Federal Register / Vol. 72, No. 111 / Monday, June 11, 2007 / Notices 32079 

1 72 FR 27091 (May 14, 2007). 

2 7 U.S.C. 1 et seq. 

3 15 U.S.C. 78f. 

4 15 U.S.C. 78q–1. 

5 7 U.S.C. 7a–1. 

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

Dated: June 4, 2007. 

David M. Spooner, 

Assistant Secretary for Import 

Administration. 

[FR Doc. E7–11249 Filed 6–8–07; 8:45 am] 

BILLING CODE 3510–DS–S 

DEPARTMENT OF COMMERCE 

International Trade Administration 

Export Trade Certificate of Review 

ACTION: Notice of application to amend 

the Export Trade Certificate of Review 

ssued to the American Sugar Alliance. 

SUMMARY: Export Trading Company 

Affairs (‘‘ETCA’’) of the International 

Trade Administration, Department of 

Commerce, has received an application 

to amend an Export Trade Certificate of 

Review (‘‘Certificate’’). This notice 

summarizes the proposed amendment 

and requests comments relevant to 

whether the Certificate should be 

issued. 

FOR FURTHER INFORMATION CONTACT: 

Jeffrey Anspacher, Director, Export 

Trading Company Affairs, International 

Trade Administration, (202) 482–5131 

(this is not a toll-free number) or e-mail 

at oetca@ita.doc.gov. 

SUPPLEMENTARY INFORMATION: Title III of 

the Export Trading Company Act of 

1982 (15 U.S.C. 4001–21) authorizes the 

Secretary of Commerce to issue Export 

Trade Certificates of Review. An Export 

Trade Certificate of Review protects the 

holder and the members identified in 

the Certificate from state and federal 

government antitrust actions and from 

private treble damage antitrust actions 

for the export conduct specified in the 

Certificate and carried out in 

compliance with its terms and 

conditions. Section 302(b)(1) of the 

Export Trading Company Act of 1982 

and 15 CFR 325.6(a) require the 

Secretary to publish a notice in the 

Federal Register identifying the 

applicant and summarizing its proposed 

export conduct. 

Request for Public Comments 

Interested parties may submit written 

comments relevant to the determination 

of whether an amended Certificate 

should be issued. If the comments 

include any privileged or confidential 

business information, it must be clearly 

marked and a nonconfidential version of 

the comments (identified as such) 

should be included. Any comments not 

marked as privileged or confidential 

business information will be deemed to 

be nonconfidential. An original and five 

(5) copies, plus two (2) copies of the 

nonconfidential version, should be 

submitted no later than 20 days after the 

date of this notice to: Export Trading 

Company Affairs, International Trade 

Administration, U.S. Department of 

Commerce, Room 7021B, Washington, 

DC 20230. Information submitted by any 

person is exempt from disclosure under 

the Freedom of Information Act (5 

U.S.C. 552). However, nonconfidential 

versions of the comments will be made 

available to the applicant if necessary 

for determining whether or not to issue 

the Certificate. Comments should refer 

to this application as ‘‘Export Trade 

Certificate of Review, American Sugar 

Alliance, application number 06– 

A0003.’’ 

The American Sugar Alliance’s 

(‘‘ASA’’) original Certificate was issued 

on March 16, 2007 (72 FR 14081, March 

26, 2007). A summary of the current 

application for an amendment follows. 

Summary of the Application: 

Applicant: American Sugar Alliance 

(‘‘ASA’’), 2111 Wilson Boulevard, Suite 

600, Arlington, VA 22201. 

Contact: Robert C. Cassidy, Jr., 

Counsel to ASA, Telephone: (202) 663– 

6740. 

Application No.: 06–A0003. 

Date Deemed Submitted: May 29, 

2007. 

Proposed Amendment: ASA seeks to 

amend its Certificate to: 

1. Add the following company as a 

new ‘‘Member’’ of the Certificate within 

the meaning of section 325.2(l) of the 

Regulations (15 CFR 325.2(l)): 

Americane Sugar Refining LLC, Taylor, 

MI. 

2. Revise the Export Trade Activities 

and Methods of Operation. The 

proposed changes, shown as 

underscored text, are as follows: 

CPA Administration 

The ASA will allocate all CPAs at one 

time. ASA may reallocate CPAs if a new 

Producer becomes a Member. In the 

event that any CPAs are returned to 

ASA for any reason, ASA will reallocate 

those CPAs among interested Producers. 

The allocation, and any reallocations, 

will be completed before December 16, 

2007. 

Information Collection and Exchange 

ASA may ask Producers individually 

for their production capacity figures for 

2006 for the purposes of allocating the 

CPAs. Producers may supply that 

information to ASA, and ASA may 

allocate and reallocate CPAs to 

Producers based on this information. 

Dated: June 5, 2007. 

Jeffrey Anspacher, 

Director, Export Trading Company Affairs. 

[FR Doc. E7–11145 Filed 6–8–07; 3:21 pm] 

BILLING CODE 3510–DR–P 

COMMODITY FUTURES TRADING 

COMMISSION 

Order Exempting the Trading and 

Clearing of Certain Credit Default 

Products Pursuant to the Exemptive 

Authority in Section 4(c) of the 

Commodity Exchange Act (‘‘CEA’’) 

AGENCY: Commodity Futures Trading 

Commission 

ACTION: Final order. 

SUMMARY: On May 14, 2007, the 

Commodity Futures Trading 

Commission (‘‘CFTC’’ or the 

‘‘Commission’’) published for pubic 

comment in the Federal Register 1 a 

proposal to exempt for the CEA 2 the 

trading and clearing of certain products 

called credit default options (‘‘CDOs’’) 

and credit default basket options 

(‘‘CDBOs’’) that are proposed to be 

traded on the Chicago Board Options 

Exchange (‘‘CBOE’’), a natioal securities 

exchange registered under Section 6 of 

the Securities Exchange Act of 1934 

(‘‘1934 Act’’),3 and cleared through the 

Options Clearing Corporation (‘‘OCC’’), a 

registered securities clearing agency 

registered under Section 17A of the 

1934 Act,4 and Derivatives Clearing 

Organization registered under Section 

5b of the CEA.5 The proposed order was 

preceded by a request from OCC to 

approve rules that would permit it to 

clear these CDOs and CDBOs in its 

capacity as a registered securities 

clearing agency. OCC’s request 

presented novel and complex issues of 

jurisdiction and the Commission 

determined that an order exempting the 

trading and clearing of such instruments 

from pertinent requirements of the CEA 

may be appropriate. The Commission 

has reviewed the comments made in 

response to its proposal and the entire 

record in this matter and has 

determined to issue an order exempting 

the trading and clearing of these 

contracts from the CEA. 

Authority for this exemption is found 

in Section 4(c) of the CEA.6

DATES: Effective Date: June 5, 2007. 

FOR FURTHER INFORMATION CONTACT: John 

C. Lawton, Deputy Director and Chief 

Counsel, 202–418–5480; 

jlawton@cftc.gov, Robert B. Wasserman, 

Associate Director, 202–418–7719, 

lgregory*@cftc.gov, Division of Clearing 

and Intermediary Oversight, Commodity 

Futures Trading Commission, Three 


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32080 Federal Register / Vol. 72, No. 111 / Monday, June 11, 2007 / Notices 

7 7 U.S.C. 7a–1. 

8 15 U.S.C. 78q–1. 

9 15 U.S.C. 78f. 

10See Release No. 34–55251, 72 FR 7091 (Feb. 14, 

2007). 

11See SR–CBOE–2007–026. 

12 7 U.S.C. 7a–2(c), 17 CFR §§ 39.4(a), 40.5. 

13See SR–OCC–2007–01 A–1; SR–OCC–2007–06. 

OCC has filed identical proposed rule changes with 

the SEC. 

14HOUSE CONF. REPORT ON NO. 102–978, 

1992 U.S.C.C.A.N. 3179, 3213 (‘‘4(c) Conf. Report’’). 

15 72 FR 27091 (May 14, 2007). 

16 In this regard, consistent with the legislative 

history to Section 4(c) of the CEA, the Commission 

is not making a finding that CDOs and CDBO are 

(or are not) subject to the CEA. 

17CEA Section 3(b), 7 U.S.C. 5(b) (emphasis 

added. See also CEA Section 4(c)(1), 7 U.S.C. 6(c)(1) 

(purpose of exemptions is ‘‘to promote responsible 

economic or financial innovation and fair 

competition.’’) 

Lafayette Centre, 1151 21st, NW., 

Washington, DC 20581. 

SUPPLEMENTARY INFORMATION: 

Introduction 

The OCC is both a Derivatives 

Clearing Organization (‘‘DCO’’) 

registered pursuant to Section 5b of the 

CEA,7 and a securities clearing agency 

registered pursuant to Section 17A of 

the 1934 Act.8 The CBOE is a national 

securities exchange registered as such 

under Section 6 of the 1934 Act.9

CBOE has filed with the Securities 

and Exchange Commission (‘‘SEC’’) 

proposed rule changes to provide for the 

listing and trading on CBOE of cashsettled products characterized by CBOE 

as options based on credit events in one 

or more debt securities of specified 

‘‘Reference Entities.’’ 10 These products 

are referred to as Credit Default Options 

(‘‘CDOs’’), and would pay the holder a 

specified amount upon the occurrence, 

as determined by CBOE, of a ‘‘Credit 

Event,’’ defined to mean an ‘‘Event of 

Default’’ on any debt security issued or 

guaranteed by a specified ‘‘Reference 

Entity.’’ 

CBOE has also filed with the SEC 

proposed rule changes to provide for the 

listing and trading on CBOE of products 

called Credit Default Basket Options 

(‘‘CDBOs’’).11 These are similar in 

concept to CDOs, except that a CDBO 

covers more than one Reference Entity. 

For each individual Reference Entity, a 

notional value (a fraction of the 

aggregate Notional Face Value of the 

basket) and a recovery rate is specified. 

CDBOs may be of the multiple-payout 

variety, or of the single-payout variety, 

where a payout occurs only the first 

time a Credit Event is confirmed with 

respect to a Reference Entity prior to 

expiration. 

OCC has filed with the CFTC, 

pursuant to Section 5c(c) of the CEA 

and Commission Regulations 39.4(a) 

and 40.5 thereunder,12 requests for 

approval of rules and rule amendments 

that would enable OCC to clear and 

settle these CDOs and CDBOs in its 

capacity as a registered securities 

clearing agency (and not in its capacity 

as a DCO).13 Section 5c(c)(3) provides 

that the CFTC must approve any such 

rules and rule amendments submitted 

for approval unless it finds that the 

rules or rule amendments would violate 

the CEA. 

The request for approval concerning 

the CDO product was filed effective 

March 8, 2007. On April 23, 2007, the 

review period was extended pursuant to 

Regulation 40.5(c) until June 6, 2007, on 

the ground that the CDOs ‘‘raise novel or 

complex issues, including the nature of 

the contract, that require additional time 

for review.’’ The request for approval 

concerning the CDBO product was filed 

effective April 23, 2007. 

II. Section 4(c) of the Commodity 

Exchange Act 

Section 4(c)(1) of the CEA empowers 

the CFTC to ‘‘promote responsible 

economic or financial innovation and 

fair competition’’ by exempting any 

transaction or class of transactions from 

any of the provisions of the CEA 

(subject to exceptions not relevant here) 

where the Commission determines that 

the exemption would be consistent with 

the public interest. The Commission 

may grant such an exemption by rule, 

regulation or order, after notice and 

opportunity for hearing, and may do so 

on application of any person or on its 

own initiative. In enacting Section 4(c), 

Congress noted that the goal of 

provision ‘‘is to give the Commission a 

means of providing certainty and 

stability to existing and emerging 

markets so that financial innovation and 

market development can proceed in an 

effective and competitive manner.’’ 14 As 

noted in the proposing release,15 In 

granting an exemption, the CFTC need 

not find that the CDOs and CDBOs are 

(or are not) subject to the CEA. 

Section 4(c)(2) provides that the 

Commission may grant exemptions only 

when it determines that the 

requirements for which an exemption is 

being provided should not be applied to 

the agreements, contracts or transactions 

at issue, and the exemption is consistent 

with the public interest and the 

purposes of the CEA; that the 

agreements, contracts or transactions 

will be entered into solely between 

appropriate persons; and that the 

exemption will not have a material 

adverse effect on the ability of the 

Commission or any contract market to 

discharge its regulatory or selfregulatory responsibilities under the 

CEA. 

In the May 14, 2007 Federal Register 

release, the Commission requested 

public comment on the matters 

discussed above and all issues raised by 

its proposed exemptive order. 

III. Comment Letters 

The Commission received four 

comment letters. The Chicago 

Mercantile Exchange (‘‘CME’’) stated that 

it ‘‘applauds’’ the Commission’s 

proposal to promote innovation but that 

it believed some issues should be 

addressed before a final order is issued. 

CME argued that: (1) It would be unfair 

for OCC and CBOE to receive exemptive 

relief yet continue to oppose CME’s 

efforts to list competitive products; (2) 

the Commission should not accept 

OCC’s and CBOE’s characterization of 

the products as options; (3) there are 

strong arguments that the products are 

based on commodities, not securities; 

and (4) it is not proper to define 

‘‘appropriate persons’’ in terms of the 

status of the person’s intermediary. 

OCC focused on the ‘‘appropriate 

persons’’ issue. OCC argued that in light 

of the customer suitability rules and the 

overall federal securities regulatory 

framework, the products would be 

limited to ‘‘appropriate persons.’’ 

The Chicago Board of Trade ‘‘CBOTS’’) 

suggested that characterizing the CDOs 

and CDBOs as ‘‘novel instruments’’ 

should be repudiated or clarified 

because it could have implications 

under the patent laws. 

IV. Findings and Conclusions 

After considering the complete record 

in this matter, including the comments 

received, the Commission has 

determined that the requirements of 

Section 4(c) have been met.16 First, the 

exemption is consistent with the public 

interest and with the purposes of the 

CEA. The purposes of the CEA include 

‘‘promot[ing] responsible innovation and 

fair competition among boards of trade, 

other markets and market 

participants.’’ 17 With respect to the 

competitive issue raised by CME in its 

comment letter, the Commission 

believes that an exemptive order in 

response to OCC’s request for rule 

approval is the best way to promote 

responsibile innovation and fair 

competition among futures markets and 

securities markets. In cases such as this 

one where innovative products come 

close to the jurisdictional line between 

commodities and securities, rather than 

attempting to draw that line with 

precision with regard to the CBOE 

products and thereby potentially 


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Federal Register / Vol. 72, No. 111 / Monday, June 11, 2007 / Notices 32081 

18Under Section 4(c) of the CEA, the Commission 

need not resolve whether, as CME argues in its 

comment letter, these products are based on 

commodities and not securities, or, as CBOE argues 

in its comment letter, these products are securities 

subject to the securities laws. Nor need the 

Commission determine, as CME urges, whether the 

products are properly characterized as options. 

Finally, the Commission notes that its references to 

the novelty of the issues raised by these products 

refer to issues under the CEA and were not 

intended to be applicable in any matter relating to 

patent or intellectual property law. 

19 44 U.S.C. 3507(d). 20 7 U.S.C. 19(a). 

imposing litigation costs on both the 

private sector and the public sector, it 

may be more efficient and is a proper 

use of Section 4(c) exemptive authority 

to permit, without compromising the 

public interest, the products to trade on 

both sides of the line and let 

competitive forces determine which 

venue is successful. 

Second, the CDOs and CDBOs would 

be entered into solely between 

appropriate persons. This issue was 

discussed by both CME and OCC in 

their respective comment letters. 

Section 4(c)(3) includes within the term 

‘‘appropriate persons’’ a number of 

specified categories of persons, but also 

in subparagraph (K), ‘‘such other 

persons that the Commission 

determines to be appropriate in light of 

* * * the applicability of appropriate 

regulatory protections.’’ (Emphasis 

added.) These products will be traded 

on a regulated exchange. CBOE, OCC, 

and their members who will 

intermediate these transactions, are 

subject to extensive and detailed 

oversight by the SEC and, in the case of 

the intermediaries, the securities selfregulatory organizations. It should be 

noted that CME has listed or will list 

comparable products and has not 

limited access to its markets to specified 

categories of persons. In light of where 

the products will be traded, the 

regulatory protections available under 

the securities laws, and the goal of 

promoting fair competition, these 

products will be traded by appropriate 

persons. 

Third, the exemption would not have 

a material adverse effect on the ability 

of the Commission or any designated 

contract market to carry out their 

regulatory responsibilities under the 

CEA. There is no reason to believe that 

granting an exemption here would 

interfere with the Commission’s or a 

designated contract market’s ability to 

oversee the trading of similar products 

on a designated contract market or 

otherwise to carry out their duties. None 

of the comment letters received 

addressed this issue.18

Therefore, upon due consideration, 

pursuant to its authority under Section 

4(c) of the CEA, the Commission hereby 

issues this Order and exempts the 

trading and clearing of CDOs and 

CDBOs to be listed and traded on CBOE 

and cleared through OCC as a securities 

clearing agency from the CEA. This 

Order is contingent upon the approval 

by the SEC, pursuant to Section 19(b) of 

the 1934 Act, of CBOE and OCC rules 

to permit the listing and trading of 

CDOs and CDBOs on CBOE. This Order 

is subject to termination or revision, on 

a prospective basis, if the Commission 

determines upon further information 

that this exemption is not consistent 

with the public interest. If the 

commission believes such exemption 

becomes detrimental to the public 

interest, the Commission may revoke 

this Order on its own motion. 

V. Related Matters 

A. Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

(‘‘PRA’’) 19 imposes certain requirements 

on federal agencies (including the 

Commission) in connection with their 

conducting or sponsoring any collection 

of information as defined by the PRA. 

The order would not require a new 

collection of information from any 

entities that would be subject to the 

order. 

B. Cost-Benefit Analysis 

Section 15(a) of the CEA, as amended 

by Section 119 of the Commodity 

Futures Modernization Act of 2000 

(‘‘CFMA’’),20 requires the Commission to 

consider the costs and benefits of its 

action before issuing an order under the 

CEA. By its terms, Section 15(a) as 

amended does not require the 

Commission to quantify the costs and 

benefits of an order or to determine 

whether the benefits of the order 

outweigh its costs. Rather, Section 15(a) 

simply requires the Commission to 

‘‘consider the costs and benefits’’ of its 

action. 

Section 15(a) of the CEA further 

specifies that costs and benefits shall be 

evaluated in light of five broad areas of 

market and public concern: protection 

of market participants and the public; 

efficiency, competitiveness, and 

financial integrity of futures markets; 

price discovery; sound risk management 

practices; and other public interest 

considerations. Accordingly, the 

Commission could in its discretion give 

greater weight to any one of the five 

enumerated areas and could in its 

discretion determine that, 

notwithstanding its costs, a particular 

order was necessary or appropriate to 

protect the public interest or to 

effectuate any of the provisions or to 

accomplish any of the purposes of the 

CEA. 

The order issued today is expected to 

facilitate market competition. The 

commission has considered the costs 

and benefits of the order in light of the 

specific provisions of Section 15(a) of 

the CEA, as follows: 

1. Protection of market participants 

and the public. Protections for market 

participants and the public exist in that 

CBOE, OCC and their members who will 

intermediate CDOs and CDBOs are 

subject to extensive oversight by the 

SEC and, in the case of intermediaries, 

securities self-regulatory organizations. 

2. Efficiency, competition, and 

financial integrity. The exemptive order 

may enhance market efficiency and 

competition since it could encourage 

potential trading of CDOs and CDBOs 

on markets other than designated 

contract markets. Financial integrity 

will not be impaired since the CDOs and 

CDBOs will be cleared by OCC, a DCO 

and SEC-registered clearing agency, and 

intermediated by SEC-registered brokerdealers. 

3. Price discovery. Price discovery 

may be enhanced through market 

competition. 

4. Sound risk management practices. 

OCC has described appropriate riskmanagement practices that it will follow 

in connection with the clearing of CDOs 

and CDBOs. 

5. Other public interest 

considerations. The exemptive order 

may encourage development of credit 

derivative products through market 

competition without unnecessary 

regulatory burden. 

The Commission requested comment 

on its application of these factors in the 

proposing release. No comments were 

received. 

After considering these factors, the 

Commission has determined to issue 

this Order. 

* * * * * 

Issued in Washington, DC, on June 5, 2007 

by the Commission. 

Eileen A. Donovan, 

Acting Secretary of the Commission. 

[FR Doc. 07–2878 Filed 6–8–07; 8:45 am] 

BILLING CODE 6351–01–M 

CORPORATION FOR NATIONAL AND 

COMMUNITY SERVICE 

Proposed Information Collection; 

Comment Request 

AGENCY: Corporation for National and 

Community Service. 


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