briefly specify the nature of the issues raised and the specific provision of the Act or the Commission's regulations, including the form or content requirements of this section, with which the new rule or rule amendment is inconsistent or appears to be inconsistent with the Act or the Commission's regulations.
(e) Effect of non-approval. (1) Notification to a registered entity under paragraph (d)(3) of this section of the Commission's determination not to approve a new rule or rule amendment does not prevent the registered entity from subsequently submitting a revised version of the proposed rule or rule amendment for Commission review and approval, or from submitting the new rule or rule amendment as initially proposed, in a supplemented submission; the revised or supplemented submission will be reviewed without prejudice.
(2) Notification to a registered entity under paragraph (d)(3) of this section of the Commission's determination not to approve a proposed rule or rule amendment of a registered entity shall be presumptive evidence that the entity may not truthfully certify under § 40.6 that the same, or substantially the same, proposed rule or rule amendment complies with the Act and 17 CFR chapter I.
§ 40.6   Self-certification of rules.
(a) Submission requirements. A registered entity shall comply with the certification and submission requirements of this section prior to implementing any rule that has not obtained Commission approval under § 40.5, or that is submitted under § 40.10, except as otherwise provided by § 40.10(a). A submission shall comply with the following conditions:
(1) The registered entity has filed its submission electronically in a format and manner specified by the Commission.
(2) The registered entity has provided a certification that the registered entity posted a notice of pending certification with the Commission and a copy of the submission, concurrent with the filing of a submission with the Commission, on the registered entity's website. Information that the registered entity seeks to keep confidential may be redacted from the documents published on the registered entity's website but it must be republished consistent with any determination made pursuant to § 40.8(c)(4).
(3) The Commission has received the submission not later than the open of business on the business day that is 10 business days prior to the registered entity's implementation of the rule or rule amendment.
(4) The Commission has not stayed the submission pursuant to § 40.6(c).
(5) The rule or rule amendment is not a rule or rule amendment of a designated contract market that materially changes a term or condition of a contract for future delivery of an agricultural commodity enumerated in section 1a(9) of the Act or an option on such a contract or commodity in a delivery month having open interest.
(6) Rule certifications implemented in response to an emergency.
(i) Rules or rule amendments implemented under procedures of the governing board to respond to an emergency as defined in § 40.1, shall, if practicable, be filed with the Commission prior to the implementation or, if not practicable, be filed with the Commission at the earliest possible time after implementation, but in no event more than twenty-four hours after implementation. Such rules shall be subject to the review and stay provisions of paragraphs (b) and (c) of this section.
(ii) New rules or rule amendments that establish standards for responding to an emergency must be submitted pursuant to paragraph (a) of this section or may be submitted pursuant to § 40.5.
(7) The rule submission shall include:
(i) The information required by appendix D to this part (“Emergency Rule Certification” should be noted in the Description section in the case of a rule or rule amendment that responds to an emergency);
(ii) The text of the rule (in the case of a rule amendment, deletions and additions must be indicated);
(iii) The date of intended implementation;
(iv) A certification by the registered entity that the rule complies with the Act and the Commission's regulations thereunder;
(v) A concise explanation and analysis that is complete with respect to the operation, purpose, and effect of the proposed rule or rule amendment and its compliance with applicable provisions of the Act, including core principles, and the Commission's regulations thereunder;
(vi) A brief explanation of any substantive opposing views expressed to the registered entity by governing board or committee members, members of the entity or market participants, that were not incorporated into the rule, or a statement that no such opposing views were expressed; and
(vii) As appropriate, a request for confidential treatment pursuant to the procedures provided in § 40.8;
(8) The registered entity shall provide, if requested by Commission staff, additional evidence, information or data that may be beneficial to the Commission in conducting a due diligence assessment of the filing and the registered entity's compliance with any of the requirements of the Act or the Commission's regulations or policies thereunder; and
(9) Notwithstanding the 10 business day filing requirement of paragraphs (a)(3) and (b)(1) of this section, a registered entity may file a submission and certification of a new rule or a rule amendment that delists, or withdraws the certification of, a product that has no open interest and may make the delisting or withdrawal of the product with no open interest effective immediately upon filing the submission, provided that the submission is made in compliance with paragraphs (a)(1), (2) and (7) of this section.
(b) Review by the Commission. (1) The Commission shall have 10 business days to review the new rule or rule amendment before the new rule or rule amendment is deemed certified and can be made effective, unless the Commission notifies the registered entity during the 10-business day review period that it intends to issue a stay of the certification under paragraph (c) of this section.
(2) Any amendment or supplementation made by the registered entity to the submission will be treated as the filing of a new submission under this section and be subject to the initial 10-business day review period in accordance with paragraph (b)(1) of this section, unless the amendment or supplementation is requested by the Commission or is made for correction of typographical errors, renumbering or other non-substantive revisions.
(c) Stay —(1) Stay of certification of new rule or rule amendment. The Commission may stay the certification of a new rule or rule amendment submitted pursuant to paragraph (a) of this section by issuing a notification informing the registered entity that the Commission is staying the certification of the rule or rule amendment on the grounds that the rule or rule amendment presents novel or complex issues that require additional time to analyze, the rule or rule amendment is accompanied by an inadequate explanation or the rule or rule amendment is potentially inconsistent with the Act or the Commission's regulations thereunder. The Commission will have an additional 90 days from the date of the notification to conduct the review. The decision to stay the certification of a rule in such circumstances shall be delegable pursuant to § 40.7 of this part.
(2) Public comment. The Commission shall provide a 30-day comment period within the 90-day period in which the stay is in effect as described in paragraph (c)(1) of this section. The Commission shall publish a notice of the 30-day comment period on the Commission website. Comments from the public shall be submitted as specified in that notice.
(3) Expiration of a stay of certification of new rule or rule amendment. A new rule or rule amendment subject to a stay pursuant to this paragraph (c)(3) shall become effective and can be implemented, pursuant to the certification, at the expiration of the 90-day review period described in paragraph (c)(1) of this section unless the Commission withdraws the stay prior to that time, or the Commission notifies the registered entity during the 90-day time period that it objects to the certification on the grounds that the proposed rule or rule amendment is inconsistent with the Act or 17 CFR chapter I.
(4) Stay of effectiveness of rules or rule amendments already implemented. The Commission may stay the effectiveness of an implemented rule during the pendency of Commission proceedings for filing a false certification or during the pendency of a petition to alter or amend the rule pursuant to section 8a(7) of the Act. The decision to stay the effectiveness of a rule in such circumstances shall not be delegable to any employee of the Commission.
(5) Effect of objection. (i) Notification to a registered entity under paragraph (c) of this section of the Commission's objection to a certification by a registered entity on the grounds that the proposed rule or rule amendment is inconsistent with the Act or the Commission's regulations does not prevent the registered entity from subsequently submitting a revised version of the proposed rule or rule amendment for certification or Commission review and approval, or from submitting the new rule or rule amendment as initially proposed, in a supplemented submission; the revised or supplemented submission will be reviewed without prejudice.
(ii) Notification to a registered entity under paragraph (c) of this section of the Commission's objection to a certification by a registered entity shall be presumptive evidence that the entity may not truthfully certify under this part that the same, or substantially the same, proposed rule or rule amendment complies with the Act and the Commission's regulations thereunder.
(d) Notification of rule amendments. Notwithstanding the rule certification requirement of Section 5c(c)(1) of the Act and paragraph (a) of this section, a registered entity may place the following rules or rule amendments into effect without certification to the Commission if the following conditions are met:
(1) The registered entity provides to the Commission at least weekly a summary notice of all rule amendments made effective pursuant to this paragraph (d)(1) during the preceding week. Such notice must be labeled “Weekly Notification of Rule Amendments” and need not be filed for weeks during which no such actions have been taken. One copy of each such submission shall be furnished electronically in a format and manner specified by the Commission; and
(2) The rule governs:
(i) Non-substantive revisions. Corrections of typographical errors, renumbering, periodic routine updates to identifying information about registered entities and other such non-substantive revisions of a product's terms and conditions that have no effect on the economic characteristics of the product;
(ii) Delivery standards set by third parties. Changes to grades or standards of commodities deliverable on a product that are established by an independent third party and that are incorporated by reference as product terms, provided that the grade or standard is not established, selected or calculated solely for use in connection with futures or option trading and such changes do not affect deliverable supplies or the pricing basis for the product;
(iii) Index products. Routine changes in the composition, computation, or method of selection of component entities of an index (other than routine changes to securities indexes to the extent that such changes are not described in paragraph (e)(2)(vi) of this section) referenced and defined in the product's terms, that do not affect the pricing basis of the index, which are made by an independent third party whose business relates to the collection or dissemination of price information and which was not formed solely for the purpose of compiling an index for use in connection with a futures or option product;
(iv) Option contract terms. Changes to option contract rules, which may qualify for implementation without notice pursuant to paragraph (e)(2)(vii) of this section, relating to the strike price listing procedures, strike price intervals, and the listing of strike prices on a discretionary basis;
(v) Fees. Fees or fee changes, other than fees or fee changes associated with market making or trading incentive programs, that:
(A) Total $1.00 or more per contract, and
(B) Are established by an independent third party or are unrelated to delivery, trading, clearing or dispute resolution.
(vi) Survey lists. Changes to lists of banks, brokers, dealers, or other entities that provide price or cash market information to an independent third party and that are incorporated by reference as product terms;
(vii) Approved brands. Changes in lists of approved brands or markings pursuant to previously certified or Commission approved standards or criteria;
(viii) Delivery facilities and delivery service providers. Changes in lists of approved delivery facilities and delivery service providers (including weigh masters, assayers, and inspectors) at a delivery location, pursuant to previously certified or Commission approved standards or criteria;
(ix) Trading months. The initial listing of trading months, or an amendment to existing trading months, which may qualify for implementation without notice pursuant to paragraph (e)(2)(viii) of this section, within the currently established cycle of trading months;
(x) Minimum tick. Reductions in the minimum price fluctuation (or “tick”).
(xi) Contact information. Updates of email addresses or other contact information that market participants use to submit block trades;
(xii) Changes to no cancellation ranges. For a contract for the purchase or sale of a commodity for future delivery or an option on such a contract or an option on a commodity (other than a swap), changes to no cancellation ranges (which are the price ranges within which a trade will not be cancelled); or
(xiii) Option premiums or margins. For a contract for the purchase or sale of a commodity for future delivery or an option on such a contract or an option on a commodity (other than a swap), payment or collection of commodity options premiums or margins; or for a swap, payment or collection of option premiums or margins.
(e) Notification of rule amendments not required. Notwithstanding the rule certification requirements of section 5c(c)(1) of the Act and paragraph (a) of this section, a registered entity may place the following rules or rule amendments into effect without certification or notice to the Commission if the following conditions are met:
(1) The registered entity maintains documentation regarding all changes to rules; and
(2) The rule governs:
(i) Transfer of membership or ownership. Procedures and forms for the purchase, sale or transfer of membership or ownership, but not including qualifications for membership or ownership, any right or obligation of membership or ownership or dues or assessments;
(ii) Administrative procedures. The organization and administrative procedures of a registered entity governing bodies such as a Board of Directors, Officers and Committees, but not voting requirements, Board of Directors or Committee composition requirements or procedures, decision making procedures, use or disclosure of material non-public information gained through the performance of official duties, or requirements relating to conflicts of interest;
(iii) Administration. The routine, daily administration, direction and control of employees, requirements relating to gratuity and similar funds, but not guaranty, reserves, or similar funds; declaration of holidays, and changes to facilities housing the market, trading floor or trading area;
(iv) Standards of decorum. Standards of decorum or attire or similar provisions relating to admission to the floor, badges, or visitors, but not the establishment of penalties for violations of such rules; and
(v) Fees. Fees or fee changes, other than fees or fee changes associated with market making or trading incentive programs, that:
(A) Are less than $1.00 per contract; or
(B) Relate to matters such as dues, badges, telecommunication services, booth space, real time quotations, historical information, publications, software licenses or other matters that are administrative in nature.
(vi) Securities indexes. Routine changes to the composition, computation or method of security selection of an index that is referenced and defined in the product's rules, and which is made by an independent third party.
(vii) Option contract terms. For registered entities that are in compliance with the daily reporting requirements of § 16.01 of this chapter, changes to option contract rules relating to the strike price listing procedures, strike price intervals, and the listing of strike prices on a discretionary basis.
(viii) Trading months. For registered entities that are in compliance with the daily reporting requirements of § 16.01 of this chapter, the initial listing of trading months which are within the currently established cycle of trading months.
§ 40.7   Delegations.
(a) Procedural matters. (1) The Commission hereby delegates, until it orders otherwise, to the Director of the Division of Clearing and Risk and, separately, to the Director of the Division of Market Oversight, to be exercised by either Director, as appropriate, or by such employees of the Commission that either Director may designate from time to time, the following authorities, with the concurrence of the General Counsel or the General Counsel's delegate:
(i) To request, pursuant to § 40.3(c)(2) or § 40.5(c)(1)(ii) of this part, that the registered entity requesting approval amend the proposed product, rule or rule amendment, or supplement the submission to the Commission;
(ii) To notify the registered entity, pursuant to § 40.3(e) or § 40.5(e) of this part, that the Commission is not approving, or is unable to approve, the proposed product, rule or rule amendment;
(iii) To make all determinations reserved to the Commission in § 40.10.
(2) The Commission hereby delegates, until it orders otherwise, to the Director of the Division of Clearing and Risk and, separately, to the Director of the Division of Market Oversight, to be exercised by either Director, as appropriate, or by such employees of the Commission that either Director may designate from time to time, the following authorities, after consultation with the Office of General Counsel or the General Counsel's delegate to notify a registered entity:
(i) Pursuant to § 40.3(d) of this part, that the time for review of the submission has been extended because the product raises novel or complex issues that require additional time for review;
(ii) Pursuant to § 40.5(d) of this part, that the time for review of the submission has been extended because the proposed rule or rule amendment raises novel or complex issues that require additional time for review or is of major economic significance;
(iii) Pursuant to § 40.6(c) of this part, that the proposed rule or rule amendment has been stayed because there exist novel or complex issues that require additional time to analyze, or there is potential inconsistency with the Act or the Commission's regulations.
(3) The Commission hereby delegates, until it orders otherwise, to the Director of the Division of Clearing and Risk and, separately, to the Director of the Division of Market Oversight, to be exercised by either Director, as appropriate, or by such employees of the Commission that either Director may designate from time to time, the authority to notify a registered entity, pursuant to § 40.3(d) or § 40.5(d) of this part, that the time for review of the submission has been extended, or that a rule certified pursuant to § 40.6(c) has been stayed, because the submission is incomplete or provides an inadequate explanation.
(4) Emergency rules. The Commission hereby delegates to the Director of the Division of Market Oversight and, separately, to the Director of the Division of Clearing and Risk, to be exercised by either Director, as appropriate, or by such other employee or employees of the Commission that either Director may designate from time to time, authority to receive notification of emergency rules under § 40.6(a)(6)(ii) of this part.
(5) The Commission hereby delegates to the Director of the Division of Market Oversight, to be exercised by the Director or by such employees of the Commission that the Director may designate from time to time, with the concurrence of the General Counsel or the General Counsel's delegate, the authority to determine whether a rule or rule amendment submitted by a designated contract market is material under § 40.4(b)(5), and to notify the designated contract market of such determination.
(b) Approval authority. The Commission hereby delegates, until it orders otherwise, to the Director of the Division of Clearing and Risk and, separately, to the Director of the Division of Market Oversight, to be exercised by either Director, as appropriate, or by such employees of the Commission that either Director may designate from time to time, with the concurrence of the General Counsel or the General Counsel's delegate, the authority to approve, pursuant to section 5c(c)(3) of the Act and § 40.5 of this part, rules or rule amendments of a registered entity that:
(1) Relate to, but do not substantially change, the quantity, quality, or other delivery specifications, procedures, or obligations for delivery, cash settlement, or exercise under an agreement, contract or transaction approved for trading by the Commission; daily settlement prices; clearing position limits; requirements or procedures for governance of a registered entity; procedures for transfer trades; trading hours; minimum price fluctuations; and maximum price limit and trading suspension provisions;
(2) Reflect routine modifications that are required or anticipated by the terms of the rule of a registered entity;
(3) Establish or amend or relate to speculative limits or position accountability provisions that are in compliance with the requirements of the Act and17 CFR chapter I;
(4) Are in substance the same as a rule of the same or another registered entity which has been approved previously by the Commission pursuant to section 5c(c)(3) of the Act;
(5) Are consistent with a specific, stated policy or interpretation of the Commission; or
(6) Relate to the listing of additional trading months of approved contracts.
(c) Notwithstanding the provisions of this section, the Director of the Division of Clearing and Risk and, separately, the Director of the Division of Market Oversight may submit to the Commission for its consideration any matter that has been delegated pursuant to this section.
(d) Nothing in this section shall be deemed to prohibit the Commission, at its election, from exercising any of the authority delegated pursuant to this section.
(e) The Commission hereby delegates, until it orders otherwise, to the Director of the Division of Clearing and Risk and, separately, to the Director of the Division of Market Oversight, to be exercised by either Director, as appropriate, or by such employees of the Commission that either Director may designate from time to time, the authority to specify the format and manner to be used by a registered entity when filing a submission pursuant to this part.
§ 40.8   Availability of public information.
(a) The following sections of all applications to become a designated contract market, swap execution facility, derivatives clearing organization, or swap data repository shall be made publicly available: Transmittal letter and first page of the application cover sheet, proposed rules, narrative summary of the applicant's proposed activities and regulatory compliance chart, documents establishing the applicant's legal status, documents setting forth the applicant's corporate and governance structure and any other part of the application not covered by a request for confidential treatment.
(b) [Reserved]
(c) A registered entity's filing of new products pursuant to the self-certification procedures of § 40.2 of this part, new products for Commission review and approval pursuant to § 40.3 of this part, new rules and rule amendments for Commission review and approval pursuant to § 40.4 or § 40.5 of this part, and new rules and rule amendments pursuant to the self-certification procedures of § 40.6 and § 40.10 of this part shall be treated as public information unless accompanied by a request for confidential treatment. If a registered entity files a request for confidential treatment, the following procedures shall apply:
(1) A detailed written justification of the confidential treatment request must be filed simultaneously with the request for confidential treatment. The form and content of the detailed written justification shall be governed by § 145.9 of this chapter;
(2) All material for which confidential treatment is requested must be segregated in an appendix to the submission;
(3) The submission itself must indicate that material has been segregated and, as appropriate, an additional redacted version provided;
(4) Commission staff may make an initial determination with respect to the request for confidential treatment without regard to whether a request for the information has been sought under the Freedom of Information Act;
(5) All requests for confidential treatment shall be subject to the process provided by § 145.9 of this chapter.
(6) A submitter of information under this part may appeal an adverse decision by staff to the Commission's Office of General Counsel. The form and content of such appeal shall be governed by § 145.9(g) of this chapter.
(7) The grant of any part of a request for confidential treatment under this section may be reconsidered if a subsequent request under the Freedom of Information Act is made for the information.
(d) Commission staff will not consider confidential treatment requests for information that is required to be made public under the Act. The terms and conditions of a product submitted to the Commission pursuant to §§ 40.2, 40.3, 40.5 and 40.6 of this part shall be made publicly available at the time of submission.
§ 40.9   [Reserved]
§ 40.10   Special certification procedures for submission of rules by systemically important derivatives clearing organizations.
(a) Advance notice. A systemically important derivatives clearing organization, as defined in § 39.2 of this chapter, shall provide notice to the Commission not less than 60 days in advance of any proposed change to its rules, procedures, or operations that could materially affect the nature or level of risks presented by the systemically important derivatives clearing organization. A notice submitted under this section shall be subject to the filing requirements of § 40.6(a)(1) and the website publication requirements of § 40.6(a)(2).
(1) The notice of a proposed change shall provide the information required to be submitted under § 40.6(a)(7) and shall specifically describe:
(i) The nature of the change and expected effects on risks to the systemically important derivatives clearing organization, its clearing members, or the market; and
(ii) How the systemically important derivatives clearing organization plans to manage any identified risks.
(2) Concurrent with providing the Commission with the advance notice or any request or other information related to the advance notice, the systemically important derivatives clearing organization shall provide the Board of Governors of the Federal Reserve System with a copy of such notice, request or other information in the same format and manner as required by the Board of Governors for those designated financial market utilities for which it is the Supervisory Agency pursuant to section 803(8) of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
(3) The systemically important derivatives clearing organization may request that the Commission expedite the review on the grounds that the change would materially decrease risk. The Commission, in its discretion, may expedite the review and, pursuant to paragraph (g) of this section, notify the systemically important derivatives clearing organization in less than 60 days from the date the Commission receives the notice of proposed change in writing that it does not object to the proposed change and authorizes implementation of the change on an earlier date.
(b) Changes requiring advance notice. Changes to a systemically important derivatives clearing organization's rules, procedures, or operations that could materially affect the nature or level of risks presented by the systemically important derivatives clearing organization may include, but are not limited to: material changes to its default management plan or default rules or procedures required under § 39.16 or 39.35 of this chapter, program of risk analysis and oversight required under § 39.18 of this chapter, or recovery and wind down plans required under § 39.39 of this chapter; the adoption of a new or materially revised margin methodology; the establishment of a cross-margining program or similar arrangement with another clearing organization; and material changes to its approach to the stress testing required under § 39.13(h)(3) or 39.36(a) or (c) of this chapter. If a systemically important derivatives clearing organization determines that a proposed change could not materially affect the nature or level of risks it presents and therefore does not file an advance notice, the Commission may determine otherwise and require the systemically important derivatives clearing organization to withdraw the proposed change and provide notice pursuant to this section.
(c) Further information. The Commission may require the systemically important derivatives clearing organization to provide any further information necessary to assess the effect the proposed change would have on the nature or level of risks associated with the systemically important derivatives clearing organization's payment, clearing, or settlement activities and the sufficiency of any proposed risk management techniques.
(d) Notice of objection. A systemically important derivatives clearing organization shall not implement a change to which the Commission has an objection on the grounds that the proposed change is not consistent with the Act or 17 CFR chapter I, or any applicable rules, orders, or standards prescribed under section 805(a) of the Dodd-Frank Act. The Commission will notify the systemically important derivatives clearing organization in writing of any objection regarding the proposed change within 60 days from the later of:
(1) The date that the notice of the proposed change was received; or
(2) The date the Commission received any further information it had requested for consideration of the notice.
(e) Implementation of change absent Commission objection. A systemically important derivatives clearing organization may implement a change if it has not received an objection to the proposed change within 60 days from the later of:
(1) The date that the Commission received the notice of proposed change; or
(2) The date the Commission received any further information it had requested for consideration of the notice.
(f) Extended review. The Commission may, during the 60-day review period, extend the review period if the proposed change raises novel or complex issues. A notification by the Commission pursuant to this paragraph will extend the review for an additional 60 days. Any extension under this paragraph will extend the time periods under paragraphs (d) and (e) of this section for an additional 60 days.
(g) Change allowed earlier if notified of no objection. A systemically important derivatives clearing organization may implement a change in less than 60 days from the date the Commission receives the notice of proposed change or the date the Commission receives any further information it has requested, if the Commission notifies the systemically important derivatives clearing organization in writing that it does not object to the proposed change and authorizes implementation of the change on an earlier date, subject to any conditions imposed by the Commission.
(h) Emergency changes. A systemically important derivatives clearing organization may implement a change that would otherwise require advance notice under this section if it determines that an emergency exists and immediate implementation of the change is necessary for the systemically important derivatives clearing organization to continue to provide its services in a safe and sound manner.
(1) The systemically important derivatives clearing organization shall provide notice of any such emergency change to the Commission as soon as practicable, which shall be no later than 24 hours after implementation of the change.
(2) The notice of an emergency change shall:
(i) Provide the information required for advance notice as set forth in paragraph (a) of this section;
(ii) Describe the nature of the emergency; and
(iii) Describe the reason the change was necessary for the systemically important derivatives clearing organization to continue to provide its services in a safe and sound manner.
(3) The Commission may require modification or rescission of the emergency change if it finds that the change is not consistent with the Act or 17 CFR chapter I, or any applicable rules, orders, or standards prescribed under section 805(a) of the Dodd-Frank Act.
(i) Where in §§ 39.3(g), 39.4(f), 39.13(i), and 39.15(b)(2) of this chapter a derivatives clearing organization is required to submit rules for approval pursuant to § 40.5, a systemically important derivatives clearing organization instead shall submit such rules pursuant to this section if the rules could materially affect the nature or level of risks presented by the systemically important derivatives clearing organization.
§ 40.11   Review of event contracts based upon certain excluded commodities.
(a) Prohibition. A registered entity shall not list for trading or accept for clearing on or through the registered entity any of the following:
(1) An agreement, contract, transaction, or swap based upon an excluded commodity, as defined in Section 1a(19)(iv) of the Act, that involves, relates to, or references terrorism, assassination, war, gaming, or an activity that is unlawful under any State or Federal law; or
(2) An agreement, contract, transaction, or swap based upon an excluded commodity, as defined in Section 1a(19)(iv) of the Act, which involves, relates to, or references an activity that is similar to an activity enumerated in § 40.11(a)(1) of this part, and that the Commission determines, by rule or regulation, to be contrary to the public interest.
(b) [Reserved]
(c) 90-day review and approval of certain event contracts. The Commission may determine, based upon a review of the terms or conditions of a submission under § 40.2 or § 40.3, that an agreement, contract, transaction, or swap based on an excluded commodity, as defined in Section 1a(19)(iv) of the Act, which may involve, relate to, or reference an activity enumerated in § 40.11(a)(1) or § 40.11(a)(2), be subject to a 90-day review. The 90-day review shall commence from the date the Commission notifies the registered entity of a potential violation of § 40.11(a).
(1) The Commission shall request that a registered entity suspend the listing or trading of any agreement, contract, transaction, or swap based on an excluded commodity, as defined in Section 1a(19)(iv) of the Act, which may involve, relate to, or reference an activity enumerated in § 40.11(a)(1) or § 40.11(a)(2), during the Commission's 90-day review period. The Commission shall post on the Web site a notification of the intent to carry out a 90-day review.
(2) Final determination. The Commission shall issue an order approving or disapproving an agreement, contract, transaction, or swap that is subject to a 90-day review under § 40.11(c) not later than 90 days subsequent to the date that the Commission commences review, or if applicable, at the conclusion of such extended period agreed to or requested by the registered entity.
§ 40.12   Staying of certification and tolling of review period pending jurisdictional determination.
(a) Notice of novel derivative products. (1) A registered entity certifying, submitting for approval, or otherwise filing a proposal to list, trade, or clear a novel derivative product (other than a product subject to the provisions of § 1.8 of this chapter) having elements of both a security and a contract for the sale of a commodity for future delivery (or an option on such contract or an option on a commodity) may provide notice of its proposal to the Commission and the Securities and Exchange Commission with a statement that written notice has been provided to both agencies through an appropriate means provided in each Commission's regulations.
(2) If concurrent notice is not provided pursuant to § 40.12(a)(1), the Commission shall notify the Securities and Exchange Commission of the registered entity's submission of a novel derivative product described in § 40.12(a)(1) and accompany such notice with a copy of the submission. The Commission shall determine whether a particular submission is a novel derivative product requiring notice to the Securities and Exchange Commission not later than five business days subsequent to the date that the registered entity submits the product for Commission review.
(b) Tolling of review period. Upon receipt of a request for a jurisdictional determination, pursuant to Section 718(a)(2) of the Dodd-Frank Act, by the Commission or the Securities and Exchange Commission, the product certification shall be stayed or the approval review period shall be tolled until a final determination order is issued.
(1) The Commission will provide the registered entity with a written notice of stay pending issuance of a final determination order by the Commission or the Securities and Exchange Commission.
(2) The stay shall be withdrawn or the approval review period shall resume upon the Commission's or the Securities and Exchange Commission's issuance of a final determination order finding that the Commission has jurisdiction over the submission.
(3) Determination order. A final determination, for purposes of § 40.12(b) of this part, shall be a determination order issued by the Commission or the Securities and Exchange Commission pursuant to Section 718(a)(3) of the Dodd-Frank Act.
(c) Judicial review of determination order. The filing of a petition by a complaining Commission, pursuant to Section 718(b) of the Dodd-Frank Act, shall operate as a stay of the agency order.
(1) The stay shall remain in effect until the date on which the United States Court of Appeals for the District of Columbia Circuit issues a final determination pursuant to Section 718(b)(4) of the Dodd-Frank Act, or until such date that there is a final disposition of an appeal of that determination.
(2) The submission review period shall resume upon issuance of a final determination, as described in § 40.12(c)(1), that the Commission has jurisdiction over the submission.