77670 Federal Register / Vol. 76, No. 240 / Wednesday, December 14, 2011 / Rules and Regulations 

1 5 U.S.C. 552. 

2 17 CFR 145.9. 

3See Dodd-Frank Wall Street Reform and 

Consumer Protection Act of 2010, Public Law 111– 

203, 124 Stat. 1376 (2010). The text of the DoddFrank Act may be accessed at http://www.cftc.gov/ 

LawRegulation/OTCDERIVATIVES/index.htm. 

4Pursuant to section 701 of the Dodd-Frank Act, 

Title VII may be cited as the ‘‘Wall Street 

Transparency and Accountability Act of 2010.’’ 

5 7 U.S.C. 1 et seq. 

AEA PA D North Philadelphia, PA 

[Amended] 

Northeast Philadelphia Airport, Philadelphia, 

PA 

(Lat. 40°04′55′′ N., long. 75°00′38′′ W.) 

That airspace extending upward from the 

surface to and including 2,600 feet MSL 

within a 5.6-mile radius of the Northeast 

Philadelphia Airport. This Class D airspace 

area is effective during the specific dates and 

times established in advance by a Notice to 

Airmen. The effective date and time will 

thereafter be continuously published in the 

Airport/Facility Directory. 

Paragraph 6002 Class E airspace designated 

as surface areas. 

* * * * * 

AEA PA E2 North Philadelphia, PA 

[Amended] 

Northeast Philadelphia Airport, Philadelphia, 

PA 

(Lat. 40°04′55′′ N., long. 75°00′38′′ W.) 

That airspace extending upward from the 

surface within a 5.6-mile radius of the 

Northeast Philadelphia Airport. This Class E 

airspace area is effective during the specific 

dates and times established in advance by a 

Notice to Airmen. The effective date and time 

will thereafter be continuously published in 

the Airport/Facility Directory. 

Issued in College Park, Georgia, on 

November 29, 2011. 

Mark D. Ward, 

Manager, Operation Support Group, Eastern 

Service Center, Air Traffic Organization. 

[FR Doc. 2011–31854 Filed 12–13–11; 8:45 am] 

BILLING CODE 4910–13–P 

DEPARTMENT OF COMMERCE 

National Oceanic and Atmospheric 

Administration 

15 CFR Part 922 

[Docket No. 070726412–1300–02] 

RIN 0648–AV88 

Research Area Within Gray’s Reef 

National Marine Sanctuary; Notice of 

Effective Date 

AGENCY: Office of National Marine 

Sanctuaries (ONMS), National Oceanic 

and Atmospheric Administration 

(NOAA), Department of Commerce 

(DOC). 

ACTION: Notice of effective date. 

SUMMARY: NOAA published a final rule 

for the establishment of a research area 

within the Gray’s Reef National Marine 

Sanctuary on October 14, 2011 (76 FR 

63824). Pursuant to Section 304(b) of 

the National Marine Sanctuaries Act (16 

U.S.C. 1434(b)) the final regulations take 

effect after 45 days of continuous 

session of Congress beginning on 

October 14, 2011. Through this notice, 

NOAA is announcing the regulations 

became effective on December 4, 2011. 

DATES: Effective Date: The regulations 

published on October 14, 2011 (76 FR 

63824) are effective on December 4, 

2011. 

FOR FURTHER INFORMATION CONTACT: 

Resource Protection Coordinator Becky 

Shortland at (912) 598–2381. 

Dated: December 5, 2011. 

Holly A. Bamford, 

Deputy Assistant Administrator for Ocean 

Services and Coastal Zone Management. 

[FR Doc. 2011–31918 Filed 12–13–11; 8:45 am] 

BILLING CODE 3510–NK–M 

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Part 1 

RIN 3038–AD64 

Retail Commodity Transactions Under 

Commodity Exchange Act 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Interpretation; Request for 

comments. 

SUMMARY: The Commodity Futures 

Trading Commission (‘‘Commission’’ or 

‘‘CFTC’’) is issuing this interpretation of 

the term ‘‘actual delivery’’ as set forth in 

section 2(c)(2)(D)(ii)(III)(aa) of the 

Commodity Exchange Act (‘‘CEA’’) 

pursuant to section 742(a) of the DoddFrank Wall Street Reform and Consumer 

Protection Act. The Commission 

requests comment on whether this 

interpretation accurately construes the 

statutory language. In the event that 

comments demonstrate a need to modify 

this interpretation, the Commission will 

take appropriate action. 

DATES: Effective December 14, 2011. 

Comments must be received by 

February 13, 2012. 

ADDRESSES: Comments, identified by 

RIN number, may be sent by any of the 

following methods: 

• Agency Web site, via its Comments 

Online process: http:// 

comments.cftc.gov. Follow the 

instructions for submitting comments 

through the Web site. 

• Mail: David A. Stawick, Secretary of 

the Commission, Commodity Futures 

Trading Commission, Three Lafayette 

Centre, 1155 21st Street NW., 

Washington, DC 20581. 

• Hand Delivery/Courier: Same as 

mail above. 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

FOR FURTHER INFORMATION CONTACT: 

Rosemary Hollinger, Regional Counsel, 

Division of Enforcement, (312) 596– 

0538, rhollinger@cftc.gov, or Martin B. 

White, Assistant General Counsel, 

Office of the General Counsel, (202) 

418–5129, mwhite@cftc.gov, Commodity 

Futures Trading Commission, Three 

Lafayette Centre, 1155 21st Street NW., 

Washington, DC 20581. 

All comments must be submitted in 

English, or, if not, accompanied by an 

English translation. Comments will be 

posted as received to http:// 

www.cftc.gov. You should submit only 

information that you wish to make 

available publicly. If you wish the 

Commission to consider information 

that may be exempt from disclosure 

under the Freedom of Information Act 

(‘‘FOIA’’),1 a petition for confidential 

treatment of the exempt information 

may be submitted according to the 

established procedures in § 145.9 of the 

CFTC’s regulations.2 The Commission 

reserves the right, but shall have no 

obligation, to review, prescreen, filter, 

redact, refuse, or remove any or all of 

your submission from http:// 

www.cftc.gov that it may deem to be 

inappropriate for publication, such as 

obscene language. All submissions that 

have been redacted or removed that 

contain comments on the merits of the 

rulemaking will be retained in the 

public comment file and will be 

considered as required under the 

Administrative Procedure Act and other 

applicable laws, and may be accessible 

under FOIA. 

SUPPLEMENTARY INFORMATION: 

I. Background 

On July 21, 2010, President Obama 

signed the Dodd-Frank Wall Street 

Reform and Consumer Protection Act 

(‘‘Dodd-Frank Act’’).3 Title VII of the 

Dodd-Frank Act 4 amended the 

Commodity Exchange Act (‘‘CEA’’) 5 to 

establish a comprehensive new 

regulatory framework for swaps and 

security-based swaps. The legislation 

was enacted to reduce risk, increase 

transparency, and promote market 

integrity within the financial system by, 

among other things: (1) Providing for the 

registration and comprehensive 

regulation of swap dealers and major 

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Federal Register / Vol. 76, No. 240 / Wednesday, December 14, 2011 / Rules and Regulations 77671 

6 7 U.S.C. 2(c)(2)(D). 

7The jurisdictional grant provided to the 

Commission by new CEA section 2(c)(2)(D) is in 

addition to, and independent from, the jurisdiction 

over contracts of sale of a commodity for future 

delivery and transactions subject to regulation 

pursuant to CEA section 19 that the CEA has 

historically granted to the Commission. The 

jurisdictional grant provided by new CEA section 

2(c)(2)(D) is also in addition to, and independent 

from, the jurisdiction over swaps granted to the 

Commission by the Dodd-Frank Act. 

8 373 F.3d 861 (7th Cir. 2004); see also CFTC v. 

Erskine, 512 F.3d 309 (6th Cir. 2008). 

9 373 F.3d at 863–64. 

10 Id. at 868–69. 

11Food, Conservation and Energy Act of 2008, 

Public Law 110–246, 122 Stat. 1651 (2008). 

12 156 Cong. Rec. S5,924 (daily ed. July 15, 2010) 

(statement of Sen. Lincoln); see also Hearing to 

Review Implications of the CFTC v. Zelener Case 

Before the Subcomm. on General Farm 

Commodities and Risk Management of the H. 

Comm. on Agriculture, 111th Cong. 52–664 (2009) 

(‘‘In 2004 the Seventh Circuit Court made a 

decision in the CFTC v. Zelener [case]. It adopted 

a narrow definition of the term ‘transactions for 

future delivery.’ What it held is that a 3-day 

contract offered to retail customers for foreign 

currency that on its face promised delivery was not 

a futures contract and was, therefore, outside the 

CFTC’s jurisdiction. This was even though the 

contracts operated in practice as futures contracts. 

Following the Zelener decision, many [fraudsters] 

were given a roadmap to evade CFTC jurisdiction 

and to scam customers or consumers.’’) (statement 

of Hon. Leonard L. Boswell, United States 

Representative and Chairman, Subcommittee on 

General Farm Commodities and Risk Management); 

(‘‘What we are talking about here though is 

expanding the—well, correcting would be the 

argument the Zelener interpretation of what a 

futures contract is. If in substance it is a futures 

contract, it is going to be regulated. It doesn’t matter 

how clever your draftsmanship is.’’) (statement of 

Hon. Jim Marshall, United States Representative). 

13 7 U.S.C. 2(c)(2)(D)(i). 

14 7 U.S.C. 6(a). 

15 7 U.S.C. 6(b). 

16 7 U.S.C. 6b. 

17 7 U.S.C. 2(c)(2)(D)(iii). 

18 7 U.S.C. 2(c)(2)(D)(ii)(III)(aa). 

19The Commission has not adopted any 

regulations permitting a longer actual delivery 

period for any commodity pursuant to new CEA 

section 2(c)(2)(D)(ii)(III)(aa). Accordingly, the 28- 

day actual delivery period set forth in this provision 

remains applicable to all commodities. 

20 In 1985, the Commission’s Office of General 

Counsel issued a staff interpretation determining 

whether certain hypothetical precious metals 

transactions would be subject to regulation under 

the CEA. Interpretive Letter 85–2, Bank Activities 

Involving the Sale of Precious Metals (CFTC Office 

of General Counsel Aug. 6, 1985), Comm. Fut. L. 

Rep. (CCH) ¶ 22,673 (‘‘Letter 85–2’’). Letter 85–2 

opined on whether the hypothetical transactions 

would constitute leverage contracts, as defined by 

17 CFR 31.4(w), or contracts of sale of a commodity 

for future delivery, as that term is used in CEA 

section 2(a)(1)(A). Letter 85–2 is not relevant to a 

determination of whether ‘‘actual delivery’’ has 

occurred within the meaning of new CEA section 

2(c)(2)(D)(ii)(III)(aa) for several reasons, including, 

but not limited to, the following: (1) Letter 85–2 

predates new CEA section 2(c)(2)(D) by 

approximately 26 years and therefore does not 

purport to construe new CEA section 2(c)(2)(D); (2) 

to the extent Letter 85–2 assumes the occurrence of 

delivery of a commodity, it does not purport to 

determine whether ‘‘actual delivery’’ has occurred 

under new CEA section 2(c)(2)(D)(ii)(III)(aa); and (3) 

new CEA section 2(c)(2)(D)(iii) explicitly subjects 

certain retail commodity transactions to CEA 

sections 4(a), 4(b), and 4b ‘‘as if’’ they were 

contracts of sale of a commodity for future delivery, 

regardless of whether they are, in fact, contracts of 

sale of a commodity for future delivery under CEA 

section 2(a)(1)(A). 

21 7 U.S.C. 2(c)(2)(D)(ii)(III)(bb). 

swap participants; (2) imposing clearing 

and trade execution requirements on 

standardized derivative products; (3) 

creating robust recordkeeping and realtime reporting regimes; and (4) 

enhancing the Commission’s 

rulemaking and enforcement authorities 

with respect to, among others, all 

registered entities and intermediaries 

subject to the Commission’s oversight. 

In addition, section 742(a) of the 

Dodd-Frank Act amends section 2(c)(2) 

of the CEA to add a new subparagraph, 

section 2(c)(2)(D) of the CEA,6 entitled 

‘‘Retail Commodity Transactions.’’ New 

CEA section 2(c)(2)(D) provides the 

Commission with a new source of 

jurisdiction over certain retail 

commodity transactions.7 Congress 

enacted this provision following court 

decisions, including CFTC v. Zelener,8

that narrowly interpreted the term 

‘‘contract of sale of a commodity for 

future delivery’’—the statutory term for 

a futures contract—based on language in 

customer agreements. Zelener involved 

retail foreign currency transactions that 

were characterized as spot sales in 

contract documents, but in which, in 

practice, customer positions were held 

open indefinitely and customers never 

took delivery of foreign currency.9

Zelener held that the transactions 

were not subject to CFTC jurisdiction 

because they did not involve futures 

contracts but were ‘‘in form, spot sales 

for delivery within 48 hours.’’ 10 In so 

ruling, the court focused solely on the 

language of the customer agreements. 

Following Zelener, Congress provided 

the Commission with additional 

authority over retail foreign currency 

transactions in the CFTC 

Reauthorization Act of 2008.11

Similarly, in section 742(a) of the DoddFrank Act, Congress provided the 

Commission with additional authority 

over non-foreign currency retail 

commodity transactions by making 

specified forms of these transactions 

subject to certain provisions of the CEA 

regardless of whether they involve a 

‘‘contract of sale of a commodity for 

future delivery.’’ Senator Lincoln 

explained the rationale for this 

legislation during floor debate on the 

Dodd-Frank Act: 

[the] contracts [in Zelener] function just like 

futures contracts, but the court of appeals, 

* * * based on the wording of the contract 

documents, held them to be spot contracts 

outside of CFTC jurisdiction. The CFTC 

Reauthorization Act of 2008, which was 

enacted as part of that year’s Farm Bill, 

clarified that such transactions in foreign 

currency are subject to CFTC anti-fraud 

authority. It left open the possibility, 

however, that such Zelener-type contracts 

could still escape CFTC jurisdiction if used 

for other commodities such as energy and 

metals. 

Section 742 corrects this by extending the 

Farm Bill’s ‘‘Zelener fraud fix’’ to retail offexchange transactions in all commodities. 

Further, a transaction with a retail customer 

that meets the leverage and other 

requirements set forth in Section 742 is 

subject not only to the anti-fraud provisions 

of CEA Section 4b (which is the case for 

foreign currency), but also to the on-exchange 

trading requirement of CEA Section 4(a), ‘‘as 

if’’ the transaction was a futures contract.12

Accordingly, new CEA section 

2(c)(2)(D) broadly applies to any 

agreement, contract, or transaction in 

any commodity that is entered into 

with, or offered to (even if not entered 

into with), a non-eligible contract 

participant or non-eligible commercial 

entity on a leveraged or margined basis, 

or financed by the offeror, the 

counterparty, or a person acting in 

concert with the offeror or counterparty 

on a similar basis.13 New CEA section 

2(c)(2)(D) further provides that such an 

agreement, contract, or transaction shall 

be subject to CEA sections 4(a),14 4(b),15

and 4b 16 ‘‘as if the agreement, contract, 

or transaction was a contract of sale of 

a commodity for future delivery.’’ 17

New CEA section 2(c)(2)(D) excepts 

certain transactions from its application. 

In particular, new CEA section 

2(c)(2)(D)(ii)(III)(aa) 18 excepts a contract 

of sale that ‘‘results in actual delivery 

within 28 days or such other longer 

period as the Commission may 

determine by rule or regulation based 

upon the typical commercial practice in 

cash or spot markets for the commodity 

involved.’’ 19

The Commission is issuing this 

interpretation to inform the public of 

the Commission’s views as to the 

meaning of the term ‘‘actual delivery’’ as 

used in new CEA section 

2(c)(2)(D)(ii)(III)(aa) and to provide the 

public with guidance on how the 

Commission intends to assess whether 

any given transaction results in actual 

delivery within the meaning of the 

statute.20 The Commission requests 

comment on whether its interpretation 

of ‘‘actual delivery’’ accurately 

construes the statutory language. 

This interpretation does not address 

the meaning or scope of new CEA 

section 2(c)(2)(D)(ii)(III)(bb) 21 or any 

exception to new CEA section 2(c)(2)(D) 

other than new CEA section 

2(c)(2)(D)(ii)(III)(aa). Similarly, this 

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77672 Federal Register / Vol. 76, No. 240 / Wednesday, December 14, 2011 / Rules and Regulations 

22 7 U.S.C. 1a(27). 

23 7 U.S.C. 1a(47)(B)(ii). 

24See, e.g., Statutory Interpretation Concerning 

Forward Transactions, 55 FR 39188 (Sept. 25, 1990) 

(‘‘Brent Interpretation’’). 

25Based on Examples 1 and 2, an agreement, 

contract, or transaction that results in ‘‘physical 

delivery’’ within the meaning of section 

1.04(a)(2)(i)–(iii) of the Model State Commodity 

Code would ordinarily result in ‘‘actual delivery’’ 

under new CEA section 2(c)(2)(D)(ii)(III)(aa), absent 

other evidence indicating that the purported 

delivery is a sham. See Model State Commodity 

Code § 1.04(a)(2)(i)–(iii), Comm. Fut. L. Rep. 

Archive (CCH) ¶ 22,568 (Apr. 5, 1985). Conversely, 

an agreement, contract, or transaction that does not 

result in ‘‘physical delivery’’ within the meaning of 

section 1.04(a)(2)(i)–(iii) of the Model State 

Commodity Code is highly unlikely to result in 

‘‘actual delivery’’ under new CEA section 

2(c)(2)(D)(ii)(III)(aa). 

interpretation does not address the 

meaning or scope of contracts of sale of 

a commodity for future delivery, the 

forward contract exclusion from the 

term ‘‘future delivery’’ set forth in CEA 

section 1a(27),22 or the forward contract 

exclusion from the term ‘‘swap’’ set 

forth in CEA section 1a(47)(B)(ii).23 Nor 

does this interpretation alter any 

statutory interpretation or statement of 

Commission policy relating to the 

forward contract exclusion.24

II. Commission Interpretation of 

‘‘Actual Delivery’’ 

In the view of the Commission, the 

determination of whether ‘‘actual 

delivery’’ has occurred within the 

meaning of new CEA section 

2(c)(2)(D)(ii)(III)(aa) requires 

consideration of evidence regarding 

delivery beyond the four corners of 

contract documents. This interpretation 

of the statutory language is based on 

Congress’s use of the word ‘‘actual’’ to 

modify ‘‘delivery’’ and on the legislative 

history of new CEA section 

2(c)(2)(D)(ii)(III)(aa) described above. 

Consistent with this interpretation of 

the statutory language, in determining 

whether actual delivery has occurred 

within 28 days, the Commission will 

employ a functional approach and 

examine how the agreement, contract, or 

transaction is marketed, managed, and 

performed, instead of relying solely on 

language used by the parties in the 

agreement, contract, or transaction. This 

approach best accomplishes Congress’s 

intent when it enacted section 742(a) of 

the Dodd-Frank Act and gives full 

meaning to Congress’s term ‘‘actual 

delivery.’’ 

Relevant factors in this determination 

include the following: ownership, 

possession, title, and physical location 

of the commodity purchased or sold, 

both before and after execution of the 

agreement, contract, or transaction; the 

nature of the relationship between the 

buyer, seller, and possessor of the 

commodity purchased or sold; and the 

manner in which the purchase or sale is 

recorded and completed. The 

Commission provides the following 

examples to illustrate how it will 

determine whether actual delivery has 

occurred within the meaning of new 

CEA section 2(c)(2)(D)(ii)(III)(aa). 

Example 1: Actual delivery will have 

occurred if, within 28 days, the seller has 

physically delivered the entire quantity of 

the commodity purchased by the buyer, 

including any portion of the purchase made 

using leverage, margin, or financing, into the 

possession of the buyer and has transferred 

title to that quantity of the commodity to the 

buyer. 

Example 2: Actual delivery will have 

occurred if, within 28 days, the seller has 

physically delivered the entire quantity of 

the commodity purchased by the buyer, 

including any portion of the purchase made 

using leverage, margin, or financing, whether 

in specifically segregated or fungible bulk 

form, into the possession of a depository 

other than the seller and its parent company, 

partners, agents, and other affiliates, that is: 

(a) A financial institution as defined by the 

CEA; (b) a depository, the warrants or 

warehouse receipts of which are recognized 

for delivery purposes for any commodity on 

a contract market designated by the 

Commission; or (c) a storage facility licensed 

or regulated by the United States or any 

United States agency, and has transferred 

title to that quantity of the commodity to the 

buyer.25

Example 3: Actual delivery will not have 

occurred if, within 28 days, a book entry is 

made by the seller purporting to show that 

delivery of the commodity has been made to 

the buyer and/or that a sale of a commodity 

has subsequently been covered or hedged by 

the seller through a third party contract or 

account, but the seller has not, in accordance 

with the methods described in Example 1 or 

2, physically delivered the entire quantity of 

the commodity purchased by the buyer, 

including any portion of the purchase made 

using leverage, margin, or financing, and 

transferred title to that quantity of the 

commodity to the buyer, regardless of 

whether the agreement, contract, or 

transaction between the buyer and seller 

purports to create an enforceable obligation 

on the part of the seller, or a parent company, 

partner, agent, or other affiliate of the seller, 

to deliver the commodity to the buyer. 

Example 4: Actual delivery will not have 

occurred if, within 28 days, the seller has 

purported to physically deliver the entire 

quantity of the commodity purchased by the 

buyer, including any portion of the purchase 

made using leverage, margin, or financing, in 

accordance with the method described in 

Example 2, and transfer title to that quantity 

of the commodity to the buyer, but the title 

document fails to identify the specific 

financial institution, depository, or storage 

facility with possession of the commodity, 

the quality specifications of the commodity, 

the identity of the party transferring title to 

the commodity to the buyer, and the 

segregation or allocation status of the 

commodity. 

Example 5: Actual delivery will not have 

occurred if, within 28 days, an agreement, 

contract, or transaction for the purchase or 

sale of a commodity is rolled, offset, or 

otherwise netted with another transaction or 

settled in cash between the buyer and the 

seller, but the seller has not, in accordance 

with the methods described in Example 1 or 

2, physically delivered the entire quantity of 

the commodity purchased by the buyer, 

including any portion of the purchase made 

using leverage, margin, or financing, and 

transferred title to that quantity of the 

commodity to the buyer, regardless of 

whether the agreement, contract, or 

transaction between the buyer and seller 

purports to create an enforceable obligation 

on the part of the seller, or a parent company, 

partner, agent, or other affiliate of the seller, 

to deliver the commodity to the buyer. 

Issued in Washington, DC, on December 1, 

2011 by the Commission. 

David A. Stawick, 

Secretary of the Commission. 

[FR Doc. 2011–31355 Filed 12–13–11; 8:45 am] 

BILLING CODE P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 31 

[TD 9566] 

RIN 1545–BK82 

Employer’s Annual Federal Tax Return 

and Modifications to the Deposit Rules 

AGENCY: Internal Revenue Service, 

Treasury. 

ACTION: Final regulations and removal of 

temporary regulations. 

SUMMARY: This document contains final 

regulations relating to the Employers’ 

Annual Federal Tax Program (the Form 

944 Program) and the requirements for 

depositing social security, Medicare, 

and withheld Federal income taxes 

(collectively ‘‘employment taxes’’). 

These final regulations allow certain 

employers to file a Form 944, 

‘‘Employer’s ANNUAL Federal Tax 

Return,’’ rather than Forms 941, 

‘‘Employer’s QUARTERLY Federal Tax 

Return.’’ Additionally, these final 

regulations provide guidance related to 

the lookback periods and deposit 

requirements for employers required to 

file Forms 941 and Form 944. These 

final regulations affect taxpayers that 

file Forms 941, Form 944, and any 

related Spanish-language returns or 

returns for U.S. possessions. 

DATES: Effective Date: These regulations 

are effective on December 14, 2011. 

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