67078 Federal Register / Vol. 78, No. 217 / Friday, November 8, 2013 / Proposed Rules 

accommodates side-by-side placement 

of LD–3 containers in the cargo 

compartment. The basic Airbus Model 

A350–900 series configuration will 

accommodate 315 passengers in a 

standard two-class arrangement. The 

design cruise speed is Mach 0.85 with 

a Maximum Take-Off Weight of 602,000 

lbs. Airbus proposes the Model A350– 

900 series to be certified for extended 

operations (ETOPS) beyond 180 minutes 

at entry into service for up to a 420- 

minute maximum diversion time. 

The Airbus Model A350–900 series 

airplane, like its predecessors the A320, 

A330, A340 and A380, will use side 

stick controllers for pitch and roll 

control. Regulatory requirements 

pertaining to conventional wheel and 

column, such as pilot strength and 

controllability, are not directly 

applicable for the side stick. In addition, 

pilot control authority may be uncertain 

because the side sticks are not 

mechanically interconnected as with 

conventional wheel and column 

controls. 

Type Certification Basis 

Under Title 14, Code of Federal 

Regulations (14 CFR) 21.17, Airbus must 

show that the Model A350–900 series 

meets the applicable provisions of 14 

CFR part 25, as amended by 

Amendments 25–1 through 25–128. 

The FAA has determined that Airbus 

Model A350–900 series airplanes must 

comply with the following sections: 

§§ 25.143, 25.145(b), 25.175(b), 25.671, 

and 25.1329(a). 

If the Administrator finds that the 

applicable airworthiness regulations 

(i.e., 14 CFR part 25) do not contain 

adequate or appropriate safety standards 

for the Airbus Model A350–900 series 

because of a novel or unusual design 

feature, special conditions are 

prescribed under § 21.16. 

Special conditions are initially 

applicable to the model for which they 

are issued. Should the type certificate 

for that model be amended later to 

include any other model that 

incorporates the same or similar novel 

or unusual design feature, the proposed 

special conditions would also apply to 

the other model under § 21.101. 

In addition to the applicable 

airworthiness regulations and proposed 

special conditions, the Airbus Model 

A350–900 series must comply with the 

fuel vent and exhaust emission 

requirements of 14 CFR part 34 and the 

noise certification requirements of 14 

CFR part 36 and the FAA must issue a 

finding of regulatory adequacy under 

section 611 of Public Law 92–574, the 

‘‘Noise Control Act of 1972.’’ 

The FAA issues special conditions, as 

defined in 14 CFR 11.19, under § 11.38, 

and they become part of the typecertification basis under § 21.17(a)(2). 

Novel or Unusual Design Features 

The Airbus Model A350–900 series 

will incorporate the following novel or 

unusual design features: side stick 

controllers for pitch and roll control in 

place of conventional wheels and 

columns. 

Discussion 

Current FAA regulations do not 

specifically address the use of side stick 

controllers for pitch and roll control. 

The unique features of the side stick 

must therefore be demonstrated through 

flight and simulator tests to have 

suitable handling and control 

characteristics when considering the 

following: 

(1) The handling qualities tasks/

requirements of the A350 Special 

Conditions and other 14 CFR part 25 

requirements for stability, control, and 

maneuverability, including the effects of 

turbulence. 

(2) General ergonomics: Arm rest 

comfort and support, local freedom of 

movement, displacement angle 

suitability, and axis harmony. 

(3) Inadvertent input in turbulence. 

(4) Inadvertent pitch-roll cross talk. 

The Handling Qualities Rating 

Method (HQRM) of Appendix 5 of the 

Flight Test Guide, AC 25–7C, may be 

used to show compliance. 

Applicability 

As discussed above, these proposed 

special conditions apply to Airbus 

Model A350–900 series airplanes. 

Should Airbus apply later for a change 

to the type certificate to include another 

model incorporating the same novel or 

unusual design feature, the proposed 

special conditions would apply to that 

model as well. 

Conclusion 

This action affects only certain novel 

or unusual design features on the Airbus 

Model A350–900 series airplanes. It is 

not a rule of general applicability. 

List of Subjects in 14 CFR Part 25 

Aircraft, Aviation safety, Reporting 

and recordkeeping requirements. 

The authority citation for these 

special conditions is as follows: 

Authority: 49 U.S.C. 106(g), 40113, 44701, 

44702, 44704. 

The Proposed Special Conditions 

Accordingly, the Federal Aviation 

Administration (FAA) proposes the 

following special conditions as part of 

the type certification basis for Airbus 

Model A350–900 series airplanes in the 

absence of specific requirements for side 

stick controllers: 

1. Pilot strength: In lieu of the 

‘‘strength of pilots’’ limits shown in 

§ 25.143(c) for pitch and roll, and in lieu 

of specific pitch force requirement of 

§§ 25.145(b) and 25.175(d), it must be 

shown that the temporary and 

maximum prolonged force levels for the 

side stick controllers are suitable for all 

expected operating conditions and 

configurations, whether normal or nonnormal. 

2. Pilot control authority: The 

electronic side stick controller coupling 

design must provide for corrective and/ 

or overriding control inputs by either 

pilot with no unsafe characteristics. 

Annunciation of the controller status 

must be provided, and must not be 

confusing to the flight crew. 

3. Pilot control: It must be shown by 

flight tests that the use of side stick 

controllers does not produce unsuitable 

pilot-in-the-loop control characteristics 

when considering precision path 

control/tasks and turbulence. In 

addition, pitch and roll control force 

and displacement sensitivity must be 

compatible, so that normal inputs on 

one control axis will not cause 

significant unintentional inputs on the 

other. 

Issued in Renton, Washington, on October 

22, 2013. 

Stephen P. Boyd, 

Acting Manager, Transport Airplane 

Directorate, Aircraft Certification Service. 

[FR Doc. 2013–26912 Filed 11–7–13; 8:45 am] 

BILLING CODE 4910–13–P 

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Part 170 

RIN 3038–AE09 

Membership in a Registered Futures 

Association 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Commodity Futures 

Trading Commission (‘‘Commission’’) 

proposes to amend its regulations to 

require that all persons registered with 

the Commission as introducing brokers 

(‘‘IBs’’), commodity pool operators 

(‘‘CPOs’’), and commodity trading 

advisors (‘‘CTAs’’) must become and 

remain members of at least one 

registered futures association (‘‘RFA’’). 

DATES: Comments must be received on 

or before January 17, 2014. 


wreier-aviles on DSK5TPTVN1PROD with PROPOSALS
Federal Register / Vol. 78, No. 217 / Friday, November 8, 2013 / Proposed Rules 67079 

1 17 CFR 145.9. Commission regulations referred 

to herein can be found on the Commission’s Web 

site, www.cftc.gov. 

2 17 CFR 170.15 and 170.16. See also Registration 

of Swap Dealers and Major Swap Participants, 77 

FR 2613 (Jan. 19, 2012). 

3See 7 U.S.C. 21(e), which specifies that any 

person registered under the CEA, who is not a 

member of an RFA, shall be subject to such other 

rules and regulations as the Commission may find 

necessary to protect the public interest and promote 

just and equitable principles of trade. 

4 7 U.S.C. 21(a). 

5SROs include designated contract markets 

(‘‘DCMs’’ or ‘‘exchanges’’), swap execution facilities 

(‘‘SEFs’’), registered futures associations, and 

derivatives clearing organizations (‘‘DCOs’’). Among 

other things, SROs maintain and update a 

standardized audit program and coordinate audit 

and financial statement surveillance activities over 

firms that are members of more than one SRO. 

6 7 U.S.C. 12a(5). 

7 7 U.S.C. 21(m). 

8Membership in Registered Futures Association, 

72 FR 2614 (Jan. 22, 2007). 

9NFA Bylaw 1101 is available at: http://

www.nfa.futures.org/nfamanual/NFAManual.aspx?

RuleID=BYLAW%201101&Section=3. 

10Membership in a Registered Futures 

Association, 71 FR 64171 at n.7 (proposed Nov. 1, 

2006). The Commission notes that proposed 

§ 170.17, like § 170.15 and § 170.16, does not 

directly require associated persons (‘‘APs’’) to join 

a RFA. This is because APs must be sponsored by 

one of the aforementioned entities. 

11Public Law 111–203, 124 Stat. 1376 (2010). 

ADDRESSES: You may submit comments, 

identified by RIN number 3038–AE09, 

by any of the following methods: 

• The agency’s Web site, at http://

comments.cftc.gov. Follow the 

instructions for submitting comments 

through the Web site. 

• Mail: Melissa D. Jurgens, Secretary 

of the Commission, Commodity Futures 

Trading Commission, Three Lafayette 

Centre, 1155 21st Street NW., 

Washington, DC 20581. 

• Hand Delivery/Courier: Same as 

mail above. 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

Please submit your comments using 

only one method. 

All comments must be submitted in 

English, or if not, accompanied by an 

English translation. Comments will be 

posted as received to http://

www.cftc.gov. You should submit only 

information that you wish to make 

available publicly. If you wish the 

Commission to consider information 

that you believe is exempt from 

disclosure under the Freedom of 

Information Act, a petition for 

confidential treatment of the exempt 

information may be submitted according 

to the procedures established in § 145.9 

of the Commission’s regulations.1

The Commission reserves the right, 

but shall have no obligation, to review, 

pre-screen, filter, redact, refuse or 

remove any or all of your submission 

from http://www.cftc.gov that it may 

deem to be inappropriate for 

publication, such as obscene language. 

All submissions that have been redacted 

or removed that contain comments on 

the merits of the rulemaking will be 

retained in the public comment file and 

will be considered as required under the 

Administrative Procedure Act and other 

applicable laws, and may be accessible 

under the Freedom of Information Act. 

FOR FURTHER INFORMATION CONTACT: 

Andrew Chapin, Associate Director, 

Division of Swap Dealer and 

Intermediary Oversight, 202–418–5465, 

achapin@cftc.gov; Jason Shafer, 

Attorney Advisor, Division of Swap 

Dealer and Intermediary Oversight, 

(202) 418–5097, jshafer@cftc.gov; or 

Hannah Ropp, Economist, 202–418– 

5228, hropp@cftc.gov, Office of the 

Chief Economist, Commodity Futures 

Trading Commission, Three Lafayette 

Centre, 1155 21st Street NW., 

Washington, DC 20581. 

SUPPLEMENTARY INFORMATION: 

I. Background 

Part 170 of the Commission’s 

regulations pertains to RFAs. RFAs 

serve a vital self-regulatory role by 

functioning as frontline regulators of 

their members subject to Commission 

oversight. Regulations 170.15 and 

170.16 require each registered futures 

commission merchant (‘‘FCM’’), and 

each registered swap dealer (‘‘SD’’) and 

major swap participant (‘‘MSP’’), 

respectively, to become a member of an 

RFA, subject to an exception for certain 

notice registered brokers or dealers.2

However, there is no such mandatory 

membership requirement for other 

registrants. In the absence of a 

mandatory membership requirement, 

those registrants not already members of 

an RFA are nevertheless subject to the 

rules and regulations of the 

Commission,3 and, absent this proposal, 

the Commission would assume the role 

performed by the RFA for this class of 

registrants. Currently, the National 

Futures Association (‘‘NFA’’) is the sole 

RFA under Section 17(a) of the 

Commodity Exchange Act (‘‘CEA’’),4

and it is also a self-regulatory 

organization (‘‘SRO’’).5

II. Proposed Regulation 

Section 8a(5) of the CEA authorizes 

the Commission to promulgate such 

regulations as, in the judgment of the 

Commission, are reasonably necessary 

to effectuate any of the provisions, or to 

accomplish any of the purposes, of the 

CEA.6 Section 17(m) of the CEA permits 

the Commission to require membership 

in an RFA if the Commission 

determines that mandatory membership 

is necessary or appropriate to achieve 

the purposes and objectives of the CEA.7

Pursuant to its statutory authority, the 

Commission hereby proposes to amend 

Part 170 by adding § 170.17 to require 

each person registered as an IB, CPO, or 

CTA to become and remain a member of 

an RFA based on its preliminary belief 

that such membership is necessary or 

appropriate to ensure comprehensive 

and effective market oversight which is 

applied consistently to all registered 

intermediaries. 

The Commission previously 

promulgated § 170.15 to require, subject 

to an exception for certain notice 

registered securities brokers or dealers, 

that all persons registered with the 

Commission as FCMs must become and 

remain members of at least one RFA.8

NFA Bylaw 1101 states that no member 

of NFA may ‘‘carry an account, accept 

an order or handle a transaction’’ in 

commodity futures contracts for, or on 

behalf of, any non-member of NFA that 

is required to be registered with the 

Commission as, inter alia, an IB, CPO, 

or CTA.9 Accordingly, any IB, CPO or 

CTA required to be registered that 

desires to conduct business directly 

with an FCM must become a member of 

NFA, and derivatively, must ensure that 

it conducts business only with those 

IBs, CPOs or CTAs that also are NFA 

members. Therefore, given the NFA’s 

status as the sole RFA under Section 

17(a) of the CEA, at the time it was 

proposed, the Commission noted that 

§ 170.15 would operate in conjunction 

with NFA Bylaw 1101 to assure 

essentially complete NFA membership 

from the universe of commodity 

professionals: FCMs, CPOs, CTAs and 

IBs.10

In proposing new Regulation 170.17, 

the Commission recognizes that due to 

recent changes to the CEA, § 170.15 and 

NFA Bylaw 1101 will no longer assure 

NFA membership for all IBs, CPOs or 

CTAs. In particular, the Dodd-Frank 

Wall Street Reform and Consumer 

Protection Act (‘‘Dodd-Frank Act’’) 

amended the CEA to establish a 

comprehensive new regulatory 

framework for swaps.11 The new 

regulatory framework provides that, 

among other things, entities that engage 

in regulated activity with respect to 

swaps will be required to register with 

the Commission as IBs, CPOs, or CTAs, 

as appropriate. However, due to the 

unique nature of swap transactions, it 

may be possible for these Commission 

registrants to serve clients without 

interacting with a firm that ‘‘carries an 

account,’’ e.g., an FCM or an SD who 


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67080 Federal Register / Vol. 78, No. 217 / Friday, November 8, 2013 / Proposed Rules 

12See, e.g., Business Conduct Standards for Swap 

Dealers and Major Swap Participants with 

Counterparties, Final Rule, 77 FR 9734, 9825 (Feb. 

17, 2012). 

13Exemption from Registration as a Commodity 

Trading Advisor, 65 FR 12938 (March 10, 2000). 

14 44 U.S.C. 3501 et seq. 

15See OMB Control No. 3038–0023, http://

www.reginfo.gov/public/do/

PRAOMBHistory?ombControlNumber=3038-0023. 

16The Commission has designated NFA to 

receive Form 7–R submissions on its behalf. The 

Commission notes that application for NFA 

membership is incorporated in Form 7–R. 

17 Data provided by NFA was used in estimating 

this figure. Specifically, the data shows that, on 

April 11, 2013, there were 5 IBs, 1 IB/CTA, 30 

CPOs, 8 CTAs, and 9 CPO/CTAs who indicated that 

they transact exclusively in swaps. 

18 Data provided by NFA was used in estimating 

this figure. Specifically, the 756 figure is calculated 

by adding the following (as of April 11, 2013, the 

total number of registered firms without NFA 

membership): 20 IBs, 1 IB/CPO, 2 IB/CTAs, 59 

CPOs, 628 CTAs, and 46 CPO/CTAs. 

accepts customer funds. For example, a 

CTA may advise a ‘‘special entity’’ on 

swaps in the capacity of an 

‘‘independent advisor,’’ pursuant to 

section 4s(h)(5) of the CEA,12 or a CPO 

may operate a pool that trades only 

swaps that are not cleared through a 

DCO. As a result, these registrants 

would not be captured by the 

intersection of §§ 170.15 or 170.16, and 

NFA Bylaw 1101, and would not be 

required to become members of NFA. 

Proposed § 170.17 would eliminate 

existing gaps in the regulatory oversight 

programs established by the 

Commission and NFA. The proposed 

rule would advance the Commission’s 

effort to create an oversight regime that 

levels the playing field by ensuring 

consistent treatment of all its registered 

intermediaries, including FCMs, SDs, 

MSPs, IBs, CPOs, and CTAs. 

In sum, consistent with Sections 8a(5) 

and 17m of the CEA, the Commission 

preliminarily believes that the proposed 

rule is necessary or appropriate to 

facilitate comprehensive and effective 

market oversight by NFA in its capacity 

as an SRO. By mandating membership 

in an RFA by each person registered as 

an IB, CPO, or CTA, the proposed rule 

would enable NFA to ensure 

compliance with Section 17 of the CEA, 

and rules and regulations thereunder. 

As the only RFA, NFA serves as the 

frontline regulator of its members, 

subject to Commission oversight. 

Without mandatory membership in 

NFA or another RFA, effective 

implementation of the programs 

required by Section 17 of the CEA and 

NFA’s self-regulatory programs could be 

impeded. 

III. Request for Comment 

To ensure that the proposed rule 

would, if adopted, achieve its stated 

purpose, the Commission requests 

comment generally on all aspects of the 

proposed rule. Specifically, the 

Commission requests comment on the 

following: 

(1) Regulation 4.14(a)(9) was adopted 

on March 10, 2000.13 Regulation 

4.14(a)(9) provides that a person is not 

required to register as a CTA if it does 

not: (i) Direct any client accounts; or (ii) 

provide commodity trading advice 

based on, or tailored to, the commodity 

interest or cash market positions or 

other circumstances or characteristics of 

particular clients. This exemption from 

CTA registration generally pertains to 

persons only providing advice to the 

general public, such as in a newsletter, 

and not to specific clients. When 

adopted, Regulation 4.14(a)(9) did not 

require CTAs to de-register who were, at 

the time, registered with the 

Commission, but who could avail 

themselves of 4.14(a)(9). Therefore, 

many CTAs are currently registered 

with the Commission even though they 

qualify for an exemption from 

Commission registration pursuant to 

4.14(a)(9). Should entities who are 

currently registered with the 

Commission but otherwise qualify for a 

Rule 4.14(a)(9) exemption be required to 

become members of NFA? If not, why? 

(2) The Commission has not identified 

an impact on the risk management 

decisions of market participants as a 

result of the proposed regulation, but 

seeks comment as to any potential 

impact. Will proposed § 170.17 impact, 

positively or negatively, the risk 

management procedures or actions of 

intermediaries? 

The Commission further requests 

comment on the specific questions 

included throughout this release. 

IV. Administrative Compliance 

A. Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

(‘‘PRA’’) 14 imposes certain 

requirements on Federal agencies, 

including the Commission, in 

connection with their conducting or 

sponsoring any collection of 

information, as defined by the PRA. 

This proposed rulemaking would result 

in an amendment to existing collection 

of information OMB Control Number 

3038–0023.15 The Commission is 

therefore submitting this proposal to the 

Office of Management and Budget 

(‘‘OMB’’) for review. If adopted, 

responses to this collection of 

information would be mandatory. An 

agency may not conduct or sponsor, and 

a person is not required to respond to, 

a collection of information unless it 

displays a currently valid control 

number. 

Registration with the Commission 

requires each applicant for registration 

to, among other things, file a Form 

7–R providing basic background and 

contact information.16 The proposed 

regulation would not require affected 

IBs, CPOs, and CTAs to register with the 

Commission, but only to become a 

member of the NFA. 

As of April 11, 2013, NFA has 

indicated that 53 CPOs, CTAs, and IBs 

have applied for or have been approved 

for Commission registration solely 

because of their activity in the swaps 

market.17 Furthermore, NFA indicated 

to the Commission that, as of April 11, 

2013, there are 756 non-FCM registrants 

that are currently registered with the 

Commission, but are not NFA 

members.18 Therefore, based on current 

information provided by NFA, the 

Commission estimates that there may be 

a total of 809 respondents affected by 

this proposed rule, and accordingly, the 

Commission preliminarily believes that 

OMB Collection 3038–0023 needs to be 

adjusted to account for an increase in 

the number of respondents. The 

proposed regulation would otherwise 

not impact the burden estimates 

currently provided for Collection 3038– 

0023. 

The Commission seeks comment 

about the total number of respondents 

that it estimates may be impacted by the 

proposed rule, i.e., the Commission’s 

preliminary estimate of 809 potential 

respondents. In particular, the 

Commission seeks comment as to the 

number of persons who have registered 

or plan to register as CTAs, CPOs, and 

IBs in order to serve the swap market 

exclusively and would be required to 

register with the Commission as a result 

of their activity in uncleared swaps (i.e., 

would not otherwise be captured by the 

aforementioned interplay of CFTC 

§§ 170.15 and 170.16 and NFA Bylaw 

1101). 

Information Collection Comments 

The Commission invites the public 

and other Federal agencies to comment 

on any aspect of the reporting burdens 

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

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

comments in order to: (1) Evaluate 

whether the proposed collection of 

information is necessary for the proper 

performance of the functions of the 

Commission, including the information 

will have practical utility; (2) evaluate 

the accuracy of the Commission’s 

estimate of the burden of the proposed 

collection of information; (3) determine 

whether there are ways to enhance the 


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19 5 U.S.C. 601 et seq. 

20Policy Statement and Establishment of 

Definitions of ‘‘Small Entities’’ for Purposes of the 

Regulatory Flexibility Act, 47 FR 18618, 18619 

(Apr. 30, 1982). 

21See, with respect to commodity trading 

advisors, 47 FR at 18620, and see, with respect to 

IBs, Introducing Brokers and Associated Persons of 

Introducing Brokers, Commodity Trading Advisors 

and Commodity Pool Operators; Registration and 

Other Regulatory Requirements, 48 FR 35276 (Aug. 

3, 1983). 

22See infra note 28. As stated in the booklet titled 

‘‘NFA Regulatory Requirements: For FCMs, IBs, 

CPOs, and CTAs,’’ NFA audits have two major 

objectives: (1) To determine whether the firm is 

maintaining records in accordance with NFA rules 

and applicable CFTC regulations; and (2) To ensure 

that the firm is being operated in a professional 

manner and that customers are protected against 

unscrupulous activities and fraudulent or highpressure sales practices. 

23The Commission believes that many of the 

recordkeeping obligations associated with preparing 

with a NFA audit are already required for 

Commission registrants. For example, Sections 4.23 

and 4.33 of the Commission’s Regulations are 

recordkeeping requirements associated with 

registered CPOs and CTAs, respectively. Moreover, 

given the average periodicity for NFA audits, the 

magnitude of annual audit-related costs is limited. 

quality, utility, and clarity of the 

information to be collected; and (4) 

minimize the burden of the collection of 

information on those who are to 

respond, including through the use of 

automated collection techniques or 

other forms of information technology. 

Comments may be submitted directly 

to the Office of Information and 

Regulatory Affairs, by fax at (202) 395– 

6566 or by email at OIRAsubmissions@

omb.eop.gov. Please provide the 

Commission with a copy of submitted 

comments so that all comments can be 

summarized and addressed in the final 

rule preamble. Refer to the ADDRESSES

section of this notice of proposed 

rulemaking for comment submission 

instructions to the Commission. A copy 

of the supporting statements for the 

collections of information discussed 

above may be obtained by visiting 

RegInfo.gov. OMB is required to make a 

decision concerning the collection of 

information between 30 and 60 days 

after publication of this document in the 

Federal Register. Therefore, a comment 

is best assured of having its full effect 

if OMB receives it within 30 days of 

publication. 

B. Regulatory Flexibility Act 

The Regulatory Flexibility Act 19

requires that agencies consider whether 

the rules they propose will have a 

significant economic impact on a 

substantial number of small entities 

and, if so, provide a regulatory 

flexibility analysis respecting the 

impact. 

1. CPOs 

The Commission has previously 

determined that CPOs are not small 

entities for purposes of the Regulatory 

Flexibility Act.20 Accordingly, the 

Chairman, on behalf of the Commission, 

hereby certifies pursuant to 5 U.S.C. 

605(b) that the proposed rules will not 

have a significant economic impact on 

a substantial number of small entities 

with respect to these entities. 

2. IBs and CTAs 

The Commission has previously 

determined to evaluate within the 

context of a particular rule proposal 

whether all or some IBs or CTAs should 

be considered to be small entities and, 

if so, to analyze the economic impact on 

them of any such rule.21

Since there could be some small 

entities that register as IBs or CTAs, the 

Commission is considering whether this 

rulemaking would have a significant 

economic impact on these registrants. 

The proposed rules would require all 

CTAs and IBs who register with the 

Commission to become members of an 

RFA. As previously noted, this would 

require CTAs and IBs to ‘‘check a box’’ 

on Form 7–R and ensure they are 

prepared for an NFA audit.22 However, 

as discussed below, the Commission 

preliminarily believes that any costs 

associated with preparing for an audit 

by the NFA should not be substantially 

different from, or significantly exceed, 

the costs associated with preparing for 

an audit by the Commission, which 

every registered entity would already be 

responsible to do.23 To the extent that 

this proposed rule only pertains to 

CFTC registrants, the Commission 

preliminarily believes that any auditrelated costs incident to NFA 

membership would be minimal, and 

should not have a significant economic 

impact on IBs, CPOs, or CTAs that are 

small entities. Consequently, the 

Commission finds that there is no 

significant economic impact on IBs or 

CTAs resulting from this rulemaking. 

Accordingly, for the reasons stated 

above, the Commission preliminarily 

believes that the proposal will not have 

a significant economic impact on a 

substantial number of small entities. 

Therefore, the Chairman, on behalf of 

the Commission, hereby certifies, 

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

proposed regulations being published 

today by this Federal Register release 

will not have a significant economic 

impact on a substantial number of small 

entities. 

C. Considerations of Costs and Benefits 

Section 15(a) of the CEA requires the 

Commission to consider the costs and 

benefits of its actions before 

promulgating a regulation under the 

CEA or issuing an order. Section 15(a) 

further specifies that the costs and 

benefits shall be evaluated in light of the 

following 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. 

1. Background 

As discussed above, prior to the 

Dodd-Frank Act, the intersection of 

§ 170.15 and NFA Bylaw 1101 

effectively required most CFTCregistered intermediaries to be members 

of NFA. Because NFA Bylaw 1101 

provides that NFA members transacting 

futures business on behalf of customers 

cannot transact with non-members, and 

§ 170.15 requires all FCMs to be NFA 

members, any IB, CPO, or CTA that 

engages with an FCM is required to 

maintain NFA membership in order to 

transact in futures. 

In assessing the costs and benefits of 

the proposed rule, the Commission, in 

consultation with the NFA, has 

identified the following typical 

scenarios in which, under the current 

Commission regulations and NFA rules, 

a firm is registered with the 

Commission, but is not an NFA 

member: 

• A firm that is no longer in business, 

but subject to Commission action, is 

prohibited from withdrawing its 

registration with the Commission until 

after the Commission action is resolved, 

but, since the firm no longer actively 

participates in the futures markets, it 

has withdrawn its NFA membership (in 

other words, a firm has a ‘‘withdrawal 

hold’’); 

• A firm that is not ready to 

commence business as a CTA and/or 

CPO first becomes registered in order to 

complete the more complex process of 

being properly vetted for registration, 

and then adds membership later when 

it is preparing to commence trading and 

to submit a disclosure document to NFA 

for review; 

• When an NFA member firm no 

longer has at least one principal who is 

registered as an AP of the firm, NFA 

rules provide that the firm’s 

membership can be withdrawn if the 

situation is not corrected. If the firm 

does not re-attain NFA membership by 

adding a new principal who is an AP of 

the firm, typically the firm’s registration 

is subsequently withdrawn as well; 

• CTAs that do not manage accounts 

consistent with the parameters of 


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24Under the current Regulations and NFA 

bylaws, an IB, CPO, and CTA who transacts only 

in uncleared swaps with another IB, CPO, or CTA 

who similarly limits its transactions to uncleared 

swaps, will not be required to become a member of 

NFA so long as both parties are (1) not members of 

NFA and (2) continue to transact only in uncleared 

swaps with similarly-situated entities. 

25See Form 7–R, http://www.nfa.futures.org/nfaregistration/templates-and-forms/form7-r.HTML. 

Applications forms for NFA membership and 

Associate membership are incorporated in Forms 

7–R and 8–R. See NFA Membership and Dues, 

http://www.nfa.futures.org/nfa-registration/NFAmembership-and-dues.HTML. 

26See NFA Membership and Dues, http://

www.nfa.futures.org/nfa-registration/NFAmembership-and-dues.HTML. 

27The Commission notes that the NFA states that 

it seeks to audit all new registrants within the first 

year of NFA membership, and periodically 

thereafter. See http://www.nfa.futures.org/nfa-faqs/

compliance-faqs/audits/index.HTML. 

28Entities that will become Commission 

registrants for the first time should expect to incur 

the costs of ensuring they are adequately prepared 

for an on-site examination by the Commission. 

Such costs, however, are not attributable to the 

present rule proposal. 

29NFA provides a booklet titled ‘‘NFA Regulatory 

Requirements: For FCMs, IBs, CPOs, and CTAs,’’ 

the NFA Manual, CFTC Regulations, and the ‘‘SelfExamination Checklist,’’ which all NFA must 

complete on a yearly basis. All are available on 

NFA’s Web site at www.nfa.futures.org. 

30See 17 CFR 1.17(a)(1)(iii). 

31NFA’s manual is available at http://

www.nfa.futures.org/nfamanual/NFAManual.aspx?

RuleID=SECTION%205&Section=7. 

§ 4.14(a)(9) register with the 

Commission, but are not required to 

become members of NFA and thus do 

not become members of NFA. 

Moreover, the Dodd-Frank Act 

amended the CEA to establish a 

comprehensive new regulatory 

framework for swaps markets. 

Accordingly, an intermediary that was 

previously not required to register with 

the Commission because its activities 

were limited to swaps may now be 

required to register with the 

Commission. However, unlike futures 

transactions, because some swaps can 

be entered into bilaterally and not be 

cleared through a central counterparty 

(in other words, will not necessarily 

require the use of an FCM, SD, or MSP), 

the intersection of §§ 170.15 and 170.16 

and NFA Bylaw 1101 may not require 

an IB, CPO, or CTA who transacts only 

in uncleared swaps to become a member 

of an RFA.24

Proposed § 170.17 would eliminate 

these gaps in the regulatory oversight 

programs established by the 

Commission and NFA. In conjunction 

with § 170.15, which requires all FCMs 

to become members of an RFA, and 

§ 170.16, which requires all SDs and 

MSPs to become members of an RFA, 

the Commission is intending to create 

an oversight regime that levels the 

playing field by ensuring consistent 

treatment of all its registered 

intermediaries. The Commission 

preliminarily believes that the proposed 

regulation is necessary to ensure 

comprehensive regulation and equal 

oversight of all intermediaries. 

2. Costs 

There would be certain costs 

associated with the proposed regulation. 

First, affected CFTC registrants would 

be required to become NFA members. 

The Commission understands that the 

process for a current CFTC registrant to 

become an NFA member amounts to 

checking a box on the CFTC registration 

form and updating some contact 

information; thus, the Commission 

preliminarily believes the cost of filing 

for membership to be less than one halfhour of labor.25

Affected entities would also be 

subject to certain membership fees. The 

Commission understands that NFA 

imposes initial membership dues and 

annual membership dues for IBs, CPOs, 

and CTAs. Currently, the initial 

membership dues to become an NFA 

member are $750 for the first year, and 

the annual dues to maintain 

membership are $750 per year 

thereafter.26

The Commission preliminarily 

believes that the rule may impose 

certain compliance costs on affected 

entities. However, such costs should not 

be substantially different from or 

significantly exceed the costs associated 

with current Commission regulations. 

NFA members are subject to periodic 

audits by NFA. The Commission 

understands that NFA audits CPOs, 

CTAs and IBs every three to four years, 

but the frequency may vary depending 

on NFA’s risk analysis.27 The 

Commission also understands that 

while the direct cost of the audit is 

covered by the annual membership 

dues, members may incur indirect costs 

associated with an on-site audit, e.g., 

preparing for the audit and providing 

staff to assist NFA staff during the audit. 

The Commission has authority to ensure 

all IBs, CTAs, and CPOs, registered with 

the Commission are in compliance with 

Commission regulations applicable to 

IBs, CTAs and CPOs as Commission 

registrants and to conduct on-site 

examinations of the operations and 

activities of IBs, CTAs, and CPOs as 

Commission registrants. Given the 

existing costs associated with ongoing 

compliance and examinations under the 

Commission regulations currently in 

effect, the Commission preliminarily 

believes that the costs associated with 

preparing for an audit by the NFA 

should not be substantially different 

from or significantly exceed the costs 

associated with preparing for an audit 

by the Commission, which every 

registered entity is already responsible 

to do (e.g., have properly prepared and 

maintained books and records available 

for examination at all times).28 All 

affected entities should expect to incur 

costs necessary to work with NFA to 

facilitate regulatory audits.29 Therefore, 

the Commission preliminarily believes 

that IBs, CPOs, and CTAs covered by the 

proposed rule may incur few, if any, 

additional audit-related costs by virtue 

of their NFA membership. 

Likewise, with respect to general, 

ongoing compliance costs, the 

Commission preliminarily believes that 

NFA membership would impose few 

additional costs on subject IBs, CPOs, 

and CTAs, because as Commission 

registrants, these participants would 

already be subject to the majority of 

regulations that NFA is responsible to 

enforce. Specifically, in its capacity as 

an SRO, NFA would act, in respect of 

entities subject to the proposed rule, as 

the frontline regulator for the programs 

required by Section 17 of the CEA and 

the regulations thereunder. Section 17 

and those regulations, however, are 

applicable to subject entities, 

independent of whether they are NFA 

members. Accordingly, in the main, 

entities would not incur any additional 

general, ongoing compliance costs as a 

result of NFA membership. However, in 

certain limited situations, there may be 

costs associated with being an NFA 

member in excess of those costs 

incurred for being registered with the 

Commission. For example, the 

Commission’s capital rules require that 

registered IBs maintain adjusted net 

capital equal to or in excess of the 

greatest of $45,000 [or] the amount of 

adjusted net capital required by a 

registered futures association of which it 

is a member.30 However, section 5 of the 

NFA Manual sets forth the following 

capital requirements for member IBs: 

(a) Each Member IB, except an IB operating 

pursuant to a guarantee agreement which 

meets the requirements set forth in CFTC 

Regulation 1.10(j), must maintain Adjusted 

Net Capital (as defined in CFTC Regulation 

1.17) equal to or in excess of the greatest of: 

(i) $45,000; 

(ii) For Member IBs with less than 

$1,000,000 in Adjusted Net Capital, $6,000 

per office operated by the IB (including the 

main office); 

(iii) For Member IBs with less than 

$1,000,000 in Adjusted Net Capital, $3,000 

for each AP sponsored by the IB.31

Therefore, while the Commission 

preliminarily believes, as noted above, 

that comprehensive and effective market 

oversight conducted by NFA would 


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32See supra note 18. 

33See supra note 18. Specifically, the 652 figure 

is calculated by adding the following (as of April 

11, 2013): 2 IBs, 20 CPOs, 605 CTAs, and 25 CPO/ 

CTAs. To arrive at the monetary estimate, the 652 

figure was multiplied by the $750.00 per-entity 

initial cost. The Commission notes, however, that 

some entities currently registered with the 

Commission may withdraw their registration 

because they are inactive in derivatives markets or 

for some other reason. As a result, the total number 

of affected entities may be reduced, and 

corresponding total costs associated with the 

proposed rule may be lower. 

34 Id. 

35See supra note 17. NFA indicated that on April 

11, 2013, it had approved 52 firms that deal 

exclusively in swaps for registration as an IB, CPO, 

or CTA and that the IB, CPO, or CTA registration 

of 1 additional firm that deals exclusively in swaps 

is currently pending. 

36For example, the Commission’s final definition 

of the term ‘‘U.S. Person’’ as it relates to crossborder swap transactions could dramatically affect 

the number of market participants required to 

register with the Commission. 

enhance market oversight and promote 

effective implementation of the CEA, 

the Commission recognizes that in 

certain limited situations, the 

requirements to be an NFA member may 

be more stringent, and potentially most 

costly to comply with, than the 

requirements associated with being 

registered with the Commission. The 

Commission requests comment on 

whether there are any additional 

situations similar to the example 

described above where the costs 

associated with NFA membership 

diverge from the costs of Commission 

registration. 

The Commission contacted NFA to 

determine the number of IBs, CPOs, and 

CTAs that would be directly impacted 

by this rule (i.e., currently registered 

with the Commission, but not currently 

members of NFA). NFA indicated to the 

Commission that, as of April 11, 2013, 

there were 756 non-FCM firms that are 

registered with the Commission, but are 

not NFA members.32 Large percentages 

of the identified IBs, IB/CPOs, IBs/

CTAs, and CPOs —90%, 100%, 100% 

and 66%, respectively—are firms that 

are subject to a withdrawal hold. A 

smaller percentage of CPOs/CTAs (46%) 

and CTAs (4%) also fit within this 

category. This category of entities—i.e., 

those intermediaries that are subject to 

a withdrawal hold—should not be 

affected by the proposed regulations 

because they are, in the majority of 

cases, no longer in business, and, in any 

case, are not actively trading. 

Relying on the information provided 

by NFA, the Commission estimates that 

a combined 652 entities are CFTC 

registrants because of the activities that 

qualify them as a CPO, CTA or IB, but 

are not NFA members, equating to an 

initial cost to the industry of 

approximately $489,000.33 In addition, 

the Commission anticipates a small cost 

to each firm to update the firm’s 

registration statement and other 

paperwork necessary to become an NFA 

member. The Commission estimates 

annual ongoing cost to the industry of 

the same amount ($489,000) 34 plus the 

indirect costs of the periodic audits, 

which the Commission cannot estimate 

at this time due to the entity-specific 

nature of the indirect costs incurred. 

The Commission also asked NFA for 

estimates regarding the number of future 

IBs, CPOs, and CTAs who will be 

required to register for the first-time 

with the Commission because of their 

swaps activity. NFA indicated that 53 

firms that have applied for or have been 

approved for Commission registration 

have indicated they participate 

exclusively in the swaps markets.35

However, the Commission estimates 

that this number may increase after 

certain regulations affecting the 

registration status of swaps entities 

come into effect.36 Moreover, as 

described above, this regulation would 

directly affect the subset of these new 

entities required to register for the first 

time because they are active exclusively 

in the uncleared swaps market and 

engage with similarly-situated entities. 

The Commission preliminarily believes 

that many entities have yet to apply for 

registration under the Commission’s 

new swaps market regime, and as such 

the Commission is not yet able to 

accurately determine the exact number 

of new registrants that will be affected 

by the proposed regulation. 

The Commission requests comment 

on all aspects of its preliminary 

consideration of costs. Has the 

Commission accurately identified the 

costs of this proposed regulation? Are 

there other costs to the Commission, 

market participants, and/or the 

American public that may result from 

the adoption of the proposed regulation 

that the Commission should consider? 

The Commission seeks specific 

comment on the following: 

• How many IBs, CPOs, and CTAs 

will be affected by the proposed 

regulation? 

• How many entities are active only 

in the uncleared swaps markets and 

plan to register with the Commission— 

and so would need to become members 

of NFA as a result of the proposed 

regulation? 

• What are the costs of an NFA audit? 

Please identify and, where possible, 

quantify such costs. Do the types of 

costs or amount of costs vary depending 

on whether the audit is online or onsite? 

Do market participants bear different 

costs with respect to NFA’s periodic 

audits versus daily audits? 

• Would the proposed rule result in 

ongoing compliance costs beyond those 

an entity would face as a result of being 

registered with the Commission? Are 

there any costs of NFA membership 

beyond those an entity would face as a 

result of being registered with the 

Commission? 

• Are there other costs of NFA 

membership that the Commission 

should consider? 

3. Benefits 

The proposed regulation would 

enable the Commission to carry out its 

obligations pursuant to Section 17 of the 

CEA to delegate certain oversight 

responsibility for intermediaries, 

including IBs, CPOs, and CTAs, to an 

RFA. As described above, the NFA 

cannot enforce its rules over registrants 

who do not become NFA members, and 

existing regulations would not require 

all IBs, CPOs, and CTAs to become NFA 

members. Thus, the Commission 

proposed new § 170.17 to require IBs, 

CPOs, and CTAs to become NFA 

members analogously to how § 170.15 

presently requires FCMs to become NFA 

members and how § 170.16 requires the 

same of SDs and MSPs. In so doing, the 

Commission preliminarily believes it 

would ensure a level regulatory playing 

field for all registered intermediaries. 

The proposed rule would enable the 

NFA to apply its experience as a SRO 

to oversee all registered IBs, CPOs, and 

CTAs. 

In addition, the Commission 

preliminarily believes that by requiring 

membership in an RFA, the proposed 

rule would result in a more efficient 

deployment of agency resources which 

would otherwise have to be used to 

oversee these registrants who would, 

without this rule, not be overseen by 

NFA. 

Moreover, by requiring all registered 

IBs, CPOs and CTAs to become NFA 

members, the public would benefit from 

NFA’s developed set of rules and 

oversight capabilities to ensure the 

integrity of the swaps market and its 

participants. This increase in market 

integrity may lead to a corresponding 

increase in market participation as the 

public and market participants grow 

more confident in the safety of these 

markets. The Commission preliminarily 

believes that the proposed regulation 

would ensure that NFA has the 

authority necessary to fulfill its 

delegated responsibilities to provide 

regulatory oversight and promote 

market integrity. 

The Commission requests comment 

on all aspects of its preliminary 


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consideration of benefits. Has the 

Commission accurately identified the 

benefits of this proposed regulation? Are 

there other benefits to the Commission, 

market participants, and/or the public 

that may result from the adoption of the 

proposed regulation that the 

Commission should consider? 

4. Section 15(a) 

Section 15(a) of the CEA requires the 

Commission to consider the effects of its 

actions in light of the following five 

factors: 

a. Protection of Market Participants and 

the Public 

The proposed regulation would 

protect the public by ensuring that all 

registered intermediaries are subject to 

the same level of comprehensive NFA 

oversight. Because the entities affected 

by the proposed regulation act as 

intermediaries for clients, it is 

imperative that these entities be subject 

to proper oversight in order to protect 

customers from wrongdoing. 

The Commission seeks comment as to 

how market participants and the public 

may be protected by the proposed 

regulation. 

b. Efficiency, Competitiveness, and 

Financial Integrity of Markets 

The proposed regulation would act to 

create a more level playing field for 

intermediaries, ensuring that all such 

registered entities are subject to the 

same level of oversight and regulatory 

responsibility. In so doing, the 

Commission preliminarily believes the 

integrity of markets would be enhanced. 

The Commission seeks comment as to 

how the proposed regulation may 

promote the efficiency, competitiveness, 

and financial integrity of markets. 

c. Price Discovery 

The Commission has not identified an 

impact on price discovery as a result of 

the proposed regulation, but seeks 

comment as to any potential impact. 

Will proposed § 170.17 impact, 

positively or negatively, the price 

discovery process? 

d. Sound Risk Management 

The Commission has not identified an 

impact on the risk management 

decisions of market participants as a 

result of the proposed regulation, but 

seeks comment as to any potential 

impact. Will proposed § 170.17 impact, 

positively or negatively, the risk 

management procedures or actions of 

intermediaries? 

e. Other Public Interest Considerations 

The Commission preliminarily 

believes that proposed § 170.17 may 

promote public confidence in the 

integrity of derivatives markets by 

ensuring consistent and adequate 

regulation and oversight of all 

intermediaries. Will proposed § 170.17 

impact, positively or negatively, any 

heretofore unidentified matter of 

interest to the public? 

List of Subjects in 17 CFR Part 170 

Authority delegations (Government 

agencies), Commodity futures, 

Reporting and recordkeeping 

requirements. 

For the reasons stated in the 

preamble, the Commodity Futures 

Trading Commission proposes to amend 

17 CFR part 170 as follows: 

PART 170—REGISTERED FUTURES 

ASSOCIATIONS 

■ 1. The authority citation for part 170 

is revised to read as follows: 

Authority: 7 U.S.C. 6p, 12a, and 21. 

Subpart C—Membership in a 

Registered Futures Association 

■ 2. In subpart C, add § 170.17 to read 

as follows: 

§ 170.17 Introducing Brokers, Commodity 

Pool Operators, and Commodity Trading 

Advisors. 

Each person registered as an 

introducing broker, commodity pool 

operator, or commodity trading advisor 

must become and remain a member of 

at least one futures association that is 

registered under Section 17 of the Act 

and that provides for the membership 

therein of such introducing broker, 

commodity pool operator, or commodity 

trading advisor, as the case may be, 

unless no such futures association is so 

registered. 

Issued in Washington, DC, on November 5, 

2013, by the Commission. 

Melissa D. Jurgens, 

Secretary of the Commission. 

Appendix to Membership in a 

Registered Futures Association— 

Commission Voting Summary 

Note: The following appendix will not 

appear in the Code of Federal Regulations. 

Appendix—Commission Voting 

Summary 

On this matter, Chairman Gensler and 

Commissioners Chilton, O’Malia, and Wetjen 

voted in the affirmative; no Commissioner 

voted in the negative. 

[FR Doc. 2013–26790 Filed 11–7–13; 8:45 am] 

BILLING CODE 6351–01–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

33 CFR Part 117 

[Docket No. USCG–2013–0778] 

RIN 1625–AA09 

Drawbridge Operation Regulation; 

Broad Creek, Laurel, DE 

AGENCY: Coast Guard, DHS. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Coast Guard is proposing 

to change the regulation that governs the 

operation of the Poplar Street Bridge, 

mile 8.2, and the U.S. 13A Bridge over 

Broad Creek, mile 8.25, both at Laurel, 

DE. The proposed new rule would 

change the current regulation by 

requiring a forty-eight hour advance 

notice and by allowing the bridges to 

remain in the closed position for the 

passage of vessels. 

DATES: Comments and related material 

must reach the Coast Guard on or before 

January 7, 2014. 

ADDRESSES: You may submit comments 

identified by docket number USCG– 

2013–0778 using any one of the 

following methods: 

(1) Federal eRulemaking Portal: 

http://www.regulations.gov. 

(2) Fax: 202–493–2251. 

(3) Mail or Delivery: Docket 

Management Facility (M–30), U.S. 

Department of Transportation, West 

Building Ground Floor, Room W12–140, 

1200 New Jersey Avenue SE., 

Washington, DC 20590–0001. Deliveries 

accepted between 9 a.m. and 5 p.m., 

Monday through Friday, except Federal 

holidays. The telephone number is 202– 

366–9329. 

See the ‘‘Public Participation and 

Request for Comments’’ portion of the 

SUPPLEMENTARY INFORMATION section 

below for instructions on submitting 

comments. To avoid duplication, please 

use only one of these four methods. 

FOR FURTHER INFORMATION CONTACT: If 

you have questions on this proposed 

rule, call or email Mrs. Jessica Shea, 

Fifth Coast Guard District Bridge 

Administration Division, Coast Guard; 

telephone 757–398–6422, email 

jessica.c.shea2@uscg.mil. If you have 

questions on viewing or submitting 

material to the docket, call Barbara 

Hairston, Program Manager, Docket 

Operations, telephone 202–366–9826. 

SUPPLEMENTARY INFORMATION: 

Table of Acronyms 

CFR Code of Federal Regulations 

DHS Department of Homeland Security 


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