47738 Federal Register / Vol. 75, No. 152 / Monday, August 9, 2010 / Proposed Rules 

1See 17 CFR 1.3(gg) (defining the term ‘‘customer 

funds’’). 

2Regulation 1.20(a) does not require a written 

acknowledgment to be obtained from ‘‘a derivatives 

clearing organization that has adopted and 

submitted to the Commission rules that provide for 

the segregation as customer funds, in accordance 

with all relevant provisions of the Act and the rules 

and orders promulgated thereunder, of all funds 

held on behalf of customers.’’ 

3 7 U.S.C. 1 et seq. 

4 17 CFR parts 1–199. 

5See 17 CFR 1.3(rr) (defining the term ‘‘foreign 

futures or foreign options secured amount’’). 

6 74 FR 7838 (February 20, 2009). 

List of Subjects in 14 CFR Part 71 

Airspace, Incorporation by reference, 

Navigation (air). 

The Withdrawal 

Accordingly, pursuant to the 

authority delegated to me, the FAA 

withdraws the NPRM published in the 

Federal Register June 8, 2010, (75 FR 

32317) [2010–13609]. 

Authority: 49 U.S.C. 106(g), 40103, 40113, 

40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959– 

1963 Comp., p. 389. 

Issued in Washington, DC, July 28, 2010. 

Edith V. Parish, 

Manager, Airspace and Rules Group. 

[FR Doc. 2010–19489 Filed 8–6–10; 8:45 am] 

BILLING CODE 4910–13–P 

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Parts 1, 30, and 140 

RIN 3038–AC72 

Acknowledgment Letters for Customer 

Funds and Secured Amount Funds 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Commodity Futures 

Trading Commission (‘‘Commission’’ or 

‘‘CFTC’’) is proposing to amend its 

regulations regarding the required 

content of the acknowledgment letter 

that a registrant must obtain from any 

depository holding its segregated 

customer funds or funds of foreign 

futures or foreign options customers, 

and certain technical changes. 

DATES: Submit comments on or before 

September 8, 2010. 

ADDRESSES: You may submit comments, 

identified by RIN number, by any of the 

following methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Agency Web Site: http:// 

www.cftc.gov. Follow the instructions 

for submitting comments on the Web 

site. 

• E-mail: 

acknowledgmentletter@cftc.gov. Include 

the RIN number in the subject line of 

the message. 

• Fax: 202–418–5521. 

• 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. 

FOR FURTHER INFORMATION CONTACT: 

Phyllis P. Dietz, Associate Director, 

202–418–5449, pdietz@cftc.gov, or 

Eileen A. Donovan, Special Counsel, 

202–418–5096, edonovan@cftc.gov, 

Division of Clearing and Intermediary 

Oversight, Commodity Futures Trading 

Commission, Three Lafayette Centre, 

1155 21st Street, NW., Washington, DC 

20581. 

SUPPLEMENTARY INFORMATION: 

I. Background 

Regulation 1.20 (17 CFR 1.20) requires 

futures commission merchants (FCMs) 

that accept customer funds and 

derivatives clearing organizations 

(DCOs) that accept customer funds from 

FCMs to segregate and separately 

account for those funds.1 Currently, 

Regulation 1.20 requires such FCMs and 

DCOs to obtain from the bank, trust 

company, FCM or DCO 2 holding 

customer funds in the capacity of a 

depository (each, a ‘‘Depository’’) a 

written acknowledgment that the 

Depository was informed that the 

customer funds deposited therein are 

those of commodity or option customers 

and are being held in accordance with 

the provisions of the Commodity 

Exchange Act (Act) 3 and CFTC 

regulations.4 Regulation 1.26 (17 CFR 

1.26), which requires FCMs and DCOs 

to segregate and separately account for 

instruments purchased with customer 

funds, repeats the requirement to obtain 

an acknowledgment letter. FCMs also 

must obtain a similar written 

acknowledgment from Depositories 

holding ‘‘secured amount’’ funds 5

required under Regulation 30.7 (17 CFR 

30.7), which governs the treatment of 

money, securities, and property held for 

or on behalf of the FCM’s foreign futures 

and foreign options customers. 

On February 20, 2009, the 

Commission published proposed 

amendments to Regulations 1.20, 1.26, 

and 30.7 for public comment.6 The 

proposed amendments set out specific 

representations that would be required 

in the acknowledgment letters in order 

to reaffirm and clarify the obligations 

that Depositories incur when accepting 

customer funds or secured amount 

funds. The Commission also proposed 

several technical changes. 

In response, the Commission received 

comment letters from the Futures 

Industry Association (‘‘FIA’’), Joint 

Audit Committee (‘‘JAC’’), National 

Futures Association (‘‘NFA’’), Managed 

Funds Association (‘‘MFA’’), and Katten 

Muchin Rosenman LLP (‘‘Katten’’), 

which are discussed below. In light of 

the comments received, the Commission 

has determined to re-propose the 

amendments to Regulations 1.20, 1.26, 

and 30.7, with several changes made in 

response to the comments. In addition, 

the Commission is proposing standard 

template acknowledgment letters that 

would be required to be used. These are 

proposed for inclusion in a new 

Appendix A to each of Regulations 1.20, 

1.26, and 30.7. The Commission invites 

public comment on all aspects of the 

proposed regulations and the proposed 

letters. 

II. Comments Received 

FIA generally supported the proposed 

regulations but requested that the 

effective date of the final rule be 

extended beyond the proposed date of 

180 days from the date of publication in 

the Federal Register to allow FCMs, 

DCOs, and Depositories sufficient time 

to negotiate and put in place 

acknowledgment letters satisfying the 

proposed Commission regulations and 

also to allow them an opportunity to 

work together to develop a standard 

template acknowledgment letter that 

would satisfy the proposed regulations. 

In addition, FIA expressed interest in 

having its member Depositories work 

with the Commission on a standardized 

notice, authentication, and instruction 

protocol and encouraged the 

Commission to develop a system for 

electronic filing of the new 

acknowledgment letters. 

The JAC supported the proposed 

regulations but requested guidance 

regarding the circumstances that would 

necessitate updating acknowledgment 

letters (e.g., name change of FCM or 

depository, merger of FCM or 

depository, addition or deletion of 

account number) as well as acceptable 

timeframes for such updating. In 

addition, the JAC questioned the benefit 

of requiring submission of 

acknowledgment letters to the 

Commission without also requiring 

documentation necessary for 

verification. Finally, the JAC requested 

that the Commission amend Regulation 

30.7 to provide relief, similar to that 

provided under Regulations 1.20 and 

1.26, that would exempt DCOs from 

having to provide acknowledgment 

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Federal Register / Vol. 75, No. 152 / Monday, August 9, 2010 / Proposed Rules 47739 

letters if they follow the requirements of 

the CEA. 

NFA supported the proposed 

regulations but recommended that the 

Commission require that 

acknowledgment letters be filed with 

NFA as well as the Commission when 

NFA is the firm’s designated selfregulatory organization (‘‘DSRO’’), so 

that NFA has ready access to the same 

information that the Commission does. 

NFA also asked that the Commission 

clarify when acknowledgment letters 

should be amended for changes made 

after the effective date of the proposed 

regulations. 

Katten supported the purpose of the 

proposed regulations but suggested 

several revisions. First, Katten 

recommended that the Commission 

require an FCM, in opening an account 

with a Depository, to include in the 

account opening agreement an 

obligation on the Depository to release 

customer funds ‘‘immediately upon 

proper notice and instruction’’ from the 

FCM or the Commission (the same 

language that would be required in the 

acknowledgment letter under the 

proposed regulations). Katten expressed 

concern that a Depository would be 

exposed to potential liability to the FCM 

if the Depository were to honor an 

instruction from the Commission 

without the FCM’s express consent. 

Second, Katten noted that the proposed 

regulations set no guidelines to be 

followed or conditions to be met before 

the Commission could issue an 

instruction to release customer funds. 

Third, Katten recommended that the 

Commission establish a reasonable 

means for a Depository to authenticate 

an instruction from the Commission. 

Fourth, Katten asked the Commission to 

confirm that, in the event that an FCM 

files for bankruptcy, a Depository will 

have no obligation to release customer 

funds except upon instruction from the 

bankruptcy trustee or pursuant to a 

court order. Fifth, Katten requested that 

the Commission provide additional 

guidance on a Depository’s obligation to 

release customer funds ‘‘immediately’’ 

upon instruction from the Commission 

and suggested the use of the term 

‘‘promptly’’ instead. Finally, Katten 

noted that Depositories frequently 

contract with an FCM depositor to 

advance monies to the FCM intraday, 

with the understanding that the FCM 

will deposit in the customer segregated 

account prior to the end of the business 

day (or by the start of the next business 

day), sums sufficient to repay the 

advance. Katten requested that the 

Commission confirm that, in the event 

that the FCM fails to repay the advance 

in a timely manner, or in the event of 

the FCM’s bankruptcy, a Depository is 

entitled to recourse against the customer 

funds account for the amount of such 

funds advanced. 

MFA commended the Commission for 

the proposed rulemaking and stated that 

it believes the proposed rules would 

provide customers with greater clarity 

with respect to their deposited funds. 

The Commission’s response to the 

comments received is discussed below. 

III. Discussion of the Proposed 

Regulations 

A. Regulation 1.20 

In its original proposal, the 

Commission set out specific 

representations that Depositories would 

have to include in the acknowledgment 

letter required under Regulation 1.20. 

The proposed changes to Regulation 

1.20 would have required the 

Depository to acknowledge in the letter 

that: (1) The FCM or DCO has 

established the account for the purpose 

of depositing customer funds; (2) the 

customer funds deposited therein are 

those of commodity or option customers 

of the FCM, or clearing members of the 

DCO, and that those funds are to be 

segregated in accordance with the 

provisions of the Act and Part 1 of the 

CFTC regulations; (3) the customer 

funds shall not be subject to any right 

of offset, or lien, for or on account of 

any indebtedness, obligations or 

liabilities owed by the FCM or DCO; (4) 

the Depository must treat the customer 

funds in accordance with the Act and 

CFTC regulations; and (5) the 

Depository must immediately release 

the customer funds upon proper notice 

and instruction from the FCM or DCO 

or from the Commission. 

As noted above, FIA recommended 

the development of a standard template 

acknowledgment letter that would 

satisfy the proposed regulations. The 

Commission agrees with this 

recommendation, and the specific 

representations that the Commission 

originally proposed for the letter have 

been incorporated into a standard 

template acknowledgment letter that 

would be adopted as Appendix A to 

Regulation 1.20. An FCM or DCO would 

be required to use this letter to satisfy 

the requirements of Regulation 1.20. 

The Commission also has accepted 

the recommendation to develop a 

system for electronic filing of the 

acknowledgment letters. As initially 

proposed, paragraphs (d)(2) and (e)(2) of 

Regulation 1.20 would have required 

that a copy of the acknowledgment 

letter be filed with the regional office of 

the Commission with jurisdiction over 

the state in which the FCM or DCO’s 

principal place of business is located; to 

reflect the change to electronic filing, 

paragraphs (d)(2) and (e)(2) now require 

that a copy of the letter be filed ‘‘with 

the Commission in the manner specified 

by the Commission.’’ The Commission 

will offer guidance on electronic filing 

procedures for the acknowledgment 

letters before a final rule takes effect but 

expects that filing will be done through 

‘‘WinJammerTM,’’ an application 

currently used by FCMs to file their 

financial reports with the Commission. 

The use of WinJammerTM will ensure 

that only those individuals authorized 

by an FCM to submit an 

acknowledgment letter on its behalf will 

be able to do so, and it also will allow 

NFA and other DSROs to have access to 

the acknowledgment letters. 

Regulation 1.20 currently does not 

address the circumstances under which 

an FCM or a DCO must amend an 

existing acknowledgment letter or the 

amount of time allowed for doing so. 

Proposed paragraphs (d)(3) and (e)(3) 

require the acknowledgment letter to be 

amended within 60 days of any changes 

in the following: the name of the FCM 

or DCO depositing the customer funds; 

the name of the bank, trust company, 

DCO or FCM receiving the customer 

funds; or the account number(s) under 

which the customer funds are held. 

The proposed standard template 

acknowledgment letter includes 

language that requires the Depository to 

acknowledge that it must ‘‘immediately’’ 

release customer funds upon ‘‘proper 

notice and instruction’’ from the FCM or 

DCO or from the Commission. The 

Commission recognizes that the release 

of customer funds may be delayed by 

practical considerations (e.g., Fedwire is 

unavailable), but the Depository must 

make every effort to execute the transfer 

as soon as possible. The transfer of 

customer funds from a segregated 

account cannot be delayed due to 

concerns about the financial status of 

the FCM or DCO that deposited the 

funds. 

The Commission is not proposing 

specific standards for what constitutes 

‘‘proper notice’’ from the Commission to 

the Depository. This is because 

reasonable actions could vary, 

depending on the situation. For 

example, in certain circumstances, it 

may not be possible to expeditiously 

provide written notice, and a telephone 

call would be sufficient and even 

preferable. However, the Commission 

would confirm the instruction in 

writing as soon as practicable. 

As noted above, the Commission 

received a comment letter expressing 

concern that a Depository would be 

exposed to potential liability to the FCM 

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47740 Federal Register / Vol. 75, No. 152 / Monday, August 9, 2010 / Proposed Rules 

7 7 U.S.C. 6d. 

8See Section 4d(b) of the Act, 7 U.S.C. 6d(b). The 

arrangement outlined in the comment letter is 

distinguishable from other arrangements involving 

segregated funds that the Commission has 

previously allowed. For example, CFTC 

Interpretative Letter No. 86–9 confirmed that, when 

there is sufficient aggregate value in the form of 

cash and securities, but insufficient cash, in the 

customer segregated account to meet a customer 

margin or variation call, a bank may allow an 

overdraft in the account in order to meet the call 

and may settle the overdraft by offsetting securities 

held in the customer segregated account. The letter 

allowed such offsetting only to meet the obligations 

of customers, not obligations of the FCM. Similarly, 

CFTC No-Action Letter No. 04–26 confirmed that an 

FCM that holds excess funds in segregation and has 

a residual interest in such funds may pay account 

service charges directly out of a customer 

segregated account as a reduction of such residual 

interest, subject to additional conditions set forth in 

the letter. Although the letter allowed the charges 

to be paid from the customer segregated account, 

the funds being used had to belong to the FCM and 

not to its customers. 

9Regulation 1.25(c) sets forth the requirements 

for investment of customer funds in money market 

mutual funds. Among them is the requirement that 

if the FCM or DCO ‘‘holds its shares of the fund 

with the fund’s shareholder servicing agent, the 

sponsor of the fund and the fund itself are required 

to provide the acknowledgement letter required by 

§ 1.26.’’ See 17 CFR 1.25(c)(3). 

10The Commission has issued an interpretative 

statement with respect to the secured amount 

requirement set forth in Regulation 30.7. See 17 

CFR part 30, App. B. 

if the Depository were to honor an 

instruction from the Commission 

without the FCM’s express consent. The 

Commission believes that the 

acknowledgment letter and Regulation 

1.20, as proposed, would provide 

sufficient legal basis for the Depository 

to act on any such instruction from the 

Commission. The letter, which must be 

agreed to and signed by both the FCM 

(or DCO) and the Depository, states: ‘‘We 

will not hold you responsible for acting 

pursuant to any instruction from the 

CFTC upon which you have relied after 

having taken reasonable measures to 

assure that such instruction was 

provided to you by a duly authorized 

officer or employee of the CFTC.’’ The 

Commission would issue such an 

instruction only when, in the judgment 

of the Commission, it is necessary to do 

so for the protection of customer funds. 

For example, the prospective insolvency 

of the FCM could prompt an instruction 

from the Commission to release the 

customer funds. However, the standard 

template acknowledgment letter does 

include language confirming that, in the 

event that the FCM becomes subject to 

a voluntary or involuntary petition for 

relief under the U.S. Bankruptcy Code, 

the Depository will have no obligation 

to release the customer funds except 

upon instruction from the bankruptcy 

trustee or pursuant to a court order. 

One of the comment letters also noted 

that Depositories frequently contract 

with an FCM depositor to advance 

monies to the FCM intraday, with the 

understanding that the FCM will 

deposit in the customer segregated 

account prior to the end of the business 

day (or by the start of the next business 

day), sums sufficient to repay the 

advance. The Commission was asked to 

confirm that, in the event that the FCM 

fails to repay the advance in a timely 

manner, or in the event of the FCM’s 

bankruptcy, a Depository is entitled to 

recourse against the customer funds 

account for the amount of such funds 

advanced. The Commission believes 

that Section 4d of the Act 7 does not 

permit such an arrangement because the 

advance is made to the FCM account 

holder and Section 4d expressly 

prohibits ‘‘any person, 

including* * *any depository, that has 

received any money, securities, or 

property for deposit in a [customer 

segregated account], to hold, dispose of, 

or use any such money, securities, or 

property as belonging to the depositing 

futures commission merchant or any 

person other than the customers of such 

futures commission merchant.’’ 8

B. Regulation 1.26 

The proposed changes to Regulation 

1.26 would affirm that the written 

acknowledgment required for 

instruments in which customer funds 

are invested is identical to the written 

acknowledgment required under 

Regulation 1.20 and therefore must meet 

the requirements set out in Regulation 

1.20. The Commission also is proposing 

a standard template acknowledgment 

letter to be used when customer funds 

are invested in money market mutual 

funds, which would be adopted as 

Appendix A to Regulation 1.26.9

C. Regulation 30.7 

In its original proposal, the 

Commission proposed to amend 

Regulation 30.7 to set out specific 

representations that Depositories 

holding secured amount funds would 

have to include in the acknowledgment 

letter required by the regulation.10 The 

proposed changes to Regulation 30.7 

would have required the Depository to 

acknowledge in the letter that: (1) It 

meets the requirement set out in 

Regulation 30.7(c)(1), which lists the 

types of depositories that may accept 

secured amount funds; (2) the FCM has 

established the account for the purpose 

of depositing money, securities, or 

property for or on behalf of customers 

that include, but are not limited to, 

foreign futures and foreign options 

customers; (3) the money, securities, or 

property deposited therein are held on 

behalf of foreign futures and foreign 

options customers of the FCM and may 

not be commingled with the FCM’s own 

funds or any other funds that the 

Depository may hold, in accordance 

with the provisions of the Act and Part 

30 of the CFTC regulations; (4) the 

money, securities, or property shall not 

be subject to any right of offset, or lien, 

for or on account of any indebtedness, 

obligations or liabilities owed by the 

FCM; (5) the Depository must treat the 

money, securities, or property in 

accordance with the provisions of the 

Act and CFTC regulations; and (6) the 

Depository must release immediately, 

subject to requirements of applicable 

foreign law, the money, securities, or 

property upon proper notice and 

instruction from the FCM or the 

Commission. 

As noted above, the Commission now 

is proposing a standard template 

acknowledgment letter under 

Regulations 1.20 and 1.26, and the 

Commission is doing the same for 

Regulation 30.7. The specific 

representations that the Commission 

originally proposed for the letter 

required under Regulation 30.7 have 

been incorporated into a standard 

template acknowledgment letter that 

would be adopted as Appendix A to 

Regulation 30.7. 

Also as noted above, the Commission 

has decided to develop a system for 

electronic filing of the acknowledgment 

letters. As initially proposed, paragraph 

(c)(2)(iii) of Regulation 30.7 would have 

required the FCM to file a copy of the 

written acknowledgment with the 

regional office of the Commission with 

jurisdiction over the state in which the 

FCM’s principal place of business is 

located; to reflect the change to 

electronic filing, paragraph (c)(2)(ii) 

now requires that a copy of the letter be 

filed ‘‘with the Commission in the 

manner specified by the Commission.’’ 

The Commission will offer guidance on 

electronic filing procedures for the 

acknowledgment letters before a final 

rule takes effect but expects that filing 

will be done through ‘‘WinJammerTM,’’ 

an application currently used by FCMs 

to file their financial reports with the 

Commission. The use of WinJammerTM

will ensure that only those individuals 

authorized by an FCM to submit an 

acknowledgment letter on its behalf will 

be able to do so, and it also will allow 

NFA and other DSROs to have access to 

the acknowledgment letters. 

Regulation 30.7 currently does not 

address the circumstances under which 

an FCM must amend an existing 

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Federal Register / Vol. 75, No. 152 / Monday, August 9, 2010 / Proposed Rules 47741 

11Regulation 30.7(c)(1) (17 CFR 30.7(c)(1)) sets 

out certain requirements that an entity must meet 

to qualify as a depository that may accept from an 

FCM the money, securities, and property 

representing the foreign futures or foreign options 

secured amount. 

12The Commission notes that under the laws of 

some foreign countries, immediate release of 

customer funds may not always be possible. 

Regulation 30.6(a) (17 CFR 30.6(a)) requires FCMs 

to furnish customers with a separate written 

disclosure statement containing the language set 

forth in Regulation 1.55(b) (17 CFR 1.55(b)). 

Regulation 1.55(b)(7) states in relevant part: 

No domestic organization regulates the activities 

of a foreign exchange * * * and no domestic 

regulator has the power to compel enforcement of 

the rules of the foreign exchange or the laws of the 

foreign country. Moreover, such laws or regulations 

will vary depending on the foreign country in 

which the transaction occurs. * * * [F]unds 

received from customers to margin foreign futures 

transactions may not be provided the same 

protections as funds received to margin futures 

transactions on domestic exchanges. 

13Appendix E of Public Law 106–554, 114 Stat. 

2763 (2000). 

14See Section 5b of the Act, 7 U.S.C. 7a–1. See 

also Section 1a(9) of the Act, 7 U.S.C. 1a(9) 

(defining the term ‘‘derivatives clearing 

organization’’). 

15 5 U.S.C. 601 et seq. 

16 47 FR 18618 (Apr. 30, 1982). 

17 Id. at 18619. 

18 66 FR 45604, 45609 (Aug. 29, 2001). 

19 44 U.S.C. 3501 et seq. 

acknowledgment letter or the amount of 

time allowed for doing so. Proposed 

paragraph (c)(2)(iii) requires the 

acknowledgment letter to be amended 

within 60 days of any changes in the 

following: the name of the FCM; the 

name of the Depository; 11 or the 

account number(s) under which the 

secured amount funds are held. 

The proposed standard template 

acknowledgment letter includes 

language that requires the Depository to 

acknowledge that it must ‘‘immediately’’ 

release, subject to the requirements of 

U.S. or non-U.S. law as applicable,12

secured amount funds upon ‘‘proper 

notice and instruction’’ from the FCM or 

from the Commission. The Commission 

recognizes that the release of secured 

amount funds may be delayed by 

practical considerations (e.g., Fedwire is 

unavailable), but the Depository must 

make every effort to execute the transfer 

as soon as possible. The transfer cannot 

be delayed due to concerns about the 

financial status of the FCM that 

deposited the funds. 

The Commission is not proposing 

specific standards for what constitutes 

‘‘proper notice’’ from the Commission to 

the Depository. This is because 

reasonable actions could vary, 

depending on the situation. For 

example, in certain circumstances, it 

may not be possible to expeditiously 

provide written notice, and a telephone 

call would be sufficient and even 

preferable. However, the Commission 

would confirm the instruction in 

writing as soon as practicable. 

D. Technical Amendments 

Regulation 1.20(a) imposes upon 

‘‘[e]ach registrant’’ the requirement to 

obtain and retain a written 

acknowledgment when customer funds 

are deposited with ‘‘any bank, trust 

company, clearing organization, or 

another futures commission merchant.’’ 

Regulation 1.20(a) applies to FCMs, as 

distinguished from Regulation 1.20(b), 

which applies to DCOs. Therefore, the 

Commission proposes to substitute the 

term ‘‘futures commission merchant’’ for 

the term ‘‘registrant’’ to more accurately 

reflect the intent and meaning of 

Regulation 1.20(a). In connection with 

this, the Commission further proposes 

to insert the word ‘‘other’’ before the 

term ‘‘futures commission merchant’’ 

that appears subsequently in the same 

sentence, to distinguish between the 

FCM holding the funds of its own 

customers and an FCM holding 

customer funds of another FCM. 

Regulations 1.20, 1.26, and 30.7 

currently require that acknowledgment 

letters be retained for the period 

specified in Regulation 1.31, which 

applies to all recordkeeping required by 

the Act and CFTC regulations. 

Regulation 1.31 requires records to be 

kept for five years and to be readily 

accessible for the first two years of that 

five-year period. The proposed revisions 

would make clear that an 

acknowledgment letter is to be kept 

readily accessible for as long as the 

account remains open and that the 

retention requirements that would 

otherwise apply under Regulation 1.31 

would only take effect once the account 

has been closed. For example, if the 

account remains open for ten years, the 

letter must be kept readily accessible for 

twelve years (the ten years during which 

the account is open plus the two years 

required by Regulation 1.31) and then 

for an additional three years, also as 

required by Regulation 1.31. 

Regulations 1.20 and 1.26 use the 

term ‘‘clearing organization’’ to describe 

an entity that performs clearing 

functions. The Act, as amended by the 

Commodity Futures Modernization Act 

of 2000,13 now provides that a clearing 

organization for a contract market must 

register as a ‘‘derivatives clearing 

organization.’’ 14 To be consistent with 

the Act and other CFTC regulations, the 

Commission proposes to replace the 

term ‘‘clearing organization,’’ wherever it 

appears in Regulations 1.20 and 1.26, 

with the term ‘‘derivatives clearing 

organization.’’ 

Finally, the Commission also is 

proposing technical amendments to 

Regulation 140.91 to explicitly delegate 

to the Director of the Division of 

Clearing and Intermediary Oversight the 

authority to perform certain functions 

that are reserved to the Commission 

under the proposed changes to 

Regulations 1.20, 1.26, and 30.7. Thus, 

for example, the Director of the Division 

of Clearing and Intermediary Oversight 

would have delegated authority to 

instruct a Depository to release 

customer funds or secured amount 

funds. 

E. Proposed Effective Date 

FCMs and DCOs will need to obtain 

new acknowledgment letters that 

comply with the proposed regulations 

before the final regulations take effect. 

The Commission recognizes the need for 

time to obtain the letters. However, the 

adoption of a standard template 

acknowledgment letter would eliminate 

the need for FCMs and Depositories to 

negotiate new acknowledgment letters 

that satisfy the proposed regulations. 

Therefore, the proposed effective date of 

the amendments to Regulations 1.20, 

1.26, and 30.7 is 90 days from the date 

of publication of the final regulations in 

the Federal Register. 

III. Related Matters 

A. Regulatory Flexibility Act 

The Regulatory Flexibility Act 

(‘‘RFA’’) 15 requires Federal agencies, in 

promulgating regulations, to consider 

the impact of those regulations on small 

businesses. The amendments adopted 

herein will affect FCMs and DCOs. The 

Commission has previously established 

certain definitions of ‘‘small entities’’ to 

be used by the Commission in 

evaluating the impact of its regulations 

on small entities in accordance with the 

RFA.16 The Commission has previously 

determined that FCMs 17 and DCOs 18

are not small entities for the purpose of 

the RFA. Accordingly, pursuant to 5 

U.S.C. 605(b), the Chairman, on behalf 

of the Commission, certifies that the 

proposed regulations will not have a 

significant economic impact on a 

substantial number of small entities. 

B. Paperwork Reduction Act 

The Paperwork Reduction Act 

(‘‘PRA’’) 19 imposes certain requirements 

on Federal agencies in connection with 

their conducting or sponsoring any 

collection of information as defined by 

the PRA. The regulations to be amended 

under this proposal are part of an 

approved collection of information 

(OMB Control No. 3038–0024). The 

proposed amendments would not result 

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in any material modification to this 

approved collection. Accordingly, for 

purposes of the PRA, the Commission 

certifies that these proposed 

amendments, if promulgated in final 

form, would not impose any new 

reporting or recordkeeping 

requirements. 

C. Cost-Benefit Analysis 

Section 15(a) of the Act requires that 

the Commission, before promulgating a 

regulation under the Act or issuing an 

order, consider the costs and benefits of 

its action. By its terms, Section 15(a) 

does not require the Commission to 

quantify the costs and benefits of a new 

regulation or determine whether the 

benefits of the regulation outweigh its 

costs. Rather, Section 15(a) simply 

requires the Commission to ‘‘consider 

the costs and benefits’’ of its action. 

Section 15(a) further specifies that 

costs and benefits shall be evaluated in 

light of the following considerations: (1) 

Protection of market participants and 

the public; (2) efficiency, 

competitiveness, and financial integrity 

of futures markets; (3) price discovery; 

(4) sound risk management practices; 

and (5) other public interest 

considerations. Accordingly, the 

Commission could, in its discretion, 

give greater weight to any one of the five 

considerations and could, in its 

discretion, determine that, 

notwithstanding its costs, a particular 

regulation was necessary or appropriate 

to protect the public interest or to 

effectuate any of the provisions or to 

accomplish any of the purposes of the 

Act. 

The Commission has evaluated the 

costs and benefits of the proposed 

regulations in light of the specific 

considerations identified in Section 

15(a) of the Act, as follows: 

1. Protection of market participants 

and the public. The proposed 

regulations would benefit FCMs and 

DCOs, as well as customers of the 

futures and options markets, by 

reaffirming the legal obligation of 

Depositories holding customer funds or 

secured amount funds to treat those 

funds in accordance with the 

requirements of the Act and CFTC 

regulations. 

2. Efficiency and competition. The 

proposed regulations are not expected to 

have an effect on efficiency or 

competition. 

3. Financial integrity of futures 

markets and price discovery. The 

proposed regulations would enhance 

and strengthen the protection of 

customer funds and secured amount 

funds, thus contributing to the financial 

integrity of the futures and options 

markets as a whole. This, in turn, would 

further support the price discovery and 

risk transfer functions of such markets. 

4. Sound risk management practices. 

The proposed regulations would 

reinforce the sound risk management 

practices already required of FCMs and 

DCOs holding customer funds or 

secured amount funds. 

5. Other public considerations. 

Requiring specific representations in a 

Depository’s written acknowledgment 

would reduce the likelihood that the 

Depository would misinterpret its 

obligations in connection with the 

safekeeping and administration of 

customer funds and secured amount 

funds. The Commission recognizes that 

there are certain administrative costs 

associated with obtaining new 

acknowledgment letters. However, the 

Commission believes those costs are 

minimal and are outweighed by the 

benefits. For example, because a 

template letter is required, FCMs and 

DCOs will not have to expend resources 

to negotiate new letters with their 

Depositories. 

Accordingly, after considering the five 

factors enumerated in the Act, the 

Commission has determined to propose 

the regulations set forth below. 

List of Subjects in 17 CFR Parts 1, 30, 

and 140 

Commodity futures, Consumer 

protection. 

For the reasons stated in the 

preamble, the Commission proposes to 

amend 17 CFR parts 1, 30, and 140 as 

follows: 

PART 1—GENERAL REGULATIONS 

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, 6j, 6k, 6l, 6m, 6n, 6o, 

6p, 7, 7a, 7b, 8, 9, 12, 12a, 12c, 13a, 13a–1, 

16, 16a, 19, 21, 23, and 24, as amended by 

the Commodity Futures Modernization Act of 

2000, Appendix E of Pub. L. 106–554, 114 

Stat. 2763 (2000). 

2. Revise § 1.20 to read as follows: 

§ 1.20 Customer funds to be segregated 

and separately accounted for. 

(a) All customer funds shall be 

separately accounted for and segregated 

as belonging to commodity or option 

customers. Such customer funds when 

deposited with any bank, trust 

company, derivatives clearing 

organization or another futures 

commission merchant shall be 

deposited under an account name 

which clearly identifies them as such 

and shows that they are segregated as 

required by the Act and this part. Each 

futures commission merchant shall 

obtain and maintain readily accessible 

in its files in accordance with § 1.31, for 

as long as the account remains open, 

and thereafter for the period provided in 

§ 1.31, a written acknowledgment from 

such bank, trust company, derivatives 

clearing organization, or other futures 

commission merchant, in accordance 

with the requirements of paragraph (d) 

of this section: Provided, however, that 

an acknowledgment need not be 

obtained from a derivatives clearing 

organization that has adopted and 

submitted to the Commission rules that 

provide for the segregation as customer 

funds, in accordance with all relevant 

provisions of the Act and the rules and 

orders promulgated thereunder, of all 

funds held on behalf of customers. 

Under no circumstances shall any 

portion of customer funds be obligated 

to a derivatives clearing organization, 

any member of a contract market, a 

futures commission merchant, or any 

depository except to purchase, margin, 

guarantee, secure, transfer, adjust or 

settle trades, contracts or commodity 

option transactions of commodity or 

option customers. No person, including 

any derivatives clearing organization or 

any depository, that has received 

customer funds for deposit in a 

segregated account, as provided in this 

section, may hold, dispose of, or use any 

such funds as belonging to any person 

other than the option or commodity 

customers of the futures commission 

merchant which deposited such funds. 

(b) All customer funds received by a 

derivatives clearing organization from a 

member of the derivatives clearing 

organization to purchase, margin, 

guarantee, secure or settle the trades, 

contracts or commodity options of the 

clearing member’s commodity or option 

customers and all money accruing to 

such commodity or option customers as 

the result of trades, contracts or 

commodity options so carried shall be 

separately accounted for and segregated 

as belonging to such commodity or 

option customers, and a derivatives 

clearing organization shall not hold, use 

or dispose of such customer funds 

except as belonging to such commodity 

or option customers. Such customer 

funds when deposited in a bank or trust 

company shall be deposited under an 

account name which clearly shows that 

they are the customer funds of the 

commodity or option customers of 

clearing members, segregated as 

required by the Act and these 

regulations. The derivatives clearing 

organization shall obtain and maintain 

readily accessible in its files in 

accordance with § 1.31, for as long as 

the account remains open, and 

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thereafter for the period provided in 

§ 1.31, a written acknowledgment from 

such bank or trust company, in 

accordance with the requirements of 

paragraph (e) of this section. 

(c) Each futures commission merchant 

shall treat and deal with the customer 

funds of a commodity customer or of an 

option customer as belonging to such 

commodity or option customer. All 

customer funds shall be separately 

accounted for, and shall not be 

commingled with the money, securities 

or property of a futures commission 

merchant or of any other person, or be 

used to secure or guarantee the trades, 

contracts or commodity options, or to 

secure or extend the credit, of any 

person other than the one for whom the 

same are held: Provided, however, That 

customer funds treated as belonging to 

the commodity or option customers of a 

futures commission merchant may for 

convenience be commingled and 

deposited in the same account or 

accounts with any bank or trust 

company, with another person 

registered as a futures commission 

merchant, or with a derivatives clearing 

organization, and that such share 

thereof as in the normal course of 

business is necessary to purchase, 

margin, guarantee, secure, transfer, 

adjust, or settle the trades, contracts or 

commodity options of such commodity 

or option customers or resulting market 

positions, with the derivatives clearing 

organization or with any other person 

registered as a futures commission 

merchant, may be withdrawn and 

applied to such purposes, including the 

payment of premiums to option 

grantors, commissions, brokerage, 

interest, taxes, storage and other fees 

and charges, lawfully accruing in 

connection with such trades, contracts 

or commodity options: Provided, 

further, That customer funds may be 

invested in instruments described in 

§ 1.25. 

(d)(1) The written acknowledgment 

required by paragraph (a) of this section 

is set out in Appendix A to this section. 

(2) The futures commission merchant 

shall file a copy of the written 

acknowledgment with the Commission 

in the manner specified by the 

Commission. 

(3) The written acknowledgment shall 

be amended within 60 days of any 

changes in the following: 

(i) The name of the futures 

commission merchant depositing 

customer funds; 

(ii) The name of the bank, trust 

company, derivatives clearing 

organization or futures commission 

merchant receiving customer funds; or 

(iii) The account number(s) under 

which customer funds are held. 

(e)(1) The language set forth in the 

written acknowledgment required under 

paragraph (b) of this section shall be as 

set out in Appendix A to this section. 

(2) The derivatives clearing 

organization shall file a copy of the 

written acknowledgment with the 

Commission in the manner specified by 

the Commission. 

(3) The written acknowledgment shall 

be amended within 60 days of any 

changes in the following: 

(i) The name of the derivatives 

clearing organization depositing 

customer funds; 

(ii) The name of the bank or trust 

company receiving customer funds; or 

(iii) The account number(s) under 

which customer funds are held. 

Appendix § 1.20—Acknowledgment 

Letter for CFTC Regulation 1.20 

Customer Segregated Account 

[Date] 

[Name and Address of Bank, Trust Company, 

Derivatives Clearing Organization or 

Futures Commission Merchant] 

We refer to the Segregated Account(s) 

which [Name of Futures Commission 

Merchant or Derivatives Clearing 

Organization] (‘‘we’’ or ‘‘our’’) have opened or 

will open with [Name of Bank, Trust 

Company, Derivatives Clearing Organization 

or Futures Commission Merchant] (‘‘you’’ or 

‘‘your’’) entitled: 

[Name of Futures Commission Merchant or 

Derivatives Clearing Organization] CFTC 

Regulation 1.20 Customer Segregated 

Account 

Account Number(s): 

(collectively, the ‘‘Account(s)’’). 

You acknowledge and agree that we have 

opened or will open the above-referenced 

Account(s) for the purpose of depositing, as 

applicable, money, securities and other 

property (collectively the ‘‘Funds’’) of our 

customers who trade commodities, options, 

cleared OTC derivatives products and other 

products, as required by Commodity Futures 

Trading Commission (‘‘CFTC’’) Regulation 

1.20, as amended; that the Funds held by 

you, hereafter deposited in the Account(s) or 

accruing to the credit of the Accounts, will 

be separately accounted for and segregated 

on your books from our own Funds and all 

other accounts maintained by us in 

accordance with the provisions of the 

Commodity Exchange Act, as amended (the 

‘‘Act’’), and Part 1 of the CFTC’s regulations, 

as amended; and that the Funds must 

otherwise be treated in accordance with the 

provisions of the Act and CFTC regulations. 

Furthermore, you acknowledge and agree 

that such Funds may not be used by you or 

by us to secure or guarantee any obligations 

we may have owing to you, nor used by us 

to secure credit from you. You further 

acknowledge and agree that the Funds in the 

Account(s) shall not be subject to any right 

of offset or lien for or on account of any 

indebtedness, obligations or liabilities we 

may now or in the future have owing to you. 

This prohibition does not affect your right to 

recover funds advanced in the form of cash 

transfers you make in lieu of liquidating 

assets held in the Account(s) for purposes of 

variation settlement or posting original 

margin. 

In addition, you agree that the Account(s) 

may be examined at any reasonable time by 

an appropriate officer, agent or employee of 

the CFTC or a self-regulatory organization, 

and this letter constitutes the authorization 

and direction of the undersigned to permit 

any such examination or audit to take place. 

You acknowledge and agree that the Funds 

in the Account(s) shall be released 

immediately, subject to the requirements of 

U.S. or non-U.S. law as applicable, upon 

proper notice and instruction from an 

appropriate officer or employee of us or of 

the CFTC. We will not hold you responsible 

for acting pursuant to any instruction from 

the CFTC upon which you have relied after 

having taken reasonable measures to assure 

that such instruction was provided to you by 

a duly authorized officer or employee of the 

CFTC. You further acknowledge that we will 

provide to the CFTC a copy of this 

acknowledgment. 

In the event that we become subject to 

either a voluntary or involuntary petition for 

relief under the U.S. Bankruptcy Code, we 

acknowledge that you will have no obligation 

to release the Funds held in the Account(s), 

except upon instruction of the Trustee in 

Bankruptcy or pursuant to the Order of the 

respective U.S. Bankruptcy Court. 

Notwithstanding anything in the foregoing 

to the contrary, nothing contained herein 

shall be construed as limiting your right to 

assert any right of set off against or lien on 

assets other than assets maintained in the 

Account(s) nor to impose such charges 

against us or any proprietary account 

maintained by us with you. Further, it is 

understood that amounts represented by 

checks, drafts or other items shall not be 

considered to be part of the Account(s) until 

finally collected. Accordingly, checks, drafts 

and other items credited to the Account(s) 

and subsequently dishonored or otherwise 

returned to you, or reversed, for any reason 

and any claims relating thereto, including but 

not limited to claims of alteration or forgery, 

may be charged back to the Account(s), and 

we shall be responsible to you as a general 

endorser of all such items whether or not 

actually so endorsed. 

You may conclusively presume that any 

withdrawal from the Account(s) and the 

balances maintained therein are in 

conformity with the Act and CFTC 

regulations without any further inquiry, and 

you shall not in any manner not expressly 

agreed to herein be responsible for ensuring 

compliance by us with the provisions of the 

Act and CFTC regulations. 

You may, and are hereby authorized to, 

obey the order, judgment, decree or levy of 

any court of competent jurisdiction or any 

governmental agency with jurisdiction, 

which order, judgment, decree or levy relates 

in whole or in part to the Account(s). In any 

event, you shall not be liable by reason of any 

such action or omission to act, to us or to any 

other person, firm, association or corporation 

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even if thereafter any such order, decree, 

judgment or levy shall be reversed, modified, 

set aside or vacated. 

This letter agreement constitutes the entire 

understanding of the parties with respect to 

its subject matter and supersedes and 

replaces all prior writings, including any 

applicable agreement between the parties in 

connection with the Account(s), with respect 

thereto. This letter agreement shall be 

governed by and construed in accordance 

with the laws of [Insert governing law] 

without regard to the principles of choice of 

law. 

Please acknowledge that you agree to abide 

by the requirements and conditions set forth 

above by signing and returning the enclosed 

copy of this letter. 

[Name of Futures Commission Merchant or 

Derivatives Clearing Organization] 

By: 

Name: 

Title: 

ACKNOWLEDGED AND AGREED: 

[Name of Bank, Trust Company, Derivatives 

Clearing Organization or Futures 

Commission Merchant] 

By: 

Name: 

Title: 

DATE: 

3. Revise § 1.26 to read as follows: 

§ 1.26 Deposit of instruments purchased 

with customer funds. 

(a) Each futures commission merchant 

who invests customer funds in 

instruments described in § 1.25, except 

for investments in money market 

mutual funds, shall separately account 

for such instruments and segregate such 

instruments as belonging to such 

commodity or option customers. Such 

instruments, when deposited with a 

bank, trust company, derivatives 

clearing organization or another futures 

commission merchant, shall be 

deposited under an account name 

which clearly shows that they belong to 

commodity or option customers and are 

segregated as required by the Act and 

this part. Each futures commission 

merchant upon opening such an 

account shall obtain and maintain 

readily accessible in its files in 

accordance with § 1.31, for as long as 

the account remains open, and 

thereafter for the period provided in 

§ 1.31, a written acknowledgment from 

such bank, trust company, derivatives 

clearing organization or other futures 

commission merchant, in accordance 

with the requirements of paragraph (d) 

of § 1.20: Provided, however, that an 

acknowledgment need not be obtained 

from a derivatives clearing organization 

that has adopted and submitted to the 

Commission rules that provide for the 

segregation as customer funds, in 

accordance with all relevant provisions 

of the Act and the rules and orders 

promulgated thereunder, of all funds 

held on behalf of customers and all 

instruments purchased with customer 

funds. Such bank, trust company, 

derivatives clearing organization or 

other futures commission merchant 

shall allow inspection of such 

instruments at any reasonable time by 

representatives of the Commission. 

(b) Each derivatives clearing 

organization which invests money 

belonging or accruing to commodity or 

option customers of its clearing 

members in instruments described in 

§ 1.25, except for investments in money 

market mutual funds, shall separately 

account for such instruments and 

segregate such instruments as belonging 

to such commodity or option customers. 

Such instruments, when deposited with 

a bank or trust company, shall be 

deposited under an account name 

which will clearly show that they 

belong to commodity or option 

customers and are segregated as 

required by the Act and this part. Each 

derivatives clearing organization upon 

opening such an account shall obtain 

and maintain readily accessible in its 

files in accordance with § 1.31, for as 

long as the account remains open, and 

thereafter for the period provided in 

§ 1.31, a written acknowledgment from 

such bank or trust company, in 

accordance with the requirements of 

paragraph (e) of § 1.20. Such bank or 

trust company shall allow inspection of 

such instruments at any reasonable time 

by representatives of the Commission. 

(c) Each futures commission merchant 

or derivatives clearing organization 

which invests customer funds in money 

market mutual funds, as permitted by 

§ 1.25, shall separately account for such 

funds and segregate such funds as 

belonging to such commodity or option 

customers. Such funds shall be 

deposited under an account name 

which clearly shows that they belong to 

commodity or option customers and are 

segregated as required by the Act and 

this part. Each futures commission 

merchant or derivatives clearing 

organization, upon opening such an 

account, shall obtain and maintain 

readily accessible in its files in 

accordance with § 1.31, for as long as 

the account remains open, and 

thereafter for the period provided in 

§ 1.31, a written acknowledgment from 

the money market mutual fund as set 

out in Appendix A to this section. 

Appendix A § 1.26—Acknowledgment 

Letter for CFTC Regulation 1.26 

Customer Segregated Money Market 

Mutual Fund Account 

[Date] 

[Name and Address of Money Market Mutual 

Fund] 

We propose to invest funds held by [Name 

of Futures Commission Merchant or 

Derivatives Clearing Organization] (‘‘we’’ or 

‘‘our’’) on behalf of our commodity futures 

and options customers in shares of [Name of 

Money Market Mutual Fund] (‘‘you’’ or 

‘‘your’’) under account(s) entitled (or shares 

issued to): 

[Name of Futures Commission Merchant or 

Derivatives Clearing Organization] CFTC 

Regulation 1.26 Customer Segregated 

Money Market Mutual Fund Account 

Account Number(s): 

(collectively, the ‘‘Account(s)’’). 

You acknowledge and agree that we are 

holding these funds, including any shares 

issued and amounts accruing in connection 

therewith (collectively the ‘‘Funds’’), for the 

benefit of our customers who trade 

commodities, options, cleared OTC 

derivatives products and other products 

(‘‘Commodity Customers’’), as required by 

Commodity Futures Trading Commission 

(‘‘CFTC’’) Regulation 1.26, as amended; that 

the Funds held by you, hereafter deposited 

in the Account(s) or accruing to the credit of 

the Accounts, will be separately accounted 

for and segregated on your books from our 

own funds and from any other funds held by 

us in accordance with the provisions of the 

Commodity Exchange Act, as amended (the 

‘‘Act’’), and Part 1 of the CFTC’s regulations, 

as amended; and that the Funds must 

otherwise be treated in accordance with the 

provisions of the Act and CFTC regulations. 

Furthermore, you acknowledge and agree 

that such Funds may not be used by you or 

by us to secure or guarantee any obligations 

we may have owing to you, nor used by us 

to secure credit from you. You further 

acknowledge and agree that the Funds in the 

Account(s) shall not be subject to any right 

of offset or lien for or on account of any 

indebtedness, obligations or liabilities we 

may now or in the future have owing to you. 

In addition, you agree that the Account(s) 

may be examined at any reasonable time by 

an appropriate officer, agent or employee of 

the CFTC or a self-regulatory organization, 

and this letter constitutes the authorization 

and direction of the undersigned to permit 

any such examination or audit to take place. 

You acknowledge and agree that the Funds 

in the Account(s) shall be released 

immediately, subject to the requirements of 

U.S. or non-U.S. law as applicable, upon 

proper notice and instruction from an 

appropriate officer or employee of us or of 

the CFTC. We will not hold you responsible 

for acting pursuant to any instruction from 

the CFTC upon which you have relied after 

having taken reasonable measures to assure 

that such instruction was provided to you by 

a duly authorized officer or employee of the 

CFTC. You further acknowledge that we will 

provide to the CFTC a copy of this 

acknowledgment. 

In the event we become subject to either a 

voluntary or involuntary petition for relief 

under the U.S. Bankruptcy Code, we 

acknowledge that you will have no obligation 

to release the Funds held in the Account(s), 

except upon instruction of the Trustee in 

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Bankruptcy or pursuant to the Order of the 

respective U.S. Bankruptcy Court. 

Notwithstanding anything in the foregoing 

to the contrary, nothing contained herein 

shall be construed as limiting your right to 

assert any right of setoff against or lien on 

assets other than assets maintained in the 

Account(s) nor to impose such charges 

against us or any proprietary account 

maintained by us with you. Further, it is 

understood that amounts represented by 

checks, drafts or other items shall not be 

considered to be part of the Account(s) until 

finally collected. Accordingly, checks, drafts 

and other items credited to the Account(s) 

and subsequently dishonored or otherwise 

returned to you, or reversed, for any reason 

and any claims relating thereto, including but 

not limited to claims of alteration or forgery, 

may be charged back to the Account(s), and 

we shall be responsible to you as a general 

endorser of all such items whether or not 

actually so endorsed. 

You may conclusively presume that any 

withdrawal from the Account(s) and the 

balances maintained therein are in 

conformity with the Act and CFTC 

regulations without any further inquiry, and 

you shall not in any manner not expressly 

agreed to herein be responsible for ensuring 

compliance by us with the provisions of the 

Act and CFTC regulations. 

You may, and are hereby authorized to, 

obey the order, judgment, decree or levy of 

any court of competent jurisdiction or any 

governmental agency with jurisdiction, 

which order, judgment, decree or levy relates 

in whole or in part to the Account(s). In any 

event, you shall not be liable by reason of any 

such action or omission to act, to us or to any 

other person, firm, association or corporation 

even if thereafter any such order, decree, 

judgment or levy shall be reversed, modified, 

set aside or vacated. We are permitted to 

invest our Commodity Customers’ funds in 

money market mutual funds pursuant to 

CFTC Regulation 1.25. That rule sets forth 

the following conditions, among others, with 

respect to any investment in a money market 

mutual fund: 

(1) The net asset value of the fund must be 

computed by 9:00 a.m. of the business day 

following each business day and be made 

available to us by that time; 

(2) The fund must be legally obligated to 

redeem an interest in the fund and make 

payment in satisfaction thereof by the close 

of the business day following the day on 

which we make a redemption request except 

as otherwise specified in CFTC Regulation 

1.25(c)(5)(ii); and 

(3) The agreement under which we invest 

our Commodity Customers’ funds must not 

contain any provision that would prevent us 

from pledging or transferring fund shares to 

a third party permitted to receive the shares 

under the rules of the SEC. 

This letter agreement constitutes the entire 

understanding of the parties with respect to 

its subject matter and supersedes and 

replaces all prior writings, including any 

applicable agreement between the parties in 

connection with the Account(s), with respect 

thereto. 

This letter agreement shall be governed by 

and construed in accordance with the laws 

of [Insert governing law] without regard to 

the principles of choice of law. 

Please acknowledge that you agree to abide 

by the requirements and conditions set forth 

above by signing and returning the enclosed 

copy of this letter. 

[Name of Futures Commission Merchant or 

Derivatives Clearing Organization] 

By: 

Name: 

Title: 

ACKNOWLEDGED AND AGREED: 

[Name of Money Market Mutual Fund] 

By: 

Name: 

Title: 

DATE: 

PART 30—FOREIGN FUTURES AND 

OPTIONS TRANSACTIONS 

4. 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. 

5. Revise paragraph (c)(2) of § 30.7 to 

read as follows: 

§ 30.7 Treatment of foreign futures or 

foreign options secured amount. 

* * * * * 

(c) * * * 

(2)(i) Each futures commission 

merchant must obtain and maintain 

readily accessible in its files in 

accordance with § 1.31, for as long as 

the account remains open, and 

thereafter for the period provided in 

§ 1.31, a written acknowledgment from 

such depository as set out in Appendix 

E to this part. 

(ii) The futures commission merchant 

shall file a copy of the written 

acknowledgment with the Commission 

in the manner specified by the 

Commission. 

(iii) The written acknowledgment 

shall be amended within 60 days of any 

changes in the following: 

(A) The name of the futures 

commission merchant; 

(B) The name of the depository; or 

(C) The account number(s) under 

which money, securities, and property 

representing the foreign futures or 

foreign options secured amount are 

held. 

* * * * * 

6. Add appendix E to read as follows: 

Appendix E to Part 30— 

Acknowledgment Letter for CFTC 

Regulation 30.7 Customer Secured 

Account 

[Date] 

[Name and Address of Depository] 

We refer to the Secured Amount 

Account(s) which [Name of Futures 

Commission Merchant] (‘‘we’’ or ‘‘our’’) have 

opened or will open with [Name of 

Depository] (‘‘you’’ or ‘‘your’’) entitled: 

[Name of Futures Commission Merchant] 

CFTC Regulation 30.7 Customer Secured 

Account 

Account Number(s): 

(collectively, the ‘‘Account(s)’’). 

You acknowledge and agree that we have 

opened or will open the above-referenced 

Account(s) for the purpose of depositing, as 

applicable, money, securities and other 

property (collectively ‘‘Funds’’) for or on 

behalf of our customers who trade 

commodities, options, cleared OTC 

derivatives products and other products, that 

include, but are not limited to, customers 

who are entering into foreign futures and/or 

foreign options transactions (as such terms 

are defined in U.S. Commodity Futures 

Trading Commission (‘‘CFTC’’) Regulation 

30.1, as amended). The Funds deposited in 

the Account(s) or accruing to the credit of the 

Accounts will be kept separate and apart and 

separately accounted for on your books from 

our own funds in accordance with the 

provisions of the Commodity Exchange Act, 

as amended (the ‘‘Act’’), and Part 30 of the 

CFTC’s regulations, as amended, and may not 

be commingled with our own Funds in any 

proprietary account we maintain with you 

and the Funds must otherwise be treated in 

accordance with the provisions of the Act 

and CFTC regulations. 

Furthermore, you acknowledge and agree 

that such Funds may not be used by you or 

by us to secure or guarantee any obligations 

we may have owing to you, nor used by us 

to secure credit from you. You further 

acknowledge and agree that the Funds in the 

Account(s) shall not be subject to any right 

of offset or lien for or on account of any 

indebtedness, obligations or liabilities we 

may now or in the future have owing to you, 

and that you understand the nature of the 

Funds held or hereafter deposited in the 

Account(s) and that you will treat and 

maintain such Funds in accordance with the 

provisions of the Act and CFTC regulations. 

This prohibition does not affect your right to 

recover funds advanced in the form of cash 

transfers you make in lieu of liquidating 

assets held in the Account(s) for purposes of 

variation settlement or posting original 

margin. 

In addition, you agree that the Account(s) 

may be examined at any reasonable time by 

an appropriate officer, agent or employee of 

the CFTC or a self-regulatory organization, 

and this letter constitutes the authorization 

and direction of the undersigned to permit 

any such examination or audit to take place. 

You acknowledge and agree that you meet 

the requirements detailed for depositories in 

CFTC Regulation 30.7, as amended. You 

further acknowledge and agree that the 

Funds in the Account(s) shall be released 

immediately, subject to the requirements of 

US or non-U.S. law as applicable, upon 

proper notice and instruction from an 

appropriate officer or employee of us or of 

the CFTC. We will not hold you responsible 

for acting pursuant to any instruction from 

the CFTC upon which you have relied after 

having taken reasonable measures to assure 

that such instruction was provided to you by 

a duly authorized officer or employee of the 

CFTC. You further acknowledge that we will 

provide to the CFTC a copy of this 

acknowledgment. 

WReier-Aviles on DSKGBLS3C1PROD with PROPOSALS

47746 Federal Register / Vol. 75, No. 152 / Monday, August 9, 2010 / Proposed Rules 

In the event we become subject to either a 

voluntary or involuntary petition for relief 

under the U.S. Bankruptcy Code, we 

acknowledge that you will have no obligation 

to release the Funds held in the Account(s), 

except upon instruction of the Trustee in 

Bankruptcy or pursuant to the Order of the 

respective U.S. Bankruptcy Court. 

Notwithstanding anything in the foregoing to 

the contrary, nothing contained herein shall 

be construed as limiting your right to assert 

any right of set off against or lien on assets 

other than assets maintained in the 

Account(s) nor to impose such charges 

against us or any proprietary account 

maintained by us with you. Further, it is 

understood that amounts represented by 

checks, drafts or other items shall not be 

considered to be part of the Account(s) until 

finally collected. Accordingly, checks, drafts 

and other items credited to the Account(s) 

and subsequently dishonored or otherwise 

returned to you, or reversed, for any reason 

and any claims relating thereto, including but 

not limited to claims of alteration or forgery, 

may be charged back to the Account(s), and 

we shall be responsible to you as a general 

endorser of all such items whether or not 

actually so endorsed. 

You may conclusively presume that any 

withdrawal from the Account(s) and the 

balances maintained therein are in 

conformity with the Act and CFTC 

regulations without any further inquiry, and 

you shall not in any manner not expressly 

agreed to herein be responsible for ensuring 

compliance by us with the provisions of the 

Act and CFTC regulations. 

You may, and are hereby authorized to, 

obey the order, judgment, decree or levy of 

any court of competent jurisdiction or any 

governmental agency with jurisdiction, 

which order, judgment, decree or levy relates 

in whole or in part to the Account(s). In any 

event, you shall not be liable by reason of any 

such action or omission to act, to us or to any 

other person, firm, association or corporation 

even if thereafter any such order, decree, 

judgment or levy shall be reversed, modified, 

set aside or vacated. 

This letter agreement constitutes the entire 

understanding of the parties with respect to 

its subject matter and supersedes and 

replaces all prior writings, including any 

applicable agreement between the parties in 

connection with the Account(s), with respect 

thereto. 

This letter agreement shall be governed by 

and construed in accordance with the laws 

of [Insert governing law] without regard to 

the principles of choice of law. 

Please acknowledge that you agree to abide 

by the requirements and conditions set forth 

above by signing and returning the enclosed 

copy of this letter. 

[Name of Futures Commission Merchant] 

By: 

Name: 

Title: 

ACKNOWLEDGED AND AGREED: 

[Name of Depository] 

By: 

Name: 

Title: 

DATE: 

PART 140—ORGANIZATION, 

FUNCTIONS, AND PROCEDURES OF 

THE COMMISSION 

7. The authority citation for part 140 

continues to read as follows: 

Authority: 7 U.S.C. 2 and 12a. 

7. In § 140.91, redesignate paragraphs 

(a)(7) and (a)(8) as paragraphs (a)(8) and 

(a)(11) respectively; add new paragraphs 

(a)(7), (a)(9), and (a)(10); and revise 

newly designated paragraph (a)(11) to 

read as follows: 

§ 140.91 Delegation of authority to the 

Director of the Division of Clearing and 

Intermediary Oversight. 

(a) * * * 

(7) All functions reserved to the 

Commission in § 1.20 of this chapter. 

* * * * * 

(9) All functions reserved to the 

Commission in § 1.26 of this chapter. 

(10) All functions reserved to the 

Commission in § 30.7 of this chapter. 

(11) All functions reserved to the 

Commission in § 41.41 of this chapter. 

Any action taken pursuant to the 

delegation of authority under this 

paragraph (a)(11) 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 August 3, 

2010, by the Commission. 

David A. Stawick, 

Secretary of the Commission. 

[FR Doc. 2010–19553 Filed 8–6–10; 8:45 am] 

BILLING CODE P 

ENVIRONMENTAL PROTECTION 

AGENCY 

40 CFR Part 81 

[EPA–R06–OAR–2010–0412; FRL–9186–1] 

Determination of Nonattainment and 

Reclassification of the Dallas/Fort 

Worth 1997 8-hour Ozone 

Nonattainment Area; TX 

AGENCY: Environmental Protection 

Agency (EPA). 

ACTION: Proposed rule. 

SUMMARY: EPA is proposing to 

determine that the Dallas/Fort Worth 

(DFW) moderate 8-hour ozone 

nonattainment area did not attain the 

1997 8-hour ozone national ambient air 

quality standard (NAAQS or standard) 

by June 15, 2010, the attainment 

deadline set forth in the Clean Air Act 

(CAA or Act) and Code of Federal 

Regulations (CFR) for moderate 

nonattainment areas. This proposal is 

based on EPA’s review of complete, 

quality assured and certified ambient air 

quality monitoring data for the 2007– 

2009 monitoring period that are 

available in the EPA Air Quality System 

(AQS) database. If EPA finalizes this 

determination, the DFW area will be 

reclassified by operation of law as a 

serious 8-hour ozone nonattainment 

area for the 1997 8-hour standard. The 

serious area attainment date for the 

DFW area would be as expeditiously as 

practicable, but not later than June 15, 

2013. Once reclassified, Texas must 

submit State Implementation Plan (SIP) 

revisions for the DFW area that meet the 

1997 8-hour ozone nonattainment 

requirements for serious areas as 

required by the Act. In this action, EPA 

is also proposing that Texas submit the 

required SIP revisions for the serious 

area attainment demonstration, 

reasonable further progress (RFP), 

reasonably available control technology 

(RACT), contingency measures, and for 

all other serious area measures required 

under CAA section 182(c) to EPA no 

later than one year after the effective 

date of the final rulemaking for this 

reclassification; except that we propose 

that Texas submit the required SIP 

revision for the Stage II vapor recovery 

to EPA no later than two years after the 

effective date of the final rulemaking for 

this reclassification, pursuant to section 

182(b)(3)(A) of the Act. 

DATES: Comments must be received on 

or before September 8, 2010. 

ADDRESSES: Submit your comments, 

identified by Docket ID No. EPA–R06– 

OAR–2010–0412, by one of the 

following methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the on-line 

instructions for submitting comments. 

• EPA Region 6 ‘‘Contact Us’’ Web 

site: http://epa.gov/region6/ 

r6coment.htm. Please click on ‘‘6PD’’ 

(Multimedia) and select ‘‘Air’’ before 

submitting comments. 

• E-mail: Mr. Guy Donaldson at 

donaldson.guy@epa.gov. Please also 

send a copy by e-mail to the person 

listed in the FOR FURTHER INFORMATION

CONTACT section below. 

• Fax: Mr. Guy Donaldson, Chief, Air 

Planning Section (6PD–L), at fax 

number 214–665–6762. 

• Mail: Mr. Guy Donaldson, Chief, 

Air Planning Section (6PD–L), 

Environmental Protection Agency, 1445 

Ross Avenue, Suite 1200, Dallas, Texas 

75202–2733. 

• Hand or Courier Delivery: Mr. Guy 

Donaldson, Chief, Air Planning Section 

(6PD–L), Environmental Protection 

Agency, 1445 Ross Avenue, Suite 1200, 

Dallas, Texas 75202–2733. Such 

WReier-Aviles on DSKGBLS3C1PROD with PROPOSALS