Federal Register / Vol. 80, No. 56 / Tuesday, March 24, 2015 / Rules and Regulations 15507 

1Enhancing Protections Afforded Customers and 

Customer Funds Held by Futures Commission 

Merchants and Derivatives Clearing Organizations, 

Final Rule, 78 FR 68506 (Nov. 14, 2013) (amending 

17 CFR parts 1, 3, 22, 30 and 140). 

2See 17 CFR 1.22(c)(3)(i). As defined in 

Regulation 1.22(c)(1), a customer’s account is 

‘‘undermargined,’’ when the value of the customer 

funds for a customer’s account is less than the total 

amount of collateral required by derivatives 

clearing organizations for that account’s contracts. 

See 78 FR 68513, n.30. 

3See 17 CFR 1.22(c)(5)(ii); See 78 FR at 68578. 

4See 17 CFR 1.22(c)(5)(iii)(A). 

5See 17 CFR 1.22(c)(5)(iii)(C). 

6Residual Interest Deadline for Futures 

Commission Merchants, Notice of Proposed 

Rulemaking, 79 FR 68148 (Nov. 14, 2014) 

(amending 17 CFR part 1). 

(SBREFA) requires FAA to comply with 

small entity requests for information or 

advice about compliance with statutes 

and regulations within its jurisdiction. 

A small entity with questions regarding 

this document may contact its local 

FAA official, or the person listed under 

the FOR FURTHER INFORMATION CONTACT

heading at the beginning of the 

preamble. To find out more about 

SBREFA on the Internet, visit http://

www.faa.gov/regulations_policies/

rulemaking/sbre_act/. 

List of Subjects in 14 CFR Part 91 

Air traffic control, Aircraft, Airmen, 

Airports, Aviation safety, Freight, Libya. 

The Amendment 

In consideration of the foregoing, the 

Federal Aviation Administration 

amends chapter I of title 14, Code of 

Federal Regulations as follows: 

PART 91—GENERAL OPERATING AND 

FLIGHT RULES 

■ 1. The authority citation for part 91 

continues to read as follows: 

Authority: 49 U.S.C. 106(f), 106(g), 1155, 

40101, 40103, 40105, 40113, 40120, 44101, 

44111, 44701, 44704, 44709, 44711, 44712, 

44715, 44716, 44717, 44722, 46306, 46315, 

46316, 46504, 46506–46507, 47122, 47508, 

47528–47531, 47534, articles 12 and 29 of the 

Convention on International Civil Aviation 

(61 Stat. 1180), (126 Stat. 11). 

■ 2. In § 91.1603, revise paragraphs (c) 

and (e) to read as follows: 

§ 91.1603 Special Federal Aviation 

Regulation No. 112—Prohibition Against 

Certain Flights Within the Tripoli (HLLL) 

Flight Information Region (FIR). 

* * * * * 

(c) Permitted operations. This section 

does not prohibit persons described in 

paragraph (a) of this section from 

conducting flight operations within the 

Tripoli (HLLL) FIR under the following 

conditions: 

(1) Flight operations are conducted 

under a contract, grant, or cooperative 

agreement with a department, agency, or 

instrumentality of the U.S. government 

(or under a subcontract between the 

prime contractor of the department, 

agency, or instrumentality, and the 

person described in paragraph (a) of this 

section), with the approval of the FAA, 

or under an exemption issued by the 

FAA. The FAA will process requests for 

approval or exemption in a timely 

manner, with the order of preference 

being: First, for those operations in 

support of U.S. government-sponsored 

activities; second, for those operations 

in support of government-sponsored 

activities of a foreign country with the 

support of a U.S. government 

department, agency, or instrumentality; 

and third, for all other operations. 

(2) [Reserved] 

* * * * * 

(e) Expiration. This Special Federal 

Aviation Regulation will remain in 

effect until March 20, 2017. The FAA 

may amend, rescind, or extend this 

Special Federal Aviation Regulation as 

necessary. 

Issued in Washington, DC, under the 

authority of 49 U.S.C. 106(f), 40101(d)(1), 

40105(b)(1)(A), and 44701(a)(5), on March 19, 

2015. 

Michael P. Huerta, 

Administrator. 

[FR Doc. 2015–06697 Filed 3–20–15; 8:45 am] 

BILLING CODE 4910–13–P 

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Part 1 

RIN 3038–AE22 

Residual Interest Deadline for Futures 

Commission Merchants 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Final rule. 

SUMMARY: The Commodity Futures 

Trading Commission (‘‘Commission’’ or 

‘‘CFTC’’) is amending its regulations to 

remove the December 31, 2018 

automatic termination date for the 

phased-in compliance schedule for 

futures commission merchants 

(‘‘FCMs’’) and provides assurance that 

the residual interest deadline, as 

defined in the regulations (‘‘Residual 

Interest Deadline’’), will only be revised 

through a separate Commission 

rulemaking. 

DATES: The final rule is effective May 

26, 2015. 

FOR FURTHER INFORMATION CONTACT: 

Division of Swap Dealer and 

Intermediary Oversight: Thomas Smith, 

Acting Director, 202–418–5495, tsmith@

cftc.gov; Jennifer Bauer, Special 

Counsel, 202–418–5472, jbauer@

cftc.gov; Joshua Beale, AttorneyAdvisor, 202–418–5446, jbeale@

cftc.gov, Three Lafayette Centre, 1155 

21st Street NW., Washington, DC 20581. 

Division of Clearing and Risk: Kirsten 

V.K. Robbins, Associate Chief Counsel, 

202–418–5313, krobbins@cftc.gov, 

Three Lafayette Centre, 1155 21st Street 

NW., Washington, DC 20581. 

Office of the Chief Economist: 

Stephen Kane, Research Economist, 

202–418–5911, skane@cftc.gov, Three 

Lafayette Centre, 1155 21st Street NW., 

Washington, DC 20581. 

SUPPLEMENTARY INFORMATION: 

I. Background 

On October 30, 2013, the Commission 

amended Regulation 1.22 to enhance the 

safety of funds deposited by customers 

with FCMs as margin for futures 

transactions.1 The amendments require 

an FCM to maintain its own capital 

(hereinafter referred to as the FCM’s 

‘‘Residual Interest’’) in customer 

segregated accounts in an amount equal 

to or greater than its customers’ 

aggregate undermargined amounts.2 The 

Commission established a phased-in 

compliance schedule for Regulation 

1.22 with an initial Residual Interest 

Deadline of 6:00 p.m. Eastern Time on 

the date of the settlement referenced in 

Regulation 1.22(c)(2)(i) or (c)(4) (the 

‘‘Settlement Date’’), beginning 

November 14, 2014.3 Amended 

Regulation 1.22 also directs staff to host 

a public roundtable and publish a report 

for public comment by May 16, 2016 

addressing, to the extent information is 

practically available, the practicability 

(for both FCMs and customers) of 

moving the Residual Interest Deadline 

from 6:00 p.m. Eastern Time on the 

Settlement Date, to the time of 

settlement or to some other time of day.4

Furthermore, amended Regulation 1.22 

provides that, absent Commission 

action, the phased-in compliance period 

for the Residual Interest Deadline 

automatically terminates on December 

31, 2018.5 In the case of such automatic 

termination, the Residual Interest 

Deadline would change to the time of 

settlement on the Settlement Date. 

II. The Proposal 

On November 3, 2014, the 

Commission proposed to revise 

Regulation 1.22 to remove the December 

31, 2018 automatic termination of the 

phase-in compliance period.6 In the 

NPRM, the Commission stated the 

intention to retain the Residual Interest 


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15508 Federal Register / Vol. 80, No. 56 / Tuesday, March 24, 2015 / Rules and Regulations 

7See 17 CFR 1.22(c)(3)(i). The term ‘‘Residual 

Interest Deadline’’ is defined in Regulation 

1.22(c)(5). If an FCM is required to increase its 

Residual Interest as a result of customer 

undermargined accounts, the FCM must deposit 

additional funds into the customer segregated 

accounts by the specified Residual Interest 

Deadline. 

8The Commission received two comment letters 

filed by the Coalition of National Producers and 

Agribusiness. The second comment letter was 

identical to the first with the exception of an 

amendment adding two additional signatories. 

9The comments are available on the 

Commission’s Web site, http://comments.cftc.gov/

PublicComments/CommentList.aspx?id=1537. 10 7 U.S.C. 19(a). 

Deadline 7 at 6 p.m. Eastern Time, 

unless the Commission takes further 

action via rulemaking. 

In the NPRM, the Commission stated 

that the removal of the automatic 

termination of the phase-in compliance 

period would provide the Commission 

with a greater degree of flexibility to 

assess all relevant data, including the 

costs and benefits of revising the 

Residual Interest Deadline. The 

Commission also retained in Regulation 

1.22 the requirement for Commission 

staff to publish for public comment a 

report addressing the practicability and 

costs and benefits of revising the 

Residual Interest Deadline, and the 

additional requirement for Commission 

staff to conduct a public roundtable on 

the issue. 

The Commission invited comments 

on all aspects of the amendments, 

particularly those regarding the 

practicability and costs and benefits of 

revising the Residual Interest Deadline. 

III. Comments and Response 

The Commission received ten 

comments on the NPRM. The comments 

were submitted by the Futures Industry 

Association (‘‘FIA’’), CME Group 

(‘‘CME’’), National Futures Association 

(‘‘NFA’’), National Introducing Brokers 

Association (‘‘NIBA’’), Managed Funds 

Association (‘‘MFA’’), Coalition of 

National Producers and Agribusiness 

(‘‘Agribusiness Coalition’’),8 National 

Grain and Feed Association (‘‘NGFA’’), 

National Council of Farmer 

Cooperatives (‘‘NCFC’’), the Honorable 

Heidi Heitkamp, United States Senate, 

and Chris Barnard.9 All ten comments 

supported the proposed amendments. 

The FIA and its member firms 

supported the amendments, stating their 

willingness to participate in the study 

and citing concerns that a residual 

interest deadline earlier than 6:00 p.m. 

Eastern Time on the Settlement Date 

might impose significant financial and 

operational burdens on both customers 

and FCMs. The NFA encouraged the 

Commission to consider industry 

comment on the timing and parameters 

of the study to ensure the Commission 

has the most complete information 

available. The NIBA, NCFC, NGFA, 

Agribusiness Coalition, and MFA added 

that an earlier Residual Interest 

Deadline could force the pre-funding of 

margin by FCMs, in turn causing 

increased operational costs on FCMs 

and their customers, which could result 

in the possible exit of certain customers 

from the marketplace. Senator Heitkamp 

also supported the proposed 

amendments and stated that the rule 

would provide end users with the 

certainty they need to run their 

businesses. 

All commenters supported the 

position that any future revisions 

should be done through separate 

rulemaking. The FIA and CME further 

stated that the opportunity to provide 

input on the setting of the Residual 

Interest Deadline was something 

consistent with the goals of, if not 

required by, the Administrative 

Procedure Act. Chris Barnard asked for 

certainty on the proposed retention of 

the existing deadline absent further 

Commission rulemaking, stating that 

such a requirement is open-ended. 

The Commission has considered the 

comments and is adopting the 

amendments as proposed. Amending 

Regulation 1.22 to require the 

Commission to conduct a separate 

rulemaking prior to revising the 

Residual Interest Deadline will provide 

market participants with an opportunity 

to review and comment on the 

Commission’s staff’s roundtable and 

public report. The amendments also 

provide market participants with an 

opportunity to review and to provide 

comments, via a rulemaking process, on 

any Commission proposed revisions to 

the Residual Interest Deadline. 

IV. Cost-Benefit Considerations 

Section 15(a) of the Commodity 

Exchange Act (‘‘CEA’’) requires the 

Commission to consider the costs and 

benefits of its actions before 

promulgating a regulation under the 

CEA or issuing certain orders.10 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 

section 15(a) factors. 

As noted in the NPRM, the status quo 

baseline with which the costs and 

benefits are compared is the Residual 

Interest Deadline of 6:00 p.m. Eastern 

Time on the Settlement Date, which 

would apply until the Commission takes 

further action or, in the absence of 

further action, until December 31, 2018. 

The status quo baseline includes the 

automatic termination of the phase-in 

compliance period at December 31, 

2018, which, absent Commission action, 

would move the Residual Interest 

Deadline to the time of settlement 

referenced in Regulation 1.22(c)(2)(i), or 

as appropriate, 1.22(c)(4). 

As also noted in the NPRM, the status 

quo baseline is similar to this final 

rulemaking and, as such, the 

Commission believes that there is not 

likely to be any material differences 

between this final rulemaking and the 

status quo baseline in terms of the first 

four section 15(a) factors. The 

Commission notes that the amendments 

will alter the procedure followed with 

regard to the removal of the automatic 

termination of the phase-in period, 

which could alter the cost and benefit 

with respect to the fifth section 15(a) 

factor. The Commission specifically 

invited comment on the cost and benefit 

implications related to the fifth section 

15(a) factor (‘‘other public interest 

considerations’’). However, the 

Commission received no comments that 

contained any quantitative data 

regarding the monetary value of any 

public interest considerations. As such, 

the Commission has considered the fifth 

section 15(a) factor qualitatively. 

All commenters supported the 

termination of the automatic phase-in 

compliance period. The CME stated that 

removing the automatic moving of the 

residual interest deadline will allow 

impacted market participants, including 

customers and FCMs, to provide 

comments on any proposed rule change 

that results from the study. In addition, 

the FIA stated the adoption of the 

amendment will also afford the 

Commission the opportunity to 

carefully consider the results of the staff 

study without being bound by an 

unnecessary deadline. 

The Commission agrees with 

commenters that a separate rulemaking 

prior to revising the Residual Interest 

Deadline will afford the public an 

opportunity to participate in any future 

decision-making concerning any 

possible movement of the Residual 

Interest Deadline. The termination of 

the automatic phase-in compliance 

period will grant the Commission more 

opportunity to consider the study and 


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Federal Register / Vol. 80, No. 56 / Tuesday, March 24, 2015 / Rules and Regulations 15509 

11 5 U.S.C. 601 et seq. 

12 47 FR 18618 (Apr. 30, 1982). 

13 Id. at 18619. 

14 Id. 

the public roundtable, as well as an 

opportunity to receive and evaluate 

additional public comment on any 

proposed rule change. 

V. Related Matters 

A. Regulatory Flexibility Act 

The Regulatory Flexibility Act 

(‘‘RFA’’) 11 requires Federal agencies, in 

promulgating regulations, to consider 

the impact of those regulations on small 

entities. The Commission has 

previously established certain 

definitions of ‘‘small entities’’ to be used 

by the Commission in evaluating the 

impact of its rules on small entities in 

accordance with the RFA.12 The final 

amendments would affect FCMs. The 

Commission previously has determined 

that FCMs are not small entities for 

purposes of the RFA, and, thus, the 

requirements of the RFA do not apply 

to FCMs.13 The Commission’s 

determination was based, in part, upon 

the obligation of FCMs to meet the 

minimum financial requirements 

established by the Commission to 

enhance the protection of customers’ 

segregated funds and protect the 

financial condition of FCMs generally.14

Accordingly, the Chairman, on behalf of 

the Commission, hereby certifies 

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

amendments will not have a significant 

economic impact on a substantial 

number of small entities. 

B. Paperwork Reduction Act 

The Paperwork Reduction Act 

(‘‘PRA’’) provides that a Federal 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 issued by the Office of 

Management and Budget (‘‘OMB’’). This 

rulemaking amends requirements that 

contain a collection of information for 

which the Commission has previously 

received a control number from OMB. 

The title for this collection of 

information is ‘‘Regulations and Forms 

Pertaining to Financial Integrity of the 

Market Place, OMB control number 

3038–0024’’. This collection of 

information is not expected to be 

impacted by the rule amendment 

approved herein, as the calculations 

which are already reflected in the 

burden estimate are not expected to 

change; the phase-in period for 

assessing compliance relative to such 

calculations is the sole aspect of the 

collection of information that will be 

altered. The PRA burden hours 

associated with this collection of 

information are therefore not expected 

to be increased or reduced as a result of 

the final amendments. 

Accordingly, for purposes of the PRA, 

these final rule amendments would not 

impose any new reporting or 

recordkeeping requirements. 

List of Subjects in 17 CFR Part 1 

Brokers, Commodity futures, 

Consumer protection, Reporting and 

recordkeeping requirements. 

For the reasons discussed in the 

preamble, the Commodity Futures 

Trading Commission amends 17 CFR 

part 1 as set forth below: 

PART 1—GENERAL REGULATIONS 

UNDER THE COMMODITY EXCHANGE 

ACT 

■ 1. The authority citation for part 1 

continues to read as follows: 

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

6d, 6e, 6f, 6g, 6h, 6i, 6k, 6l, 6m, 6n, 6o, 6p, 

6r, 6s, 7, 7a–1, 7a–2, 7b, 7b–3, 8, 9, 10a, 12, 

12a, 12c, 13a, 13a–1, 16, 16a, 19, 21, 23, and 

24 (2012). 

■ 2. In § 1.22, revise paragraphs 

(c)(5)(iii)(B) and (C) to read as follows: 

§ 1.22 Use of futures customer funds 

restricted. 

* * * * * 

(c) * * * 

(5) * * * 

(iii) * * * 

(B) Nine months after publication of 

the report required by paragraph 

(c)(5)(iii)(A) of this section, the 

Commission may (but shall not be 

required to) do either of the following: 

(1) Terminate the phase-in period 

through rulemaking, in which case the 

phase-in period shall end as of a date 

established by a final rule published in 

the Federal Register, which date shall 

be no less than one year after the date 

such rule is published; or 

(2) Determine that it is necessary or 

appropriate in the public interest to 

propose through rulemaking a different 

Residual Interest Deadline. In that 

event, the Commission shall establish, if 

necessary, a phase-in schedule in the 

final rule published in the Federal 

Register. 

(C) If the phase-in schedule has not 

been terminated or revised pursuant to 

paragraph (c)(5)(iii)(B) of this section, 

then the Residual Interest Deadline shall 

remain 6:00 p.m. Eastern Time on the 

date of the settlement referenced in 

paragraph (c)(2)(i) or, as appropriate, 

(c)(4) of this section until such time that 

the Commission takes further action 

through rulemaking. 

Issued in Washington, DC, on March 18, 

2015, by the Commission. 

Christopher J. Kirkpatrick, 

Secretary of the Commission. 

Note: The following appendices will not 

appear in the Code of Federal Regulations. 

Appendices to Residual Interest 

Deadline for Futures Commission 

Merchants—Commission Voting 

Summary, Chairman’s Statement, and 

Commissioners’ Statements 

Appendix 1—Commission Voting 

Summary 

On this matter, Chairman Massad and 

Commissioners Wetjen, Bowen, and 

Giancarlo voted in the affirmative. No 

Commissioner voted in the negative. 

Appendix 2—Statement of Chairman 

Timothy G. Massad 

Today we are finalizing a change to a rule 

that concerns one of the most important 

objectives of the Commission, which is to 

protect customer funds. In addition, today’s 

action reflects one of my key priorities since 

taking office, which is to make sure our rules 

do not impose undue burdens or unintended 

consequences for the nonfinancial 

commercial businesses that depend on the 

derivatives markets to hedge commercial 

risks. 

Today’s action concerns Regulation 1.22, 

regarding the posting of collateral. When a 

customer’s account has insufficient margin, a 

futures commission merchant must commit 

its own capital—often referred to as the 

FCM’s ‘‘residual interest’’—to make up the 

difference. Regulation 1.22 sets the deadline 

for posting residual interest. That deadline, 

in turn, affects when customers must post 

collateral. The regulation provided that the 

deadline, which is currently 6:00 p.m. on the 

next day, would automatically become earlier 

in a couple years, without any Commission 

action or opportunity for public input. 

Last fall, we proposed to amend the rule 

so that the FCM’s deadline to post ‘‘residual 

interest’’ will not become earlier than 6:00 

p.m. without an affirmative Commission 

action and an opportunity for public 

comment. Today, we are finalizing that 

change. 

An earlier deadline can help make sure 

that FCMs always hold sufficient margin and 

do not use one customer’s margin to support 

another customer, but it can also impose 

costs on customers who must deliver margin 

sooner. We will do a study of how well the 

current rule and deadline are working, the 

practicability of changing the deadline, and 

the costs and benefits of any change. Today’s 

action will make sure that the Commission 

considers all those issues and that customers 

will have an opportunity to provide us with 

input on any future change the Commission 

may consider. 

Appendix 3—Statement of 

Commissioner Mark P. Wetjen 

In the fall of 2013, the Commission made 

some important changes to rule 1.22, to 

which registered futures commission 


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15510 Federal Register / Vol. 80, No. 56 / Tuesday, March 24, 2015 / Rules and Regulations 

merchants (FCMs) are subject. The revision 

to this rule, known as the ‘‘residual-interest 

requirement’’, clarified that one customer’s 

funds could not be used by an FCM to cover 

another customer’s margin deficit, but 

phased in a deadline for stricter compliance 

with this clarified standard. The change was 

designed to reduce risks to those customer 

funds placed in the care of FCMs, and were 

among a host of regulatory enhancements 

adopted by the Commission after two failures 

of large, registered FCMs in 2011 and 2012— 

MF Global and Peregrine Financial. 

I supported those regulatory 

enhancements—including the revision to 

rule 1.22—because of the importance of the 

matter addressed in each: The safekeeping of 

customer money, which is the most 

sacrosanct duty that any financial institution 

owes to its customers. Today, the overall 

framework of regulatory requirements that 

registered FCMs must comply with is 

substantially different today than in 2011. 

For example, FCMs are no longer permitted 

to use customer funds for in-house lending 

through repurchase agreements; they are 

subject to restrictions on the types of 

securities that customer funds can be 

invested in; they must pass on customer 

initial margin on a gross basis to the 

clearinghouse; through LSOC (legal 

segregation with operational comingling) 

they must legally segregate cleared swaps 

customer collateral on an individual basis; 

and they were required to significantly 

enhance their supervision of and accounting 

for customer funds. As a result, the risks 

posed to customers funds stewarded by 

FCMs have been significantly reduced. 

The recent customer protection 

rulemakings all were well intentioned, but 

indisputably carried some additional costs 

and burdens for both FCMs and their 

customers. The analysis was made at the 

time, however, that those burdens and costs 

were outweighed by the benefits to FCM 

customers, especially against the very recent 

backdrop of hundreds of millions of dollars 

of customer funds having been stolen, or tied 

up in a bankruptcy proceeding, for at least a 

period of time. 

The release before us essentially re-weighs 

the cost or burden on one hand, and the 

benefit on the other, and comes up with a 

slightly different, but well supported, 

conclusion regarding the residual-interest 

requirement. The costs or burdens revisited 

in the release: (1) Uncertainty to the 

marketplace invited by a time-of-settlement 

compliance deadline that was subject to 

future review by the Commission staff, which 

suggested a change could come to the 

requirements, but might not; and (2) the 

anticipated costs to FCMs of having to 

finance the funding to top up their 

customers’ margin deficits, or the cost to 

customers of pre-funding their margin 

accounts with FCMs. And the benefit at issue 

in the release: The value to an FCM customer 

of ensuring that its funds will never be 

borrowed by an FCM to cover another 

customer’s deficit. 

The inherent risk to this common practice 

by FCMs is that should an FCM become 

insolvent after it posts required margin to the 

clearinghouse, but before it collects margin 

deficits from all of its customers, the 

customers whose funds were used to cover a 

deficit might not see those funds again, or 

perhaps only after a protracted bankruptcy 

proceeding. This practice also is not 

technically compliant with how rule 1.22 is 

written, which prohibits FCMs from ‘‘using, 

or permitting the use of, the futures customer 

funds of one futures customer to purchase, 

margin, or settle the trades, contracts, or 

commodity options of, or to secure or extend 

the credit of, any person other than such 

futures customer.’’ 

This final rule keeps the residual-interest 

deadline at the close of business on the day 

following the margin-deficit calculation and 

eliminates the future deadline of the time of 

settlement on the day following the margindeficit calculation. The Commission staff is 

still required to perform a feasibility study to 

determine whether future, more aggressive 

residual-interest deadlines would be 

desirable. 

The comment file overwhelmingly 

supported the change in today’s final rule— 

in other words, commenters took the view 

that the potential costs associated with the 

2013 residual-interest rule appear to 

outweigh the risk that some of their funds 

could be lost in the event their FCM becomes 

insolvent after the time of settlement, but 

before an FCM collects margin deficits. 

Indeed, the risk that an FCM becomes 

insolvent during this precise timeframe 

without some prior notice to its customers of 

financial stress at the FCM is very low. 

Notably, many comments supporting this 

final rule were filed by FCM customers, the 

constituency rule 1.22 is designed to protect, 

and who appreciate the aforementioned risk. 

The Commission must respect the comment 

process and the FCM-customer viewpoint 

that today’s rule better balances the cost and 

benefits of rule 1.22. 

Another relevant factor that supports the 

change to rule 1.22 is the risk of 

concentration within the FCM community as 

a whole, and what that means for the costs 

to customers of trading in derivatives and its 

related impacts on liquidity in those markets. 

The number of registered FCMs has 

decreased in recent years, which may make 

it more difficult for customers to manage 

their risk by limiting their ability to access 

the markets, or by making it more difficult for 

them to allocate funds between multiple 

FCMs to minimize concentration risk. 

The results of the public comment process, 

when considered in the context of the overall 

stronger regulatory framework for FCMs and 

the concentration in the FCM community 

described above, give me the comfort needed 

to support the changes to 1.22 contained in 

today’s release. 

On the other hand, without the five-year 

phase-in period, we might see a reluctance by 

the industry to move as swiftly to streamline 

margin-collection practices and to take 

advantage of any technological solutions that 

may be developed. Some recent technology 

advances hold the promise to reduce the very 

sorts of risks addressed by rule 1.22 by 

facilitating real-time margin collection and 

settlement. To be sure, those advances would 

have been more seriously and expeditiously 

tested and—if they demonstrate merit— 

embraced without the change to rule 1.22 we 

are releasing today. In other words, just as in 

2013 when the existing rule was finalized, I 

continue to believe that the most costly 

solutions for complying with rule 1.22 that 

were anticipated by many commenters 

should not be the ones ultimately embraced 

by the marketplace. Moreover, given 

regulatory requirements imposed by other 

regulators, today members of the clearing 

ecosystem are exploring a variety of solutions 

to new compliance and capital burdens that 

also would ease and enable stricter 

compliance with rule 1.22, thus minimizing 

further the likelihood that pre-funding 

customer margin accounts with FCMs will 

become the preferred solution to compliance. 

Finally, I note that a study and roundtable 

to review these advancements, and how they 

might lower risks and related costs, still are 

mandated by law, and I ask the Chairman to 

direct staff to move swiftly to comply with 

these regulatory requirements so that the 

Commission may act appropriately when and 

if it needs to. I look forward to continuing to 

collaborate with staff and market participants 

as we work towards enhancing the safety and 

efficiency of our markets. 

Appendix 4—Statement of 

Commissioner J. Christopher Giancarlo 

I support the Commission’s action to 

change the residual interest deadline, if 

necessary or appropriate, only upon a 

Commission rulemaking following a public 

comment period. This approach will allow 

the Commission to better understand the 

market impacts and operational challenges of 

moving the residual interest deadline. This 

approach is especially important given the 

likely negative impacts on smaller futures 

commission merchants who provide our 

farmers, ranchers and rural producers with 

critical risk management services. 

I call on the Commission to take the same 

deliberative approach to the de minimis 

exception to the swap dealer definition so 

that the de minimis level does not 

automatically adjust from $8 billion to $3 

billion, absent a rulemaking with proper 

notice and comment. Like today’s proposal, 

the Commission should only adjust the de 

minimis threshold if necessary or appropriate 

after it has considered the data and weighed 

public comments. 

[FR Doc. 2015–06548 Filed 3–23–15; 8:45 am] 

BILLING CODE 6351–01–P 

ENVIRONMENTAL PROTECTION 

AGENCY 

40 CFR Part 63 

[EPA–HQ–OAR–2009–0234; FRL–9923–98– 

OAR] 

RIN 2060–AS39 

National Emission Standards for 

Hazardous Air Pollutants: Coal- and 

Oil-Fired Electric Steam Generating 

Units 

AGENCY: Environmental Protection 

Agency (EPA). 


TKELLEY on DSK3SPTVN1PROD with RULES