Federal Register / Vol. 75, No. 137 / Monday, July 19, 2010 / Proposed Rules 41775 

2009–1136 and Airspace Docket No. 09– 

ANM–26) and be submitted in triplicate 

to the Docket Management System (see 

ADDRESSES section for address and 

phone number). You may also submit 

comments through the Internet at http:// 

www.regulations.gov. 

Commenters wishing the FAA to 

acknowledge receipt of their comments 

on this action must submit with those 

comments a self-addressed stamped 

postcard on which the following 

statement is made: ‘‘Comments to FAA 

Docket No. FAA–2009–1136 and 

Airspace Docket No. 09–ANM–26’’. The 

postcard will be date/time stamped and 

returned to the commenter. 

All communications received on or 

before the specified closing date for 

comments will be considered before 

taking action on the proposed rule. The 

proposal contained in this action may 

be changed in light of comments 

received. All comments submitted will 

be available for examination in the 

public docket both before and after the 

closing date for comments. A report 

summarizing each substantive public 

contact with FAA personnel concerned 

with this rulemaking will be filed in the 

docket. 

Availability of NPRMs 

An electronic copy of this document 

may be downloaded through the 

Internet at http://www.regulations.gov. 

Recently published rulemaking 

documents can also be accessed through 

the FAA’s web page at http:// 

www.faa.gov/airports_airtraffic/ 

air_traffic/publications/ 

airspace_amendments/. 

You may review the public docket 

containing the proposal, any comments 

received, and any final disposition in 

person in the Dockets Office (see the 

ADDRESSES section for the address and 

phone number) between 9 a.m. and 5 

p.m., Monday through Friday, except 

Federal holidays. An informal docket 

may also be examined during normal 

business hours at the Northwest 

Mountain Regional Office of the Federal 

Aviation Administration, Air Traffic 

Organization, Western Service Center, 

Operations Support Group, 1601 Lind 

Avenue, SW., Renton, WA 98057. 

Persons interested in being placed on 

a mailing list for future NPRM’s should 

contact the FAA’s Office of Rulemaking, 

(202) 267–9677, for a copy of Advisory 

Circular No. 11–2A, Notice of Proposed 

Rulemaking Distribution System, which 

describes the application procedure. 

The Proposal 

The FAA is proposing an amendment 

to Title 14 Code of Federal Regulations 

(14 CFR) Part 71 by establishing Class E 

surface airspace within a 4.1-mile radius 

of Deer Park Airport to accommodate 

existing RNAV (GPS) SIAPs at the 

airport. This action also would remove 

the Non-Directional Radio Beacon 

(NDB) from the legal description of the 

existing Class E airspace area extending 

upward from 700′ above the surface, as 

the NDB soon will be decommissioned. 

This action would enhance the safety 

and management of aircraft operations 

at the airport. 

Class E airspace designations are 

published in paragraph 6002 and 6005, 

respectively, of FAA Order 7400.9T, 

signed August 27, 2009, and effective 

September 15, 2009, which is 

incorporated by reference in 14 CFR 

71.1. The Class E airspace designation 

listed in this document will be 

published subsequently in this Order. 

The FAA has determined that this 

proposed regulation only involves an 

established body of technical 

regulations for which frequent and 

routine amendments are necessary to 

keep them operationally current. 

Therefore, this proposed regulation; (1) 

Is not a ‘‘significant regulatory action’’ 

under Executive Order 12866; (2) is not 

a ‘‘significant rule’’ under DOT 

Regulatory Policies and Procedures (44 

FR 11034; February 26, 1979); and (3) 

does not warrant preparation of a 

regulatory evaluation as the anticipated 

impact is so minimal. Since this is a 

routine matter that will only affect air 

traffic procedures and air navigation, it 

is certified that this proposed rule, 

when promulgated, would not have a 

significant economic impact on a 

substantial number of small entities 

under the criteria of the Regulatory 

Flexibility Act. 

The FAA’s authority to issue rules 

regarding aviation safety is found in 

Title 49 of the U.S. Code. Subtitle 1, 

Section 106, describes the authority for 

the FAA Administrator. Subtitle VII, 

Aviation Programs, describes in more 

detail the scope of the agency’s 

authority. This rulemaking is 

promulgated under the authority 

described in Subtitle VII, Part A, 

Subpart I, Section 40103. Under that 

section, the FAA is charged with 

prescribing regulations to assign the use 

of the airspace necessary to ensure the 

safety of aircraft and the efficient use of 

airspace. This regulation is within the 

scope of that authority as it establishes 

additional controlled airspace at Deer 

Park Airport, Deer Park, WA. 

List of Subjects in 14 CFR Part 71 

Airspace, Incorporation by reference, 

Navigation (air). 

The Proposed Amendment 

Accordingly, pursuant to the 

authority delegated to me, the Federal 

Aviation Administration proposes to 

amend 14 CFR Part 71 as follows: 

PART 71—DESIGNATION OF CLASS A, 

B, C, D AND E AIRSPACE AREAS; AIR 

TRAFFIC SERVICE ROUTES; AND 

REPORTING POINTS 

1. The authority citation for 14 CFR 

Part 71 continues to read as follows: 

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

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

1963 Comp., p. 389. 

§ 71.1 [Amended] 

2. The incorporation by reference in 

14 CFR 71.1 of the FAA Order 7400.9T, 

Airspace Designations and Reporting 

Points, signed August 27, 2009, and 

effective September 15, 2009 is 

amended as follows: 

Paragraph 6002 Class E airspace 

Designated as Surface Areas. 

* * * * * 

ANM WA E2 Deer Park, WA [New] 

Deer Park Airport, WA 

(Lat. 47°58′01′′ N., long. 117°25′43′′ W.) 

Within a 4.1-mile radius of Deer Park 

Airport. This Class E airspace area is effective 

during the specific dates and times 

established in advance by a Notice to 

Airmen. The effective date and time will 

thereafter be continuously published in the 

Airport/Facility Directory. 

Paragraph 6005 Class E airspace areas 

extending upward from 700 feet or more 

above the surface of the earth. 

* * * * * 

ANM WA E5 Deer Park, WA [Modified] 

Deer Park Airport, WA 

(Lat. 47°58′01′′ N., long. 117°25′43′′ W.) 

That airspace extending upward from 700 

feet above the surface within a 7-mile radius 

of the Deer Park Airport, excluding the 

Spokane, WA, Class E airspace area. 

Issued in Seattle, Washington, on July 1, 

2010. 

John Warner, 

Manager, Operations Support Group, Western 

Service Center. 

[FR Doc. 2010–17516 Filed 7–16–10; 8:45 am] 

BILLING CODE 4910–13–P 

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Part 16 

RIN 3038–AC63 

Account Ownership and Control 

Report 

AGENCY: Commodity Futures Trading 

Commission. 

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41776 Federal Register / Vol. 75, No. 137 / Monday, July 19, 2010 / Proposed Rules 

1 ‘‘Reporting entities’’ are defined broadly to 

include any registered entity required to provide 

the Commission with trade data on a regular basis, 

where such data is used for the Commission’s trade 

practice or market surveillance programs. At 

present, reporting entities would include 

designated contract markets (‘‘DCMs’’), derivatives 

transaction execution facilities (‘‘DTEFs’’), and 

exempt commercial markets with significant price 

discovery contracts (‘‘ECM SPDCs’’). In addition, 

should the Commission adopt the proposed rule, it 

would also collect ownership and control 

information from foreign boards of trade (‘‘FBOTs’’) 

operating in the U.S. pursuant to staff direct access 

no-action letters if such letters are conditioned on 

the regular reporting of trade data to the 

Commission. The Commission notes that much of 

the data required in the proposed OCR is already 

maintained by one or more registered entities to 

comply with existing regulatory requirements. The 

OCR will necessitate each reporting entity to collate 

and correlate these and other data points into a 

single record for trading accounts active on its 

trading facility, and to transmit such record to the 

Commission for regulatory purposes. 

2 74 FR 31642 (July 2, 2009). The ANPR noted 

that ‘‘most reporting entities will be designated 

contract markets, but they could be any registered 

entity that provides trade data to the Commission 

on a regular basis.’’ Footnote 1, above, emphasizes 

that reporting entities are not limited to DCMs. 

3Comments were due on or before August 17, 

2009. 4 74 FR 31642, at 31646 and 31643. 

5For example, the proposed OCR does not require 

the last four digits of account owners’ and 

controllers’ social security numbers or taxpayer 

identification numbers, as was contemplated in the 

ANPR. In their place, however, it would collect 

account owners’ and controllers’ dates of birth, as 

well as their National Futures Association (‘‘NFA’’) 

identification numbers, if any. The proposed OCR’s 

complete data requirements are described in 

Section IV(A). 

ACTION: Notice of proposed rulemaking 

(‘‘Notice’’). 

SUMMARY: The Commodity Futures 

Trading Commission (‘‘CFTC’’ or 

‘‘Commission’’) hereby proposes to 

collect certain ownership, control, and 

related information for all trading 

accounts active on U.S. futures 

exchanges and other reporting entities. 

The information collected will enhance 

market transparency, increase the 

Commission’s trade practice and market 

surveillance capabilities, leverage 

existing surveillance systems and data, 

and facilitate the Commission’s 

enforcement and research programs. 

Upon adoption of a final rule, the 

Commission will codify its 

requirements in Commission Regulation 

16.03. The Commission welcomes 

public comments on its proposal. 

DATES: Comments must be received on 

or before September 17, 2010. The 

Commission or Commission staff will 

hold a public meeting during the 

comment period in order to discuss the 

proposed rulemaking. 

ADDRESSES: Comments should be sent to 

David Stawick, Secretary, Commodity 

Futures Trading Commission, Three 

Lafayette Centre, 1155 21st Street, NW., 

Washington, DC 20581. Comments may 

be submitted via e-mail at 

OCR@cftc.gov. ‘‘Account Ownership and 

Control Report’’ must be in the subject 

field of responses submitted via e-mail, 

and clearly indicated on written 

submissions. Comments may also be 

submitted by connecting to the Federal 

eRulemaking Portal at http:// 

www.regulations.gov and following 

comment submission instructions. All 

comments must be in English. 

FOR FURTHER INFORMATION CONTACT: 

Sebastian Pujol Schott, Associate 

Deputy Director, Market Compliance, 

202–418–5641, or Cody J. Alvarez, 

Attorney Advisor, 202–418–5404, 

Division of Market Oversight, 

Commodity Futures Trading 

Commission, Three Lafayette Centre, 

1155 21st Street, NW., Washington, DC 

20581. 

SUPPLEMENTARY INFORMATION: 

I. Background 

The Commission proposes to collect 

ownership and control information via 

an account ‘‘Ownership and Control 

Report’’ (‘‘OCR’’) submitted weekly by all 

U.S. futures exchanges and other 

reporting entities (collectively, 

‘‘reporting entities’’).1 This Notice 

specifies the proposed content of the 

OCR, as well as its form and manner. In 

addition, it summarizes public 

comments received in response to a 

previously published Advanced Notice 

of Proposed Rulemaking (‘‘ANPR’’) in 

which the Commission explained its 

need and intended uses for ownership 

and control information. 

A. Advanced Notice of Proposed 

Rulemaking 

On July 2, 2009, the Commission 

published for public comment an ANPR 

where it proposed to collect certain 

ownership, control, and related 

information for all trading accounts 

active on U.S. futures exchanges. The 

Commission stated its intention to 

collect this information via an OCR 

submitted periodically by DCMs and 

other reporting entities.2 The ANPR was 

not a formal rule proposal; however, it 

did provide a detailed explanation of 

the Commission’s need and intended 

uses for ownership and control 

information. The ANPR explained that 

the OCR would be designed to enhance 

market transparency, leverage the 

Commission’s existing surveillance 

systems, and foster synergies between 

its market surveillance, trade practice, 

enforcement, and economic research 

programs. In addition, it addressed key 

technical points, including: (1) The data 

that the Commission planned to collect 

through OCRs; (2) the frequency with 

which OCRs were to be submitted; and 

(3) the form and manner in which OCRs 

should be provided. Finally, the ANPR 

gave examples of the Commission’s 

intended uses for ownership and control 

information, and described existing 

Commission surveillance systems that 

would benefit from OCRs. 

The Commission invited all interested 

parties to submit general comments on 

the OCR within a 45-day comment 

window.3 In addition, it posed eight 

specific questions addressing what 

additional information, if any, should be 

included in the OCR; the root sources of 

ownership and control information; the 

flow of data from those sources through 

reporting entities and on to the 

Commission; the form and manner of 

OCR transmission; the costs and 

burdens that the OCR might impose on 

reporting entities and their root data 

sources; and related matters. The 

Commission stated that comments 

received in response to the ANPR would 

help it ‘‘formulate an effective and 

practical rule,’’ and that comments 

would be ‘‘used in developing a 

proposed rule at a later date.’’ 4 The 

Commission received a total of 12 

comment letters from 16 interested 

parties. 

All comment letters were reviewed 

carefully by Commission staff. They 

expressed a range of opinions, both in 

support and opposition to the OCR. 

Many comment letters understood the 

utility of gathering ownership and 

control information for at least some 

trading accounts, but questioned 

specific elements of the Commission’s 

approach as outlined in the ANPR. The 

comments received and the 

Commission’s responses are 

summarized in Section III below. Briefly 

stated, however, the Commission 

continues to believe that ownership and 

control information is fundamental to 

the effective regulation of 21st-century 

futures markets. While it has made some 

modifications in response to comments 

received, and also added several new 

data points, the Commission is now 

formally proposing the OCR largely as 

described in the ANPR.5 The 

Commission welcomes all public 

comments. 

II. Ownership and Control Information 

as a Regulatory Tool 

A. Commission’s Need for the OCR 

The Commission’s need for 

ownership and control information 

reflects fundamental changes in the 

technology, products, and platforms of 

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Federal Register / Vol. 75, No. 137 / Monday, July 19, 2010 / Proposed Rules 41777 

6Based on fiscal years 2000 and 2009, as reported 

in the Commission’s FY 2009 Performance and 

Accountability Report, p.14. 

7 In addition, futures and options trading volume 

reached a peak of approximately 3.37 billion 

contracts traded in 2008, an increase of over 466% 

compared to the year 2000. 

8Final rules were adopted on March 23, 2009 and 

became effective April 22, 2009. See 74 FR 12178. 9The criteria established by Section 2(h)(7) of the 

Act include price linkage and arbitrage 

relationships with other contracts, material price 

reference, and material liquidity. 10See for example 74 FR 37988 (July 30, 2009) 

(wherein the ICE Henry Financial LD1 Fixed Price 

contract became the first contract found by the 

Commission to perform a significant price 

discovery function). 

11See Letter from Richard A. Shilts, Director, 

Division of Market Oversight, to Dee Blake, Director 

of Regulation, ICE Futures Europe (June 17, 2008) 

(requiring, among other things, that ICE Futures 

Europe provide a daily report of large trader 

positions in each linked contract). On January 21, 

2009, the Commission published a Notice in the 

Federal Register to provide notice that the 

conditions set forth in the staff no-action letter 

dated June 17, 2008, would equally apply to noaction relief of any FBOT that lists for trading by 

direct access from the U.S. any linked contract. 74 

FR 3570, 3572 (January 21, 2009). See also Letter 

from Richard A. Shilts, Director, Division of Market 

Oversight, to Dee Blake, Director of Regulation, ICE 

Futures Europe (August 20, 2009) (requiring, among 

other things, that ICE Futures Europe provide trade 

execution and audit trail data for the CFTC’s Trade 

Surveillance System on a trade-date plus one basis). 

12 ‘‘Trade register’’ is a generic term for a 

comprehensive, daily record of every trade 

facilitated by an exchange, whether executed on the 

centralized market (via open-outcry or 

electronically) or off of it (e.g., block trades and 

exchange of futures for swaps). Trade registers 

contain detailed information with respect to the 

terms of a trade (e.g., contract, price, quantity, etc.), 

the parties involved, and other data points. They 

also contain trading account numbers, but no 

information with respect to the owners or 

controllers of those accounts. In addition, the 

trading account numbers in trade registers often do 

not correspond to account numbers reported to 

other Commission data systems, including its large 

trader reporting system. The Commission has 

recently standardized the content and format of all 

trade registers submitted to it, which are now 

required to be FIXML Trade Capture Reports. The 

Commission notes that OCR reporting requirements 

will be triggered by the regular reporting of trade 

data for use in the Commission’s trade practice or 

market surveillance programs, regardless of whether 

such data is deemed a ‘‘trade register’’ by the entity 

providing it. 

U.S. futures trading. DCMs, in 

particular, have undergone a decadelong transition from geographicallydefined trading pits to electronic 

platforms with global reach. Between 

2000 and 2009, electronic trading grew 

from approximately 9 percent to 

approximately 81 percent of volume on 

all U.S. DCMs. Over the same time 

period, the number of actively-traded 

futures and options contracts listed on 

U.S. exchanges increased more than 

seven fold, from approximately 266 

contracts in 2000 to approximately 

1,866 contracts in 2009.6 Most 

importantly, total DCM futures and 

options trading volume rose from 

approximately 594.5 million contracts 

in 2000 to approximately 2.78 billion in 

2009, an increase of over 368%.7

Volume growth and changes in 

trading technology have coincided with 

equally important developments in the 

business of futures trading. One 

development of significant regulatory 

consequence is the growing economic 

integration between DCM contracts and 

their equivalents traded on ECMs, 

FBOTs, or other DCMs. Such linkages 

present both new trading opportunities 

and new regulatory challenges for the 

Commission and exchanges. In 

particular, both must be vigilant that 

trading in one market is not used to 

distort another, or to facilitate abusive 

trading practices across markets. The 

Commission’s role with respect to such 

linked contracts is especially vital, as it 

is best equipped to collect regulatory 

information from competing exchanges 

and conduct surveillance of linked 

contracts across markets. 

A second development of regulatory 

consequence is the increased dispersion 

and opacity of market participants as 

U.S. exchange floors are replaced by a 

broader, global customer base. Whereas 

the Commission once monitored trading 

via on-site surveillance of open-outcry 

pits, today surveillance is primarily 

electronic and data-driven. 

Paradoxically, while electronic trading 

has conferred important informational 

advantages, including improved audit 

trails, the concomitant increases in 

trading volumes, products offered, and 

trader dispersion and anonymity have 

created equally important regulatory 

challenges. Foremost among these is 

scale. Effective surveillance of millions 

of daily records—for example, an 

average of approximately 2.9 million 

trades per day in December 2009— 

requires automated systems capable of 

intelligently searching for patterns and 

anomalies buried deep within the data. 

Crucially, it also requires 

comprehensive data streams with 

sufficient reference points to uncover 

relationships where none appear to exist 

and to analyze information based on 

desired criteria. The proposed OCR 

helps both the Commission and selfregulatory organizations accomplish 

these tasks by adding account control, 

account ownership, and common 

control or ownership as new reference 

points for trade practice and market 

surveillance programs. 

Taken together, these and other 

changes have transformed regulation 

and self-regulation in the futures 

industry. The Commission has worked 

diligently to keep pace in every respect. 

Its efforts have included the assertion of 

jurisdiction where appropriate, and the 

acquisition of regulatory data—such as 

the proposed OCR—from all necessary 

sources. In March 2009, for example, the 

Commission adopted final rules with 

respect to significant price discovery 

contracts (‘‘SPDCs’’) traded on ECMs, 

which, in some cases, have grown from 

nascent trading facilities to large 

electronic trading platforms listing 

contacts that rival DCM contracts and 

contracts that serve a significant price 

discovery function.8 The final rules 

address concerns that trading in SPDCs, 

if insufficiently regulated, could 

adversely impact the contracts to which 

they are linked or the parties that refer 

to SPDCs for the pricing of transactions. 

The final rules also describe, in 

guidance, how the Commission expects 

to apply the statutory criteria for 

determining whether an ECM contract 

serves a significant price discovery 

function.9 Once such a determination is 

made, SPDCs become subject to nine 

core principle requirements, including 

the provision of regulatory data to the 

Commission. As of June 28, 2010, eight 

ECM contracts have been recognized as 

SPDCs.10 In another example, 

Commission staff has twice amended its 

direct access no-action letter for an 

FBOT offering DCM-linked contract(s), 

ultimately requiring additional 

regulatory data, including large trader 

reports and trade execution and audit 

trail data with respect to the linked 

contract(s).11

The Commission has also worked 

diligently to modernize its automated 

surveillance systems and to upgrade the 

data sources available for those systems. 

In many cases, the Commission already 

receives the information it requires for 

effective regulation, including large 

trader reports for market surveillance 

and exchange trade registers for trade 

practice surveillance.12 The proposed 

OCR is intended to integrate these 

existing resources, and leverage them in 

dynamic new ways. As explained 

below, it would improve the Division of 

Market Oversight’s (‘‘DMO’’) detection 

and deterrence capabilities with respect 

to specific trade practice violations and 

market abuses. It would also help bridge 

the gap between individual transactions 

reported to the Commission on 

exchange trade registers and aggregate 

positions reported to it in large trader 

data. 

The OCR would allow the 

Commission’s Division of Enforcement 

(‘‘DOE’’) and its Office of Chief 

Economist (‘‘OCE’’) to better and more 

efficiently utilize regulatory data in 

support of their own missions. In 

addition, it would increase market 

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41778 Federal Register / Vol. 75, No. 137 / Monday, July 19, 2010 / Proposed Rules 

13 ISS tools and data are used to detect and 

prevent price manipulation and market congestion 

on regulated exchanges, and to enforce speculative 

position limits pursuant to section 4a of Commodity 

Exchange Act (‘‘Act’’). ISS receives data from 

reporting firms via large trader reports filed daily 

with the Commission. Large trader reports show 

open end-of-day positions in futures and options 

that are at or above specific reporting levels set by 

the Commission (‘‘large traders’’). Related accounts 

are aggregated by reporting firms and given a 

‘‘special account number’’ which DMO uses to track 

their consolidated end of day positions. Like ISS, 

TSS is also a combination of analytical tools and 

databases. It also includes powerful algorithms to 

analyze large quantities of trade data for suspicious 

trading patterns. TSS forms the backbone of the 

Commission’s automated trade practice surveillance 

program and also provides data and analysis for 

Commission enforcement and research programs, as 

described below. 14The Act is codified at 7 U.S.C. 1 et seq. (2000). 

transparency and respond to new 

regulatory data needs in an era of 

predominantly electronic trading. In 

short, the proposed OCR reflects the 

Commission’s belief that its traditional 

data resources—exchange trade registers 

and large trader reports—must be 

expanded. Accordingly, the 

Commission proposes to supplement 

those resources with ownership and 

control information for all trading 

accounts. 

B. Specific Benefits Expected From the 

OCR 

1. Benefits to DMO’s Trade Practice and 

Market Surveillance Programs 

The Commission’s primary 

responsibility is to ensure that U.S. 

futures markets accurately reflect the 

underlying forces of supply and demand 

for all products traded, and that futures 

markets are free from fraud and abuse. 

DMO monitors all futures and option 

markets to detect and prevent price 

manipulation, abusive trading practices, 

and customer harm. It is concerned with 

both market-wide abuses, such as 

manipulation (i.e., market surveillance) 

and individual trading violations (i.e., 

trade practice surveillance); often, the 

two are connected. DMO’s surveillance 

programs include routine monitoring of 

markets and trades, and detailed, datadriven investigations when appropriate. 

To conduct its surveillance programs, 

DMO collects daily trade data from all 

U.S. DCMs or their regulatory service 

providers, as well as from ECMs with 

SPDCs and FBOTs with linked 

contracts. The data collected is central 

to DMO’s trade practice surveillance 

program, and of growing importance to 

market surveillance and other regulatory 

efforts, as explained below. Presently, 

the Commission’s trade practice and 

market surveillance programs utilize 

distinct platforms—the Integrated 

Surveillance System (‘‘ISS’’) for market 

surveillance and the Trade Surveillance 

System (‘‘TSS’’) for trade practice 

surveillance.13

Broadly speaking, ISS facilitates the 

storage, analysis, and mining of large 

trader data while TSS does the same for 

trade data. Both systems include a range 

of tools for automated surveillance, 

pattern detection, ad hoc examination of 

raw data, and investigation. One 

valuable benefit of the OCR is that it 

would help integrate these two primary 

systems by linking individual 

transactions reported on exchange trade 

registers (TSS) with aggregate positions 

reported in large trader data (ISS). DMO 

would have the data necessary to 

reconstruct trading based on trade 

registers, and determine how large 

traders established their positions as 

recorded in the large trader reporting 

system. 

One important benefit of the OCR is 

that it would help TSS to make more 

sophisticated analytical use of the trade 

register data already available. As 

indicated previously, ‘‘trade register’’ is 

a generic term for a comprehensive, 

daily record of every trade facilitated by 

an exchange. Trade registers contain 

detailed information with respect to the 

terms of a trade, but no OCR-type data. 

Together, TSS and exchange trade 

registers aid in the detection, analysis, 

and investigation of numerous abusive 

trading practices, including trading 

ahead of customer orders, wash trading, 

pre-arranged trading, money-passing, 

and other trade practice violations. 

To identify these violations and 

others that may arise in the future, 

DMO’s trade practice analysts, equipped 

with TSS, must distinguish violative 

trading patterns hidden within 

extremely large data sets. However, 

TSS’s analytical capabilities are 

proportional to the content of its source 

data, which presently does not include 

ownership and control information 

sufficient to aggregate related trading 

accounts within and across exchanges. 

This absence of ownership and control 

information impairs DMO’s ability to 

efficiently detect trade practice 

violations such as those listed above, or 

to uncover other violations that would 

be evident with ownership and control 

information. For example, instances of 

potential money-passing (including 

money laundering) become much more 

evident when two apparently unrelated 

accounts with frequent trading activity 

are known to be under common 

ownership. In addition, the absence of 

ownership and control information 

impairs DMO’s ability to identify small 

and medium sized traders whose open 

interest does not reach reportable levels, 

but who can still have deleterious 

effects on the markets during 

concentrated periods of intra-day 

trading. Such scenarios include intraday position limit violations and 

‘‘banging the close’’ manipulations. The 

OCR would allow DMO to addresses 

each of these current limitations. 

2. Benefits to the Division of 

Enforcement 

DOE investigates and prosecutes 

alleged violations of the Act and 

Commission regulations.14 It can act 

against any number of persons and 

entities suspected of such violations, 

including individuals and firms 

registered with the Commission, those 

who are engaged in commodity futures 

and option trading on designated 

domestic exchanges, and those who 

improperly market futures and options 

contracts. DOE proceedings typically 

begin with careful investigations based 

on leads developed internally or 

information referred by other 

Commission divisions, industry selfregulatory associations; state, federal, 

and international authorities; and 

members of the public. 

The OCR will be of immediate help to 

this investigatory work, especially if it 

relies on aggregating related trading 

accounts. DOE investigations in the 

areas of intra-day manipulation and 

trade practice abuses rely on exchange 

trade registers. At present, however, the 

absence of ownership and control 

information in trade register data 

presents an obstacle when DOE is 

investigating potential price 

manipulations or trade practice abuses, 

such as front-running. Without this 

information, DOE staff must first 

identify the universe of accounts traded 

in a relevant period, then request and 

await information from outside the 

Commission to identify the entity 

associated with the account number, 

and finally aggregate all identified 

entities that relate to a common owner. 

Only then can staff assess a particular 

owner’s trading activity. This timeconsuming process must be re-created 

every time DOE initiates an intra-day 

trading manipulation investigation. The 

Commission believes the information 

contained in the OCR would 

significantly reduce the time and 

resources expended in determining the 

identities and relationships between 

account holders, and thus facilitate DOE 

investigations and prosecutions across 

markets and exchanges. 

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Federal Register / Vol. 75, No. 137 / Monday, July 19, 2010 / Proposed Rules 41779 

15CME Group submitted a single comment letter 

on behalf of four DCMs: the Chicago Mercantile 

Exchange, Inc.; the Board of Trade of the City of 

Chicago, Inc.; the New York Mercantile Exchange, 

Inc.; and the Commodity Exchange, Inc. Its 

comments are noted here as those of a ‘‘DCM 

group.’’ 

16ATA, CME Group, ICE Futures, KCBT, MGEX, 

PMMA/NEFI, and Zhang. 

17PMAA/NEFI Joint Comment Letter at 1. In the 

ANPR, the Commission stated that it anticipates 

most OCR reporting entities will be DCMs, but they 

could be any registered entity that provides trade 

data to the Commission on a regular basis. 

18 ICE Futures Comment Letter at 1. 

19 KCBT Comment Letter at 1. 

20Newedge Comment Letter at 1 and 5. 

21Newedge Comment Letter at 8. In a related 

footnote, Newedge described how the SEC 

‘‘conducts a cost-benefit analysis,’’ analyzes new 

rules under the Paperwork Reduction Act,’’ and 

‘‘prepares a final regulatory flexibility analysis in its 

rulemakings.’’ The Commission notes that these 

elements were not included in the ANPR, which 

was not a proposed or final rule, but they are 

included in this Notice. 

22FIA Comment Letter at 2. 

23CME Group Comment Letter at 5. 

24CME Group Comment Letter at 4. The Form 

102, titled ‘‘Identification of Special Accounts,’’ is 

part of the Commission’s large-trader reporting 

system. The Form 102 must be filed by FCMs, 

clearing members and foreign brokers who carry 

Continued 

3. Benefits to the Office of the Chief 

Economist 

OCE conducts research on major 

policy issues facing the Commission 

and assesses the economic impact of 

regulatory changes on the futures 

markets. It also participates in the 

development of Commission 

rulemakings, provides expert advice to 

other Commission offices and divisions, 

and conducts special studies and 

evaluations as required. An important 

objective of OCE is to help the 

Commission achieve deeper and more 

sophisticated knowledge of the futures 

markets from the data available to it. 

The OCR will advance this objective in 

significant ways. 

OCE is particularly interested in the 

OCR as a tool for enhancing the 

transparency of regulated markets 

through the disclosure of information on 

related accounts. It has a number of 

initiatives under way designed to 

enhance the Commission’s surveillance 

capabilities, assist in enforcement, and 

improve data integrity. Related account 

information derived from the OCR will 

help OCE to better link traders’ intraday transactions with their end-of-day 

positions. It will also help OCE to 

calculate how different categories of 

traders contribute to market wide openinterest. Building on these results, OCE 

will achieve more sophisticated benefits 

for the Commission, including new 

avenues of surveillance and 

enforcement tools. For example, armed 

with OCR/trade register-derived data, 

OCE will eventually be able to 

accurately identify and categorize 

market participants based on their 

actual trading behavior on a contract-bycontract basis, rather than on how they 

self-report to the Commission (e.g., 

registration type or marketing/ 

merchandising activity on Commission 

Form 40). 

In addition to these specific projects, 

ownership and control information 

available via the OCR will allow OCE to 

perform more complete and accurate 

studies and provide more targeted 

guidance to other Commission staff in 

pursuing trade practice violations and 

attempted manipulations. 

III. Comments Received in Response to 

the Advanced Notice 

The Commission received 12 

comment letters from 16 commenters in 

response to the ANPR. Comment letters 

were submitted by: the Air Transport 

Association of America, Inc. (‘‘ATA’’); 

CME Group Inc. (‘‘CME Group’’); the 

Futures Industry Association (‘‘FIA’’); 

Foley & Lardner LLP (‘‘F&L’’); ICE 

Futures U.S., Inc. (‘‘ICE Futures’’); the 

Kansas City Board of Trade (‘‘KCBT’’); 

MF Global Inc. (‘‘MF Global’’); the 

Minneapolis Grain Exchange (‘‘MGEX’’); 

Newedge USA, LLC (‘‘Newedge’’); Paul, 

Hastings, Janofsky & Walker LLP (‘‘PH’’); 

the Petroleum Marketers Association of 

America and the New England Fuel 

Institute, writing jointly (‘‘PMMA/ 

NEFI’’); and one private commenter (Mr. 

Zhang).15 Commission staff reviewed all 

comments carefully. 

Many commenters recognized 

potential regulatory benefits stemming 

from enhanced ownership and control 

information, including benefits for the 

public, the Commission, or industry 

self-regulatory organizations.16 Two 

commenters representing commodity 

trade associations strongly endorsed the 

OCR, noting their approval of ‘‘efforts to 

acquire all information from DCMs, 

ECMs, and DTEFs to improve market 

transparency and integrity.’’ 17 The OCR 

also received qualified support from 

some DCMs. One DCM, for example, 

indicated that the OCR will promote 

‘‘further integration of our existing 

market surveillance and trade practice 

surveillance data and bridge gaps that 

may exist between individual 

transaction data contained in the 

Exchange trade register and position 

data contained in large trader reports 

filed with the Exchange.’’ 18 Another 

stated the OCR will ‘‘exponentially 

increase market transparency’’ and 

‘‘Commission and exchange compliance 

staffs will benefit greatly from the 

wealth of information at their 

disposal.’’ 19

While commenters often 

acknowledged the regulatory value of 

gathering ownership and control 

information, many also expressed 

specific concerns with one or more 

elements of the OCR as described in the 

ANPR. One significant area of concern 

focused on the OCR’s potential costs. 

Comments in this regard ranged from 

proposals to curtail the OCR to outright 

opposition to any OCR implementation. 

Commenters were also broadly 

concerned with the potential difficulty 

of acquiring certain OCR data points, 

and with whether every OCR data point 

contemplated in the ANPR is necessary 

to achieve the Commission’s regulatory 

objectives. Finally, commenters raised 

concerns with respect to the privacy of 

ownership and control information and 

equal implementation of OCR 

requirements across exchanges. These 

concerns, and the Commission’s 

responses to them, are summarized 

below. 

A. The OCR’s Costs, Benefits, and 

Alternatives 

Several commenters raised concerns 

with respect to the OCR’s potential 

costs. At one extreme, an FCM 

commenter expressed outright 

opposition to the OCR, claiming that it 

would ‘‘result in an inordinate amount 

of work and expense for many, if not 

most FCMs’’ and may ‘‘cause some FCMs 

to go out of business.’’ 20 The FCM also 

asserted that the CFTC apparently had 

not ‘‘considered the burden that would 

be imposed on FCMs other than to a 

relatively nominal extent.’’ 21 Similarly, 

an industry association representing 

numerous large FCMs stated that the 

OCR ‘‘would impose a significant 

burden on FCMs’’ and ‘‘the potential 

costs will far outweigh the expected 

benefits to the Commission.’’ 22

Many commenters concerned with the 

OCR’s potential costs recommended that 

the Commission pursue a more limited 

OCR that focuses only on a limited 

number of trading accounts. 

Specifically, they suggested that the 

OCR should be a record of ownership 

and control for trading accounts tied to 

‘‘special accounts’’ in the Commission’s 

large trader reporting system. One DCM 

group, for example, asked the 

Commission to consider whether 

ownership and control information was 

necessary for every account, ‘‘as 

experience suggests there is little 

incremental regulatory value below 

certain thresholds.’’ 23 It recommended 

that the Commission instead ‘‘automate 

the data collection process for Form 

102s.’’ 24 In support of its 

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special accounts. Special accounts are accounts that 

reach large-trader reportable position levels in a 

particular product, these levels are established by 

the Commission. 

25CME Group Comment Letter at 4. 

26Newedge Comment Letter at 7. The Form 102, 

titled ‘‘Identification of Special Accounts,’’ is part of 

the Commission’s large-trader reporting system. 

27FIA Comment Letter at 4. 

28 KCBT Comment Letter at 1. MGEX Comment 

Letter at 1. 

29 KCBT Comment Letter at 2. 

30 ICE Futures Comment Letter at 4. 

31FIA Comment Letter at 2. 

32FIA Comment Letter at 2. 

33 ‘‘Root data sources’’ are those entities from 

which reporting entities may need to gather certain 

ownership and control information in order to 

provide the Commission with a complete OCR for 

every trading account active in its markets. 

34FIA Comment Letter at 2. 

recommendation, the DCM group 

argued that the OCR is a ‘‘largely 

duplicative report’’ when compared to 

the Form 102 and that ‘‘modernizing’’ 

and ‘‘enhancing the accuracy’’ of the 

Form 102 would be more cost effective 

than developing a new report.25

Similarly, an FCM commenter 

‘‘question[ed] the benefits to be gained 

by obtaining Form 102-type information 

for small trades and/or inactive 

accounts,’’ 26 and an industry 

association contested ‘‘the necessity of 

collecting OCR data with respect to 

accounts that have not been designated 

‘special accounts.’ ’’ 27

The Commission appreciates 

commenters’ concerns with respect to 

the OCR’s potential costs. However, it 

also believes that commenters have not 

fully understood the Commission’s 

intended uses for ownership and control 

information. For example, commenters’ 

emphasis on an enhanced Form 102 as 

an alternative to the OCR suggest that 

they view the OCR primarily as an 

addendum to the Commission’s market 

surveillance program, which aims to 

detect and deter price manipulation 

through reporting and surveillance of 

open positions. In this regard, the 

Commission notes that while its 

objectives do include improved position 

surveillance, they also include 

improved trade surveillance—regardless 

of position size—and other regulatory 

goals outlined previously. Indeed, the 

proposed OCR forms a new category of 

surveillance data that will benefit any 

regulatory effort focused on trades and 

trading behavior by account owners and 

controllers within and across reporting 

entities. The Commission believes that 

such information is vital for effective 

oversight of the U.S. futures markets. 

At the same time, the Commission is 

sensitive to the cost concerns raised in 

response to the ANPR. It invites 

interested parties to include detailed 

cost estimates in any future comment 

letters submitted with respect to the 

proposed OCR. Such estimates should 

be as specific as possible, should 

itemize different categories of costs (e.g., 

hardware and software, personnel, onetime ‘‘start-up’’ costs, and on-going 

operational costs), and should reflect 

the costs to the commenter itself rather 

than an industry average. The 

Commission is also open to comments 

suggesting that the OCR should be 

limited to accounts meeting certain 

thresholds as a way of containing its 

costs. However, such comments should 

address an account’s trading volume or 

frequency within a given time period, 

and not just its relationship to a 

reportable position under the large 

trader reporting system. Any comments 

suggesting that the Commission gather 

ownership and control information for 

only a subset of accounts based on their 

trading volume or frequency should also 

document the cost savings to the 

commenter from reporting only that 

subset. In addition, any such comments 

should also address how the 

commenter’s proposed threshold would 

meet the Commission’s regulatory needs 

as explained in this Notice. 

A second significant theme in the 

comment letters pertained to the flow of 

ownership and control information from 

its root sources, through reporting 

entities, and on to the Commission. 

Citing cost and efficiency, two DCMs 

recommended that FCMs and clearing 

members submit their ownership and 

control information directly to the 

Commission.28 They suggested that 

FCM reporting entities would benefit if 

their reporting systems could be built to 

a single Commission standard rather 

than to multiple exchange standards.29

Another DCM recommended that 

ownership and control information be 

sent directly to the Commission to 

resolve any jurisdictional issues that 

might arise when exchanges require 

data from non-members.30 In contrast to 

these DCM perspectives, an industry 

association representing FCMs agreed 

that ‘‘DCMs would be the appropriate 

funnel through which [OCR] 

information is transmitted to the 

Commission.’’ 31 However, to avoid 

undue burden arising from divergent 

OCR standards at different exchanges, it 

also proposed that the ‘‘protocols 

prescribing the content, format and 

transmission of ownership and control 

information from FCMs to the several 

DCMs be uniform.’’ 32

The Commission agrees that uniform 

protocols are an absolute necessity for 

the OCR. Accordingly, the proposed 

rule specifies that reporting entities 

must adopt a single standard, acceptable 

to the Commission, for submitting their 

OCRs to the Commission. Such 

standards will apply to the OCR’s 

content, format, and the time and 

manner of its transmission. The 

Commission anticipates that this 

requirement will lead reporting entities 

and their root data sources to coordinate 

their efforts and develop an industrywide standard for the flow of ownership 

and control information from root data 

sources to reporting entities.33 In 

addition, the Commission proposes to 

grant the industry adequate time to 

design and implement the OCR once a 

final rule is adopted, as explained 

below. With respect to jurisdictional 

issues, the Commission is aware that 

some market participants may not be 

members of their corresponding 

reporting entity. However, in these 

cases, or where ‘‘membership’’ is not a 

relevant concept based on an reporting 

entity’s business structure, market 

participants must still access the 

exchange directly via its facilities or via 

those of an intermediary providing a 

technology interface, a clearing 

guarantee, or some other service. 

Successful implementation of the OCR 

will require reporting entities to offer 

their services only on the condition that 

ownership and control information be 

provided upon request by the relevant 

party in possession of such information. 

Finally, the Commission believes that 

reporting entities are the appropriate 

vehicle for reporting ownership and 

control information to the Commission. 

The trading account numbers which 

they provide in their OCRs must 

correlate perfectly to those reported on 

their related trade registers. Thus, 

reporting entities are in the best position 

to ensure that their trade registers and 

their OCRs match as required. 

B. Ownership and Control Information 

May Be Difficult To Obtain or 

Unnecessary 

Many commenters raised concerns 

with respect to the organizational and 

technological challenges that reporting 

entities and root data sources may face 

in gathering and standardizing 

ownership and control information. The 

FCM community, in particular, focused 

on the difficulty of aggregating data 

from different internal systems into a 

single OCR file. An industry association, 

for example, stated that ‘‘[t]he creation, 

use, form, storage and retention of data 

are not uniform across FCMs’’ and some 

information might even be ‘‘on paper 

stored at offsite retention centers’’ or 

otherwise unavailable.34 An FCM 

explained how ‘‘many FCMs maintain 

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35Newedge Comment Letter at 4. 

36CME Group, FIA, ICE Futures, KCBT, MF 

Global, and MGEX. 

37CME Group Comment Letter at 4. 

38FIA Comment Letter at 3. 

39MGEX Comment Letter at 2. 

40 KCBT Comment Letter at 3. 

41 ICE Futures Comment Letter at 2. 

42CME Group Comment Letter at 4. 

43FIA Comment Letter at 1. 

44 In this scenario, the executing firm should 

provide ownership and control information for the 

execution account, and the clearing firm should 

provide the account to which the trade is given-up. 

The Commission will link both through the give-up 

group ID. 

45While ‘‘collective investment vehicle’’ is not 

defined in regulations under the CEA, it is 

‘‘commonly used to describe any entity through 

which persons combine funds (i.e., cash) or other 

assets, which are invested and managed by the 

entity.’’ 67 FR 48328, 48331 (July 23, 2002). 

trade reporting information and trader/ 

system IDs in different locations’’ and 

how it would be a ‘‘difficult and timeconsuming task’’ to reconcile this data.35

A number of letters identified specific 

account and trade types that may 

present special challenges in an OCR.36

One DCM group noted that ‘‘[g]ive-up 

transactions, bunched orders and 

omnibus accounts are widespread in the 

industry, and each creates challenges in 

the context of the OCR as currently 

proposed.’’ 37 An industry association 

provided additional information, 

explaining that for give-up trades ‘‘[t]he 

account number used by the executing 

firm does not necessarily tie back to the 

account number used by the clearing 

firm for a customer’s account.’’ 38

Another DCM noted that ‘‘[e]xtra efforts 

will be needed to obtain and keep 

current detail[ed] information that 

involves omnibus accounts, index 

accounts with multiple investors, or any 

accounts with multiple owners, 

participants or controllers.’’ 39 A third 

DCM explained its belief that omnibus 

and give-up accounts will be difficult to 

obtain information from ‘‘because the 

underlying accounts are not carried on 

the clearing member’s books.’’ 40 This 

concern was echoed by another FCM as 

an important component of its comment 

letter. 

Some commenters questioned 

whether every OCR data point 

contemplated in the ANPR is necessary 

to achieve the Commission’s regulatory 

objectives. One DCM, for example, 

stated that ‘‘it does not believe that all 

the information itemized in the 

Advanced Notice is necessary’’ and that 

‘‘some of the information would be 

redundant.’’ 41 Similarly, a DCM group 

focused specifically on the date of 

ownership assignment and the 

commodity trading advisor number, 

stating that these data points ‘‘may add 

complexity to the reporting process 

without commensurate value.’’ 42

As a consequence of these perceived 

challenges, the Commission received a 

significant number of comment letters 

suggesting that it form an industry-wide 

working group to discuss the OCR and 

its implementation. DCM and FCM 

commenters both concurred in the 

recommendation. One commenter, for 

example, called for an ‘‘inclusive, 

industry-wide committee calling on the 

expertise of all affected stakeholders 

* * * to address significant operational 

and other issues regarding the 

appropriate design of the OCR.’’ 43

The Commission is aware of the 

numerous challenges posed by the OCR. 

However, it believes that those 

challenges can be overcome via a 

coordinated industry effort and a 

reasonable implementation schedule. 

Upon the adoption of any final rule in 

this area, the Commission will grant 

reporting entities and root data sources 

considerable time to coordinate, 

develop, and implement the OCR. 

Specifically, the Commission would 

propose to require OCR test files from 

all reporting entities within 12 months 

of a final rule, and final OCR 

implementation within 18 months of a 

final rule. Interested parties are invited 

to comment on this proposed schedule. 

Any comments requesting additional 

time to implement test or final OCRs 

should include an alternate 

implementation schedule with specific 

dates and benchmarks. 

The Commission also emphasizes that 

its proposal has a number of features 

intended to eliminate unnecessary data 

points from the OCR and to define 

ownership and control in less than the 

broadest possible terms. First, to 

facilitate implementation, the 

Commission has determined to 

eliminate from the OCR several data 

points that were included in the ANPR. 

For example, the proposed OCR does 

not include the date on which the 

trading account was assigned to its 

current owner(s). In addition, as 

discussed below, the proposed OCR 

would not collect information with 

respect to social security numbers or 

taxpayer identification numbers. 

Second, the Commission notes that at 

least one technical obstacle, pertaining 

to give-ups, can potentially be 

addressed via improvements to the daily 

exchange trade registers on which OCR 

account numbers will be based. Via a 

separate initiative, the Commission has 

already requested that exchanges create 

a ‘‘give-up group ID’’ that links two 

related events—the execution of a trade 

and its subsequent give-up, both of 

which are reported on trade registers. In 

cases where an execution-only firm does 

not possess ownership and control 

information for the given-up trade, the 

reporting entity may collect it from the 

clearing firm, and the Commission will 

be able to form a complete record of the 

trade and its subsequent allocation 

through the give-up group ID.44 With 

respect to omnibus accounts, however, 

the Commission believes that 

identifying their ultimate beneficial 

owners and controllers remains 

necessary despite the acquisition of 

information which will be required with 

respect to accounts trading on an 

undisclosed basis. 

Third, the proposed OCR reduces the 

overall reporting burden by narrowing 

the definition of ‘‘ownership’’ with 

respect to collective investment vehicles 

(‘‘CIV’’).45 Under the proposed OCR, CIV 

ownership information will be required 

only with respect to persons whose 

ownership share is 10 percent or more 

of the CIV’s net asset value, as defined 

in Commission Regulation 4.10. Fourth, 

the proposed OCR defines ‘‘controller’’ 

as an individual or individuals with the 

legal authority to exercise discretion 

over trading decisions by a trading 

account or with the authority to 

determine the trading strategy of an 

automated trading system. The authority 

to exercise discretion is sufficient to 

qualify as a controller, regardless of 

whether such authority is actually used. 

Individuals acting without discretion 

will not be considered account 

controllers. 

Interested parties are invited to 

comment on the Commission’s 

proposed definitions, including its 

proposed definitions of ownership and 

control, and to suggest specific 

alternatives if they will achieve the 

Commission’s objectives in a more 

efficient manner. The Commission also 

invites comments from interested 

parties who believe that a data point in 

the proposed OCR is impossible to 

collect for technical reasons. Such 

comments should fully explain the 

technical obstacle, including the 

account, trade, or ownership type to 

which the obstacle applies. Comments 

should also identify the entity holding 

the data in question, or an explanation 

that the data is not maintained by any 

entity subject to the Commission’s 

authority or that of a Commission 

registrant (including any requirement 

that a user of an exchange’s facilities 

consent to providing ownership and 

control information prior to utilizing 

such facilities). Any request to deviate 

from the definitions or data points in 

the proposed OCR should include 

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46CME Group Comment Letter at 3. 

47ATA Comment Letter at 1. 

48The Commission notes that OCRs will only be 

required with respect to trading account numbers 

reported on trade registers. Thus, an ECM SPDC 

reporting trades in only certain contracts (i.e., SPDC 

contracts) will be required to provide ownership 

and control information only for trading accounts 

active in those contracts. 

49Congress has begun to take steps to promote 

transparency in swap contracts. The financial 

services reform bills passed by the House of 

Representatives and the Senate each requires swaps 

to be cleared, subject to certain exemptions, and 

further requires, with respect to swaps that are 

subject to the clearing requirement, that such swaps 

be executed on a board of trade designated as a 

contract market under Section 5 of the Act or on 

a swap execution facility registered or exempt 

under Section 5h of the Act (where such a trading 

environment is available). 

50FIA, F&L, ICE Futures, Newedge, and PH. 51F&L Comment Letter at 1. 52F&L Comment Letter at 1 and 2. 53Newedge Comment Letter at 6. 54 ICE Futures Comment Letter at 2. 

55See 44 U.S.C. 3541 et seq. FISMA was enacted 

in 2002 as Title III of the E-Government Act of 2002 

(Pub. L. 107–347, 116 Stat. 2899) and recognizes the 

importance of information security to the economic 

and national security interests of the United States. 

It requires the Commission and other federal 

agencies to develop, document and implement 

agency-wide programs to provide information 

security for the information and information 

systems that support the operations and assets of 

the agency, including those provided or managed 

by another agency, contractor, or other source. 

56Section 8(e) of the Act provides that the 

Commission may ‘‘upon request’’ furnish 

information in its possession to any committee of 

Congress, another U.S. government department or 

agency, individual state or foreign futures authority 

‘‘acting within the scope of its jurisdiction.’’ 

Similarly, disclosure of information is also 

permitted under Section 8(b) of the Act in 

connection with congressional, administrative or 

judicial proceedings, in any receivership 

proceeding involving a receiver appointed in a 

judicial proceeding brought under the Act, or in any 

bankruptcy proceeding in which the Commission 

has intervened, or in which the Commission has the 

right to appear and be heard under Title 11 of the 

U.S. Code. 

technical diagrams; data flow-charts; 

FCM, introducing broker (‘‘IB’’) and 

foreign broker account opening and 

record retention procedures with 

respect to that data point; and other 

detailed information as appropriate to 

establish the difficulty or impossibility 

of implementing the OCR as proposed. 

In short, while the Commission is 

prepared to amend the proposed OCR 

where necessary, it will do so only on 

the basis of detailed and welldocumented comments. 

Finally, the Commission notes that it 

does not intend to convene an industry 

working-group to develop the OCR. 

While industry coordination will be 

crucial, the Commission’s role is to 

clearly articulate its requirements and 

expectations. Industry participants are 

best situated to determine how those 

requirements can be met. Should any 

element of the proposed OCR remain 

unclear, the Commission strongly 

encourages industry participants to 

present their questions via the public 

comment process for this proposed rule. 

C. The OCR Should Be Implemented 

Equally Across Exchanges and Should 

Respect Privacy Considerations 

Some commenters argued that DCMs 

should not be the only registered 

entities required to provide the OCR. 

One DCM group noted its concern that 

the OCR is limited to trading accounts 

active on U.S. futures exchanges, and 

does not ‘‘encompass trading on exempt 

commercial markets (‘‘ECMs’’) and 

foreign boards of trade (‘‘FBOTs’’).’’ The 

DCM group stated that such an 

exclusion ‘‘would give ECMs and FBOTs 

an unfair competitive advantage over 

U.S. futures exchanges.’’ 46 Similarly, a 

commodity trade association urged the 

Commission to obtain OCR information 

from all trading platforms including the 

OTC market.47

The Commission agrees that OCR 

requirements should apply equally to all 

entities reporting trade data to the 

Commission on a regular basis for trade 

practice or market surveillance 

purposes. For purposes of this Notice, 

however, the proposed OCR specifically 

includes DCMs, DTEFs, and ECM 

SPDCs within the definition of reporting 

entities.48 In addition, the Commission 

emphasizes that its proposed rule 

requires ownership and control 

information equally regarding both U.S. 

and non-U.S. entities and natural 

persons. 

Should the Commission receive 

appropriate statutory authority with 

respect to OTC and swap transactions, 

it would consider collecting ownership 

and control information with respect to 

such transactions.49 The Commission 

invites public comment in this area, 

including comment with respect to the 

entities (e.g., trade repositories, 

designated contract markets, or swap 

execution facilities) from which the 

Commission should collect OCR data 

and the product and transaction types 

for which the Commission should 

collect data. The Commission invites 

public comment on any additional types 

of information or data elements related 

to OTC and swap transactions that 

should be collected and reported to the 

Commission. 

Five commenters expressed concerns 

regarding OCR information security and 

confidentiality.50 One law firm 

commenter, for example, focused its 

comment letter, on ‘‘ensuring that all 

identifying information, including 

highly sensitive Social Security number 

information, will be treated as 

confidential and not subject to public 

disclosure.’’ 51 It specifically asked that 

the Commission ‘‘address confidentiality 

concerns as it moves forward with its 

rulemaking’’ and ‘‘incorporate a 

requirement that the exchanges, in 

gathering this information, have a duty 

to treat it as non-public and 

confidential.’’ 52 An FCM commenter 

raised a similar concern when it asked 

‘‘can the CFTC ensure that exchanges 

will not use sensitive account 

ownership or controller information for 

their own purposes?’’ 53 One DCM stated 

that the exchange ‘‘rarely found it 

necessary to obtain the Social Security 

Number (‘‘SSN’’) or Tax Identification 

Number (‘‘TIN’’) of a trader’’ and that the 

risks involved in the ‘‘collection, 

transmission and use of client SSN/TIN 

information by multiple entities 

outweigh the benefit that collection of 

such information would bestow.’’ 54

The Commission agrees with several 

of the privacy concerns raised above. Its 

internal use and handling of ownership 

and control information will be 

protected using controls mandated by 

the Federal Information Security 

Management Act of 2002 (‘‘FISMA’’).55

Specifically, OCR data will be treated as 

non-public personal information and 

will be subject to internal access 

controls. Submission of the OCR to the 

Commission will be through secure 

communications protocols. Any CFTC 

system or equipment used to store or 

transmit the OCR will be certified and 

accredited as a major system with 

medium risk and will have appropriate 

controls for access; awareness and 

training; audit and accountability; 

configuration management; contingency 

planning; identification and 

authentication; incident response; 

maintenance; media protection; 

physical environment; personnel; 

acquisition; communications; and 

integrity. Subject to a number of narrow 

exceptions, the Commission notes that 

Section 8(a) of the Act severely restricts 

disclosure of ‘‘information that would 

separately disclose the business 

transactions or market positions of any 

person and trade secrets or names of 

customers.’’ 56 Furthermore, the 

Commission pursuant to Section 8a(6) 

of the Act, may in connection with 

investigations of improper trading or 

transactions, disclose to any registered 

entity, registered futures association or 

self-regulatory organization (‘‘SRO’’), 

factual data such as market positions, 

business transactions, and the names of 

the parties. However, the registered 

entity, registered futures association or 

SRO, may not disclose this information 

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57 In connection with Section 8a(6), the 

Commission has designated and authorized certain 

Commission employees to disclose confidential 

information to certain, designated Exchange staff. 

See 17 CFR 140.72. The disclosure of confidential 

information in this Regulation specifically requires 

a prior determination by the Commission or its 

designees that the disclosure is necessary because 

‘‘the transaction or market operation disrupts or 

tends to disrupt any market or is otherwise harmful 

or against the best interests of producers, 

consumers, or investors or that disclosure is 

necessary or appropriate to effectuate the purposes 

of the [CEA].’’ 17 CFR 140.72(a). 

received from the Commission except in 

any SRO action or proceeding.57

The Commission has also determined 

not to collect the last four digit of 

account owners’ and controllers’ SSNs 

or TINs, as originally contemplated in 

the ANPR. While its objectives for the 

OCR require that the Commission 

identify all trading account owners and 

controllers uniquely within and across 

reporting entities, the Commission is 

also sensitive to the privacy and 

security concerns summarized above. 

Accordingly, the Commission proposes 

to achieve the unique identification that 

SSNs and TINs would have provided 

via a combination of other data points. 

The proposed OCR would require 

reporting entities to provide the name 

and address of a trading account’s 

owner(s) and controller(s). It would also 

require the date of birth for each 

account owner and controller, as well as 

their NFA ID number, if any. These data 

points are additions to the OCR as 

contemplated in the ANPR, and seek to 

mitigate the loss of SSNs and TINs as 

unique identifiers for account owners 

and controllers. 

In the alternative, or in addition to the 

aforementioned data points, the 

Commission invites public comment 

with respect to how the futures industry 

could develop and maintain a system to 

assign unique account identification 

numbers (‘‘UAIN’’) to all account owners 

and account controllers. The 

Commission would consider requiring 

that the UAIN be utilized in the OCR 

and potentially other data reports 

submitted to the Commission for 

regulatory purposes. The Commission 

also invites comment on how this UAIN 

could be linked to all orders submitted 

to an exchange’s electronic trading 

system or executed via open outcry, and 

included in the trade registers submitted 

daily to the Commission by exchanges. 

The Commission seeks comment on 

how the UAIN could be automatically 

linked to a trade when a user signs into 

a trading system. Should the 

Commission receive appropriate 

statutory authority with respect to OTC 

and swap transactions, the Commission 

seeks comment on how the UAIN could 

be linked to a swap transaction. 

Finally, the proposed rule 

implementing the OCR requires each 

reporting entity to segregate information 

provided to it by root data sources if 

such data is provided in furtherance of 

the Commission’s OCR requirements 

and not otherwise required to be 

provided by the reporting entity 

(‘‘protected data’’). More specifically, 

reporting entities must ensure that their 

protected data is used only for 

regulatory or enforcement purposes 

such as trade practice surveillance, 

market surveillance, audit, investigative, 

or rule enforcement. The use of 

protected data for any commercial 

reasons, including business 

development, is strictly prohibited. In 

addition, protected data must be under 

the exclusive control of the reporting 

entity’s regulatory compliance 

department. Reporting entities should 

establish appropriate ‘‘firewall’’ 

procedures and access controls to 

ensure the confidentiality, privacy, and 

safekeeping of protected data within 

their regulatory compliance 

departments. Commission staff will 

review the adequacy and 

implementation of such controls during 

its periodic reviews of trading facilities’ 

self-regulatory programs. 

IV. Ownership and Control Report 

Outline 

The OCR will serve as an ownership, 

control, and relationship directory for 

every trading account number reported 

to the Commission through reporting 

entities’ trade registers. The data points 

proposed for the OCR have been 

specifically selected to achieve four 

Commission objectives. These include: 

(1) Identifying all accounts that are 

under common ownership or control at 

a single reporting entity; (2) identifying 

all accounts that are under common 

ownership or control at multiple 

reporting entities; (3) identifying all 

trading accounts whose owners or 

controllers are also included in the 

Commission’s large trader reporting 

program (including Forms 40 and 102); 

and (4) identifying the entities to which 

the Commission should have recourse if 

additional information is required, 

including the trading account’s 

executing firm and clearing firm, and 

the name(s) of the firm(s) providing 

OCR information for the trading 

account. 

A. Specific Data Points Required by the 

Ownership and Control Report 

To ensure that the objectives outlined 

above are achieved, each reporting 

entity’s OCR should include the 

following information with respect to 

each account reported in its trade 

registers: 

• The trading account number, as 

reported in the reporting entity’s trade 

register (tags 448 and 452, Party Role 24, 

in the Trade Capture Report); 

• The trading account’s ultimate 

beneficial owner(s), including: 

Æ For each ultimate beneficial owner 

who is a natural person— 

■ Their first, middle, and last name, 

■ Their date of birth, 

■ The address of their primary 

residence, 

■ Their NFA identification number, 

if any; 

Æ For each ultimate beneficial owner 

who is not a natural person— 

■ Their name and primary business 

address, 

■ Their NFA identification number, 

if any; 

• For trading account controller(s) 

(who must be natural persons): 

Æ The first, middle, and last name of 

each controller, 

Æ The date of birth of each controller, 

Æ The name and primary business 

address of the entity that employs each 

controller with respect to the reported 

account, if any; 

Æ The NFA identification number of 

each controller, if any; 

• The date on which the trading 

account was assigned to its current 

controller(s); 

• A designation of the trading 

account as one whose orders are 

generated exclusively by a natural 

person, exclusively by an automated 

trading system, or generated sometimes 

by a natural person and sometimes by 

an automated trading system; 

• The special account number 

associated with the trading account, if 

one has been assigned; 

• An indication of whether the 

trading account is part of a reportable 

account under the Commission’s large 

trader reporting system, 

Æ In addition, for a trading account 

that becomes part of a reportable 

account under the Commission’s large 

trader reporting system after December 

31st, 2011, the date on which the 

trading account first becomes part of a 

reportable account; 

• Indication of whether the trading 

account is a firm omnibus account, and 

if so, the name of the firm, 

Æ In addition, for a trading account 

that becomes part of firm omnibus 

account after December 31st, 2011, the 

date on which the trading account is 

first included in the firm’s omnibus 

account; 

• The name of the executing firm for 

the trading account, and its unique 

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58 7 U.S.C. 19(a). 

59E.g., Fishermen’s Dock Co-op., Inc. v. Brown, 75 

F3d 164 (4th Cir. 1996); Center for Auto Safety v. 

Peck, 751 F.2d 1336 (D.C. Cir. 1985) (agency has 

discretion to weigh factors in undertaking costbenefit analyses). 

60 44 U.S.C. 3501–3520. 

61 7 U.S.C. 12(a)(1). 

identifier as reported in the TCR (TCR 

tags 448 and 452, Party Role 1); 

• The name of the clearing firm for 

the trading account, and its unique 

identifier as reported in the TCR (TCR 

tags 448 and 452, Party Role 4); 

• The name of each root data source 

providing the reporting entity with 

information with respect to the trading 

account; 

• The name of the exchange or other 

entity submitting the OCR to the 

Commission; and 

• The OCR transmission date. 

B. Definition of Account Controller 

For purposes of the OCR, ‘‘account 

controller’’ is defined as a natural 

person, or group of natural persons, 

with the legal authority to exercise 

discretion over trading decisions by a 

trading account, with the authority to 

determine the trading strategy of an 

automated trading system, or 

responsible for the supervision of any 

automated system or strategy. The 

authority to exercise discretion is 

sufficient, regardless of whether such 

authority is actually exercised. An 

individual who executes trades for an 

account, without input or discretion in 

any decision involving the account or 

its trades, will not be considered an 

account controller with respect to that 

account. With respect to CIVs, ‘‘ultimate 

beneficial owner’’ excludes those whose 

ownership share of the CIV is less than 

10 percent of its net asset value, as 

defined in Commission Regulation 4.10. 

V. Form, Manner, and Frequency of the 

Ownership and Control Report 

Reporting entities should submit the 

OCR weekly, in FIXML via SFTP. Each 

reporting entity’s first OCR submission 

should constitute a ‘‘master file’’ 

containing the required data for all 

trading account numbers present in its 

trade register during the previous 30 

days. The master file will establish a 

baseline directory. Each subsequent 

OCR should be a weekly ‘‘change file’’ 

reporting only additions, deletions, or 

amendments to the master file. If the 

reported change includes changes to an 

account’s owner(s) or controller(s), the 

effective date of such change should 

also be reported. 

VI. Related Matters 

A. Cost-Benefit Analysis 

Section 15(a) of the Act requires the 

Commission to consider the costs and 

benefits of its actions before issuing a 

new regulation or order under the Act.58

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 

proposed rules shall be evaluated in 

light of five broad areas of market and 

public concern: (1) Protection of market 

participants and the public; (2) 

efficiency, competitiveness, and 

financial integrity of futures markets; (3) 

price discovery; (4) sound risk 

management practices; and (5) other 

public interest considerations. In 

conducting its analysis, the Commission 

may, in its discretion, give greater 

weight to any one of the five 

enumerated areas 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.59

The proposed rule requires reporting 

entities to provide the Commission with 

certain ownership, control, and related 

information on a weekly basis for all 

active trading accounts. The 

Commission understands that reporting 

entities may not have all of the required 

OCR information and that the proposed 

rule could also have an impact on other 

entities that are sources of root data. 

While the Commission cannot fully 

quantify all of the costs to be borne by 

reporting entities and root data sources 

until the data collection process is fully 

implemented, it recognizes that the 

initial cost of developing and 

implementing the OCR could be 

significant. However, the Commission 

also believes that the OCR program, 

once implemented, will be less 

burdensome for reporting entities and 

root data sources to maintain on an 

ongoing basis. 

Notwithstanding the costs to be 

incurred by reporting entities and root 

data sources, the Commission believes 

the OCR’s benefits are substantial and 

important. As described above, the OCR 

will increase regulated markets’ 

transparency to the Commission. It will 

also help the Commission to better meet 

regulatory data needs that have arisen as 

electronic platforms have become the 

dominant venue for regulated futures 

trading in the United States. In addition, 

the OCR will better equip the 

Commission to monitor trading 

practices across markets. It will also 

provide additional data and reference 

points which will further empower the 

Commission’s automated trade 

surveillance system, TSS, and allow 

Commission staff to make more 

sophisticated analytical use of the trade 

register data already available. For 

example, OCE will be able to perform 

more complete and accurate studies and 

provide more targeted guidance to other 

Commission staff in pursuing trade 

practice violations and attempted 

manipulations. Also, DOE will use the 

information to reduce the time and 

resources expended in determining the 

identities and relationships between 

account holders, thereby facilitating 

DOE investigations and prosecutions 

across markets and exchanges. 

After considering the costs and 

benefits, the Commission has 

determined to issue the proposed rule. 

B. Paperwork Reduction Act 

Provisions of proposed Commission 

Regulation 16.03 would result in new 

collection of information requirements 

within the meaning of the Paperwork 

Reduction Act of 1995 (‘‘PRA’’).60 The 

Commission therefore is submitting this 

proposal to the Office of Management 

and Budget (OMB) for review in 

accordance with 44 U.S.C. 3507(d) and 

5 CFR 1320.11. The title for this 

collection of information is ‘‘Regulation 

16.03—Ownership and control report’’ 

(OMB control number 3038–NEW). If 

adopted, responses to this new 

collection of information would be 

mandatory. The Commission will 

protect proprietary information 

according to the Freedom of Information 

Act and 17 CFR part 145, ‘‘Commission 

Records and Information.’’ In addition, 

section 8(a)(1) of the Act strictly 

prohibits the Commission, unless 

specifically authorized by the Act, from 

making public ‘‘data and information 

that would separately disclose the 

business transactions or market 

positions of any person and trade 

secrets or names of customers.’’ 61

1. Information Provided by Reporting 

Entities 

Under proposed Regulation 16.03, 

reporting entities, which presently 

would include DCMs, DTEFs, and ECM 

SPDCs, would be required to provide 

ownership and control reports to the 

Commission on a weekly basis. Such 

reports would include ownership, 

control and related information for each 

account active on the reporting entity. 

Commission staff estimates that each 

reporting entity would expend 480 

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Federal Register / Vol. 75, No. 137 / Monday, July 19, 2010 / Proposed Rules 41785 

62Reporting entities presently include 1 ECM 

SPDC and 16 DCMs. As of June 28, 2010, all eight 

recognized SPDCs were trading on the same ECM. 

63For example, an ECM is only required to 

provide OCR data with respect to their SPDCs and 

the number of SPDCs on an ECM may vary over 

time. 

64Root data sources may include FCMs, CPOs, 

CTAs, and IBs. 

65 5 U.S.C. 601 et seq. 

66 47 FR 18618 at 18619 (April 30, 1982). 

67 Id. 

68 66 FR 42255 at 42268 (August 10, 2001). 

69 47 FR 18618 (April 30, 1982). 

70 Id. at 18619–20. 

71 Id. at 18620. 

72 Id. 

hours for discussions with staff and 

representatives of other reporting 

entities and root data sources to develop 

and implement the OCR process. The 

proposed rule would also require each 

reporting entity to expend 

approximately 5,676 hours to establish 

the required information technology 

infrastructure. At present, the 

Commission staff would receive weekly 

OCRs from up to 17 reporting entities.62

Accordingly, the aggregate hours 

required for start-up by all reporting 

entities would total 104,652. 

Annualized over an estimated useful life 

of ten years, start-up requirements for 

all reporting entities combined would 

be approximately 10,465 hours per year. 

In addition to the hours required for 

start-up, proposed Regulation 16.03, if 

adopted, would impose certain ongoing 

costs. Commission staff estimates that 

each reporting entity would expend 

about 33 hours for each weekly OCR 

transmitted to the Commission resulting 

in an aggregate requirement of 29,172 

hours annually (assuming that such 

reports are provided by each reporting 

entity for each of 52 weeks). 

It is also estimated that start-up and 

continuing costs may involve product 

and service purchases. Commission staff 

estimates that reporting entities could 

expend up to $8,000 annually per 

reporting entity on product and service 

purchases to comply with proposed 

Regulation 16.03. This would result in 

an aggregated cost of $ 136,000 per 

annum (17 reporting entities × $ 8,000). 

The analysis above is a best estimate. 

Reporting entities may need to expend 

additional resources in order to acquire 

OCR data from root data sources; the 

number of reporting entities and their 

reporting requirements may change; and 

the trade volume (and the 

corresponding amount of OCR 

information) may vary at each reporting 

entity.63

While reporting entities are 

responsible for providing the OCR, the 

Commission is nonetheless aware that 

root data sources may be required to 

supply reporting entities with certain 

OCR data.64 However, the Commission 

is not collecting information directly 

from the root data sources nor is it 

estimating their reporting burden under 

the PRA. 

2. Information Collection Comments 

The Commission invites the public 

and other federal agencies to comment 

on any aspect of the reporting and 

recordkeeping burdens discussed above. 

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

Commission solicits comments in order 

to: (i) Evaluate whether the proposed 

collection of information is necessary 

for the proper performance of the 

functions of the Commission, including 

whether the information will have 

practical utility; (ii) evaluate the 

accuracy of the Commission’s estimate 

of the burden of the proposed collection 

of information; (iii) determine whether 

there are ways to enhance the quality, 

utility, and clarity of the information to 

be collected; and (iv) 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 e-mail 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 release. 

Consequently, a comment to OMB is 

most assured of being fully effective if 

received by OMB (and the Commission) 

within 30 days after publication of this 

notice of proposed rulemaking. 

C. Regulatory Flexibility Act 

1. Reporting Entities 

The Regulatory Flexibility Act 

(‘‘RFA’’) requires that agencies consider 

the impact of their regulations on small 

entities.65 In a policy statement the 

Commission has already established 

certain definitions of ‘‘small entities’’ to 

be used in evaluating the impact of its 

rules on such small entities in 

accordance with the RFA.66 In that 

statement, the Commission concluded 

that DCMs are not small entities.67 The 

Commission has also previously 

determined that DTEFs and ECMs (with 

or without SPDCs) are not small entities 

for purposes of the RFA.68

2. FCMs, IBs, Commodity Pool 

Operators (‘‘CPOs’’), and Commodit 

Trading Advisors (‘‘CTAs’’) 

The requirements of the proposed rule 

fall mainly on reporting entities, as 

described above. However, the 

Commission believes that root data 

sources may be prompted to provide 

reporting entities with some OCR data. 

In this regard, the Commission has 

previously determined that one 

potential root data source—FCMs—are 

not small entities for the purposes of the 

RFA.69

Other potential sources of root data 

include CPOs, CTAs, and IBs who may 

be required to provide OCR information 

to FCMs or reporting entities. With 

respect to CPOs, the Commission has 

previously determined that registered 

CPOs are not small entities based upon 

the Commission’s existing regulatory 

standard for exempting certain small 

CPOs from the requirement to register 

under the Act.70 In the case of CPOs 

exempt from registration, the 

Commission has previously determined 

that a CPO is a small entity if it meets 

the criteria for exemption from 

registration under Regulation 

4.13(a)(2).71 In the case of CTAs, the 

Commission has stated that it would 

evaluate within the context of a 

particular rule proposal whether all or 

some affected CTAs would be 

considered to be small entities and, if 

so, the economic impact on them of the 

proposal.72 Under the proposed rule, 

those CTAs and exempt CPOs that are 

in exclusive control of OCR information 

may be required to provide that 

information to reporting entities. The 

Commission believes much of the data 

to be provided by CTAs and exempt 

CPOs should already be possessed by 

CTAs and exempt CPOs. Also, any 

expenditure that must be made in order 

to comply with the proposed rule will 

likely be proportionate to the size of the 

CTA or exempt CPO. Therefore, to the 

extent a CTA or exempt CPO is a small 

entity and must provide OCR 

information, its related costs should also 

be smaller. In the event a CTA or 

exempt CPO might be considered a 

small entity required to provide OCR 

information, the Commission does not 

believe the proposed reporting 

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41786 Federal Register / Vol. 75, No. 137 / Monday, July 19, 2010 / Proposed Rules 

73 48 FR 35248, 35275–78 (Aug. 3, 1983). 

74 IBs may rely on FCMs to carry out customer 

identification procedures and thus customer 

information may be retained by the FCM. 

75 17 CFR 1.37(a)(1). 

requirements to have a significant 

economic impact on that small entity. 

With respect to IBs, the Commission 

previously stated that it is appropriate 

to evaluate within the context of a 

particular rule proposal whether some 

or all IBs should be considered to be 

small entities and, if so, to analyze the 

economic impact on such entities at that 

time.73 Under the proposed rule, 

reporting entities may require OCR 

information from IBs. However, much of 

the information required by the OCR, 

such as customer name and date of 

birth, is already maintained by 

registered IBs and/or FCMs in order to 

comply with anti-money laundering 

rules.74 Also, Commission Regulation 

1.37 already requires IBs to maintain the 

name of the person exercising control of 

the account.75 Additional information 

required by the proposed rule, if not 

already available to reporting entities 

through an FCM, is likely maintained by 

IBs as part of their normal business 

practice. Furthermore, to the extent 

expenditures must be made to comply 

with the proposed rule, they should be 

commensurate with the size of the IB. 

For example, if an IB is small, with a 

limited number of customers, the 

burden to comply with the proposed 

rule should also be smaller. To the 

extent that IBs can be deemed to be 

small entities, the Commission does not 

consider the provision of OCR data to 

have a significant economic impact. 

The Commission specifically requests 

comment on whether the proposed rules 

will have a significant economic impact 

on a substantial number of small 

entities. 

Accordingly, the Chairman, on behalf 

of the Commission, hereby certifies, 

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

actions proposed to be taken herein will 

not have a significant economic impact 

on a substantial number of small 

entities. 

List of Subjects 

17 CFR Part 16 

Commodity futures, Reports by 

contract markets. 

In consideration of the foregoing and 

pursuant to the authority contained in 

the Commodity Exchange Act, the 

Commission hereby proposes to amend 

17 CFR Part 16 as follows: 

PART 16—REPORTS BY CONTRACT 

MARKETS 

1. The Authority Citation for Part 16 

will be amended to read as follows: 

Authority: 7 U.S.C. 2, 2(h)(7), 6a, 6c, 6g, 6i, 

7, 7a, and 12a, as amended by Title XIII of 

the Food, Conservation and Energy Act of 

2008, Public Law 110–246, 122 Stat. 1624 

(June 18, 2008), unless otherwise noted. 

2. Add § 16.03 to read as follows: 

§ 16.03 Ownership and control report 

(‘‘OCR’’). 

(a) Entities required to submit reports. 

Ownership and control reports shall be 

filed by any registered entity required to 

provide the Commission with trade data 

on a regular basis, where such data is 

used for the Commission’s trade 

practice or market surveillance 

programs (‘‘reporting entities’’). 

Reporting entities include, but are not 

limited to, designated contract markets, 

derivatives transaction execution 

facilities, and exempt commercial 

markets with significant price discovery 

contracts. 

(b) Information to be provided. Each 

reporting entity shall provide the 

following information with respect to 

every trading account also reported in 

its trade register: 

(1) The trading account number; 

(2) The trading account’s ultimate 

beneficial owner(s), including: 

(i) For each ultimate beneficial owner 

who is a natural person— 

(A) Their first, middle, and last name, 

(B) Their date of birth, and 

(C) The address of their primary 

residence, 

(D) Their National Futures 

Association (‘‘NFA’’) identification 

number, if any; 

(ii) For each ultimate beneficial owner 

that is not a natural person— 

(A) Their name and primary business 

address, and 

(B) Their NFA identification number, 

if any; 

(3) For trading account controller(s) 

(who must be natural persons): 

(i) The first, middle, and last name of 

each controller, 

(ii) The date of birth of each 

controller, and 

(iii) The name and primary business 

address of the entity that employs each 

controller with respect to the reported 

account, if any, and 

(iv) The NFA identification number of 

each controller, if any; 

(4) The date on which the trading 

account was assigned to its current 

controller(s); 

(5) A designation of the trading 

account as one whose orders are 

generated exclusively by a natural 

person, exclusively by an automated 

trading system, or generated sometimes 

by a natural person and sometimes by 

an automated trading system; 

(6) The special account number 

associated with the trading account, if 

one has been assigned; 

(7) An indication of whether the 

trading account is part of a reportable 

account under the Commission’s large 

trader reporting system, 

(i) In addition, for a trading account 

that becomes part of reportable account 

under the Commission’s large trader 

reporting system after December 31st, 

2011, the date on which the trading 

account first becomes part of a 

reportable account; 

(ii) [Reserved] 

(8) An indication of whether the 

trading account is a firm omnibus 

account, and if so, the name of the firm, 

(i) In addition, for a trading account 

that becomes part of firm omnibus 

account after December 31st, 2011, the 

date on which the trading account is 

first included in the firm’s omnibus 

account; 

(ii) [Reserved] 

(9) The name of the executing firm for 

the trading account, and its unique 

identifier reported in the reporting 

entity’s trade register; 

(10) The name of the clearing firm for 

the trading account, and its unique 

identifier reported in the reporting 

entity’s trade register; 

(11) The name of each root data 

source providing the reporting entity 

with information with respect to the 

trading account; 

(12) The name of the reporting entity 

submitting the OCR to the Commission; 

and 

(13) The OCR transmission date. 

(c) Definition of account controller. 

For purposes of this section, ‘‘account 

controller’’ means a natural person, or a 

group of natural persons, with the legal 

authority to exercise discretion over 

trading decisions by a trading account, 

with the authority to determine the 

trading strategy of an automated trading 

system, or responsible for the 

supervision of any automated system or 

strategy. The authority to exercise 

discretion is sufficient, regardless of 

whether such authority is actually 

exercised. An individual who executes 

trades for an account, without input or 

discretion in any decision involving the 

account or its trades, will not be 

considered an account controller with 

respect to that account. 

(d) Account types subject to reporting. 

Each reporting entity shall provide the 

information required in paragraph (b) of 

this section for all trading accounts also 

reported in its trade register, including 

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Federal Register / Vol. 75, No. 137 / Monday, July 19, 2010 / Proposed Rules 41787 

76Preliminary Findings Regarding the Market 

Events of May 6, 2010, Report of the Staffs of the 

CFTC and SEC to the Joint Advisory Committee on 

Emerging Regulatory Issues (May 18, 2010). 

commodity pools and other collective 

investment vehicles (‘‘CIV’’), and 

omnibus accounts and any accounts 

trading on an undisclosed basis. 

Disclosure shall be made equally for 

accounts representing U.S. and non-U.S. 

entities and natural persons. Provided 

however, that if an ultimate beneficial 

owner’s ownership share of a CIV is less 

than 10 percent of the CIV’s net asset 

value, as defined in Commission 

Regulation 4.10, then the ultimate 

beneficial owner need not be reported. 

(e) Form, time, and manner of filing 

reports; uniform protocol required. Each 

reporting entity shall submit its OCR in 

the time, manner, and format required 

by the Commission or its designee. 

Reporting entities shall adopt a single, 

uniform protocol, acceptable to the 

Commission, for the technical structure 

of the OCR. 

(f) Protection of OCR data. Each 

Reporting entity shall segregate any 

information provided by its root data 

sources, if such data is provided in 

furtherance of the Commission’s OCR 

requirements and not otherwise 

required to be provided by the reporting 

entity (‘‘protected data’’). Reporting 

entities must ensure that protected data 

is used only for regulatory or 

enforcement purposes such as trade 

practice surveillance, market 

surveillance, audit, investigation, or rule 

enforcement. Protected data shall be 

under the exclusive control of the 

reporting entity’s regulatory compliance 

department. Reporting entities shall 

establish appropriate firewall 

procedures and access controls to 

ensure the confidentiality, privacy and 

safekeeping of protected data within 

their regulatory compliance 

departments. 

Issued in Washington, DC, on July 8, 2010 

by the Commission. 

David A. Stawick, 

Secretary of the Commission. 

Note: The following appendix will not 

appear in the Code of Federal Regulations. 

Concurring Statement of Commissioner 

O’Malia Regarding the Proposal for the 

Account Ownership and Control Report 

I concur on the release of the Notice of 

proposed rulemaking related to Account 

Ownership and Control Report (‘‘OCR’’). The 

Commission must gain greater transparency 

over the data it receives. The OCR represents 

a place where technology must catch-up to 

how trades are executed in the futures 

markets so critical data ultimately flows to 

the Commission. 

The events of May 6th clearly highlight 

that technology drives the structure and 

function of the markets. In order to better 

understand trading behavior in the 

derivatives markets, including the trading 

behaviors of high frequency traders, it is 

essential to discover who controls which 

accounts and how those trading styles impact 

markets, including the order book, which is 

vital to fulfilling our surveillance and 

enforcement obligations. CFTC staff recently 

noted in the preliminary report on the events 

of May 6th that ‘‘obtaining account 

ownership and control information in the 

exchange trade registers * * * would 

increase the timeliness and efficiency of 

account identification, an essential step in 

data analysis.’’ 76 The Commission must get 

as close as possible to real-time surveillance 

and post-trade transparency; the OCR would 

move the Commission a step closer to that 

goal. 

Currently, the data the Commission 

receives from exchanges and other reporting 

entities lacks information because the 

Commission has not demanded it. However, 

I believe the Commission must now demand 

ownership and control information on all 

trading accounts in order to enhance the 

transparency of information reported to the 

Commission. The proposed rule will allow 

the Commission to aggregate related trading 

accounts within and across exchanges in 

order to better detect abusive trading 

practices. For example, the OCR will allow 

the Commission’s Division of Market 

Oversight to identify small and medium 

sized traders whose open interest does not 

reach reportable levels, but who can still 

have deleterious effects on the markets 

during concentrated periods of intra-day 

trading. Such intra-day trading scenarios 

include intra-day position limit violations 

and ‘‘banging the close’’ manipulations. 

The OCR will also bridge the gap between 

individual transactions reported to the 

Commission on exchange trade registers and 

aggregate positions reported to it in large 

trader data so the Commission can determine 

how traders established their positions. The 

OCR will allow the Commission’s Office of 

the Chief Economist to accurately identify 

and categorize market participants based on 

their actual trading behavior on a contractby-contract basis, rather than on how they 

self-report to the Commission (e.g., 

registration type or marketing/merchandising 

activity on CFTC Form 40). In short, the OCR 

will allow the Commission to better oversee 

the markets. 

Based on the comments received from the 

Advanced Notice of Proposed Rulemaking 

published in the Federal Register on July 2, 

2009, I appreciate that there are concerns 

regarding the implementation of the OCR for 

numerous reasons, including the costs and 

the difficulty of acquiring specific data 

points. Therefore, it is critical that the 

Commission engage market participants 

including exchanges, clearing organizations, 

futures commission merchants, introducing 

brokers, and others to understand what data 

is available and the most effective means by 

which to acquire this data. I strongly support 

the modification to this proposed rule to 

accommodate a staff technical conference to 

provide market participants an opportunity 

to provide constructive recommendations as 

to the most effective means by which the 

Commission can collect this data. 

The proposed financial reform legislation 

that is currently being negotiated by the 

Conference Committee will issue a new 

mandate to the Commission for the oversight 

of the swaps market. Under the proposed 

legislation the Commission will be hit with 

a tsunami of data that will need to be 

standardized to reflect ownership, control, 

and other information of the massive overthe-counter (OTC) market. If this legislation 

is signed into law, the OCR rulemaking, 

whether in the post-comment or possible 

implementation phase, will coincide with the 

Commission’s rulemaking efforts under its 

new mandate. Therefore, I hope to receive 

comment with respect to the entities (e.g., 

trade repositories, designated contract 

markets, or swap execution facilities) from 

which the Commission should collect OCR 

data and the product and transaction types 

for which the Commission should collect 

data. I hope to receive comment on any 

additional types of information or data 

elements related to OTC and swap 

transactions that should be collected and 

reported to the Commission. Finally, I am 

interested in receiving comment on how the 

derivatives industry could develop and 

maintain a system to assign unique account 

identification numbers (‘‘UAIN’’) to all 

account owners and account controllers. 

On a related issue, I understand that 

Commission staff is seeking to automate the 

information collected via CFTC Forms 40 and 

102. This process is long overdue and must 

be accomplished in an expedited fashion. 

Automation of these forms will minimize the 

manual entry and cross checking of data and 

will minimize opportunities for human error. 

It is my hope that the Commission will 

release for public comment a proposed rule 

related to these forms later this summer. 

[FR Doc. 2010–17530 Filed 7–16–10; 8:45 am] 

BILLING CODE 6351–01–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 54 

[REG–120391–10] 

RIN 1545–BJ58 

Requirement for Group Health Plans 

and Health Insurance Issuers To 

Provide Coverage of Preventive 

Services Under the Patient Protection 

and Affordable Care Act 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Notice of proposed rulemaking 

by cross-reference to temporary 

regulations. 

SUMMARY: Elsewhere in this issue of the 

Federal Register, the IRS is issuing 

mstockstill on DSKH9S0YB1PROD with PROPOSALS