Federal Register / Vol. 77, No. 124 / Wednesday, June 27, 2012 / Proposed Rules 38229 

1See 17 CFR 145.9. 

Yellowstone International Airport. This Class 

D 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 6002 Class E airspace designated 

as surface areas. 

* * * * * 

ANM MT E2 Bozeman, MT [Modified] 

Bozeman Yellowstone International Airport, 

MT 

(Lat. 45°46′39′′ N., long. 111°09′07′′ W.) 

Within a 5.4-mile radius of Bozeman 

Yellowstone International 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 6004 Class E airspace designated 

as an extension to a Class D surface area. 

* * * * * 

ANM MT E4 Bozeman, MT [Modified] 

Bozeman Yellowstone International Airport, 

MT 

(Lat. 45°46′39′′ N., long. 111°09′07′′ W.) 

That airspace extending upward from the 

surface within 3 miles each side of the 316° 

bearing of Bozeman Yellowstone 

International Airport extending from the 5.4- 

mile radius of the airport to 15.5 miles 

northwest of the airport, and that airspace 2.4 

miles each side of the 212° bearing of the 

Bozeman Yellowstone International Airport 

extending from the 5.4-mile radius of the 

airport to 7 miles southwest of the airport. 

Paragraph 6005 Class E airspace areas 

extending upward from 700 feet or more 

above the surface of the earth. 

* * * * * 

ANM MT E5 Bozeman, MT [Modified] 

Bozeman Yellowstone International Airport, 

MT 

(Lat. 45°46′39′′ N., long. 111°09′07′′ W.) 

That airspace extending upward from 700 

feet above the surface within a 13.5-mile 

radius of Bozeman Yellowstone International 

Airport, and within 8 miles northeast and 13 

miles southwest of the 316° bearing of the 

airport extending from the 13.5-mile radius 

to 24.4 miles northwest of the airport. 

Paragraph 6006 En route domestic airspace 

areas. 

* * * * * 

ANM MT E6 Bozeman, MT [Modified] 

Bozeman Yellowstone International Airport, 

MT 

(Lat. 45°46′39′′ N., long. 111°09′07′′ W.) 

That airspace extending upward from 

1,200 feet above the surface within a 50-mile 

radius of the Bozeman Yellowstone 

International Airport; excluding existing 

lateral limits of controlled airspace 12,000 

feet MSL and above. 

Issued in Seattle, Washington, on June 19, 

2012. 

Robert Henry, 

Acting Manager, Operations Support Group, 

Western Service Center. 

[FR Doc. 2012–15698 Filed 6–26–12; 8:45 am] 

BILLING CODE 4910–13–P 

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Part 43 

RIN 3038–AD84 

Rules Prohibiting the Aggregation of 

Orders To Satisfy Minimum Block 

Sizes or Cap Size Requirements, and 

Establishing Eligibility Requirements 

for Parties to Block Trades 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Commodity Futures 

Trading Commission (‘‘Commission’’) is 

issuing a notice of proposed rulemaking 

to add certain provisions to part 43 of 

the Commission’s regulations pertaining 

to block trades in swap contracts. The 

provisions would: (i) Prohibit the 

aggregation of orders for different 

trading accounts in order to satisfy the 

minimum block size or cap size 

requirements, except for orders 

aggregated by certain commodity 

trading advisors (‘‘CTAs’’), investment 

advisers and foreign persons (as 

described in this release), if such person 

has more than $25,000,000 in total 

assets under management (‘‘AUM’’); (ii) 

provide that parties to a block trade 

must individually qualify as eligible 

contract participants (‘‘ECPs’’), except 

where a designated contract market 

allows certain CTAs, investment 

advisers and foreign persons (as 

described in this release), to transact 

block trades for customers who are not 

ECPs, if such CTA, investment adviser 

or foreign person has more than 

$25,000,000 in total AUM; and (iii) 

require that persons transacting block 

trades on behalf of customers must 

receive prior written instruction or 

consent from the customer to do so. 

DATES: Comments must be received on 

or before July 27, 2012. 

ADDRESSES: You may submit comments, 

identified by RIN number [TBD], by any 

of the following methods: 

• The agency’s Web site: at http:// 

comments.cftc.gov. Follow the 

instructions for submitting comments 

through the Web site. 

• Mail: David A. Stawick, Secretary of 

the Commission, Commodity Futures 

Trading Commission, Three Lafayette 

Centre, 1155 21st Street NW., 

Washington, DC 20581. 

• Hand Delivery/Courier: Same as 

mail above. 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

Please submit your comments using 

only one method. 

All comments must be submitted in 

English, or if not, accompanied by an 

English translation. Comments will be 

posted as received to www.cftc.gov. You 

should submit only information that 

you wish to make available publicly. If 

you wish the Commission to consider 

information that you believe is exempt 

from disclosure under the Freedom of 

Information Act, a petition for 

confidential treatment of the exempt 

information may be submitted according 

to the procedures established in § 145.9 

of the Commission’s regulations.1

Commenters to this notice of 

proposed rulemaking are requested to 

refrain from providing comments with 

respect to the provisions in part 43 of 

the Commission’s regulations that are 

beyond the scope of this notice of 

proposed rulemaking. The Commission 

only plans to address those comments 

that are responsive to the policies, 

merits and substance of the proposed 

provisions set forth in this notice of 

proposed rulemaking. 

The Commission reserves the right, 

but shall have no obligation, to review, 

pre-screen, filter, redact, refuse or 

remove any or all of your submission 

from www.cftc.gov that it may deem to 

be inappropriate for publication, such as 

obscene language. All submissions that 

have been redacted or removed that 

contain comments on the merits of the 

rulemaking will be retained in the 

public comment file and will be 

considered as required under the 

Administrative Procedure Act and other 

applicable laws, and may be accessible 

under the Freedom of Information Act. 

FOR FURTHER INFORMATION CONTACT: 

Nancy Markowitz, Deputy Director, 

Division of Market Oversight, 202–418– 

5453, nmarkowitz@cftc.gov; Nadia 

Zakir, Special Counsel, Division of 

Market Oversight, 202–418–5720, 

nzakir@cftc.gov; Laurie Gussow, 

Attorney-Advisor, 202–418–7623, 

lgussow@cftc.gov; George Pullen, 

Economist, Division of Market 

Oversight, 202–418–6709, 

gpullen@cftc.gov; Esen Onur, 

Economist, Office of the Chief 

Economist, 202–418–6146, 

eonur@cftc.gov; or Herminio Castro, 


emcdonald on DSK67QTVN1PROD with PROPOSALS
38230 Federal Register / Vol. 77, No. 124 / Wednesday, June 27, 2012 / Proposed Rules 

2See Public Law 111–203, 124 Stat. 1376 (2010). 

3The short title of Title VII of the Dodd-Frank Act 

is the ‘‘Wall Street Transparency and 

Accountability Act of 2010.’’ 

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

5See generally CEA section 2(a)(13), 7 U.S.C. 

2(a)(13). 

6See CEA sections 2(a)(13)(E)(ii) and (iii). 

7See Real-Time Public Reporting of Swap 

Transaction Data, 75 FR 76,139 (Dec. 7, 2010), as 

corrected in Real-Time Public Reporting of Swap 

Transaction Data Correction, 75 FR 76,930 (Dec. 10, 

2010) (‘‘Initial Proposal’’). 8The Initial Proposal defined the term ‘‘large 

notional swap’’. See proposed § 43.2(l), 75 FR 

76,171. The Adopting Release finalized the term as 

‘‘large notional off-facility swap’’, to denote, in 

relevant part, that the swap is not executed 

pursuant to SEF or DCM rules and procedures. See 

§ 43.2, 77 FR 1182, 1244 (Jan. 9, 2012) (‘‘Adopting 

Release’’). Specifically, the Adopting Release 

defined the term as an ‘‘off-facility swap that has 

a notional or principal amount at or above the 

appropriate minimum block size applicable to such 

publicly reportable swap transaction and is not a 

block trade as defined in § 43.2 of the Commission’s 

regulations.’’ Id. 

The final definition of ‘‘block trade’’ in the 

Adopting Release is similar to how that term was 

defined in the Initial Proposal. See proposed 

§ 43.2(f), 75 FR 76,171. The Adopting Release 

defines the term ‘‘block trade’’ as a publicly 

reportable swap transaction that: ‘‘(1) [i]nvolves a 

swap that is listed on a [SEF or DCM]; (2) [o]ccurs 

away from the [SEF’s or DCM’s] trading system or 

platform and is executed pursuant to the [SEF’s or 

DCM’s] rules and procedures; (3) has a notional or 

principal amount at or above the appropriate 

minimum block size applicable to such swap; and 

(4) [i]s reported subject to the rules and procedures 

of the [SEF or DCM] and the rules described in [part 

43], including the appropriate time delay 

requirements set forth in § 43.5.’’ See § 43.2, 77 FR 

1,243. 

9See proposed § 43.5, 75 FR 76174–76. 

10Proposed § 43.5(k)(1) in the Initial Proposal 

provided that the time delay for the public 

dissemination of data for a block trade or large 

notional off-facility swap shall commence at the 

time of execution of such trade or swap. See 75 FR 

76,176. Proposed § 43.5(k)(2) provided that the time 

delay for standardized block trades and large 

notional off-facility swaps (i.e., swaps that fall 

under CEA Section 2(a)(13)(C)(i) and (iv)) would be 

15 minutes from the time of execution. Id. The 

Initial Proposal did not provide specific time delays 

for large notional off-facility swaps (i.e., swaps that 

fall under Section 2(a)(13)(C)(ii) and (iii)). Instead, 

proposed § 43.5(k)(3) provided that such swaps 

shall be reported subject to a time delay that may 

be prescribed by the Commission. Id. 

The Adopting Release established time delays for 

the public dissemination of block trades and large 

notional off-facility swaps in § 43.5. See 77 FR 

1247–49. 

11See CEA Section 1a(18). 

12The initial comment period for the Initial 

Proposal closed on February 7, 2011. The comment 

periods for most proposed rulemakings 

implementing the Dodd-Frank Act—including the 

proposed part 43 rules—subsequently were 

reopened for the period of April 27 through June 

2, 2011. 

13The American Benefits Council and the 

Committee on the Investment of Employee Benefit 

Assets comment letter at 3 (Feb. 7, 2011). The 

comment letter specifically requested that the rule 

be revised such that the words ‘‘including any’’ 

from the second sentence are deleted and replaced 

with the word ‘‘an.’’ 

14Tradeweb comment letter at 5 (Feb. 7, 2011). 

Counsel, Office of General Counsel, 

202–418–6705, hcastro@cftc.gov, 

Commodity Futures Trading 

Commission, Three Lafayette Center, 

1155 21st Street NW., Washington, DC 

20581. 

SUPPLEMENTARY INFORMATION: 

I. Background 

A. The Dodd-Frank Act 

On July 21, 2010, President Obama 

signed the Dodd-Frank Wall Street 

Reform and Consumer Protection Act 

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

Dodd-Frank Act 3 amended the 

Commodity Exchange Act (‘‘CEA’’ or 

‘‘Act’’) 4 to establish a comprehensive, 

new regulatory framework for swaps 

and security-based swaps. This 

legislation was enacted to reduce risk, 

increase transparency and promote 

market integrity within the financial 

system by, inter alia: (1) Providing for 

the registration and comprehensive 

regulation of swap dealers (‘‘SDs’’) and 

major swap participants (‘‘MSPs’’); (2) 

imposing mandatory clearing and trade 

execution requirements on standardized 

derivative products; (3) creating robust 

recordkeeping and real-time reporting 

regimes; and (4) enhancing the 

Commission’s rulemaking and 

enforcement authorities with respect to, 

among others, all registered entities and 

intermediaries subject to the 

Commission’s oversight. 

Section 727 of the Dodd-Frank Act 

enacted section 2(a)(13) of the CEA, 

which authorizes and requires the 

Commission to promulgate regulations 

for the real-time public reporting of 

swap transaction and pricing data.5

Among other things, sections 

2(a)(13)(E)(ii) and (iii) of the CEA 

respectively require the Commission to 

prescribe regulations specifying ‘‘the 

criteria for determining what constitutes 

a large notional swap transaction (block 

trade) for particular markets and 

contracts’’ and ‘‘the appropriate time 

delay for reporting large notional swap 

transactions (block trades) to the 

public.’’ 6

B. The Initial Proposal 

In order to implement the various 

statutory requirements imposed under 

section 2(a)(13) of the CEA, the 

Commission published an initial notice 

of proposed rulemaking on December 7, 

2010 (the ‘‘Initial Proposal’’).7 As 

relevant to this notice of proposed 

rulemaking, the Initial Proposal 

proposed: (1) Definitions for the terms 

‘‘large notional off-facility swap’’ and 

‘‘block trade’’; 8 (2) a method for 

determining the appropriate minimum 

block sizes for large notional off-facility 

swaps and block trades; 9 and (3) a 

framework for timely reporting of such 

transactions and trades.10

Among other requirements contained 

in the Initial Proposal, proposed 

§ 43.5(b)(1) provided that eligible parties 

to a block trade (or large notional swap) 

must be ECPs,11 except that a designated 

contract market (‘‘DCM’’) may allow a 

CTA acting in an asset managerial 

capacity and registered pursuant to 

Section 4n of the Act, or a principal 

thereof, including any investment 

adviser who satisfies the criteria of 

§ 4.7(a)(2)(v), or a foreign person 

performing a similar role or function 

and subject as such to foreign 

regulation, to transact block trades for 

customers who are not eligible contract 

participants (‘‘non-ECPS’’), if such CTA, 

investment adviser or foreign person has 

more than $25,000,000 in total AUM. 

The proposed rule further required that 

a person transacting a block trade on 

behalf of a customer must receive 

written instruction or prior consent 

from the customer to do so. 

Furthermore, proposed § 43.5(m) of 

the Initial Proposal prohibited the 

aggregation of orders for different 

trading accounts in order to satisfy the 

minimum block size requirement, 

except if done on a DCM by a CTA 

acting in an asset managerial capacity 

and registered pursuant to Section 4n of 

the Act, or a principal thereof, including 

any investment adviser who satisfies the 

criteria of § 4.7(a)(2)(v), or a foreign 

person performing a similar role or 

function and subject as such to foreign 

regulation, if such CTA, investment 

adviser or foreign person has more than 

$25,000,000 in total AUM. 

The Commission issued the Initial 

Proposal for public comment for a 

period of 60 days, but later reopened the 

comment period for an additional 45 

days.12

1. Comments in Response to the Initial 

Proposal 

The Commission received four 

comment letters in response to the 

proposed aggregation rule. The 

American Benefits Council and the 

Committee on the Investment of 

Employee Benefit Assets stated that 

qualified investment advisers who are 

not CTAs should be able to aggregate 

block trade orders for different trading 

accounts.13 Tradeweb commented that 

the CTAs that trade on SEFs should also 

be permitted to aggregate trades of 

behalf of their customers for purposes of 

block trades.14 J.P. Morgan commented 

that the proposed rule appears to reflect 

a concern that private negotiation offers 

less protection to unsophisticated 


emcdonald on DSK67QTVN1PROD with PROPOSALS
Federal Register / Vol. 77, No. 124 / Wednesday, June 27, 2012 / Proposed Rules 38231 

15 J.P. Morgan comment letter at 9, n. 13 (Jan. 12, 

2011). 

16WMBA comment letter at 4–5 (Feb. 7, 2011) 

(commenting that ‘‘the public dissemination of 

incremental activity that would otherwise 

constitute a block trade could jeopardize 

identification of counterparties and materially 

reduce market liquidity.’’) 

17Real-Time Public Reporting of Swap 

Transaction Data, 77 FR 1,182 (Jan. 9, 2012). 

18Commenters are directed to the Adopting 

Release for a discussion of the issues addressed 

therein. See id. 

19See id. at 1,185. 

20Commenters are directed to the Further 

Proposal for a discussion of the issues addressed 

therein. See ‘‘Procedures to Establish Appropriate 

Minimum Block Sizes for Large Notional OffFacility Swaps and Block Trades,’’ 77 FR 15,460 

(Mar. 15, 2012). The comment period for the 

Further Proposal ended on May 14, 2012. 21See 77 FR 1,243. 

22 J.P. Morgan Comment letter at 5 (Jan. 12, 2011). 

23The following DCMs have rules permitting 

block trading: Cantor Futures Exchange, L.P. (rule 

IV–16); CBOE Futures Exchange LLC (rule 415); 

Chicago Board of Trade (rule 526); CME (rule 526); 

ELX Futures, L.P. (rule IV–16); Eris Exchange, LLC 

(rule 601); Green Exchange, LLC (rule 602); ICE 

Futures (rule 4.31); Nasdaq OMX Futures Exchange, 

Inc. (rule E23); New York Mercantile Exchange, Inc. 

(rule 526); NYSE Liffe US, LLC (rule 423); and 

OneChicago LLC Futures Exchange (rule 417). Each 

of the aforementioned DCMs also have rules 

prohibiting aggregation of orders to meet minimum 

block transaction size: Cantor Futures Exchange, 

L.P. (rule IV–16(K)); CBOE Futures Exchange LLC 

(rule 415(a)(i)); Chicago Board of Trade (rule 526A); 

CME (rule 526A); ELX Futures, L.P. (rule IV–16(a)); 

Eris Exchange, LLC (rule 601(b)(1)); Green 

Exchange, LLC (rule 602(a)); ICE Futures (rule 

4.31(a)(ii)(B)); Nasdaq OMX Futures Exchange, Inc. 

(rule E23(d)); New York Mercantile Exchange, Inc. 

(rule 526A); NYSE Liffe US, LLC (rule 423(a)(1)); 

and OneChicago LLC Futures Exchange (rule 

418(a)(i)). 

24 77 FR 15,516. 

25 77 FR 15,489–90. 

investors than trading through the 

central market, and that since all 

entities that transact in the OTC market 

already must be ECPs, the analogous 

concern about customer protection in 

the swaps market is already 

addressed.15 In related comments, the 

Wholesale Market Brokers Association 

(Americas) (‘‘WMBA’’) commented that 

‘‘work-up’’ or ‘‘join-the-trade’’ periods 

be permitted and recognized to satisfy 

the block trade requirement.16

C. The Adopting Release and Further 

Proposal 

On January 9, 2012, the Commission 

issued a notice of final rulemaking 17

(‘‘Adopting Release’’) that finalized 

several provisions that were proposed in 

the Initial Proposal pertaining to, among 

other things, the reporting, public 

dissemination and recordkeeping 

requirements applicable to certain swap 

transactions.18

Based on the public comments 

received in response to the Initial 

Proposal, in the Adopting Release the 

Commission agreed that additional 

analysis was necessary prior to issuance 

of final rules for appropriate minimum 

block sizes, and accordingly determined 

not to make final its proposed § 43.5 

rules specifying the criteria for 

determining block trade sizes. Instead, 

the Commission intended to issue a 

separate notice of proposed rulemaking 

that would specifically address the 

appropriate criteria for determining 

appropriate minimum block trade sizes 

in light of data and comments 

received.19 On March 15, 2012, the 

Commission decided to further propose 

(‘‘Further Proposal’’) certain other block 

trade provisions that were included 

with the Initial Proposal.20

After it issued the Further Proposal, 

the Commission determined that the 

aggregation provision and the provision 

that specified the eligible parties to a 

block trade, including the proposed 

requirement that persons transacting 

block trades on behalf of customers 

must receive prior written instruction or 

consent from the customer to do so, 

were inadvertently omitted from the 

Further Proposal. These provisions are 

the subject of this notice of proposed 

rulemaking. 

II. Notice of Proposed Rulemaking 

A. Proposed § 43.6(h)(6)—Aggregation 

Proposed § 43.6(h)(6) would prohibit 

the aggregation of orders for different 

trading accounts in order to satisfy the 

minimum block size or cap size 

requirements, except that aggregation is 

permissible if done on a DCM or SEF by 

a person who: (i)(A) is a CTA registered 

pursuant to Section 4n of the Act or 

exempt from such registration under the 

Act, or a principal thereof, and who has 

discretionary trading authority or 

directs client accounts, (B) is an 

investment adviser who has 

discretionary trading authority or 

directs client accounts and satisfies the 

criteria of § 4.7(a)(2)(v) of this chapter, 

or (C) is a foreign person who performs 

a similar role or function as the persons 

described in (A) or (B) and is subject as 

such to foreign regulation, and (ii) has 

more than $25,000,000 in total AUM. 

The prohibition of aggregation of 

orders for different trading accounts in 

order to meet the minimum block size 

or cap size requirements is an integral 

element in ensuring the integrity of 

block trading principles, and in 

preserving the basis for the anonymity 

associated with cap sizes. As defined in 

the Adopting Release, a block trade is a 

publicly reportable transaction that: (1) 

Involves a swap that is listed on a 

registered SEF or DCM; (2) occurs away 

from the registered SEF’s or DCM’s 

trading system or platform (and is 

executed pursuant to the rules of such 

SEF or DCM); (3) has a notional or 

principal amount at or above the 

appropriate minimum block size 

applicable to such swap; and (4) is 

reported subject to the rules and 

procedures of the SEF or DCM and 

Commission regulations, including the 

appropriate time delay requirements.21

While block transactions are conducted 

pursuant to the rules of a SEF or DCM, 

by definition these transactions occur 

away from the SEF’s or DCM’s trading 

system or platform, where there is no 

pre-trade transparency. If too many 

trades were permitted to be aggregated 

and thus executable as blocks, the CEA 

objectives of increased transparency and 

price discovery for swaps trading could 

be undermined.22 By prohibiting 

aggregation of orders for different 

accounts to meet the minimum block 

size requirement, the proposed rule 

would protect the principles of block 

trading, and would help to prevent 

potential circumvention of exchangetrading and of the real-time reporting 

obligations associated with non-block 

transactions. By presumption, the 

aggregation of orders for different 

accounts to meet the minimum block 

size threshold would be prohibited. 

Indeed, in the futures market, all 

block trade rules approved by the 

Commission have included an 

aggregation prohibition (with the 

discrete exception of block trades done 

through certain CTAs). Accordingly, in 

the futures market, where market 

participants have engaged in block 

transactions for years, DCMs that permit 

block trading have rules that prohibit 

the aggregation of orders for different 

trading accounts to meet the minimum 

block size requirement.23

As proposed in this release, the rule 

also would prohibit aggregation in order 

to meet the cap size requirements. A cap 

size is defined in the Further Proposal 

as the maximum notional or principal 

amount of a publicly reportable swap 

transaction that is publicly 

disseminated.24 A transaction that 

meets the cap size requirement would 

be eligible to mask the total size of the 

transaction if it equals or exceeds the 

cap size for a given swap category.25

The Commission adopted cap sizes in 

order to help to protect the anonymity 

of counterparties’ market positions and 

business transactions, and to mitigate 

the potential impact that real-time 

public reporting of extraordinarily large 

positions could have in reducing market 


emcdonald on DSK67QTVN1PROD with PROPOSALS
38232 Federal Register / Vol. 77, No. 124 / Wednesday, June 27, 2012 / Proposed Rules 

26 Id. 

27A majority of DCMs currently maintain similar 

rules permitting certain CTAs, investment advisors 

and foreign persons to aggregate. See, e.g., CME 

Rulebook, rule 526 (providing an exception for 

block transactions by permitting aggregation if done 

by a CTA registered or exempt from registration 

under the Act, including without limitation, any 

investment adviser registered or exempt from 

registration under the Investment Adviser’s Act of 

1940 * * * provided that such advisers have total 

AUM exceeding $25 million and the block trade is 

suitable for the customers of such advisors. See 

also, CBOE Futures Exchange LLC (rule 415(a(i)); 

Chicago Board of Trade (rule 526I); CME (rule 526I); 

ELX Futures, L.P. (rule IV–16(a)); Eris Exchange, 

LLC (rule 601(b)(10)); Green Exchange, LLC (rule 

602(j)); ICE Futures ((rule 4.31(a)(ii)(B)); Nasdaq 

OMX Futures Exchange, Inc., (rule E23); New York 

Mercantile Exchange, Inc. (rule 526I); NYSE Liffe 

US, LLC (rule 423(a)(i)); and OneChicago LLC 

Futures Exchange (rule 417(a)(i)). 

28Parties that are non-ECPs may not enter into 

any swap transactions, including blocks, except on 

or subject to the rules of a DCM. Specifically, 

section 2(e) of the CEA provides that ‘‘[i]t shall be 

unlawful for any person, other than an eligible 

contract participant, to enter into a swap unless the 

swap is entered into on, or subject to the rules of, 

a board of trade designated as a contract market 

under section 5.’’ 7 U.S.C. 2(e). 

29Most DCMs that permit block trading require 

that parties to the block trade must be ECPs with 

a limited exception for CTAs. The following DCMs 

have rules excepting CTAs from the requirement 

that parties to a block trade must be ECPs: CBOE 

Futures Exchange LLC (rule 415(a)(ii)); Chicago 

Board of Trade (rule 526I); CME (rule 526I); ELX 

Futures, L.P. (rule IV–16(c)); Eris Exchange, LLC 

(rule 601(b)(10)); Green Exchange, LLC (rule 602(a) 

and (j)); ICE Futures (rule 4.31(a)(i)); Nasdaq OMX 

Futures Exchange, Inc., (rule E23(d)); New York 

Mercantile Exchange, Inc. (rule 526I); NYSE Liffe 

US, LLC (rule 423(a)(ii)); and OneChicago LLC 

Futures Exchange (rule 417(a)(ii)). 

30See 5 U.S.C. 601 et seq. 

31See Whitman v. Am. Trucking Ass’ns, 531 U.S. 

457 (2001); Am. Trucking Assns. v. EPA, 175 F.3d 

1027, 1043 (D.C. Cir. 1985); Mid-Tex Elec. Coop., 

Inc. v. FERC, 773 F.2d 327, 340 (DC Cir. 1985). 

liquidity.26 By preventing aggregation of 

orders to meet the cap size requirement, 

the proposed rule will help to ensure 

that cap sizes are used for the specific 

purpose for which they are intended 

(extraordinarily large positions), and 

will help to prevent potential 

circumvention of the real-time reporting 

obligations. 

The proposed rule further provides 

that aggregation of orders for different 

trading accounts for purposes of the 

block size or cap size requirements may 

be permitted on a DCM or SEF if done 

by a person who: (i)(A) Is a CTA who 

is registered pursuant to Section 4n of 

the Act or is exempt from registration 

under the Act, or a principal thereof, 

and has discretionary trading authority 

or directs client accounts, (B) is an 

investment adviser who has 

discretionary trading authority or 

directs client accounts and satisfies the 

criteria of § 4.7(a)(2)(v) of the 

Commission’s regulations, or (C) is a 

foreign person who performs a similar 

role or function to the persons described 

in (A) or (B) and is subject as such to 

foreign regulation, and (ii) has more 

than $25,000,000 in total AUM. As 

noted above, DCMs that permit block 

trading in connection with futures 

contracts currently prohibit aggregation 

of orders to meet the block size 

requirement, and a majority of these 

DCMs have substantially similar rules 

that allow aggregation in such context if 

done by certain CTAs, investment 

advisers and foreign persons.27

The Commission is seeking comments 

on whether this exception to the 

prohibition of aggregation of orders is 

appropriate in the context of the swaps 

market. The Commission seeks 

comments on whether such an 

exception should be available to other 

categories of Commission registrants, 

and if so, why? Additionally, the 

Commission seeks comments on 

whether the $25 million AUM 

requirement for the specified account 

controllers is appropriate in the context 

of block transactions for swaps? Further, 

the Commission seeks comments on 

whether the $25 million AUM 

requirement should include only swaps 

assets, or be based per asset class, or be 

different for the five asset classes of 

swaps? In addition to these specific 

questions, the Commission requests 

comments on all aspects of this notice 

of proposed rulemaking. 

B. Proposed § 43.6(i)—Eligible Block 

Trade Parties 

The Commission is also proposing 

under new § 43.6(i)(1) a provision that 

describes the eligible parties to a block 

trade. The proposed provision provides 

that parties to a block trade must be 

‘‘eligible contract participants,’’ as that 

term is defined under Section 1a(18) of 

the CEA and the Commission’s 

regulations. The proposed rule includes 

an exception to the ECP requirement by 

providing that a DCM may allow: (i) A 

CTA registered pursuant to Section 4n 

of the Act, or exempt from registration 

under the Act, or a principal thereof, 

who has discretionary trading authority 

or directs client accounts, (ii) an 

investment adviser who has 

discretionary trading authority or 

directs client accounts and satisfies the 

criteria of § 4.7(a)(2)(v) of the 

Commission’s regulations, or (iii) a 

foreign person who performs a similar 

role or function to the persons described 

in (i) or (ii) and is subject as such to 

foreign regulation, to transact block 

trades for customers who are not ECPs, 

if such CTA, investment adviser or 

foreign person has more than 

$25,000,000 in total AUM.28

In the current futures market, all 

DCMs require that parties to block 

trades must be ECPs. A majority of these 

DCMs permit certain CTAs, investment 

advisers and foreign persons to transact 

a block trade on behalf of their non-ECP 

customers. The proposed rule, including 

the limited exception, is currently 

reflected in the rulebooks of numerous 

DCMs that permit block trading in the 

futures market.29

Proposed § 43.6(i)(2) further provides 

that a person transacting a block trade 

on behalf of a customer must receive 

prior written instruction or consent 

from the customer to do so. Such 

instruction or consent may be provided 

in a power of attorney or similar 

document by which the customer 

provides the person with discretionary 

trading authority or the authority to 

direct the trading in its account. This 

rule also is substantially similar to the 

block trading rules maintained by 

existing DCMs. 

III. Related Matters 

A. Regulatory Flexibility Act 

The Regulatory Flexibility Act 

(‘‘RFA’’) requires that agencies consider 

whether the rules they propose will 

have a significant economic impact on 

a substantial number of small entities 

and, if so, provide a regulatory 

flexibility analysis respecting the 

impact.30 The RFA focuses on direct 

impact to small businesses and not on 

indirect impacts on these businesses, 

which may be tenuous and difficult to 

discern.31 The CFTC believes that this 

proposal would not have a significant 

economic impact on a substantial 

number of small entities. 

1. Effect of the Proposed Rulemaking 

This release proposes a rule that 

would prohibit the aggregation of orders 

for different trading accounts in order to 

satisfy the minimum block size, or cap 

size requirement. The proposed rule 

further provides that aggregation is 

permissible if done on a DCM or SEF by 

a person who: (i)(A) Is a CTA who is 

registered pursuant to Section 4n of the 

Act, or is exempt from registration 

under the Act, or a principal thereof, 

and has discretionary trading authority 

or directs client accounts, (B) is an 

investment adviser who has 

discretionary trading authority or 

directs client accounts and satisfies the 

criteria of § 4.7(a)(2)(v) of the 

Commission’s regulations, or (C) is a 

foreign person who performs a similar 

role or function to the persons described 

in (A) or (B) and is subject as such to 

foreign regulation, and (ii) has more 

than $ 25,000,000 in total AUM. 


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32See, respectively and as indicated, 47 FR 

18618, 18619, Apr. 30, 1982 (DCMs, CPOs, FCMs, 

and large traders); and, 66 FR 20740, 20743, 

Apr. 25, 2001 (ECPs). 

33See respectively, Registration of Swap Dealers 

and Major Swap Participants, 77 FR 2613, 2620 

(Jan. 19, 2012) (swap dealers and major swap 

participants); Requirements for Derivatives Clearing 

Organizations, Designated Contract Markets, and 

Swap Execution Facilities Regarding the Mitigation 

of Conflicts of Interest, 75 FR 63732, 63746 

(Oct. 18, 2010) (SEFs); Further Definition of 

‘‘Swap,’’ ‘‘Security-Based Swap,’’ and ‘‘SecurityBased Swap Agreement’’; Mixed Swaps; SecurityBased Swap Agreement Recordkeeping, 76 FR 

29818, 29868 (May 23, 2011) (Products). 

34See supra note 32. 

35The Commission may determine on a case-bycase basis whether CTAs are not small entities for 

the purpose of the RFA based upon a case by case 

determination. See 47 FR 18618, 18620 (Apr. 30, 

1982). 

36ECPs have been determined not to be small 

entities. See 66 FR 20740, 20743 (Apr. 25, 2001). 

37See 44 U.S.C. 3501. 

38 44 U.S.C. 3502.3(A)(i). 

39See 5 CFR 1320.3(c)(1). 

This release also proposes under new 

§ 43.6(i)(1) a provision that describes the 

eligible parties to a block trade. The 

proposed rule provides that parties to a 

block trade must be ‘‘eligible contract 

participants,’’ as that term is defined 

under Section 1a(18) of the CEA and the 

Commission’s regulations. The 

proposed rule further provides that a 

DCM may allow: (i) A CTA who is 

registered pursuant to Section 4n of the 

Act, or exempt from registration under 

the Act, or a principal thereof, who has 

discretionary trading authority or 

directs client accounts, (ii) an 

investment adviser who has 

discretionary trading authority or 

directs client accounts and satisfies the 

criteria of § 4.7(a)(2)(v) of the 

Commission’s regulations, or (iii) a 

foreign person who performs a similar 

role or function to the persons described 

in (i) or (ii) and is subject as such to 

foreign regulation, to transact block 

trades on behalf of their customers who 

are not eligible contract participants, if 

such CTA, investment adviser or foreign 

person has more than $25,000,000 in 

total AUM. 

The CFTC is of the view that this 

proposal may affect primarily the 

following entities: DCMs, futures 

commission merchants (‘‘FCMs’’), ECPs, 

swap dealers, major swap participants, 

certain CTAs, SEFs and certain 

investment advisers. The majority of 

entities impacted by this proposed 

rulemaking have been determined by 

the Commission not to be small entities. 

To the extent that a small number of 

small entities may be affected by the 

proposed rules, the Commission 

believes, as described below, that the 

proposed rules would not have a 

significant economic impact on a 

substantial number of such entities. 

2. Specific Entities That May Be Small 

Entities 

As noted above, the Commission has 

previously determined that DCMs, 

FCMs, and ECPs are not small entities 

for purposes of the Regulatory 

Flexibility Act.32 Certain other entities 

that may be affected by this rulemaking, 

including SDs, MSPs and SEFs, have 

been certified by the Commission not to 

be small entities in other recent 

rulemakings implementing the 

requirements of the Dodd-Frank Act.33

a. Entities affected under § 43.6(h)(6): 

FCMs, CTAs, and investment advisers. 

As noted above, the CFTC previously 

has determined that registered FCMs are 

not small entities for purposes of the 

RFA based upon, among other things, 

the registration requirements that FCMs 

must meet, including certain minimum 

financial requirements that enhance the 

protection of customers’ segregated 

funds and protect the financial 

condition of FCMs generally.34 With 

respect to certain CTAs 35 and 

investment advisers who would not be 

permitted to aggregate under the 

proposed rule, the Commission notes 

that the same provisions embodied in 

the proposed rule are currently required 

by DCM rules (under rules accepted by 

the Commission) and thus, such entities 

currently must comply with the same 

aggregation prohibition. Thus, all DCMs 

that permit aggregation for purposes of 

the block size requirement, only permit 

aggregation by CTAs, investment 

advisers and foreign persons that have 

more than $25,000,000 in total AUM. 

Accordingly, the Commission believes 

that this rule does not impact entities 

that heretofore have not been able to 

aggregate. To the extent that certain 

CTAs and investment advisers with less 

than $25,000,000 AUM are not currently 

permitted to aggregate, the 

Commission’s codification of these rules 

would not have any significant 

economic impact on a substantial 

number of small entities. 

b. Entities affected under § 43.6(i)(1): 

Certain non-ECP participants on DCMs, 

certain investment advisors, and FCMs. 

New § 43.6(i)(1) provides that parties 

to a block trade must be ‘‘eligible 

contract participants,’’ 36 as that term is 

defined under Section 1a(18) of the CEA 

and § 1.3 of the Commission’s 

regulations, except for certain CTAs, 

investment advisers or foreign persons 

performing a similar role or function 

having more than $25,000,000 in total 

AUM, which may transact block trades 

for customers who are not ECPs. As 

indicated above, certain CTAs and 

investment advisers that have less than 

$25,000,000 in AUM would not be 

covered under the proposed rule 

because the provision embodied in the 

proposed rule is substantially the same 

as is currently required by DCM rules 

(under rules accepted by the 

Commission). Similarly, any non-ECP 

participants who trade on DCMs also 

would be prohibited under current DCM 

rules from directly entering into a block 

transaction unless their qualifying CTA, 

investment adviser, or foreign person 

acts on their behalf. To the extent that 

these entities are not currently 

permitted to aggregate, the 

Commission’s codification of these rules 

would not have any 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 proposed 

rules will not have a significant 

economic impact on a substantial 

number of small businesses. 

Nonetheless, the Commission 

specifically requests comment on the 

economic impact that this notice of 

proposed rulemaking may have on small 

entities. 

B. Paperwork Reduction Act 

The purposes of the Paperwork 

Reduction Act of 1995, 44 U.S.C. 3501 

et seq. (‘‘PRA’’) are, among other things, 

to minimize the paperwork burden to 

the private sector, ensure that any 

collection of information by a 

government agency is put to the greatest 

possible uses, and minimize duplicative 

information collections across the 

government.37 The PRA applies to all 

information, ‘‘regardless of form or 

format,’’ that a government is 

‘‘obtaining, causing to be obtained, [or] 

soliciting’’ and requires ‘‘disclosure to 

third parties or the public, of facts or 

opinions,’’ when the information 

collection calls for ‘‘answers to identical 

reporting or recordkeeping requirements 

imposed, on ten or more persons[.]’’ 38

The PRA requirements have been 

determined to include not only 

mandatory but also voluntary 

information collections, and include 

both written and oral 

communications.39

The proposed rules would not impose 

any new recordkeeping or information 

collection requirements, or other 

collections of information that require 

approval of the Office of Management 

and Budget (‘‘OMB’’) under the PRA. 

The proposed rules are covered by 

existing collection requirements and 

would not change existing collection 


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40See 77 FR 1182 (Jan. 9, 2012), as amended by 

the Further Proposal. OMB has assigned control 

number 3038–0070 to the existing collection of 

information, which is titled ‘‘Part 43—Real-Time 

Public Reporting.’’ 

41 7 U.S.C. 19(a). 

42The Commission notes that for an initial 

interim period, as outlined in § 43.5 of the Adopting 

Release, all transactions will be treated as block 

trades and will enjoy delayed reporting temporarily. 43WMBA comment letter at 4–5 (Feb. 7, 2011). 

requirements.40 The Commission invites 

public comment on the accuracy of its 

estimate that no additional 

recordkeeping or information collection 

requirements or changes to existing 

collection requirements would result 

from the rules proposed herein. 

C. Cost-Benefit Considerations 

Section 15(a) of the CEA 41 requires 

the Commission to consider the costs 

and benefits of its actions before 

promulgating a regulation or issuing an 

order under the CEA. Section 15(a) 

further specifies that the costs and 

benefits shall be evaluated in light of the 

following five broad areas of market and 

public concern: (1) Protection of market 

participants and the public; (2) 

efficiency, competitiveness, and 

financial integrity of futures markets; (3) 

price discovery; (4) sound risk 

management practices; and (5) other 

public interest considerations. The 

Commission considers the costs and 

benefits resulting from its discretionary 

determinations with respect to the 

Section 15(a) factors. 

The baseline for the Commission’s 

assessment of costs and benefits 

attributable to its discretionary actions 

in this rulemaking is the costs and 

benefits that would otherwise exist 

today (i.e., post-Dodd-Frank Act 

enactment) absent this Commission 

action. The Commission recognizes that 

before the Dodd-Frank Act, swap 

transactions were executed over-thecounter and were not publicly reported. 

One of the implications of the DoddFrank Act is that most swap transactions 

are required to be publicly disseminated 

by SDRs as soon as technologically 

practicable, unless the notional value of 

the swap transaction meets the 

minimum block trade threshold.42 That 

is the baseline for the Commission’s 

proposed assessment of costs and 

benefits in this release. The Commission 

proposes that costs and benefits with 

respect to block trade thresholds are 

already accounted for in the Further 

Proposal and that this rule only 

considers the additional costs and 

benefits relevant to proposed 

§ 43.6(h)(6) and proposed § 43.6(i). 

1. Costs and Benefits Relevant to 

Proposed § 43.6(h)(6)—Aggregation 

The Commission is proposing 

§ 43.6(h)(6) to specify that, except as 

otherwise provided, it is impermissible 

to aggregate orders for different accounts 

in order to satisfy minimum block trade 

or cap size requirements. The proposed 

rule further provides that aggregation 

may be permitted on a DCM or SEF if 

done by a person who: (i)(A) Is a CTA 

who is registered pursuant to Section 4n 

of the Act or is exempt from registration 

under the Act, or a principal thereof, 

and has discretionary trading authority 

or directs client accounts, (B) is an 

investment adviser who has 

discretionary trading authority or 

directs client accounts and satisfies the 

criteria of § 4.7(a)(2)(v) of the 

Commission’s regulations, or (C) is a 

foreign person who performs a role or 

function similar to the persons 

described in (A) or (B) and is subject as 

such to foreign regulation, and (ii) has 

more than $25,000,000 in total AUM. 

Costs 

The Commission expects that there 

will be some incremental cost attendant 

to compliance with proposed 

§ 43.6(h)(6), and seeks data from the 

public in order to quantify the same. 

The Commission believes that the 

overall benefits to the market of 

allowing for the aggregation of orders 

under certain circumstances (i.e., if 

done on a designated contract market or 

a swap execution facility by certain 

CTAs, investment advisers or foreign 

persons) will mitigate costs of reduced 

market liquidity that could result from 

execution of such transactions away 

from the centralized marketplace. The 

Commission also expects there to be 

some advisors who will be prohibited 

from aggregating orders for different 

trading accounts in order to satisfy the 

minimum block size, or cap size 

requirements. The Commission also 

proposes that as a result of some 

advisors not being allowed to aggregate, 

there might be some minimal 

unquantifiable cost associated with a 

decrease in competition among such 

traders in the market. The Commission 

seeks comment on these and any other 

costs that may result from this proposal. 

In particular, and as noted above, the 

WMBA claimed in its comment letter 

that ‘‘work-up’’ or ‘‘join-the-trade’’ 

periods be permitted to satisfy the block 

trade requirements, and that ‘‘the public 

dissemination of incremental activity 

that would otherwise constitute a block 

trade could jeopardize identification of 

counterparties and materially reduce 

market liquidity.’’ 43 The Commission 

seeks comment on the costs and benefits 

of the rules proposed in this release 

with respect to the specific implications 

claimed by WMBA. 

Benefits 

The proposed rule is designed, in 

large part, to prevent circumvention of 

the exchange trading requirements and 

of the real-time reporting obligations 

associated with non-block transactions. 

Absent this prohibition, the goals of the 

Commission’s regulations regarding 

block trading, namely increased 

transaction transparency, better price 

discovery and improved 

competitiveness in the markets as well 

as better risk management, could be 

frustrated by those whose trades 

individually fail to meet the minimum 

block trade threshold (and cap size 

threshold as a result), but nevertheless 

achieve the benefits intended for 

extraordinarily large positions by 

aggregating those individual trades. In 

other words, such entities would be able 

to evade the exchange-trading and 

reporting obligations that are integral to 

price transparency. The Commission 

seeks comment on these and any other 

benefits that may result from this 

proposal. 

Section 15(a) Factors 

(1) Protection of market participants 

and the public. 

The Commission believes that the 

proposed rule would protect market 

participants from unfair practices by 

preventing trades that do not meet the 

minimum block trade threshold from 

enjoying extended reporting times. This 

requirement would mean that trades 

that are not extraordinarily large, and 

hence, that do not need extra reporting 

time would not qualify as block trades 

and would be made public as soon as 

technologically practicable. Hence, the 

proposed rule would increase 

transparency of non-block transactions, 

and thus, would protect market 

participants by informing their trading 

determinations through increased 

transparency and price discovery. 

(2) Efficiency, competitiveness, and 

financial integrity of the futures 

markets. 

The Commission expects the 

prohibition of aggregation of trades to 

improve efficiency and competitiveness 

in the markets by allowing more trades 

to be reported without the time delay 

that is applied to qualifying block 

trades. This requirement would mean 

that a higher number of trades would be 

eligible for real time reporting, and that 


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44Using wage rate estimates based on salary 

information for the securities industry compiled by 

the Securities Industry and Financial Markets 

Association (‘‘SIFMA’’), the estimate is calculated 

as follows: Compliance manager at 2 hours. A 

senior programmer’s adjusted hourly wage is 

$77.77, estimated using the following calculations: 

(1) [(2009 salary + bonus) * (salary growth per 

professional type, 2009–2010)] = Estimated 2010 

total annual compensation. The most recent data 

provided by the SIFMA report describe the 2009 

total compensation (salary + bonus) by professional 

type, the growth in base salary from 2009 to 2010 

for each professional type, and the 2010 base salary 

for each professional type; thus, the Commission 

estimated the 2010 total compensation for each 

professional type, but, in the absence of similarly 

granular data on salary growth or compensation 

from 2010 to 2011 and beyond, did not estimate 

dollar costs beyond 2010. 

(2) [(Estimated 2010 total annual compensation)/ 

(1,800 annual work hours)] = Hourly wage per 

professional type. 

(3) [(Hourly wage) * (Adjustment factor for 

overhead and other benefits, which the Commission 

has estimated to be 1.3)] = Adjusted hourly wage 

per professional type. 

(4) [(Adjusted hourly wage) * (Estimated hour 

burden for compliance)] = Dollar cost of compliance 

for each hour burden estimate per professional type. 

would increase market transparency as 

well as promote competition in the 

swap markets. The rule also would 

protect the integrity of the derivatives 

market by ensuring that smaller trades, 

which do not qualify as block 

transactions, are executed on the trading 

system where there is pre-trade and 

post-trade transparency. 

The Commission also recognizes that 

advisors who are prohibited from 

aggregating orders in order to satisfy the 

minimum block size or cap size 

requirements might not trade at the 

most favorable prices in the market, 

which might have a negative effect on 

the number of such traders in the 

market. While the Commission expects 

that competition in the market may be 

negatively affected as a result of 

prohibiting aggregation, the Commission 

anticipates that the positive effects of 

the proposed rule on competition 

outweigh its negative effects. 

(3) Price discovery. 

The Commission expects the 

proposed rule to improve price 

discovery in the swap markets by 

preventing aggregation of trades and as 

a result promoting more trades to be 

publicly reported as soon as 

technologically practicable. This would 

result in enhanced swap market price 

discovery, since market participants and 

the public would be able to observe realtime pricing information for a higher 

percentage of transactions in the market. 

In addition, the Commission expects 

that the rule would enhance price 

discovery by ensuring that smaller 

trades, which do not qualify as block 

transactions, are executed on the trading 

system where there is pre-trade and 

post-trade transparency and where 

buyers and sellers may make informed 

trading decisions based on the market’s 

transparency. 

(4) Sound risk management practices. 

The Commission anticipates that the 

proposed criteria, if adopted, would 

likely result in enhanced price 

discovery as discussed above. With 

better and more accurate data, swap 

market participants would likely be 

better able to measure and manage risk. 

The Commission proposes that if the 

prohibition of aggregation of trades was 

not adopted, swap transactions may not 

be reported to an SDR ‘‘as soon as 

technologically practicable.’’ The 

Commission also proposes that by 

preventing this delay in the reporting 

period of a swap transaction to an SDR, 

the Commission will possess the 

information it needs to monitor the 

transfer and positions of risk among 

counterparties in the swaps market. 

(5) Other public interest 

considerations. 

The Commission has not identified 

any other public interest considerations 

regarding the proposed rule. 

2. Costs and Benefits Relevant to 

Proposed § 43.6(i)—Eligible Block Trade 

Parties 

Costs 

Proposed § 43.6(i)(1) requires that 

parties to a block trade must be eligible 

contract participants, as defined under 

the CEA and Commission regulations, 

except that a DCM may allow: (i) A CTA 

registered pursuant to Section 4n of the 

Act or exempt from registration under 

the Act, or a principal thereof, and who 

has discretionary trading authority or 

directs client accounts, (ii) an 

investment adviser who has 

discretionary trading authority or 

directs client accounts and satisfies the 

criteria of § 4.7(a)(2)(v) of the 

Commission’s regulations, or (iii) a 

foreign person who performs a similar 

role or function to the persons described 

in (i) or (ii) and is subject as such to 

foreign regulation, to transact block 

trades for customers who are not eligible 

contract participants, if such CTA, 

investment adviser or foreign person has 

more than $25,000,000 in total AUM. 

This proposed rule codifies, in part, the 

requirement under Section 2(e) of the 

CEA, which requires that ‘‘[i]t shall be 

unlawful for any person, other than an 

eligible contract participant, to enter 

into a swap unless the swap is entered 

into on, or subject to the rules of * * * 

a designated contract market.’’ In 

addition, the provisions allowing 

certain entities (as described in this 

release) to enter into block trades on 

behalf of their non-ECP customers on 

DCMs is substantially similar to the 

existing DCM rules that allow block 

trading in the futures market. 

Proposed § 43.6(i)(2) further provides 

that no person may conduct a block 

trade on behalf of a customer unless the 

person receives prior written instruction 

or consent to do so. The proposed rule 

further provides that such instruction or 

consent may be provided in the power 

of attorney or similar document by 

which the customer provides the person 

with discretionary trading authority or 

the authority to direct the trading in its 

account. The Commission is of the view 

that the cost associated with the written 

instruction or consent is minimal. The 

Commission estimates that a prior 

written instruction or consent 

requirement would impose an initial 

non-recurring burden of approximately 

2 personnel hours at an approximate 

cost of $155.54 for each CTA, 

investment adviser or foreign person.44

Benefits 

The Commission has determined that 

the benefits of proposed § 43.6(i) are 

significant. The proposed rule, if 

adopted, would allow customers who 

are not ECPs to engage in block trade 

transactions through certain entities as 

outlined in the rule. By permitting 

certain CTAs, investment advisers and 

foreign persons to transact swaps on 

behalf of non-ECP customers, the rule 

provides important safeguards for nonECPs when entering into block 

transactions in swaps. The Commission 

believes that access to block trades 

would allow customers who are not 

ECPs to diversify their risk or improve 

their investment strategies. In addition, 

the Commission also anticipates the 

access to block trades for non-ECPs to 

increase their participation in swap 

markets, increasing liquidity in the 

markets for everyone. 

Section 15(a) Factors 

(1) Protection of market participants 

and the public. 

The Commission does not anticipate 

the proposed rule to have any 

significant effect on the protection of 

market participants and the public. 

(2) Efficiency, competitiveness, and 

financial integrity of the futures 

markets. 

The Commission expects the 

proposed rule to improve 

competitiveness in the markets by 

allowing customers who are not ECPs to 

have access to block trades through 

certain CTAs, investment advisers and 


emcdonald on DSK67QTVN1PROD with PROPOSALS
38236 Federal Register / Vol. 77, No. 124 / Wednesday, June 27, 2012 / Proposed Rules 

foreign persons. The Commission 

anticipates an increase in 

competitiveness due to the fact that 

more customers would use the swap 

markets as a result of this rule. An 

increased participation in a market 

would also serve to increase liquidity, 

as well as competition, in that market. 

(3) Price discovery. 

The Commission does not anticipate 

the proposed rule to have any 

significant effect on price discovery in 

the market. 

(4) Sound risk management practices. 

The Commission does not anticipate 

the proposed rule to have any 

significant effect on risk management 

practices. 

(5) Other public interest 

considerations. 

The Commission has not identified 

any other public interest considerations 

regarding the proposed rule. 

The Commission requests comments 

on its cost and benefit considerations 

with respect to the proposed rule, and 

any alternatives. The Commission 

specifically requests that commenters 

provide data from which the 

Commission may quantify the costs or 

benefits of the proposed rule. 

IV. Rule Text 

List of Subjects in 17 CFR Part 43 

Large notional off-facility trades, 

Block trades, Appropriate minimum 

block sizes, Real-time public reporting, 

Public dissemination, Cap size, 

Anonymity, Swap category. 

For the reasons stated in the 

preamble, the Commodity Futures 

Trading Commission proposes to amend 

17 CFR part 43 as set forth below: 

PART 43—[AMENDED] 

1. The authority citation for part 43 

shall continue to read as follows: 

Authority: 7 U.S.C. 2(a), 12a(5) and 24a, 

amended by Pub. L. 111–203, 124 Stat. 1376 

(2010). 

2. Add section 43.6(h)(6) to part 43 to 

read as follows: 

§ 43.6(h)(6) Aggregation. 

Except as otherwise stated in this 

paragraph, the aggregation of orders for 

different accounts in order to satisfy the 

minimum block trade size or the cap 

size requirement is prohibited. 

Aggregation is permissible on a 

designated contract market or swap 

execution facility if done by a person 

who: 

(i)(A) Is a commodity trading advisor 

registered pursuant to Section 4n of the 

Act, or exempt from registration under 

the Act, or a principal thereof, who has 

discretionary trading authority or 

directs client accounts, 

(B) Is an investment adviser who has 

discretionary trading authority or 

directs client accounts and satisfies the 

criteria of § 4.7(a)(2)(v) of this chapter, 

or 

(C) Is a foreign person who performs 

a similar role or function as the persons 

described in subparagraphs (A) or (B) 

and is subject as such to foreign 

regulation; and, 

(ii) Has more than $25,000,000 in total 

assets under management. 

3. Add Section 43.6(i) to part 43 to 

read as follows: 

§ 43.6(i) Eligible Block Trade Parties. 

(1) Parties to a block trade must be 

‘‘eligible contract participants,’’ as 

defined in Section 1a(18) of the Act and 

the Commission’s regulations. However, 

a designated contract market may allow: 

(i) A commodity trading advisor 

registered pursuant to Section 4n of the 

Act, or exempt from registration under 

the Act, or a principal thereof, who has 

discretionary trading authority or 

directs client accounts, (ii) an 

investment adviser who has 

discretionary trading authority or 

directs client accounts and satisfies the 

criteria of § 4.7(a)(2)(v) of this chapter, 

or (iii) a foreign person who performs a 

similar role or function as the persons 

described in (i) or (ii) of this paragraph 

and is subject as such to foreign 

regulation, to transact block trades for 

customers who are not eligible contract 

participants if such commodity trading 

advisor, investment adviser or foreign 

person has more than $25,000,000 in 

total assets under management. 

(2) A person transacting a block trade 

on behalf of a customer must receive 

prior written instruction or consent 

from the customer to do so. Such 

instruction or consent may be provided 

in the power of attorney or similar 

document by which the customer 

provides the person with discretionary 

trading authority or the authority to 

direct the trading in its account. 

Issued in Washington, DC, on June 20, 

2012, by the Commission. 

David A. Stawick, 

Secretary of the Commission. 

Appendix to Rules Prohibiting the 

Aggregation of Orders To Satisfy 

Minimum Block Sizes or Cap Size 

Requirements, and Establishing 

Eligibility Requirements for Parties to 

Block Trades 

Commission Voting Summary 

Note: The following appendix will not 

appear in the Code of Federal Regulations. 

On this matter, Chairman Gensler and 

Commissioners Sommers, Chilton, O’Malia 

and Wetjen voted in the affirmative; no 

Commissioner voted in the negative. 

[FR Doc. 2012–15481 Filed 6–26–12; 8:45 am] 

BILLING CODE 6351–01–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

33 CFR Part 100 

[Docket No. USCG–2012–0215] 

RIN 1625–AA08 

Special Local Regulation, Underwater 

Music Festival, Carr Inlet, Cutts Island, 

WA 

AGENCY: Coast Guard, DHS. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Coast Guard proposes to 

establish a Special Local Regulation 

(SLR) around Cutts Island located in 

Carr Inlet, WA. This SLR is necessary to 

ensure the safety of the maritime public 

during the Underwater Music Festival 

and would do so by establishing speed 

and towing restrictions, limiting the 

number of vessels permitted to raft 

together and limiting the distance 

persons are permitted to swim from 

vessels or shore. 

DATES: Comments and related material 

must be received by the Coast Guard on 

or before July 17, 2012. 

ADDRESSES: You may submit comments 

identified by docket number USCG– 

2012–0215 using any one of the 

following methods: 

(1) Federal eRulemaking Portal: 

http://www.regulations.gov. 

(2) Fax: 202–493–2251. 

(3) Mail: Docket Management Facility 

(M–30), U.S. Department of 

Transportation, West Building Ground 

Floor, Room W12–140, 1200 New Jersey 

Avenue SE., Washington, DC 20590– 

0001. 

(4) Hand delivery: Same as mail 

address above, between 9 a.m. and 

5 p.m., Monday through Friday, except 

Federal holidays. The telephone number 

is 202–366–9329. 

To avoid duplication, please use only 

one of these four methods. See the 

‘‘Public Participation and Request for 

Comments’’ portion of the 

SUPPLEMENTARY INFORMATION section 

below for instructions on submitting 

comments. 

FOR FURTHER INFORMATION CONTACT: If 

you have questions on this proposed 

rule, call or email ENS Anthony P. 


emcdonald on DSK67QTVN1PROD with PROPOSALS