67282 Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 

the Commission Web site for a 30-day 

public comment period. A derivatives 

clearing organization that wishes to 

request confidential treatment for 

portions of its submission may do so in 

accordance with the procedures set out 

in § 145.9(d). 

(5) The Commission will review the 

submission and determine whether the 

swap, or group, category, type, or class 

of swaps described in the submission is 

required to be cleared. The Commission 

will make its determination not later 

than 90 days after a complete 

submission has been received, unless 

the submitting derivatives clearing 

organization agrees to an extension. The 

determination of when such submission 

is complete shall be at the sole 

discretion of the Commission. In making 

a determination that a clearing 

requirement shall apply, the 

Commission may require such terms 

and conditions to the requirement as the 

Commission determines to be 

appropriate. 

(c) Commission-initiated reviews. (1) 

The Commission on an ongoing basis 

will review swaps that have not been 

accepted for clearing by a derivatives 

clearing organization to make a 

determination as to whether the swaps 

should be required to be cleared. In 

undertaking such reviews, the 

Commission will use information 

obtained pursuant to Commission 

regulations from swap data repositories, 

swap dealers, and major swap 

participants, and any other available 

information. 

(2) Notice regarding any 

determination made under paragraph 

(c)(1) of this section will be posted on 

the Commission Web site for a 30-day 

public comment period. 

(3) If no derivatives clearing 

organization has accepted for clearing a 

particular swap, group, category, type, 

or class of swaps that the Commission 

finds would otherwise be subject to a 

clearing requirement, the Commission 

will: 

(i) Investigate the relevant facts and 

circumstances; 

(ii) Within 30 days of the completion 

of its investigation, issue a public report 

containing the results of the 

investigation; and 

(iii) Take such actions as the 

Commission determines to be necessary 

and in the public interest, which may 

include requiring the retaining of 

adequate margin or capital by parties to 

the swap, group, category, type, or class 

of swaps. 

(d) Stay of clearing requirement. (1) 

After making a determination that a 

swap, or group, category, type, or class 

of swaps is required to be cleared, the 

Commission, on application of a 

counterparty to a swap or on its own 

initiative, may stay the clearing 

requirement until the Commission 

completes a review of the terms of the 

swap, or group, category, type, or class 

of swaps and the clearing arrangement. 

(2) A counterparty to a swap that 

wishes to apply for a stay of the clearing 

requirement for that swap shall submit 

a written request to the Secretary of the 

Commission that includes: 

(i) The identity and contact 

information of the counterparty to the 

swap; 

(ii) The terms of the swap subject to 

the clearing requirement; 

(iii) The name of the derivatives 

clearing organization clearing the swap; 

(iv) A description of the clearing 

arrangement; and 

(v) A statement explaining why the 

swap should not be subject to a clearing 

requirement. 

(3) A derivatives clearing organization 

that has accepted for clearing a swap, or 

group, category, type, or class of swaps 

that is subject to a stay of the clearing 

requirement shall provide any 

information requested by the 

Commission in the course of its review. 

(4) The Commission will complete its 

review not later than 90 days after 

issuance of the stay, unless the 

derivatives clearing organization that 

clears the swap, or group, category, 

type, or class of swaps agrees to an 

extension. 

(5) Upon completion of its review, the 

Commission may: 

(i) Determine, subject to any terms 

and conditions as the Commission 

determines to be appropriate, that the 

swap, or group, category, type, or class 

of swaps must be cleared; or 

(ii) Determine that the clearing 

requirement will not apply to the swap, 

or group, category, type, or class of 

swaps, but clearing may continue on a 

non-mandatory basis. 

PART 140—ORGANIZATION, 

FUNCTIONS, AND PROCEDURES OF 

THE COMMISSION 

3. The authority citation for part 140 

continues to read as follows: 

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

4. In § 140.94, revise paragraph (a)(5) 

and add new paragraphs (a)(6) and (a)(7) 

to read as follows: 

§ 140.94 Delegation of authority to the 

Director of the Division of Clearing and 

Intermediary Oversight. 

(a) * * * 

(5) All functions reserved to the 

Commission in § 5.14 of this chapter; 

(6) All functions reserved to the 

Commission in §§ 39.5(b)(2) and (d)(3) 

of this chapter; and 

(7) All functions reserved to the 

Commission in §§ 39.11 (b)(1)(vi), 

(b)(2)(ii), (c)(1), (c)(2), (f)(1), and (f)(4) of 

this chapter. 

* * * * * 

Issued in Washington, DC, on October 26, 

2010, by the Commission. 

David A. Stawick, 

Secretary of the Commission. 

Note: The following attachment will not 

appear in the Code of Federal Regulations: 

Statement of Chairman Gary Gensler 

Process for Review of Swaps for 

Mandatory Clearing October 26, 2010 

I support the proposed rulemaking to 

establish a process for the review and 

designation of swaps for mandatory 

clearing. One of the primary goals of the 

Dodd-Frank Act was to lower risk by 

requiring standardized swaps to be 

centrally cleared. The process set out in 

the proposed rule is consistent with the 

Congressional requirement that 

derivatives clearing organizations 

(DCOs) be eligible to clear the swaps 

and that before a swap becomes subject 

to mandatory clearing the public get to 

provide input on the contract or class of 

contracts. Though we have until July to 

finalize this rulemaking, it is my hope 

that we can finish by April. This would 

allow us to begin reviewing the 

contracts that are already being cleared 

by DCOs and under Dodd-Frank have 

already been deemed submitted to the 

Commission for consideration. 

[FR Doc. 2010–27532 Filed 11–1–10; 8:45 am] 

BILLING CODE 6351–01–P 

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Part 40 

RIN 3038–AD07 

Provisions Common to Registered 

Entities 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Commodity Futures 

Trading Commission (‘‘Commission’’ or 

‘‘CFTC’’) is proposing rules to 

implement new statutory provisions 

enacted under Title VII of the DoddFrank Wall Street Reform and Consumer 

Protection Act (‘‘Dodd-Frank Act’’) and 

amend existing rules affected by the 

passage of the Dodd-Frank Act. These 

proposed rules apply to designated 

contract markets (‘‘DCMs’’), derivatives 


jlentini on DSKJ8SOYB1PROD with PROPOSALS
Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 67283 

1 17 CFR 145.9. 

2See Dodd-Frank Wall Street Reform and 

Consumer Protection Act, Public Law 111–203, 124 

Stat. 1376 (2010). The text of the Dodd-Frank Act 

may be accessed at http://www.cftc.gov/ 

LawRegulation/OTCDERIVATIVES/index.htm. 

3Pursuant to Section 701 of the Dodd-Frank Act, 

Title VII may be cited as the ‘‘Wall Street 

Transparency and Accountability Act of 2010.’’ 

4 7 U.S.C. 1 et seq. 

5The Dodd-Frank Act created new registered 

entities, including SEFs and SDRs. Issues related to 

the regulation of these entities will be addressed in 

other rulemakings issued by the Commission. 

6A SIDCO is a DCO that has been designated as 

a systemically important financial market utility by 

the Financial Stability Oversight Council pursuant 

to Section 804 of the Dodd-Frank Act. 

7Commission regulations referred to herein are 

found at 17 CFR 1. 

clearing organizations (‘‘DCOs’’), swap 

execution facilities (‘‘SEFs’’) and swap 

data repositories (‘‘SDRs’’). The 

proposed rules implement the new 

statutory framework for certification and 

approval for new products, new rules 

and rule amendments submitted to the 

Commission by registered entities. 

Furthermore, the proposed rules 

prohibit event contracts based on 

certain excluded commodities, establish 

special procedures for certain rule 

changes proposed by systemically 

important derivatives clearing 

organizations (‘‘SIDCOs’’), and provide 

for the tolling of review periods for 

certain novel derivative products 

pending the resolution of jurisdictional 

determinations. 

DATES: Submit comments on or before 

January 3, 2011. 

ADDRESSES: You may submit comments, 

identified by RIN number, 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 

instructions for submitting comments. 

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 is exempt from disclosure under the 

Freedom of Information Act, a petition 

for confidential treatment of the exempt 

information may be submitted according 

to the procedures established in CFTC 

Regulation 145.9.1 The Commission 

reserves the right, but shall have no 

obligation, to review, pre-screen, 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 the Freedom of Information Act. 

FOR FURTHER INFORMATION CONTACT: 

Bella Rozenberg, Special Counsel, 

Division of Market Oversight (‘‘DMO’’), 

at 202–418–5119 or 

brozenberg@cftc.gov, Riva Spear 

Adriance, Associate Director for Market 

Review, DMO at 202–418–5494 or 

radriance@cftc.gov, in each case, also at 

the Commodity Futures Trading 

Commission, Three Lafayette Centre, 

1155 21st Street, NW., Washington, DC 

20581. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Background 

II. The Proposed Amendments to Part 40 of 

the Commission’s Regulations 

a. Definitions 

b. Listing and accepting products for 

trading or clearing by certification 

c. Voluntary submission of new products 

for Commission review and approval 

d. Amendments to terms or conditions of 

enumerated agricultural contracts 

e. Voluntary submission of rules for 

Commission review and approval 

f. Self-certification of rules 

g. Delegations 

h. Availability of public information 

i. Special certification procedures for 

submission of rules by systemically 

important derivatives clearing 

organizations 

j. Review of event contracts based on 

certain excluded commodities 

k. Tolling of review period pending 

jurisdictional determination 

III. Related Matters 

a. Regulatory Flexibility Act 

b. Paperwork Reduction Act 

c. Cost Benefit Analysis 

I. Background 

On July 21, 2010, President Obama 

signed the Dodd-Frank Act.2 Title VII of 

the Dodd-Frank Act 3 amended the 

Commodity Exchange Act (‘‘Act’’) 4 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 

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. 

Section 745 of the Dodd-Frank Act 

amends Section 5c of the Act to provide 

for new rule, rule amendment and 

product certification and approval 

procedures, which are applicable to 

DCMs and DCOs, as well as new 

registered entities, SEFs and SDRs.5

Section 745 of the Dodd-Frank Act also 

authorizes the Commission to prohibit 

the listing of event contracts based on 

certain excluded commodities if such 

contracts involve one or more activities 

enumerated in the Dodd-Frank Act. 

Furthermore, Section 745 of the DoddFrank Act authorizes the Commission to 

prohibit contracts based on similar 

activities if they are determined by rule 

or regulation to be contrary to the public 

interest. Section 806(e)(1) of the DoddFrank Act requires that a SIDCO 6

provide the Commission with 60 days 

advance notice of any proposed changes 

to rules, procedures or operations that 

could materially affect the nature or 

level of risk presented by a SIDCO. 

Finally, the Commission proposes to toll 

the review period of novel derivative 

products pending a determination as to 

whether the Commission or the 

Securities and Exchange Commission 

(‘‘SEC’’) has jurisdiction over novel 

derivative products. 

The Commission proposes a number 

of changes in order to enhance its ability 

to administer the Act, as amended, 

ensure consistency with various new 

requirements of the Dodd-Frank Act and 

clarify the regulatory obligations 

imposed on market participants. 

Specifically, the Commission proposes 

to amend sections 40.1 through 40.8 and 

adopt new sections 40.10 through 

40.12 7 to amend the definitions, 

establish certification and approval 

procedures for the rules and products of 

registered entities, including SIDCOs, 

prohibit event contracts based on 

certain excluded commodities, and 

codify statutory requirements relating to 

tolling of the review period pending 

SEC and CFTC jurisdictional 

determinations. 


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8The restriction in the current regulations reflects 

an ambiguity in the Act as modified by the 

Commodity Futures Modernization Act (‘‘CFMA’’). 

Prior to enactment of the CFMA in 2000, Section 

5a(a)(12)(A) of the Act required that all changes to 

contract terms and conditions be submitted to the 

Commission for approval ‘‘except those rules 

relating to the setting of levels of margin.’’ In 

Section 113 of the CFMA, Congress removed 

Section 5a(a)(12)(A), allowing registered entities to 

amend their rules by self-certification. The new 

provision did not retain any reference to margin 

rules. However, Section 8(a)(7) was not amended by 

the CFMA, and retained a provision that allowed 

the Commission to alter or supplement the rules of 

a registered entity, except for rules relating to ‘‘the 

setting of levels of margin,’’ thereby creating 

uncertainty as to whether registered entities could 

adopt or change margin rules without certifying 

those rules to the Commission. Because there was 

no indication that Congress intended to alter the 

special status of rules relating to the setting of 

margin levels, the Commission resolved this 

ambiguity by excluding the setting of margin levels 

from the definition of ‘‘rule.’’ Section 8(a)(7)(D) now 

permits the Commission to require the changes with 

respect to margin requirements provided that the 

Commission’s rules, regulations or orders (i) are 

limited to protecting the financial integrity of a 

DCO, (ii) are designed for risk management 

purposes to protect the financial integrity of 

transactions, and (iii) do not set specific margin 

amounts. 

9For instance, in January 2006, when the 

Commission issued Technical and Clarifying 

Amendments to Rules for Exempt Markets, 

Derivatives Transaction Execution Facilities and 

Designated Contract Markets, and Procedural 

Changes for Derivatives Clearing Organization 

Registration Applications, it required DCMs to 

provide documentation demonstrating compliance 

with the Act and the Commission’s regulations. It 

expressly stated, ‘‘DCMs are responsible in the first 

instance, and the Commission is ultimately 

responsible in its oversight role, for assuring that 

DCM products and rules comply with applicable 

designation criteria and Core Principles. When a 

DCM self-certifies a product or rule, it is, in effect, 

pledging that the product or rule does meet those 

standards. Assuming the DCM is acting in good 

faith, it must have some reasonable basis for making 

that pledge * * * [and therefore] * * * when 

reasonable questions arise, it should not be 

burdensome for a DCM to share information 

regarding the reasonable basis underlying the new 

product or a rule with the Commission or its staff.’’ 

See 71 FR 1956 (Jan. 12, 2006). 

Although Section 745 of the DoddFrank Act does not provide a statutory 

deadline for promulgation of final rules, 

Part 40 of the Commission’s regulations 

currently is inconsistent with certain 

provisions of Section 745. In addition, 

since, as noted, the Dodd-Frank Act 

created new registered entities, SEFs 

and SDRs, the rule certification 

procedures for these new registered 

entities must be in place by the time 

these entities begin operating. 

Therefore, Part 40 should be amended 

by July 15, 2011, the date when relevant 

provisions of the Dodd-Frank Act 

become effective. 

The Commission requests comment 

on all aspects of the proposed rules, as 

well as comment on the specific 

provisions and issues highlighted in the 

discussion below. 

II. The Proposed Amendments to Part 

40 of the Commission’s Regulations 

a. Section 40.1 Definitions 

To implement the requirements of the 

Dodd-Frank Act and to ensure the 

Commission’s ability to administer Part 

40, the Commission proposes a number 

of amendments to the definitions found 

in § 40.1. The Commission proposes to 

add definitions for ‘‘dormant swap 

execution facilities’’ and ‘‘dormant swap 

data repositories’’ to provide consistency 

with the extant § 40.1definitions for 

dormant DCMs and dormant DCOs. 

Also, the Commission proposes to 

delete the definition of a ‘‘dormant 

derivatives trading execution facility’’ 

since this entity was eliminated by the 

Dodd-Frank Act. 

Further, the Commission proposes to 

revise the definition of ‘‘emergency’’ to 

include an occurrence or circumstance 

that threatens the timely collection and 

payment of funds in connection with 

clearing and settlement by a derivatives 

clearing organization. In addition, the 

Commission proposes to incorporate 

references to swap transactions where 

appropriate to ensure consistency in 

application of Part 40 to both current 

and new registered entities. The 

Commission also proposes to delete the 

existing restriction on Commission 

review of rules relating to margin levels 

currently included in the definition of 

rule.8 The restriction is no longer 

appropriate as Section 736 of the DoddFrank Act amends Section 8a(7) of the 

Act to permit the Commission to alter or 

supplement the rules of a registered 

entity by issuing rules, regulations or 

orders regarding margin requirements. 

By necessity, such action requires the 

Commission to be able to review a 

DCO’s rules ‘‘relating to the setting of 

levels of margin’’ in the first instance, 

even though the Commission itself is 

not authorized to ‘‘set specific margin 

amounts’’ under Section 8(a)(7). Finally, 

the Commission proposes to revise the 

definition of ‘‘terms and conditions’’ to 

add a new paragraph (j)(15) to include 

specific information relating to swaps 

proposed to be cleared by a DCO. By 

supplementing other provisions of 

paragraph (j) that are relevant to swaps, 

the Commission seeks to clarify the 

types of information that may 

differentiate swaps from futures 

contracts. These include, for example, 

the following: notional value; relevant 

dates, tenor, and day count conventions; 

stub, premium, or initial cash flow 

components; and payment and reset 

frequency. 

b. Section 40.2 Listing and accepting 

products for trading or clearing by 

certification 

Section 5c(c) of the Act permits 

registered entities to list for trading or 

accept for clearing any new product by 

providing to the Commission a written 

certification that the new product, rule, 

or rule amendment complies with the 

Act and Commission regulations. Under 

current § 40.2, prior to listing or 

accepting products for trading or 

clearing by certification, the 

Commission requires, among other 

things, that registered entities provide 

the terms and conditions of their 

products and certify that submitted 

products comply with the Act and 

Commission regulations. The 

Commission also requires that registered 

entities provide, only if requested by 

Commission staff, additional 

information relating to whether the 

contract meets the requirements of the 

Act or the Commission’s regulations or 

policies thereunder. 

Further, the Act permits registered 

entities to list for trading only those 

products that are not susceptible to 

manipulation and have appropriate 

position limitations or position 

accountability for speculators. To assist 

registered entities in demonstrating 

compliance with these Core Principles 

and to better ensure the integrity of 

certified products, the Commission 

proposes two amendments to § 40.2. 

The Commission proposes to amend 

§ 40.2 to require registered entities to 

include in their submission 

documentation relied on to establish the 

basis for compliance with the applicable 

provisions of the Act and the 

Commission’s regulations thereunder, 

including the Core Principles for 

registered entities. The proposed 

amendments to § 40.2 will increase the 

timeliness and efficiency of Commission 

review. The Commission has always 

required that registered entities have 

evidence supporting their certification 

of compliance with the Act available for 

Commission review.9

Based on these experiences, the 

Commission proposes to amend 

§ 40.2(a) to require a registered entity to 

include in its submission any 

documentation relied on to establish the 

basis for compliance with the Act and 

the Commission’s regulations 

thereunder, including the applicable 

Core Principles. For DCM and SEF 

submissions of new products and 

product amendments, the Commission 

expects submissions to include 

documentation demonstrating that the 

product is not readily susceptible to 

manipulation (Core Principle 3 for 


jlentini on DSKJ8SOYB1PROD with PROPOSALS
Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 67285 

DCMs and SEFs) and that associated 

position limits or position 

accountability provisions are necessary 

and appropriate (Core Principle 5 for 

DCMs and Core Principle 4 for SEFs). 

Proposed §§ 40.3, 40.5, and 40.6 contain 

a similar requirement for submission of 

new products, rules and rule 

amendments. 

The Commission believes that before 

self-certifying that a new contract 

complies with the Act and the 

Commission’s regulations, a registered 

entity should conduct an appropriate 

due diligence review to support that 

assertion. Furthermore, the Commission 

believes that any such review should 

generate some form of documentation at 

the registered entity substantiating the 

review, including information used and 

sources consulted to reach the 

conclusion supporting self-certification. 

Therefore, the Commission believes that 

the inclusion of such information in the 

self-certified submission itself should 

not be burdensome for registered 

entities that are conducting appropriate 

due diligence reviews before making 

such submissions. 

Further, the Commission proposes a 

new § 40.2 requirement that registered 

entities examine potential legal issues 

associated with the listing of products 

and include certain representations with 

their submissions. The reason for these 

requirements is that certain commodity 

futures and option products are based 

on measures or linked to information 

that may be subject to bona fide 

intellectual property rights claims. 

Commodity futures and option 

contracts, such as those based on 

emission credits, can also be based on 

underlying markets that are constructs 

of Federal or state regulations. In these 

and other circumstances, the 

Commission has an interest in verifying 

that registered entities have an adequate 

understanding of the legal conditions 

and constraints that may have a material 

impact on the trading of these types of 

products. Accordingly, the Commission 

proposes to add § 40.2(a)(3)(vi) to 

require that certified product 

submissions be accompanied by a 

written statement verifying that the 

registered entity has undertaken a due 

diligence review of the legal conditions, 

including conditions relating to 

contractual and intellectual property 

rights, that may affect the trading of the 

product underlying the contract. 

Finally, the Commission proposes in 

§ 40.2(a)(3)(vii) to require a registered 

entity to certify that the registered entity 

has posted a copy of the pending 

product certification submission on the 

registered entity’s Web site at the time 

of the filing. This will permit market 

participants to receive prompt notice of 

new rules filed with the Commission. 

c. Section 40.3 Voluntary submission 

of new products for Commission review 

and approval 

Although the Dodd-Frank Act does 

not specifically require that the 

Commission amend § 40.3, the 

Commission believes that the 

amendments described below are 

necessary to enhance the Commission’s 

ability to administer the Act. Similar to 

its proposed amendments to § 40.2, 

described above, the Commission 

proposes to amend § 40.3 to require 

DCMs, DCOs, and SEFs to include with 

their requests for new product approval 

all documentation relied upon to 

determine that the new product 

complies with applicable Core 

Principles. 

In addition, similar to proposed 

§ 40.2(a)(3)(vi), proposed § 40.3(a)(9) 

requires registered entities to submit a 

written statement that they have 

undertaken a due diligence review of 

the legal conditions, including 

conditions relating to contractual and 

intellectual property rights, that may 

affect the trading of the product. These 

additional requirements should 

expedite Commission review. Moreover, 

parallel to proposed §§ 40.2(a)(3)(vii) 

and 40.6(a)(2), proposed § 40.3(a)(10) 

requires a registered entity to certify that 

the registered entity has posted a copy 

of the pending product certification 

submission on the registered entity’s 

Web site at the time of the filing. As 

mentioned above, this will allow market 

participants to receive prompt notice of 

pending requests for product approval. 

Also, to provide the overall consistency 

with the requirements of the DoddFrank Act, proposed § 40.3(d)(1) 

authorizes the Commission to extend 

the review period if the product raises 

novel or complex issues. 

Finally, the Commission notes that 

the standard for review and approval for 

new products remains unchanged; that 

is, the Commission shall approve a new 

product unless the terms and conditions 

of such product would violate the Act 

or the Commission’s regulations 

thereunder. 

d. Section 40.4 Amendments to terms 

or conditions of enumerated agricultural 

products 

The Commission proposes a number 

of technical amendments to clarify 

existing regulatory obligations imposed 

on the DCMs that trade contracts based 

on an agricultural commodity listed in 

Section 1a(9) of the Act. 

Pursuant to Section 5c(c)(2)(B) of the 

Act, rules that materially change a term 

or condition of a contract with open 

interest that is based on an agricultural 

commodity enumerated in Section 1a(9) 

of the Act, must be approved by the 

Commission prior to implementation. A 

finding of materiality is, by statute, at 

the reasonable discretion of the 

Commission. Through prior rulemaking, 

the Commission has enumerated several 

rule categories in § 40.4(b) that are 

deemed not to be material for purposes 

of Section 5c(c)(2)(B) of the Act and 

thus not subject to prior approval. The 

Commission has separately enumerated 

several categories of registered entities’ 

rules in § 40.6(d) that need not be 

approved by, or certified with, the 

Commission prior to implementation. 

Exchange rules that come within these 

categories typically are limited in scope 

and are implemented under enabling 

rules that have already been approved 

by, or certified with, the Commission. 

Since there is substantial overlap 

between the categories of rules deemed 

not to be material under § 40.4(b) and 

the categories of rules enumerated in 

§ 40.6(d), the Commission proposes to 

amend § 40.4(b) to refer to § 40.6(d) for 

the purpose of identifying rules that are 

deemed by the Commission not to be 

material under Section 5c(c)(2)(B) of the 

Act. Such rules would qualify for 

implementation under § 40.6 without 

prior approval or certification. 

In addition, the Commission proposes 

to clarify that changes in trading hours 

in § 40.4(b)(3) and changes required to 

comply with an order of an adjudicative 

or regulatory body in § 40.4(b)(4), while 

not material for purposes of Section 

5c(c)(2)(B) of the Act, must be 

implemented through a prior certified 

submission under § 40.6(a) because of 

their potential effects on the operations 

of a DCM. 

e. Section 40.5 Voluntary submission 

of rules for Commission review and 

approval 

Section 745 of the Dodd-Frank Act 

establishes a new standard for the 

review of new rules or rule 

amendments. That standard, as codified 

in proposed § 40.5(b), requires the 

Commission to approve a new rule or 

rule amendment unless the rule or rule 

amendment is inconsistent with the Act 

or the Commission’s regulations 

promulgated thereunder. In determining 

whether a rule is inconsistent with the 

Act, the Commission may also consider, 

for example, whether the new rule or 

rule amendment potentially disrupts 

market integrity, or increases systemic 

risk. 

The Commission also proposes 

amendments to the information required 

to be submitted when requesting 


jlentini on DSKJ8SOYB1PROD with PROPOSALS
67286 Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 

approval of amendments to the terms 

and conditions of a product under 

§ 40.5. Consistent with § 40.2 and § 40.3, 

the Commission proposes to amend 

§ 40.5(a)(7) to require a registered entity 

submitting an amendment of a product’s 

terms and conditions to include with its 

submission the documentation relied 

upon to establish the basis for 

compliance with the Act and the 

Commission’s regulations thereunder, 

including the applicable Core 

Principles. 

Additionally, similar to 

§§ 40.2(a)(3)(vii), 40.3(a)(10) and 40.6 

(a)(2), the Commission proposes in 

§ 40.5(a)(6) to require registered entities 

to certify that the registered entity has 

posted a copy of the pending product 

certification submission on the 

registered entity’s Web site at the time 

of the filing. This will permit market 

participants to receive prompt notice of 

new requests for approval filed with the 

Commission. The Commission intends 

to continue its current practice of 

publishing all requests for Commission 

review and approval on its Web site. 

Finally, proposed § 40.5(a)(11) requires 

registered entities, in connection with 

the submission of a request for changes 

to a product’s terms or conditions, to 

submit a written statement that they 

have undertaken a due diligence review 

of the legal conditions, including 

conditions relating to contractual and 

intellectual property rights, that may 

affect the trading of the product, similar 

to the statement required in §§ 40.2 and 

40.3. 

f. Section 40.6 Self-certification of 

rules 

Section 745 of the Dodd-Frank Act 

amended Section 5c(c) of the Act to 

include a new 10-day certification 

review period for all rules and rule 

amendments submitted to the 

Commission by registered entities and 

to permit the Commission to stay the 

certification of rules or rule 

amendments that, among other things, 

present novel or complex issues that 

require additional time to analyze. The 

Commission proposes to codify these 

new certification provisions in § 40.6, as 

follows. 

To implement the amended 

procedures for self-certification of rules 

described in Section 745 of the DoddFrank Act, the Commission proposes in 

§ 40.6(a)(3) to require registered entities 

to submit self-certifications at least ten 

business days before the projected 

effective date. A rule certification will 

become effective ten business days after 

the Commission receives the 

certification, unless the Commission 

notifies the registered entity, within 10 

business days, that it is staying the 

certification pursuant to § 40.6(c). 

Parallel to proposed § 40.5(a), 

proposed § 40.6(a) requires a registered 

entity to certify that the registered entity 

has posted a copy of the pending 

product certification submission on the 

registered entity’s Web site at the time 

of the filing. This will permit market 

participants to receive prompt notice of 

new rules or rule amendments filed 

with the Commission. The Commission 

intends to continue its current practice 

of publishing the self-certified rules on 

its Web site. 

Further, in proposed § 40.6(a)(6), the 

Commission clarifies the distinction 

between rules that establish standards 

and authorize appropriate parties to 

respond to an emergency—which must 

be submitted to the Commission prior to 

implementation—and rules that 

implement a response to a particular 

emergency—which, in certain 

circumstances, may be submitted to the 

Commission after implementation. 

Similar to §§ 40.2, 40.3 and 40.5, 

proposed § 40.6(a)(7)(v) requires that 

amendments to the terms and 

conditions of a product be accompanied 

by documentation relied upon to 

establish the basis for compliance with 

the Act and the regulations thereunder, 

including the applicable Core 

Principles. 

As is proposed for §§ 40.2, 40.3 and 

40.5 and discussed above, the 

Commission proposes to amend 

§ 40.6(a)(7)(viii) to require registered 

entities to include with their 

certification of any changes to a 

product’s terms and conditions, a 

written statement that they have 

undertaken a due diligence review of 

legal conditions relating to futures or 

options trading based on the underlying 

product or instrument. 

Under proposed § 40.6(b), a new rule 

or rule amendment will become 

effective ten business days after the 

certified rule or rule amendment is 

received by the Commission, unless the 

Commission notifies the registered 

entity that it is staying the certification. 

Generally, a DCM seeking to adopt a 

program (such as a program to address 

conflicts of interest), which is in 

substance the same as a program 

previously approved by the 

Commission, or an exchange seeking to 

change a rule establishing trading hours 

or seeking to modify the terms and 

conditions of a listed contract for which 

it has provided sufficient evidence of 

compliance with Core Principles, may 

self-certify and, without Commission 

action, implement the proposed rule or 

rule amendment after ten business days. 

Proposed § 40.6(c)(1) stays the 

certification of a rule if the Commission 

determines that the new rule or rule 

amendment presents novel or complex 

issues, is certified with an inadequate 

explanation, or is potentially 

inconsistent with the Act or the 

Commission’s regulations thereunder. 

Once the Commission issues a 

notification of stay to the registered 

entity, the Commission will have 90 

days to conduct a review. The rule will 

be certified upon expiration of the 90- 

day review period unless the 

Commission objects to the certification. 

If the Commission decides to lift the 

stay prior to the expiration of the 90-day 

review period, the Commission will 

notify the registered entity of its action. 

The Commission also notes that the 

new stay provision in proposed 

§ 40.6(c)(1) is distinct from the stay 

provision presently in effect under 

current § 40.6(b), which the Commission 

proposes to move to § 40.6(c)(4). The 

latter provision, which implements 

Commission authority under section 

8a(7) of the Act, permits the 

Commission to stay the effectiveness of 

a rule or rule amendment that already 

has been implemented pursuant to the 

self-certification procedures in § 40.6(a). 

Conversely, the new stay provision in 

proposed § 40.6(c)(1), pursuant to the 

Commission’s new authority in Section 

745 of the Dodd-Frank Act, authorizes a 

stay of the certification itself and would 

be issued during the review process, 

thereby possibly preventing the certified 

rule or rule amendment from ever 

becoming effective in the first instance. 

A stay of a rule certification may be 

appropriate, for example, where a 

registered entity certifies a rule that 

raises unique issues not previously 

reviewed by Commission staff. In 

addition, the Commission believes that 

new rules or rule amendments may raise 

a number of complex issues if they 

appear to have a material impact on the 

futures market or the underlying cash 

market. Thus such rules are more likely 

to be subject to an extended review 

period to allow the Commission to 

adequately identify and address 

complex regulatory issues. For example, 

the Commission may need more than 

ten business days to determine whether 

a proposed market maker incentive 

program appropriately encourages 

market liquidity and does not have 

unnecessary anticompetitive effects. 

Staff might also need more than ten 

business days to analyze whether 

deliverable supplies of an underlying 

commodity are sufficient to support a 

proposed change to a spot month 

speculative position limit on a physicaldelivery contract. The above mentioned 


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10 It is the Commission’s intention to promptly 

post the notice and new rule or rule amendment in 

order to commence the public comment period as 

soon as possible within the 90-day review period. 

This will maximize the amount of time after the 

comment period closes for the submitter to respond 

to public comments and possibly revise its 

proposed rule or rule amendment and for the 

Commission to thoroughly consider the issues 

raised by the new rule or rule amendment. 

11 In addition, the Commission’s Web site 

provides a link for signing up to receive press 

releases issued by the Office of Public Affairs. This 

service enables members of the public to be 

apprised of the opening of comment periods in a 

timely manner. 

12See 75 FR 56513 (Sept. 16, 2010). 

13 17 CFR part 145. 

examples of submissions often raise a 

number of complex issues that may 

require an extended review period. 

Proposed § 40.6(c)(2) provides for a 

30-day public comment period, within 

the 90-day review period, whenever the 

Commission determines to stay a new 

rule or rule amendment and take it 

under further review. Under proposed 

§ 40.6(c)(2), the Commission would 

provide notice of the comment period 

by posting the notice and the new rule 

or rule amendment submission on the 

Commission’s Web site.10

The Commission believes that 

publication of the notice of the 30-day 

comment period on the Commission’s 

Web site, www.cftc.gov, will provide the 

public and market participants with the 

timely opportunity to comment on new 

rules or rule amendment submissions. 

The Commission routinely uses its Web 

site to disseminate information 

regarding Commission activities and 

industry filings.11 Web site publication 

would facilitate public comment while 

allowing Commission staff adequate 

time to assess comments and complete 

a substantive analysis within the 

statutory 90-day time frame. Finally, the 

Commission anticipates enhancements 

to its Web site publication procedures to 

promptly inform interested members of 

the public of stayed rules through email 

notifications on the Commission’s Web 

site. 

The Commission is also exploring the 

possibility of having registered entities 

file rule certifications, as well as other 

types of submissions, through a portal 

located at www.cftc.gov. The 

Commission believes that allowing 

registered entities to file rule 

certifications in this manner will 

simplify the filing process and also 

provide the public with close to realtime access to new rules and rule 

amendments submitted to the 

Commission for review. The 

Commission is determining the 

technological requirements necessary to 

implement this filing process. Once the 

Commission has formulated a process 

for submitting certifications through the 

Commission’s Web site, the Commission 

will notify the public and establish a 

timeline to implement new electronic 

filing procedures. 

The Commission proposes several 

amendments to § 40.6(d). Specifically, 

the Commission proposes to permit 

registered entities to implement 

reductions to a contract’s minimum tick 

size without approval by or certification 

to the Commission, in order to maintain 

consistency between §§ 40.4(b) and 

40.6(d). The Commission in proposed 

§ 40.6(d)(2)(v), requires that fee changes 

associated with market making or other 

incentive programs be submitted for 

Commission review under § 40.6(a). 

Finally, the Commission also proposes 

that changes to the terms of all options, 

including options on agricultural 

products, options on futures, and 

options on physicals, that relate to the 

strike price listing procedures, strike 

price intervals, and the listing of strike 

price on a discretionary basis, be 

implemented without certification or 

notice under § 40.6(d)(3). 

g. Section 40.7 Delegations 

To ensure that the review process is 

conducted in an efficient manner, the 

Commission proposes to amend § 40.7 

to delegate to the Director of the 

Division of Clearing and Intermediary 

Oversight and, separately, to the 

Director of the Division of Market 

Oversight, after consultation with the 

General Counsel or the General 

Counsel’s designee, the authority to 

extend the review of new contracts, 

rules and rule amendments submitted to 

the Commission pursuant to § 40.3(d) 

and § 40.5(d) and the authority to stay 

the certification of new rules or rule 

amendments pursuant to § 40.6(c), when 

the submission raises novel or complex 

issues that require additional time to 

analyze, is of major economic 

significance or is potentially 

inconsistent with the Act or 

Commission Regulations. 

Furthermore, the Commission 

proposes to delegate to the Director of 

the Division of Clearing and 

Intermediary Oversight and, separately, 

to the Director of the Division of Market 

Oversight the authority to stay or to 

extend the review of new products, new 

rules and rule amendments pursuant to 

§ 40.3 (d) or § 40.5(d) or § 40.6(c), when 

the submission is incomplete or 

accompanied by an inadequate 

explanation. 

Finally, proposed § 40.7(a)(1)(iii) 

delegates to the Director of the Division 

of Clearing and Intermediary Oversight 

or the Director’s designee, subject to the 

concurrence of the General Counsel or 

the General Counsel’s designee, all 

determinations under proposed § 40.10 

with respect to a SIDCO’s proposed 

change in rules, procedures or 

operations that could materially affect 

the nature or level of risks presented by 

the SIDCO. This includes a 

determination that the proposed change 

is consistent with the Act and the 

Commission’s regulations, and the 

purposes of the Dodd-Frank Act and any 

applicable rules, orders or standards 

prescribed under Section 805(a) of the 

Dodd-Frank Act. 

h. Section 40.8 Availability of public 

information 

This section describes information 

that the Commission will make public 

and provides for procedures for 

requesting confidential treatment of part 

40 submissions to the Commission. The 

Commission proposes to retain 

reference to an electronic trading facility 

on which significant price discovery 

contracts are traded or executed in 

§ 40.8 until July 20, 2012. Although the 

Dodd-Frank Act eliminated these 

entities, they are allowed to continue 

operation until July 20, 2012, pursuant 

to grandfather relief issued by the 

Commission.12

In addition, the Commission proposes 

to amend § 40.8 to include new 

registered entities, SEFs and SDRs. 

Confidential treatment requests will be 

considered pursuant to part 145 of the 

Commission’s regulations.13

i. Section 40.10 Special certification 

procedures for submission of rules by 

systemically important derivatives 

clearing organizations 

To implement the provisions of 

Section 806(e) of the Dodd-Frank Act, 

proposed § 40.10(a) would require a 

SIDCO to provide the Commission with 

advance notice of any proposed change 

to its rules, procedures or operations 

that could ‘‘materially affect the nature 

or level of risks’’ presented by the 

SIDCO. The SIDCO would be required 

to provide the notice not less than 60 

days in advance of the proposed change. 

Submission of proposed changes would 

be subject to the filing requirements of 

§ 40.6(a)(1), as well as the Web site 

publication requirements under 

§ 40.6(a)(2). In addition to providing 

information required under § 40.6(a)(7), 

the notice would have to describe the 

nature of the change, the expected 

effects on risks to the SIDCO, its 

clearing members, and the market, and 

how the SIDCO planned to manage 

those risks. Under proposed 40.10(a)(2), 

concurrent with providing the 

Commission with the advance notice or 


jlentini on DSKJ8SOYB1PROD with PROPOSALS
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14Non-material changes include, for example, 

corrections of typographical errors, renumbering, 

periodic updates to identifying information about 

approved entities and other such non-substantive 

revisions of a product’s terms and conditions that 

have no effect on the economic characteristics of 

the product. See § 40.6(c)(2)(i). 

any request or other information related 

to the advance notice, the SIDCO would 

be required to provide the Board of 

Governors of the Federal Reserve 

System with a copy of such notice, 

request or other information. 

Under proposed § 40.10(b), changes 

that could materially affect the nature or 

level of risks would be defined as those 

as to which there is a reasonable 

possibility that the changes could 

substantially affect the performance of 

essential clearing and settlement 

functions or the overall nature or level 

of risk presented by the SIDCO. Such 

changes could include, but would not 

be limited to, changes that materially 

affect financial resources, participant 

and product eligibility, risk 

management (including matters relating 

to margin and stress testing), daily or 

intraday settlement procedures, default 

procedures, system safeguards (business 

continuity and disaster recovery), and 

governance. Materiality would be 

determined on a case-by-case basis. If a 

SIDCO were to determine that a 

proposed change was not material and 

it did not file an advance notice, but the 

Commission determined that the change 

was material, the Commission could 

require the SIDCO to withdraw the 

proposed change and provide advance 

notice pursuant to § 40.10. 

The Commission requests comment 

on the proposed materiality standard in 

general and, more specifically, whether 

another approach to defining materiality 

would be more effective. The 

Commission further requests comment 

on whether, as an alternative to the 

proposed approach, the standard in 

proposed paragraph (b) should set forth 

examples of changes that would be 

considered to be non-material and could 

be treated in accordance with the 

provisions of § 40.6. The Commission 

solicits recommendations regarding 

what types of changes might be 

identified as non-material. At a 

minimum, the Commission would 

consider deeming to be non-material 

changes those listed in § 40.6(c) 

(proposed to be redesignated as 

§ 40.6(d)) and that are relevant to 

SIDCOs.14 The Commission notes that 

while this list of non-material changes 

is useful in the broader context of all 

rule changes that could be submitted 

under the certification procedures of 

§ 40.6, the fact that the Dodd-Frank Act 

and § 40.10 already establish a 

materiality threshold makes the existing 

list of non-material changes less 

meaningful for purposes of § 40.10. The 

Commission believes that any further 

refinement of what might be considered 

non-material for purposes of § 40.10 

would have to be appropriately 

circumscribed so as to be specific 

enough to provide useful guidance for 

SIDCOs, while remaining broad enough 

so as not to inappropriately limit the 

types of changes that the Commission 

would consider material and subject to 

the procedures of § 40.10. 

Under proposed § 40.10(c), the 

Commission may require a SIDCO to 

provide further information to assess the 

nature or level of any risks associated 

with the proposed change and the 

sufficiency of any proposed risk 

management technique. 

Further, under proposed § 40.10(d), 

within 60 days from the date the 

Commission received a notice of a 

proposed change, the Commission 

would inform a SIDCO if it objects to 

the proposed change on the grounds 

that the change is not consistent with 

the Act or the Commission’s regulations, 

or the purposes of the Dodd-Frank Act 

or any applicable rules, orders, or 

standards prescribed under Section 

805(a) of the Dodd-Frank Act. If the 

Commission were to require further 

information, the Commission would 

have an additional 60 days after the date 

the Commission received the requested 

information, to inform the SIDCO of any 

objection to the proposed change. The 

Commission may ask for additional 

information more than once. In such 

case, the review period would be 

extended 60 days from the date that the 

information pertaining to the last 

request was received. 

Proposed § 40.10(e) would allow a 

SIDCO to implement a proposed rule 

change if the review period lapsed 

without Commission action. 

Proposed § 40.10(f) would allow the 

Commission, during the 60-day review 

period, to extend the review period for 

an additional 60 days if the proposed 

change raised novel or complex issues. 

For example, if the Commission does 

not request additional information but 

extends the review period 60 days upon 

receiving the advance notice, the 

maximum review period would be 120 

days after receipt of the advance notice. 

On the other hand, if the Commission 

requests and obtains additional 

information 30 days after receiving the 

notice and then extends the review 

period 60 days in order to consider 

complex or novel issues, then the 

Commission would have a maximum of 

150 days to reach a determination after 

receipt of the advance notice. 

Proposed § 40.10(g) would permit a 

SIDCO to implement a proposed change 

prior to the expiration of the review 

period if it received a notification in 

writing from the Commission that the 

Commission does not object to the 

proposed change and authorizes the 

SIDCO to implement the change. Such 

authorization may be subject to 

conditions imposed by the Commission. 

Proposed § 40.10(h) would permit a 

SIDCO to implement a change without 

providing 60 days advance notice to the 

Commission if the SIDCO determined 

that an emergency exists and immediate 

implementation of the change was 

necessary for the SIDCO to continue to 

provide its services in a safe and sound 

manner. The SIDCO would be required 

to notify the Commission of the 

emergency change as soon as 

practicable, but no later than 24 hours 

after implementation of the change. The 

notification must provide the 

information required in an advance 

notice, as well as describe the nature of 

the emergency and explain why the 

emergency change was necessary for the 

SIDCO to continue to provide its 

services in a safe and sound manner. 

Under the proposed regulation, the 

Commission could require modification 

or rescission of the emergency change if 

the Commission determined that the 

change was not consistent with the Act 

or the Commission’s regulations or the 

purposes of the Dodd-Frank Act, or any 

applicable rules, orders, or standards 

prescribed under section 805(a) of the 

Dodd-Frank Act. 

Finally, the Commission requests 

comment on whether there are any 

substantive changes to rules, 

procedures, or operations that should 

not be permitted to be adopted under 

emergency circumstances without prior 

notice to the Commission. For example, 

should there be restrictions on a 

SIDCO’s ability to demand significantly 

higher assessments from clearing 

members on an emergency basis? 

j. Section 40.11 Review of event 

contracts based on certain excluded 

commodities 

Section 745(b) of the Dodd-Frank Act 

authorizes the Commission to prohibit 

the listing, trading, or clearing of 

agreements, contracts, transactions or 

swaps that are based upon an 

occurrence, extent of a concurrence, or 

contingency (other than a change in the 

price, rate, value, or level of a 

commodity not described in Section 

1a(19)(i) of the Act) that is beyond the 

control of the parties to the relevant 

contract, agreement, or transaction and 

associated with financial, commercial, 

or economic consequence, as defined in 


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

16 5 U.S.C. 601 et seq. 

17 47 FR 18618, 18619 (April 30, 1982) and 66 FR 

45604, 45609 (August 29, 2001). 

18See Section 721 of the Dodd-Frank Act. The 

Commission anticipates proposing regulations that 

would further specify those entities that must 

register as a SEF. The Commission does not believe 

that such proposals would alter its determination 

that a SEF is not a ‘‘small entity’’ for purposes of 

the RFA. 

Section 1a(19)(iv) of the Act, if the 

contract involves terrorism, 

assassination, war, gaming, an activity 

that is unlawful under any Federal or 

State law, or any similar activity that the 

Commission determines, by rule or 

regulation, to be contrary to the public 

interest. 

Pursuant to this authority, the 

Commission proposes new § 40.11(a)(1) 

to prohibit the listing, trading, or 

clearing of any above mentioned 

agreements, contracts, transactions or 

swaps. In addition, the Commission 

proposes new § 40.11(a)(2) to prohibit 

the listing, trading, or clearing of any 

agreements, contracts, transactions or 

swaps involving activities similar to 

those enumerated in § 40.11(a)(1) and 

that the Commission determines, by rule 

or regulation, to be contrary to the 

public interest. 

If during the review process for a 

product submitted under § 40.2 or 

§ 40.3, the Commission determines that 

such product may involve an activity 

that is enumerated in § 40.11(a), the 

Commission will request that the 

registered entity suspend the listing or 

trading of the contract and will conduct 

a 90-day review to determine whether 

the product violates § 40.11(a). Upon 

completion of its review, the 

Commission will issue an order, as 

required by Section 745(b) of the DoddFrank Act, finding either that the 

product violates or does not violate the 

prohibitions in proposed § 40.11(a). 

k. Section 40.12 Tolling of review 

period pending jurisdictional 

determination 

Under Section 718(a) of the DoddFrank Act, a registered entity certifying, 

submitting for approval, or otherwise 

filing a proposal to list a product having 

elements of both a security and a 

derivative may provide notice of its 

proposal both to the Commission and 

the Securities and Exchange 

Commission. However, under Section 

718(a)(1)(B) of the Dodd-Frank Act, if 

the registered entity chooses not to 

provide such notice, then the 

Commission must notify the Securities 

and Exchange Commission of the 

submission and accompany such notice 

with a copy of the registered entity’s 

complete filing if it determines that the 

proposal has elements of both securities 

and futures. If either Commission 

requests a jurisdictional determination 

pursuant to Section 718 of the DoddFrank Act, the Commission will toll the 

applicable product certification or 

approval review period until the 

issuance of a final determination order. 

If the Commission or the Securities 

and Exchange Commission seeks 

judicial review of a jurisdictional 

determination, proposed § 40.12 stays 

the challenged order, as well as the 

review period for the product, until the 

United States Court of Appeals for the 

District of Columbia Circuit issues a 

final determination pursuant to Section 

718(b) of the Dodd-Frank Act, or until 

there is resolution of an appeal of that 

determination. The submission review 

period will resume only upon a finding 

that the Commission has jurisdiction 

over the submission. 

l. Revision of Appendices to Part 40 

The Commission proposes to revise 

the appendices to Part 40 to clarify the 

new regulatory requirements and to 

provide consistency with the overall 

requirements of the Act, as amended by 

the Dodd-Frank Act. The present 

content of Appendix A relates solely to 

the listing of certain futures contracts by 

DCMs and not to the listing of contracts 

by registered entities generally. 

Accordingly, the Commission proposes 

to delete the content of Appendix A, 

currently titled ‘‘Guideline No. 1,’’ from 

part 40. The substance of the appendix 

will be incorporated into part 38 as part 

of a separate rulemaking. 

In addition, the Commission proposes 

to move and incorporate the current 

language in Appendix B, currently 

titled, ‘‘Schedule of Fees,’’ into 

Appendix A. The Commission proposes 

to reserve Appendix B for a future 

rulemaking. Appendix C remains 

reserved. 

The Commission proposes minor 

amendments to the submission cover 

sheet and instructions provided in 

Appendix D to part 40. The proposed 

submission cover sheet has been 

modified to include SEFs and SDRs. 

The amended cover sheet will be posted 

on the Commission’s Web site upon 

publication of the final rules. The 

Commission also proposes to amend the 

instructions in Appendix D to clarify 

that registered entities must describe the 

substance of the submission with 

enough specificity to characterize all 

material aspects of the filing. A 

description of the submission should 

allow a party reading it to ascertain the 

subject and effect of the submission. For 

example, a description of ‘‘Market 

Regulation Advisory’’ does not provide 

the reader with sufficient information to 

understand what the particular 

Advisory addresses or its effect, thereby 

rendering the description less useful. A 

clear and informative description will 

facilitate and expedite the posting of the 

submission on the Commission’s Web 

site. As noted above, the Commission is 

exploring whether an electronic 

submission system can be established 

and made available to registered entities 

in the near future. The Commission is 

seeking the public’s view on whether 

automated submission of rules, rule 

amendments, and products might be 

facilitated by a Web site portal 

dedicated to this purpose. 

III. Related Matters 

a. Regulatory Flexibility Act 

The Regulatory Flexibility Act 

(‘‘RFA’’) 15 requires that agencies 

consider whether the rules they propose 

will have a significant economic impact 

on a substantial number of small entities 

and, if so, provide a regulatory 

flexibility analysis respecting the 

impact.16 The proposed rules detailed in 

this release would require DCOs, DCMs, 

SEFs and SDRs to submit to the 

Commission, before they become 

effective, new products, new rules, and 

rule amendments, with a selfcertification that the rules comply with 

the Act and Commission regulations. 

The requirements for the selfcertification are not complex, and may 

be satisfied by the completion of a cover 

sheet with a detailed explanation of the 

filing. These self-certification rules will 

not impose a significant economic 

impact on any entity. 

Moreover, the Commission previously 

determined that DCOs and DCMs are 

not ‘‘small entities’’ for purposes of the 

RFA.17 The Commission has not 

determined whether SEFs and SDRs, 

new registered entities created by the 

Dodd-Frank Act, are small entities. The 

Dodd-Frank Act defines an SDR to mean 

any person that collects and maintains 

information or records with respect to 

transactions or positions in, or the terms 

and conditions of, swaps entered into by 

third parties for the purpose of 

providing a centralized recordkeeping 

facility for swaps. The Dodd Frank Act 

defines a SEF to mean a trading system 

or platform in which multiple 

participants have the ability to execute 

or trade swaps by accepting bids and 

offers made by multiple participants in 

the facility or system, through any 

means of interstate commerce, including 

any trading facility that facilitates the 

execution of swaps between persons 

and is not a DCM.18


jlentini on DSKJ8SOYB1PROD with PROPOSALS
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19See Core Principle 2 applicable to SEFs under 

Section 733 of the Dodd-Frank Act and Core 

Principles 1–3 applicable to SDRs under Section 

728 of the Dodd-Frank Act. 

20 44 U.S.C. 3501 et seq. 

The Commission previously 

determined that DCMs and DCOs are 

not ‘‘small entities’’ for purposes of the 

RFA. The Commission’s reasoning 

included the fact that the Commission 

designates a contract market or a DCO 

only when the entity meets specific 

criteria, including the expenditure of 

sufficient resources to establish and 

maintain adequate self-regulatory 

programs. Likewise, the Commission 

will register an entity such as a SEF or 

an SDR only after the entity has met a 

number of criteria, including the 

expenditure of sufficient resources to 

establish and maintain an adequate selfregulatory program.19 Because SEFs and 

SDRs will be required to demonstrate 

compliance with Core Principles, many 

of which are similar to those applicable 

to DCMs and DCOs, the Commission 

hereby determines that SEFs and SDRs 

are not ‘‘small entities’’ for the purposes 

of the RFA. 

Accordingly, the Chairman, on behalf 

of the Commission, hereby certifies 

pursuant to 5 U.S.C. § 605(b) that the 

proposed rules will not have a 

significant impact on a substantial 

number of small entities. The 

Commission invites the public to 

comment on all aspects of this 

Regulatory Flexibility Analysis. 

b. Paperwork Reduction Act 

The Commission may not conduct or 

sponsor, and a registered entity is not 

required to respond to, a collection of 

information unless it displays a 

currently valid Office of Management 

and Budget (‘‘OMB’’) control number. 

Proposed amendments to §§ 40.2, 40.3, 

40.5 and 40.6 will impose new 

information collection requirements 

within the meaning of the Paperwork 

Reduction Act 20 on registered entities, 

as will new proposed §§ 40.10 and 

40.12. Accordingly, the Commission has 

requested that OMB approve and assign 

a new control number for the proposed 

collections of information. In 

connection with its request, the 

Commission has submitted this notice 

of proposed rulemaking along with 

supporting documentation for OMB’s 

review in accordance with 44 U.S.C. 

3507(d) and 5 CFR 1320.11. The title for 

this collection of information is Part 40, 

Provisions Common to Registered 

Entities, OMB control number 3038– 

D07. If adopted, responses to this new 

collection of information will be 

mandatory. 

The Commission will protect 

proprietary information according to the 

Freedom of Information Act and 17 CFR 

part 145, ‘‘Commission Records and 

Information.’’ In addition, section 8(a)(1) 

of the Act strictly prohibits the 

Commission, unless specifically 

authorized by the Act, from making 

public ‘‘data and information that would 

separately disclose the business 

transactions or market positions of any 

person and trade secrets or names of 

customers.’’ The Commission also is 

required to protect certain information 

contained in a government system of 

records according to the Privacy Act of 

1974, 5 U.S.C. 552a. 

1. Information Provided by Reporting 

Entities/Persons 

The proposed rules require DCMs, 

DCOs, and new registered entities, SEFs 

and SDRs, to collect and submit to the 

Commission new rules, amended rules 

and new products pursuant to the 

procedures outlined in proposed 

§§ 40.2, 40.3, 40.5, 40.6, 40.10, and 

40.12. The Commission proposes these 

information collection requirements in 

order to give effect to various notice, 

rule certification, and rule approval 

provisions of the Dodd-Frank Act. 

The Commission estimated the 

proposed information collection 

burdens on registered entities below. 

These estimates account for (1) the 

number of respondents; (2) the number 

of responses required of each 

respondent; (3) the average hours 

required to produce each response; and 

(4) the aggregate annual reporting 

burden. The Commission estimates that 

the aggregate effect of proposed §§ 40.2, 

40.3, 40.5, 40.6, 40.10, and 40.12 will be 

to increase the overall information 

collection burden on registered entities 

by approximately 8,300 hours per year, 

resulting mostly from the preparation of 

materials to be filed with the 

Commission in connection with the 

listing of products or the certification or 

approval of rules and rule amendments. 

The Commission estimates that there 

will be 70 designated or registered 

entities that would be required to file 

documentation with the Commission on 

a periodic basis. 

Proposed §§ 40.5 and 40.6 require 

each registered entity to comply with 

new certification and approval 

requirements when seeking to 

implement new rules or rule 

amendments, including changes to 

product terms or conditions. In 

addition, to ensure that market 

participants are promptly notified of 

product and rule submissions to the 

Commission, proposed §§ 40.2(a)(3)(vii), 

40.3(a)(10), 40.5(a)(6), and 40.6(a)(2) 

require registered entities to state that 

they posted a copy of the certification or 

request for approval on the registered 

entity’s Web site at the time of the filing 

with the Commission. 

Estimated number of respondents: 45. 

Annual responses by each 

respondent: 120. 

Estimated average hours per response: 

2.52. 

Aggregate annual reporting burden: 

13,608. 

Proposed § 40.10 requires SIDCOs to 

provide to the Commission 60 days 

advance notice of proposed changes to 

rules, procedures or operations that 

could materially affect the nature or 

level of risks presented by the SIDCO. 

Estimated number of respondents: 4. 

Annual responses by each 

respondent: 2. 

Estimated average hours per response: 

5. 

Aggregate annual reporting burden: 

40. 

Proposed § 40.12 requires registered 

entities to provide notice to the 

Commission and the Securities and 

Exchange Commission when certifying, 

submitting for approval, or otherwise 

filing a proposal to list a product having 

elements of both a security and a 

derivative. 

Estimated number of respondents: 17. 

Annual responses by each 

respondent: 34. 

Estimated average hours per response: 

2.52. 

Aggregate annual reporting burden: 

1,456. 

The Commission invites public 

comment on the accuracy of its estimate 

of the collection requirements that 

would result from the proposed 

regulations. 

2. Information Collection Comments 

The Commission invites the public 

and other federal agencies to comment 

on the information collection 

requirements proposed in this notice. 

Pursuant to 44 U.S.C. 3506(c)(2)(B), the 

Commission solicits comments to: (1) 

Evaluate whether the proposed 

collections of information are necessary 

for the proper performance of the 

functions of the Commission, including 

whether the information will have 

practical utility; (2) evaluate the 

accuracy of the estimated burden of the 

proposed information collection 

requirements, including the degree to 

which the methodology and the 

assumptions that the Commission 

employed were valid; (3) determine 

whether there are ways to enhance the 

quality, utility, or clarity of the 


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21 7 U.S.C. 19(a). 

22See, e.g., Fisherman’s Doc Co-op., Inc v. Brown, 

75 F.3d 164 (4th Cir. 1996); Center for Auto Safety 

v. Peck, 751 F.2d 1336 (DC Cir. 1985) (noting that 

an agency has discretion to weigh factors in 

undertaking cost-benefit analysis). 

information proposed to be collected; 

and (4) minimize the burden of the 

proposed collections of information on 

DCMs, SEFs, DCOs, and SDRs, for 

example through implementation of an 

electronic rule and product submission 

system. 

Comments may be submitted directly 

to the Office of Information and 

Regulatory Affairs, by fax at (202) 395– 

6566 or by e-mail at 

OIRAsubmissions@omb.eop.gov. Please 

provide the Commission with a copy of 

submitted comments so that they can be 

summarized and addressed in the final 

rule. Refer to the Addresses section of 

this notice of proposed rulemaking for 

comment submission instructions to the 

Commission. A copy of the supporting 

statements for the collections of 

information discussed above may be 

obtained by visiting RegInfo.gov. OMB 

is required to make a decision 

concerning the collection of information 

between 30 and 60 days after 

publication of this release. 

Consequently, a comment to OMB is 

best assured of receiving full 

consideration only if received by OMB 

(and the Commission) within 30 days of 

publication of this notice of proposed 

rulemaking. 

c. Cost-Benefit Analysis 

Section 15(a) of the Act requires the 

Commission to consider the costs and 

benefits of its actions before issuing new 

regulations or orders.21 By its terms, 

Section 15(a) does not require the 

Commission to quantify the costs and 

benefits of a new regulation or to 

determine whether the benefits of the 

proposed regulation outweigh its costs. 

Rather, Section 15(a) requires the 

Commission to ‘‘consider the costs and 

benefits’’ of its proposed regulation. 

Section 15(a) further specifies that costs 

and benefits shall be evaluated in light 

of five broad areas of market and public 

concern: (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. In 

conducting its analysis, the Commission 

may, in its discretion, give greater 

weight to any one of the five 

enumerated areas and it may determine 

that, notwithstanding its costs, a 

particular rule is necessary to protect 

the public interest or to effectuate any 

of the provisions or to accomplish any 

of the purposes of the Act.22

As discussed above, the proposed 

regulations require registered entities, 

including DCMs, SEFs, DCOs, and 

SDRs, to comply with new certification 

and approval procedures when 

submitting products and rules for 

Commission review. These procedures 

are mandatory pursuant to the DoddFrank Act. The Commission has 

determined that the costs associated 

with the self-certification and 

submission for Commission review of 

new products, new rules, and rule 

amendments will not negatively affect 

the efficiency, competitiveness, and 

financial integrity of the futures and 

swaps markets, particularly because of 

the time limits that Congress has 

imposed on Commission review. The 

Commission will have 10 days to review 

new products, new rules, and rule 

amendments, and only 90 days if it 

stays a rule to issue a rule approval or 

disapproval. 

The Commission believes that the 

benefits of the rulemaking are 

significant. The Commission’s 

certification and approval procedures 

ensure that registered entities do not 

enact rules that may be anticompetitive, 

unfair to market participants, or 

otherwise detrimental to the public 

interest. In addition, the special 

certification procedures for SIDCOs and 

certain event contracts implement 

Section 745 of the Dodd-Frank Act and 

ensure that the Commission has 

adequate time and information to 

analyze the registered entity’s proposal 

and to consider the broader implications 

of permitting the entity to implement 

the rule or list the product. The SIDCO 

notice requirement, in particular, may 

be crucially important to the 

Commission’s oversight of sound risk 

management practices and to its efforts 

to mitigate systemic risks, whereas the 

proposed event contract provisions, 

consistent with the intent of Congress, 

prevent individuals from speculating on 

activities that are harmful to national 

security and potentially detrimental to 

the stability of the futures markets and 

their price discovery function. Finally, 

the Commission’s notice requirements 

with respect to the submission of novel 

derivative products promote 

cooperation between the Commission 

and the SEC and facilitate more effective 

and less duplicative regulation of 

registered entities. 

For these reasons, the Commission 

believes that the certification and 

approval procedures proposed in this 

notice are needed to fulfill the 

requirements of the Dodd-Frank Act in 

order to protect market participants and 

to ensure the continued competitiveness 

and financial integrity of the futures and 

derivative markets. 

The Commission invites public 

comment on its cost-benefit 

considerations. Commenters are also 

invited to submit any data or other 

information that they may have 

quantifying or qualifying the costs and 

benefits of the proposal with their 

comment letters. 

List of Subjects in 17 CFR Part 40 

Commodity futures, Contract markets, 

Designation application, Reporting and 

recordkeeping requirements, Swap 

execution facility, Swap data repository, 

Systemically important derivatives 

clearing organization, Rule approval, 

Rule certification, Review of certain 

event contracts. 

In light of the foregoing, and pursuant 

to authority in the Act, and, in 

particular, Sections 3, 5, 5c(c) and 8a(5) 

of the Act, the Commission hereby 

proposes to revise Part 40 of Title 17 of 

the Code of Federal Regulations to read 

as follows: 

PART 40—PROVISIONS COMMON TO 

REGISTERED ENTITIES 

Sec. 

40.1 Definitions. 

40.2 Listing and accepting products for 

trading or clearing by certification. 

40.3 Voluntary submission of new products 

for Commission review and approval. 

40.4 Amendments to terms or conditions of 

enumerated agricultural products. 

40.5 Voluntary submission of rules for 

Commission review and approval. 

40.6 Self-certification of rules. 

40.7 Delegations. 

40.8 Availability of public information. 

40.9 Corporate governance [Reserved] 

40.10 Special certification procedures for 

submission of rules by systemically 

important derivatives clearing 

organizations. 

40.11 Review of event contracts based on 

certain excluded commodities. 

40.12 Tolling of review period pending 

jurisdictional determination. 

Appendix A to Part 40—Schedule of Fees 

Appendix B to Part 40—[Reserved] 

Appendix C to Part 40—[Reserved] 

Appendix D to Part 40—Submission Cover 

Sheet and Instructions 

Authority: 7 U.S.C. 1a, 2, 5, 6, 7, 7a, 8 and 

12, as amended by Titles VII and VIII of the 

Dodd-Frank Wall Street Reform and 

Consumer Protection Act, Pub. L. 111–203, 

124 Stat. 1376 (2010). 

§ 40.1 Definitions. 

As used in this part: 

(a) Business day means the intraday 

period of time starting at the business 

hour of 8:15 a.m. and ending at the 


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business hour of 4:45 p.m.; business 

hour means any hour between 8:15 a.m. 

and 4:45 p.m.. Business day and 

business hour are Eastern Standard 

Time or Eastern Daylight Savings Time, 

whichever is currently in effect in 

Washington, DC, on all days except 

Saturdays, Sundays and federal 

holidays in Washington, DC. 

(b) Dormant contract or dormant 

product means: 

(1) Any agreement, contract, 

transaction, instrument, swap or any 

such commodity futures or option 

contract with respect to all future or 

option expiries, listed on a designated 

contract market, a swap execution 

facility or cleared by a registered 

derivatives clearing organization, that 

has no open interest and in which no 

trading has occurred for a period of 

twelve complete calendar months 

following a certification to, or approval 

by, the Commission; provided, however, 

that no contract or instrument under 

this paragraph (b)(1) initially and 

originally certified to, or approved by, 

the Commission within the preceding 

36 complete calendar months shall be 

considered to be dormant; or 

(2) Any commodity futures or option 

contract, swap or other agreement, 

contract, transaction or instrument of a 

dormant designated contract market, 

swap execution facility or a dormant 

derivatives clearing organization; or 

(3) Any commodity futures or option 

contract or other agreement, contract, 

swap, transaction or instrument not 

otherwise dormant that a designated 

contract market, a swap execution 

facility or a derivatives clearing 

organization self-declares through 

certification to be dormant. 

(c) Dormant designated contract 

market means any designated contract 

market on which no trading has 

occurred during the period of twelve 

consecutive calendar months, preceding 

the first day of the most recent calendar 

month; provided, however, no 

designated contract market shall be 

considered to be dormant if its initial 

and original Commission order of 

designation was issued within the 

preceding 36 consecutive calendar 

months. 

(d) Dormant derivatives clearing 

organization means any derivatives 

clearing organization registered 

pursuant to Section 5b of the Act that 

has not accepted for clearing any 

agreement, contract or transaction that 

is required or permitted to be cleared by 

a derivatives clearing organization 

under Sections 5b(a) and 5b(b) of the 

Act, respectively, for a period of twelve 

complete calendar months; provided, 

however, no derivatives clearing 

organization shall be considered to be 

dormant if its initial and original 

Commission order of registration was 

issued within the preceding 36 

complete calendar months. 

(e) Dormant swap data repository 

means any registered swap data 

repository on which no data has resided 

for a period of twelve consecutive 

calendar months, preceding the most 

recent calendar month. 

(f) Dormant swap execution facility 

means any swap execution facility on 

which no trading has occurred for a 

period of twelve consecutive calendar 

months, preceding the first day of the 

most recent calendar month; provided, 

however, no swap execution facility 

shall be considered to be dormant if its 

initial and original Commission order of 

registration was issued within the 

preceding 36 consecutive calendar 

months. 

(g) Dormant rule means: 

(1) Any registered entity rule which 

remains unimplemented for twelve 

consecutive calendar months following 

a certification with, or an approval by, 

the Commission; or 

(2) Any rule or rule amendment of a 

dormant designated contract market, 

dormant swap execution facility, 

dormant swap data repository or 

dormant derivatives clearing 

organization. 

(h) Emergency means any occurrence 

or circumstance that, in the opinion of 

the governing board of a registered 

entity, or a person or persons duly 

authorized to issue such an opinion on 

behalf of the governing board of a 

registered entity under circumstances 

and pursuant to procedures that are 

specified by rule, requires immediate 

action and threatens or may threaten 

such things as the fair and orderly 

trading in, or the liquidation of or 

delivery pursuant to, any agreements, 

contracts, swaps or transactions or the 

timely collection and payment of funds 

in connection with clearing and 

settlement by a derivatives clearing 

organization, including: 

(1) Any manipulative or attempted 

manipulative activity; 

(2) Any actual, attempted, or 

threatened corner, squeeze, congestion, 

or undue concentration of positions; 

(3) Any circumstances which may 

materially affect the performance of 

agreements, contracts, swaps or 

transactions, including failure of the 

payment system or the bankruptcy or 

insolvency of any participant; 

(4) Any action taken by any 

governmental body, or any other 

registered entity, board of trade, market 

or facility which may have a direct 

impact on trading or clearing and 

settlement; and 

(5) Any other circumstance which 

may have a severe, adverse effect upon 

the functioning of a registered entity. 

(i) Rule means any constitutional 

provision, article of incorporation, 

bylaw, rule, regulation, resolution, 

interpretation, stated policy, terms and 

conditions, trading protocol, agreement 

or instrument corresponding thereto, 

including those that authorize a 

response or establish standards for 

responding to a specific emergency, in 

whatever form adopted, and any 

amendment or addition thereto or repeal 

thereof, made or issued by a registered 

entity or by the governing board thereof 

or any committee thereof. 

(j) Terms and conditions means any 

definition of the trading unit or the 

specific commodity underlying a swap 

or a contract for the future delivery of 

a commodity or commodity option 

contract, specification of cash 

settlement or delivery standards and 

procedures, and establishment of 

buyers’ and sellers’ rights and 

obligations under the swap or contract. 

Whenever possible, all proposed swap 

or contract terms and conditions should 

conform to industry standards or those 

terms and conditions adopted by 

comparable contracts. Terms and 

conditions include provisions relating 

to the following: 

(1) Quality and other standards that 

define the commodity or instrument 

underlying the contract; 

(2) Quantity standards or other 

provisions related to swap or contract 

size; 

(3) Any applicable premiums or 

discounts for delivery of nonpar 

products; 

(4) Trading hours, trading months and 

the listing of swaps or contracts; 

(5) The pricing basis, minimum price 

fluctuations, and maximum price 

fluctuations; 

(6) Any price limits, trading halts, or 

circuit breaker provisions, and 

procedures for the establishment of 

daily settlement prices; 

(7) Position limits, position 

accountability standards, and position 

reporting requirements; 

(8) Delivery points and locational 

price differentials; 

(9) Delivery standards and 

procedures, including fees related to 

delivery or the delivery process; 

alternatives to delivery and applicable 

penalties or sanctions for failure to 

perform; 

(10) If cash settled; the definition, 

composition, calculation and revision of 

the cash settlement price or index; 


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(11) Payment or collection of 

commodity option premiums or 

margins; 

(12) Option exercise price, if it is 

constant, and method for calculating the 

exercise price, if it is variable; 

(13) Threshold prices for an option 

contract, the existence of which is 

contingent upon those prices; 

(14) Any restrictions or requirements 

for exercising an option; and 

(15) With respect to swaps cleared by 

a derivatives clearing organization, 

specifications including but not limited 

to: 

(i) Notional values; 

(ii) Relevant dates, tenor, and day 

count conventions; 

(iii) Index; 

(iv) Relevant prices, rates or coupons; 

(v) Currency; 

(vi) Stub, premium, or initial cash 

flow components along with subsequent 

life cycle events; 

(vii) Payment and reset frequency; 

(viii) Business calendars; 

(ix) Accrual type; and 

(x) Spread or points. 

§ 40.2 Listing and accepting products for 

trading or clearing by certification. 

(a) A designated contract market or a 

swap execution facility must comply 

with the submission requirements of 

this section prior to listing a product for 

trading that has not been approved 

under § 40.3 of this part or that remains 

dormant subsequent to being submitted 

under this section or approved under 

§ 40.3 of this part. A derivatives clearing 

organization must comply with the 

submission requirements of this section 

prior to accepting for clearing a product 

that is not listed or traded on a 

designated contract market, derivatives 

clearing organization or a swap 

execution facility and has not been 

approved for clearing under § 40.3 or 

§ 40.5 of this part or that remains 

dormant subsequent to being submitted 

under this section or approved under 

§ 40.5 of this part. A submission shall 

comply with the following conditions: 

(1) The designated contract market, or 

the swap execution facility, or the 

derivatives clearing organization has 

filed its submission electronically in a 

format specified by the Secretary of the 

Commission with the Secretary of the 

Commission at submissions@cftc.gov, 

and with the relevant branch chief at the 

regional office having local jurisdiction 

over the registered entity; 

(2) The Commission has received the 

submission at its headquarters by the 

open of business on the business day 

preceding the product’s listing or 

acceptance for clearing; and 

(3) The submission includes: 

(i) A copy of the submission cover 

sheet in accordance with the 

instructions in Appendix D to this part; 

(ii) A copy of the product’s rules, 

including all rules related to its terms 

and conditions, or the rules establishing 

the terms and conditions of the listed 

product that make it acceptable for 

clearing; 

(iii) The intended listing date; 

(iv) A certification by the designated 

contract market, the swap execution 

facility, or the derivatives clearing 

organization that the product to be 

listed complies with the Act and 

Commission regulations thereunder; 

(v) The documentation relied on to 

establish the basis for compliance with 

the applicable provisions of the Act and 

the Commission’s regulations 

thereunder, including the Core 

Principles; 

(vi) A written statement verifying that 

the registered entity has undertaken a 

due diligence review of the legal 

conditions, including conditions that 

relate to contractual and intellectual 

property rights, which may materially 

affect the trading of the product; 

(vii) Certification that the registered 

entity posted a notice of pending 

product certification with the 

Commission and a copy of the 

submission, concurrent with the filing 

of a submission with the Commission, 

on the registered entity’s Web site. 

Information which the registered entity 

seeks to keep confidential may be 

redacted from the documents published 

on the registered entity’s Web site, but 

must be republished consistent with any 

determination made pursuant to 

§ 40.8(c)(4); 

(viii) A request for confidential 

treatment, if appropriate, as permitted 

under § 40.8. 

(b) Additional information. If 

requested by Commission staff, a 

registered entity shall provide any 

additional evidence, information or data 

that demonstrates that the contract 

meets, initially or on a continuing basis, 

all of the requirements of the Act and 

the Commission’s regulations and 

policies thereunder. 

(c) Stay. The Commission may stay 

the listing of a contract pursuant to 

paragraph (a) of this section during the 

pendency of Commission proceedings 

for filing a false certification or during 

the pendency of a petition to alter or 

amend the contract terms and 

conditions pursuant to Section 8a(7) of 

the Act. The decision to stay the listing 

of a contract in such circumstances shall 

not be delegable to any employee of the 

Commission. 

§ 40.3 Voluntary submission of new 

products for Commission review and 

approval. 

(a) Request for approval. Pursuant to 

Section 5c(c) of the Act, a designated 

contract market, a swap execution 

facility, or a derivatives clearing 

organization may request that the 

Commission approve a new or dormant 

product prior to listing the product for 

trading or clearing, or if a product was 

initially submitted under § 40.2 of this 

part, subsequent to listing the product 

for trading or clearing. A submission 

requesting approval shall: 

(1) Be filed electronically with the 

Secretary of the Commission at 

Submissions@cftc.gov, and with the 

regional office of the Commission 

having local jurisdiction over the 

registered entity in a format specified by 

the Secretary of the Commission; 

(2) Include a copy of the submission 

cover sheet in accordance with the 

instructions in Appendix D to this part; 

(3) Include a copy of the rules that set 

forth the contract’s terms and 

conditions; 

(4) Include the documentation relied 

on to establish the basis for compliance 

with the applicable provisions of the 

Act and the Commission’s regulations 

thereunder, including the Core 

Principles; 

(5) Describe any agreements or 

contracts entered into with other parties 

that enable the registered entity to carry 

out its responsibilities; 

(6) Include the certifications required 

in § 41.22 for product approval of a 

commodity that is a security future or a 

security futures product as defined in 

Sections 1a(44) or 1a(45) of the Act, 

respectively, and, if applicable, include 

the notice required in § 40.12(a) for the 

listing of novel derivative products; 

(7) Include, if appropriate, a request 

for confidential treatment as permitted 

under § 40.8; 

(8) Include the filing fee required 

under Appendix A to this part; 

(9) Include a written statement 

verifying that the registered entity has 

undertaken a due diligence review of 

the legal conditions, including 

conditions relating to contractual and 

intellectual property rights, that may 

materially affect the trading of the 

product; 

(10) Certify that the registered entity 

posted a notice of pending request for 

approval of new product with the 

Commission and a copy of the 

submission, concurrent with the filing 

of a submission with the Commission, 

on the registered entity’s Web site. 

Information which the registered entity 

seeks to keep confidential may be 

redacted from the documents published 


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67294 Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 

on the registered entity’s Web site, but 

must be republished consistent with any 

determination made pursuant to 

§ 40.8(c)(4); 

(11) Include, if requested by 

Commission staff, additional evidence, 

information or data demonstrating that 

the contract meets, initially or on a 

continuing basis, all of the requirements 

of the Act, or other requirements for 

designation or registration under the Act 

or the Commission’s regulations or 

policies thereunder. The registered 

entity shall submit the requested 

information by the open of business on 

the date that is two business days from 

the date of request by Commission staff. 

(b) Standard for review and approval. 

The Commission shall approve a new 

product unless the terms and conditions 

of the product violate the Act or the 

Commission’s regulations. 

(c) Forty-five day review. All products 

submitted for Commission approval 

under this paragraph shall be deemed 

approved by the Commission 45 days 

after receipt by the Commission, or at 

the conclusion of an extended period as 

provided under paragraph (d) of this 

section, unless notified otherwise 

within the applicable period, if: 

(1) The submission complies with the 

requirements of paragraph (a) of this 

section; and 

(2) The submitting entity does not 

amend the terms or conditions of the 

product or supplement the request for 

approval, except as requested by the 

Commission or for correction of 

typographical errors, renumbering or 

other non-substantive revisions, during 

that period. Any voluntary, substantive 

amendment by the submitting entity 

will be treated as a new submission 

under this section. 

(d) Extension of time. The 

Commission may extend the 45 day 

review period in paragraph (c) of this 

section for: 

(1) An additional 45 days, if the 

product raises novel or complex issues 

that require additional time for review 

in which case, the Commission shall 

notify the registered entity within the 

initial 45 day review period and shall 

briefly describe the nature of the 

specific issues for which additional time 

for review is required; or 

(2) Any extended review period to 

which the registered entity agrees in 

writing. 

(e) Notice of non-approval. The 

Commission at any time during its 

review under this section may notify the 

registered entity that it will not, or is 

unable to, approve the product. This 

notification will briefly specify the 

nature of the issues raised and the 

specific provision of the Act or the 

Commission’s regulations, including the 

form or content requirements of 

paragraph (a) of this section, that the 

product violates, appears to violate or 

potentially violates but which cannot be 

ascertained from the submission. 

(f) Effect of non-approval. (1) 

Notification to a registered entity under 

paragraph (e) of this section of the 

Commission’s determination not to 

approve a product does not prejudice 

the entity from subsequently submitting 

a revised version of the product for 

Commission approval or from 

submitting the product as initially 

proposed pursuant to a supplemented 

submission. 

(2) Notification to a registered entity 

under paragraph (e) of this section of the 

Commission’s refusal to approve a 

product shall be presumptive evidence 

that the entity may not truthfully certify 

under § 40.2 that the same, or 

substantially the same, product does not 

violate the Act or the Commission’s 

regulations thereunder. 

§ 40.4 Amendments to terms or conditions 

of enumerated agricultural products. 

(a) Notwithstanding the provisions of 

this part, a designated contract market 

must submit for Commission approval 

under the procedures of § 40.5, prior to 

its implementation, any rule or dormant 

rule that, for a delivery month having 

open interest, would materially change 

a term or condition, as defined in 

§ 40.1(j), of a contract for future delivery 

in an agricultural commodity 

enumerated in Section 1a(9) of the Act, 

or of an option on such a contract or 

commodity. 

(b) The following rules or rule 

amendments are not material and 

should not be submitted under this 

section: 

(1) Changes that are enumerated in 

§ 40.6(d)(2) may be implemented 

without prior approval or certification if 

implemented pursuant to the 

notification procedures of § 40.6(d); 

(2) Changes that are enumerated in 

§ 40.6(d)(3)(ii) may be implemented 

without prior approval or certification 

or notification as permitted pursuant to 

§ 40.6(d)(3); 

(3) Changes in trading hours may be 

implemented without prior approval if 

implemented pursuant to the 

procedures of § 40.6(a); 

(4) Changes required to comply with 

a binding order of a court of competent 

jurisdiction, or a rule, regulation or 

order of the Commission or of another 

federal regulatory authority, may be 

implemented without prior approval if 

implemented pursuant to the 

procedures of § 40.6(a); or 

(5) Any other rule: 

(i) The text of which has been 

submitted for review at least ten 

business days prior to its 

implementation and that has been 

labeled ‘‘Non-Material Agricultural Rule 

Change;’’ 

(ii) For which the designated contract 

market has provided an explanation as 

to why it considers the rule ‘‘nonmaterial,’’ and any other information 

that may be beneficial to the 

Commission in analyzing the merits of 

the entity’s claim of non-materiality; 

and 

(iii) With respect to which the 

Commission has not notified the 

contract market during the review 

period that the rule appears to require 

or does require prior approval under 

this section, may be implemented 

without prior approval if implemented 

under the procedures of § 40.6(a). 

§ 40.5 Voluntary submission of rules for 

Commission review and approval. 

(a) Request for approval of rules. 

Pursuant to Section 5c(c) of the Act, a 

registered entity may request that the 

Commission approve a new rule, rule 

amendment or dormant rule prior to 

implementation of the rule, or if the 

request was initially submitted under 

§§ 40.2 or 40.6 of this part, subsequent 

to implementation of the rule. A request 

for approval shall: 

(1) Be filed electronically with the 

Secretary of the Commission at 

Submissions@cftc.gov, and with the 

regional office of the Commission 

having local jurisdiction over the 

registered entity in a format specified by 

the Secretary of the Commission; 

(2) Include a copy of the submission 

cover sheet in accordance with the 

instructions in Appendix D to this part; 

(3) Set forth the text of the rule or rule 

amendment (in the case of a rule 

amendment, deletions and additions 

must be indicated); 

(4) Describe the proposed effective 

date of the rule or rule amendment and 

any action taken or anticipated to be 

taken to adopt the proposed rule by the 

registered entity or by its governing 

board or by any committee thereof, and 

cite the rules of the entity that authorize 

the adoption of the proposed rule; 

(5) Explain the operation, purpose, 

and effect of the proposed rule, 

including, as applicable, a description 

of the anticipated benefits to market 

participants or others, any potential 

anticompetitive effects on market 

participants or others, and how the rule 

fits into the registered entity’s 

framework of self-regulation; 

(6) Certify that the registered entity 

posted a notice of pending rule with the 

Commission and a copy of the 


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submission, concurrent with the filing 

of a submission with the Commission, 

on the registered entity’s Web site. 

Information which the registered entity 

seeks to keep confidential may be 

redacted from the documents published 

on the registered entity’s Web site but 

must be republished consistent with any 

determination made pursuant to 

§ 40.8(c)(4); 

(7) Include the documentation relied 

on to establish the basis for compliance 

with the applicable provisions of the 

Act and the Commission’s regulations 

thereunder, including the Core 

Principles; 

(8) Provide additional information 

which may be beneficial to the 

Commission in analyzing the new rule 

or rule amendment. If a proposed rule 

affects, directly or indirectly, the 

application of any other rule of the 

registered entity, the pertinent text of 

any such rule must be set forth and the 

anticipated effect described; 

(9) Describe briefly any substantive 

opposing views expressed to the 

registered entity by governing board or 

committee members, members of the 

entity or market participants with 

respect to the new rule or rule 

amendment that were not incorporated 

into the new rule or rule amendment; 

(10) Identify any Commission 

regulation that the Commission may 

need to amend, or sections of the Act or 

the Commission’s regulations that the 

Commission may need to interpret, in 

order to approve the new rule or rule 

amendment. To the extent that such an 

amendment or interpretation is 

necessary to accommodate a new rule or 

rule amendment, the submission should 

include a reasoned analysis supporting 

the amendment to the Commission’s 

regulation or the interpretation; 

(11) Include, for all products, a 

written statement verifying that the 

registered entity has undertaken a due 

diligence review of the legal conditions, 

including conditions relating to 

contractual and intellectual property 

rights, which may materially affect the 

trading of such product or products, if 

the proposed rule specifically relates to 

one or more listed products; 

(12) As appropriate, include a request 

for confidential treatment as permitted 

under the procedures of § 40.8; 

(b) Standard for review and approval. 

The Commission shall approve a new 

rule or rule amendment unless the rule 

or rule amendment is inconsistent with 

the Act or the Commission’s regulations. 

(c) Forty-five day review. (1) All rules 

submitted for Commission approval 

under paragraph (a) of this section shall 

be deemed approved by the Commission 

under section 5c(c) of the Act 45 days 

after receipt by the Commission, or at 

the conclusion of such extended period 

as provided under paragraph (d) of this 

section, unless the registered entity is 

notified otherwise within the applicable 

period, if: 

(i) The submission complies with the 

requirements of paragraph (a) of this 

section; 

(ii) The registered entity does not 

amend the proposed rule or supplement 

the submission, except as requested by 

the Commission, during the pendency 

of the review period other than for 

correction of typographical errors, 

renumbering or other non-substantive 

revisions. Any amendment or 

supplementation not requested by the 

Commission will be treated as the 

submission of a new filing under this 

section. 

(2) The Commission shall commence 

the review period in paragraph (c) of 

this section for a compliant submission 

under § 40.4(b)(5) ten business days 

after its receipt. 

(d) Commencement and extension of 

time for review. The Commission may 

further extend the review period in 

paragraph (c) of this section for any 

approval request for: 

(1) An additional 45 days, if the 

proposed rule raises novel or complex 

issues that require additional time for 

review or is of major economic 

significance, the submission is 

incomplete or the requestor does not 

respond completely to Commission 

questions in a timely manner, in which 

case, the Commission shall notify the 

submitting registered entity within the 

initial forty-five day review period and 

shall briefly describe the nature of the 

specific issues for which additional time 

for review shall be required; or 

(2) Any period, beyond the additional 

45 days provided in § 40.5(d)(1), to 

which the registered entity agrees in 

writing. 

(e) Notice of non-approval. Any time 

during its review under this section, the 

Commission may notify the registered 

entity that it will not, or is unable to, 

approve the new rule or rule 

amendment. This notification will 

briefly specify the nature of the issues 

raised and the specific provision of the 

Act or the Commission’s regulations, 

including the form or content 

requirements of this section, with which 

the new rule or rule amendment is 

inconsistent or appears to be 

inconsistent with the Act or the 

Commission’s regulations. 

(f) Effect of non-approval. (1) 

Notification to a registered entity under 

paragraph (e) of this section does not 

prevent the registered entity from 

subsequently submitting a revised 

version of the proposed rule or rule 

amendment for Commission review and 

approval or from submitting the new 

rule or rule amendment as initially 

proposed in a supplemented 

submission; the revised submission will 

be reviewed without prejudice. 

(2) Notification to a registered entity 

under paragraph (e) of this section of the 

Commission’s determination not to 

approve a proposed rule or rule 

amendment of a registered entity shall 

be presumptive evidence that the entity 

may not truthfully certify that the same, 

or substantially the same, proposed rule 

or rule amendment under § 40.6(a) of 

this section. 

(g) Expedited approval. 

Notwithstanding the provisions of 

paragraph (c) of this section, changes to 

a proposed rule or a rule amendment, 

including changes to terms and 

conditions of a product that are 

consistent with the Act and Commission 

regulations and with standards 

approved or established by the 

Commission may be approved by the 

Commission at such time and under 

such conditions as the Commission 

shall specify in the written notification, 

provided, however, that the 

Commission may, at any time, alter or 

revoke the applicability of such a notice 

to any particular product or rule 

amendment. 

§ 40.6 Self-certification of rules. 

(a) Required certification. A registered 

entity shall comply with the following 

conditions prior to implementing any 

rule that has not obtained Commission 

approval under § 40.5 of this part, that 

remains dormant subsequent to being 

submitted under this section or 

approved under § 40.5 of this part, or 

that is submitted under § 40.10 of this 

part, except as otherwise provided by 

§ 40.10(a): 

(1) The registered entity has filed its 

submission electronically in a format 

specified by the Secretary of the 

Commission with the Secretary of the 

Commission at submissions@cftc.gov 

and with the relevant branch chief at the 

regional office having local jurisdiction 

over the registered entity. 

(2) The registered entity has provided 

a certification that the registered entity 

posted a notice of pending certification 

with the Commission and a copy of the 

submission, concurrent with the filing 

of a submission with the Commission, 

on the registered entity’s Web site. 

Information that the registered entity 

seeks to keep confidential may be 

redacted from the documents published 

on the registered entity’s Web site, but 

it must be republished consistent with 


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any determination made pursuant to 

§ 40.8(c)(4). 

(3) The Commission has received the 

submission at its headquarters not later 

than the open of business on the 

business day that is 10 business days 

prior to the registered entity’s 

implementation of the rule or rule 

amendment. 

(4) The Commission has not stayed 

the submission pursuant to § 40.6(c). 

(5) The rule or rule amendment is not 

a rule or rule amendment of a 

designated contract market that 

materially changes a term or condition 

of a contract for future delivery of an 

agricultural commodity enumerated in 

section 1a(4) of the Act or an option on 

such a contract or commodity in a 

delivery month having open interest; 

(6) Emergency rule certifications. (i) 

New rules or rule amendments that 

establish standards for responding to an 

emergency must be submitted pursuant 

to § 40.6(a); 

(ii) Rules or rule amendments 

implemented under procedures of the 

governing board to respond to an 

emergency as defined in § 40.1, shall, if 

practicable, be filed with the 

Commission prior to the 

implementation or, if not practicable, be 

filed with the Commission at the earliest 

possible time after implementation, but 

in no event more than twenty-four hours 

after implementation; and 

(7) The rule submission shall include: 

(i) A copy of the submission cover 

sheet in accordance with the 

instructions in Appendix D to this part 

(in the case of a rule or rule amendment 

that responds to an emergency, 

‘‘Emergency Rule Certification’’ should 

be noted in the Description section of 

the submission coversheet); 

(ii) The text of the rule (in the case of 

a rule amendment, deletions and 

additions must be indicated); 

(iii) The date of intended 

implementation; 

(iv) A certification by the registered 

entity that the rule complies with the 

Act and the Commission’s regulations 

thereunder; 

(v) The documentation relied on to 

establish the basis for compliance with 

the applicable provisions of the Act and 

the Commission’s regulations 

thereunder, including the Core 

Principles; 

(vi) A brief explanation of any 

substantive opposing views expressed to 

the registered entity by governing board 

or committee members, members of the 

entity or market participants, that were 

not incorporated into the rule, or a 

statement that no such opposing views 

were expressed; 

(vii) As appropriate, a request for 

confidential treatment pursuant to the 

procedures provided in § 40.8; 

(viii) For amendments to a product’s 

terms or conditions, a written statement 

certifying that the registered entity has 

undertaken a due diligence review of 

the legal conditions, including 

conditions relating to contractual and 

intellectual property rights, that may 

materially affect the trading of the 

product. 

(8) The registered entity shall provide, 

if requested by Commission staff, 

additional evidence, information or data 

that may be beneficial to the 

Commission in conducting a due 

diligence assessment of the filing and 

the registered entity’s compliance with 

any of the requirements of the Act or the 

Commission’s regulations or policies 

thereunder. 

(b) Review by the Commission. The 

Commission shall have 10 business days 

to review the new rule or rule 

amendment before the new rule or rule 

amendment is deemed certified and can 

be made effective, unless the 

Commission notifies the registered 

entity during the 10-business day 

review period that it intends to issue a 

stay of the certification under paragraph 

(c) of this section. 

(c) Stay—(1) Stay of certification of 

new rule or rule amendment. The 

Commission may stay the certification 

of a new rule or rule amendment 

submitted pursuant to paragraph (a) of 

this section by issuing a notification 

informing the registered entity that the 

Commission is staying the certification 

of the rule or rule amendment on the 

grounds that the new rule or rule 

amendment presents novel or complex 

issues that require additional time to 

analyze, the rule is accompanied by an 

inadequate explanation or the rule is 

potentially inconsistent with the Act or 

the Commission’s regulations 

thereunder. The Commission will have 

90 days from the date of the notification 

to conduct the review. The decision to 

stay the certification of a rule in such 

circumstances shall be delegable 

pursuant to § 40.7 of this part. 

(2) Public comment. The Commission 

shall provide a 30-day comment period, 

within the 90-day period while the stay 

is in effect as described in paragraph 

(c)(1) of this section. The Commission 

shall publish a notice of the 30-day 

comment period on the Commission 

Web site. Comments from the public 

shall be submitted as specified in that 

notice. 

(3) Expiration of a stay of certification 

of new rule or rule amendment. A new 

rule or rule amendment subject to a stay 

pursuant to paragraph (c) shall become 

effective, pursuant to the certification, at 

the expiration of the 90-day review 

period described in paragraph (c)(1) of 

this section unless the Commission 

withdraws the stay prior to that time, or 

the Commission notifies the registered 

entity during the 90-day time period 

that it objects to the proposed 

certification on the grounds that the 

proposed rule or rule amendment is 

inconsistent with the Act or the 

Commission’s regulations. 

(4) Stay of effectiveness of rules or 

rule amendments already implemented. 

The Commission may stay the 

effectiveness of an implemented rule 

during the pendency of Commission 

proceedings for filing a false 

certification or during the pendency of 

a petition to alter or amend the rule 

pursuant to section 8a(7) of the Act. The 

decision to stay the effectiveness of a 

rule in such circumstances shall not be 

delegable to any employee of the 

Commission. 

(d) Notification of rule amendments. 

Notwithstanding the rule certification 

requirement of Section 5c(c)(1) of the 

Act and paragraph (a) of this section, a 

registered entity may place the 

following rules or rule amendments into 

effect on the following business day 

without certification to the Commission 

if the following conditions are met: 

(1) The registered entity provides to 

the Commission at least weekly a 

summary notice of all rule amendments 

made effective pursuant to this 

paragraph during the preceding week. 

Such notice must be labeled ‘‘Weekly 

Notification of Rule Amendments’’ and 

need not be filed for weeks during 

which no such actions have been taken. 

One copy of each such submission shall 

be furnished electronically in a format 

specified by the Secretary of the 

Commission; and 

(2) The rule governs: 

(i) Non-substantive revisions. 

Corrections of typographical errors, 

renumbering, periodic routine updates 

to identifying information about 

approved entities and other such nonsubstantive revisions of a product’s 

terms and conditions that have no effect 

on the economic characteristics of the 

product; 

(ii) Delivery standards set by third 

parties. Changes to grades or standards 

of commodities deliverable on a product 

that are established by an independent 

third party and that are incorporated by 

reference as product terms, provided 

that the grade or standard is not 

established, selected or calculated solely 

for use in connection with futures or 

option trading and such changes do not 

affect deliverable supplies or the pricing 

basis for the product; 


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(iii) Index products. Routine changes 

in the composition, computation, or 

method of selection of component 

entities of an index (other than routine 

changes to securities indexes to the 

extent that such changes are not 

described in paragraph (d)(3)(ii)(F) of 

this section) referenced and defined in 

the product’s terms, that do not affect 

the pricing basis of the index, which are 

made by an independent third party 

whose business relates to the collection 

or dissemination of price information 

and which was not formed solely for the 

purpose of compiling an index for use 

in connection with a futures or option 

product; 

(iv) Option contract terms. Changes to 

option contract rules, which may 

qualify for implementation without 

notice pursuant to paragraph 

(d)(3)(ii)(G) of this section, relating to 

the strike price listing procedures, strike 

price intervals, and the listing of strike 

prices on a discretionary basis; 

(v) Fees. Fees or fee changes, other 

than fees or fee changes associated with 

market making or trading incentive 

programs, that: 

(A) Total $1.00 or more per contract, 

and 

(B) Are established by an independent 

third party or are unrelated to delivery, 

trading, clearing or dispute resolution. 

(vi) Survey lists. Changes to lists of 

banks, brokers, dealers, or other entities 

that provide price or cash market 

information to an independent third 

party and that are incorporated by 

reference as product terms; 

(vii) Approved brands. Changes in 

lists of approved brands or markings 

pursuant to previously certified or 

Commission approved standards or 

criteria; 

(viii) Delivery facilities and delivery 

service providers. Changes in lists of 

approved delivery facilities and delivery 

service providers (including weigh 

masters, assayers, and inspectors) at a 

delivery location, pursuant to 

previously certified or Commission 

approved standards or criteria; 

(ix) Trading months. The initial 

listing of trading months, which may 

qualify for implementation without 

notice pursuant to (d)(3)(ii)(H) of this 

section, within the currently established 

cycle of trading months; or 

(x) Minimum tick. Reductions in the 

minimum price fluctuation (or ‘‘tick’’). 

(3) Notification of rule amendments 

not required. Notwithstanding the rule 

certification requirements of section 

5c(c)(1) of the Act and paragraph (a) of 

this section, a registered entity may 

place the following rules or rule 

amendments into effect without 

certification or notice to the 

Commission if the following conditions 

are met: 

(i) The registered entity maintains 

documentation regarding all changes to 

rules; and 

(ii) The rule governs: 

(A) Transfer of membership or 

ownership. Procedures and forms for the 

purchase, sale or transfer of membership 

or ownership, but not including 

qualifications for membership or 

ownership, any right or obligation of 

membership or ownership or dues or 

assessments; 

(B) Administrative procedures. The 

organization and administrative 

procedures of a registered entity 

governing bodies such as a Board of 

Directors, Officers and Committees, but 

not voting requirements, Board of 

Directors or Committee composition 

requirements or procedures, decision 

making procedures, use or disclosure of 

material non-public information gained 

through the performance of official 

duties, or requirements relating to 

conflicts of interest; 

(C) Administration. The routine, daily 

administration, direction and control of 

employees, requirements relating to 

gratuity and similar funds, but not 

guaranty, reserves, or similar funds; 

declaration of holidays, and changes to 

facilities housing the market, trading 

floor or trading area; 

(D) Standards of decorum. Standards 

of decorum or attire or similar 

provisions relating to admission to the 

floor, badges, or visitors, but not the 

establishment of penalties for violations 

of such rules; and 

(E) Fees. Fees or fee changes, other 

than fees or fee changes associated with 

market making or trading incentive 

programs, that: 

(1) Are less than $1.00; or 

(2) Relate to matters such as dues, 

badges, telecommunication services, 

booth space, real time quotations, 

historical information, publications, 

software licenses or other matters that 

are administrative in nature. 

(F) Securities indexes. Routine 

changes to the composition, 

computation or method of security 

selection of an index that is referenced 

and defined in the product’s rules, and 

which is made by an independent third 

party. 

(G) Option contract terms. For 

registered entities that are in 

compliance with the daily reporting 

requirements of § 16.01 of this chapter, 

changes to option contract rules relating 

to the strike price listing procedures, 

strike price intervals, and the listing of 

strike prices on a discretionary basis. 

(H) Trading months. For registered 

entities that are in compliance with the 

daily reporting requirements of § 16.01 

of this chapter, the initial listing of 

trading months which are within the 

currently established cycle of trading 

months. 

§ 40.7 Delegations. 

(a) Procedural matters. (1) The 

Commission hereby delegates, until it 

orders otherwise, to the Director of the 

Division of Clearing and Intermediary 

Oversight and, separately, to the 

Director of the Division of Market 

Oversight, to be exercised by either 

Director, as appropriate, or by such 

employees of the Commission that 

either Director may designate from time 

to time, the following authorities, with 

the concurrence of the General Counsel 

or the General Counsel’s delegate: 

(i) To request, pursuant to § 40.3(c)(2) 

or § 40.5(c)(1)(B) of this part, that the 

registered entity requesting approval 

amend the proposed product, rule or 

rule amendment, or supplement the 

submission to the Commission; 

(ii) To notify the registered entity, 

pursuant to § 40.3(e) or § 40.5(e) of this 

part, that the Commission is not 

approving, or is unable to approve, the 

proposed product, rule or rule 

amendment; 

(iii) To make all determinations 

reserved to the Commission in § 40.10. 

(2) The Commission hereby delegates, 

until it orders otherwise, to the Director 

of the Division of Clearing and 

Intermediary Oversight and, separately, 

to the Director of the Division of Market 

Oversight, to be exercised by either 

Director, as appropriate, or by such 

employees of the Commission that 

either Director may designate from time 

to time, the following authorities, after 

consultation with the Office of General 

Counsel or the General Counsel’s 

delegate to notify a registered entity: 

(i) Pursuant to § 40.3(d) of this part, 

that the time for review of the 

submission has been extended because 

the product raises novel or complex 

issues that require additional time for 

review; 

(ii) Pursuant to § 40.5(d) of this part, 

that the time for review of the 

submission has been extended because 

the proposed rule or rule amendment 

raises novel or complex issues that 

require additional time for review or is 

of major economic significance; 

(iii) Pursuant to § 40.6(c) of this part, 

that the proposed rule or rule 

amendment has been stayed because 

there exist novel or complex issues that 

require additional time to analyze, or 

there is potential inconsistency with the 

Act or the Commission’s regulations. 

(3) The Commission hereby delegates, 

until it orders otherwise, to the Director 


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of the Division of Clearing and 

Intermediary Oversight and, separately, 

to the Director of the Division of Market 

Oversight, to be exercised by either 

Director, as appropriate, or by such 

employees of the Commission that 

either Director may designate from time 

to time, the authority to notify a 

registered entity, pursuant to § 40.3(d) 

or § 40.5(d) of this part, that the time for 

review of the submission has been 

extended, or that a rule certified 

pursuant to § 40.6(c) has been stayed, 

because the submission is incomplete or 

provides an inadequate explanation. 

(4) Emergency rules. The Commission 

hereby delegates to the Director of the 

Division of Market Oversight and, 

separately, to the Director of the 

Division of Clearing and Intermediary 

Oversight, to be exercised by either 

Director, as appropriate, or by such 

other employee or employees of the 

Commission that either Director may 

designate from time to time, authority to 

receive notification of emergency rules 

under § 40.6(a)(6)(ii) of this part. 

(5) The Commission hereby delegates 

to the Director of the Division of Market 

Oversight, to be exercised by the 

Director or by such employees of the 

Commission that the Director may 

designate from time to time, with the 

concurrence of the General Counsel or 

the General Counsel’s delegate, the 

authority to determine whether a rule 

change submitted by a designated 

contract market for a materiality 

determination under § 40.4(b)(5) of this 

part is not material (in which case it 

may be reported pursuant to the 

provisions of § 40.6(d) of this part), or is 

material, in which case he or she shall 

notify the registered entity that the rule 

change must be submitted for the 

Commission’s prior approval. 

(b) Approval authority. The 

Commission hereby delegates, until it 

orders otherwise, to the Director of the 

Division of Clearing and Intermediary 

Oversight and, separately, to the 

Director of the Division of Market 

Oversight, to be exercised by either 

Director, as appropriate, or by such 

employees of the Commission that 

either Director may designate from time 

to time, with the concurrence of the 

General Counsel or the General 

Counsel’s delegate, the authority to 

approve, pursuant to section 5c(c)(3) of 

the Act and § 40.5 of this part, rules or 

rule amendments of a registered entity 

that: 

(1) Relate to, but do not substantially 

change, the quantity, quality, or other 

delivery specifications, procedures, or 

obligations for delivery, cash settlement, 

or exercise under an agreement, contract 

or transaction approved for trading by 

the Commission; daily settlement 

prices; clearing position limits; 

requirements or procedures for 

governance of a registered entity; 

procedures for transfer trades; trading 

hours; minimum price fluctuations; and 

maximum price limit and trading 

suspension provisions; 

(2) Reflect routine modifications that 

are required or anticipated by the terms 

of the rule of a registered entity; 

(3) Establish or amend speculative 

limits or position accountability 

provisions that are in compliance with 

the requirements of the Act and the 

Commission’s regulations; 

(4) Are in substance the same as a rule 

of the same or another registered entity 

which has been approved previously by 

the Commission pursuant to section 

5c(c)(3) of the Act; 

(5) Are consistent with a specific, 

stated policy or interpretation of the 

Commission; or 

(6) Relate to the listing of additional 

trading months of approved contracts. 

(c) Notwithstanding the provisions of 

this section, the Director of the Division 

of Clearing and Intermediary Oversight 

and, separately, the Director of the 

Division of Market Oversight may 

submit to the Commission for its 

consideration any matter that has been 

delegated pursuant to this section. 

(d) Nothing in this section shall be 

deemed to prohibit the Commission, at 

its election, from exercising any of the 

authority delegated pursuant to this 

section. 

§ 40.8 Availability of public information. 

(a) The following sections of all 

applications to become a designated 

contract market, a swap execution 

facility, a derivatives clearing 

organization, or a swap data repository 

shall be made publicly available: 

Transmittal letter, proposed rules, the 

applicant’s regulatory compliance 

narrative, documents establishing the 

applicant’s legal status, documents 

setting forth the applicant’s corporate 

and governance structure, and any other 

part of the application not covered by a 

request for confidential treatment. 

(b) The following submissions 

provided by an electronic trading 

facility on which significant price 

discovery contracts are traded or 

executed will be public: Rulebook, the 

facility’s regulatory compliance chart, 

documents establishing the facility’s 

legal status, documents setting forth the 

facility’s governance structure, and any 

other parts of the submissions not 

covered by a request for confidential 

treatment (§ 40.8(b) will be removed on 

July 20, 2012). 

(c) A registered entity’s filing of new 

products pursuant to the selfcertification procedures of § 40.2 of this 

part, new products for Commission 

review and approval pursuant to § 40.3 

of this part, new rules and rule 

amendments for Commission review 

and approval pursuant to § 40.4 or 

§ 40.5 of this part, and new rules and 

rule amendments pursuant to the selfcertification procedures of § 40.6 and 

§ 40.10 of this part shall be treated as 

public information unless accompanied 

by a request for confidential treatment. 

If a registered entity files a request for 

confidential treatment, the following 

procedures shall apply: 

(1) A detailed written justification of 

the confidential treatment request must 

be filed simultaneously with the request 

for confidential treatment. The form and 

content of the detailed written 

justification shall be governed by 

§ 145.9 of this chapter; 

(2) All material for which confidential 

treatment is requested must be 

segregated in an Appendix to the 

submission; 

(3) The submission itself must 

indicate that material has been 

segregated and, as appropriate, an 

additional redacted version provided; 

(4) Commission staff may make an 

initial determination with respect to the 

request for confidential treatment 

without regard to whether a request for 

the information has been sought under 

the Freedom of Information Act; 

(5) All requests for confidential 

treatment shall be subject to the process 

provided by § 145.9 of this chapter. 

(6) A submitter of information under 

this part may appeal an adverse 

decision by staff to the Commission’s 

Office of General Counsel. The form and 

content of such appeal shall be 

governed by § 145.9(g) of this chapter. 

(7) The grant of any part of a request 

for confidential treatment under this 

section may be reconsidered if a 

subsequent request under the Freedom 

of Information Act is made for the 

information 

(d) Commission staff will not consider 

confidential treatment requests for 

information that is required to be made 

public under Section 5(d)(7) of the Act. 

The terms and conditions of a product 

submitted to the Commission pursuant 

to § 40.2, § 40.3 or § 40.5 of this part 

shall be made publicly available at the 

time of submission. 


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Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 67299 

§ 40.9 Corporate Governance [Reserved] 

§ 40.10 Special certification procedures for 

submission of rules by systemically 

important derivatives clearing 

organizations. 

(a) Advance notice. A registered 

derivatives clearing organization that 

has been designated by the Financial 

Stability Oversight Council as a 

systemically important derivatives 

clearing organization shall provide 

notice to the Commission not less than 

60 days in advance of any proposed 

change to its rules, procedures, or 

operations that could materially affect 

the nature or level of risks presented by 

the systemically important derivatives 

clearing organization. A notice 

submitted under this section shall be 

subject to the filing requirements of 

§ 40.6(a)(1) and the Web site publication 

requirements of § 40.6(a)(2). 

(1) The notice of a proposed change 

shall provide the information required 

to be submitted under § 40.6(a)(7) and 

shall specifically describe: 

(i) The nature of the change and 

expected effects on risks to the 

systemically important derivatives 

clearing organization, its clearing 

members, or the market; and 

(ii) How the systemically important 

derivatives clearing organization plans 

to manage any identified risks. 

(2) Concurrent with providing the 

Commission with the advance notice or 

any request or other information related 

to the advance notice, the systemically 

important derivatives clearing 

organization shall provide the Board of 

Governors of the Federal Reserve 

System with a copy of such notice, 

request or other information. 

(b) Materiality. The term ‘‘materially 

affect the nature or level of risks 

presented,’’ when used to qualify 

determinations on a change to rules, 

procedures, or operations of a 

systemically important derivatives 

clearing organization, means matters as 

to which there is a reasonable 

possibility that the change could affect 

the performance of essential clearing 

and settlement functions or the overall 

nature or level of risk presented by the 

systemically important derivatives 

clearing organization. Such changes 

may include, but are not limited to, 

changes that materially affect financial 

resources, participant and product 

eligibility, risk management (including 

matters relating to margin and stress 

testing), daily or intraday settlement 

procedures, default procedures, system 

safeguards (business continuity and 

disaster recovery), and governance. If a 

systemically important derivatives 

clearing organization determines that a 

proposed change is not material and 

therefore does not file an advance notice 

under this § 40.10, but the Commission 

determines that the change is material, 

the Commission may require the 

systemically important derivatives 

clearing organization to withdraw the 

proposed change and provide notice 

pursuant to this section. 

(c) Further information. The 

Commission may require the 

systemically important derivatives 

clearing organization to provide any 

further information necessary to assess 

the effect the proposed change would 

have on the nature or level of risks 

associated with the systemically 

important derivatives clearing 

organization’s payment, clearing, or 

settlement activities and the sufficiency 

of any proposed risk management 

techniques. 

(d) Notice of objection. A systemically 

important derivatives clearing 

organization shall not implement a 

change to which the Commission has an 

objection on the grounds that the 

proposed change is not consistent with 

the Act or the Commission’s regulations, 

or the purposes of the Dodd-Frank Act 

or any applicable rules, orders, or 

standards prescribed under Section 

805(a) of the Dodd-Frank Act. The 

Commission will notify the systemically 

important derivatives clearing 

organization in writing of any objection 

regarding the proposed change within 

60 days from the later of: 

(1) The date that the notice of the 

proposed change was received; or 

(2) The date the Commission received 

any further information it had requested 

for consideration of the notice. 

(e) Implementation of change absent 

Commission objection. A systemically 

important derivatives clearing 

organization may implement a change if 

it has not received an objection to the 

proposed change within 60 days from 

the later of: 

(1) The date that the Commission 

received the notice of proposed change; 

or 

(2) The date the Commission received 

any further information it had requested 

for consideration of the notice. 

(f) Extended review. The Commission 

may, during the 60-day review period, 

extend the review period if the 

proposed change raises novel or 

complex issues. A notification by the 

Commission pursuant to this paragraph 

will extend the review for an additional 

60 days. Any extension under this 

paragraph will extend the time periods 

under paragraphs (d) and (e) of this 

section for an additional 60 days. 

(g) Change allowed earlier if notified 

of no objection. A systemically 

important derivatives clearing 

organization may implement a change 

in less than 60 days from the date the 

Commission receives the notice of 

proposed change or the date the 

Commission receives any further 

information it has requested, if the 

Commission notifies the systemically 

important derivatives clearing 

organization in writing that it does not 

object to the proposed change and 

authorizes implementation of the 

change on an earlier date, subject to any 

conditions imposed by the Commission. 

(h) Emergency changes. A 

systemically important derivatives 

clearing organization may implement a 

change that would otherwise require 

advance notice under this section if it 

determines that an emergency exists and 

immediate implementation of the 

change is necessary for the systemically 

important derivatives clearing 

organization to continue to provide its 

services in a safe and sound manner. 

(1) The systemically important 

derivatives clearing organization shall 

provide notice of any such emergency 

change to the Commission as soon as 

practicable, which shall be no later than 

24 hours after implementation of the 

change. 

(2) The notice of an emergency change 

shall: 

(i) Provide the information required 

for advance notice as set forth in 

paragraph (a) of this section; 

(ii) Describe the nature of the 

emergency; and 

(iii) Describe the reason the change 

was necessary for the systemically 

important derivatives clearing 

organization to continue to provide its 

services in a safe and sound manner. 

(3) The Commission may require 

modification or rescission of the 

emergency change if it finds that the 

change is not consistent with the Act or 

the Commission’s regulations, or the 

purposes of the Dodd-Frank Act or any 

applicable rules, orders, or standards 

prescribed under Section 805(a) of the 

Dodd-Frank Act. 

§ 40.11 Review of event contracts based 

on certain excluded commodities. 

(a) Prohibition. A registered entity 

shall not list for trading or clearing on 

or through the registered entity any of 

the following: 

(1) An agreement, contract, 

transaction, or swap based on an 

excluded commodity, as defined in 

Section 1a(19)(iv) of the Act, that 

involves, relates to, or references 

terrorism, assassination, war, gaming, or 

an activity that is unlawful under any 

State or Federal law; or 


jlentini on DSKJ8SOYB1PROD with PROPOSALS
67300 Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 

1Even though ECM–SPDC was eliminated by the 

Dodd-Frank Act, the Commission proposes to retain 

references to this entity in the cover sheet since 

ECM may be allowed to operate until July 20, 2012, 

pursuant to grandfather relief issued by the 

Commission. See 75 FR 56513 (Sept. 16, 2010). 

(2) An agreement, contract, 

transaction, or swap based on an 

excluded commodity, as defined in 

Section 1a(19)(iv) of the Act, which 

involves, relates to, or references an 

activity that is similar to an activity 

enumerated in § 40.11(a)(1) of this part, 

and that the Commission determines, by 

rule or regulation, to be contrary to the 

public interest. 

(b) [Reserved.] 

(c) 90-day review and approval of 

certain event contracts. The 

Commission may determine, based 

upon a review of the terms or conditions 

of a submission under § 40.2 or § 40.3, 

that an agreement, contract, transaction, 

or swap based on an excluded 

commodity, as defined in Section 

1a(19)(iv) of the Act, which may 

involve, relate to, or reference an 

activity enumerated in § 40.11(a)(1) or 

§ 40.11(a)(2), be subject to a 90-day 

review. The 90-day review shall 

commence from the date the 

Commission notifies the registered 

entity of a potential violation of 

§ 40.11(a). 

(1) The Commission shall request that 

a registered entity suspend the listing or 

trading of any agreement, contract, 

transaction, or swap based on an 

excluded commodity, as defined in 

Section 1a(19)(iv) of the Act, which may 

involve, relate to, or reference an 

activity enumerated in § 40.11(a)(1) or 

§ 40.11(a)(2), during the Commission’s 

90-day review period. The Commission 

shall post on the Web site a notification 

of the intent to carry out a 90-day 

review. 

(2) Final determination. The 

Commission shall issue an order 

approving or disapproving an 

agreement, contract, transaction, or 

swap that is subject to a 90-day review 

under § 40.11(c) no later than 90 days 

subsequent to the date that the 

Commission commences review, or if 

applicable, at the conclusion of such 

extended period agreed to or requested 

by the registered entity. 

§ 40.12 Tolling of review period pending 

jurisdictional determination. 

(a) Notice of novel derivative 

products. (1) A registered entity 

certifying, submitting for approval, or 

otherwise filing a proposal to list, trade, 

or clear an agreement, contract, 

transaction, or swap having elements of 

both a security and a derivative, 

including a contract for the sale of a 

commodity for future delivery, may 

provide notice of its proposal to the 

Commission and the Securities and 

Exchange Commission with a statement 

that written notice has been provided to 

both agencies through an appropriate 

means provided in each Commission’s 

regulations. 

(2) If concurrent notice is not 

provided pursuant to § 40.12(a)(1), the 

Commission shall notify the Securities 

and Exchange Commission of the 

registered entity’s submission of a novel 

derivative product and accompany such 

notice with a copy of the submission. 

The Commission shall determine 

whether a particular submission is a 

novel derivative product requiring 

notice to the Securities and Exchange 

Commission not later than five business 

days subsequent to the date that the 

registered entity submits the product for 

Commission review. 

(b) Tolling of review period. Upon 

receipt of a request for a jurisdictional 

determination, pursuant to Section 

718(a)(2) of the Dodd-Frank Act, by the 

Commission or the Securities and 

Exchange Commission, the product 

certification or the approval review 

period for the submitted agreement, 

contract, transaction, or swap shall be 

tolled until a final determination order 

is issued. 

(1) The Commission will provide the 

registered entity with a written notice of 

stay pending issuance of a final 

determination order by the Commission 

or the Securities and Exchange 

Commission. 

(2) The submission review period will 

resume upon the Commission’s or the 

Securities and Exchange Commission’s 

issuance of a final determination order 

finding that the Commission has 

jurisdiction over the submission. 

(3) Determination order. A final 

determination, for purposes of § 40.12(b) 

of this part, shall be a determination 

order issued by the Commission or the 

Securities and Exchange Commission 

pursuant to Section 718(a)(3) of the 

Dodd-Frank Act. 

(c) Judicial review of determination 

order. The filing of a petition by a 

complaining Commission, pursuant to 

Section 718(b) of the Dodd-Frank Act, 

shall operate as a stay of the agency 

order. 

(1) The stay shall remain in effect 

until the date on which the United 

States Court of Appeals for the District 

of Columbia Circuit issues a final 

determination pursuant to Section 

718(b)(4) of the Dodd-Frank Act, or until 

such date that there is a final 

disposition of an appeal of that 

determination. 

(2) The submission review period 

shall resume upon issuance of a final 

determination, as described in 

§ 40.12(c)(1), that the Commission has 

jurisdiction over the submission. 

Appendix A to Part 40—Schedule of 

Fees 

(a) Applications for product approval. Each 

application for product approval under § 40.3 

must be accompanied by a check or money 

order made payable to the Commodity 

Futures Trading Commission in an amount to 

be determined annually by the Commission 

and published in the Federal Register. 

(b) Checks and applications should be sent 

to the attention of the Office of the 

Secretariat, Commodity Futures Trading 

Commission, Three Lafayette Centre, 1155 

21st Street, NW., Washington, DC 20581. No 

checks or money orders may be accepted by 

personnel other than those in the Office of 

the Secretariat. 

(c) Failure to submit the fee with an 

application for product approval will result 

in return of the application. Fees will not be 

returned after receipt. 

Appendix B to Part 40—[Reserved] 

Appendix C to Part 40—[Reserved] 

Appendix D to Part 40—Submission 

Cover Sheet and Instructions 

(a) A properly completed submission cover 

sheet shall accompany all rule and product 

submissions submitted electronically by a 

registered entity to the Secretary of the 

Commodity Futures Trading Commission, at 

submissions@cftc.gov in a format specified by 

the Secretary of the Commission. A properly 

completed submission cover sheet shall 

include all of the following: 

1. Identifier Code (optional)—A registered 

entity Identifier Code at the top of the cover 

sheet, if applicable. Such codes are 

commonly generated by registered entities to 

provide an identifier that is unique to each 

filing (e.g., NYMEX Submission 03–116). 

2. Date—The date of the filing. 

3. Organization—The name of the 

organization filing the submission (e.g., 

CBOT). 

4. Filing as a—Check in the appropriate 

box indicating that the rule or product is 

being submitted by a designated contract 

market (DCM), derivatives clearing 

organization (DCO), swap execution facility 

(SEF), or swap data repository (SDR), 

electronic trading facility with a significant 

price discovery contract (the term will be 

removed on July 20, 2012).1

5. Type of Filing—An indication as to 

whether the filing is a new rule, rule 

amendment or new product. The registered 

entity should check the appropriate box to 

indicate the applicable category under that 

heading. 

6. Rule Numbers—For rule filings, the rule 

number(s) being adopted or modified in the 

case of rule amendment filings. 

7. Description—For rule or rule 

amendment filings a description of the new 

rule or rule amendment, including a 

discussion of its expected impact on the 


jlentini on DSKJ8SOYB1PROD with PROPOSALS
Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules 67301 

1 17 CFR 145.9. 

2See Dodd-Frank Wall Street Reform and 

Consumer Protection Act, Public Law No. 111–203, 

124 Stat. 1376 (2010). The text of the Dodd-Frank 

Act may be accessed at http://www.cftc.gov./ 

LawRegulation/OTCDERIVATIVES/index.htm. 

3Pursuant to Section 701 of the Dodd-Frank Act, 

Title VII may be cited as the ‘‘Wall Street 

Transparency and Accountability Act of 2010.’’ 

4 7 U.S.C. 1 et seq. (2006). 

registered entity, market participants, and the 

overall market. The narrative should describe 

the substance of the submission with enough 

specificity to characterize all material aspects 

of the filing. 

(b) Other Requirements—A submission 

shall comply with all applicable filing 

requirements for proposed rules, rule 

amendments, or products. The filing of the 

submission cover sheet does not obviate the 

registered entity’s responsibility to comply 

with applicable filing requirements (e.g., 

rules submitted for Commission approval 

under § 40.5 must be accompanied by an 

explanation of the purpose and effect of the 

proposed rule along with a description of any 

substantive opposing views). 

(c) Checking the box marked ‘‘confidential 

treatment requested’’ on the Submission 

Cover Sheet does not obviate the submitter’s 

responsibility to comply with all applicable 

requirements for requesting confidential 

treatment in § 40.8 and, where appropriate, 

§ 145.9 of this chapter, and will not 

substitute for notice or full compliance with 

such requirements. 

Issued in Washington, DC, on October 26, 

2010, by the Commission. 

David A. Stawick, 

Secretary of the Commission. 

Note: The following attachment will not 

appear in the Code of Federal Regulations. 

Statement of Chairman Gary Gensler 

Provisions Common to Registered Entities 

October 26, 2010 

I support the proposal to publish for 

comment the proposed rule on the 

Commission’s process for certification and 

approval of rules and new products for 

designated contract markets (DCMs), 

derivatives clearing organizations (DCOs), 

swap execution facilities (SEFs) and swap 

data repositories (SDRs). The Dodd-Frank Act 

establishes enhanced procedures for 

Commission review and certification of new 

rules, rule amendments and products. 

Today’s rule gives important procedural 

guidance to registered entities on how to 

comply with Congress’s mandate for the 

Commission’s review of new rules and 

products. 

[FR Doc. 2010–27533 Filed 11–1–10; 8:45 am] 

BILLING CODE 6351–01–P 

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Chapter I 

RIN Number 3038–AD26 

Antidisruptive Practices Authority 

Contained in the Dodd-Frank Wall 

Street Reform and Consumer 

Protection Act 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Advance notice of proposed 

rulemaking; request for comments. 

SUMMARY: The Dodd-Frank Wall Street 

Reform and Consumer Protection Act 

(the ‘‘Dodd-Frank Act’’) amends section 

4c(a) of the Commodity Exchange Act 

(‘‘CEA’’) in section 747 to expressly 

prohibit certain trading practices 

deemed disruptive of fair and equitable 

trading. The Commodity Futures 

Trading Commission (‘‘Commission’’) is 

issuing this advance notice of proposed 

rulemaking and request for public 

comment to assist the Commission in 

promulgating such rules and regulations 

to meet the requirements of section 747. 

DATES: Comments must be in writing 

and received by January 3, 2011. 

ADDRESSES: You may submit comments, 

identified by RIN number AD26, by any 

of the following methods: 

• Agency Web site, via its Comments 

Online process: Comments may be 

submitted to: http://comments.cftc.gov. 

Follow the instructions for submitting 

comments on 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. 

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 is exempt from disclosure under the 

Freedom of Information Act, a petition 

for confidential treatment of the exempt 

information may be submitted according 

to the established procedures in CFTC 

Regulation 145.9.1

The Commission reserves the right, 

but shall have no obligation, to review, 

pre-screen, 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 the Freedom of Information Act. 

FOR FURTHER INFORMATION CONTACT: 

Robert Pease, Counsel to the Director of 

Enforcement, 202–418–5863, 

rpease@cftc.gov, or Mark D. Higgins, 

Counsel to the Director of Enforcement, 

202–418–5864, mhiggins@cftc.gov, 

Division of Enforcement, Commodity 

Futures Trading Commission, Three 

Lafayette Centre, 1151 21st Street, NW., 

Washington, DC 20581. 

SUPPLEMENTARY INFORMATION: 

I. Background 

On July 21, 2010, President Obama 

signed the Dodd-Frank Wall Street 

Reform and Consumer Protection Act 

(‘‘Dodd-Frank Act’’).2 Title VII of the 

Dodd-Frank Act 3 amended the 

Commodity Exchange Act (‘‘CEA’’) 4 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 

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. 

Section 747 of the Dodd-Frank Act 

amends section 4c(a) of the CEA to add 

a new section entitled ‘‘Disruptive 

Practices.’’ 

II. Solicitation for Comments About 

Disruptive Practices Pursuant to DoddFrank Act Section 747 

In section 747 of the Dodd-Frank Act, 

Congress amended the CEA to expressly 

prohibit certain trading practices that it 

determined were disruptive of fair and 

equitable trading. Dodd-Frank section 

747 amends section 4c(a) of the CEA to 

make it unlawful for any person to 

engage in any trading, practice, or 

conduct on or subject to the rules of a 

registered entity that— 

(A) violates bids or offers; 

(B) demonstrates intentional or 

reckless disregard for the orderly 

execution of transactions during the 

closing period; or 

(C) is, is of the character of, or is 

commonly known to the trade as, 


jlentini on DSKJ8SOYB1PROD with PROPOSALS