Federal Register / Vol. 89, No. 42 / Friday, March 1, 2024 / Proposed Rules 15083 

1 17 CFR 145.9. The Commission’s regulations 

referred to in this release are found at 17 CFR 

chapter I (2022), available on the Commission’s 

website at https://www.cftc.gov/LawRegulation/ 

CommodityExchangeAct/index.htm. 

2See Registration of Foreign Boards of Trade, 

Final Rule, 76 FR 80674 (Dec. 23, 2011); 17 CFR 

part 48. ‘‘Direct access’’ is defined as an explicit 

grant of authority by a foreign board of trade to an 

identified member or other participant located in 

the United States to enter trades directly into the 

trade matching system of the foreign board of trade. 

CEA section 4(b)(1)(A), 7 U.S.C. 6(b)(1)(A); 17 CFR 

48.2(c). 

3See Sec. 738, Dodd-Frank Wall Street Reform 

and Consumer Protection Act, Public Law 111–203, 

Continued 

Individual means a person, entity, or 

party, whether real or fictitious, other 

than those that constitute a business or 

government under this Part. 

* * * * * 

■ 4. Add § 461.4 to read as follows: 

§ 461.4 Impersonation of Individuals 

Prohibited. 

It is a violation of this part, and an 

unfair or deceptive act or practice to: 

(a) materially and falsely pose as, 

directly or by implication, an 

individual, in or affecting commerce as 

commerce is defined in the Federal 

Trade Commission Act (15 U.S.C. 44); or 

(b) materially misrepresent, directly 

or by implication, affiliation with, 

including endorsement or sponsorship 

by, an individual, in or affecting 

commerce as commerce is defined in 

the Federal Trade Commission Act (15 

U.S.C. 44). 

■ 5. Add § 461.5 to read as follows: 

§ 461.5 Means and Instrumentalities: 

Provision of Goods or Services for Unlawful 

Impersonation Prohibited. 

It is a violation of this part, and an 

unfair or deceptive act or practice to 

provide goods or services with 

knowledge or reason to know that those 

goods or services will be used to: 

(a) materially and falsely pose as, 

directly or by implication, a government 

entity or officer thereof, a business or 

officer thereof, or an individual, in or 

affecting commerce as commerce is 

defined in the Federal Trade 

Commission Act (15 U.S.C. 44); or 

(b) materially misrepresent, directly 

or by implication, affiliation with, 

including endorsement or sponsorship 

by, a government entity or officer 

thereof, a business or officer thereof, or 

an individual, in or affecting commerce 

as commerce is defined in the Federal 

Trade Commission Act (15 U.S.C. 44). 

By direction of the Commission. 

April J. Tabor, 

Secretary. 

[FR Doc. 2024–03793 Filed 2–29–24; 8:45 am] 

BILLING CODE 6750–01–P 

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Part 48 

RIN 3038–AF37 

Foreign Boards of Trade 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Commodity Futures 

Trading Commission (CFTC or 

Commission) is proposing to amend its 

regulations to permit a foreign board of 

trade (FBOT) registered with the 

Commission to provide direct access to 

its electronic trading and order 

matching system to an identified 

member or other participant located in 

the United States and registered with 

the Commission as an introducing 

broker (IB) for submission of customer 

orders to the FBOT’s trading system for 

execution. The Commission is also 

proposing to establish a procedure for 

an FBOT to request revocation of its 

registration, and to remove certain 

outdated references to ‘‘existing noaction relief.’’ 

DATES: Comments must be received on 

or before April 22, 2024. 

ADDRESSES: You may submit comments, 

identified by ‘‘Foreign Boards of Trade’’ 

and RIN 3038–AF37, by any of the 

following methods: 

• CFTC Comments Portal: https://

comments.cftc.gov. Select the ‘‘Submit 

Comments’’ link for this rulemaking and 

follow the instructions on the Public 

Comment Form. 

• Mail: Send to Christopher 

Kirkpatrick, Secretary of the 

Commission, Commodity Futures 

Trading Commission, Three Lafayette 

Center, 1155 21st Street NW, 

Washington, DC 20581. 

• Hand Delivery/Courier: Follow the 

same instruction as for Mail, above. 

Please submit your comments using 

only one of these methods. Submissions 

through the CFTC Comments Portal are 

encouraged. 

All comments must be submitted in 

English or, if not, accompanied by an 

English translation. Comments will be 

posted as received to https://comments.

cftc.gov. You should submit only 

information that you wish to make 

available publicly. If you wish the 

Commission to consider information 

that you believe is exempt from 

disclosure under the Freedom of 

Information Act (FOIA), a petition for 

confidential treatment of the exempt 

information may be submitted according 

to the procedures established in section 

145.9 of the Commission’s regulations.1

The Commission reserves the right, 

but shall have no obligation, to review, 

pre-screen, filter, redact, refuse or 

remove any or all of your submission 

from https://comments.cftc.gov that it 

may deem to be inappropriate for 

publication, such as obscene language. 

All submissions that have been redacted 

or removed that contain comments on 

the merits of this proposed rule will be 

retained in the public comment file and 

will be considered as required under the 

Administrative Procedure Act (APA) 

and other applicable laws, and may be 

accessible under FOIA. 

FOR FURTHER INFORMATION CONTACT: 

Alexandros Stamoulis, Associate 

Director, Division of Market Oversight, 

Commodity Futures Trading 

Commission, (646) 746–9792, 

astamoulis@cftc.gov, 290 Broadway, 6th 

Floor, New York, NY 10007; Roger 

Smith, Associate Chief Counsel, 

Division of Market Oversight, 

Commodity Futures Trading 

Commission, (202) 418–5344, rsmith@

cftc.gov, 77 West Jackson Blvd., Suite 

800, Chicago, IL 60604; Maura Dundon, 

Special Counsel, (202) 418–5286, 

mdundon@cftc.gov, Commodity Futures 

Trading Commission, Division of 

Market Oversight, Three Lafayette 

Centre, 1151 21st Street NW, 

Washington, DC 20581. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Background 

II. The Proposed Amendments 

A. Section 48.4—Registration Eligibility 

and Scope 

B. Section 48.8—Conditions of Registration 

C. Section 48.9—Revocation of Registration 

D. Section 48.6—Foreign Boards of Trade 

Providing Direct Access Pursuant to 

Existing No-Action Relief 

III. Related Matters 

A. Regulatory Flexibility Act 

B. Paperwork Reduction Act 

C. Cost Benefit Considerations 

I. Background 

Under part 48 of the Commission’s 

regulations, an FBOT must be registered 

with the Commission in order to 

provide its members or other 

participants located in the United States 

with direct access to its electronic 

trading and order matching system.2

Part 48 is authorized by section 738 of 

the Dodd-Frank Act, which amended 

section 4(b) of the Commodity Exchange 

Act (CEA), to provide that the 

Commission may adopt rules and 

regulations requiring FBOTs that wish 

to provide U.S. persons with direct 

access to register with the Commission.3


ddrumheller on DSK120RN23PROD with PROPOSALS1
15084 Federal Register / Vol. 89, No. 42 / Friday, March 1, 2024 / Proposed Rules 

124 Stat. 1376, 1726–1728 (2010) (codified at 7 

U.S.C. 6(b)). 

4See 76 FR 80674 at 80674–80675. 

5 Intermediaries are entities that act on behalf of 

another person with respect to a trade. They are 

generally required to register with the Commission 

and, depending on the nature of their activities, 

may be subject to various financial, disclosure, 

reporting, and recordkeeping requirements. 

6 IB is defined, subject to certain exclusions and 

additions, in CEA section 1a(31) as any person 

(except an individual who elects to be and is 

registered as an associated person of a futures 

commission merchant) (i) who (I) is engaged in 

soliciting or in accepting orders for (aa) the 

purchase or sale of any commodity for future 

delivery, security futures product, or swap; (bb) any 

agreement, contract, or transaction described in 

section 2(c)(2)(C)(i) or section 2(c)(2)(D)(i); (cc) any 

commodity option authorized under section 4c; or 

(dd) any leverage transaction authorized under 

section 19; and (II) does not accept any money, 

securities, or property (or extend credit in lieu 

thereof) to margin, guarantee, or secure any trades 

or contracts that result or may result therefrom; or 

(ii) who is registered with the Commission as an IB. 

7 U.S.C. 1a(31). IB is further defined, subject to 

certain exclusions and additions, in Commission 

regulation 1.3(mm) as (1) Any person who, for 

compensation or profit, whether direct or indirect: 

(i) Is engaged in soliciting or in accepting orders 

(other than in a clerical capacity) for the purchase 

or sale of any commodity for future delivery, 

security futures product, or swap; any agreement, 

contract or transaction described in section 

2(c)(2)(C)(i) or section 2(c)(2)(D)(i) of the CEA; any 

commodity option transaction authorized under 

section 4c; or any leverage transaction authorized 

under section 19; or who is registered with the 

Commission as an IB; and (ii) Does not accept any 

money, securities, or property (or extend credit in 

lieu thereof) to margin, guarantee, or secure any 

trades or contracts that result or may result 

therefrom. 17 CFR 1.3(mm). IBs are subject to 

registration with the Commission under CEA 

section 4d(g) and Commission regulation 3.4(a). 7 

U.S.C. 6d(g) and 17 CFR 3.4(a). 

7The term ‘‘eligible IB’’ is used in this release to 

mean an IB that is located in the United States and 

registered with the Commission as an IB. Direct 

access, as defined in the CEA and part 48, refers 

explicitly to members or other participants of an 

FBOT that are located in the United States. See 

footnote 2, supra. For purposes of this rulemaking 

and as used herein, the terms ‘‘U.S. customer’’ and 

‘‘United States customer’’ refer to customers located 

in the United States, its territories or its 

possessions. 

8See footnote 14, infra, and accompanying text. 

9Under § 48.2(l), member or other participant is 

defined as a member or other participant of an 

FBOT and any affiliate thereof that has been granted 

direct access by the FBOT. 17 CFR 48.2(l). 

Proprietary account is defined in § 1.3, 17 CFR 1.3. 

10A § 30.10 exemptive order permits firms 

subject to regulation by a foreign regulator to 

conduct business from locations outside of the U.S. 

for U.S. persons on FBOTs without registering as 

FCMs, based upon the firm’s substituted 

compliance with a foreign regulatory structure 

found comparable to that administered by the 

Commission under the CEA. Used herein, U.S. 

commodity pool refers to a commodity pool that 

does not meet the criteria set forth in 

§ 3.10(c)(5)(iii)(A) through (F), 17 CFR 

3.10(c)(5)(iii)(A) through (F). 

11The proposed addition of the words ‘‘registered 

as such’’ here is intended as a technical change 

rather than a substantive change; i.e., that the 

reference is intended to refer to registered FCMs is 

already implied by the subsequent clause ‘‘or a firm 

exempt from such registration . . .’’ 

Prior to enactment of the part 48 FBOT 

registration procedures in 2011, FBOTs 

relied on no-action letters that were 

requested by the FBOT and granted by 

Commission staff in order to provide 

direct access to U.S. persons.4

Part 48 provides the procedures, 

requirements, and conditions to be met 

by FBOTs that seek to provide their 

members and other participants in the 

U.S. with direct access to the FBOT’s 

trade matching system. The regulations 

set forth, among other things, 

procedures an FBOT must follow in 

applying for registration, requirements 

that an FBOT must meet in order to 

obtain registration, conditions that an 

FBOT must satisfy on a continuing basis 

upon obtaining registration, and 

provisions for the termination of 

registration. 

The Commission has not amended 

part 48 since it was first promulgated in 

2011. Based on the Commission’s 

experience engaging with registered 

FBOTs and applying part 48 over the 

ensuing years, the Commission is 

proposing certain amendments to the 

regulation. The proposed amendments 

are limited in scope and would not 

change the overall registration structure 

or framework of part 48. Rather, the 

proposal would amend § 48.4 to 

broaden the types of intermediaries 

eligible for direct access for submission 

of customer orders to the FBOT to 

include IBs registered with the 

Commission as such and located in the 

United States.5 An IB is generally 

defined as an individual or organization 

that solicits or accepts orders to buy or 

sell futures contracts, commodity 

options, retail off-exchange forex or 

commodity contracts, or swaps, but 

does not accept money or other assets 

from customers to support these orders.6

Currently, § 48.4 only includes certain 

futures commission merchants (FCMs), 

commodity pool operators (CPOs), and 

commodity trading advisors (CTAs) as 

intermediaries that are eligible for 

entering orders on behalf of customers 

or commodity pools (in the case of 

CPOs) via direct access on a registered 

FBOT. 

In addition, the proposed 

amendments would amend § 48.9 to 

provide registered FBOTs with a 

procedure to request revocation of their 

FBOT registration. Further, the 

Commission proposes to delete § 48.6, 

which provides for an alternate 

registration procedure for FBOT’s acting 

under the preexisting staff no-action 

letter process, because such no-action 

letter process and no-action letters are 

no longer in effect. 

II. Proposed Amendments 

A. Section 48.4—Registration Eligibility 

and Scope 

The Commission proposes to amend 

§ 48.4(b) to permit FBOTs to provide 

direct access to eligible IBs to enter 

orders directly into an FBOT’s trading 

and order matching system on behalf of 

U.S. customers.7 Section 48.4(b) 

identifies the types of members or other 

participants located in the U.S. that may 

enter orders directly into the trading 

and order matching system of a 

registered FBOT, and the types of 

accounts for which orders may be 

submitted by such members or other 

participants. In this regard, the types of 

members or other participants currently 

identified in § 48.4(b) represent the 

types of members or other participants 

that were trading via direct access on 

FBOTs that operated in reliance on 

CFTC staff no-action letters at the time 

part 48 was promulgated.8 Specifically, 

§ 48.4(b)(1) provides that any member or 

other participant located in the U.S. 

may enter orders for their proprietary 

accounts.9 Further, § 48.4(b)(2) provides 

that registered FCMs may submit orders 

on behalf of their customers. Section 

48.4(b)(3) permits certain CPOs to 

submit orders on behalf of U.S. 

commodity pools and certain CTAs to 

submit orders on behalf of U.S. 

customers provided, however, all trades 

by the CPO or CTA effected through 

submission of such orders are 

guaranteed by a registered FCM or a 

firm exempt from FCM registration 

pursuant to § 30.10.10 The Commission 

proposes to amend § 48.4(b), by 

inserting a new paragraph (b)(4) to 

provide that eligible IBs may submit 

orders on behalf of their customers— 

subject to the same condition now in 

place for CPOs and CTAs submitting 

orders on behalf of U.S. commodity 

pools or U.S. customers: all trades 

effected through submission of U.S. 

customer orders must be guaranteed by 

a registered FCM or a firm exempt from 

FCM registration pursuant to § 30.10. 

The Commission also proposes to 

amend paragraph (b)(3) to insert the 

words ‘‘registered as such’’ following 

‘‘futures commission merchant’’ to 

clarify that the reference is limited to 

FCMs registered with the Commission 

as such.11

Direct access is defined in the CEA 

and part 48 of the Commission’s 

regulations to mean an explicit grant of 

authority by an FBOT to an identified 

member or other participant located in 

the U.S. to enter trades directly into the 


ddrumheller on DSK120RN23PROD with PROPOSALS1
Federal Register / Vol. 89, No. 42 / Friday, March 1, 2024 / Proposed Rules 15085 

12CEA section 4(b)(1)(A), 7 U.S.C. 6(b)(1)(A); 17 

CFR 48.2(c). 

13Conversely, a person located in the U.S. who 

accesses an FBOT through an intermediary 

(whether such intermediary is located in the United 

States or not) and without an explicit grant of 

authority by the FBOT (i.e., such person is not an 

identified member or other participant of the FBOT) 

would not meet the definition of ‘‘direct access’’ for 

purposes of part 48. See, e.g., 76 FR 80674 at 80688. 

14Registration of Foreign Boards of Trade, Notice 

of Proposed Rulemaking, 88 FR 61432, 70977 (Nov. 

19, 2010). See also, Q & A—Final Rule on 

Registration of Foreign Boards of Trade, What 

entities will be eligible to trade via direct access 

from the U.S.?, available at https://www.cftc.gov/ 

sites/default/files/idc/groups/public/@newsroom/ 

documents/file/fbot_qa_final.pdf (‘‘[t]he registration 

regulations identify the types of entities to which 

a registered FBOT could grant direct access: 

identified members and other participants that 

trade for their proprietary accounts; FCMs that 

submit orders on behalf of U.S. customers; and 

CPOs or CTAs, or entities exempt from such 

registration, that submit orders on behalf of U.S. 

pools or for accounts of U.S. customers for which 

they have discretionary authority. This is consistent 

with the existing no-action relief.’’); and Fact Sheet, 

Final Rules Regarding the Registration of Foreign 

Boards of Trade, available at https://www.cftc.gov/ 

sites/default/files/idc/groups/public/@newsroom/ 

documents/file/fbot_factsheet_final.pdf. 

15 88 FR 61432 at 70977. 

16 Including the proposed provision relating to 

the guarantee of U.S. customer trades in proposed 

new § 48.4(b)(4) would ensure that U.S. customer 

trades executed by eligible IBs via direct access are 

guaranteed by a firm that is registered as an FCM 

or exempt from FCM registration under § 30.10. In 

so doing, the proposed rule would act to reinforce 

adherence with part 30, insofar as part 30 generally 

requires intermediaries holding funds of U.S. 

customers in connection with the offer or sale of 

foreign futures and options contracts to be 

registered as FCMs or exempt from FCM registration 

under § 30.10. Part 30 of the Commission’s 

regulations governs the offer and sale of foreign 

futures and options contracts to customers located 

in the United States. These regulations are designed 

to carry out Congress’s intent that foreign futures 

and foreign options products offered or sold in the 

U.S. be subject to regulatory safeguards comparable 

to those applicable to domestic transactions. 

Section 30.4 of the Commission’s regulations 

requires that in order to accept any money, 

securities or property (or extend credit in lieu 

thereof) to margin, guarantee or secure transactions 

conducted by U.S. persons on an FBOT, a person 

must be registered as an FCM. See 17 CFR 30.4(a). 

The Commission may grant and has granted 

exemptions to this requirement to register as an 

FCM based on petitions filed pursuant to 17 CFR 

30.10. See footnote 10, supra. 

17Section 30.6 of the Commission’s regulations 

requires FCMs and IBs to provide a statement to 

customers disclosing the risks of trading foreign 

futures and options outside the United States. 17 

CFR 30.6. This requirement also applies to exempt 

foreign IBs, CPOs, and CTAs. 17 CFR 30.5(c). 

Petitions for exemptive relief under § 30.10 for 

firms seeking an exemption from FCM registration 

must demonstrate that such firms are subject to a 

comparable regulatory program that includes, 

among other elements, minimum sales practice 

standards, including disclosure of the risks of 

futures and options transactions and, in particular, 

the risk of transactions undertaken outside the 

jurisdiction of domestic law. 17 CFR part 30, 

appendix A, Sales Practice Standards. 

trade matching engine of the FBOT.12

This means that the FBOT itself, as 

opposed to its members or participants, 

has identified and permitted a member 

or participant to enter trades directly 

into the FBOT’s order matching and 

trade entry system from the United 

States.13 For example, a registered 

FBOT may authorize its member firms 

or other participants eligible to handle 

U.S. customer orders to enter orders on 

behalf of their customers in the U.S. or 

to otherwise permit their customers in 

the U.S. to access the trading system 

using the member firm’s or participant’s 

identifier and grant of authority. In such 

cases the FBOT permits an identified 

exchange member or other participant to 

allow their customers in the U.S., who 

have not been granted explicit authority 

by the FBOT as a member or other 

participant of the FBOT, to have access 

to the exchange’s trading systems, 

subject to a guarantee from an exchange 

participant firm. The proposed 

amendment to § 48.4(b) would permit 

registered FBOTs to grant explicit 

authority to eligible IBs to act in such 

capacity, provided that all trades 

effected by the IB through submission of 

U.S. customer orders are guaranteed by 

a registered FCM or a firm exempt from 

FCM registration pursuant to § 30.10. 

In promulgating § 48.4(b) the 

Commission set forth criteria based on 

then-existing staff no-action letters for 

FBOTs, noting that persons that would 

be permitted by the FBOT to trade by 

direct access from the U.S. pursuant to 

the registration rules would be the types 

of persons that are currently able to 

trade by direct access pursuant to staff 

issued no-action relief letters.14

However, the referenced staff no-action 

letters did not include any provision for 

IBs. In the proposing release for part 48, 

the Commission requested comments 

concerning additional entities that 

should be eligible for direct access to 

the trading and order matching systems 

of FBOTs from the U.S.15 At that time, 

no comments were received in response 

to that request and the Commission 

adopted § 48.4(b) as proposed and 

without direct comment. 

The Commission believes that 

permitting eligible IBs to submit 

customer orders via direct access to 

FBOTs may be beneficial to market 

participants and affected markets. 

Designated contract markets (DCMs) 

may provide for IBs to act as executing 

brokers for customer accounts that in 

turn use FCM clearing members to 

whom executed trades are given up for 

clearing and through which such 

customer accounts are carried, typically 

in an omnibus customer account or a 

fully disclosed basis. FBOTs may 

similarly permit IBs located outside of 

the United States to enter trades directly 

into the trade matching system of the 

FBOT on behalf of their customer 

accounts. The proposed amendment to 

§ 48.4 would permit registered IBs

located in the U.S. to act in a

comparable capacity on registered

FBOTs in cases where an FBOT will be

providing direct access to the IB for the

purpose of submitting customer orders

for execution. The Commission

preliminarily believes that allowing

eligible IBs to have direct access to

registered FBOTs to execute

transactions on behalf of their clients

may provide market participants that

wish to trade in foreign futures contracts

with greater choice in brokers and

broker arrangements, and may increase

competition among firms offering

execution brokerage services to

customers on registered FBOTs. The

Commission furthermore preliminarily

believes that affording greater choice in

brokers and broker arrangements would

not undermine or otherwise adversely

affect customer protections available to

U.S. customers as their trades would be

guaranteed by a registered FCM or firm

exempt from FCM registration under

§ 30.10,16 and would be subject to

required risk disclosures relating to 

foreign futures transactions.17

Request for Comment 

The Commission requests comments 

on all aspects of the proposal to amend 

§ 48.4(b) to permit registered FBOTs to

provide direct access to eligible IBs to

enter orders directly into the FBOT’s

trading and order matching system on

behalf of customers, provided that all

trades effected through submission of

U.S. customer orders are guaranteed by

a registered FCM or a firm exempt from

FCM registration pursuant to § 30.10. In

particular, the Commission requests

comment on the following questions.

(1) Would extending direct access

eligibility to eligible IBs for the purpose 

of submitting customer orders 

potentially result in any unintended 

consequences? Is there any reason the 

Commission should not amend § 48.4 to 

extend direct access eligibility to 

eligible IBs for the purpose of 

submitting customer orders? Are there 

other issues the Commission should 

address in order to ensure that FBOTs 

providing direct access to IBs under 

proposed § 48.4(b)(4) does not harm 

U.S. markets or increase risk to the U.S. 

economy? 

(2) The proposed regulation would

require that an FCM registered with the 

Commission as such or a firm exempt 

from such registration pursuant to 

§ 30.10 act as a clearing firm and

guarantee, without limitation, all trades


ddrumheller on DSK120RN23PROD with PROPOSALS1
15086 Federal Register / Vol. 89, No. 42 / Friday, March 1, 2024 / Proposed Rules 

18See footnote 11, supra, and accompanying text. 

19Subpart C of part 170 of the Commission’s 

regulations provides for certain exceptions to the 

general requirement that Commission-registered 

FCMs and CTAs must become NFA members. See 

17 CFR 170.15 and 170.17. 

20See 17 CFR 48.9. 

of the IB effected through submission of 

orders for U.S. customers to the trading 

system. 

(a) Is this condition appropriate? Why 

or why not? 

(b) Does ‘‘act as a clearing firm and 

guarantee, without limitation, all trades 

of the introducing broker’’ effectively 

translate to and encapsulate the various 

comparable foreign regimes and market 

structures of FBOTs and their clearing 

organizations? Are there relevant 

considerations relating to the clearing 

and guarantee of IB trades that differ 

from that of CPO and CTA trades? 

(c) How could this condition impact 

trades submitted by an IB on behalf of 

a self-clearing firm? Do direct clearing 

members of FBOT clearing 

organizations use IBs to submit their 

orders to FBOTs? If so, does this 

proposed condition raise any 

operational issues, additional costs, or 

other issues for such direct clearing 

members (e.g., relating to portfolio 

margining, risk management, or other)? 

(3) Should the Commission instead 

require all U.S. customer trades entered 

by an IB via direct access on a registered 

FBOT to be guaranteed by a registered 

FCM (but not extend the condition to 

firms exempt from FCM registration 

under § 30.10 to carry such trades)? 

Would permitting firms exempt from 

FCM registration under § 30.10 to carry 

U.S. customer trades entered by an IB 

via direct access on a registered FBOT 

raise any issues with anti-money 

laundering (AML) requirements under 

the Bank Secrecy Act and Commission 

regulations? What would be the effects 

of requiring such trades to be carried 

exclusively by clearing members that 

are registered with the Commission as 

FCMs? 

(4) Are there additional registration 

requirements under § 48.7 that the 

Commission should consider for FBOTs 

that provide direct access to IBs under 

proposed § 48.4(b)(4)? 

(5) In addition to the information that 

FBOTs provide to the Commission on 

an ongoing basis under § 48.8, is there 

additional information that the 

Commission should receive from FBOTs 

that provide direct access to IBs under 

proposed § 48.4(b)(4), and if so, why? 

For example, is there additional 

information that FBOTs could provide 

to assist the Commission in identifying, 

evaluating, and addressing situations 

that may adversely impact consumers, 

IBs, market participants, and financial 

markets? Further, please describe 

whether this information should be 

provided on a periodic basis (i.e., 

quarterly or monthly), or event-driven 

basis (i.e., after a disciplinary action). 

B. Section 48.8—Conditions of 

Registration 

The Commission is proposing 

conforming amendments that will 

include eligible IBs in §§ 48.8(a)(4)(ii), 

48.8(a)(5)(i) and 48.8(a)(5)(iii) alongside 

FCMs, CPOs and CTAs. 

Section 48.8(a)(4)(ii) requires all 

orders transmitted via direct access and 

pursuant to an FBOT’s registration to be 

for a member’s or other participant’s 

proprietary trading account unless 

transmitted by a registered FCM, CPO or 

CTA (or exempt CPO or CTA). The 

Commission proposes to include IBs in 

this section along with FCMs, CPOs and 

CTAs, to conform with the proposed 

changes to § 48.4(b) that would allow 

eligible IBs to transmit orders via direct 

access on behalf of the accounts of their 

customers. The Commission also 

proposes to add the words ‘‘registered as 

such’’ following the final reference to 

‘‘futures commission merchant’’ in 

§ 48.8(a)(4)(ii) to conform to the 

proposed amendment to § 48.4(b)(3).18

Section 48.8(a)(5)(i) provides that a 

registered FBOT must require each 

current and prospective member or 

other participant granted direct access 

and not registered with the Commission 

as an FCM, CPO or CTA to agree to and 

submit to the jurisdiction of the 

Commission with respect to activities 

conducted pursuant to the FBOT’s 

registration. Registered FCMs, CPOs and 

CTAs are excluded from this 

requirement because they are otherwise 

subject to the jurisdiction of the 

Commission as Commission registrants. 

Registered IBs are likewise subject to the 

jurisdiction of the Commission as 

registrants and the Commission 

therefore proposes to include IBs 

alongside FCMs, CPOs and CTAs in 

§ 48.8(a)(5)(i). 

Section 48.8(a)(5)(iii) provides that a 

registered FBOT, its clearing 

organization, and each current and 

prospective member or other participant 

granted direct access that is not 

registered with the Commission as an 

FCM, CPO or CTA must maintain with 

the FBOT written representations 

stating that such entity will provide 

prompt access to books, records, and 

premises upon the request of the 

Commission, U.S. Department of Justice 

and, if appropriate, the National Futures 

Association (NFA). Registered FCMs, 

CPOs and CTAs are excluded from this 

requirement because they are otherwise 

required to provide such access to 

books, records, and premises as 

Commission registrants and, where 

applicable, NFA members.19 Registered 

IBs, as Commission registrants and NFA 

members, are likewise required to 

provide such access to books, records, 

and premises by the Commission, U.S. 

Department of Justice, and NFA, and the 

Commission therefore proposes to 

include IBs alongside FCMs, CPOs and 

CTAs in § 48.8(a)(5)(iii). 

Request for Comment 

The Commission requests comments 

on the proposed conforming changes to 

§§ 48.8(a)(4)(ii), 48.8(a)(5)(i) and 

48.8(a)(5)(iii). 

C. Section 48.9—Revocation of 

Registration 

The Commission proposes to amend 

§ 48.9 to establish a procedure for 

FBOTs to request voluntary revocation 

of registration. Section 48.9 addresses 

certain events which could lead the 

Commission to revoke an FBOT’s 

registration, including the failure to 

satisfy registration requirements or 

conditions, and certain other specified 

events.20 However, part 48 presently 

does not contain any provisions for an 

FBOT to request voluntary revocation of 

its registration. In order to allow 

registered FBOTs to more easily 

ascertain the steps required to request 

revocation, the Commission proposes to 

amend § 48.9(b) (‘‘Other Events that 

Could Result in Revocation’’) by adding 

a new paragraph (b)(5). New § 48.9(b)(5) 

would clarify that the Commission may 

revoke an FBOT’s registration in 

response to a voluntary request by an 

FBOT to do so, and provide that an 

FBOT can make such request via email 

to the Commission. 

Request for Comment 

The Commission requests comments 

on all aspects of the proposed 

amendment to § 48.9 to establish a 

procedure for FBOTs to request 

voluntary revocation of registration. 

D. Section 48.6—Foreign Boards of 

Trade Providing Direct Access Pursuant 

to Existing No-Action Relief 

Section 48.6 provides for a limited 

application procedure for FBOTs that 

had been operating under existing staff 

no-action letters and FBOTs that had 

submitted a complete application for a 

staff no-action letter that was pending as 

of the effective date of part 48. Those 

limited application provisions are no 

longer applicable because all FBOTs 


ddrumheller on DSK120RN23PROD with PROPOSALS1
Federal Register / Vol. 89, No. 42 / Friday, March 1, 2024 / Proposed Rules 15087 

21 5 U.S.C. 601 et seq. 

22See Policy Statement and Establishment of 

‘‘Small Entities’’ for purposes of the Regulatory 

Flexibility Act, 47 FR 18618 (Apr. 30, 1982). 

23 76 FR at 80698. 

24 85 FR 78718, 78733 (Dec. 7, 2020). 

25 44 U.S.C. 3501 et seq. 

26See 44 U.S.C. 3502(3)(A). 

27See 44 U.S.C. 3507(a)(3); 5 CFR 1320.5(a)(3). 

28See 44 U.S.C. 3501. 

29See 44 U.S.C. 3502(3). 

30The Commission’s most recent burden 

estimates for this collection are available at https:// 

www.reginfo.gov/public/do/PRAViewICR?ref_

nbr=202301-3038-001. 31 7 U.S.C. 19(a). 

with previously existing staff no-action 

letters have been registered under part 

48 and all such no-action letters have 

been revoked. Accordingly, the 

Commission proposes to delete § 48.6. 

As a conforming amendment the 

Commission also proposes to delete 

§ 48.2(h) (definition of ‘‘existing noaction relief’’) as that definition will no 

longer be applicable or necessary once 

existing § 48.6 is removed. 

Request for Comment 

The Commission requests comments 

on all aspects of the proposal to delete 

§§ 48.6 and 48.2(h). 

III. Related Matters 

A. Regulatory Flexibility Act 

The Regulatory Flexibility Act (RFA) 

requires agencies to consider whether 

the rules they propose will have a 

significant economic impact on a 

substantial number of small entities 

and, if so, provide a regulatory 

flexibility analysis with respect to such 

impact.21 The Commission has 

previously established certain 

definitions of ‘‘small entities’’ to be used 

by the Commission in evaluating the 

impact of its regulations on small 

entities in accordance with the RFA.22

The proposed amendments to part 48 

would impact FBOTs. The Commission 

has previously determined that FBOTs 

are not small entities for purposes of the 

RFA.23

The proposed amendments to part 48 

would also impact eligible IBs by 

providing them with the potential to 

gain direct access to FBOTs that 

incorporate the new regulatory 

provisions allowing such IBs direct 

access. The Commission has previously 

established that IBs may in some cases 

be deemed ‘‘small entities’’ for the 

purposes of the RFA.24 However, the 

proposed rules do not impose any new 

burden on eligible IBs. Instead, the 

proposal would remove a regulatory 

barrier preventing these small entities 

from accessing FBOTs. Accordingly, the 

Commission believes that the regulation 

will be less burdensome to small-entity 

eligible IBs and will not impose any 

additional costs on them. 

Therefore, the Chairman, on behalf of 

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

605(b), hereby certifies that the 

proposed rules will not have a 

significant economic impact on a 

substantial number of small entities. 

B. Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

(PRA),25 imposes certain requirements 

on Federal agencies (including the 

Commission) in connection with 

conducting or sponsoring any 

‘‘collection of information,’’ 26 as 

defined by the PRA. Under the PRA, an 

agency may not conduct or sponsor, and 

a person is not required to respond to, 

a collection of information unless it 

displays a currently valid control 

number from the Office of Management 

and Budget (OMB).27 The PRA is 

intended, in part, to minimize the 

paperwork burden created for 

individuals, businesses, and other 

persons as a result of the collection of 

information by Federal agencies, to 

ensure the greatest possible benefit and 

utility of information created, collected, 

maintained, used, shared, and 

disseminated by or for the Federal 

Government.28 The PRA applies to all 

information, ‘‘regardless of form or 

format,’’ whenever the government is 

obtaining, causing to be obtained, or 

soliciting information, and includes 

required disclosure to third parties or 

the public, of facts or opinions, when 

the information collection calls for 

answers to identical questions posed to, 

or identical reporting or recordkeeping 

requirements imposed on, ten or more 

persons.29

This notice of proposed rulemaking 

(NPRM) proposes amendments to 

regulations that contain collections of 

information for which the Commission 

has previously received a control 

number from OMB: 3038–0101, 

Registration of Foreign Boards of Trade 

(17 CFR part 48).30 This collection 

addresses the information collection 

requirements associated with part 48’s 

registration requirement and related 

registration procedures and conditions 

that apply to FBOTs that wish to 

provide direct access to their electronic 

trading and order matching systems. 

The NPRM would provide a process for 

FBOTs to request voluntary revocation 

of their registration, allow eligible IBs to 

act as direct access participants, and 

remove an outdated reference to ‘‘no 

action relief.’’ 

The Commission believes that these 

proposed amendments do not contain 

any new collections of information and 

would not increase the burden 

associated with the information 

collections under part 48. While the 

proposed amendments establish a new 

process for FBOTs to submit requests for 

revocation of their registration, the 

proposed regulations allow FBOTs to 

submit their requests electronically via 

email to the Commission and do not 

mandate any specific form or format for 

such requests. Accordingly, this new 

submission method would not 

constitute a collection of information 

under the PRA. In addition, the 

proposed amendments do not affect the 

provisions of part 48 covered in the 

current PRA approval (§ 48.8 (periodic 

data submissions to the Commission), 

§ 48.9 (demonstration of compliance); 

and § 48.10 (listing additional futures 

and options contracts)). Accordingly, 

the Commission is retaining its existing 

estimates for the burden associated with 

the information collections under OMB 

Collection 3038–0101. The Commission 

requests public comment on this 

determination. 

C. Cost-Benefit Considerations 

1. Introduction 

Section 15(a) of the CEA 31 requires 

the Commission to ‘‘consider the costs 

and benefits’’ of its actions before 

promulgating a regulation under the 

CEA or issuing certain orders. CEA 

section 15(a) further specifies that the 

costs and benefits 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. The 

Commission considers the costs and 

benefits resulting from its discretionary 

determinations with respect to the CEA 

section 15(a) factors. 

The Commission has endeavored to 

assess the expected costs and benefits of 

the proposed amendments in 

quantitative terms, including Paperwork 

Reduction Act (PRA)-related costs, 

where practicable. In situations where 

the Commission is unable to quantify 

the costs and benefits, the Commission 

identifies and considers the costs and 

benefits of the applicable proposed 

amendments in qualitative terms. 

The Commission notes that this 

consideration of costs and benefits is 

based on, inter alia, its understanding 

that the derivatives markets regulated by 

the Commission function 

internationally, with (1) transactions 


ddrumheller on DSK120RN23PROD with PROPOSALS1
15088 Federal Register / Vol. 89, No. 42 / Friday, March 1, 2024 / Proposed Rules 

32See, e.g., 7 U.S.C. 2(i). 

33NFA website, https://www.nfa.futures.org/ 

registration-membership/membership-anddirectories.html. 

34The definition of ‘‘direct access’’ does not 

include identified members or other participants of 

an FBOT that are located outside of the United 

States. See 17 CFR 48.2(c). 

that involve entities organized in the 

United States occurring across different 

international jurisdictions, (2) some 

entities organized outside of the United 

States that are prospective Commission 

registrants, and (3) some entities that 

typically operate both within and 

outside the United States, and that 

follow substantially similar business 

practices wherever located. Where the 

Commission does not specifically refer 

to matters of location, the discussion of 

costs and benefits below refers to the 

effects of the proposed regulations on all 

relevant derivatives activity, whether 

based on their actual occurrence in the 

United States or on their connection 

with activities in, or effect on, U.S. 

commerce.32

In the following consideration of costs 

and benefits, the Commission first 

identifies and discusses the benefits and 

costs attributable to the proposed rule 

amendments. The Commission, where 

applicable, then considers the costs and 

benefits of the proposed rule 

amendments in light of the five public 

interest considerations set out in § 15(a) 

of the CEA. 

2. Proposed Regulations 

The Commission is proposing to 

amend certain rules in part 48 of its 

regulations relating to FBOTs. The 

Commission identifies the costs and 

benefits of the proposed amendments 

relative to the baseline of the regulatory 

status quo. In particular, the baseline 

against which the Commission 

considers the costs and benefits of these 

proposed rule amendments is the 

statutory and regulatory requirements of 

the CEA and Commission regulations 

now in effect, in particular CEA section 

4(b) and part 48 of the Commission’s 

regulations. 

• Proposed Amendments to § 48.6 

The Commission proposes to delete 

§ 48.6, which provides for an alternate 

registration procedure for FBOTs acting 

under the preexisting staff no-action 

letter process, because such no-action 

letter process and no-action letters are 

no longer in effect. Removal of § 48.6 

and elimination of the alternate 

registration procedure will not increase 

costs to FBOTs because § 48.6 and the 

alternate registration procedure are 

already in effect null. 

• Proposed Amendments to § 48.9 

The Commission proposes to amend 

§ 48.9 to establish a procedure for 

FBOTs to request voluntary revocation 

of registration. This amendment would 

not impose a new requirement for 

FBOTs. The baseline is the current 

practice of the Commission, whereby 

requests for voluntary revocation are 

processed on an ad-hoc basis. The 

primary benefit will be to allow 

registrants to more easily ascertain the 

steps required to request revocation. 

The amendments are not expected to 

increase costs to registered FBOTs 

compared to the status quo. 

• Proposed Amendments to § 48.4 and 

Conforming Amendments to § 48.8 

The proposed amendments to § 48.4 

and conforming amendments to § 48.8 

would permit a registered FBOT to 

provide direct access to its electronic 

trading and order matching system to an 

identified member or other participant 

located in the U.S. and registered with 

the Commission as an IB for submission 

of customer orders to the FBOT’s 

trading system for execution, provided 

that all trades effected through 

submission of U.S. customer orders are 

guaranteed by a registered FCM or a 

firm exempt from FCM registration 

pursuant to § 30.10. 

There are presently 24 FBOTs 

registered with the Commission. Under 

the current rules, eligible intermediaries 

permitted direct access on registered 

FBOTs for purposes of entering trades 

on behalf of non-proprietary client 

accounts include certain FCMs, CTAs, 

and CPOs. The proposed amendments 

would add eligible IBs to the existing 

list of eligible intermediaries. Similar to 

trades submitted by CTAs and CPOs via 

direct access, the trades executed by 

eligible IBs on behalf of customers 

located in the U.S. would be required to 

be guaranteed by a registered FCM or a 

firm exempt from FCM registration 

pursuant to § 30.10. IBs specialize in 

soliciting and executing orders for their 

clients. The field of trade execution is 

continuously evolving with 

technological advances, and has helped 

bring down execution costs. As of 

January 2024, the following number of 

CTAs, CPOs, and IBs were registered 

with the Commission as shown on table 

1.33

TABLE 1 

CTAs 1 ............................................... 1,262 

CPOs 1 .............................................. 1,190 

IBs ..................................................... 937 

FCMs ................................................ 60 

Swap Dealers ................................... 106 

1These categories are not mutually exclusive, i.e., a CPO may also be registered as a 

CTA. 

Table 1 above shows that the number 

of IBs is more than a quarter of all 

CFTC-registered intermediaries. The 

Commission does not know how many 

FBOTs would provide direct access to 

eligible IBs and how many eligible IBs 

would become direct access members or 

participants of registered FBOTs. There 

could also be new IB entrants that are 

granted direct access to registered 

FBOTs. However, by permitting FBOTs 

to provide direct access to eligible IBs, 

the proposed amendments could lead to 

a significant increase in the number of 

choices for U.S. customers with respect 

to execution of trades on FBOTs. 

Although the Commission lacks the 

data and information to quantitatively 

estimate the costs and benefits of 

permitting IBs located in the U.S. to 

have direct access to registered FBOTs, 

it has endeavored to assess the expected 

costs and benefits of the proposal in 

qualitative terms. The lack of data and 

information to estimate costs is 

attributable in part to uncertainty 

regarding how FBOTs would choose to 

respond to the proposed amendments to 

part 48 and how IBs located in the U.S. 

would choose to respond to potential 

new opportunities to participate on 

registered FBOTs. The Commission 

specifically requests data and 

information from IBs located in the U.S., 

registered FBOTs, market participants, 

and other commenters to allow it to 

better estimate the costs and benefits of 

the proposal. 

The baseline is the status quo in 

which § 48.4 permits FBOTs to provide 

direct access to certain FCMs, CPOs and 

CTAs for purposes of transmission of 

orders for certain client accounts. 

Furthermore, foreign IBs not located in 

the U.S. may have similar arrangements 

on FBOTs whereby their customer 

orders are transmitted to an FBOT.34 IBs 

are not included in § 48.4 as 

intermediaries eligible to have direct 

access and transmit trades on behalf of 

customers. As such, registered FBOTs 

currently do not provide direct access to 

IBs located in the United States to enter 

orders on behalf of their customers. 

Relative to the baseline, the primary 

effect of the proposed amendment to 

§ 48.4 would be to allow registered 

FBOTs to provide direct access to 

eligible IBs in order to transmit orders 

of U.S. customers. This could promote 

competition among execution-only 

brokers on registered FBOTs. There may 

be advantages to customers from having 

additional choices in brokers and 


ddrumheller on DSK120RN23PROD with PROPOSALS1
Federal Register / Vol. 89, No. 42 / Friday, March 1, 2024 / Proposed Rules 15089 

brokerage arrangements to trade foreign 

futures on registered FBOTs—for 

example, lower trading costs or the use 

of advantageous proprietary execution 

algorithms developed by such IBs. 

From the standpoint of registered 

FBOTs, allowing eligible IBs to become 

direct access participants would open 

up potential new distribution channels 

that could lead to additional trading 

volume. This in turn could improve the 

viability of some traded instruments. 

Similarly, eligible IBs would be able to 

pursue new business models and/or 

expand existing business models onto 

new foreign markets. 

FBOTs that decide to provide direct 

access to eligible IBs and that do not 

already have necessary structures in 

place to do so may incur certain costs 

relating to, for example, modification of 

rules, procedures and/or systems to 

enable direct access to eligible IBs to 

submit customer orders to the FBOT’s 

trading system for execution. The 

Commission is interested in receiving 

public comments regarding these and 

any other costs associated with eligible 

IBs having direct access to registered 

FBOTs. In this regard, the Commission 

requests public comment on any 

potential costs of the proposal, 

including comments relating to 

questions 6 through 9 in the ‘‘request for 

comment’’ section below. 

• Section 15(a) Factors 

Section 15(a) of the CEA requires the 

Commission to consider the costs and 

benefits of the amendments to part 48 

with respect to the following factors: 

protection of market participants and 

the public; efficiency, competitiveness, 

and financial integrity of markets; price 

discovery; sound risk management 

practices; and other public interest 

considerations. 

(i) Protection of Market Participants and 

the Public 

The proposed changes to part 48 

would not affect the basic protection for 

customers with respect to their foreign 

futures transactions. Under the 

proposed rule, U.S. customer assets are 

required to be maintained by registered 

FCMs or similar entities exempt from 

FCM registration pursuant to § 30.10. 

(ii) Efficiency, Competitiveness, and 

Financial Integrity of Markets 

The current part 48 treats eligible IBs 

differently from certain FCMs, CTAs 

and CPOs located in the U.S. in regard 

to their ability to be granted direct 

access to registered FBOTs for the 

purpose of executing third-party client 

trades. Similarly, intermediaries located 

outside of the United States may, under 

the status quo, offer execution services 

to U.S. and non-U.S. customers on 

registered FBOTs. The proposed change 

would permit eligible IBs to offer 

competing execution services on 

registered FBOTs. Alternatively, to the 

extent that clientele for these IBs is 

distinct from other kinds of 

intermediaries, the rule change may 

enable them to access new foreign 

futures markets. Greater competition 

among introducing brokers and 

additional and new types of customers 

participating in affected markets may 

lead to increased market efficiencies 

and greater financial integrity. 

Furthermore, that trades of U.S. 

customers must be guaranteed by 

registered FCMs or comparable foreign 

firms promotes the financial integrity of 

affected markets by ensuring that 

intermediaries handling U.S. customer 

funds are subject to certain regulatory 

safeguards. 

(iii) Price Discovery 

There is a potential for the proposed 

changes to part 48 to positively affect 

price discovery in futures markets. 

Participation of eligible IBs as direct 

access members may lead to increased 

participation and volume on registered 

FBOTs, in particular during hours when 

U.S. brokers are more active than 

foreign brokers. 

(iv) Risk Management Practices 

As noted above, the proposed changes 

will not affect how customer assets are 

treated. However, registered FCMs and 

firms exempt from FCM registration 

pursuant to § 30.10 may need to expand 

their risk mitigation processes to ensure 

that they have robust processes for 

managing the risk associated with 

eligible IBs executing trades on 

registered FBOTs via direct access. 

(v) Other Public Interest Considerations 

As noted above, the proposed changes 

may enable new and distinct kinds of 

market participants to access registered 

FBOTs, which could help improve 

liquidity and reduce fragmentation in 

affected markets. 

Request for Comment 

The Commission invites public 

comment on all aspects of its cost 

benefit considerations, including the 

discussion of the section 15(a) factors 

and the identification and assessment of 

any costs or benefits not discussed 

herein. Commenters may also suggest 

alternatives to the proposed approach 

where the commenters believe that the 

alternatives would be appropriate under 

the CEA and would provide a more 

appropriate cost-benefit profile. 

Commenters are requested to provide 

data and any other information or 

statistics to support their position. To 

the extent commenters believe that the 

costs or benefits of any aspect of the 

proposed rules are reasonably 

quantifiable, the Commission requests 

that they provide data and any other 

information or statistics to assist the 

Commission in quantification. In 

particular, the Commission requests 

comment on the following questions: 

(6) What is the experience of FCMs, 

CTAs and CPOs regarding the 

magnitude of benefits to their customers 

from their direct access participation on 

FBOTs? 

(7) Have there been instances of harm 

to customers/clients from FCMs, CTAs 

and/or CPOs participating as direct 

access members of registered FBOTs? 

(8) Would direct access trading by 

eligible IBs on registered FBOTs pose 

substantive challenges and/or costs to 

FCMs or firms exempt from FCM 

registration under § 30.10 who carry or 

would carry the accounts of trades 

executed by such IBs? 

(9) Are there additional costs or 

benefits from the proposed rule change 

that have not been discussed? 

List of Subjects in 17 CFR Part 48 

Registration of foreign boards of trade. 

For the reasons stated in the 

preamble, the Commodity Futures 

Trading Commission proposes to amend 

17 CFR part 48 as follows: 

PART 48—REGISTRATION OF 

FOREIGN BOARDS OF TRADE 

■ 1. The authority citation for part 48 

continues to read as follows: 

Authority: 7 U.S.C. 5, 6 and 12a, unless 

otherwise noted. 

§ 48.2 [Amended] 

■ 2. In § 48.2 remove paragraph (h) and 

redesignate paragraphs (i) through (l), as 

paragraphs (h) through (k), respectively. 

■ 3. In § 48.4 revise paragraph (b) to 

read as follows: 

§ 48.4 Registration eligibility and scope. 

* * * * * 

(b) A foreign board of trade may apply 

for registration under this part in order 

to permit the members and other 

participants of the foreign board of trade 

that are located in the United States to 

enter trades directly into the trading and 

order matching system of the foreign 

board of trade, to the extent that such 

members or other participants are: 

(1) Entering orders for the member’s 

or other participant’s proprietary 

accounts; 

(2) Registered with the Commission as 

futures commission merchants and are 


ddrumheller on DSK120RN23PROD with PROPOSALS1
15090 Federal Register / Vol. 89, No. 42 / Friday, March 1, 2024 / Proposed Rules 

submitting customer orders to the 

trading system for execution; 

(3) Registered with the Commission as 

a commodity pool operator or 

commodity trading advisor, or are 

exempt from such registration pursuant 

to § 4.13 or § 4.14 of this chapter, and 

are submitting orders for execution on 

behalf of a United States pool that the 

member or other participant operates or 

an account of a United States customer 

for which the member or other 

participant has discretionary authority, 

respectively, provided that a futures 

commission merchant registered with 

the Commission as such or a firm 

exempt from such registration pursuant 

to § 30.10 of this chapter acts as clearing 

firm and guarantees, without limitation, 

all such trades of the commodity pool 

operator or commodity trading advisor 

effected through submission of orders to 

the trading system; or 

(4) Registered with the Commission as 

introducing brokers and are submitting 

customer orders to the trading system 

for execution, provided that a futures 

commission merchant registered with 

the Commission as such or a firm 

exempt from such registration pursuant 

to § 30.10 of this chapter acts as a 

clearing firm and guarantees, without 

limitation, all trades of the introducing 

broker effected through submission of 

orders for United States customers to 

the trading system. 

* * * * * 

§ 48.6 [Removed and Reserved] 

■ 4. Remove and reserve § 48.6. 

■ 5. In § 48.8 revise paragraphs (a)(4)(ii) 

and (a)(5)(i) and (iii) to read as follows: 

§ 48.8 Conditions of registration. 

* * * * * 

(a) * * * 

(4) * * * 

(ii) All orders that are transmitted to 

the foreign board of trade’s trading 

system by a foreign board of trade’s 

identified member or other participant 

that is operating pursuant to the foreign 

board of trade’s registration will be 

solely for the member’s or trading 

participant’s own account unless such 

member or other participant is 

registered with the Commission as a 

futures commission merchant or such 

member or other participant is 

registered with the Commission as an 

introducing broker, commodity pool 

operator or commodity trading advisor, 

or is exempt from registration as a 

commodity pool operator or commodity 

trading advisor pursuant to § 4.13 or 

§ 4.14 of this chapter, provided that a 

futures commission merchant registered 

with the Commission as such or a firm 

exempt from such registration pursuant 

to § 30.10 of this chapter acts as clearing 

firm and guarantees, without limitation, 

all trades of the introducing broker, 

commodity pool operator or commodity 

trading advisor effected through 

submission of orders for United States 

pools or customers to the trading 

system. 

(5) * * * 

(i) Prior to operating pursuant to 

registration under this part and on a 

continuing basis thereafter, a registered 

foreign board of trade will require that 

each current and prospective member or 

other participant that is granted direct 

access to the foreign board of trade’s 

trading system and that is not registered 

with the Commission as a futures 

commission merchant, an introducing 

broker, a commodity trading advisor or 

a commodity pool operator, file with the 

foreign board of trade a written 

representation, executed by a person 

with the authority to bind the member 

or other participant, stating that as long 

as the member or other participant is 

authorized to enter orders directly into 

the trade matching system of the foreign 

board of trade, the member or other 

participant agrees to and submits to the 

jurisdiction of the Commission with 

respect to activities conducted pursuant 

to the registration. 

* * * * * 

(iii) The foreign board of trade, 

clearing organization, and each current 

and prospective member or other 

participant that is granted direct access 

to the foreign board of trade’s trading 

system and that is not registered with 

the Commission as a futures 

commission merchant, an introducing 

broker, a commodity trading advisor, or 

a commodity pool operator will 

maintain with the foreign board of trade 

written representations, executed by 

persons with the authority to bind the 

entity making them, stating that as long 

as the foreign board of trade is registered 

under this regulation, the foreign board 

of trade, the clearing organization or 

member of either or other participant 

granted direct access pursuant to this 

regulation will provide, upon the 

request of the Commission, the United 

States Department of Justice and, if 

appropriate, the National Futures 

Association, prompt access to the 

entity’s, member’s, or other participant’s 

original books and records or, at the 

election of the requesting agency, a copy 

of specified information containing such 

books and records, as well as access to 

the premises where the trading system 

is available in the United States. 

■ 6. In § 48.9, add paragraph (b)(5) to 

read as follows: 

§ 48.9 Revocation of registration. 

* * * * * 

(b) * * * 

(5) The Commission may revoke a 

foreign board of trade’s registration in 

response to a voluntary request by the 

foreign board of trade to vacate its 

registration. A foreign board of trade 

may file a request to vacate its 

registration with the Secretary of the 

Commission at FBOTapplications@

cftc.gov. 

* * * * * 

Issued in Washington, DC, on February 23, 

2024, by the Commission. 

Robert Sidman, 

Deputy Secretary of the Commission. 

Note: The following appendices will not 

appear in the Code of Federal Regulations. 

Appendices to Foreign Boards of 

Trade—Commission Voting Summary 

and Chairman’s and Commissioners’ 

Statements 

Appendix 1—Commission Voting 

Summary 

On this matter, Chairman Behnam and 

Commissioners Johnson, Goldsmith Romero, 

Mersinger, and Pham voted in the 

affirmative. No Commissioner voted in the 

negative. 

Appendix 2—Statement of Support of 

Chairman Rostin Behnam 

I support the proposed amendments to 

CFTC rules for foreign boards of trade 

(FBOTs) that would permit a registered FBOT 

to provide direct access to its electronic 

trading and order matching system to a 

registered introducing broker (IB) located in 

the United States for submission of customer 

orders to the FBOT’s trading system for 

execution. Based upon more than ten years 

of Commission experience with the existing 

rules for FBOTs, the Commission is also 

proposing certain enhancements and 

modernization of the existing ruleset. 

The existing FBOT rules were promulgated 

in 2011. Today’s proposed amendments are 

emblematic of the Commission’s ongoing 

consideration of its existing rules and my 

commitment to ensuring that our rules 

continue to address the reality of today’s 

markets and their structure. The proposed 

changes may enable new types of market 

participants to access registered FBOTs, 

which could help improve liquidity and 

reduce fragmentation, thereby promoting 

healthier markets. 

I look forward to hearing the public’s 

comments on the proposed amendments to 

the regulations for FBOTs. I thank staff in the 

Division of Market Oversight, Office of the 

General Counsel, and the Office of the Chief 

Economist for all of their work on the 

proposal. 


ddrumheller on DSK120RN23PROD with PROPOSALS1
Federal Register / Vol. 89, No. 42 / Friday, March 1, 2024 / Proposed Rules 15091 

1The Commission is also proposing to establish 

a procedure for an FBOT to request the revocation 

of its registration, and to remove certain outdated 

references to ‘‘existing no-action relief.’’ 

2 7 U.S.C. 6(b). 

3 Id. 

4Registration of Foreign Boards of Trade, 76 FR 

80674 (Dec. 23, 2011). 

5 17 CFR 48.4(b)(3). 

6 7 U.S.C. 1a(31). 

Appendix 3—Statement of 

Commissioner Kristin N. Johnson 

Introduction 

The Commodity Futures Trading 

Commission’s (Commission or CFTC) 

governing statute, the Commodity Exchange 

Act (CEA), enumerates several key aims. 

Protecting customers from the misuse of 

customer assets is one of the central goals of 

derivatives market regulations. Protecting 

customers begins with carefully evaluating, 

reviewing, monitoring, and enforcing the 

regulations that govern intermediaries in our 

markets. 

The Commission has established a 

comprehensive customer protection 

framework that applies to futures 

commission merchants (FCM). This 

framework requires certain entities that hold 

customer assets to register with the 

Commission as an FCM. Under our rules, 

FCMs must comply with strict segregation 

and risk disclosure requirements and 

establish know-your-customer (KYC) and 

anti-money laundering (AML) programs. 

Consequently, any Commission rule or 

regulation that permits entities exempt from 

registration as an FCM to hold customer 

assets must be based on a careful evaluation 

and consideration of the protections afforded 

to such customers. Our consideration is 

particularly critical, if not heightened, in the 

absence of FCM registration. 

Additionally, the Commission must ensure 

that U.S. customers are not afforded less 

protection when trading outside the United 

States. Trading in foreign markets exposes 

U.S. customers—institutional or retail—to a 

number of important risks because clearing 

intermediaries may hold U.S. customers’ 

cash and securities outside the United States. 

The mechanics of trading in foreign 

markets involve posting customer cash and 

securities to a clearing firm or exchange 

organized pursuant to the laws of, and 

physically located in, a foreign jurisdiction. 

A bankruptcy or insolvency proceeding 

related to the foreign clearing firm will be 

subject to applicable foreign laws. These laws 

will govern the application of any customer 

protections and the repatriation of customer 

assets to U.S. residents. As a result, U.S. 

customers may not receive the specific 

protections they would be afforded as 

customers of a Commission-registered FCM 

under the U.S. bankruptcy code and part 190 

of the Commission’s regulations. 

Part 48 of the Commission’s regulations 

sets forth the conditions under which a 

foreign board of trade (FBOT) may provide 

persons located in the United States with 

direct access to the FBOT’s trading system to 

trade foreign futures and options. CFTC 

Regulation 48.4 establishes the registration 

eligibility for FBOTs and identifies the 

entities to which an FBOT may permit direct 

access once it is registered. 

The Commission seeks to amend part 48 to 

permit an FBOT registered with the 

Commission to provide direct access to 

introducing brokers (IBs) located in the 

United States and registered with the 

Commission to submit orders to trade foreign 

futures and options on behalf of customers 

located in the United States (Proposed 

Rule).1 Under the Proposed Rule, the foreign 

futures and options must be cleared by a 

registered FCM or a foreign clearing firm that 

is exempt from FCM registration (exempt 

clearing firm) and located in a foreign 

jurisdiction that the Commission has 

determined to have a comparable regulatory 

framework to the CFTC’s regulatory scheme 

pursuant to CFTC Regulation 30.10. 

While our regulations permit exempt 

clearing firms, the Commission must 

maintain a robust process for evaluating 

exemption requests. These criteria, pursuant 

to CFTC Regulation 30.10, ensure that only 

countries with comparable regulatory 

requirements—including with respect to 

segregation, risk disclosures, and KYC and 

AML programs—are granted an exemption 

from Commission regulations. The need for 

strong customer protection safeguards is 

heightened when firms organized and located 

outside the United States. solicit U.S. 

customers to engage in derivatives activities 

outside the United States. 

The Proposed Rule must therefore include 

critical customer protection and market 

integrity guardrails. The Commission must 

ensure that U.S. customers allowed to have 

direct access to FBOTs through CFTCregistered IBs receive customer protections 

equivalent to the protections available when 

engaging with U.S.-registered FCMs. 

Wherever the Commission permits firms to 

follow foreign regulatory requirements 

instead of Commission requirements, the 

Commission must undertake a thorough 

process to ensure that those foreign 

requirements are, among other things, no less 

protective for customers than Commission 

requirements. 

Over the course of my tenure as a 

Commissioner, I have consistently supported 

the Commission’s efforts to advance the 

protection of customer funds. I support the 

Proposed Rule, which includes important 

protections for U.S. customers, and look 

forward to comments confirming or offering 

guidance on how the Commission may 

ensure that the Proposed Rule advances 

equivalent protections for U.S. customers 

clearing through an exempt clearing firms, 

including with respect to segregation 

requirements, risk disclosures, and KYC and 

AML programs. 

Part 48 History 

Since as early as 1996, FBOTs relied on 

staff no-action letters to provide trading 

direct access to persons located in the United 

States. Section 738 of the Dodd-Frank Wall 

Street Reform and Consumer Protection Act 

(Dodd-Frank Act) amends section 4(b) of the 

CEA, empowering the Commission to ‘‘adopt 

rules and regulations requiring registration 

with the Commission for [an FBOT] that 

provides the members of the [FBOT] or other 

participants located in the United States with 

direct access to the electronic trading and 

order matching system.’’ 2 To have direct 

access, a U.S.-registered IB must be given ‘‘an 

explicit grant of authority’’ by the FBOT ‘‘to 

enter trades directly into the [FBOT’s] trade 

matching system.’’ 3

In 2011, the Commission adopted part 48 

pursuant to this statutory mandate, requiring 

an FBOT to register with the Commission in 

order to provide its members or other 

participants located in the United States with 

direct access for electronic trading and 

execution.4

Under part 48, registered FBOTs may 

permit direct access by specified participants 

located in the United States for the purpose 

of executing customer orders, but the 

Commission imposed very important 

conditions on certain specific trading 

intermediaries—Commission-registered CPOs 

and CTAs submitting orders on behalf of a 

United States pool or customer. Those CPOs 

and CTAs are also required to submit such 

orders for clearing to a Commissionregistered FCM or a clearing broker exempt 

from FCM registration under CFTC regulation 

30.10 that ‘‘guarantees, without limitation, all 

such trades.’’ 5 As an intermediary between 

the U.S.-located customer and the foreign 

exchange, the FCM or foreign clearing broker 

is liable for all trades executed on the FBOT. 

Proposed Rule 

The Proposed Rule would be the first 

change to part 48 since 2011, amending 

CFTC Regulation 48.4(b) to add IBs located 

in the United States and registered with the 

Commission to the list of trading 

intermediaries to whom FBOTs may grant 

direct access for the execution of U.S. 

customer orders. The customer base of IBs is 

diverse and includes both institutional 

customers, retail customers, and end-users. 

IBs engage in soliciting U.S. customers to 

purchase a wide range of derivatives, 

including futures contracts, but do not collect 

margin against those orders (or extend credit 

in lieu of margin).6

Currently, FBOTs may provide direct 

access to IBs located outside the United 

States but not to IBs located in the United 

States. Under the Proposed Rule, FBOTs 

would be able to provide registered IBs 

located in the United States with direct 

access to execute customer trades, provided 

that, like CTAs and CPOs, they submit such 

orders for clearing to a Commissionregistered FCM or a firm exempt from FCM 

registration under CFTC Regulation 30.10 

that guarantees all trades. 

Commission Customer Protections 

The condition requiring that IBs submit 

their foreign futures and options to a 

Commission-registered FCM or exempt 

clearing firm is meant to safeguard customer 

margin; but the Commission must be deeply 

thoughtful in its assessment of whether a 

foreign jurisdiction offers comparable 

customer protection guardrails. Protecting 

the assets of customers is one of the 

Commission’s core missions. 

Adopted in 1987, part 30 of the CFTC’s 

regulations are intended to ‘‘add to the 


ddrumheller on DSK120RN23PROD with PROPOSALS1
15092 Federal Register / Vol. 89, No. 42 / Friday, March 1, 2024 / Proposed Rules 

7Foreign Futures and Foreign Options 

Transactions, 52 FR 28980, 28980 (Aug. 5, 1987). 

8At the request of my office, division staff 

included a reminder in the Preamble to the 

Proposed Rule that these foreign futures and 

options transactions would also be subject to 

required risk disclosures pursuant to CFTC 

Regulation 30.6, which requires IBs and FCMs to 

provide a statement to customers disclosing the 

risks of trading foreign futures and options offshore. 

9 17 CFR 30.7. 

10CFTC, Anti-Money Laundering, https://

www.cftc.gov/IndustryOversight/AntiMoney

Laundering/index.htm#:∼:text=The%20BSA%20

and%20related%20regulations,of%20accounts%20

involving%20foreign%20persons. 

11See Appendix A to part 30, title 17, https://

www.ecfr.gov/current/title-17/chapter-I/part-30/ 

appendix-Appendix%20A%20to%20Part%2030. 

12 Id. 

13 Id. 14 Kristin N. Johnson, Commissioner, CFTC, 

Combatting Systemic Risk and Fostering Integrity of 

the Global Financial System Through Rigorous 

Standards and International Comity (Jan. 24, 2024), 

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

Testimony/johnsonstatement012424#_ftnref5. 

15See Appendix A to part 30, title 17, https://

www.ecfr.gov/current/title-17/chapter-I/part-30/ 

appendix-Appendix%20A%20to%20Part%2030. 

Commission’s existing customer protection 

regulatory scheme coverage of foreign futures 

and options transactions undertaken by U.S. 

domiciliaries.’’ 7

Pursuant to CFTC Regulation 30.4, an 

intermediary that accepts the funds of U.S. 

residents must register as an FCM, provide 

risk disclosures and comply with the 

customer protection framework for U.S. 

customers established in CFTC Regulation 

30.7.8 Notably, a Commission-registered FCM 

is required to maintain in a separate account 

sufficient customer funds (referred to as 

secured amounts) to cover its liabilities to 

foreign futures and options customers, among 

other requirements.9 Separately, the Bank 

Secrecy Act and related regulations require 

FCMs and IBs to ‘‘establish [AML] programs, 

report suspicious activity, verify the identity 

of customers and apply enhanced due 

diligence to certain types of accounts 

involving foreign persons.’’ 10

By contrast, pursuant to CFTC Regulation 

30.10, an exempt clearing firm may hold the 

funds of U.S. customers outside the United 

States without registering as an FCM, if it is 

located in a jurisdiction that the Commission 

has determined has a comparable regulatory 

framework to the U.S. scheme. The 

Commission may grant, and has granted, 

exemptions from part 30 pursuant to the 

exemptive procedures set forth in CFTC 

Regulation 30.10, a framework that has been 

in place at least since the 1980s. Customers 

of exempt clearing firms should benefit from 

the customer protection, risk disclosure, 

KYC, and AML requirements available to 

customers of Commission-registered FCMs. 

In making its comparability determination, 

the Commission considers certain threshold 

elements of a comparability framework, 

including minimum financial requirements 

for entities that accept customer funds; 

protection of customer funds from 

misapplication; and sales practice standards, 

which includes disclosure of the risks of 

futures and options transactions, particularly 

the risk of foreign transactions traded outside 

the jurisdiction of U.S. law.11 In evaluating 

the treatment of customer funds, the 

Commission will also ‘‘consider protections 

accorded customer funds in a bankruptcy 

under applicable law, as well as protection 

from fraud.’’ 12 The Commission may also 

take into account other factors. This analysis 

is essential to ensuring the integrity of our 

markets, the protection of our customers, and 

the mitigation of systemic risk. 

Protecting U.S. Customers in Foreign 

Jurisdictions 

In adopting the Proposed Rule’s 

requirement that foreign futures and options 

transactions be cleared through either an 

FCM or a clearing firm exempt from FCM 

registration, the Commission’s goal is to 

ensure that U.S. customers are not afforded 

less protection when trading offshore and 

clearing through an exempt clearing firm. 

This is accomplished through the application 

of robust comparability standards when the 

Commission provides exemptions pursuant 

to CFTC Regulation 30.10. 

The Commission has been guided by 

‘‘Congress’ intent that foreign futures and 

options products sold in the U.S. be subject 

to regulatory safeguards comparable to those 

applicable to domestic transactions.’’ 13 The 

legal and regulatory framework of the foreign 

jurisdiction must be found to be comparable 

to the U.S. framework, but the foreign 

jurisdiction’s segregation, risk disclosure, 

KYC, and AML requirements merit particular 

attention. 

As I noted in a recent statement regarding 

a proposed comparability determination for 

the UK’s capital adequacy and financial 

reporting requirements, ‘‘mutual 

understanding and respect for partner 

regulators in other countries advances the 

Commission’s goal of setting a global 

standard for sound derivatives regulation, 

enhances market stability, and is also deeply 

rigorous, reflecting the Commission’s 

commitment to safe swaps markets.’’ 14

The Commission included several 

important questions as requests for 

comments to assist in evaluating whether 

certain elements of the foreign jurisdiction’s 

laws adequately protect our markets and 

customers. I want to highlight a few 

questions below. 

(1) Are there other issues the Commission

should address in order to ensure that FBOTs 

providing direct access to IBs under proposed 

§ 48.4(b)(4) does not harm U.S. markets or

increase risk to the U.S. economy?

(2) Are there relevant considerations

relating to the clearing and guarantee of IB 

trades that differ from that of CPO and CTA 

trades? 

(3) Should the Commission instead require

all U.S. customer trades entered by an IB via 

direct access on a registered FBOT to be 

guaranteed by a registered FCM (but not 

extend the condition to firms exempt from 

FCM registration under § 30.10 to carry such 

trades)? Would permitting firms exempt from 

FCM registration under § 30.10 to carry U.S. 

customer trades entered by an IB via direct 

access on a registered FBOT raise any issues 

with anti-money laundering (AML) 

requirements under the Bank Secrecy Act 

and Commission regulations? 

I invite comments regarding comparable 

protections for U.S. customers clearing 

through an exempt clearing firms pursuant to 

CFTC Regulation 30.10, including with 

respect to segregation requirements, risk 

disclosures, and KYC and AML programs. 

These comments may inform the 

development of the Proposed Rule. 

The Commission is required to engage in 

a rigorous comparability assessment of the 

foreign jurisdiction’s legal and regulatory 

scheme. Among other concerns, the analysis 

must ensure that permitting U.S. customers 

to access foreign markets through IBs does 

not engender systemic risks that may 

undermine the integrity of U.S. or global 

derivatives markets or otherwise amplify 

risks to the U.S. or global economy. Exempt 

clearing firms must protect the positions and 

collateral of U.S. customers under the 

relevant laws of their jurisdiction in a 

manner parallel to the protections afforded 

customer positions and collateral under U.S. 

regulations governing the protection of assets 

of U.S. customers using on a Commissionregistered FCM as a clearing intermediary. 

Risk disclosure requirements reduce 

information asymmetries, improve 

transparency, and enable U.S. customers to 

make informed decisions about the 

appropriateness of entering into a foreign 

futures and options transaction. Commissionregistered FCMs that clear foreign futures and 

options transactions for U.S. IB customers are 

required to provide disclosures to alert U.S. 

customers to the risks of trading in foreign 

markets and the application of foreign laws. 

It is imperative that U.S. customers that clear 

through an exempt clearing firm are similarly 

apprised. 

The Preamble to the Proposed Rule notes 

that an exempt clearing firm should be 

subject to a comparable regulatory program 

that includes, among other elements, 

minimum sales practice standards, including 

‘‘disclosure of the risks of futures and options 

transactions and, in particular, the risk of 

transactions undertaken outside the 

jurisdiction of domestic law.’’ 15 The 

Commission must be certain. 

Protecting our markets from fraud, illicit 

trading, and money laundering or terrorism 

financing promotes market integrity within 

our financial system. Commission-registered 

FCMs that clear foreign futures and options 

transactions for U.S. IB customers are subject 

to KYC and AML requirements under the 

Bank Secrecy Act and Commission 

regulations. The Commission must be 

confident that allowing foreign clearing firms 

exempt from FCM registration under CFTC 

Regulation 30.10 are allowed to carry U.S. 

customer trades entered by an IB via direct 

access on a registered FBOT would not raise 

any issues with KYC and AML requirements. 

Careful consideration must be given to the 

existence of similar requirements in the 

country in which the exempt clearing firm is 

located. 

I look forward to the comments to the 

Proposed Rule. I am particularly interested in 

commenters’ perspective on whether the 

Proposed Rule will engender risks or 

consequences that the Proposed Rule fails to 


ddrumheller on DSK120RN23PROD with PROPOSALS1
Federal Register / Vol. 89, No. 42 / Friday, March 1, 2024 / Proposed Rules 15093 

1The Dodd Frank Act provided that the CFTC 

may adopt rules and regulations requiring 

registration for FBOTs that seek direct access to 

U.S. customers. Post-Dodd Frank Act regulations in 

part 48 providing that registration framework has 

conditions limiting the scope of intermediaries 

eligible for direct access for submission of customer 

orders, not allowing for introducing brokers. 

2See CFTC, Transcript of December 5, 2011 

Commission Meeting, https://www.cftc.gov/sites/ 

default/files/idc/groups/public/@swaps/documents/ 

dfsubmission/dfsubmission12_120511-trans.pdf. 

3See Id. 

4See Treasury’s The 2024 National Money 

Laundering Risk Assessment, The 2024 National 

Terrorist Financing Risk Assessment, and The 2024 

National Proliferation Financing Risk Assessment, 

https://home.treasury.gov/news/press-releases/ 

jy2080. 

1See, e.g., Keynote Address by Commissioner 

Caroline D. Pham, 98th Annual Convention of the 

American Cotton Shippers Association (June 22, 

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

SpeechesTestimony/opapham2; Statement of 

Commissioner Caroline D. Pham on Staff Letter 

Regarding ADM Investor Services, Inc. (June 16, 

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

SpeechesTestimony/phamstatement061623. 

2 Id. 

examine or consider. Among other risks, it is 

imperative that the Commission understand 

the diverse risks to U.S. retail customers. 

Conclusion 

I support the issuance of the Proposed 

Rule, which seeks to advance the CEA’s goals 

of protecting U.S. markets, market 

participants, and both institutional and retail 

customers. 

I commend the careful work of the staff of 

the Division of Market Oversight, including 

Alexandros Stamoulis, Roger Smith, Maura 

Dundon, and David Reiffen, on the Proposed 

Rule. 

Appendix 4—Statement of 

Commissioner Christy Goldsmith 

Romero 

The CFTC is proposing to change a postDodd Frank Act reform to issue a rule that 

permits CFTC-registered foreign boards of 

trade to have direct access to U.S. customers 

through introducing brokers.1 The DoddFrank Act defines direct access to mean an 

explicit grant of authority by a foreign board 

of trade to identified members or other 

participants located in the United States to 

enter trades directly into the trade matching 

engine of the foreign board of trade. As 

described in the open Commission meeting 

on the final rule, ‘‘By adopting uniform 

application procedures and registration 

requirements and conditions, the process by 

which foreign boards of trade are permitted 

to provide direct access to their trading 

systems will become more standardized, 

more transparent to both registration 

applicants and the general public, and will 

promote fair and consistent treatment of all 

applicants.’’ 2

The Commission in 2011 limited direct 

access to certain intermediaries that did not 

include IBs, explaining, 

Part 48 identifies the types of entities to 

which a registered FBOT could grant direct 

access. That would include identified 

members and other participants that trade 

for their proprietary accounts, FCMs that can 

submit orders on behalf of U.S. customers, 

and CPOs or CTAs or entities exempt from 

such registration that submit orders on behalf 

of U.S. pools or for accounts of U.S. 

customers for which they have discretionary 

authority. Again, this list of eligible 

participants is consistent with the 

participants under the existing no-action 

relief.3

FBOT’s have operated under this rule ever 

since. For the first time, this proposal would 

change that rule and expand direct access to 

an additional 937 intermediaries who are 

registered introducing brokers. It is not 

addressed in the rule or preamble why this 

rule change is necessary. I am aware of an 

early 2020 request from one of the 24 

registered foreign boards of trade for noaction relief related to direct access for IBs. 

The CFTC did not act on that request over 

the last four years. I am not aware that the 

request has been made by any other FBOT. 

The CFTC is going farther than what was 

requested by one FBOT, and is instead 

changing the rule for all foreign boards of 

trade. 

As regulators, we have an important 

responsibility to make an independent 

assessment of what is needed to carry out the 

CFTC’s mission to promote market resilience, 

integrity, and vibrancy through sound 

regulation. If the Commission is going to 

engage in rulemaking to change post-Dodd 

Frank Act reforms, it is important that the 

CFTC analyze the current market need for the 

change, and the consequences of changing 

the rule, including any potential increase in 

benefits as well as risks (and conditions 

necessary to manage those risks). 

It can be difficult to make decisions on 

proposed rules based on a general statement 

that the Commission is proposing the rule 

‘‘based on the Commission’s experience 

engaging with registered FBOTs and applying 

part 48 over the ensuing years.’’ I would have 

liked to have seen a discussion of that 

experience, the current state of the market, 

and the need for expanded access for more 

than one FBOT. FBOTs are all over the 

world, reflecting unique nations, continents, 

markets, and issues. I look forward to public 

comment on whether there are important 

differences in FBOTs that should be reflected 

in any potential final rule. I appreciate a 

November 2023 letter by the Futures Industry 

Association, which explains: 

With IBs currently not allowed FBOT direct 

access under 48.4(b), U.S. participants are 

left without this access route after EU-based 

IBs close, usually around 1 p.m. Eastern 

time. Updating the rules to expand direct 

access to U.S.-registered IBs would allow U.S. 

market participants continued access to the 

relevant foreign markets after the closure of 

those broker firms in Europe that provide 

access earlier in the day. This is especially 

important for U.S. participants’ ability to 

conduct their risk management during 

periods of high market volatility, such as 

those experienced with the collapse of 

Silicon Valley Bank and Russian invasion of 

Ukraine. 

Given the public interests behind the 2011 

rule of standardization, transparency, and a 

need for fair and consistent treatment, as well 

as FIA’s description of a current risk 

management need, I am willing to support 

releasing the proposed rule to gain public 

comment. However, I caution not to read into 

this supportive vote that I will vote in favor 

of any future action on this or other 

rulemaking or action without sufficient 

independent CFTC analysis to accompany an 

industry request. 

Finally, given the Commission’s mission to 

promote market integrity, I question the 

proposed allowance of a guarantee by an 

entity exempt from FCM registration under 

Regulation 30.10 that is not required to 

follow the anti-money laundering and other 

requirements of the Bank Secrecy Act, rather 

than limit the guarantee to registered FCMs. 

While an entity exempt from FCM 

registration under Regulation 30.10 may be 

subject to another country’s anti-money 

laundering regime, the CFTC does not have 

the same level of insight or enforceability 

with that entity as with a registered FCM that 

is subject to the BSA. 

As the former head of a Federal law 

enforcement office (the Special Inspector 

General for the Troubled Asset Relief 

Program), I have significant experience in 

using Currency Transaction Reports and 

Suspicious Activity Reports required by the 

BSA to investigate and prosecute money 

laundering, organized crime, drug trafficking 

and other criminal enterprises. I have 

experienced the benefit of financial 

institutions serving as a first line of defense 

given their BSA requirements. 

The Commission’s mission includes 

requiring safeguards to combat money 

laundering, illicit finance, and terrorist 

financing that can threaten national security 

and financial stability, and undermine 

confidence in the U.S. financial system. 

Illicit finance threats, vulnerabilities, and 

risks facing the United States continue to 

grow.4 The Bank Secrecy Act plays a critical 

role in addressing these threats and risks. 

I appreciate the staff for their work on this 

proposed rule change and look forward to 

public comment. 

Appendix 5—Statement of Support of 

Commissioner Caroline D. Pham 

I support the Notice of Proposed 

Rulemaking on Foreign Boards of Trade 

(FBOT) (Proposed FBOT Amendments or 

Proposal) because it promotes access to 

markets for U.S. participants, competition, 

and liquidity. I would like to thank Maura 

Dundon, Roger Smith, and Alexandros 

Stamoulis in the CFTC’s Division of Market 

Oversight for their work on the Proposal. I 

especially appreciate their efforts to work 

with me and include my revisions. 

As a CFTC Commissioner, I have made it 

clear that I believe in good policy that 

enables growth, progress, and access to 

markets.1 Accordingly, I am pleased to 

support Commission efforts that take a 

pragmatic approach to issues that hinder 

market access and cross-border activity.2

Today’s Proposal exemplifies policy that 

ensures a level playing field, and I applaud 

this step in the right direction for market 

structure. 

FBOTs have been a critical piece of the 

CFTC’s markets for decades and provide 


ddrumheller on DSK120RN23PROD with PROPOSALS1
15094 Federal Register / Vol. 89, No. 42 / Friday, March 1, 2024 / Proposed Rules 

3While FBOTs initially had operated pursuant to 

no-action relief, in 2011, following the Dodd-Frank 

Wall Street and Consumer Protection Act of 2010, 

the Commission began registering FBOTs. See 

Registration of Foreign Boards of Trade, Final Rule, 

76 FR 80674 (Dec. 23, 2011), https://www.federal

register.gov/documents/2011/12/23/2011-31637/ 

registration-of-foreign-boards-of-trade. 

4See 17 CFR 48.4. 

5The Commission generally defines an IB as an 

individual or organization that solicits or accepts 

orders to buy or sell futures contracts, commodity 

options, retail off-exchange forex or commodity 

contracts, or swaps, but does not accept money or 

other assets from customers to support these orders. 

See CEA section 1a(31); 17 CFR 1.3(mm). The 

Commission registers IBs under CEA section 4d(g) 

and Regulation 3.4(a). See 7 U.S.C. 6d(g) and 17 

CFR 3.4(a). 

6U.S. customers could also use a firm exempted 

by the Commission pursuant to Regulation 30.10. 

The CFTC’s part 30 regulations govern the offer and 

sale of foreign futures and options contracts to U.S. 

customers. Regulation 30.4 requires that in order to 

accept any money, securities or property (or extend 

credit in lieu thereof) to margin, guarantee or secure 

transactions conducted by U.S. persons on an 

FBOT, a person must be registered as an FCM. See 

17 CFR 30.4(a). The Commission may grant and has 

granted exemptions to this requirement to register 

as an FCM based on petitions filed pursuant to 17 

CFR 30.10. A Regulation 30.10 exemptive order 

permits firms subject to regulation by a foreign 

regulator to conduct business from locations 

outside of the U.S. for U.S. persons on FBOTs 

without registering as FCMs, based upon the firm’s 

substituted compliance with a foreign regulatory 

structure found comparable to that administered by 

the Commission under the CEA. 

7Commissioner Pham Announces New Members 

and Leadership of the CFTC’s Global Markets 

Advisory Committee and Subcommittees (June 30, 

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

PressReleases/8740-23. 

8Opening Statement of Commissioner Caroline D. 

Pham before the Global Markets Advisory 

Committee (Feb. 13, 2023), https://www.cftc.gov/ 

PressRoom/SpeechesTestimony/ 

phamstatement021323. Most recently, the GMAC 

made eight recommendations to the CFTC that 

promote access to markets and competition while 

safeguarding financial stability. CFTC Global 

Markets Advisory Committee Advances Key 

Recommendations (Feb. 8, 2024), https://

www.cftc.gov/PressRoom/PressReleases/8860-24. 

access for U.S. market participants to nonU.S. markets in realization of the global 

economy and international business.3 The 

main substantive amendment in today’s 

Proposed FBOT Amendments is to 

Regulation 48.4, which currently permits 

futures commission merchants (FCMs), 

commodity pool operators (CPOs), and 

commodity trading advisors (CTAs) to enter 

orders on behalf of customers or commodity 

pools via direct access on a registered FBOT.4

As explained in the Proposal, the 

Commission is proposing to permit 

introducing brokers (IBs) 5 to submit 

customer orders via direct access to FBOTs 

by adding IBs to the list of permissible 

intermediaries in Regulation 48.4. Doing so 

would permit IBs to act as executing brokers 

for U.S. customers that in turn use another 

intermediary, like an FCM,6 for clearing and 

carrying the customer accounts, similar to the 

way IBs currently perform this service on 

CFTC-registered designated contract markets 

(DCMs). Among other benefits, U.S. market 

participants interested in trading foreign 

futures could have more choices in brokers 

and broker arrangements. The Proposed 

FBOT Amendments will also ensure that 

customer protections are in place, similar to 

the current FBOT requirements for FCMs, 

CPOs, and CTAs. 

As sponsor of the CFTC’s Global Markets 

Advisory Committee (GMAC),7 I have 

devoted a significant part of my 

Commissionership to supporting solutions 

that will enhance the resiliency and 

efficiency of global markets.8 The Proposal is 

policy that mitigates market fragmentation 

and the associated impact on liquidity, and 

promotes the overall competitiveness of our 

derivatives markets. I am pleased to support 

the Proposed FBOT Amendments, and I look 

forward to the public comments. 

[FR Doc. 2024–04117 Filed 2–29–24; 8:45 am] 

BILLING CODE 6351–01–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Food and Drug Administration 

21 CFR Part 50 

[Docket No. FDA–2022–D–2997] 

Key Information and Facilitating 

Understanding in Informed Consent; 

Draft Guidance for Sponsors, 

Investigators, and Institutional Review 

Boards; Availability 

AGENCY: The Office for Human Research 

Protections, Office of the Assistant 

Secretary for Health, Office of the 

Secretary, and the Food and Drug 

Administration, HHS. 

ACTION: Notification of availability. 

SUMMARY: The Office for Human 

Research Protections, Office of the 

Assistant Secretary for Health (OHRP), 

and the Food and Drug Administration 

(FDA) are announcing the availability of 

a draft guidance entitled ‘‘Key 

Information and Facilitating 

Understanding in Informed Consent.’’ 

This draft guidance provides 

recommendations related to two 

provisions of the revised Federal Policy 

for the Protection of Human Subjects 

(the revised Common Rule) by the U.S. 

Department of Health and Human 

Services (HHS) and identical provisions 

in FDA’s proposed rule ‘‘Protection of 

Human Subjects and Institutional 

Review Boards.’’ FDA’s proposed rule, if 

finalized, would harmonize certain 

sections of FDA’s regulations on human 

subject protections and institutional 

review boards (IRBs), to the extent 

practicable and consistent with other 

statutory provisions, with the revised 

Common Rule, in accordance with the 

21st Century Cures Act (Cures Act). The 

guidance addresses the provisions of the 

revised Common Rule that require 

informed consent to begin with key 

information about the research and to 

present information in a way that 

facilitates understanding and identical 

provisions in FDA’s proposed rule. 

DATES: Submit either electronic or 

written comments on the draft guidance 

by April 30, 2024 to ensure that FDA 

and OHRP consider your comment on 

this draft guidance before the agencies 

begin work on the final version of the 

guidance. 

ADDRESSES: You may submit comments 

on any guidance at any time as follows: 

Electronic Submissions 

Submit electronic comments in the 

following way: 

• Federal eRulemaking Portal: 

https://www.regulations.gov. Follow the 

instructions for submitting comments. 

Comments submitted electronically, 

including attachments, to https://

www.regulations.gov will be posted to 

the docket unchanged. Because your 

comment will be made public, you are 

solely responsible for ensuring that your 

comment does not include any 

confidential information that you or a 

third party may not wish to be posted, 

such as medical information, your or 

anyone else’s Social Security number, or 

confidential business information, such 

as a manufacturing process. Please note 

that if you include your name, contact 

information, or other information that 

identifies you in the body of your 

comments, that information will be 

posted on https://www.regulations.gov. 

• If you want to submit a comment 

with confidential information that you 

do not wish to be made available to the 

public, submit the comment as a 

written/paper submission and in the 

manner detailed (see ‘‘Written/Paper 

Submissions’’ and ‘‘Instructions’’). 

Written/Paper Submissions 

Submit written/paper submissions as 

follows: 

• Mail/Hand Delivery/Courier (for 

written/paper submissions): Dockets 

Management Staff (HFA–305), Food and 

Drug Administration, 5630 Fishers 

Lane, Rm. 1061, Rockville, MD 20852. 

• For written/paper comments 

submitted to the Dockets Management 

Staff, FDA will post your comment, as 

well as any attachments, except for 

information submitted, marked and 

identified, as confidential, if submitted 

as detailed in ‘‘Instructions.’’ 

Instructions: All submissions received 

must include the Docket No. FDA– 

2022–D–2997 for ‘‘Key Information and 

Facilitating Understanding in Informed 


ddrumheller on DSK120RN23PROD with PROPOSALS1