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[Federal Register Volume 79, Number 146 (Wednesday, July 30, 2014)]
[Rules and Regulations]
[Pages 44125-44127]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-17934]

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COMMODITY FUTURES TRADING COMMISSION

17 CFR Parts 1, 30, and 140

RIN 3038-AD88

Enhancing Protections Afforded Customers and Customer Funds Held 
by Futures Commission Merchants and Derivatives Clearing Organizations; 
Correction

AGENCY: Commodity Futures Trading Commission.

ACTION: Correcting Amendments.

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SUMMARY: The Commodity Futures Trading Commission (``CFTC'') is 
correcting final rules published in the Federal Register of November 
14, 2013 (``final rules''). Those rules, which adopted new regulations 
and amended existing regulations requiring enhanced customer 
protections, risk management programs, internal monitoring and 
controls, capital and liquidity standards, customer disclosures, and 
auditing and examination programs for futures commission merchants, 
took effect on January 13, 2014. This correction amends erroneous 
cross-references found in three sections of the final rules. 
Additionally, this correction amends one section of the final rules to 
insert language that was in the proposed rulemaking, and which was 
stated as being adopted in the preamble to the final rules, but was 
erroneously omitted from the final rule text.

DATES: Effective on July 30, 2014.

FOR FURTHER INFORMATION CONTACT: Thomas Smith, Deputy Director, 202-
418-5495, tsmith@cftc.gov, or Mark Bretscher, Attorney-Advisor, 312-
596-0529, mbretscher@cftc.gov, Division of Swap Dealer and Intermediary 
Oversight, Commodity Futures Trading Commission, Three Lafayette 
Centre, 1155 21st Street NW., Washington, DC 20581.

SUPPLEMENTARY INFORMATION: In the Federal Register of November 14, 2013 
(78 FR 68506), the CFTC published final rules adopting new regulations 
and amending existing regulations requiring enhanced customer 
protections, risk management programs, internal monitoring and 
controls, capital and liquidity standards, customer disclosures, and 
auditing and examination programs for futures commission merchants. 
Those rules in 17 CFR 1.23(d)(2) and 1.23(d)(3) include erroneous 
cross-references to 17 CFR 1.23(c)(1) and 1.23(c)(2), which do not 
exist. Instead, the cross-references should be to 17 CFR 1.23(d)(1) and 
1.23(d)(2). Accordingly, the Commission is making a correcting 
amendment which removes the erroneous cross-references to 17 CFR 
1.23(c)(1) and 1.23(c)(2), contained in 17 CFR 1.23(d)(2) and 
1.23(d)(3), and replaces them with corrected cross-references to 17 CFR 
1.23(d)(1) and 1.23(d)(2).
    Further, the final rules in 17 CFR 30.7(g)(4) include an erroneous 
cross-reference to 17 CFR 30.7(h)(2), which should reference 17 CFR 
30.7(l), and an erroneous cross-reference to 17 CFR 30.7(g)(2), which 
should reference 17 CFR 30.7(g)(3). Also, 17 CFR 30.7(g)(5) contains an 
erroneous cross-reference to 17 CFR 30.7(c)(1) and 30.7(c)(2), which 
should reference 30.7(g)(3) and 30.7(g)(4). Thus, the Commission is 
making a correcting amendment to 17 CFR 30.7(g)(4) and 30.7(g)(5) as 
discussed above.
    Additionally, the final rules in 17 CFR 30.7(d)(1) erroneously 
omitted language that was contained in the proposed rulemaking 
published on November 14, 2012; \1\ and was stated as having been 
adopted in the preamble to the final rules.\2\ The erroneously omitted 
language states that a futures commission merchant is not required to 
obtain an acknowledgment letter from a derivatives clearing 
organization (``DCO'') if the DCO maintains rules that have been 
submitted to the Commission and that provide for the segregation of 
customer funds in accordance with all relevant provisions of the 
Commodity Exchange Act \3\ and Commission regulations. Thus, the 
Commission is making a correcting amendment to 17 CFR 30.7(d)(1) to 
rectify that error.
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    \1\ 77 FR 67866 (November 14, 2012).
    \2\ See 78 FR 68506 at 68578, fn 592.
    \3\ 7 U.S.C. 1 et seq.
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    Finally, the final rules in 17 CFR 140.91(a)(12) include an 
erroneous cross-reference to 17 CFR 140.91(a)(8), which should 
reference 17 CFR 140.91(a)(12). Thus, the Commission is making a 
correcting amendment to 17 CFR 140.91(a)(12) that removes the erroneous 
cross-reference to 17 CFR 140.91(a)(8) and replaces it with a cross-
reference to 17 CFR 140.91(a)(12).

List of Subjects

17 CFR Part 1

    Brokers, Commodity futures, Consumer protection, Reporting and 
recordkeeping requirements.

17 CFR Part 30

    Commodity futures, Consumer protection, Currency, Reporting and 
recordkeeping requirements.

17 CFR Part 140

    Authority delegations (Government agencies), Organization and 
functions (Government agencies).

    In consideration of the foregoing, 17 CFR parts 1, 30, and 140 are 
corrected by making the following correcting amendments:

PART 1--GENERAL REGULATIONS UNDER THE COMMODITY EXCHANGE ACT

0
1. The authority citation for part 1 continues to read as follows:

    Authority:  7 U.S.C. 1a, 2, 5, 6, 6a, 6b, 6c, 6d, 6e, 6f, 6g, 
6h, 6i, 6k, 6l, 6m, 6n, 6o, 6p, 6r, 6s, 7, 7a-1, 7a-2, 7b, 7b-3, 8, 
9, 10a, 12,

[[Page 44126]]

12a, 12c, 13a, 13a-1, 16, 16a, 19, 21, 23, and 24, as amended by 
Title VII of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act, Pub. L. 111-203, 124 Stat. 1376 (2010).

0
2. In Sec.  1.23, revise paragraph (d)(2) introductory text, paragraphs 
(d)(2)(i) and (d)(2)(v), and paragraph (d)(3) introductory text to read 
as follows:

Sec.  1.23  Interest of futures commission merchant in segregated 
futures customer funds; additions and withdrawals.

* * * * *
    (d) * * *
    (2) The futures commission merchant files written notice of the 
withdrawal or series of withdrawals, with the Commission and with its 
designated self-regulatory organization immediately after the chief 
executive officer, chief finance officer or other senior official as 
described in paragraph (d)(1) of this section pre-approves the 
withdrawal or series of withdrawals. The written notice must:
    (i) Be signed by the chief executive officer, chief finance officer 
or other senior official as described in paragraph (d)(1) of this 
section that pre-approved the withdrawal, and give notice that the 
futures commission merchant has withdrawn or intends to withdraw more 
than 25 percent of its residual interest in segregated accounts holding 
futures customer funds;
* * * * *
    (v) Contain a representation by the chief executive officer, chief 
finance officer or other senior official as described in paragraph 
(d)(1) of this section that pre-approved the withdrawal, or series of 
withdrawals, that, after due diligence, to such person's knowledge and 
reasonable belief, the futures commission merchant remains in 
compliance with the segregation requirements after the withdrawal. The 
chief executive officer, chief finance officer or other senior official 
as described in paragraph (d)(1) of this section must consider the 
daily segregation calculation as of the close of business on the 
previous business day and any other factors that may cause a material 
change in the futures commission merchant's residual interest since the 
close of business the previous business day, including known unsecured 
futures customer debits or deficits, current day market activity and 
any other withdrawals made from the futures accounts; and
* * * * *
    (3) After making a withdrawal requiring the approval and notice 
required in paragraphs (d)(1) and (2) of this section, and before the 
completion of its next daily segregated funds calculation, no futures 
commission merchant may make any further withdrawals from accounts 
holding futures customer funds, except to or for the benefit of futures 
customers, without, for each withdrawal, obtaining the approval 
required under paragraph (d)(1) of this section and filing a written 
notice in the manner specified under paragraph (d)(2) of this section 
with the Commission and its designated self-regulatory organization 
signed by the chief executive officer, chief finance officer, or other 
senior official. The written notice must:
* * * * *

PART 30--FOREIGN FUTURES AND FOREIGN OPTIONS TRANSACTIONS

0
3. The authority citation for part 30 continues to read as follows:

    Authority:  7 U.S.C. 1a, 2, 6, 6c, and 12a, unless otherwise 
noted.

0
4. In Sec.  30.7, revise paragraph (d)(1), paragraph (g)(4) 
introductory text, paragraph (g)(4)(v), and paragraph (g)(5) 
introductory text to read as follows:

Sec.  30.7  Treatment of foreign futures or foreign options secured 
amount.

* * * * *
    (d) Written acknowledgment from depositories. (1) A futures 
commission merchant must obtain a written acknowledgment from each 
depository prior to or contemporaneously with the opening of an account 
by the futures commission merchant with such depository; Provided, 
however, that a written acknowledgment need not be obtained from a 
derivatives clearing organization that has adopted and submitted to the 
Commission rules that provide for the separate holding of foreign 
futures or foreign options secured amount, in accordance with all 
relevant provisions of the Act, this part and the regulations and 
orders promulgated thereunder, of all funds held on behalf of 30.7 
customers and all instruments purchased with funds set aside as the 
foreign futures or foreign options secured amount as provided for under 
paragraph (h) of this section.
* * * * *
    (g) * * *
    (4) A futures commission merchant must file written notice of the 
withdrawal or series of withdrawals that exceed 25 percent of the 
futures commission merchant's residual interest in 30.7 customer funds 
as computed under paragraph (l) of this section with the Commission and 
with its designated self-regulatory organization immediately after the 
chief executive officer, chief finance officer or other senior official 
as described in paragraph (g)(3) of this section pre-approves the 
withdrawal or series of withdrawals. The written notice must:
* * * * *
    (v) Contain a representation by the chief executive officer, chief 
finance officer or other senior official as described in paragraph 
(g)(3) of this section that pre-approved the withdrawal, or series of 
withdrawals, that to such person's knowledge and reasonable belief, the 
futures commission merchant remains in compliance with the secured 
amount requirements after the withdrawal. The chief executive officer, 
chief finance officer or other appropriate senior official as described 
in paragraph (g)(3) of this section must consider the daily 30.7 
calculation as of the close of business on the previous business day 
and any other factors that may cause a material change in the futures 
commission's residual interest since the close of business the previous 
business day, including known unsecured customer debits or deficits, 
current day market activity and any other withdrawals made from the 
30.7 customer accounts; and
* * * * *
    (5) After making a withdrawal requiring the approval and notice 
required in paragraphs (g)(3) and (4) of this section, and before the 
next daily secured amount calculation, no futures commission merchant 
may make any further withdrawals from accounts holding 30.7 customer 
funds, except to or for the benefit of 30.7 customers, without, for 
each withdrawal, obtaining the approval required under paragraph (g)(3) 
of this section and filing a written notice with the Commission under 
paragraph (g)(4)(vi) of this section and its designated self-regulatory 
organization signed by the chief executive officer, chief finance 
officer, or other senior official. The written notice must:
* * * * *

PART 140--ORGANIZATION, FUNCTIONS, AND PROCEDURES OF THE COMMISSION

0
5. The authority citation for part 140 continues to read as follows:

    Authority:  7 U.S.C. 2(a)(12), 12a, 13(c), 13(d), 13(e), and 
16(b).

0
6. In Sec.  140.91, revise paragraph (a)(12) to read as follows:

[[Page 44127]]

Sec.  140.91  Delegation of authority to the Director of the Division 
of Clearing and Risk and to the Director of the Division of Swap Dealer 
and Intermediary Oversight.

    (a) * * *
    (12) All functions reserved to the Commission in Sec.  41.41 of 
this chapter. Any action taken pursuant to the delegation of authority 
under this paragraph (a)(12) shall be made with the concurrence of the 
General Counsel or, in his or her absence, a Deputy General Counsel.
* * * * *

    Issued in Washington, DC, on July 25, 2014, by the Commission.
Christopher J. Kirkpatrick,
Acting Secretary of the Commission.
[FR Doc. 2014-17934 Filed 7-29-14; 8:45 am]
BILLING CODE 6351-01-P
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