61432 Federal Register / Vol. 88, No. 171 / Wednesday, September 6, 2023 / Proposed Rules 

1 5 U.S.C. 552. 

2Regulation 145.9. Commission regulations 

referred to in this release are found at 17 CFR 

chapter I (2021), and are accessible on the 

Commission’s website at https://www.cftc.gov/ 

LawRegulation/CommodityExchangeAct/index.htm. 

3Section 1a(40) of the CEA defines the term 

registered entity to include DCMs, DCOs, SEFs and 

SDRs. 

4See CEA section 5c(c)(1); 17 CFR 40.2 and 40.6. 

But see § 40.4 (requiring that a DCM submit for 

Commission approval any rule that would 

materially change a term or condition of a contract 

for future delivery in an agricultural commodity 

enumerated in CEA section 1a(9) or of an option on 

such contract or commodity). 

5See CEA section 5c(c)(1); 17 CFR 40.3 and 40.5. 

6See § 40.8. Regulation § 40.8 is not the subject 

of this rulemaking. 

7See § 40.10. 

8Provisions Common to Registered Entities, 76 

FR 44776 (July 27, 2011) (the ‘‘2011 Final Rule’’). 

In 2021, the Commission made targeted, conforming 

amendments to § 40.1(j)(1)(vii) and (j)(2)(vii) (the 

portion of the definition of ‘‘terms and conditions’’ 

that relates to position limits) to conform this text 

to reflect the position limits amendments adopted 

by the Commission at that time. See Position Limits 

for Derivatives, 86 FR 3236 (January 14, 2021). 

Additionally, in 2015, the Commission removed 

from § 40.8 and appendix D to part 40 all references 

to electronic trading facilities on which significant 

price discovery contracts are traded or executed to 

reflect the fact that the Dodd-Frank Act eliminated 

these facilities from the CEA. See Repeal of the 

Exempt Commercial Market and Exempt Board of 

Trade Exemptions, 80 FR 59575 (October 2, 2015). 

9As discussed below in note 10, the Commission 

also proposes to make two conforming, nonsubstantive changes to update the citations 

referencing the definition of emergency located in 

the guidance section regarding Emergency 

Authority of appendix B for each of parts 37 and 

38. Regulation § 40.11 relates to the Commission’s 

review of certain event contracts and is not the 

subject of this rulemaking. 

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Parts 37, 38, and 40 

RIN 3038–AF28 

Provisions Common to Registered 

Entities 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Commodity Futures 

Trading Commission (‘‘Commission’’) is 

proposing to amend the Commission’s 

regulations under the Commodity 

Exchange Act (‘‘CEA’’ or ‘‘Act’’) that 

govern how registered entities submit 

self-certifications, and requests for 

approval, of their rules, rule 

amendments, and new products for 

trading and clearing, as well as the 

Commission’s review and processing of 

such submissions. The proposed 

amendments are intended to clarify, 

simplify and enhance the utility of those 

regulations for market participants and 

the Commission. 

DATES: Comments must be received on 

or before November 6, 2023. 

ADDRESSES: You may submit comments, 

identified by RIN 3038–AF28, by any of 

the following methods: 

• CFTC Comments Portal: https://

comments.cftc.gov. Select the ‘‘Submit 

Comments’’ link for this rulemaking and 

follow the instructions on the Public 

Comment Form. 

• Mail: Send to Christopher 

Kirkpatrick, Secretary of the 

Commission, Commodity Futures 

Trading Commission, Three Lafayette 

Centre, 1155 21st Street NW, 

Washington, DC 20581. 

• Hand Delivery/Courier: Follow the 

same instructions as for Mail, above. 

Please submit your comments using 

only one of these methods. To avoid 

possible delays with mail or in-person 

deliveries, submissions through the 

CFTC Comments Portal are encouraged. 

All comments must be submitted in 

English, or if not, accompanied by an 

English translation. Comments will be 

posted as received to https://

comments.cftc.gov. You should submit 

only information that you wish to make 

available publicly. If you wish the 

Commission to consider information 

that may be exempt from disclosure 

under the Freedom of Information Act 

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

treatment of the exempt information 

may be submitted according to the 

procedures established in § 145.9 of the 

Commission’s regulations.2

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 https://comments.cftc.gov that it 

may deem to be inappropriate for 

publication, such as obscene language. 

All submissions that have been redacted 

or removed that contain comments on 

the merits of the rulemaking will be 

retained in the public comment file and 

will be considered as required under the 

Administrative Procedure Act and other 

applicable laws, and may be accessible 

under FOIA. 

FOR FURTHER INFORMATION CONTACT: 

Rachel Kaplan Reicher, Senior Special 

Counsel, rreicher@cftc.gov, 202–418– 

6233, Steven Benton, Industry 

Economist, sbenton@cftc.gov, 202–418– 

5617, and Nancy Markowitz, Deputy 

Director, nmarkowitz@cftc.gov, 202– 

418–5453, Division of Market Oversight, 

and Eileen Chotiner, echotiner@cftc.gov, 

202–418–5467, Division of Clearing and 

Risk, Commodity Futures Trading 

Commission, Three Lafayette Centre, 

1151 21st Street NW, Washington, DC 

20581. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Background 

II. Proposed Regulations 

III. Related Matters 

A. Regulatory Flexibility Act 

B. Paperwork Reduction Act 

C. Cost Benefit Considerations 

I. Background 

Part 40 of the Commission’s 

regulations implements section 5c(c) of 

the CEA and sets forth provisions that 

are common to registered entities, 

including designated contract markets 

(‘‘DCMs’’), derivatives clearing 

organizations (‘‘DCOs’’), swap execution 

facilities (‘‘SEFs’’) and swap data 

repositories (‘‘SDRs’’).3 Part 40 

establishes requirements and 

procedures for registered entities to 

submit their rules and products to the 

Commission prior to implementing 

rules, listing products for trading, or 

accepting products for clearing. Part 40 

generally provides two means for 

registered entities to submit rules and 

products to the Commission. Typically, 

a registered entity elects to certify that 

their product or rule complies with the 

CEA and the Commission regulations.4

This process is known as selfcertification. Alternatively, a registered 

entity may seek Commission approval of 

the product or rule.5

The part 40 regulations also provide 

the Commission’s procedures for review 

(including approval or non-approval) of 

such product and rule submissions. The 

part 40 regulations prescribe certain 

information that must be made publicly 

available in connection with an 

application to become a DCM, SEF, DCO 

or SDR and when registered entities file 

new products, new rules and rule 

amendments.6 Additionally, the 

regulations include special certification 

provisions for certain rules submitted by 

systemically important DCOs 

(‘‘SIDCOs’’).7

With two exceptions, the Commission 

last amended the part 40 regulations in 

2011,8 in connection with implementing 

various amendments the Dodd-Frank 

Wall Street Reform and Consumer 

Protection Act (‘‘Dodd-Frank Act’’) 

made to the CEA. Based on the 

Commission’s experience applying the 

part 40 regulations over the ensuing 

years, the Commission is proposing 

amendments that are intended to clarify, 

simplify and enhance the utility of the 

part 40 regulations for registered entities 

and the Commission.9


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Federal Register / Vol. 88, No. 171 / Wednesday, September 6, 2023 / Proposed Rules 61433 

10The Commission also proposes to make two 

conforming changes that are necessitated by this 

proposed change to § 40.1. Specifically, the 

Commission proposes to update the references to 

the definition of emergency located in the guidance 

section regarding Emergency Authority of appendix 

B for each of parts 37 and 38 such that they 

reference § 40.1 rather than § 40.1(h). No substance 

is intended to be changed by these amendments. 

11The Office of the Federal Register prefers the 

solely alphabetical approach to definitions sections. 

See Document Drafting Handbook, Office of the 

Federal Register at 2–27 (Revision 1.4, January 7, 

2022). 

12The Commission is not proposing any 

substantive changes to the definition of ‘‘Business 

day.’’ 

13Unlike the definitions for a dormant DCM, 

dormant DCO and dormant SEF in § 40.1(c), (d), 

and (f), respectively, the dormant SDR definition in 

§ 40.1(e) does not provide a 36-month grace period 

after the entity’s initial and original registration 

before an SDR may become dormant. 

14Section 113 of the Commodity Futures 

Modernization Act of 2000, Appendix E of Public 

Law 106–554, 114 Stat. 2763 added section 5c(c) to 

the CEA. 

II. Proposed Amendments 

A. Section 40.1—Definitions 

1. Formatting Change to § 40.1 

Currently, the defined terms in § 40.1 

are arranged in alphabetical order, with 

lettered headers. The Commission 

proposes to remove the lettered headers 

and instead arrange the defined terms in 

§ 40.1 solely in alphabetical order,10

requiring the Commission to make fewer 

conforming changes to § 40.1 and other 

regulations when adding or removing 

defined terms in the future.11

2. Non-Substantive Amendments to the 

Definition of ‘‘Business Day’’ 

The Commission proposes nonsubstantive changes to the definition of 

the term ‘‘Business day’’ in § 40.1(a). 

Currently, the definition of the term 

‘‘Business day’’ in § 40.1(a) uses the 

term ‘‘business hour’’ and defines the 

term ‘‘business hour’’ to mean ‘‘any 

hour between 8:15 a.m. and 4:45 p.m.’’ 

With the exception of § 40.1(a), the term 

‘‘business hour’’ is not used in part 40. 

To enhance the readability of the 

definition of ‘‘Business day,’’ the 

Commission proposes to delete the 

definition of the term ‘‘business hour’’ 

and all references to the term ‘‘business 

hour’’ that currently appear in the 

definition of ‘‘Business day’’ in 

§ 40.1(a). As amended, the term 

‘‘Business day’’ would mean the 

intraday period of time starting at 8:15 

a.m. and ending at 4:45 p.m. 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.12

3. Amendments to the Definitions of 

Dormant Entities 

The Commission proposes to amend 

the definitions of the terms ‘‘Dormant 

designated contract market,’’ ‘‘Dormant 

derivatives clearing organization,’’ 

‘‘Dormant swap data repository,’’ and 

‘‘Dormant swap execution facility’’ in 

current § 40.1(c) through (f). These 

amendments relate to the duration of 

inactivity of a registered entity that will 

result in the registered entity being 

deemed dormant, and are intended to 

enhance the clarity and consistency of 

the relevant regulatory text. 

The current definitions in § 40.1(c) 

and (f) generally provide that a DCM 

and a SEF, respectively, will become 

dormant if there is no trading on the 

entity for a period of approximately 12 

months, provided that the entity will 

not become dormant during the 36- 

month period following the entity’s 

initial and original designation or 

registration, respectively. Similarly, the 

definition in current § 40.1(d) generally 

provides that a DCO will become 

dormant if the entity has not accepted 

an agreement, contract or transaction for 

clearing for a period of 12 months, 

provided that the entity will not become 

dormant during the 36-month period 

following the entity’s initial and original 

registration. The definition in current 

§ 40.1(e) generally provides that an SDR 

will become dormant if no data has 

resided on the entity for a period of 

approximately 12 months.13

The definitions are inconsistent and, 

in some cases, unclear as to how the 

applicable 12-month and 36-month 

periods are determined. In particular, 

the definitions vary in their use of the 

terms ‘‘consecutive’’ vs ‘‘complete’’ 

calendar months. Additionally, staff 

have observed that the phrases 

‘‘preceding the first day of the most 

recent calendar month’’ and ‘‘preceding 

the most recent calendar month’’ have 

been a source of uncertainty when 

calculating whether an entity has 

become dormant. The Commission has 

observed that the definitions have been 

interpreted differently sometimes by 

registered entities than was intended by 

the Commission and believes the 

proposed changes will provide 

consistency. 

To simplify the calculation of how 

long a registered entity has been 

inactive and to reduce the potential that 

market participants may interpret the 

regulatory language differently, the 

Commission proposes to amend the 

regulations to consistently state the time 

periods in days—i.e., 365 days instead 

of 12 months, and 1,095 days rather 

than 36 months. 

4. Removal of the Terms ‘‘Dormant 

Contract or Dormant Product’’ and 

‘‘Dormant Rule,’’ and Related 

Requirements 

Regulation § 40.1(b) defines the term 

‘‘Dormant contract or dormant product,’’ 

and § 40.1(g) defines the term ‘‘Dormant 

rule.’’ If a contract or product of a DCM 

or SEF is dormant pursuant to § 40.1(b), 

§ 40.2(a) prohibits the DCM or SEF from 

listing the contract or product until the 

DCM or SEF either self certifies that the 

contract or product to be listed complies 

with the CEA and Commission 

regulations pursuant to § 40.2(a) or 

obtains Commission approval of the 

contract or product pursuant to § 40.3. 

Likewise, under § 40.6(a), a registered 

entity may not implement a rule that 

has become dormant unless the 

registered entity either certifies that the 

rule complies with the CEA and 

Commission regulations in accordance 

with § 40.6(a) or obtains Commission 

approval of the rule pursuant to § 40.5. 

The Commission proposes to remove 

the terms ‘‘Dormant contract or dormant 

product’’ and ‘‘Dormant rule’’ from 

§ 40.1, and the requirements relating to 

dormant products and dormant rules 

from §§ 40.2 and 40.6. At the time the 

Commission adopted the dormant 

contract definition and the applicable 

requirements, contract markets were 

generally required to obtain 

Commission approval of any new 

products prior to listing the products. 

The CEA no longer requires approval of 

each contract or product listed by an 

exchange.14 Rather, an exchange may 

list a product after self-certifying that 

the product to be listed complies with 

the CEA and Commission regulations in 

accordance with § 40.2. Given this 

flexibility, exchanges now typically 

delist a contract that has no open 

interest before the contract can be 

considered dormant through selfcertification pursuant to § 40.6(a). 

In the Commission’s experience, 

registrants have effectively managed the 

removal of dormant products or rules as 

appropriate, particularly since the 

adoption of the self-certification 

process. Furthermore, while the removal 

of the term ‘‘dormant product’’ would 

enable a contract that has not been 

traded for an extended period of time to 

remain listed, the Commission believes 

any new trading may not pose concerns 

regarding market integrity or safety 

given that a DCM or SEF listing a 

contract has a continuing obligation to 

ensure that the contract complies with 


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61434 Federal Register / Vol. 88, No. 171 / Wednesday, September 6, 2023 / Proposed Rules 

15See, e.g., §§ 38.4(a)(2), 37.4(d), and 49.8(b). 

Similarly, in adopting changes to § 39.4(a) in 2020, 

the Commission stated that its issuance of an order 

of registration as a DCO constitutes an approval of 

the applicant’s rules that were submitted as part of 

the application. 85 FR 4852, Jan. 27, 2020. 

16See, e.g., §§ 38.4(b), 37.4(d), 40.2, and 40.3. 

17Prior to the 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) and adopted new 

section 5c(c), allowing registered entities to amend 

their rules by self-certification. The new provision 

did not retain any reference to the exclusion of 

margin rules. However, section 8a(7) of the Act was 

not amended by the CFMA except to replace 

‘‘contract market’’ with ‘‘registered entity’’, and 

retained the provision that allowed the Commission 

to alter or supplement the rules of a DCO, except 

for rules related 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 had resolved this ambiguity by 

excluding the setting of margin levels, with limited 

exceptions, from the definition of ‘‘rule’’ in 

Regulation § 40.1(h), as in effect prior to the July 

2011 amendments to part 40. Section 8a(7)(D), as 

amended by the Dodd-Frank Act, now permits the 

Commission to alter the rules of a DCO with respect 

to margin requirements, provided, however, that the 

Commission may not set specific margin amounts. 

The Commission eliminated the exclusion of the 

setting of margin levels from the definition of 

‘‘rule’’ in its 2011 Final Rule. 18Specifically, section 8a(7) of the Act provides 

that the Commission is authorized to alter or 

supplement rules of a DCO including rules with 

respect to margin requirements, provided that the 

rules shall be limited to protecting the financial 

integrity of the DCO, be designed for risk 

management purposes to protect the financial 

integrity of transactions, and not set specific margin 

amounts. 

19The Commission notes for clarity that these 

rules and rule amendments do not include details 

regarding the models used to calculate the 

premiums or margins. 

20Specifically, the analogous provisions are 

§§ 40.3(a)(2), 40.5(a)(2) and 40.6(a)(7)(i). 

21See 86 FR 3236, 3307 (January 14, 2021) 

Position Limits for Derivatives (adding the 

definition of ‘‘referenced contract’’ to § 150.1 and 

incorporating the term referenced contract into 

§ 40.1(j)(1)(vii) and (j)(2)(vii). See also Appendix C 

to Part 150-Guidance Regarding the Definition of 

Referenced Contract. Generally, the term 

‘‘referenced contract’’ as used for purposes of 

Federal position limits in part 150 and as defined 

in § 150.1 means either a futures contract or an 

option on a futures contract whose settlement price 

is determined by reference, directly or indirectly, to 

the price of one of 25 physically-settled core 

referenced futures contracts enumerated in § 150.2, 

or a swap that qualifies as an ‘‘economically 

the CEA and Commission’s regulations 

thereunder. In addition, the 

Commission is unaware of any instances 

in which the dormancy of a product or 

rule for an extended period has caused 

any market or market participant 

material harm. The Commission 

preliminarily believes that deleting the 

definitions would result in little, if any, 

reduction in market integrity or safety 

while potentially reducing compliance 

costs for market participants and 

oversight costs for the Commission. 

Accordingly, the Commission 

proposes to remove the definitions of 

‘‘dormant contract or dormant product’’ 

and ‘‘dormant rule,’’ and all references 

to ‘‘dormant contract or dormant 

product’’ and ‘‘dormant rule’’ in the 

regulations. As discussed above, the 

Commission will retain its definitions of 

dormant registered entities, and the 

rules of a dormant DCM, dormant SEF, 

dormant DCO, or dormant SDR would 

need to be approved in connection with 

the entity being reinstated as a DCM, 

SEF, DCO or SDR, respectively.15 Also, 

products would need to be approved or 

self-certified in order to be listed for 

trading by the DCM or SEF offered for 

clearing by the DCO.16

5. Amendment to the Definitions of 

‘‘Rule’’ and ‘‘Terms and Conditions’’ 

The Commission proposes to add 

‘‘margin methodology’’ to the definition 

of ‘‘Rule’’ in § 40.1. Prior to 2011, the 

definition included a restriction on 

Commission review of rules relating to 

margin levels, based on section 8a(7) of 

the Act.17 After section 736 of the DoddFrank Act amended section 8a(7) of the 

Act to remove the restriction on 

Commission review of rules relating to 

margin levels,18 the Commission 

removed the restriction from the 

definition of ‘‘Rule.’’ Although DCOs 

have been submitting margin-related 

rule changes to the Commission since 

2011, in order to provide clarity 

regarding the requirement to submit 

changes to margin methodologies, the 

Commission is proposing to revise the 

definition of ‘‘Rule’’ to include an 

explicit reference to margin 

methodology. 

The Commission proposes to amend 

the definition ‘‘Terms and conditions’’ 

by removing the following items from 

the scope of the definition such that the 

items to be removed will no longer be 

treated as terms and conditions. With 

respect to a contract for the purchase or 

sale of a commodity for future delivery 

or an option on such a contract or an 

option on a commodity (other than a 

swap), the Commission proposes to 

remove ‘‘Payment or collection of 

commodity option premiums or 

margins’’ from § 40.1(j)(1)(xi). With 

respect to a swap, the Commission 

proposes to remove ‘‘Payment or 

collection of option premiums or 

margins’’ from § 40.1(j)(2)(xi). Further, 

the Commission is proposing to add 

these items to the categories of rules that 

may be implemented without 

certification pursuant to § 40.6(d)(2). 

The Commission preliminarily believes 

that registered entities should be able to 

submit rules or rule amendments 

governing the payment or collection of 

these premiums or margins through 

weekly notices to the Commission 

pursuant to § 40.6(d)(2) as this will 

lower the burden for registered entities 

and still provide sufficient notice to the 

Commission given the fact that these 

rules and rule amendments governing 

the payment or collection of these 

premiums or margins are general in 

substance.19

The Commission requests comment 

on all aspects of its proposed 

amendments to § 40.1. 

B. Section 40.2—Listing Products for 

Trading by Certification 

1. Proposed Amendments to 

§ 40.2(a)(3)(i) and Appendix D 

Regulation § 40.2(a)(3)(i) requires a 

product certification submission to 

include a copy of the submission cover 

sheet in accordance with the 

instructions in appendix D to part 40. 

The same requirement is in the part 40 

regulations governing the submission of 

rule certifications and product and rule 

approval requests. With the 

development and evolution of the 

Commission’s online portal for the filing 

of rule and product submissions, the 

cover sheet information required by 

appendix D is currently entered by 

registered entities via the portal and 

processed and stored in the 

Commission’s online systems, making 

the cover sheet itself unnecessary. 

Accordingly, the Commission 

proposes to revise § 40.2(a)(3)(i), the 

analogous provisions in §§ 40.3, 40.5 

and 40.6,20 and appendix D to remove 

the cover sheet requirement and related 

references. As proposed, appendix D 

will continue to specify the information 

that must be entered by a registered 

entity as part of the filing process, and 

the Commission will continue to use 

such information as part of its 

processing and review of submissions. 

Additionally, the Commission 

proposes to amend appendix D to 

require a SEF or DCM when submitting 

a new product to indicate whether the 

product is a ‘‘referenced contract’’ as 

such term is defined in § 150.1 and as 

is described in appendix C to part 150. 

By way of background, the 

Commission’s amendments to position 

limits that became effective on March 

15, 2021 introduced the term 

‘‘referenced contract’’ and incorporated 

the term ‘‘referenced contract’’ into the 

regulatory text that defines the term 

‘‘terms and conditions’’ in part 40.21 As 


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equivalent swap’’ (as such term is defined in 

§ 150.1) to any of the 25 physically-settled core 

referenced futures contracts enumerated in § 150.2. 

22See § 40.1(j)(1)(vii) and (j)(2)(vii), and §§ 40.2 

and 40.3. 

23Regulation § 40.2(a)(3)(ii) requires the selfcertification to include ‘‘a copy of the product’s 

rules including all rules related to its terms and 

conditions.’’ Regulation 40.3(a)(3) says 

substantively the same thing, but using different 

words (requiring the voluntary submission for 

Commission approval of a product to include ‘‘a 

copy of the rules that set forth the contract’s terms 

and conditions’’). 

24Appendix C to part 38. Specifically, for the 

listing of futures contracts, see paragraph (a) of 

appendix C to part 38. For the listing of futures 

contracts settled by physical delivery, see paragraph 

(b) of appendix C to part 38. For the listing of 

futures contracts settled by cash delivery, see 

paragraph (c) of appendix C to part 38. For the 

listing of options on futures contracts, see 

paragraph (d) of appendix C to part 38. For the 

listing of security futures products, see paragraph 

(e) of appendix C to part 38. For the listing of nonprice-based contracts, see paragraph (f) of appendix 

C to part 38. For the listing of swap contracts, see 

paragraph (g) of appendix C to part 38. See also 

Appendix B to part 37 (pointing SEFs to appendix 

C of part 38 for guidance on how to demonstrate 

compliance with SEF Core Principle 3 for swaps 

that are settled by physical delivery or cash 

settlement). 

25See § 38.252 which provides, among other 

things, that the DCM must demonstrate for physical 

delivery contracts that it monitors a contract’s terms 

and conditions as they relate to the underlying 

commodity market and to the convergence between 

the contract price and the price of the underlying 

commodity and show a good-faith effort to resolve 

conditions that are interfering with convergence. 

26See note 24. 

27See Appendix C to part 38, paragraph 

(b)(2)(i)(A) for physically-settled contracts and 

paragraph (c)(4)(i)(A) for cash-settled contracts. 

28See id. 

29See note 24. 

a result, before listing a new contract for 

trading, a DCM or SEF must determine 

whether a new contract to be listed is a 

referenced contract.22 To facilitate 

market participants’ compliance with 

position limits, Commission staff 

maintain a workbook of all the 

referenced contracts that are listed on 

DCMs and SEFs. To better enable 

Commission staff to consider whether 

new contracts to be listed should be 

added to the workbook in a timely, 

efficient manner and to review such 

submissions, the Commission is 

proposing to amend appendix D to 

require a DCM or SEF to indicate as part 

of the filing process if a contract to be 

listed is a referenced contract. The 

identification of new products as 

referenced contracts as part of the filing 

process will enable the Commission to 

more efficiently process and review 

such submissions. 

Finally, as a related matter, the 

Commission is amending the filing 

format and manner requirement in 

§§ 40.2(a)(1), 40.3(a)(1), 40.5(a)(1) and 

40.6(a)(1) to remove the reference to the 

‘‘Secretary of’’ the Commission. The 

Commission is also proposing to 

delegate the Commission’s authority to 

specify the format and manner of filing 

under these regulations to the Directors 

of the Division of Market Oversight and 

the Division of Clearing and Risk by 

adding proposed § 40.7(e). 

2. Proposed Amendments to 

§ 40.2(a)(3)(ii) 

Currently, the text of §§ 40.2(a)(3)(ii) 

and 40.3(a)(3) both describe a 

requirement to submit as part of a selfcertification or a voluntary submission 

for Commission approval, respectively, 

the rules that set forth a contract’s terms 

and conditions. The two provisions use 

similar, but slightly different, 

language.23 Given that the two 

provisions use slightly different words, 

but are both intended to require that the 

DCM or SEF include a copy of the rules 

that set forth the contract’s terms and 

conditions, the Commission proposes to 

amend the text of § 40.2(a)(3)(ii) to 

mirror the text used in § 40.3(a)(3) so 

that both provisions use the same 

language for consistency and avoid any 

potential misreading that the differences 

in language between the two provisions 

are intended to signify a difference in 

substance. 

3. Proposed Amendments to 

§ 40.2(a)(3)(v) 

Regulation § 40.2(a)(3)(v) requires a 

DCM or SEF that self-certifies a product 

to submit a concise explanation and 

analysis of the product and its 

compliance with applicable provisions 

of the Act, including core principles, 

and the Commission’s regulations 

thereunder. Staff primarily bases its 

analysis of the product on the 

explanation and analysis the DCM or 

SEF must provide regarding the 

product’s compliance with the Act and 

Commission regulations, including 

analysis of the commodity underlying 

the product. Staff has observed a trend 

that new product certifications tend not 

to include sufficient information on the 

underlying commodity to enable the 

Commission to complete its analysis, 

particularly for contracts on new 

commodities (e.g., rare earth metals) for 

which staff may have less prior 

experience. The Commission notes that 

a DCM or SEF that provides the 

information described in appendix C to 

part 38 that applies to a contract would 

be sufficient for the Commission to 

determine the compliance of the 

contract’s terms and conditions with the 

applicable core principles.24

To ensure staff receive adequate 

information regarding the product and 

the commodity underlying the product 

in order to analyze the compliance of 

self-certified products with the 

applicable core principles, the 

Commission proposes the following 

changes to § 40.2(a)(3)(v). The 

Commission proposes to amend the text 

to include references to the ‘‘terms and 

conditions’’ of the product and to ‘‘the 

underlying commodity’’ to clarify the 

Commission’s intent that § 40.2(a)(3)(v) 

requires an explanation and analysis of 

the product’s underlying commodity, as 

well as both the product’s terms and 

conditions, and the product’s 

compliance with the applicable 

provisions of the Act, including core 

principles, and the Commission’s 

regulations thereunder. The 

Commission also proposes to add the 

words ‘‘that is complete with respect to’’ 

the product’s terms and conditions, the 

underlying commodity, and the 

product’s compliance with applicable 

provisions of the Act, including core 

principles, and the Commission’s 

regulations thereunder to ensure that, 

although the explanation be concise, it 

nevertheless has to include an 

explanation of how and why the 

contract’s terms and conditions comply 

with the applicable core principles and 

relate to the cash market of the 

underlying commodity.25

As noted above, the information 

described in appendix C to part 38 that 

applies to a contract would be sufficient 

for the Commission to determine the 

compliance of a contract’s terms and 

conditions with the applicable core 

principles.26 Appendix C to part 38 

provides guidance on the quality 

standards that should be defined for the 

underlying commodity in the contract’s 

terms and conditions for a futures 

contract.27 The quality standards used 

should reflect those used in transactions 

in the commodity in normal cash 

marketing channels and comply with 

those industry established standards.28

Accordingly, to be complete, 

submissions pursuant to § 40.2(a)(3)(v) 

should be guided by portions of 

appendix C to part 38 that apply to the 

contract being listed.29

To improve the understanding of the 

level of detail expected by the 

Commission, the discussion below 

addresses two common categories of 

contracts and provides two specific 

product examples that illustrate the 

level of detail that would meet the 

‘‘concise’’ and ‘‘complete’’ standard to 

enable the Commission to analyze the 

compliance of the contract with the 

applicable core principles. 

Generally, when listing a cash settled 

or physically settled contract on a 


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30Appendix C to part 38, paragraph (b)(2)(i)(A). 

31See id. Appendix C also provides that 

regardless of the type of commodity underlying the 

contract, the DCM or SEF’s explanation and 

analysis should describe the cash market for the 

underlying commodity and how the contract’s 

terms and conditions: reflect the cash market 

transactions in the underlying commodity; meet the 

risk management needs of prospective users; and 

promote price discovery of the underlying 

commodity. Appendix C to part 38, paragraph (a). 

32See Appendix C to part 38, paragraph 

(b)(2)(i)(A). When listing a cash settled futures 

contract on copper, the DCM should specify the 

acceptable standard of copper that underlies the 

cash price series or the physically-settled futures 

referenced price used for cash settlement purposes. 

See Appendix C to part 38, paragraph (c)(4)(i)(A). 

33See Appendix C to part 38, paragraphs (a) and 

(c). 

34For example, when listing a cash settled futures 

contract on the S&P 500 Index, the DCM’s contract 

specifications should describe the index and its 

methodology. 

35See Appendix C to part 38, paragraphs (a) and 

(c). 

36Appendix C to part 38, paragraphs (c)(3)(iv) 

and (v). 

37While the Commission proposes to include the 

word ‘‘complete,’’ the Commission notes that the 

‘‘explanation and analysis’’ requirement in 

proposed § 40.3(a)(4) does not include the qualifier 

that the submission be ‘‘concise’’ for the same 

reasons discussed below in note 47. 

commodity, the explanation and 

analysis the DCM or SEF submits 

describing the characteristics of the 

contract’s underlying commodity 

pursuant to § 40.2(a)(3)(v) should 

include characteristics such as the 

deliverable commodity’s grade, quality 

and deliverable supply, as applicable, as 

well as the other applicable 

requirements described in appendix C 

to part 38. Appendix C to part 38 

provides guidance on the quality 

standards that should be defined for the 

underlying commodity in the contract’s 

terms and conditions for a physicallysettled futures contract.30 The quality 

standards used should reflect those used 

in transactions in the commodity in 

normal cash marketing channels and 

comply with those industry established 

standards.31

As a specific example for a physically 

settled futures contract, when listing a 

physically settled futures contract on 

copper, the DCM should specify the 

acceptable standard of copper that is 

eligible for delivery on the physicallysettled futures contract.32 Today, an 

acceptable quality standard for copper 

in the cash market is Grade 1 

Electrolytic Copper Cathodes (full plate 

or cut) that conforms to the latest 

chemical and physical specifications 

adopted by the American Society for 

Testing and Materials for Grade 1 

Electrolytic Copper Cathode (B115–00 

or its latest revision). If a DCM lists a 

physically settled futures contract on 

Grade 1 Electrolytic Copper Cathodes, 

the only quality of copper allowed for 

delivery at the settlement of the futures 

contract would be copper of the quality 

that meets this industry-set standard, 

and as a result, the price of the futures 

contract would reflect the price of only 

this kind of copper. 

Throughout the life of the futures 

contract up until the time of expiration, 

copper located in a DCM-approved 

warehouse of the quality specified in 

the contract would be eligible to be 

warranted by the warehouse for delivery 

on the contract. The price of the 

physical copper (Grade 1 Electrolytic 

Copper Cathode) to which the futures 

contract settles and the price of the 

physically settled futures contract on 

Grade 1 Electrolytic Copper Cathode 

should match—or converge—at the 

expiration date. The convergence 

demonstrates that the futures contract 

accurately reflects the cash price of the 

underlying commodity and compliance 

with DCM Core Principle 3 (that the 

contract is not readily susceptible to 

manipulation). 

Similarly, when listing a cash-settled 

contract based on an excluded 

commodity, the explanation and 

analysis the DCM or SEF submits 

describing the characteristics of the 

contract’s underlying commodity 

should include characteristics such as 

the rate, index methodology, and 

pricing source, as applicable, as well as 

other applicable characteristics 

described in appendix C to part 38.33

Appendix C to part 38 provides 

guidance on the cash settlement price 

calculation for a cash-settled futures 

contract.34 Appendix C provides that 

the cash-settlement price series used by 

a DCM or SEF to settle a cash settled 

contract should be reflective of the 

underlying cash-market of the 

commodity, publicly available, timely 

and reliable.35 The DCM or SEF should 

include this information in its 

explanation of how the product 

complies with the applicable provisions 

of the Act, including core principles, 

and the Commission’s regulations 

thereunder. 

As a specific product example for a 

cash-settled excluded commodity, when 

listing a cash-settled futures contract on 

a stock index price series, such as the 

S&P 500 (a stock index of large 

capitalization stocks listed on U.S. stock 

exchanges), the DCM should specify 

how the cash settlement price based on 

the S&P 500 Index is reflective of the 

underlying cash-market, reliable, 

publicly available and timely.36 The 

DCM should describe how the S&P 500 

Index price series is reflective of the 

underlying cash market of domestic 

large capitalization stocks by describing 

the methodology for constructing and 

maintaining the S&P 500 Index. The 

DCM should describe how the S&P 500 

Index is considered by industry as an 

accurate and reliable index of large 

capitalization stocks by describing how 

the index is used as a benchmark for 

measuring the movements of the U.S. 

stock exchanges. The DCM should 

describe how frequently the index is 

calculated and where it is disseminated 

to the market place to describe how the 

index is publicly available and timely. 

The Commission requests comment 

on all aspects of its proposed 

amendments to § 40.2. 

C. Section 40.3—Voluntary Submission 

of New Products for Commission Review 

and Approval 

1. Proposed Amendments to § 40.3(a)(4) 

Regulation § 40.3(a)(4) requires that 

when a DCM, SEF or DCO voluntarily 

submits a new product for Commission 

review and approval prior to its listing 

for trading or accepting the product for 

clearing, the DCM, SEF or DCO must 

send the Commission an explanation 

and analysis of the product and its 

compliance with applicable provisions 

of the Act, including core principles, 

and the Commission’s regulations 

thereunder. Currently, staff relies 

primarily on the explanation and 

analysis provided pursuant to this 

requirement to analyze the compliance 

of a product submitted for review and 

approval by the Commission, including 

the explanation and analysis of the 

commodity underlying the product. The 

Commission proposes to amend 

§ 40.3(a)(4) to clarify that by ‘‘product’’, 

the regulation requires an explanation 

and analysis ‘‘that is complete with 

respect to’’ the product’s terms and 

conditions, the underlying commodity 

and the product’s compliance with the 

applicable provisions of the Act and 

Commission regulations thereunder.37

This amendment is intended to ensure 

the Commission receives adequate 

information regarding the product and 

the commodity underlying the product 

to analyze the compliance of the 

product submitted for voluntary 

Commission review and approval. 

2. Proposed Amendments to 

§ 40.3(a)(10) 

Currently, § 40.3(a)(10) provides that 

when a registered entity voluntarily 

submits a contract for Commission 

approval, Commission staff may request 

additional evidence, information or data 

to demonstrate that the contract meets, 

initially or on a continuing basis, the 


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38The Commission proposes these changes to 

enhance readability and address some confusion 

regarding the § 40.3 process. The Commission also 

proposes changes to reorganize § 40.5 to enhance 

readability and, in general, is proposing parallel 

structural changes to §§ 40.3 and 40.5 for 

consistency. 

39One example of a substantive amendment 

would be changes in the delivery grade or 

characteristics of the underlying commodity for a 

physically settled contract that may affect estimated 

deliverable supply and thus position limits for the 

contract. Another example would be a change in the 

price reference series of a new cash-settled contract 

that settles to a Price Reporting Agency source 

(‘‘PRA’’). Most PRAs have various series on the 

same commodity that differ from each other 

depending on characteristics such as geographical 

location of commodity transaction or commodity 

quality characteristics. PRA methodologies for the 

same commodity can differ between PRAs. If an 

amendment changes a PRA as the source, the 

underlying methodology for the price series would 

need to be examined to determine if it is not readily 

susceptible to manipulation. 

40Under current § 40.5(d)(1), the timely manner 

standard is dependent upon the facts and 

circumstances. The Commission proposes the same 

timely manner standard for § 40.3(d)(1). 41The Commission proposes to revise the heading 

of § 40.3(c) from ‘‘Forty-five day review’’ to 

‘‘Commission review’’ to reflect the fact that the 

review period may be extended beyond forty-five 

days due to adjustments so that the review period 

ends on a business day. 

42The relevant portions of section 5c(c)(4)(C) of 

the Act provide that the Commission shall take final 

action on the request not later than 90 days after 

submission of the request, unless the person 

submitting the request agrees to an extension of the 

time limitation established under paragraph 

(c)(4)(C). 

43Because an extension to which a registered 

entity may agree under proposed § 40.3(c)(3) is not 

required to be a specified number of days, 

Commission staff can ensure that the extended 

period ends on a business day. 

requirements of the Act, or other 

requirement for designation or 

registration under the Act, or the 

Commission’s regulations or policies 

thereunder. Upon such request, the 

registered entity must provide the 

requested additional evidence, 

information or data by the open of 

business two business days after the 

date staff made such request, or at the 

conclusion of such extended period 

agreed to by Commission staff after 

timely receipt of a written request from 

the registered entity. 

The Commission proposes to remove 

the two business day deadline from 

§ 40.3(a)(10) and replace it with ‘‘the 

time specified by the Commission staff’’ 

to reflect the fact that the two business 

day deadline is often not practical and 

that the amount of time the registered 

entity needs to respond depends on the 

nature and scope of the requested 

information. 

3. Proposed Amendments to § 40.3(c), 

(d) and (f) 

The Commission proposes to 

reorganize paragraphs (c) and (d) of 

§ 40.3, which address the Commission’s 

review and determination (i.e., approval 

or non-approval) of products submitted 

for Commission approval. More 

specifically, to enhance the readability 

of § 40.3(c), the Commission proposes to 

reorganize § 40.3 so that all of the 

provisions that may affect the length of 

the review period of a product 

submitted for Commission approval 

pursuant to § 40.3 appear together in 

§ 40.3(c).38 The Commission proposes to 

reorganize § 40.3(d) to address the 

Commission’s determination, including: 

approval through the passage of the 

applicable review period; and nonapproval. 

Currently, § 40.3(c) provides that all 

products submitted for Commission 

approval under § 40.3(c) 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 § 40.3(d), 

‘‘unless notified otherwise within the 

applicable period;’’ provided that the 

conditions set forth in § 40.3(c)(1) and 

(2) are satisfied. The Commission 

proposes to amend the text of the 

introductory paragraph in § 40.3(c) 

(which the Commission proposes to 

move to § 40.3(d)(1)) to clarify that the 

phrase ‘‘unless notified otherwise 

within the applicable period’’ (which 

provides a vague reference to the 

notification involved) means unless the 

Commission issues a notice of nonapproval to the registered entity under 

paragraph (d)(2) of § 40.3 within the 

applicable review period. 

In addition, the Commission is 

proposing to amend the condition in 

§ 40.3(c)(2) (which the Commission 

proposes to move to § 40.3(c)(4)) that 

must be met for the deemed approval to 

be effective. Regulation § 40.3(c)(2) 

currently requires that 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 § 40.3(c)(2). 

The Commission proposes to amend 

this condition by removing the phrase, 

except as requested by the Commission, 

and the reference to voluntary in the 

next sentence and by adding text that 

states that an amendment or 

supplementation requested by the 

Commission will be treated as a new 

submission under § 40.3 and will restart 

the review period of the submission. As 

amended, any substantive amendment 

to the terms or conditions of the product 

or supplementation to the request for 

product approval, including any 

substantive amendment requested by 

the Commission or any other 

substantive amendment made 

voluntarily by the submitting entity, 

will be treated as a new submission 

under § 40.3 and will restart the review 

period of the submission.39 The 

Commission believes these proposed 

amendments are necessary to better 

ensure the Commission has sufficient 

time to review substantive changes to 

requests for product approval. 

The Commission also proposes to 

amend § 40.3(d)(1) (which the 

Commission proposes to move to 

§ 40.3(c)(2)) to provide that the 

Commission may extend the request for 

a product approval if the submission is 

incomplete or the requestor does not 

respond completely to Commission 

questions in a timely manner. The 

Commission has the authority to extend 

their review of a rule approval request 

submission under current § 40.5(d)(1) if 

the submission is incomplete or the 

requestor does not respond completely 

to Commission questions in a timely 

manner 40 and the Commission believes 

the same ability for reviews of product 

approval request submissions under 

§ 40.3 would better enable the 

Commission to review products when 

requested by registered entities. 

The Commission proposes to add 

§ 40.3(c)(5) to extend the review period 

under proposed § 40.3(c)(1) when the 

review period would end on a day that 

is not a business day to instead end on 

the next business day,41 and to revise 

current § 40.3(d)(1), proposed to be 

redesignated as § 40.3(c)(2), to permit an 

additional extension of up to 45 days. 

By way of background, § 40.3(d)(1) 

(which the Commission proposes 

moving to § 40.3(c)(2)) provides that the 

Commission may extend the review 

period for an additional 45 days if the 

product raises novel or complex issues 

that require additional time for analysis. 

Under current § 40.3(c) and (d)(1), the 

initial 45-day review period and the 45- 

day extended review period do not 

exceed the 90 days permitted by section 

5c(c)(4)(C) of the CEA,42 absent 

agreement by the requestor to a further 

extension.43 To ensure that the total 

review period will not extend beyond 

90 days after the request is submitted, 

the Commission proposes to change the 

extended review period under 

§ 40.3(d)(1) from ‘‘an additional 45 

days’’ to ‘‘up to an additional 45 days’’ 

in proposed § 40.3(c)(2). For example, if 

the end of the initial 45-day review 

period would fall on a Saturday, and is 


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44Current § 40.3(d)(2) provides the Commission 

with authority to extend the review period with the 

written agreement of the registered entity. The 

proposed amendment in § 40.3(c)(3) would ensure 

it is clear that the authority also applies during any 

extended review period. 

45 Given that the Commission states specifically 

in § 40.4(b)(1) through (4) that the changes covered 

therein are not material, a DCM filing a change 

under § 40.4(b)(1) through (4) does not need to file 

a non-materiality explanation. 

extended by proposed § 40.3(c)(5) to 

Monday, the next business day, for a 

total of 47 days, any additional 

extension under proposed § 40.3(c)(2) 

could not exceed 43 days (47 + 43 = 90). 

The Commission also proposes to 

make explicit in proposed § 40.3(c)(3) 

that the Commission may at any time 

extend its review period for any period 

of time, provided that it does so with 

the written agreement of the registered 

entity.44

Additionally, the Commission is 

proposing to amend § 40.3(f)(1) (which 

the Commission proposes to move to 

§ 40.3(e)(1)). Current § 40.3(f)(1) 

provides that notification to a registered 

entity under paragraph (e) of § 40.3 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. The Commission believes 

that amending the text by replacing the 

word ‘‘prejudice’’ with ‘‘prevent’’, 

replacing the words ‘‘pursuant to’’ with 

‘‘in’’, adding the phrase ‘‘the revised or 

supplemented submission will be 

reviewed without prejudice’’ at the end, 

and inserting two commas will help 

avoid any confusion as to the effect of 

the non-approval. Also, the changes to 

the paragraph would improve 

consistency with §§ 40.5(e)(1) and 

40.6(c)(5)(i). 

Finally, the Commission proposes to 

amend § 40.3(f)(2) (which the 

Commission proposes to move to 

§ 40.3(e)(2)). Currently, the section 

provides that notification to a registered 

entity under paragraph (e) of § 40.3 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. The 

Commission believes that amending the 

text by replacing the words ‘‘refusal’’ 

with ‘‘determination not’’—as well as 

replacing the words ‘‘does not violate 

the Act’’ with ‘‘complies with the 

Act’’—will have the effect of increasing 

clarity and provide consistency with 

§§ 40.2(a)(3)(iv) and 40.5(f)(2) (which 

the Commission proposes to be 

redesignated as § 40.5(e)(2)). 

The Commission requests comment 

on all aspects of its proposed 

amendments to § 40.3. 

D. Section 40.4—Amendments to Terms 

or Conditions of Enumerated 

Agricultural Products 

1. Clarification Regarding Scope of 

§ 40.4(a) and Materiality Under § 40.4 

Regulation § 40.4(a) requires a DCM to 

submit rule changes that would 

materially change a term or condition of 

a contract on an agricultural product 

enumerated in section 1a(9) of the CEA 

with open interest for Commission 

approval under the procedures of § 40.5. 

The Commission notes that § 40.4(a) 

applies strictly to rules that materially 

change a product’s economic terms and 

conditions, and does not apply to other 

rules. To ensure this is clear, the 

Commission proposes to add the word 

‘‘product’s’’ to the text of § 40.4(a) to 

modify ‘‘term or condition’’ as used 

therein and to replace the words 

‘‘should not be submitted under this 

section’’ with the words ‘‘are not 

required by this section to be submitted 

for Commission approval under the 

procedures of § 40.5.’’ 

By way of background, when a 

registered entity submits a change to 

any terms or conditions of a contract on 

an agricultural product enumerated in 

section 1a(9) of the CEA with open 

interest, the DCM’s assessment of 

materiality affects whether the 

registered entity submits the change for 

Commission approval under § 40.5 (as is 

required for material changes). A DCM 

may file a change that falls within any 

of the four types of discrete changes that 

the Commission enumerates in 

§ 40.4(b)(1) through (4) through selfcertification or notice filing, as 

applicable.45 For any other rule that the 

DCM believes to be non-material, 

§ 40.4(b)(5) sets forth a process for the 

DCM to implement the change through 

self-certification pursuant to § 40.6(a). In 

order for a DCM to self-certify the 

change, § 40.4(b)(5) requires the DCM to 

make a non-materiality filing and 

explain why it considers the rule change 

to be ‘‘non-material.’’ 

To assist a DCM in assessing and 

explaining whether a change to the 

terms and conditions of a contract on an 

agricultural product enumerated in 

section 1a(9) of the CEA that has open 

interest is a material change (and thus 

should be filed under § 40.5 pursuant to 

§ 40.4(a)) or is non-material (and thus 

can be implemented through the 

§ 40.6(a) self-certification process in 

accordance with § 40.4(b)(5)), the 

Commission proposes to add an 

appendix E to part 40 and to include 

therein the criteria that the Commission 

generally considers as evidence that an 

enumerated agricultural product rule 

change is non-material under 

§ 40.4(b)(5). Specifically, proposed 

appendix E to part 40 provides that a 

non-material change: should not affect a 

reasonable trader’s decision to enter 

into, or maintain, a position; should not 

affect a reasonable trader’s decision to 

make or take delivery on the contract or 

to exercise an option on the contract; 

and should not have an effect on the 

value of existing positions, including, 

but not limited to, a change affecting the 

price of the contract due to a change in 

the commodity quality characteristics of 

the existing contract, a change to the 

size of the existing contract, or a change 

to a cost of effecting delivery for the 

existing contract. 

2. Proposed Amendments to § 40.4(b) 

The Commission proposes 

amendments to § 40.4(b)(1) through (5) 

to enhance the readability, consistency 

and clarity of this regulatory text. 

Specifically, the Commission proposes 

to clarify that the intent of § 40.4(b) is 

that the rules and rule amendments 

identified as non-material need not be 

submitted for Commission approval 

under the procedures of § 40.5 by 

replacing the text stating that the rules 

and rule amendments enumerated in 

§ 40.4(b) as not material ‘‘should not be 

submitted under this section’’ with text 

stating that such rules and rule 

amendments ‘‘are not required by this 

section to be submitted for Commission 

approval under the procedures of 

§ 40.5.’’ The Commission also proposes 

to replace the word ‘‘changes’’ in each 

of § 40.4(b)(1) through (4) with ‘‘rules or 

rule amendments’’ so that the text of 

paragraphs (b)(1) through (4) use the 

same language as the text used in the 

introductory paragraph of § 40.4(b). 

Additionally, the Commission proposes 

to replace the word ‘‘if’’ in each of 

§ 40.4(b)(1), (3) and (4) with the words 

‘‘provided that they are’’ to clarify (and 

address confusion) that the 

implementation specified in the 

applicable paragraph (§ 40.4(b)(1), (3) 

and (4)) is a condition that must be 

satisfied in order to rely upon 

§ 40.4(b)(1), (3) or (4), as applicable. 

None of these amendments are intended 

to alter the substance of § 40.4. 

The Commission proposes to remove 

the reference to ‘‘changes in no 

cancellation ranges’’ in § 40.4(b)(3). As 

discussed below in section II.E.4, the 


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46The amendments include the removal of 

references to a cover sheet, dormant rules, and 

submission to the Secretary of the Commission. 

47While the Commission proposes to include the 

word ‘‘complete,’’ the Commission notes that the 

‘‘explanation and analysis’’ requirement in 

proposed § 40.5(a)(5) does not include the qualifier 

that the submission be ‘‘concise.’’ See the 2011 

Final Rule at 44782 (explaining that the 

‘‘explanation and analysis’’ requirement in final 

§ 40.5(a)(5) does not include the qualifier that the 

submission be ‘‘concise.’’ The Commission requires 

registered entities to provide a more detailed 

explanation and analysis of rules voluntarily 

submitted for Commission approval under the 

provisions of § 40.5.). 

48The Commission also proposes to eliminate the 

word ‘‘which’’ from the second sentence of 

§ 40.5(a)(6) to improve clarity and readability. 

49The Commission proposes these changes to 

enhance readability and address some confusion 

regarding the § 40.5 process. Changes to proposed 

§ 40.5(d)(2) are discussed below. 

50Because an extension to which a registered 

entity may agree under § 40.5(c)(3) is not required 

to be a specified number of days, Commission staff 

can ensure that the extended period ends on a 

business day. 

51The Commission proposes to revise the heading 

of § 40.5(c) from ‘‘Forty-five- day review’’ to 

‘‘Commission review’’ to reflect the fact that the 

review period may be extended beyond forty-five 

days due to adjustments so that the review period 

ends on a business day. 

52The Commission proposes to add descriptive 

language into § 40.5(c)(5) to provide the reader with 

context to better understand the interaction of the 

provisions in proposed §§ 40.4(b)(5) and 40.5(c)(5). 

The descriptive language added to § 40.5(c)(5) is 

consistent with current § 40.5(c)(2). For a 

discussion of the materiality determination under 

§ 40.4(b)(5), see section II.D above. 

53Current § 40.5(d)(2) provides the Commission 

authority to extend the review period with the 

written agreement of the registered entity. The 

proposed amendment in § 40.5(c)(3) would ensure 

it is clear that the authority also applies during any 

extended review period. 

Commission proposes to amend 

§ 40.6(d) to allow a registered entity to 

file rules and rule amendments 

governing changes in no cancellation 

ranges pursuant to the notification 

procedures of § 40.6(d). By filing rules 

and rule amendments governing no 

cancellation ranges pursuant to the 

notification procedures of § 40.6(d), 

such rules and rule amendments would 

be non-material pursuant to § 40.4(b)(1), 

making the current reference to 

‘‘changes in no cancellation ranges’’ in 

§ 40.4(b)(3) redundant and unnecessary. 

Additionally, to enhance readability 

of § 40.4(b)(5), the Commission proposes 

to move from § 40.4(b)(5)(iii) to 

§ 40.4(b)(5)(i) the text requiring that a 

rule or rule amendment filed under 

§ 40.4(b)(5) be submitted pursuant to the 

procedures of § 40.6(a), and to delete 

redundant text in § 40.4(b)(5)(iii). The 

Commission proposes to add text to 

§ 40.4(b)(5)(ii) to provide that when a 

DCM provides an explanation as to why 

it considers the rule ‘‘non-material,’’ the 

DCM shall, if applicable, include a 

previously approved rule or rule 

amendment that is, in substance, the 

same as the current non-material rule or 

rule amendment. The Commission 

believes the copy of the previously 

approved rule or rule amendment 

would provide market participants with 

context and background that would be 

helpful information in understanding 

the current rule or rule amendment and 

why it is non-material. 

The Commission requests comment 

on all aspects of its proposed 

amendments to § 40.4. 

E. Section 40.5—Voluntary Submission 

of Rules for Commission Review and 

Approval 

1. Reorganization and Clarification of 

§ 40.5 

The Commission proposes to 

reorganize and clarify § 40.5, which 

addresses the submission by registered 

entities of requests for Commission 

approval of new rules and rule 

amendments and the Commission’s 

review of such rules and rule 

amendments. Under the proposed 

amendments, paragraphs (a) and (b) of 

§ 40.5 would remain largely unchanged, 

with the exception of conforming 

amendments previously discussed,46 as 

well as the following two changes. 

The Commission proposes to clarify 

that § 40.5(a)(5) requires an explanation 

and analysis ‘‘that is complete with 

respect to’’ the proposed rule changes 

for the same reasons the language 

regarding completeness is being 

proposed in §§ 40.2(a)(3)(v), 40.3(a)(4), 

and 40.6(a)(7)(v).47

Currently, § 40.5(a)(6) provides that 

the registered entity shall certify that it 

posted a notice of the ‘‘pending rule 

with the Commission.’’ To clarify that 

the ‘‘pending rule’’ is intended to mean 

the registered entity’s request for 

approval, the Commission proposes to 

amend the text of § 40.5(a)(6) to replace 

the words ‘‘pending rule with the 

Commission’’ with the words ‘‘a notice 

of its request for Commission approval 

of the new rule or rule amendment’’. 

The proposed language would also use 

language that is consistent with 

§ 40.3(a)(9).48

The Commission proposes to 

reorganize paragraphs (c) and (d) of 

§ 40.5, which address the Commission’s 

review and determination (i.e., approval 

or non-approval) of new rules and rule 

amendments. More specifically, to 

enhance the readability of § 40.5(c), the 

Commission proposes to reorganize 

§ 40.5 so that all of the provisions that 

may affect the length of the review 

period of a rule submitted for 

Commission approval pursuant to § 40.5 

appear together in § 40.5(c)—with the 

exception of expedited approval (which 

the Commission proposes to move to 

§ 40.5(d)(2)).49 The Commission 

proposes to add § 40.5(c)(6) to extend 

the review period under proposed 

§ 40.5(c)(1) 50 when the review period 

would end on a day that is not a 

business day to instead end on the next 

business day,51 and to revise current 

§ 40.5(d)(1), proposed to be redesignated 

as § 40.5(c)(2), to permit an additional 

extension of up to 45 days. 

By way of background, § 40.5(d)(1) 

(which the Commission proposes 

moving to § 40.5(c)(2)) provides that the 

Commission may extend the review 

period for 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. Under 

current § 40.5(c) and (d)(1), the initial 

45-day review period and the 45-day 

extended review period do not exceed 

the 90 days permitted by section 

5c(c)(4)(C) of the CEA, absent agreement 

by the requestor to a further extension. 

To ensure that the total review period 

will not extend beyond 90 days after the 

request is submitted, the Commission 

proposes to change the extended review 

period under § 40.5(c)(2) from ‘‘an 

additional 45 days’’ to ‘‘up to an 

additional 45 days.’’ For example, if the 

end of the initial 45-day review period 

would fall on a Saturday, and is 

extended by proposed § 40.5(c)(6) to 

Monday, the next business day, for a 

total of 47 days, any additional 

extension under proposed § 40.5(c)(2) 

could not exceed 43 days (47 + 43 = 90). 

The other changes to the regulatory 

text in proposed § 40.5(c) are nonsubstantive and are not intended to alter 

the length of time the Commission will 

review a rule submitted for Commission 

approval under § 40.5(a).52 As part of 

these non-substantive amendments, the 

Commission proposes to make explicit 

in proposed § 40.5(c)(3) that the 

Commission may at any time extend its 

review period for any period of time, 

provided that it does so with the written 

agreement of the registered entity.53

The Commission proposes to 

reorganize § 40.5(d) to address the 

Commission’s determination, including: 

approval through the passage of the 

applicable review period; expedited 

approval; and non-approval. Current 

§ 40.5(g), which addresses expedited 

approval of a proposed rule or rule 

amendment, would be redesignated as 


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54The Commission also proposes to replace the 

word ‘‘under’’ with ‘‘in compliance with’’ in 

§ 40.5(d)(1) to clarify that consideration for 

approval is contingent upon complying with the 

requirements of § 40.5(a). 

55The Commission additionally proposes to nonsubstantively revise § 40.5(f)(1) to include two new 

commas. The Commission believes this will 

improve readability and reduce the risk of 

confusion. 

56These changes also make this language 

consistent with the corresponding language in 

§§ 40.3 and 40.5. 

57The Commission also proposes to amend 

§ 40.6(a)(6)(ii) by adding the words ‘‘or may be 

submitted pursuant to § 40.5’’ to clarify that new 

rules or rule amendments that establish standards 

for responding to an emergency may be either 

certified pursuant to § 40.6(a) or submitted for 

Commission approval pursuant to § 40.5. 

58 2011 Final Rule at 44782–44783. 

59 Id. at 44783 (explaining that the Commission, 

in consideration of comments from both CME and 

OCX, determined to amend § 40.6(a) to make rules 

delisting or withdrawing the certification of 

products effective upon submission to the 

Commission. The Commission agreed that such 

submissions should be exempt from the 10- 

business-day review period in order to avoid 

complicating the delisting of the product by 

providing market participants an opportunity to 

enter into contracts between the time period of 

submission and the effective date of the rule.). 

§ 40.5(d)(2) and amended to remove the 

limitations that: expedited approval 

may be used only for ‘‘changes to’’ a 

proposed rule or a rule amendment; and 

the changes to the proposed rule or rule 

amendment may only be approved 

through expedited approval if they are 

consistent with ‘‘standards approved or 

established by the Commission.’’ The 

Commission believes that the quoted 

text that these amendments will remove 

is not necessary or could be 

misconstrued in connection with the 

ability of the Commission to approve 

proposed rules and rule amendments 

that are consistent with the CEA and 

Commission regulations on an 

expedited basis.54 Current § 40.5(f), 

which addresses the impact of nonapproval, would be redesignated as 

§ 40.5(e). 

The current text of § 40.5(f)(1) 

(proposed to be redesignated as 

§ 40.5(e)(1)) provides that notification to 

a registered entity under paragraph 

(d)(3) of § 40.5 does not prevent the 

registered entity from subsequently 

submitting a revised version of a 

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, and that the 

revised submission will be reviewed 

without prejudice. To clarify that 

notification to a registered entity under 

paragraph (d)(3) means a notification of 

non-approval by the Commission, the 

Commission proposes to amend the text 

of § 40.5(f)(1) to include ‘‘of the 

Commission’s determination not to 

approve a new rule or rule 

amendment’’. The Commission also 

proposes to add the words ‘‘or 

supplemented’’ to the text to clarify that 

supplemented submissions are reviewed 

without prejudice.55 The Commission 

believes this will help avoid any 

potential confusion and make the 

section more consistent with § 40.5(f)(2) 

(proposed to be redesignated as 

§ 40.5(e)(2)). 

Current § 40.5(f)(2) (proposed to be 

redesignated as § 40.5(e)(2)) provides 

that notification to a registered entity 

under paragraph (d)(3) of § 40.5 of the 

Commission’s determination not to 

approve a proposed rule or rule 

amendment is presumptive evidence 

that the entity may not truthfully certify 

the same, or substantially the same, 

proposed rule or rule amendment under 

§ 40.6(a). To clarify that certification 

under § 40.6(a) is referring to the 

certification that the rule or rule 

amendment complies with the CEA and 

the Commission’s regulations, the 

Commission proposes to amend the text 

of § 40.5(f)(2) to add ‘‘complies with the 

Act and the Commission’s regulations 

thereunder’’ and move the reference to 

§ 40.6(a) to earlier in the text. The 

Commission believes these changes will 

enhance clarity and improve context.56

The Commission requests comment 

on all aspects of its proposed 

amendments to § 40.5. 

F. Section 40.6—Self-Certification of 

Rules 

1. Proposed Amendments to 40.6(a) 

Regulation § 40.6(a) sets forth the 

submission requirements for rule 

certifications under CEA section 

5c(c)(1). The Commission proposes 

various non-substantive amendments to 

§ 40.6(a) to enhance its clarity. The 

proposed non-substantive amendments 

include: revising the introductory text of 

§ 40.6(a), including the heading, to 

better reflect the content of the 

regulation; moving the requirements for 

delisting of products with no open 

interest from the introductory text to a 

new § 40.6(a)(9); and revising the 

heading and ordering of § 40.6(a)(6) to 

better reflect its purposes.57 The 

Commission also proposes to remove 

references to dormant rules, the 

submission cover sheet, and the 

Secretary of the Commission, as 

previously discussed, and to correct the 

reference to the statutory definition of 

the term commodity in § 40.6(a)(5) from 

‘‘section 1a(4) of the Act’’ to ‘‘section 

1a(9) of the Act.’’ 

The Commission proposes to replace 

the word ‘‘of’’ in current § 40.6(a)(7)(v) 

with the words ‘‘that is complete with 

respect to.’’ This condition would then 

read as shown in the proposed revised 

text of § 40.6(a)(7)(v) presented in this 

Notice of Proposed Rulemaking. The 

Commission has previously explained 

that like the explanation and analysis 

required for new product submissions, 

the explanation and analysis of certified 

rules or rule amendments should be a 

clear and informative—but not 

necessarily lengthy—discussion of the 

submission, the factors leading to the 

adoption of the rule or rule amendment, 

and the expected impact of the rule or 

rule amendment on the public and 

market participants.58 Similar to the 

discussion above in section II.B.3 

regarding the level of detail in the 

explanation and analysis provided in 

new contract submissions, the 

Commission has found that some new 

rule submissions, while being concise, 

have not provided sufficient detail for 

staff to evaluate compliance of the 

proposed rule. Adding the words ‘‘that 

is complete with respect to’’ to current 

§ 40.6(a)(7)(v) is intended to add more 

direction to submitters that, while the 

required explanation be concise, it must 

also be sufficiently comprehensive to 

address the operation, purpose, and 

effect of the proposed rule or rule 

amendment and its compliance with 

applicable provisions of the Act, 

including core principles, and the 

Commission’s regulations. 

As set forth in the current 

introductory text to § 40.6(a), the 

delisting or withdrawal of the 

certification of a product with no open 

interest must comply with the 

submission and certification 

requirements in § 40.6(a)(1) and (2) and 

§ 40.6(a)(7). The Commission proposes 

to move this provision from the 

introductory paragraph of § 40.6(a) to 

new § 40.6(a)(9) to enhance the 

readability of § 40.6(a) and clarify the 

provision. Specifically, proposed new 

§ 40.6(a)(9)would explicitly state that a 

new rule or a rule amendment that 

delists, or withdraws the certification of, 

a product with no open interest may 

become effective immediately upon the 

filing of the submission, provided that 

the submission is made in compliance 

with § 40.6(a)(1) and (2) and § 40.6(a)(7). 

The Commission notes that while the 

current introductory text to § 40.6(a) is 

intended to enable a registered entity to 

delist, or withdraw a certification of, a 

product with no open interest 

immediately upon a submission,59 the 

current provision has not been well 

understood and it would be useful to 


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60The Commission also proposes to change the 

reference in § 40.6(c)(3) from ‘‘proposed 

certification’’ to ‘‘certification.’’ 

61The Commission believes the current 

designations are inconsistent with the introductory 

text of § 40.6(d). 

62The delegation is not intended to and does not 

affect any substantive authority including, for 

example, the Commission’s authority to bring an 

enforcement action based on a person’s violation of 

a registered entity’s position limit rules pursuant to 

CEA Section 4a(e). 

clarify by adding an explicit statement 

into the regulatory text. 

2. Proposed Amendments to § 40.6(b) 

Regulation § 40.6(b) sets forth the 

Commission’s review period for a rule 

certification under § 40.6(a). The 

regulation provides the Commission 

with a 10-business day review period 

after which the rule is deemed certified, 

unless the rule is stayed by the 

Commission during the review period. 

The Commission proposes to amend 

§ 40.6(b) to provide that any substantive 

amendment or supplementation of the 

rule submission will be deemed a new 

submission and restart the 10-business 

day review period, unless the 

amendment or supplementation is made 

for correction of typographical errors, 

renumbering or other non-substantive 

revisions. The proposed amendments 

are intended to preserve the 

Commission’s 10-business day review 

period where a registered entity makes 

a substantive change to a rule 

certification. 

3. Proposed Amendments to § 40.6(c) 

Regulation § 40.6(c) sets forth the 

Commission’s authority and procedures 

for staying a submission pursuant to 

§ 40.6(a). The Commission proposes to 

add the phrase ‘‘and can be 

implemented’’ in § 40.6(c)(3) in order to 

make clear that upon the expiration of 

a stay (without Commission objection), 

the registered entity may opt to 

implement the rule at a later time.60

The Commission proposes to amend 

§ 40.6 by adding a new § 40.6(c)(5) to 

address the effect of a Commission 

objection to a rule submitted pursuant 

to § 40.6(a). The proposed provision is 

based on the similar provision in 

current § 40.5(f) (Effect of nonapproval). Proposed § 40.6(c)(5)(ii) 

would provide that a Commission 

objection to a rule certification pursuant 

to § 40.6(c)(3) is presumptive evidence 

that the entity may not truthfully certify 

that the same, or substantially the same, 

rule complies with the Act and the 

Commission’s regulations. Proposed 

§ 40.6(c)(5)(i) would provide that a 

Commission objection does not, 

however, prevent the registered entity 

from subsequently submitting a revised 

or supplemented version of the 

proposed rule or rule amendment for 

review and approval or for certification. 

As discussed above with respect to 

current § 40.5(f), the revisions must 

provide a substantive basis to treat the 

revised rule differently from the 

previously submitted rule. 

4. Proposed Amendments to § 40.6(d) 

Regulation § 40.6(d)(2) sets forth 

various categories of rules that may be 

implemented by a registered entity 

without certification, provided that the 

registered entity complies with the 

weekly notification requirements in 

§ 40.6(d)(1). The Commission proposes 

to add the following new categories of 

rules to § 40.6(d)(2): updates to email 

addresses or other contact information 

that market participants use to submit 

block trades; amendments to existing 

trading months; with respect to a 

contract for the purchase or sale of a 

commodity for future delivery or an 

option on such a contract or an option 

on a commodity (other than a swap), 

payment or collection of commodity 

options premiums or margins and 

changes to no cancellation ranges; and 

with respect to a swap, payment or 

collection of option premiums or 

margins. The Commission believes 

updates to contact information for the 

submission of block trades are not 

substantive for compliance purposes 

and need not be subject to selfcertification and Commission review 

requirements of § 40.6(a). As discussed 

above in section II.A.5, the Commission 

preliminarily believes that registered 

entities should be able to submit rules 

or rule amendments governing the 

payment or collection of these 

premiums or margins (which are 

currently within the definition of terms 

and conditions in § 40.1) through 

weekly notices to the Commission 

pursuant to § 40.6(d)(2) as this will 

lower the burden for registered entities 

and still provide sufficient notice to the 

Commission. The Commission also 

preliminarily believes that registered 

entities should be able to submit rules 

or rule amendments that change no 

cancellation ranges or amend existing 

trading months through weekly notices 

to the Commission pursuant to 

§ 40.6(d)(2) as this will lower the burden 

for registered entities to implement such 

changes and still provide sufficient 

notice to the Commission. 

Regulation § 40.6(d)(3) currently sets 

forth various categories of rules that 

may be implemented without 

certification or notice to the 

Commission. The Commission proposes 

to amend current § 40.6(d)(3)(ii)(E)(1) 

(which would become § 40.6(e)(2)(v)(A)) 

to add the words ‘‘per contract’’ to be 

consistent with the corresponding 

provision in § 40.6(d)(2)(v)(A). The 

Commission also proposes to make a 

non-substantive amendment to 

redesignate § 40.6(d)(3) as § 40.6(e) and 

make corresponding designation 

changes to the other paragraphs of the 

section.61

The Commission requests comment 

on all aspects of its proposed 

amendments to § 40.6. In particular, the 

Commission requests comment on its 

proposed new categories of rules that 

may be filed pursuant to § 40.6(d)(2). 

The Commission further requests 

comments on the following questions: 

Are there other categories of rules, 

including rules specific to DCOs, DCMs, 

SEFs, or SDRs, that should be added to 

§ 40.6(d)(2)? If so, what is the rationale 

for the addition? Are there categories of 

rules that should be added to current 

§ 40.6(d)(3) (which is proposed to be 

moved to § 40.6(e))? If so, what is the 

rationale for the addition? 

In addition, the Commission requests 

comment on whether the per-contract 

fee change parameters in 

§ 40.6(d)(2)(v)(A) and 40.6(d)(3)(ii)(E)(1) 

(the latter of which would become 

§ 40.6(e)(2)(v)(A)) (i.e., above or below 

one dollar per contract) should be 

increased given the passage of time 

since the adoption of the current 

regulation. 

G. Section 40.7—Delegations 

1. Proposed Amendments to § 40.7 

Regulation § 40.7 sets forth 

delegations of the Commission’s 

authority to take various actions under 

the provisions of part 40. The 

Commission proposes to amend § 40.7 

to enhance the regulation’s utility and 

clarity and to add three new 

delegations. 

The Commission proposes to amend 

§ 40.7(b)(3) by adding the words ‘‘or 

relate to’’ to clarify that this delegation 

includes authority to approve rules or 

rule amendments of a registered entity 

that relate to, but do not establish or 

amend, speculative limits or position 

accountability provisions.62

The Commission proposes to delegate 

under proposed § 40.7(a)(1)(iv) and (v) 

the authority in proposed §§ 40.3(c)(3) 

and 40.5(c)(3) to extend the applicable 

review period set forth in §§ 40.3(c) and 

40.5(c), respectively, for the period of 

time agreed to in writing by the 

registered entity. The Commission 

believes these two delegations are 

appropriate given the agreement by the 

registered entity to the extension. 


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63Current § 40.7(a)(5) provides that if the 

Commission determines that a rule submitted by a 

DCM pursuant to § 40.4(b)(5) is not material, the 

rule may be reported pursuant to the provisions of 

§ 40.6(d). However, § 40.4(b)(5) itself provides that 

if a rule is deemed not material pursuant to the 

regulation, it may be filed pursuant to § 40.6(a). 

With respect to proposed 

§ 40.7(a)(1)(iv) and (v), should the 

Commission impose a maximum period 

of time that the staff, under delegated 

authority, may extend the period agreed 

to in writing by the registered entity? 

Why or why not? The Commission 

would still have the authority to extend 

the time for review for the period agreed 

to in writing by the registered entity, 

pursuant to proposed §§ 40.3(c)(3) and 

40.5(c)(3). 

Also, the Commission proposes to 

amend the text of § 40.7(a)(5), which 

delegates the Commission’s authority to 

determine if a proposed rule is material 

under § 40.4(b)(5). The proposed 

amendments streamline and simplify 

the text of the regulation by eliminating 

text that is not relevant to the delegation 

as well as an inconsistent reference to 

§ 40.6(d).63

Finally, as discussed above, the 

Commission is also proposing to add 

§ 40.7(e) to delegate the Commission’s 

authority to specify the format and 

manner of filing under these regulations 

to the Directors of the Division of 

Market Oversight and the Division of 

Clearing and Risk. Given that 

technology is used for the Commission 

to receive submissions from the 

registered entities under these 

regulations and the speed at which 

technology evolves, the Commission 

believes it is useful for staff to be able 

to specify the format and manner of 

filing under these regulations to 

facilitate the regulations remaining 

current with technological advances 

that registered entities and the 

Commission may use in the future. 

The Commission requests comment 

on all aspect of its proposed 

amendments to § 40.7. 

H. Section 40.10—Special Certification 

Procedures for Submission of Rules by 

SIDCOs 

1. Definition of ‘‘Materiality’’ in § 40.10 

Regulation § 40.10(a), which 

implements section 806(e) of the DoddFrank Act, requires a SIDCO to 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 SIDCO. When the Commission first 

adopted this requirement in 2011, it 

further defined ‘‘materially affect the 

nature or level of risks presented’’ in 

§ 40.10(b) as 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 SIDCO, and 

notes that such changes may include 

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. The 

Commission is proposing to revise this 

definition. 

In the more than a decade since its 

adoption, the Commission has found 

that the definition in § 40.10(b) is so 

broad and vague that it does not provide 

meaningful guidance to SIDCOs. Rather, 

the determination as to whether a 

proposed change is subject to advance 

notice under § 40.10(a) is usually made 

through discussions between the 

SIDCOs and Commission staff. 

The Commission is therefore 

proposing to revise the definition in 

§ 40.10(b) to specify that proposed 

changes that require advance notice 

under § 40.10 may include, but are not 

limited to, material changes to the 

SIDCO’s default management plan or 

default rules or procedures under 

§ 39.16 or § 39.35, program of risk 

analysis and oversight required under 

§ 39.18, or recovery and wind down 

plans required under § 39.39; the 

adoption of a new or materially revised 

margin methodology; the establishment 

of a cross-margining program or similar 

arrangement with another clearing 

organization; and material changes to its 

approach to the stress testing required 

under § 39.13(h)(3), § 39.36(a), or 

§ 39.36(c). 

The Commission notes that the ‘‘may 

include, but are not limited to’’ language 

means that the examples listed in the 

definition are not exhaustive and a 

proposed change that is not specifically 

mentioned nevertheless may be subject 

to advance notice if it meets the 

standard in § 40.10(a), including 

proposed changes that may fall under 

the broad categories listed in the current 

definition in § 40.10(b). The 

Commission requests comment on 

whether there are other examples of 

changes that should be listed in the 

definition in § 40.10(b), or whether there 

are other ways the definition could be 

revised to provide better guidance to 

SIDCOs as to when advance notice of a 

proposed change is required under 

§ 40.10. 

2. SIDCO Sbmission Under § 40.10 of 

Rules Otherwise Required To Be 

Submitted Under § 40.5 

The Commission is proposing to add 

new § 40.10(i) to require that where any 

provision of the Commission’s 

regulations requires a DCO to file rules 

for approval under § 40.5, a SIDCO 

would be required instead to file those 

rules under § 40.10, if the rules could 

materially affect the nature or level of 

risks presented by the SIDCO. Without 

this change, a requirement for DCOs to 

file rules pursuant to § 40.5 could be 

misinterpreted as relieving a SIDCO 

from having to file those same rules 

pursuant to § 40.10, or as creating a 

duplicative requirement for SIDCOs to 

submit rules under both § 40.5 and 

§ 40.10. Current regulations that require 

a DCO to file rules for approval include 

requests for transfer of open positions in 

§ 39.3(g); holding securities in a futures 

account pursuant to a portfolio 

margining program in § 39.4(f); crossmargining programs in § 39.13(i); and 

commingling of customer positions and 

associated funds in either a futures or 

cleared swaps customer account in 

§ 39.15(b). 

3. Technical Corrections to § 40.10 

The Commission is proposing to 

revise the first sentence of § 40.10(a), 

which references a registered DCO that 

has been designated by the Financial 

Stability Oversight Council as a 

systemically important DCO. After 

§ 40.10(a) was adopted, the Commission 

adopted a definition of ‘‘systemically 

important derivatives clearing 

organization’’ in § 39.2. The 

Commission proposes to change the 

reference to a systemically important 

DCO, ‘‘as defined in § 39.2 of this 

chapter.’’ 

The Commission is also proposing to 

revise § 40.10 to remove references to 

‘‘the purposes of the Dodd-Frank Act.’’ 

At the time § 40.10 was adopted, the 

Commission was still in the process of 

incorporating in its regulations changes 

necessary to reflect the purposes of the 

Dodd-Frank Act. The Commission 

subsequently adopted revisions to its 

DCO regulations that address the DoddFrank Act requirements. Accordingly, 

the references in § 40.10(d) and (h)(3) to 

the purposes of the Dodd-Frank Act are 

no longer necessary. 

The Commission requests comment 

on all aspects of its proposed 

amendments to § 40.10. 

I. Technical Correction to Authority 

Section of Part 40 

The Commission is proposing to 

remove the reference to section 7a of the 


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64Public Law 111–203, title VII, sec. 734(a), July 

21, 2010, 124 Stat. 1718 (2010). 65 5 U.S.C. 601 et seq. 66See Policy Statement and Establishment of 

‘‘Small Entities’’ for purposes of the Regulatory 

Flexibility Act, 47 FR 18618 (Apr. 30, 1982). 67 47 FR 18618, 18619 (April 30, 1982). 68New Regulatory Framework for Clearing 

Organizations, 66 FR 45604, 45609 (Aug. 29, 2001). 69Core Principles and Other Requirements for 

Swap Execution Facilities, 78 FR 33476, 33548 

(June 4, 2013). 70Swap Data Repositories, 75 FR 80898, 80926 

(Dec. 23, 2010). 

71 44 U.S.C. 3501 et seq. 

72For the previously approved estimates, see ICR 

Reference No. 202102–3038–001 (conclusion date 

Feb. 24, 2021), available at https://www.reginfo.gov/ 

public/do/PRAViewICR?ref_nbr=202102-3038-001. 

73OMB Control Number 3038–0093 has two 

Information Collections: Part 40, Provisions 

Common to Registered Entities; and Part 150, 

Position Limits. See https://www.reginfo.gov/ 

public/do/PRAViewICR?ref_nbr=202102-3038-001. 

74As discussed above in sections II.B.3, II.C.1, 

and II.F.1, the proposed amendments clarify the 

Commission’s expectations for the content of 

submissions, which some registered entities had not 

been meeting in their recent filings. Although the 

Commission views the proposed amendments as 

clarifying filing requirements rather than new 

requirements, they will increase the reporting 

burden compared to some registered entities’ 

current filing practices. 

75The 3-year average of total responses for §§ 40.2 

and 40.3 submissions combined was 848 responses, 

calculated by taking the annual total submissions 

received under §§ 40.2 and 40.3 combined from all 

entities and averaging them for the years of 2020, 

2021 and 2022. The estimated number of reports 

per respondent is calculated as 848 responses 

divided by 70 respondents (848 responses/70 

respondents = 12 responses per respondent). 

76The aggregate number of hours per report for 

§§ 40.2 and 40.3 adds 1 hour to the existing burden 

estimate of 21 hours, for a total of 22. 

77The estimated gross annual reporting burden 

(hours) is calculated by multiplying the estimated 

number of respondents times the estimated number 

of reports per respondent times the average number 

of hours per report (70 respondents × 12 reports per 

respondent × 22 hours per report = 18,480 hours). 

CEA, which was repealed by the DoddFrank Act,64 from the authority section 

for part 40. 

III. Related Matters 

A. Regulatory Flexibility Act 

The Regulatory Flexibility Act 

(‘‘RFA’’) requires agencies to 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 with respect to such 

impact.65 The Commission has 

previously established certain 

definitions of ‘‘small entities’’ to be used 

by the Commission in evaluating the 

impact of its regulations on small 

entities in accordance with the RFA.66

The proposed amendments to part 40 

set forth herein would impact DCMs, 

DCOs, SEFs and SDRs. The Commission 

has previously determined that DCMs,67

DCOs,68 SEFs,69 and SDRs 70 are not 

small entities for purposes of the RFA. 

Therefore, the Chairman, on behalf of 

the Commission, pursuant to 5 U.S.C. 

605(b), hereby certifies that the 

proposed rules will not have a 

significant economic impact on a 

substantial number of small entities. 

B. Paperwork Reduction Act 

The Paperwork Reduction Act 

(‘‘PRA’’) 71provides that Federal 

agencies, including the Commission, 

may not conduct or sponsor, and a 

person is not required to respond to, a 

collection of information unless it 

displays a valid control number from 

the Office of Management and Budget 

(‘‘OMB’’). This proposed rulemaking 

contains reporting and recordkeeping 

requirements that are collections of 

information within the meaning of the 

PRA. This section addresses the impact 

of the proposal on existing information 

collection requirements associated with 

part 40 of the Commission’s regulations. 

Changes to the existing information 

requirements as a result of this proposal 

are set forth below. OMB has assigned 

Control No 3038–0093, ‘‘Part 40, 

Provisions Common to Registered 

Entities,’’ to the information collections 

associated with these regulations.72 The 

Commission is revising its total burden 

estimates for this clearance to reflect the 

proposed amendments. 

The proposed amendments will 

modify the existing information 

collection entitled Part 40, Provisions 

Common to Registered Entities, (‘‘Part 

40 Information Collection’’), which is 

one of two Information Collections 

under OMB control number 3038– 

0093.73 The Part 40 Information 

Collection encompasses the reporting 

burdens associated with §§ 40.2 and 

40.3 (product submissions); §§ 40.5 and 

40.6 (rule submissions); and § 40.10 

(SIDCO submissions). 

1. Burden Estimates 

The proposed amendments to 

§§ 40.2(a)(3)(v), 40.3(a)(4), and 

40.6(a)(7)(v) would clarify that these 

regulations require registered entities to 

provide sufficient detail for staff to 

evaluate compliance of the products and 

rules registered entities are proposing in 

their submissions. This additional detail 

(e.g., about the underlying commodity 

in a derivatives contract) is necessary to 

allow Commission staff to assess 

whether new products and amendments 

to existing products terms and 

conditions comply with the CEA and 

Commission regulations. The 

Commission anticipates that, if adopted, 

these amendments are likely to increase 

reporting burden for registered entities, 

although some registered entities are 

already providing this information.74

Specifically, for rule submissions under 

§ 40.6, these new requirements would 

add an additional average of 30 minutes 

(for a new total of 2.5 hours). For 

product submissions under §§ 40.2 and 

40.3, the proposed amendments would 

add an additional average 1 hour of 

burden (for a new total of 22 hours). 

The aggregate burden for the Part 40 

Information Collection, including the 

burden from the proposed amendments 

and the updates to number of responses 

based on current Commission data, is 

estimated as follows: 

Product Submissions (§§ 40.2 and 40.3) 

For product submissions (§§ 40.2 and 

40.3), the number of respondents 

remains 70. The Commission estimates 

that for product submissions under 

§§ 40.2 and 40.3, the proposed 

amendments to §§ 40.2(a)(3)(v) and 

40.3(a)(4) would add an additional 

average 1 hour of burden (for a new total 

of 22 hours). Based on an updated 

review of its annual reporting data for 

the past three years (2020–2022), the 

Commission estimates that reporting 

entities are likely to submit on average 

an aggregate of 848 reports annually. 

Accordingly, the aggregate annual 

estimate for the reporting burden 

associated with product submissions 

(§§ 40.2 and 40.3), as amended by the 

proposal, is as follows: 

Estimated number of respondents: 70. 

Estimated number of reports per 

respondent: 12.75

Average number of hours per report: 

22.76

Estimated gross annual reporting 

burden (hours): 18,480.77

Rule Submissions (§§ 40.5 and 40.6) 

For rule submissions (§§ 40.5 and 

40.6), the number of respondents 

remains 70. Although the proposed 

amendments only increase reporting 

burden for § 40.6 submissions, the 

Commission averages §§ 40.5 and 40.6 

for PRA purposes. Based on an updated 

review of recent submission data from 

2020–2022, the Commission estimates 

that respondents submit on average 

1,412 reports per year. Further, the 

Commission estimates that, if the 

proposed amendments to § 40.6(a)(7)(v) 

are adopted, each respondent would 

spend approximately 2.5 hours to 

prepare and submit the required reports. 

Accordingly, the aggregate annual 

estimate for the reporting burden, as 

amended by the proposal, is as follows: 


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78The estimated number of 70 respondents 

includes 16 active DCMs, 23 registered SEFs, 15 

registered DCOs, 5 provisionally registered SDRs, 

plus pending applications for those entities. 

79As noted above, the proposed amendment 

increases the burden only for § 40.6 filings (and not 

for § 40.5 filings). However, the Commission 

aggregates §§ 40.5 and 40.6 for PRA purposes. The 

3-year average of total responses for §§ 40.5 and 

40.6 submissions combined was 1,412 responses, 

calculated by taking the annual total submissions 

received under §§ 40.5 and 40.6 combined from all 

entities and averaging them for the years of 2020, 

2021 and 2022. The estimated number of reports 

per respondent is calculated as 1,412 responses 

divided by 70 respondents (1,412 responses/70 

respondents = 20 responses per respondent). 

80The aggregate number of hours per report for 

§§ 40.5 and 40.6 adds 0.5 hours to the existing 

burden of 2 hours per report, for a total of 2.5. 

81The estimated gross annual reporting burden 

(hours) is calculated by multiplying the estimated 

number of respondents times the estimated number 

of reports per respondent times the average number 

of hours per report (70 respondents × 20 reports per 

respondent × 2.5 hours per report = 3,500 hours). 

82The 3-year average of total responses for § 40.10 

submissions was 2, calculated by taking the annual 

total submissions received under § 40.10 from all 

entities and averaging them for the years of 2020, 

2021 and 2022. 

83The estimated gross annual reporting burden 

(hours) is calculated by multiplying the estimated 

number of respondents times the estimated number 

of reports per respondent times the average number 

of hours per report (2 respondents × 1 reports per 

respondent × 50 hours per report = 100 hours). 

Estimated number of respondents: 

70.78

Estimated number of reports per 

respondent: 20.79

Average number of hours per report: 

2.5.80

Estimated gross annual reporting 

burden (hours): 3,500.81

SIDCO Submissions (§ 40.10) 

The burden for SIDCO submissions 

under § 40.10 is unaffected by the 

proposed amendments, but has been 

updated based on review of existing 

data. Based on an updated review of 

recent submission data from 2020–2022, 

the number of SIDCO respondents 

remains 2 and each respondent typically 

submits 1 report annually. The 

Commission estimates that each 

registered entity will continue to spend 

on average 50 hours to prepare and 

submit its report. The aggregate annual 

estimate burden for § 40.10 submissions 

is as follows: 

Estimated number of respondents: 2. 

Estimated number of reports per 

respondent: 1.82

Average number of hours per report: 

50. 

Estimated gross annual reporting 

burden (hours): 100.83

The Commission believes that the 

other proposed changes to reporting 

proposed in this NPRM will not 

increase the burden on the registered 

entities, and in some cases, may reduce 

reporting burden. The Commission 

anticipates that the following proposed 

changes will not result in any increase 

in reporting burden: 

Dormancy (§ 40.1(b) and (g)). If the 

proposed removal of the definitions of 

‘‘dormant contract or dormant product’’ 

and ‘‘dormant rule’’ is adopted, 

registered entities would no longer be 

required to make submissions to revive 

dormant rules or products under 

§§ 40.2, 40.3, 40.5, or 40.6, other than 

when required to do so in connection 

with reinstating a registered entity’s 

registration or designation from 

dormancy. Accordingly, the proposed 

changes would not add any burden on 

registered entities but may reduce 

burdens. 

Margin methodology rules (§§ 40.1, 

40.5, 40.6, 40.10). This provision would 

add ‘‘margin methodology’’ to the 

definition of ‘‘rule’’ and thus require the 

corresponding rule submissions. 

However, registered entities already 

have been submitting margin-related 

rule changes under the current 

requirements. The proposed change 

only clarifies existing filing 

requirements and would not add new 

reporting burdens. 

Terms and conditions; weekly 

notification (§§ 40.1(j), 40.2, and 

40.6(d)(2)). The proposed changes to the 

definition of ‘‘terms and conditions’’ 

remove certain categories of 

information, such as payments and 

collections of certain margins and 

premiums that registered entities must 

submit to the Commission as part of 

their rule submissions under § 40.6(a). 

Instead, the information would be filed 

as rules under the less burdensome 

weekly notification requirements of 

§ 40.6(d)(2). Contact information for 

block trades and amendments to ‘‘no 

cancellation ranges’’ would also be 

added to the less-burdensome weekly 

notification category under § 40.6(d)(2). 

Cover sheet (§§ 40.2, 40.3, 40.5, 40.6 

and Appendix D). The proposal would 

remove the requirement for filers to 

submit a cover sheet. The Commission’s 

electronic portal now collects the 

required information and generates a 

cover sheet automatically, allowing the 

cover-sheet requirement to be removed 

and reducing burden to the registered 

entities. 

Time period for submitting additional 

materials for product approvals 

(§ 40.3(a)(10)). The proposed rule would 

provide Commission staff greater 

flexibility to set deadlines for 

submission of any additional 

information requested by the 

Commission for voluntary product 

approval by registered entities. 

Currently, the regulation requires an 

initial two-business-day limit after the 

Commission requests the information. 

The greater staff discretion to set more 

flexible deadlines would reduce the 

need for registered entities to submit 

extension requests, thereby reducing 

their burden. 

Non-materiality criteria (§ 40.4(b)(5)). 

This provision would provide guidance 

to registered entities about the nonmateriality determination required for 

certain products. It would not change 

the submission requirements, but rather 

help registered entities understand 

Commission requirements for their 

submissions. The Commission 

anticipates that these clarifications are 

likely to reduce burden for reporting 

entities by providing more specificity 

about submission requirements. 

Materiality; submission of related 

rules (§ 40.4(b)(5)(ii)). If adopted, the 

proposed rules would require that nonmateriality submissions include any 

relevant previous rules or rule 

amendments that support nonmateriality. This could impose 

additional research, information 

collection, and filing burdens. However, 

according to Commission data, fewer 

than one non-materiality submission is 

made annually. Accordingly, the 

Commission anticipates that this 

requirement is unlikely to impose any 

material increase in reporting burden for 

covered entities. 

Resubmission (§ 40.6(c)(5)(ii)). This 

proposed provision describes how an 

objection by the Commission to a 

registered entity’s certification of a 

proposed rule or rule amendment would 

affect any future filings by the registered 

entity of the proposed rule or rule 

amendment to which the Commission 

objected. Because objections are 

infrequent, the Commission anticipates 

that the burden of this provision is 

unlikely to result in increased burden 

for reporting entities. 

Materiality standard (§ 40.10(b)). 

Under the proposed amendments, the 

definition ‘‘materially affect the nature 

or level of risks presented’’ for SIDCO 

rule submissions would be revised to 

provide more useful guidance to 

registered entities. This change would 

not affect the reporting burden. 

SIDCO submission under § 40.10 of 

rules otherwise required to be submitted 

under § 40.5. This proposed amendment 

would clarify filing requirements, but 

would not result in a substantive change 

to filing obligations. The Commission 

also anticipates that this clarification 

may reduce burden by eliminating 

mistaken duplicate filings. 

‘‘Referenced contract’’ data element 

(Appendix D). Submissions for new 

products would include a new 

structured data element in the online 


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84 7 U.S.C. 19(a). 

85See §§ 40.2, 40.3, 40.4, 40.5 and 40.6. 

86See 2011 Final Rule; Repeal of the Exempt 

Commercial Market and Exempt Board of Trade 

Exemptions, 80 FR 59575 (October 2, 2015); and 

Position Limits for Derivatives, 86 FR 3236 (January 

14, 2021). 

portal indicating whether the product is 

a ‘‘referenced contract.’’ This 

information would be the same as the 

‘‘reference contract’’ determination set 

out in § 150.1 and appendix C to part 

150. Accordingly, this is a nonsubstantive revision that will have de 

minimis impact on reporting burden. 

2. Request for Comment 

The Commission invites the public 

and other Federal agencies to comment 

on any aspect of the proposed 

information collection requirements 

discussed above. Pursuant to 44 U.S.C. 

3506(c)(2)(B), the Commission will 

consider public comments on this 

proposed collection of information in: 

(a) Evaluating whether the proposed 

collection of information is necessary 

for the proper performance of the 

functions of the Commission, including 

whether the information will have a 

practical use; 

(b) Evaluating the accuracy of the 

estimated burden of the proposed 

collection of information, including the 

degree to which the methodology and 

the assumptions that the Commission 

employed were valid; 

(c) Enhancing the quality, utility, and 

clarity of the information proposed to be 

collected; and 

(d) Minimizing the burden of the 

proposed information collection 

requirements on registered entities, 

including through the use of appropriate 

automated, electronic, mechanical, or 

other technological information 

collection techniques, e.g., permitting 

electronic submission of responses. 

Copies of the submission from the 

Commission to OMB are available from 

the CFTC Clearance Officer, 1155 21st 

Street NW, Washington, DC 20581, (202) 

418–5160 or from https://RegInfo.gov. 

Organizations and individuals desiring 

to submit comments on the proposed 

information collection requirements 

should send those comments to: 

• The Office of Information and 

Regulatory Affairs, Office of 

Management and Budget, Room 10235, 

New Executive Office Building, 

Washington, DC 20503, Attn: Desk 

Officer of the Commodity Futures 

Trading Commission; 

• (202) 395–6566 (fax); or 

• OIRAsubmissions@omb.eop.gov 

(email). 

Please provide the Commission with 

a copy of submitted comments so that 

comments can be summarized and 

addressed in the final rulemaking, and 

please refer to the ADDRESSES section of 

this rulemaking for instructions on 

submitting comments to the 

Commission. OMB is required to make 

a decision concerning the proposed 

information collection requirements 

between 30 and 60 days after 

publication of this release in the Federal 

Register. Therefore, a comment to OMB 

is best assured of receiving full 

consideration if OMB receives it within 

30 calendar days of publication of this 

release. Nothing in the foregoing affects 

the deadline enumerated above for 

public comment to the Commission on 

the proposed rules. 

C. Cost Benefit Considerations 

1. CEA Section 15(a) 

Section 15(a) of the CEA requires the 

Commission to consider the costs and 

benefits of its actions before issuing new 

regulations under the CEA.84 By its 

terms, section 15(a) does not require the 

Commission to quantify the costs and 

benefits of a new rule or to determine 

whether the benefits of the adopted rule 

outweigh its costs. Rather, section 15(a) 

requires the Commission to ‘‘consider 

the costs and benefits’’ of a subject rule. 

Section 15(a) further specifies that the 

costs and benefits of the proposed 

regulations 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. 

Collectively, these five factors are 

referred to herein as section 15(a) factors 

and they are addressed below. In 

conducting its analysis, the Commission 

may, in its discretion, give greater 

weight to any one of the five 

enumerated areas of concern and may 

determine that, notwithstanding its 

costs, a particular rule is necessary or 

appropriate to protect the public interest 

or to effectuate any of the provisions or 

to accomplish any of the purposes of the 

Act. 

The Commission recognizes that the 

proposed amendments may impose 

costs. Some of the proposed 

amendments, however, are format, 

organizational, and non-substantive 

changes, which will have no costs. The 

Commission has endeavored to assess 

the expected costs and benefits of the 

proposed amendments in quantitative 

terms, including PRA related costs, 

where possible. In situations where the 

Commission is unable to quantify the 

costs and benefits, the Commission 

identifies and considers the costs and 

benefits of the applicable proposed 

amendments in qualitative terms. The 

lack of data and information to estimate 

those costs is attributable in part to the 

nature of the proposed amendments. 

Additionally, any initial and recurring 

compliance costs for any particular 

DCM, DCO, SDR, or SEF will depend on 

the size, existing infrastructure, 

practices, and cost structure of the 

entity. 

The Commission generally requests 

comment on all aspects of its cost 

benefit considerations, including the 

identification and assessment of any 

costs and benefits not discussed herein; 

data and any other information to assist 

or otherwise inform the Commission’s 

ability to quantify or qualitatively 

describe the costs and benefits of the 

proposed amendments; and 

substantiating data, statistics, and any 

other information to support positions 

posited by commenters with respect to 

the Commission’s discussion. The 

Commission welcomes comment on 

such costs. 

2. Statutory and Regulatory Background 

Part 40 of the Commission’s 

regulations implements section 5c(c) of 

the CEA and requirements and 

procedures for registered entities, 

including DCMs, DCOs, SEFs, SDRs, 

and SIDCOs, to submit their rules and 

products to the Commission prior to 

implementing rules, listing products for 

trading, or accepting products for 

clearing. Part 40 generally provides two 

means for registered entities to submit 

rules and products to the Commission. 

There is a self-certification process and 

a Commission-approval process.85

With two exceptions, the Commission 

last amended the part 40 regulations in 

2011.86 After years of experience with 

registered entities following the 

processes set forth in the part 40 

regulations, the Commission is 

proposing amendments to clarify, 

simplify, and enhance the utility of, the 

part 40 regulations for registered entities 

and the Commission. Changes proposed 

include amendments to: § 40.1 to 

simplify the determination of whether a 

registered entity is deemed dormant and 

to remove the terms ‘‘dormant rule’’ and 

‘‘dormant contract or dormant product’’; 

§§ 40.2, 40.3, 40.4, 40.5 and 40.6 and 

appendix D to part 40 to reflect the 

development, evolution and use of the 

Commission’s online portal for the filing 

of rule and product submissions; and 

§§ 40.5, 40.6 and 40.7 to reorganize and 

enhance the regulations’ utility. The 

Commission also proposes to amend 


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87See, e.g., 7 U.S.C. 2(i). 

§ 40.10 to provide meaningful guidance 

to SIDCOs regarding filing instructions 

for rules that could materially affect the 

nature or level of risks presented by the 

SIDCO. 

3. Baseline 

The baseline for the Commission’s 

consideration of the costs and benefits 

of this proposed rulemaking is the 

existing statutory and regulatory 

framework applicable to DCMs, DCOs, 

SDRs, and SEFs, in 17 CFR part 40. 

Current part 40 provides substantive 

and procedural regulatory requirements 

for the submission of registered entities’ 

self-certifications, and requests for 

approval, of new products for trading 

and clearing and new rules and rule 

amendments. Current part 40 also 

establishes guidelines for the 

Commission’s review and processing of 

registered entities’ submissions. Current 

part 40 regulations explain what 

information must be made publicly 

available in relation to the application 

to become a DCM, DCO, SDR, or SEF, 

and when registered entities file 

submissions for new products, new 

rules and rule amendments. There are 

also special requirements for certain 

rules submitted by SIDCOs. 

The Commission notes that this costbenefit consideration is based on its 

understanding that the derivatives 

market regulated by the Commission 

functions internationally with: (1) 

transactions that involve U.S. entities 

occurring across different international 

jurisdictions; (2) some entities organized 

outside of the United States that are 

registered with the Commission; and (3) 

some entities that typically operate both 

within and outside the United States 

and that follow substantially similar 

business practices wherever located. 

Where the Commission does not 

specifically refer to matters of location, 

the discussion of costs and benefits 

below refers to the effects of the 

proposed regulations on all relevant 

derivatives activity, whether based on 

their actual occurrence in the United 

States or on their connection with, or 

effect on U.S. commerce.87

4. Proposed Amendments 

a. Proposed Amendments to § 40.1 

Regarding Dormant Registered Entities, 

Products, Contracts, and Rules 

The Commission proposes to amend 

its regulations to simplify the 

calculation of how long a registered 

entity is inactive and when a registered 

DCM, DCO, SDR or SEF is deemed 

dormant. The proposed amendments to 

§ 40.1(c) through (f) would conform the 

wording of these sections across the 

different types of registered entity such 

that any registered entity would be 

considered dormant if it is inactive for 

a period of 365 days, provided that a 

DCM, DCO or SEF will not become 

dormant during the 1,095 days 

following the entity’s initial and original 

order of designation or registration, as 

applicable. The proposed amendments 

replace the current regulatory text that 

measures time periods in months with 

language that measures the equivalent 

time in days and the proposed 

amendments provide for consistent, 

clear start and end dates for measuring 

inactivity in connection with dormancy 

status. 

In addition, the Commission proposes 

removing from § 40.1(b) and (g) the 

definitions and related requirements for 

the following terms: ‘‘dormant contract 

or dormant product,’’ and ‘‘dormant 

rule’’, respectively. As amended, the 

rules of a dormant DCM, dormant SEF, 

dormant DCO, or dormant SDR would 

still need to be approved and the 

products would still need to be selfcertified or approved in connection with 

the entity being reinstated as a DCM, 

SEF, DCO or SDR, respectively, but a 

DCM, SEF, DCO or SDR that is not 

dormant would no longer need to 

certify, or seek approval, of a particular 

rule or product that was already 

approved or certified solely due to a 

lack of implementation of the rule or 

inactivity of the particular product. 

i. Benefits 

The Commission believes that the 

proposed changes to the part 40 

dormancy regulations will benefit 

registered entities by helping registrants 

interpret dormancy period requirements 

consistently across the relevant 

registration types and more readily 

identify when dormancy applies. 

Additionally, the removal of the terms 

‘‘dormant contract or dormant product,’’ 

and ‘‘dormant rule’’ and the associated 

requirements will remove the 

administrative and compliance burdens 

of tracking whether a product or rule 

has become dormant and the potential 

costs of recertifying (or obtaining 

approval of) a dormant contract, 

product, or rule. 

ii. Costs 

The Commission expects that 

registered entities will not incur any 

increased costs related to the proposed 

amendments to the current dormancy 

regulations in part 40. The proposed 

amendments would eliminate ambiguity 

regarding how registered entities 

calculate entity dormancy periods and 

remove requirements for determining 

when a product or rule is considered 

dormant and related submission 

requirements for dormant products and 

rules. Furthermore, by removing the 

dormant rule regulations in their 

entirety, the Commission believes that it 

has generated a cost-savings because 

entities no longer need to monitor 

whether rules are dormant. Regarding 

the potential for a cost in the reduction 

of market oversight, based on 

experience with dormant products and 

rules to date, the Commission 

preliminarily believes that deleting the 

definitions would result in little, if any, 

cost to regulatory oversight because the 

Commission has observed that 

registrants typically manage products 

with no trading activity or inactive rules 

and the Commission is not aware of any 

market disruptions resulting from the 

inactivity of products or rules. 

b. Proposed Amendments to § 40.1(i) 

and (j) Regarding Definitions of Rule 

and Terms and Conditions 

The Commission proposes to amend 

§ 40.1(i)—the definition of the term 

‘‘rule’’—by including ‘‘margin 

methodology’’ in the list of specific 

items that are considered a ‘‘rule,’’ 

thereby making explicit what is already 

understood by current DCOs as 

implicitly included and codifying the 

current practice of DCOs submitting 

margin methodologies as rules to the 

Commission. The Commission also 

proposes to amend § 40.1(j)—the 

definition of the term ‘‘terms and 

conditions’’—by removing from the list 

of terms that are considered ‘‘terms and 

conditions’’ payments or collections of 

certain premiums or margins from 

§ 40.1(j)(1)(xi) and (j)(2)(xi). The 

Commission proposes to add the 

payments or collections of such 

premiums or margins, as well as 

changes to the no cancellation ranges, to 

the categories of rules that may be 

submitted without certification 

pursuant to § 40.6(d)(2). 

i. Benefits 

The proposed amendments to the 

definition of ‘‘terms and conditions’’ 

will reduce compliance burdens for 

registered entities for rule amendments 

that address payments or collections of 

certain premiums or margins and 

changes to the no cancellation ranges as 

these could be filed through a weekly 

notification pursuant to § 40.6(d)(2), 

which is a less burdensome, less costly 

process than through the current 

process under § 40.6(a). The § 40.6(d) 

process permits a registered entity to 

implement a rule immediately and 

without self-certification provided that 

the entity files a summary notification 


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Federal Register / Vol. 88, No. 171 / Wednesday, September 6, 2023 / Proposed Rules 61447 

within a week of the rule amendment. 

The Commission believes that by adding 

margin-related rule changes to the list of 

items considered a rule, the 

Commission is making it clear what 

type of information is considered a rule 

and codifying a current practice. 

ii. Costs 

The Commission believes that the 

proposed amendment to the definition 

of ‘‘rule’’ to state explicitly that ‘‘margin 

methodology’’ is included in the 

definition will make the term consistent 

with the current DCO practice and 

understanding of implicit requirements 

and therefore will not place any 

additional cost or burden on registered 

entities that submit rules to the 

Commission under part 40. 

The Commission does not expect 

registered entities to incur any 

additional costs or burdens related to 

the proposed changes to the definition 

of ‘‘terms and conditions’’ because the 

proposed amendments reduce the 

number of items of information 

registered entities must submit to the 

Commission under § 40.6(a). The 

proposed amendments also allow rules 

relating to the new categories of 

information to be implemented more 

quickly and efficiently by filing such 

rules in accordance with the 

requirements of § 40.6(d) (a process 

which allows a registered entity to 

implement rules enumerated in 

§ 40.6(d) immediately and without selfcertification, provided that the 

registered entity provides the 

Commission with a required summary 

notification of such actions within a 

week of making the rule amendments). 

c. Proposed Amendments to §§ 40.2 and 

40.3 Regarding Instructions for SelfCertification and Approval of Products 

The Commission is proposing changes 

to current §§ 40.2 and 40.3 to update 

Commission processes and clarify filing 

instructions for registered entities’ 

submission of products to the 

Commission. Proposed amendments to 

§§ 40.2(a)(1) and 40.3(a)(1) remove 

references to the Commission Secretary. 

To reflect the fact that registered entities 

now file submissions through the 

Commission’s portal and a cover sheet 

is no longer necessary, proposed 

changes to §§ 40.2(a)(3) and 40.3(a)(2) 

remove the references to a cover sheet 

and replace them with a requirement 

directing registered entities to provide 

the information required by appendix D 

to part 40. 

Proposed changes to § 40.2(a)(3) 

clarify that a registered entity’s concise 

explanation of a product must also be 

complete and that the explanation 

include the product’s terms and 

conditions, the underlying commodity, 

and the product’s compliance with the 

CEA and associated regulations. 

Proposed changes to § 40.3(a)(4) clarify 

that a registered entity’s explanation of 

a product must be complete and that the 

explanation include the product’s terms 

and conditions, the underlying 

commodity, and the product’s 

compliance with the CEA and 

associated regulations. 

The proposed amendments to 

§ 40.3(a)(10) eliminate the two-business 

day deadline for registered entities to 

respond to Commission staff requests 

for additional information with respect 

to product approval requests under 

§ 40.3 and grant Commission staff 

authority to set response deadlines. 

Proposed amendments to § 40.3(c) 

concern the length of the review period. 

Proposed amendment to § 40.3(c) make 

it clear that there is a 45-day review 

period that the Commission may extend 

for an additional 45-days, but not to 

exceed 90 days, if the product raises 

novel or complex issues that require 

additional time for analysis. The 

proposed amendments to § 40.3(c) 

would also permit the Commission to 

extend for an additional 45-days if the 

submission is ‘‘incomplete’’ or the 

entity doesn’t respond completely to 

‘‘Commission questions in a timely 

manner.’’ The proposed amendments to 

§ 40.3(c) also state that the Commission 

may extend the review period for any 

period of time, provided there is written 

agreement by the registered entity, and 

that any subsequent, substantive 

submission of information for a product 

under a § 40.3 review, whether 

requested by the Commission or 

voluntarily provided by the submitting 

entity, restarts the 45-day review period. 

The Commission also proposes an 

amendment to § 40.3(c)(5) providing 

that if a review period ends on a nonbusiness day, such review is extended 

to the next business day. 

i. Benefits 

The Commission believes the removal 

of the reference to the Secretary in the 

regulations is beneficial because the 

deletion modernizes the regulation and 

makes it consistent with current 

practices and technologies. For 

example, submitting entities no longer 

send submissions to the Commission’s 

Secretary because they upload 

documents to the Commission’s portal. 

The Commission believes that the 

elimination of the cover sheet 

requirement under §§ 40.2 and 40.3 

removes redundancy because the online 

portal requires registered entities to 

input the same information that is 

required on the coversheet. The 

Commission believes that the proposed 

amendments will benefit registered 

entities by clarifying the Commission’s 

intent as to the scope of the explanation 

and analysis required for the submission 

of self-certified products pursuant to 

§ 40.2 or for requests for a product 

approval pursuant to § 40.3. In addition, 

the proposed amendments will help 

achieve improved regulatory 

effectiveness of the product selfcertification and approval processes by 

clarifying the level of detail in the 

information provided thereby enabling 

the Commission to more effectively 

complete its analysis. 

The Commission believes that 

amending § 40.3(a)(10) to eliminate the 

two business day deadline for 

responding to Commission request for 

additional information and granting 

Commission staff the authority to set a 

deadline based on the nature of the 

requested information will provide 

more flexibility to registered entities 

and better enable the Commission to 

manage its resources and conduct more 

effective oversight over registered 

entities. The proposed changes to 

§ 40.3(c)(4) also provide that any 

substantive amendment of a § 40.3 

submission would restart the 45-day 

review period provided in § 40.3(c) to 

ensure that the Commission has 

sufficient time to analyze and consider 

the substantive changes. The restarting 

of the 45-day review period provided in 

§ 40.3(c) upon a registered entity making 

any substantive changes to their 

§ 40.3(c) filing would also encourage 

registered entities to be precise and 

consult with Commission staff regarding 

any questions when preparing § 40.3 

submissions. 

ii. Costs 

The Commission believes that there 

will not be new costs associated with 

the proposed amendments §§ 40.2 and 

40.3 requiring registered entities to 

provide complete explanations of their 

products as this information is already 

required under the current regulations. 

The current regulations instruct 

registered entities to submit 

explanations and analyses about 

products (which are to be ‘‘concise’’ 

when self-certifying under § 40.2). The 

amendment is intended to clarify the 

Commission’s original intent that the 

explanation and analysis contain 

sufficient detail for the Commission to 

evaluate the submissions for the 

purpose intended—to assess whether 

the new products would comply with 

the CEA and associated regulations. In 

general, the proposed amendments to 

§§ 40.2 and 40.3 will provide greater 


lotter on DSK11XQN23PROD with PROPOSALS3
61448 Federal Register / Vol. 88, No. 171 / Wednesday, September 6, 2023 / Proposed Rules 

88Proposed § 40.6(d)(2)(xi) will allow registered 

entities to submit rules to allow updates of email 

addresses and contact information that market 

participants use to submit block trades. Proposed 

§ 40.6(d)(2)(xii) will allow registered entities to 

submit rules that make changes to no cancellation 

ranges on contracts for the purchase or sale of a 

commodity for future delivery or an option on such 

a contract or an option on a commodity (other than 

a swap). Proposed § 40.6(d)(2)(xiii) will allow 

registered entities to submit rules that set or amend 

the payment or collection of commodity options 

premiums or margins for the purchase or sale of a 

commodity for future delivery or an option on such 

a contract or an option on a commodity (other than 

a swap). Proposed § 40.6(d)(2)(xiii) will allow 

registered entities to submit rules that set or amend 

the payments or collections of option premiums or 

margins for a swap. 

specificity, leaving less room for 

regulatory ambiguity, improve the 

quality of submissions, and reduce any 

administrative costs registered entities 

might incur when determining what 

information must be submitted to the 

Commission for a product selfcertification or product approval 

request. The proposed amendments 

eliminating the two-business day 

deadline and regarding extending the 

45-day review period as a result of any 

substantive amendments to a § 40.3 

submission, the submission being 

‘‘incomplete’’ or the entity not 

responding completely to ‘‘Commission 

questions in a timely manner’’ may 

cause registered entities to incur costs 

related to the offering of products or 

contracts, if the timelines affect productlaunch dates. 

d. Proposed Amendments to § 40.4 and 

Appendix E Regarding Terms or 

Conditions for Enumerated Agricultural 

Products 

Current § 40.4 applies to DCMs and 

identifies the rules or rule amendments 

for enumerated agricultural products 

that are not material and required to be 

submitted for approval by the 

Commission when the products being 

changed have open interest. The 

Commission proposes to add appendix 

E to part 40 to provide guidance to 

DCMs regarding criteria that the 

Commission considers as evidence that 

an enumerated agricultural product rule 

change is non-material. The 

Commission proposes to add text to 

current § 40.4(b)(5)(ii) to provide that 

when a DCM explains why it considers 

a rule ‘‘non-material’’ pursuant to 

§ 40.4(b)(5), the DCM will, if applicable, 

include a copy of a previously approved 

rule or rule amendment that is, in 

substance, the same as the non-material 

rule or rule amendment. 

i. Benefits 

The Commission believes that 

appendix E to part 40 will aid DCMs in 

determining whether a proposed change 

to terms and conditions is material. 

Specifically, the guidance offered in 

appendix E should reduce uncertainties 

and enable DCMs to more efficiently 

determine whether a proposed change 

would be material. Additionally, by 

directing DCMs to include a copy of a 

previously approved rule or rule 

amendment with submissions to the 

Commission pursuant to § 40.4(b)(5)(ii), 

the Commission believes this effort will 

provide market participants with 

context and background that would help 

them understand the current rule or rule 

amendment and why it is non-material. 

In other words, the proposed 

amendments will improve transparency 

for market participants. 

ii. Costs 

The Commission anticipates appendix 

E to part 40 might cause DCMs to incur 

a one-time compliance cost related to 

understanding appendix E’s guidance to 

assessing whether a rule is material. The 

Commission believes that DCMs will 

incur costs related to researching and 

collecting previously approved rules or 

rule amendments for submissions to the 

Commission. 

e. Proposed Amendments to §§ 40.5, 

40.6, and 40.10 Regarding Filing 

Instructions for Rules 

The Commission is proposing changes 

to update Commission processes and 

clarify submission procedures for a 

registered entity to voluntarily submit 

its rules for Commission approval and 

for a registered entity to self-certify that 

its rules comply with the Act and 

Commission regulations. Proposed 

amendments to §§ 40.5(a)(1) and 

40.6(a)(1) remove references to the 

Commission Secretary. Proposed 

amendments to §§ 40.5(a)(2) and 

40.6(a)(7)(i) remove the references to the 

cover sheet and replace these with 

references to the ‘‘information required 

by Appendix D’’ to part 40. 

The proposed amendments to the selfcertification submission requirements in 

§ 40.6(a)(7) clarify the Commission’s 

intent as to the scope of the explanation 

and analysis that registered entities 

must submit by adding that the 

explanation and analysis needs to also 

be ‘‘complete’’ to ensure enough 

information is provided so that 

Commission staff can effectively 

evaluate the rule submissions. The 

Commission proposes to move certain 

language from the introductory 

paragraph of § 40.6(a) to become 

§ 40.6(a)(9) and to state more clearly 

therein that a new rule or a rule 

amendment that delists, or withdraws 

the certification of, a product with no 

open interest may become effective 

immediately upon the filing of the 

submission, provided that the 

submission is made in compliance with 

§ 40.6(a)(1) and (2) and (7). In addition, 

the proposed amendments in 

§ 40.6(b)(2) provide that if a registered 

entity amends or supplements its initial 

rule submission under § 40.6(a), the 

Commission will treat the amendment 

as a new submission and restart the 

Commission’s 10-day review period, 

unless the amendments or 

supplementation is requested by the 

Commission or is for non-substantive 

revisions. 

The proposed amendments in 

§ 40.6(c)(5) make it clear that if the 

Commission stays and ultimately 

objects to a rule certification, the 

registered entity may re-submit a 

revised version with a substantive basis 

for treating the revised rule differently. 

Specifically, under the proposed 

amendment, a Commission objection to 

a certification of a rule or rule 

amendment that is inconsistent with the 

Act or the Commission’s regulations 

does not prevent a registered entity from 

submitting a revised proposed rule or 

rule amendment, or from submitting the 

new rule or rule amendment as initially 

proposed, in a supplemental 

submission, for certification or 

Commission review and approval. In 

addition, the objection by the 

Commission will be treated as 

presumptive evidence that the entity 

may not truthfully certify that the same 

proposed rule or substantially the same 

rule complies with CEA or the 

Commission’s regulations. 

The proposed amendments to 

§ 40.6(d)(2) expand the categories of 

rules that may be implemented without 

a certification to include a number of 

new categories of rules. The new 

categories include rule amendments 

updating email addresses or contact 

information that market participants use 

to submit block trades; rules amending 

existing trading months; rules changing 

the price ranges within which a trade 

will not be cancelled; and rules 

governing the payment or collection of 

option premiums or margins.88

Registered entities may implement rules 

within these categories by notifying the 

Commission of the rule changes on a 

weekly basis pursuant to § 40.6(d)(2). 

The proposed amendments to 

§ 40.6(d)(2) align with the Commission’s 

proposal to remove a subset of the same 

categories of rules from the definition of 

‘‘terms and conditions’’ in § 40.1. 

For SIDCOs certifying rules that could 

materially affect the nature or level of 

risks presented by the SIDCO, the 


lotter on DSK11XQN23PROD with PROPOSALS3
Federal Register / Vol. 88, No. 171 / Wednesday, September 6, 2023 / Proposed Rules 61449 

Commission proposes amendments to 

§ 40.10(b) to revise the definition in 

§ 40.10(b) to specify that proposed 

changes that require advance notice 

under § 40.10 may include, but are not 

limited to, material changes to the 

SIDCO’s default management plan or 

default rules or procedures under 

§ 39.16 or § 39.35, program of risk 

analysis and oversight required under 

§ 39.18, or recovery and wind down 

plans required under § 39.39; the 

adoption of a new or materially revised 

margin methodology; the establishment 

of a cross-margining program or similar 

arrangement with another clearing 

organization; and material changes to its 

approach to the stress testing required 

under §§ 39.13(h)(3), 39.36(a), or 

39.36(c). Finally, the Commission 

proposes an amendment to § 40.10 that 

expressly states that where any 

provision of the Commission’s 

regulations requires a DCO to file rules 

for approval under § 40.5, a SIDCO 

would be required instead to file those 

rules under § 40.10, if the rules could 

materially affect the nature or level of 

risks presented by the SIDCO. 

i. Benefits 

The Commission believes the removal 

of the reference to the Secretary 

modernizes the regulation and makes it 

consistent with current practices and 

technologies. Submitting entities no 

longer send submissions to the 

Secretary with a cover sheet because 

they instead file submissions through 

uploading documents to, and entering 

information into, the Commission’s 

portal. The Commission also believes 

that the elimination of the cover sheet 

requirement in the text of §§ 40.5 and 

40.6 removes redundancy because the 

online portal requires registered entities 

to input into the online portal the same 

information that is required on the cover 

sheet. 

The Commission believes the 

proposed amendments to § 40.6(a)(7) 

stating that registered entities must 

provide complete explanations and 

analysis to the Commission for selfcertifying rules clarifies the 

Commission’s intent as to the scope of 

the explanation and analysis required 

by establishing the information and 

detail to be addressed. This amendment 

will assist registrants with better 

understanding what to include in the 

submissions and the information 

provided will enable Commission staff 

to better assess whether the proposed 

rules comply with the CEA and 

Commission regulations. Proposed 

amendment § 40.6(a)(9) will benefit 

registered entities by providing certainty 

that a registered entity may immediately 

delist, or withdraw a certification of, a 

product with no open interest upon 

making a § 40.6(a) submission. 

The proposed amendments to 

§ 40.6(b)(2) that state that new 

information restarts the review period 

make it clear that the review period will 

be extended and should encourage 

registered entities to be thorough to 

ensure that their initial submissions are 

complete. The proposed amendments to 

§ 40.6(c)(5) provide clarity regarding the 

impact of an objection by the 

Commission to a registered entity’s 

certification of a proposed rule or rule 

amendment on the grounds that the 

proposed rule or rule amendment is 

inconsistent with the Act or the 

Commission’s regulations. Specifically, 

under the proposed amendment, if a 

registered entity wishes to resubmit 

through self-certification a rule or rule 

amendment that the Commission 

objected to on the grounds that the 

proposed rule or rule amendment is 

inconsistent with the Act or the 

Commission’s regulations, the registered 

entity must first substantively change or 

supplement the proposed rule or rule 

amendment to address the 

Commission’s objection. 

The proposed amendments to 

§ 40.6(d)(2) to add new categories of 

rules that may be implemented through 

a weekly notification to the Commission 

will enable registered entities to more 

quickly implement rules that fall within 

these new categories as the registered 

entity may implement these rules 

immediately and file a weekly 

notification of any rule amendments 

within a week of making such 

amendments. The process of drafting a 

weekly notification is less involved than 

the process of submitting the rules 

pursuant to § 40.6(a), including selfcertification that the rules comply with 

the Act and Commission regulations. 

Registered entities will be able to 

redirect their time to other compliance 

or operational activities. Proposed 

amendments to § 40.10(b) should aid 

SIDCOs in making determinations 

regarding the type of rules that must be 

submitted to the Commission under 

§ 40.10. Proposed amendment § 40.10(i) 

also should eliminate potentially 

duplicative regulatory filings under 

current § 40.5, and, as a result, SIDCOs 

will benefit from the cost-savings of not 

having to dedicate administrative efforts 

two times for the similar submissions. 

ii. Costs 

The Commission believes that the 

proposed amendments to §§ 40.5(a) and 

40.6(a), (b)(2), and (c)(5), regarding filing 

instructions for rules will not place any 

additional costs or burdens on 

registered entities because the proposed 

amendments clarify the Commission’s 

expectations. The Commission does not 

believe that there are costs associated 

with proposed amendments to § 40.5(d). 

The proposed amendments to 

§ 40.6(a)(7) inform registered entities of 

the quality of explanations and analysis 

needed for rule submissions and will 

lessen the likelihood that registered 

entities would need to amend or 

supplement submissions. If the 

Commission requests additional 

evidence, information or data pursuant 

to § 40.6(a)(8), proposed § 40.6(b) may 

result in an extended review period (as 

a result of the review period restarting) 

and the delay in implementation of a 

rule may impose a cost on a registered 

entity, depending on the nature of the 

rule. The Commission does not believe 

that there are costs associated with 

proposed amendments to § 40.6(c)(5). 

The Commission believes that the 

proposed changes to § 40.10 will not 

place additional costs or burdens on 

SIDCOs because they clarify the types of 

submissions that SIDCOs must file 

under § 40.10 and eliminate potential 

duplication in regulatory filings. 

f. Proposed Amendments to § 40.7 

Regarding Delegation of Authority 

The Commission proposes to amend 

§ 40.7 to enhance the utility and clarity 

of the regulation and add three new 

delegations. Proposed § 40.7(a)(1)(iv) 

and (v) delegates the authority in 

proposed §§ 40.3(c)(3) and 40.5(c)(3) to 

extend the applicable review period set 

forth in §§ 40.3(c) and 40.5(c), 

respectively, for the period of time 

agreed to in writing by the registered 

entity. Finally, as discussed above, the 

Commission is also proposing to add 

§ 40.7(e) to delegate the Commission’s 

authority to specify the format and 

manner of filing under these regulations 

to the Directors of the Division of 

Market Oversight and the Division of 

Clearing and Risk. 

i. Benefits 

The proposed amendments to § 40.7 

will benefit regulated entities and the 

public by improving the readability of 

this regulation because the delegations 

are organized by the applicable section 

of part 40 from the which the delegated 

authorities originated. The Commission 

believes that delegating the authority in 

proposed §§ 40.3(c)(3) and 40.5(c)(3) to 

the Divisions to extend the applicable 

review period set forth in §§ 40.3(c) and 

40.5(c), respectively, for the period of 

time agreed to in writing by the 

registered entity will enable the 

Commission to complete this process 

more efficiently. The Commission also 


lotter on DSK11XQN23PROD with PROPOSALS3
61450 Federal Register / Vol. 88, No. 171 / Wednesday, September 6, 2023 / Proposed Rules 

89 17 CFR part 150. The Commission’s latest 

amendments to part 150 became effective on March 

15, 2021. 86 FR 3236 (Jan. 14, 2021). 

believes that delegating authority to the 

Divisions to specify format and manner 

of filing in proposed § 40.7(e) also 

enhances efficiency. 

ii. Costs 

The Commission expects that there 

will be no costs incurred by registered 

entities by the proposed amendments 

clarifying and amending the authorities 

delegated to Commission staff under 

part 40. 

g. Proposed Amendments to Appendix 

D to Part 40 

With the development and use of the 

Commission’s online portal for the filing 

of rule and product submissions, the 

Commission is proposing amendments 

to appendix D to part 40 that 

reorganizes rule text and clarify 

instructions to registered entities on 

what information shall be uploaded to 

the portal. The Commission also is 

proposing a new requirement that DCMs 

and SEFs indicate when listing a new 

product whether the new product meets 

the definition of ‘‘referenced contract’’ 

as defined in § 150.1 and described in 

appendix C to part 150 that is titled 

‘‘Guidance Regarding the Definition of 

Reference Contract.’’ Part 150 of the 

Commission’s regulations outlines the 

requirements for Federal and exchangeset position limits.89 Part 150, together 

with §§ 40.1(j)(1)(vii) and (j)(2)(vii), 

40.2(a)(3)(ii) and 40.3(a)(3), require 

DCMs and SEFs to identify referenced 

contracts to assess whether a contract is 

subject to Federal position limits. 

i. Benefits 

The Commission believes that the 

proposed amendments to appendix D to 

part 40 will provide several benefits. 

First, the proposed changes clarify and 

modernize instructions. The current 

rule text is more applicable to paper 

submissions. The proposed text is 

consistent with the current 

technological practice where registered 

entities upload product and rule 

submissions using the Commission’s 

online portal. Second, the proposed 

amendment to appendix D to part 40 

would require DCMs and SEFs to 

indicate as part of filing the submission 

whether a new product to be listed 

meets the definition of a referenced 

contract, thereby alerting Commission 

staff when contracts that may need to be 

added to the Staff Workbook are being 

listed and enable the Commission to 

process and review the submission more 

efficiently. 

ii. Costs 

The Commission expects that there 

will be negligible, if any, costs incurred 

by registered entities with respect to the 

amendments proposed to modernize 

appendix D as registered entities are 

already submitting the covered rules 

and products using the portal. With 

regards to the amendment proposing 

that DCMs and SEFs indicate whether a 

new product to be listed meets the 

definition of referenced contract, the 

Commission notes that DCMs and SEFs 

will incur costs to make these 

indications. These costs, however, will 

be negligible because registered entities 

are already making the analytical 

determinations as to whether contracts 

are referenced contracts to meet their 

obligations under §§ 40.1(j)(1)(vii) and 

(j)(2)(vii), 40.2(a)(3)(ii), 40.3(a)(3) and 

part 150 of the Commission’s 

regulations. 

h. Section 15(a) Factors 

In addition to the discussion above, 

the Commission has evaluated the costs 

and benefits of the proposed 

amendments to 17 CFR part 40 in light 

of the following five broad areas of 

market and public concern identified in 

section 15(a) of the CEA: 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. 

Protection of market participants and 

the public: The Commission believes 

that the proposed changes to §§ 40.2, 

40.3, 40.5 and 40.6, regarding the 

requirement for complete explanations 

and analysis for product and rule 

submissions will help protect market 

participants and the public by 

encouraging registered entities to submit 

comprehensive and informative filings 

for product and rule changes thereby 

providing the Commission with 

sufficient information to evaluate 

whether the new products or rules 

comply with the CEA and Commission 

rules. The Commission believes that the 

proposed changes to §§ 40.3 and 40.6, 

regarding restarting review periods 

under specific circumstances, provide 

the Commission with the necessary time 

to evaluate changes and consider risks, 

and ultimately protect the interests of 

market participants and the public. 

Efficiency, competitiveness, and 

financial integrity of futures markets: 

The proposed improvements to the 

regulations providing for ‘‘complete’’ 

products and rules submissions sets 

forth in more detail the Commission’s 

original intention regarding the level of 

detail thereby better ensuring that the 

Commission can provide adequate 

oversight with minimal disruption to 

market efficiency. The Commission has 

not identified any effect of the proposed 

regulations on innovation and 

competition. 

Price discovery: The Commission has 

not identified any effect of the proposed 

regulations on price discovery. 

Sound risk management practices: 

The Commission has not identified any 

other effect of the proposed regulations 

on sound risk management practices. 

Other public interest considerations: 

The Commission has not identified any 

effect of the proposed regulations on 

other public interest considerations. 

List of Subjects in Parts 37, 38, and 40 

Commodity futures, Reporting and 

recordkeeping requirements. 

For the reasons stated in the 

preamble, the Commodity Futures 

Trading Commission proposes to amend 

17 CFR chapter I as follows: 

PART 37—SWAP EXECUTION 

FACILIITES 

■ 1. The authority citation for part 37 

continues to read as follows: 

Authority: 7 U.S.C. 1a, 2, 5, 6, 6c, 7, 7a– 

2, 7b–3, and 12a, 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. 

Appendix B to Part 37 [Amended] 

■ 2. Amend appendix B to part 37, 

under the heading Core Principle 8 of 

Section 5h of the Act—Emergency 

Authority, in the first sentence of 

paragraph (a)(1), by removing the crossreference ‘‘§ 40.1(h)’’ and adding in its 

place ‘‘§ 40.1’’. 

PART 38—DESIGNATED CONTRACT 

MARKETS 

■ 3. The authority citation for part 38 

continues to read as follows: 

Authority: 7 U.S.C. 1a, 2, 6, 6a, 6c, 6d, 6e, 

6f, 6g, 6i, 6j, 6k, 6l, 6m, 6n, 7, 7a–2, 7b, 7b– 

1, 7b–3, 8, 9, 15, and 21, as amended by the 

Dodd-Frank Wall Street Reform and 

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

124 Stat. 1376. 

Appendix B to Part 38 [Amended] 

■ 4. Amend appendix B to part 38, 

under the heading Core Principle 6 of 

section 5(d) of the Act: EMERGENCY 

AUTHORITY, in the third sentence of 

paragraph (a), by removing the crossreference ‘‘§ 40.1(h)’’ and adding in its 

place ‘‘§ 40.1’’. 


lotter on DSK11XQN23PROD with PROPOSALS3
Federal Register / Vol. 88, No. 171 / Wednesday, September 6, 2023 / Proposed Rules 61451 

PART 40—PROVISIONS COMMON TO 

REGISTERED ENTITIES 

■ 5. The authority citation for part 40 is 

revised to read as follows: 

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

■ 6. Revise § 40.1 to read as follows: 

§ 40.1 Definitions. 

As used in this part: 

Business day means the intraday 

period of time starting at 8:15 a.m. and 

ending at 4:45 p.m. 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. 

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 365 

days; provided, however, no derivatives 

clearing organization shall be 

considered dormant if its initial and 

original Commission order of 

registration was issued within the 

preceding 1,095 days. 

Dormant designated contract market 

means any designated contract market 

on which no trading has occurred for a 

period of 365 days; provided, however, 

no designated contract market shall be 

considered dormant if its initial and 

original Commission order of 

designation was issued within the 

preceding 1,095 days. 

Dormant swap data repository means 

any registered swap data repository on 

which no data has resided for a period 

of 365 days. 

Dormant swap execution facility 

means any swap execution facility on 

which no trading has occurred for a 

period of 365 days; provided, however, 

no swap execution facility shall be 

considered dormant if its initial and 

original Commission order of 

registration was issued within the 

preceding 1,095 days. 

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. 

Rule means any constitutional 

provision, article of incorporation, 

bylaw, rule, regulation, resolution, 

interpretation, stated policy, advisory, 

terms and conditions, trading protocol, 

margin methodology, agreement or 

instrument corresponding thereto, 

including those that authorize a 

response or establish standards for 

responding to a specific emergency, 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, 

in whatever form adopted. 

Terms and conditions means any 

definition of the trading unit or the 

specific commodity underlying a 

contract for the future delivery of a 

commodity or commodity option 

contract, description of the payments to 

be exchanged under a swap, 

specification of cash settlement or 

delivery standards and procedures, and 

establishment of buyers’ and sellers’ 

rights and obligations under the swap or 

contract. Terms and conditions include 

provisions relating to the following: 

(1) For a contract for the purchase or 

sale of a commodity for future delivery 

or an option on such a contract or an 

option on a commodity (other than a 

swap): 

(i) Quality and other standards that 

define the commodity or instrument 

underlying the contract; 

(ii) Quantity standards or other 

provisions related to contract size; 

(iii) Any applicable premiums or 

discounts for delivery of nonpar 

products; 

(iv) Trading hours, trading months 

and the listing of contracts; 

(v) The pricing basis, minimum price 

fluctuations, and maximum price 

fluctuations; 

(vi) Any price limits, no cancellation 

ranges, trading halts, or circuit breaker 

provisions, and procedures for the 

establishment of daily settlement prices; 

(vii) Speculative position limits, 

position accountability standards, and 

position reporting requirements, 

including an indication as to whether 

the contract meets the definition of a 

referenced contract as defined in § 150.1 

of this chapter, and if so, the name of 

either the core referenced futures 

contract or other referenced contract 

upon which the new referenced contract 

submitted under this part is based. 

(viii) Delivery points and locational 

price differentials; 

(ix) 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; 

(x) If cash settled; the definition, 

composition, calculation and revision of 

the cash settlement price or index; 

(xi) [Reserved]; 

(xii) Option exercise price, if it is 

constant, and method for calculating the 

exercise price, if it is variable; 

(xiii) Threshold prices for an option 

contract, the existence of which is 

contingent upon those prices; and 

(xiv) Any restrictions or requirements 

for exercising an option; and 

(2) For a swap: 

(i) Identification of the major group, 

category, type or class in which the 

swap falls (such as an interest rate, 

commodity, credit or equity swap) and 

of any further sub-group, category, type 

or class that further describes the swap; 

(ii) Notional amounts, quantity 

standards, or other unit size 

characteristics; 

(iii) Any applicable premiums or 

discounts for delivery of nonpar 

products; 

(iv) Trading hours and the listing of 

swaps; 

(v) Pricing basis for establishing the 

payment obligations under, and markto-market value of, the swap including, 

as applicable, the accrual start dates, 

termination or maturity dates, and, for 

each leg of the swap, the initial cash 

flow components, spreads, and points, 

and the relevant indexes, prices, rates, 

coupons, or other price reference 

measures; 

(vi) Any price limits, trading halts, or 

circuit breaker provisions, and 

procedures for the establishment of 

daily settlement prices; 


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(vii) Speculative position limits, 

position accountability standards, and 

position reporting requirements, 

including an indication as to whether 

the contract meets the definition of 

economically equivalent swap as 

defined in § 150.1 of this chapter, and, 

if so, the name of either the core 

referenced futures contract or referenced 

contract, as applicable, to which the 

swap submitted under this part is 

economically equivalent. 

(viii) Payment and reset frequency, 

day count conventions, business 

calendars, and accrual features; 

(ix) If physical delivery applies, 

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; 

(x) If cash settled, the definition, 

composition, calculation and revision of 

the cash settlement price, and the 

settlement currency; 

(xi) [Reserved]; 

(xii) Option exercise price, if it is 

constant, and method for calculating the 

exercise price, if it is variable; 

(xiii) Threshold prices for an option, 

the existence of which is contingent 

upon those prices; 

(xiv) Any restrictions or requirements 

for exercising an option; and 

(xv) Life cycle events. 

■ 7. Amend § 40.2 by revising the 

introductory text of paragraph (a) and 

paragraphs (a)(1), (a)(3)(i), (ii), (v), and 

(vi), and (d) to read as follows: 

§ 40.2 Listing products for trading by 

certification. 

(a) Submission requirements. 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. A 

submission shall comply with the 

following conditions: 

(1) The designated contract market or 

the swap execution facility has filed its 

submission electronically in a format 

and manner specified by the 

Commission; 

* * * * * 

(3) * * * 

(i) The information required by 

appendix D of this part; 

(ii) A copy of the rules that set forth 

the contract’s terms and conditions; 

* * * * * 

(v) A concise explanation and 

analysis that is complete with respect to 

the product’s terms and conditions, the 

underlying commodity, and the 

product’s compliance with applicable 

provisions of the Act, including core 

principles, and the Commission’s 

regulations thereunder. This 

explanation and analysis shall either be 

accompanied by the documentation 

relied upon to establish the basis for 

compliance with applicable law, or 

incorporate information contained in 

such documentation, with appropriate 

citations to data sources; 

(vi) A certification that the registered 

entity posted a notice of a 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 website. 

Information that the registered entity 

seeks to keep confidential may be 

redacted from the documents published 

on the registered entity’s website but 

must be republished consistent with any 

determination made pursuant to 

§ 40.8(c)(4); and 

* * * * * 

(d) Class certification of swaps. (1) A 

designated contract market or swap 

execution facility may list or facilitate 

trading in any swap or number of swaps 

based upon an ‘‘excluded commodity,’’ 

as defined in section 1a(19)(i) of the Act, 

not including any security, security 

index, and currency other than the 

United States Dollar and a ‘‘major 

foreign currency,’’ as defined in 

§ 15.03(a) of this chapter, or an 

‘‘excluded commodity,’’ as defined in 

section 1a(19)(ii)–(iv) of the Act, 

provided the designated contract market 

or swap execution facility certifies, 

under § 40.2(a)(1) and (2) and (3)(i), (iv), 

and (vi), the following: 

(i) Each particular swap within the 

certified class of swaps is based upon an 

excluded commodity specified in 

§ 40.2(d)(1); 

(ii) Each particular swap within the 

certified class of swaps is based upon an 

excluded commodity with an identical 

pricing source, formula, procedure, and 

methodology for calculating reference 

prices and payment obligations; 

(iii) The pricing source, formula, 

procedure, and methodology for 

calculating reference prices and 

payment obligations in each particular 

swap within the certified class of swaps 

is identical to a pricing source, formula, 

procedure, and methodology for 

calculating reference prices and 

payment obligations in a product 

previously submitted to the Commission 

and certified or approved pursuant to 

§ 40.2 or § 40.3; and 

(iv) Each particular swap within the 

certified class of swaps is based upon an 

excluded commodity involving an 

identical currency or identical 

currencies. 

(2) The Commission may in its 

discretion require a registered entity to 

withdraw its certification under 

§ 40.2(d)(1) and to submit each 

individual swap or certain individual 

swaps within the submission for 

Commission review pursuant to § 40.2 

or § 40.3. 

■ 8. Amend § 40.3 as follows: 

■ a. Revise the introductory text of 

paragraph (a) and paragraphs (a)(1) and 

(2), (4), (9) and (10), (c), and (d); 

■ b. Remove paragraph (e); and 

■ c. Redesignate paragraph (f) as 

paragraph (e) and revise newly 

redesignated paragraph (e). 

The revisions read as follows: 

§ 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 product 

prior to listing the product for trading or 

accepting the product for clearing, or if 

a product was initially submitted under 

§ 40.2 or § 39.5 of this chapter, 

subsequent to listing the product for 

trading or accepting the product for 

clearing. A submission requesting 

approval shall: 

(1) Be filed electronically in a format 

and manner specified by the 

Commission; 

(2) Include the information required 

by appendix D of this part; 

* * * * * 

(4) Include an explanation and 

analysis that is complete with respect to 

the product’s terms and conditions, the 

underlying commodity, and the 

product’s compliance with applicable 

provisions of the Act, including core 

principles, and the Commission’s 

regulations thereunder. This 

explanation and analysis shall either be 

accompanied by the documentation 

relied upon to establish the basis for 

compliance with the applicable law, or 

incorporate information contained in 

such documentation, with appropriate 

citations to data sources; 

* * * * * 

(9) Certify that the registered entity 

posted a notice of its request for 

Commission approval of the new 

product and a copy of the submission, 

concurrent with the filing of a 

submission with the Commission, on 

the registered entity’s website. 

Information the registered entity seeks 

to keep confidential may be redacted 

from the documents published on the 

registered entity’s website but must be 

republished consistent with any 

determination made pursuant to 

§ 40.8(c)(4); and 


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(10) Include, if requested by 

Commission staff, additional evidence, 

information or data demonstrating that 

the contract meets, initially or on a 

continuing basis, the requirements of 

the Act, or other requirement 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 time specified by 

Commission staff, or at the conclusion 

of any extended period agreed to by 

Commission staff after timely receipt of 

a written request from the registered 

entity. 

* * * * * 

(c) Commission review. (1) All 

products submitted for Commission 

approval pursuant to, and in 

compliance with the submission 

requirements of, paragraph (a) of this 

section shall be subject to review by the 

Commission for a period of 45 days after 

receipt by the Commission. 

(2) The Commission may extend the 

initial 45-day review period for up to an 

additional 45 days if the product raises 

novel or complex issues that require 

additional time to analyze, 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 45-day review 

period and shall briefly describe the 

nature of the specific issues for which 

additional time for review shall be 

required. 

(3) At any time during its review of a 

proposed product under this section, 

the Commission may extend the review 

period for any period of time to which 

the registered entity agrees in writing. 

(4) Any amendment or 

supplementation made by the registered 

entity to the submission will be treated 

as the filing of a new submission under 

this section and be subject to the initial 

45-day review period in accordance 

with paragraph (c)(1) of this section, 

unless the amendment or 

supplementation is made for correction 

of typographical errors, renumbering or 

other non-substantive revisions. Any 

substantive amendment or 

supplementation by the submitting 

entity, including an amendment or 

supplementation requested by the 

Commission, will be treated as a new 

submission under this section. 

(5) If the review period described in 

paragraph (c)(1) of this section would 

end on a day that is not a business day, 

such review period shall instead be 

extended to end on the next business 

day. 

(d) Commission determination—(1) 

Approval. Any product submitted for 

Commission approval in compliance 

with paragraph (a) of this section shall 

be deemed approved by the Commission 

under section 5c(c) of the Act at the 

conclusion of the applicable review 

period under paragraph (c) of this 

section, unless the Commission issues a 

notice of non-approval to the registered 

entity under paragraph (d)(2) of this 

section within the applicable review 

period. 

(2) 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 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 this 

section, with which the new product is 

inconsistent or appears to be 

inconsistent with the Act or the 

Commission’s regulations. 

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

Notification to a registered entity under 

paragraph (d)(2) of this section of the 

Commission’s determination not to 

approve a product does not prevent the 

entity from subsequently submitting a 

revised version of the product for 

Commission approval, or from 

submitting the product as initially 

proposed, in a supplemented 

submission; the revised or 

supplemented submission will be 

reviewed without prejudice. 

(2) Notification to a registered entity 

under paragraph (d)(2) of this section of 

the Commission’s determination not 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 

complies with the Act and the 

Commission’s regulations thereunder. 

■ 9. Revise § 40.4 to read as follows: 

§ 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 that, for a 

delivery month having open interest, 

would materially change a product’s 

term or condition, as defined in § 40.1, 

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 are 

not required by this section to be 

submitted for Commission approval 

under the procedures of § 40.5: 

(1) Rules or rule amendments that are 

enumerated in § 40.6(d)(2) may be 

implemented without prior approval or 

certification, provided that they are 

implemented pursuant to the 

notification procedures of § 40.6(d); 

(2) Rules or rule amendments that are 

enumerated in § 40.6(e)(2) may be 

implemented without prior approval or 

certification or notification as permitted 

pursuant to § 40.6(e); 

(3) Rules or rule amendments 

governing trading hours may be 

implemented without prior approval, 

provided that they are implemented 

pursuant to the procedures of § 40.6(a); 

(4) Rules or rule amendments that are 

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, 

provided that they are implemented 

pursuant to the procedures of § 40.6(a); 

or 

(5) Any rule or rule amendment: 

(i) The text of which has been 

submitted pursuant to the procedures of 

§§ 40.4(b)(5) and 40.6(a) 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 

including, if applicable, a copy of a 

previously approved rule or rule 

amendment that is, in substance, the 

same as the non-material rule or rule 

amendment; 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. 

■ 10. Amend § 40.5 as follows: 

■ a. Revise the introductory text of 

paragraph (a) and paragraphs (a)(1) and 

(2), (5) and (6), and (9), the paragraph 

heading of paragraph (c), and paragraph 

(c)(1); 

■ b. Remove paragraph (c)(2); 

■ c. Redesignate paragraph (d)(1) as 

paragraph (c)(2) and revise newly 

redesignated paragraph (c)(2); 

■ d. Redesignate paragraph (d)(2) as 

paragraph (c)(3) and revise newly 

redesignated paragraph (c)(3); 

■ e. Add paragraphs (c)(4) through (6); 


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■ f. Revise the paragraph heading of 

paragraph (d), remove paragraph (d) 

introductory text, and add a new 

paragraph (d)(1); 

■ g. Redesignate paragraph (g) as 

paragraph (d)(2) and revise newly 

redesignated paragraph (d)(2); 

■ h. Redesignate paragraph (e) as 

paragraph (d)(3) and revise newly 

redesignated paragraph (d)(3); and 

■ i. Redesignate paragraph (f) as 

paragraph (e) and revise newly 

redesignated paragraph (e). 

The revisions and additions read as 

follows: 

§ 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 or rule 

amendment prior to implementation of 

the rule, or if the rule or rule 

amendment was initially submitted 

under § 40.2 or § 40.6, subsequent to 

implementation of the rule. A request 

for approval shall: 

(1) Be filed electronically in a format 

and manner specified by the 

Commission; 

(2) Include the information required 

by appendix D of this part; 

* * * * * 

(5) Provide an explanation and 

analysis that is complete with respect to 

the operation, purpose, and effect of the 

proposed rule or rule amendment and 

its compliance with applicable 

provisions of the Act, including core 

principles, and the Commission’s 

regulations thereunder, 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 its request for 

Commission approval of the new rule or 

rule amendment and a copy of the 

submission, concurrent with the filing 

of a submission with the Commission, 

on the registered entity’s website. 

Information the registered entity seeks 

to keep confidential may be redacted 

from the documents published on the 

registered entity’s website but must be 

republished consistent with any 

determination made pursuant to 

§ 40.8(c)(4); 

* * * * * 

(9) 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; and 

* * * * * 

(c) Commission review. (1) Any rule 

submitted for Commission approval 

pursuant to, and in compliance with the 

submission requirements of, paragraph 

(a) of this section shall be subject to 

review by the Commission for a period 

of 45 days after receipt by the 

Commission. 

(2) The Commission may extend the 

initial 45-day review period for up to 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 45-day review 

period and shall briefly describe the 

nature of the specific issues for which 

additional time for review shall be 

required. 

(3) At any time during its review of a 

proposed rule under this section, the 

Commission may extend the review 

period for any period of time to which 

the registered entity agrees in writing. 

(4) Any amendment or 

supplementation made by the registered 

entity to the submission will be treated 

as the filing of a new submission under 

this section and be subject to the initial 

45-day review period in accordance 

with paragraph (c)(1) of this section, 

unless the amendment or 

supplementation is requested by the 

Commission or is made for correction of 

typographical errors, renumbering or 

other non-substantive revisions. 

(5) If a rule or rule amendment that is 

submitted for Commission approval 

under paragraph (a) of this section is 

also submitted and labeled as a ‘‘NonMaterial Agricultural Rule Change’’ in 

accordance with § 40.4(b)(5), the 

Commission shall commence the 45-day 

review period in paragraph (c)(1) of this 

section ten business days after receiving 

the submission. 

(6) If the review period described in 

paragraph (c)(1) of this section would 

end on a day that is not a business day, 

such review period shall instead be 

extended to end on the next business 

day. 

(d) Commission determination—(1) 

Approval. Any rule submitted for 

Commission approval in compliance 

with paragraph (a) of this section shall 

be deemed approved by the Commission 

under section 5c(c) of the Act at the 

conclusion of the applicable review 

period under paragraph (c) of this 

section, unless the Commission issues a 

notice of non-approval to the registered 

entity under paragraph (d)(3) of this 

section within the applicable review 

period. 

(2) Expedited approval. 

Notwithstanding the provisions of 

paragraph (c) of this section, a proposed 

rule or rule amendment, including 

changes to terms and conditions of a 

product that are consistent with the Act 

and Commission regulations, may be 

approved by the Commission at such 

time and under such conditions as the 

Commission shall specify in a written 

notification. 

(3) 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. 

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

Notification to a registered entity under 

paragraph (d)(3) of this section of the 

Commission’s determination not to 

approve a new rule or rule amendment 

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 or 

supplemented submission will be 

reviewed without prejudice. 

(2) Notification to a registered entity 

under paragraph (d)(3) 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 under § 40.6 

that the same, or substantially the same, 

proposed rule or rule amendment 

complies with the Act and the 

Commission’s regulations thereunder. 

■ 11. Amend § 40.6 as follows: 

■ a. Revise the introductory text of 

paragraph (a) and paragraphs (a)(1) and 

(2) and (5) through (8); 

■ b. Add paragraph (a)(9); 


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■ c. Revise paragraphs (b) and (c)(2) and 

(3); 

■ d. Add paragraph (c)(5); 

■ e. Revise paragraphs (d)(1) and 

(d)(2)(iii), (iv), and (ix); 

■ f. Add paragraphs (d)(2)(xi) through 

(xiii); and 

■ g. Redesignate paragraph (d)(3) as 

paragraph (e) and revise newly 

redesignated paragraph (e). 

The revisions and additions read as 

follows: 

§ 40.6 Self-certification of rules. 

(a) Submission requirements. A 

registered entity shall comply with the 

certification and submission 

requirements of this section prior to 

implementing any rule that has not 

obtained Commission approval under 

§ 40.5, or that is submitted under 

§ 40.10, except as otherwise provided by 

§ 40.10(a). A submission shall comply 

with the following conditions: 

(1) The registered entity has filed its 

submission electronically in a format 

and manner specified by the 

Commission. 

(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 website. 

Information that the registered entity 

seeks to keep confidential may be 

redacted from the documents published 

on the registered entity’s website but it 

must be republished consistent with any 

determination made pursuant to 

§ 40.8(c)(4). 

* * * * * 

(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(9) of the Act or an option on 

such a contract or commodity in a 

delivery month having open interest. 

(6)(i) 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. Such rules shall 

be subject to the review and stay 

provisions of paragraphs (b) and (c) of 

this section. 

(ii) New rules or rule amendments 

that establish standards for responding 

to an emergency must be submitted 

pursuant to § 40.6(a) or may be 

submitted pursuant to § 40.5. 

(7) The rule submission shall include: 

(i) The information required by 

appendix D of this part (‘‘Emergency 

Rule Certification’’ should be noted in 

the Description section in the case of a 

rule or rule amendment that responds to 

an emergency); 

(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) A concise explanation and 

analysis that is complete with respect to 

the operation, purpose, and effect of the 

proposed rule or rule amendment and 

its compliance with applicable 

provisions of the Act, including core 

principles, and the Commission’s 

regulations thereunder; 

(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; and 

(vii) As appropriate, a request for 

confidential treatment pursuant to the 

procedures provided in § 40.8; 

(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; and 

(9) Notwithstanding the 10 business 

day filing requirement of paragraphs 

(a)(3) and (b)(1) of this section, a 

registered entity may file a submission 

and certification of a new rule or a rule 

amendment that delists, or withdraws 

the certification of, a product that has 

no open interest and may make the 

delisting or withdrawal of the product 

with no open interest effective 

immediately upon filing the submission, 

provided that the submission is made in 

compliance with paragraphs (a)(1) and 

(2) and (7) of this section. 

(b) Review by the Commission. (1) 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. 

(2) Any amendment or 

supplementation made by the registered 

entity to the submission will be treated 

as the filing of a new submission under 

this section and be subject to the initial 

10-business day review period in 

accordance with paragraph (b)(1) of this 

section, unless the amendment or 

supplementation is made for correction 

of typographical errors, renumbering or 

other non-substantive revisions. 

(c) * * * 

(2) Public comment. The Commission 

shall provide a 30-day comment period 

within the 90-day period in which 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 website. 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 this paragraph shall become 

effective and can be implemented, 

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 certification on the 

grounds that the proposed rule or rule 

amendment is inconsistent with the Act 

or the Commission’s regulations. 

* * * * * 

(5) Effect of objection. (i) Notification 

to a registered entity under paragraph 

(c) of this section of the Commission’s 

objection to a certification by a 

registered entity on the grounds that the 

proposed rule or rule amendment is 

inconsistent with the Act or the 

Commission’s regulations does not 

prevent the registered entity from 

subsequently submitting a revised 

version of the proposed rule or rule 

amendment for certification or 

Commission review and approval, or 

from submitting the new rule or rule 

amendment as initially proposed, in a 

supplemented submission; the revised 

or supplemented submission will be 

reviewed without prejudice. 

(ii) Notification to a registered entity 

under paragraph (c) of this section of the 

Commission’s objection to a 

certification by a registered entity shall 

be presumptive evidence that the entity 

may not truthfully certify under this 

section that the same, or substantially 

the same, proposed rule or rule 


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amendment complies with the Act and 

the Commission’s regulations 

thereunder. 

(d) * * * 

(1) The registered entity provides to 

the Commission at least weekly a 

summary notice of all rule amendments 

made effective pursuant to this 

paragraph (d) 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 and manner 

specified by the Commission; and 

(2) * * * 

(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 (e)(2)(vi) 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 (e)(2)(vii) 

of this section, relating to the strike 

price listing procedures, strike price 

intervals, and the listing of strike prices 

on a discretionary basis; 

* * * * * 

(ix) Trading months. The initial 

listing of trading months, or an 

amendment to existing trading months, 

which may qualify for implementation 

without notice pursuant to paragraph 

(e)(2)(viii) of this section, within the 

currently established cycle of trading 

months; 

* * * * * 

(xi) Contact information. Updates of 

email addresses or other contact 

information that market participants use 

to submit block trades; 

(xii) Changes to no cancellation 

ranges. For a contract for the purchase 

or sale of a commodity for future 

delivery or an option on such a contract 

or an option on a commodity (other than 

a swap), changes to no cancellation 

ranges (which are the price ranges 

within which a trade will not be 

cancelled); or 

(xiii) Option premiums or margins. 

For a contract for the purchase or sale 

of a commodity for future delivery or an 

option on such a contract or an option 

on a commodity (other than a swap), 

payment or collection of commodity 

options premiums or margins; or for a 

swap, payment or collection of option 

premiums or margins. 

(e) 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: 

(1) The registered entity maintains 

documentation regarding all changes to 

rules; and 

(2) The rule governs: 

(i) 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; 

(ii) 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; 

(iii) 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; 

(iv) 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 

(v) Fees. Fees or fee changes, other 

than fees or fee changes associated with 

market making or trading incentive 

programs, that: 

(A) Are less than $1.00 per contract; 

or 

(B) 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. 

(vi) 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. 

(vii) 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. 

(viii) 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. 

■ 12. Amend § 40.7 by adding 

paragraphs (a)(1)(iv) and (v), revising 

paragraphs (a)(5) and (b)(3), and adding 

paragraph (e) to read as follows: 

§ 40.7 Delegations. 

(a) * * * 

(1) * * * 

(iv) To extend, pursuant to 

§ 40.3(c)(3), the applicable review 

period set forth in § 40.3(c) for the 

period agreed to in writing by the 

registered entity; 

(v) To extend, pursuant to § 40.5(c)(3), 

the applicable review period set forth in 

§ 40.5(c) for the period agreed to in 

writing by the registered entity. 

* * * * * 

(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 or 

rule amendment submitted by a 

designated contract market is material 

under § 40.4(b)(5), and to notify the 

designated contract market of such 

determination. 

(b) * * * 

(3) Establish or amend or relate to 

speculative limits or position 

accountability provisions that are in 

compliance with the requirements of the 

Act and the Commission’s regulations; 

* * * * * 

(e) The Commission hereby delegates, 

until it orders otherwise, to the Director 

of the Division of Clearing and Risk and, 

separately, to the Director of the 

Division of Market Oversight, to be 

exercised by either Director, as 

appropriate, or by such employees of 


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Federal Register / Vol. 88, No. 171 / Wednesday, September 6, 2023 / Proposed Rules 61457 

the Commission that either Director may 

designate from time to time, the 

authority to specify the format and 

manner to be used by a registered entity 

when filing a submission pursuant to 

this part. 

■ 13. Amend § 40.10 by revising the 

introductory text of paragraph (a), 

paragraph (b), the introductory text of 

paragraph (d), and paragraph (h)(3), and 

adding paragraph (i) to read as follows: 

§ 40.10 Special certification procedures for 

submission of rules by systemically 

important derivatives clearing 

organizations. 

(a) Advance notice. A systemically 

important derivatives clearing 

organization, as defined in § 39.2 of this 

chapter, 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 website publication 

requirements of § 40.6(a)(2). 

* * * * * 

(b) Changes requiring advance notice. 

Changes to a systemically important 

derivatives clearing organization’s rules, 

procedures, or operations that could 

materially affect the nature or level of 

risks presented by the systemically 

important derivatives clearing 

organization may include, but are not 

limited to: material changes to its 

default management plan or default 

rules or procedures required under 

§ 39.16 or § 39.35 of this chapter, 

program of risk analysis and oversight 

required under § 39.18 of this chapter, 

or recovery and wind down plans 

required under § 39.39 of this chapter; 

the adoption of a new or materially 

revised margin methodology; the 

establishment of a cross-margining 

program or similar arrangement with 

another clearing organization; and 

material changes to its approach to the 

stress testing required under 

§ 39.13(h)(3), or § 39.36(a) or (c) of this 

chapter. If a systemically important 

derivatives clearing organization 

determines that a proposed change 

could not materially affect the nature or 

level of risks it presents and therefore 

does not file an advance notice, the 

Commission may determine otherwise 

and require the systemically important 

derivatives clearing organization to 

withdraw the proposed change and 

provide notice pursuant to this section. 

* * * * * 

(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 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: 

* * * * * 

(h) * * * 

(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 any 

applicable rules, orders, or standards 

prescribed under section 805(a) of the 

Dodd-Frank Act. 

(i) Where in §§ 39.3(g), 39.4(f), 

39.13(i), and 39.15(b)(2) of this chapter 

a derivatives clearing organization is 

required to submit rules for approval 

pursuant to § 40.5, a systemically 

important derivatives clearing 

organization instead shall submit such 

rules pursuant to § 40.10 if the rules 

could materially affect the nature or 

level of risks presented by the 

systemically important derivatives 

clearing organization. 

■ 14. Revise appendix D to part 40 to 

read as follows: 

Appendix D to Part 40—Submission 

Instructions for Rules and Products 

(a) Rule and product submissions shall be 

submitted electronically to the Commission 

by a registered entity in a format and manner 

specified by the Commission, and shall 

include all of the following information: 

1. Date—The date of the filing. 

2. Organization—The name of the 

organization filing the submission (e.g., 

CBOT). 

3. Type of Registered Entity—An indication 

as to whether 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). 

4. Type of Filing—An indication as to 

whether the filing is a new rule, rule 

amendment or new product and the section 

of part 40 under which the filing is 

submitted. For a new product to be listed by 

a DCM or a SEF, an indication whether the 

new product meets the definition of 

referenced contract as such term is defined 

in § 150.1 of this chapter and is described in 

Appendix C to Part 150 of this chapter— 

Guidance Regarding the Definition of 

Referenced Contract. 

5. Rule Numbers—For rule filings, the rule 

number(s) being adopted or modified in the 

case of rule amendment filings. 

6. 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 

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. 

7. Identifier Code (optional)—A registered 

entity Identifier Code, 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). 

(b) Other Requirements—A submission 

shall comply with all applicable filing 

requirements for proposed rules, rule 

amendments, or products. The entry of the 

information required by paragraph (a) of this 

appendix 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) An indication of ‘‘confidential 

treatment requested’’ 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. 

■ 15. Add appendix E to part 40 to read 

as follows: 

Appendix E to Part 40—Guidance on 

Compliance With the Materiality 

Assessment in § 40.4 

(a) This appendix provides guidance on 

complying with the requirement in § 40.4(a) 

that a DCM must submit rule changes that 

would materially change a term or condition 

of a contract on an agricultural product 

enumerated in section 1a(9) of the CEA with 

open interest for Commission approval under 

the procedures of § 40.5. Section 40.4(a) 

applies strictly to rules that materially 

change a product’s economic terms and 

conditions, and does not apply to other rules. 

Guidance is set forth in this appendix to 

assist a DCM in assessing whether a change 

to the terms and conditions is material 

pursuant to § 40.4(a) and in explaining why 

it considers a rule to be non-material when 

§ 40.4(b)(5) is applicable. The guidance in 

this appendix can be used to demonstrate to 

the Commission compliance with the 

requirement in § 40.4(b)(5)(ii) that the DCM 

explain why it considers a rule to be nonmaterial when applicable. 

Materiality of a Change of a Term or 

Condition 

(b) Any change that is enumerated by the 

Commission in § 40.4(b)(1) through (4) is not 

material for purposes of § 40.4(a) and may be 

submitted under the applicable § 40.6 

provision that is specified in the applicable 

section of § 40.4(b). For any other rule that 

the DCM believes to be non-material, 

§ 40.4(b)(5) sets forth a process for the DCM 


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61458 Federal Register / Vol. 88, No. 171 / Wednesday, September 6, 2023 / Proposed Rules 

1 17 CFR part 40. 

2 7 U.S.C. 7a–2(c). 

3Compare 17 CFR 40.2, 40.6 (providing for selfcertification of products or rules), with 17 CFR 40.3, 

40.5 (setting forth procedures for seeking 

Commission review and approval of products or 

rules). 

4 Id. 

5 17 CFR 40.2(a)(3)(v), 40.3(a)(4). 

6 17 CFR part 38, appendix C. 

to implement the change through selfcertification pursuant to § 40.6(a). 

(c) In order for a DCM to self-certify a 

change to a term or condition of a contract 

on an agricultural product enumerated in 

CEA section 1a(9) with open interest that the 

DCM believes to be non-material, § 40.4(b)(5) 

requires the DCM to make a non-materiality 

filing and explain why it considers the rule 

change to be ‘‘non-material.’’ To assist an 

exchange in assessing and explaining 

whether a change to the terms and conditions 

is non-material pursuant to § 40.4(b)(5), the 

following paragraphs set forth the criteria 

that the Commission generally considers as 

evidence that an enumerated agricultural 

product rule change is non-material under 

§ 40.4(a) pursuant to § 40.4(b)(5). A DCM may 

address these criteria in its assessment and 

explanation to demonstrate compliance with 

§ 40.4(b)(5). 

(d) The Commission considers a change to 

the terms and conditions of a contract on an 

agricultural product enumerated in CEA 

section 1a(9) that has open interest as a nonmaterial change if: 

(1) The change should not affect a 

reasonable trader’s decision to enter into, or 

maintain, a position; 

(2) The change should not affect a 

reasonable trader’s decision to make or take 

delivery on the contract or to exercise an 

option on the contract; and 

(3) The change should not have an effect 

on the value of existing positions, including, 

but not limited to, a change affecting the 

price of the contract due to a change in the 

commodity quality characteristics of the 

existing contract, a change to the size of the 

existing contract, or a change to a cost of 

effecting delivery for the existing contract. 

Issued in Washington, DC, on August 24, 

2023, by the Commission. 

Christopher Kirkpatrick, 

Secretary of the Commission. 

Note: The following appendices will not 

appear in the Code of Federal Regulations. 

Appendices to Provisions Common to 

Registered Entities—Commission 

Voting Summary, Chairman’s 

Statement, and Commissioners’ 

Statements 

Appendix 1—Commission Voting 

Summary 

On this matter, Chairman Behnam and 

Commissioners Goldsmith Romero and Pham 

voted in the affirmative. Commissioners 

Johnson and Mersinger concurred. No 

Commissioner voted in the negative. 

Appendix 2—Statement of Support of 

Chairman Rostin Behnam 

The Commission votes today [at the 

Commission Open Meeting held on July 26, 

2023] on a proposed rule to amend part 40 

of the Commission regulations. Part 40 sets 

forth provisions common to registered 

entities, including designated contract 

markets (DCMs), derivatives clearing 

organizations (DCOs), swap execution 

facilities (SEFs), and swap data repositories 

(SDRs), and establishes requirements and 

procedures for submitting rules and 

products, listing products for trading, and 

accepting products for clearing. Part 40 has 

not been amended comprehensively since 

2011; the proposal would amend part 40 

based on the Commission’s experience 

applying the part 40 regulations since 2011, 

and is intended to clarify and enhance the 

utility of part 40. I support this proposed 

rule. 

At a high level, the proposed amendments 

would: (1) simplify the determination of 

whether a registered entity is deemed 

dormant; (2) edit language to reflect the 

development and use of the Commission’s 

online portal for filing of rule and product 

submissions; (3) reorganize and enhance the 

utility of rules regarding rule submissions 

and delegations of authority; and (4) provide 

meaningful guidance to SIDCOs regarding 

filing instructions for rules that could 

materially affect the nature or level of risks 

presented by the SIDCO. 

Appendix 3—Statement of Support of 

Commissioner Kristin N. Johnson 

I support the Commission’s issuance for 

notice and comment of proposed 

amendments to provisions common to 

registered entities as set forth in part 40 of 

the Commission’s regulations.1 These 

regulations implement section 5c(c) of the 

Commodity Exchange Act (CEA or Act),2

which prescribes the procedures for listing 

by registered entities of new products, as 

well as for approval of new rules or rule 

amendments, and also standards for review 

for and approval of the same by the 

Commission.3 These provisions apply to 

designated contract markets (DCMs), 

derivatives clearing organizations (DCOs), 

Swap Execution Facilities (SEFs), and swap 

data repositories (SDRs). 

Part 40 has not been amended 

comprehensively for a decade. Over the 

course of that same decade, a number of 

other notable market events have transpired. 

For example, in 2008, an unidentified 

person—or group of people—using the 

pseudonym Satoshi Nakamoto published a 

white paper, innocently titled Bitcoin: A 

Peer-to-Peer Electronic Cash System, that 

outlined a decentralized peer-to-peer system 

for making and processing payments. In the 

decade since the white paper’s release, we 

have witnessed exponential growth in the 

market for digital assets, including 

cryptocurrencies, as well as the explosion of 

the digital asset ecosystem. 

In addition to the developments regarding 

the creation and proliferation of digital 

assets, we have witnessed remarkable growth 

in the market for carbon credits. There is an 

indisputable and urgent need for markets to 

focus on sustainability. This Commission’s 

Second Voluntary Carbon Markets Convening 

held in this room last week highlighted this 

necessity. It also highlighted the need for 

careful consideration of important questions 

such as the potential for fraud or the veracity 

of claims regarding additionality and 

concerns regarding greenwashing. 

I am enthusiastic to support the Director of 

the Division of Enforcement Ian McGinley as 

we stand up the Environmental Fraud Task 

Force and continue the work of the Digital 

Asset Task Force. Yet, I strongly believe that 

effectively addressing fraud and market 

manipulation requires not only vigorous 

enforcement, but also thoughtful and 

proactive regulation. The amendments 

proposed today [at the Commission Open 

Meeting held on July 26, 2023] are a 

significant step in empowering the 

Commission to better understand new 

products and new rules in our markets in 

support of our regulatory mission. 

Turning to the rulemaking under 

consideration today [at the Commission 

Open Meeting held on July 26, 2023], 

registered entities generally have two options 

when submitting products and rules for 

approval: they may self-certify that the 

product or rule complies with the CEA and 

Commission regulations, or they may submit 

the product or rule for Commission 

approval.4 The proposed amendments are 

intended to build on the Commission’s 

experience over the past decade in applying 

the part 40 regulations to product and rule 

submissions to clarify, simplify, and enhance 

the utility of the part 40 regulations for both 

registered entities and the Commission. 

Many of these revisions are technical in 

nature, and I appreciate the wisdom of the 

staff in both the Division of Clearing and Risk 

and the Division of Market Oversight in 

proposing them. I note that there are 

additional revisions that update the 

regulations to reflect technological 

developments in the ways that registered 

entities communicate with the Commission— 

i.e., by using the internet. 

Consequently, the revisions to the 

requirements under regulations 

§§ 40.2(a)(3)(v) and 40.3(a)(4) merit 

additional focus. These amendments require 

a registered entity to provide an explanation 

of the nature of the new product self-certified 

or submitted to the Commission for approval, 

‘‘that is complete with respect to’’ the 

product’s terms and conditions as well as the 

product’s compliance with the applicable 

provisions of the Act, including core 

principles, and the Commission’s 

regulations.5 Staff have noted that, in their 

experience, registered entities have not 

always included sufficient information about 

the underlying commodity to a new product 

to allow the Commission to complete the 

analysis of compliance required under the 

CEA and the part 40 regulations. The 

proposed amendments not only call for 

additional information about the product’s 

underlying commodity, including 

characteristics such as the deliverable 

commodity’s grade, quality and deliverable 

supply, as applicable, but also specifically 

reference the guidance provided in appendix 

C to part 38 6 as providing the requisite level 


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1See CFTC, CFTC Backgrounder on Oversight of 

and Approach to Virtual Currency Futures Markets, 

(Jan. 4, 2018), https://www.cftc.gov/sites/default/ 

files/idc/groups/public/@newsroom/documents/ 

file/backgrounder_virtualcurrency01.pdf. 

2 Id. 

3Commissioner Christy Goldsmith Romero, 

Remarks of Commissioner Christy Goldsmith 

Romero at ISDA’s ESG Forum on Promoting Market 

Resilience: A Thoughtful Approach to the Daunting 

Challenge of Climate Financial Risk, (Mar. 7, 2023), 

https://www.cftc.gov/PressRoom/ 

SpeechesTestimony/oparomero7. 

4Commissioner Christy Goldsmith Romero at the 

Energy and Environmental Markets Advisory 

Committee, Statement of Commissioner Christy 

Goldsmith Romero: The Role of Copper and Other 

Metals in the Electrification of America, (Jul. 26, 

2023), https://www.cftc.gov/PressRoom/ 

SpeechesTestimony/romerostatement062723. 

5Commissioner Christy Goldsmith Romero, 

Statement of CFTC Commissioner Christy 

Goldsmith Romero on Request for Comment on the 

Impact of Affiliated Entities, (Jun. 28, 2023), https:// 

www.cftc.gov/PressRoom/SpeechesTestimony/

romerostatement062823. 

6See Id. 

of detail to comply with the newly proposed 

standard. 

I support the proposed amendments to part 

40 because I support making our rules clearer 

and easier to administer. I look forward to 

hearing from commenters as to whether these 

new requirements are fit for purpose and will 

enable the Commission to effectively address 

innovations regarding products, platforms, 

and technologies. I thank staff in the Division 

of Clearing and Risk and the Division of 

Market Oversight, including Rachel Kaplan 

Reicher, Steven Benton, Nancy Markowitz, 

and Eileen Chotiner, for their efforts, and 

look forward to receiving comments from 

registered entities and the public that will 

assist the Commission in achieving the best 

outcome with this rulemaking. 

Appendix 4—Statement of Support of 

Commissioner Christy Goldsmith 

Romero 

Over the last few years, derivatives markets 

have had to react quickly to new 

technologies, new government policies, and 

new economic realities. Exchanges have 

added many new products for futures in 

traditional commodity types. For example, in 

2023, exchanges listed new metals contracts 

for lithium and molybdenum to meet 

growing demand in response to the historic 

investment in and demand for electric 

vehicles and batteries. And we have also seen 

entirely new product types proliferate. 

Exchanges have listed new contracts that 

reference novel commodities, such as digital 

assets and voluntary carbon market credits. 

As sponsor of the CFTC’s Technology 

Advisory Committee, I feel comfortable 

saying that there is no shortage of 

participants with new ideas seeking access to 

our regulated markets. Under the Commodity 

Exchange Act, the Commission’s role 

includes promoting responsible innovation, 

while protecting customers and promoting 

the market integrity and transparency that 

makes American capital markets the deepest 

and most liquid in the world. New products 

may improve access to financial markets, 

reduce costs, and help manage novel risks. 

But novel derivative contracts and the 

commodity they are based on may lack a 

meaningful history that shows that the 

contract is not readily susceptible to 

manipulation. And for digital assets, showing 

that the contract is derivative of commodities 

rather than securities is important to prevent 

regulatory arbitrage. 

Especially in novel cases, the Commission 

needs complete information so it can conduct 

oversight over new products on our markets. 

The Commission needs to be able to 

understand if an exchange is fulfilling its 

core principles that govern its conduct, to 

determine whether the new product complies 

with the law, and to understand any 

increased risk the contract may pose to 

customers and financial stability. 

Under the Commodity Exchange Act, most 

exchanges are permitted to self-certify that 

new products comply with the core 

principles, including that they are not readily 

susceptible to manipulation. That means a 

potentially complex or novel product may 

enter the market even before the 

Commission’s staff have been able to 

understand fully whether it complies with 

the law, and the risks that it could pose. To 

make this assessment quickly, our staff need 

complete information about both the 

characteristics of the product and of the 

market for the underlying commodity that 

determines its price. 

I support this proposal because it 

recognizes and helps address a trend that 

Commission staff have experienced— 

submissions not including sufficient 

information for the staff to fulfill the 

Commission’s regulatory responsibility. By 

requiring a ‘‘complete’’ explanation of a new 

product’s terms and conditions and 

providing context on what it means for an 

explanation to be ‘‘complete,’’ this proposal 

would enable the Commission to fulfill its 

oversight responsibility, including to 

determine the lawfulness of the product and 

to assess risk. 

Under the proposed changes, the 

Commission’s ability to understand how the 

product’s terms and conditions comply with 

the law is increased. This also allows the 

Commission to ensure that when exchanges 

do add new products, their decisions follow 

the core principles in the law, do not put 

market integrity at risk, and are supported by 

the twin pillars of customer protection and 

financial stability. 

This proposal will help achieve the 

purposes of the Commission’s existing 

heightened review standard for digital 

assets.1 The heart of this heightened review 

is ‘‘extensive visibility and monitoring of 

markets and for virtual currency derivatives 

and underlying settlement reference rates.’’ 2

Complete information at the self-certification 

phase will help staff better understand the 

risks posed by products that may not have 

the extensive history that allows 

manipulative trading patterns to be identified 

and that may reference digital assets traded 

on unregulated or unregistered spot 

exchanges. ‘‘Complete’’ information will 

enable a more comprehensive Commission 

review of risks associated with these 

products and underlying commodities, and 

any changes necessary for market integrity or 

to protect customers and financial stability. 

This proposal would also help the 

Commission extend heightened review to 

self-certified climate and environmental 

products listed on exchanges, a 

recommendation I first made in March at 

ISDA’s ESG Conference.3 The Commission 

has recognized the challenges that exist in 

the integrity of the spot market for carbon 

credits and launched an Environmental 

Fraud Task Force, which I advocated for, to 

combat fraud in this space that can impact 

derivatives carbon products. Adopting a 

heightened review framework will allow the 

Commission to work closely with exchanges 

to ensure that they are fulfilling interest in 

these products in a responsible fashion. That 

is aided by the Commission’s access to 

complete information about their terms and 

conditions and the underlying commodity at 

the initial self-certification. 

Even where contracts address more 

traditional markets, the economic 

circumstances and customer needs are 

changing and the Commission needs 

complete information to keep pace. Notably, 

the Commission needs complete information 

on new contracts on lithium, rare earth 

metals, and copper, products that are 

drawing increased interest due to growing 

investment in EV’s and batteries encouraged 

by the ‘‘triple whammy’’ of new laws—the 

Inflation Reduction Act (IRA), the Bipartisan 

Infrastructure Law (BIL) and the CHIPS and 

Science Act. Users of these products may 

have sourcing and production location 

requirements for taking advantage of the 

IRA’s tax credits. As I said before the 

Environmental and Energy Advisory Market 

Committee, the CFTC should work with 

exchanges on listing standards that address 

those needs.4 Complete information will be 

an important tool in that effort. 

The addition of requiring ‘‘complete’’ 

information would also apply to new rules 

that are self-certified by an exchange or 

clearinghouse. The emergence of novel 

products and technologies has also created 

interest in modifying long-standing rules 

about traditional market structure. When the 

CFTC released its request for comment on 

‘‘vertical integration,’’ on novel market 

structures, I said that this is an area that 

needs to be studied to determine any 

increased risk or unintended consequences.5

As I said in my statement, I am open to 

considering such changes to traditional 

market structures, but only if they do not 

result in increased risk to customers and 

financial stability.6 This is just as true for an 

existing exchange or clearinghouse seeking to 

change its business model as it is for a novel 

registrant coming before the CFTC for the 

first time. 

The Commission has a brief window to 

delay implementation of self-certified rule 

changes that it can use when they present 

novel or complex issues. Complete 

information will help us understand when to 

exercise that authority. 

The power of markets is that, when they 

work well, they are an unmatched tool for 

innovation. It is our responsibility as a 

regulator to keep updating our rules in ways 

that both promote responsible innovation 


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61460 Federal Register / Vol. 88, No. 171 / Wednesday, September 6, 2023 / Proposed Rules 

1Statement of Commissioner Caroline D. Pham 

on Risk Management Program for Swap Dealers and 

Futures Commission Merchants Advance Notice of 

Proposed Rulemaking, U.S. Commodity Futures 

Trading Commission (June 1, 2023), https://

www.cftc.gov/PressRoom/SpeechesTestimony/

phamstatement060123. 

2 17 CFR part 40. 

3A New Regulatory Framework for Trading 

Facilities, Intermediaries and Clearing 

Organizations, 66 FR 42255 (Aug. 10, 2001). 

4 17 CFR 1.3. 

5Provisions Common to Registered Entities, 76 

FR 44776 (July 27, 2011). 

6 7 U.S.C. 1 et seq. 

7See Concurring Statement of Commissioner 

Caroline D. Pham Regarding the CFTC Request for 

Information on Climate-Related Financial Risk, U.S. 

Commodity Futures Trading Commission (June 2, 

2022), https://www.cftc.gov/PressRoom/ 

SpeechesTestimony/phamstatement060222. 

8See Statement of Commissioner Caroline D. 

Pham Regarding Request for Comment on the 

Impact of Affiliations Between Certain CFTCRegulated Entities, U.S. Commodity Futures 

Trading Commission (June 28, 2023), https://

www.cftc.gov/PressRoom/SpeechesTestimony/

phamstatement062823. 

9 7 U.S.C. 12a(7). This section authorizes the 

Commission, in certain circumstances, ‘‘to alter or 

supplement the rules of a registered entity insofar 

as necessary or appropriate by rule or regulation or 

by order.’’ 

10 17 CFR 40.2(c). 

11 17 CFR 40.3(d). 

12 17 CFR 40.5(d). 

13 17 CFR 40.6(c)(1). 

14 17 CFR 40.3(e) and 40.5(e). 

and impose appropriate guardrails that 

promote market integrity and transparency. I 

am thankful to the staff for their hard work 

on making an update in that spirit, and the 

Commission for considering this 

requirement. 

Finally, I support the proposal because it 

includes changes designed to decrease 

systemic risk. The Commission proposes to 

specify when systemically important clearing 

houses must notify the Commission when 

changing rules, procedures or operations. 

The Commission’s experience has been that 

the current standard of notification, which is 

rules, procedures or operations ‘‘that 

materially affect the nature or level of risks 

presented’’ is too broad or vague to be 

meaningful. I support the proposed 

notification to the Commission on material 

changes such as to the default management 

rule, programs related to risk analysis, 

recovery and wind down plans, revised 

margin methodology, cross-margining 

programs, or stress testing. Each of these have 

the potential to be related to systemic risk. 

The proposed changes enable the 

Commission to manage systemic risk, which 

is one of our key roles as a financial 

regulator. 

I appreciate all of the work of the staff, and 

I look forward to public comment on the rule. 

Appendix 5—Statement of Support of 

Commissioner Caroline D. Pham 

I support the Notice of Proposed 

Rulemaking regarding Amendments to 

Provisions Common to Registered Entities 

under part 40 of the CFTC’s Regulations (Part 

40 Proposal) because it is important to 

continuously improve our rules and do good 

housekeeping.1 I appreciate that this Part 40 

Proposal is ‘‘intended to clarify, simplify and 

enhance the utility of the part 40 regulations 

for market participants and the 

Commission,’’ as stated in the preamble. I 

would like to thank Rachel Kaplan Reicher, 

Steven Benton, and Nancy Markowitz of the 

Division of Market Oversight (DMO) and 

Eileen Chotiner of the Division of Clearing 

and Risk (DCR), as well as Jeannette Curtis 

and Phil Raimondi, for their work on the Part 

40 Proposal. I appreciate the staff working 

with me to make revisions and address my 

concerns. 

The Product Review Branch and Market 

Review Branch of DMO, and the Risk 

Surveillance Branch and Clearing Policy 

Branch of DCR, together with support from 

the Chief Counsel’s office of each division, 

handle part 40 2 submissions. In fiscal year 

2022, DMO reviewed 1,145 product filings 

and 1,054 rule filings. DCR reviewed 320 rule 

filings. These reviews are foundational to the 

oversight of our markets. 

Accordingly, the Part 40 Proposal is 

intended to improve processes for review of 

product and rule submissions in order to use 

CFTC staff resources more effectively, 

particularly in light of increasing volumes of 

filings related to binary options. The sizeable 

increase in listing of new binary option 

contracts is unsustainable, and I encourage 

taking a serious look at how to address this 

problem. Efforts could include a staff 

roundtable or rulemaking on the listing and 

trading of binary options and appropriate 

customer protections. 

Effective Self-Regulation 

The Part 40 Proposal provides a good 

opportunity to examine the CFTC’s 

regulatory framework and the role of selfregulation. Part 40 was established pursuant 

to the Commodity Futures Modernization Act 

of 2000 and has been in place since 2001.3

Part 40 created a new framework for the 

certification and approval of new products, 

rules, and rule amendments that are 

submitted to the CFTC by registered entities 4

such as designated contract markets (DCMs), 

swap execution facilities (SEFs), derivatives 

clearing organizations (DCOs), and swap data 

repositories (SDRs). It was again amended in 

2011 pursuant to the Dodd-Frank Act.5 The 

Part 40 Proposal preamble states that part 40 

‘‘govern[s] how registered entities submit 

self-certifications, and requests for approval, 

of their rules, rule amendments, and new 

products for trading and clearing, as well as 

the CFTC’s review and processing of such 

submissions.’’ 

As I have noted before, the Commodity 

Exchange Act 6 (CEA or Act) mandates that 

the Commission serve the public interest 

through our oversight of ‘‘a system of 

effective self-regulation of trading facilities, 

clearing systems, market participants and 

market professionals.’’ 7 Part 40 is the 

cornerstone of effective self-regulation in our 

derivatives markets because it sets forth the 

standards for listing new contracts and 

issuing or amending rules for registered 

entities, including those that are selfregulatory organizations (SROs) and have 

rulebooks that are enforceable against SRO 

members. The penalties for violating SRO 

rules can be severe, including fines, 

suspension, or revocation of membership. 

Our system of self-regulation works 

because our SROs take their role seriously in 

upholding the CFTC’s regulatory framework 

and ensuring market integrity.8 Selfregulation is effective when it is cooperative. 

I commend DCMs, SEFs, DCOs, and SDRs 

that recognize and support the efforts of our 

DMO and DCR staff, and I urge these 

registered entities to do their best to assist 

staff and make the review process as efficient 

as possible. 

Existing Checks and Balances on SelfRegulation 

Notwithstanding the important role of 

SROs in the CFTC’s regulatory framework, 

the Commission must be able to exercise 

oversight of registered entities’ new products 

and new rules or rule amendments. That is 

why our existing part 40 regulations include 

checks and balances on self-certification and 

Commission approval or non-approval for 

product and rule filings. 

Stay of Self-Certification or Extension of 

Review Period 

For example, regarding new products, 

under Rule 40.2 the Commission can stay the 

self-certification of a new product in 

circumstances involving a false certification, 

or a petition to alter or amend the contract 

terms and conditions pursuant to Section 

8a(7) 9 of the CEA.10 Under Rule 40.3, new 

products can be submitted to the 

Commission for review and approval, and the 

review period can be extended if the product 

raises novel or complex issues.11

Similarly, regarding new rules or rule 

amendments submitted under Rule 40.5 for 

Commission review and approval, the 

Commission can extend the review period for 

(1) novel or complex issues, (2) major 

economic significance, (3) incomplete 

submissions, and (4) not responding 

completely to CFTC questions in a timely 

manner.12 And under Rule 40.6, the 

Commission can stay the self-certification of 

new rule or rule amendment filings involving 

(1) novel or complex issues, (2) inadequate 

explanation, or (3) potential inconsistency 

with the CEA or CFTC regulations.13

These checks and balances are integral to 

the Commission’s oversight of SROs, and I 

support DMO and DCR staff’s use of all these 

provisions to extend or stay the review 

period if any of these criteria have been 

met—especially if there are, as applicable, 

incomplete submissions, inadequate 

explanation, or for not responding 

completely to CFTC questions in a timely 

manner. Registered entities must ensure that 

they dot their i’s and cross their t’s, and show 

their work, when submitting product or rule 

filings. 

Non-Approval of New Products or New Rule 

or Rule Amendments 

I want to emphasize that the existing part 

40 regulations provide for Commission nonapproval of new products, or new rule or rule 

amendments, submitted for review under 

Rule 40.3 or 40.5, respectively.14 Obviously, 


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Federal Register / Vol. 88, No. 171 / Wednesday, September 6, 2023 / Proposed Rules 61461 

15 17 CFR 40.3(b), (e) and 40.5(b), (e). 

16 Id. 

17 ‘‘[T]he accumulation of all powers, legislative, 

executive, and judiciary, in the same hands, 

whether of one, a few, or many, and whether 

hereditary, self-appointed, or elective, may justly be 

pronounced the very definition of tyranny.’’ James 

Madison, The Federalist No. 48 (Feb. 1, 1788), 

https://guides.loc.gov/federalist-papers/text-41- 

50#s-lg-box-wrapper-25493415. 

18See generally James Madison, The Federalist 

No. 51 (Feb. 8, 1788) (‘‘But the great security against 

a gradual concentration of the several powers in the 

same department, consists in giving to those who 

administer each department the necessary 

constitutional means and personal motives to resist 

encroachments of the others.’’), https://

guides.loc.gov/federalist-papers/text-51-60. 

19Cf. The general will, or volonte ́ ge ́ne ́rale. JeanJacques Rousseau, Article VI, Declaration of the 

Rights of Man and of the Citizen (1789). 

20The full quotation is: ‘‘But a Constitution of 

Government once changed from Freedom, can never 

be restored. Liberty once lost is lost forever.’’ ‘‘John 

Adams to Abigail Adams, 7 July 1775,’’ Founders 

Online, National Archives, https://

founders.archives.gov/documents/Adams/04-01-02- 

0160. 

21See Walt Lukken, FIA CEO, Open letter to 

CFTC Chairman Giancarlo regarding the listing of 

cryptocurrency derivatives (Dec. 7, 2017), https://

www.fia.org/fia/articles/open-letter-cftc-chairmangiancarlo-regarding-listing-cryptocurrencyderivatives and Dissenting Statement of 

Commissioner Caroline D. Pham Regarding the 

Review and Stay of KalshiEX LLC’s Political Event 

Contracts, U.S. Commodity Futures Trading 

Commission (Aug. 26, 2022), https://www.cftc.gov/ 

PressRoom/SpeechesTestimony/

phamstatement082622. 

22 7 U.S.C. 2(1). There are some important 

exceptions and ongoing legal debate as to the outer 

limits of the definition of a ‘‘commodity’’ under the 

CEA. See CFTC v. My Big Coin Pay, Inc., 334 F. 

Supp. 3d 492, 498 (D. Mass. 2018) (citing CFTC v. 

McDonnell, 287 F. Supp. 3d 213, 228 (E.D.N.Y. 

2018)). 

23 7 U.S.C. 5(a). See Concurring Statement of 

Commissioner Caroline D. Pham Regarding the 

CFTC Request for Information on Climate-Related 

Financial Risk, U.S. Commodity Futures Trading 

Commission (June 2, 2022), https://www.cftc.gov/ 

PressRoom/SpeechesTestimony/

phamstatement060222. 

24 7 U.S.C. 5(b). See Concurring Statement of 

Commissioner Caroline D. Pham Regarding the 

CFTC Request for Information on Climate-Related 

Financial Risk, U.S. Commodity Futures Trading 

Commission (June 2, 2022), https://www.cftc.gov/ 

PressRoom/SpeechesTestimony/

phamstatement060222. 

a product or rule will not be approved if it 

violates or is inconsistent, respectively, with 

the CEA or CFTC regulations.15 The 

Commission can determine that ‘‘it will not, 

or is unable to approve’’ the product or rule, 

including for form and content requirements 

for submission, because the product 

‘‘violates, appears to violate or potentially 

violates but which cannot be ascertained 

from the submission,’’ or the rule or rule 

amendment ‘‘is inconsistent or appears to be 

inconsistent’’ with the CEA and CFTC 

regulations.16

These standards and criteria grant the 

Commission and CFTC staff considerable 

discretion in conducting reviews of product 

and rule filings for approval or non-approval. 

Again, I support the Commission issuing a 

notice of non-approval if any of these criteria 

have been met. 

Delegation of Authority 

A hallmark of our American system of 

government is the constitutional law doctrine 

of separation of powers among the legislative, 

executive, and judicial branches of 

government.17 This doctrine ensures that 

each branch of government will provide 

checks and balances upon another branch’s 

exercise of power for encroachment or 

aggrandizement. I believe that this approach 

of checks and balances to defend against the 

over-concentration of power is especially 

prudent in regards to administrative 

agencies, who wield the authority to impose 

obligations on the public or withdraw 

previously-granted entitlements. These 

regulatory agencies must be fair and just in 

the exercise of the administrative power, 

which is derived from both the legislative 

branch and the executive branches of 

government. 

The self-regulatory framework set forth in 

the CEA and CFTC regulations reflects the 

scales of justice in the balance between a 

free, and safe, society. I caution against any 

attempt to put a thumb on the scale which 

would upset this delicate balance, including 

further delegations of authority by the 

Commission to the staff.18

It is a truism that the heads of 

administrative agencies are a step removed 

from the will of the people,19 because agency 

heads are not directly elected, but are instead 

appointed by the President with the advice 

and consent of the Senate. Therefore, this 

sentiment rings even more true with respect 

to the delegation of authority by the 

Commission to the staff, who though are 

dedicated public servants, are even more 

attenuated from the will of the people. Like 

liberty, both the public trust and delegations 

of authority by the Commission, ‘‘once lost, 

is lost forever.’’ 20

Other Part 40 Issues 

Finally, good process produces good 

outcomes, and there are other issues in part 

40 that should be addressed.21 I hope that the 

Commission does not wait another 12 years 

to fix them. 

Derivatives Markets and the Real Economy 

The CFTC is uniquely positioned at the 

intersection of the real economy and 

financial markets. Derivatives are 

inextricably linked to the underlying 

reference asset, and our derivatives markets 

span the breadth of agricultural products and 

other goods and articles, services, rights, and 

interests in the stream of commerce and 

financial markets.22

Because of the importance of derivatives 

markets to the real economy—in order to 

facilitate risk management and price 

discovery for farmers and ranchers, all the 

way to the largest Fortune 100 companies— 

the Commission is mandated to serve this 

‘‘national public interest’’ through our 

oversight of a system of effective selfregulation.23

This statutory mandate is intentional, and 

coupled with the mandate to promote 

responsible innovation and fair 

competition,24 the message is clear: 

Derivatives markets should enable growth 

and progress for commercial enterprise and 

free markets through providing a release 

valve for risk transfer as part of the engine 

of the real economy. 

Growth and progress is how the United 

States and the American people have 

achieved the largest economy in the world, 

with the deepest and most liquid capital 

markets. This is why America is the land of 

opportunity—why I stand for growth, 

progress, and access to markets—and why 

the Commission must preserve the balance in 

our system of effective self-regulation in the 

derivatives markets. 

I look forward to public comment on the 

Part 40 Proposal. 

[FR Doc. 2023–18694 Filed 9–5–23; 8:45 am] 

BILLING CODE 6351–01–P 


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