Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Proposed Rules 6569

Note 1: This AD applies to each airplane

identified in the preceding applicability

provision, regardless of whether it has been

otherwise modified, altered, or repaired in

the area subject to the requirements of this

AD. For airplanes that have been modified,

altered, or repaired so that the performance

of the requirements of this AD is affected, the

owner/operator must request approval for an

alternative method of compliance in

accordance with paragraph (f)(1) of this AD.

The request should include an assessment of

the effect of the modification, alteration, or

repair on the unsafe condition addressed by

this AD; and, if the unsafe condition has not

been eliminated, the request should include

specific proposed actions to address it.

Compliance: Required as indicated, unless

accomplished previously.

To detect and correct fatigue cracking in

certain areas of the rear spar of the wing,

which may lead to reduced structural

integrity of the wing and the main landing

gear (MLG), accomplish the following:

Restatement of Actions Required by AD 93–

08–15

(a) For airplanes having manufacturer’s

serial numbers (MSN) 003 through 008

inclusive, and 010 through 021 inclusive:

Prior to the accumulation of 12,000 total

flight cycles, or within 500 flight cycles after

June 11, 1993 (the effective date of AD 93–

08–15, amendment 39–8563), whichever

occurs later, modify the inner rear spar web

of the wing in accordance with Airbus

Industrie Service Bulletin A320–57–1004,

Revision 01, dated September 24, 1992, or

Revision 02, dated June 14, 1993.

Restatement of Actions Required by AD 93–

25–13

(b) For airplanes having MSN’s 002

through 051 inclusive: Prior to the

accumulation of 12,000 total flight cycles, or

within 2,000 flight cycles after February 14,

1994 (the effective date of AD 93–25–13,

amendment 39–8777), whichever occurs

later, accomplish the requirements of

paragraphs (b)(1) and (b)(2) of this AD in

accordance with Airbus Industrie Service

Bulletin A320–57–1060, dated December 8,

1992; or Revision 02, dated December 16,

1994.

(1) Perform a cold expansion of all the

attachment holes for the forward pintle

fitting of the MLG, except for the holes that

are for taper-lok bolts.

(2) Perform a cold expansion of the holes

at the actuating cylinder anchorage of the

MLG.

Note 2: Accomplishment of the cold

expansion in accordance with Airbus Service

Bulletin A320–57–1060, Revision 01, dated

April 26, 1993, is also acceptable for

compliance with the requirements of

paragraph (b) of this AD.

New Actions Required by This AD

(c) For all airplanes: Perform an ultrasonic

inspection to detect cracking of the rear spar

of the wing, in accordance with Airbus

Service Bulletin A320–57–1088, Revision 02,

dated July 29, 1999; at the applicable time

specified by paragraph (c)(1) or (c)(2) of this

AD. Repeat the inspection thereafter at

intervals not to exceed 3,600 flight cycles.

(1) For airplanes on which the actions

specified by Airbus Service Bulletin A320–

57–1004, Revision 02, dated June 14, 1993,

or earlier version; and Airbus Service

Bulletin A320–57–1060, Revision 02, dated

December 16, 1994, or earlier version; have

been accomplished: Perform the inspection

of all applicable fastener holes within 12,000

flight cycles after accomplishment of the

service bulletins, or within 750 flight cycles

after the effective date of this AD, whichever

occurs later.

(2) For airplanes on which the actions

specified by Airbus Modification 20740 and

Airbus Service Bulletin A320–57–1060,

Revision 02, dated December 16, 1994, or

earlier version, have been accomplished; or

on which Airbus Modifications 20740,

20741, and 20796 have been accomplished:

Perform the inspections at the locations and

applicable times specified by paragraphs

(c)(2)(i) and (c)(2)(ii) of this AD.

(i) Perform the inspection of left and right

fastener holes 52 to 55, 82, 83, 87, and 88;

located in the rear spar of the wing; prior to

the accumulation of 17,300 total flight cycles,

or within 750 flight cycles after the effective

date of this AD, whichever occurs later. If

any cracking is found, prior to further flight,

accomplish the requirements of paragraph

(c)(2)(ii) of this AD.

(ii) Except as required by paragraph

(c)(2)(i) of this AD: Perform the inspection of

all fastener holes located in the rear spar of

the wing that are not identified in paragraph

(c)(2)(i) of this AD prior to the accumulation

of 20,000 total flight cycles, or within 200

flight cycles after the effective date of this

AD, whichever occurs later.

Note 3: Accomplishment of the actions

specified by Airbus Service Bulletin A320–

57–1088, dated September 30, 1996, or

Revision 01, dated September 17, 1997, prior

to the effective date of this AD is acceptable

for compliance with the requirements of the

initial inspection required by paragraph (c) of

this AD.

(d) If any crack is found during any

inspection required by paragraph (c) of this

AD: Prior to further flight, repair in

accordance with a method approved by

either the Manager, International Branch,

ANM–116, FAA, Transport Airplane

Directorate; or the DGAC (or its delegated

agent). For a repair method to be approved

by the Manager, International Branch, ANM–

116, as required by this paragraph, the

Manager’s approval letter must specifically

reference this AD.

Optional Terminating Action

(e) Modification of all specified fastener

holes in the rear spar of the wing in

accordance with Airbus Service Bulletin

A320–57–1089, dated December 22, 1996;

Revision 01, dated April 17, 1997; or

Revision 02, dated November 6, 1998;

constitutes terminating action for the

ultrasonic inspections required by this AD.

Such modification, if accomplished prior to

the accumulation of 12,000 total flight cycles,

constitutes terminating action for the actions

required by paragraphs (a) and (b) of this AD.

Alternative Methods of Compliance

(f)(1) An alternative method of compliance

or adjustment of the compliance time that

provides an acceptable level of safety may be

used if approved by the Manager,

International Branch, ANM–116. Operators

shall submit their requests through an

appropriate FAA Principal Maintenance

Inspector, who may add comments and then

send it to the Manager, International Branch,

ANM–116.

(2) Alternative methods of compliance,

approved previously in accordance with AD

93–25–13; amendment 39–8777, are

approved as alternative methods of

compliance with this AD.

Note 4: Information concerning the

existence of approved alternative methods of

compliance with this AD, if any, may be

obtained from the International Branch,

ANM–116.

Special Flight Permits

(g) Special flight permits may be issued in

accordance with sections 21.197 and 21.199

of the Federal Aviation Regulations (14 CFR

21.197 and 21.199) to operate the airplane to

a location where the requirements of this AD

can be accomplished.

Note 5: The subject of this AD is addressed

in French airworthiness directive 1999–264–

135(B), dated June 30, 1999.

Issued in Renton, Washington, on February

4, 2000.

Donald L. Riggin,

Acting Manager, Transport Airplane

Directorate, Aircraft Certification Service.

[FR Doc. 00–3132 Filed 2–9–00; 8:45 am]

BILLING CODE 4910–13–U

COMMODITY FUTURES TRADING

COMMISSION

17 CFR Part 1

RIN 3038–AB51

Minimum Financial Requirements for

Futures Commission Merchants and

Introducing Brokers; Amendments to

the Restrictions on the Withdrawal of

Equity Capital from a Futures

Commission Merchant and to the

Percentage Deduction (i.e., Haircut)

Applied to the Value of Equity

Securities Collateralizing Secured

Demand Notes Included in Adjusted

Net Capital by a Futures Commission

Merchant or Introducing Broker

AGENCY: Commodity Futures Trading

Commission.

ACTION: Proposed rules.

SUMMARY: The Commodity Futures

Trading Commission (‘‘Commission’’ or

‘‘CFTC’’) is proposing to amend several

provisions of its Regulation 1.17, which

governs the minimum financial

requirements imposed upon futures

commission merchants (‘‘FCMs’’) and

introducing brokers (‘‘IBs’’). The

proposal would: ease the restrictions

6570 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Proposed Rules

1Commission rules cited herein can be found at

17 CFR Ch. I (1999).

2The prohibition against withdrawal of equity

capital set forth in Regulation 1.17(e) applies to

both FCMs and IBs. The restriction requires

consideration of both the minimum dollar amount

of net capital required for both types of registrants

($250,000 for FCMs and $30,000 for IBs) and, just

for FCMs, the amount of funds required to be

segregated and set aside for FCMs’ customers. For

purposes of this proposal, only the restriction on

FCMs need be addressed since the change relates

only to the percentage applied to the amount of

funds required to be segregated and set aside for

customers.

3Before applying the percentage capital factor,

the amount required to be segregated or set aside

is reduced by the market value of commodity

options purchased by customers on or subject to the

rules of a contract market or a foreign board of trade

for which the full premiums have been paid:

provided, however, that the option premium

deduction for each customer is limited to the

amount of customer funds and the foreign futures

and foreign options secured amounts in such

customer’s account(s).

4The JAC is comprised of representatives of the

audit and compliance departments of the selfregulatory organizations (‘‘SROs’’) and National

Futures Association. The JAC coordinates the

industry’s audit and ongoing surveillance activities

to promote a uniform framework of self-regulation.

imposed upon the withdrawal of equity

capital from an FCM; increase the

percentage deduction (i.e., ‘‘haircut’’)

applied to the value of equity securities

pledged as collateral for secured

demand notes that are included in the

adjusted net capital of an FCM or IB;

and delete a reference to a section of the

Securities and Exchange Commission’s

(‘‘SEC’’) capital rule that has been

repealed.

The Commission believes that the

current restriction on the withdrawal of

equity capital that is based on a

percentage of the amount of funds an

FCM is required to segregate or set aside

for customers may be unnecessary in

light of other early warning capital

standards and the degree of surveillance

carried out by SROs over their member

FCMs. The proposed amendment

increasing the haircut applied to equity

securities pledged as collateral for

secured demand notes would provide

greater conformity between the

Commission’s capital rules and the

capital rules of the SEC.

DATES: Comments must be received on

or before March 13, 2000.

ADDRESSES: Comments should be

mailed to Jean A. Webb, Secretary,

Commodity Futures Trading

Commission, Three Lafayette Centre,

1155 21st Street, N.W., Washington,

D.C. 20581. In addition, comments may

be sent by facsimile to (202) 418–5521,

or by electronic mail to

secretary@cftc.gov. Reference should be

made to ‘‘Minimum Financial

Requirements for Futures Commission

Merchants and Introducing Brokers—

Equity Capital.’’

FOR FURTHER INFORMATION CONTACT:

Henry J. Matecki, Financial Audit and

Review Branch, Commodity Futures

Trading Commission, 300 S. Riverside

Plaza, Room 1600–N, Chicago, IL 60606;

telephone (312) 886–3217; electronic

mail hmatecki@cftc.gov: or Gary C.

Miller, Associate Chief Accountant,

Division of Trading and Markets,

Commodity Futures Trading

Commission, Three Lafayette Centre,

1155 21st Street, N.W., Washington,

D.C. 20581; telephone (202) 418–5461;

electronic mail gmiller@cftc.gov.

SUPPLEMENTARY INFORMATION:

I. Restrictions on the Withdrawal of

Equity Capital From a Futures

Commission Merchant

A. Background

Commission Regulation 1.17(e) 1

prohibits the withdrawal of equity

capital from an FCM 2 to redeem or to

repurchase shares of stock of the FCM,

to pay dividends, or to make an

unsecured advance or loan to a

stockholder, partner, sole proprietor or

employee of the FCM if, after giving

effect to the withdrawal and to certain

other specified withdrawals and

payments, the FCM’s adjusted net

capital would be less than the greatest

of:

(1) $300,000 (120 percent of the

$250,000 minimum adjusted net capital

requirement);

(2) Seven percent of the customer

funds required to be segregated or set

aside pursuant to the Commodity

Exchange Act (‘‘Act’’) and Commission

regulations, 3 (hereinafter collectively

referred to as the ‘‘customer segregated

and secured amount’’);

(3) 120 percent of the amount of

adjusted net capital required by a

registered futures association of which

the FCM is a member; or

(4) For an FCM that is also a securities

broker or dealer registered with the

Securities and Exchange Commission

(‘‘SEC’’), the amount of net capital

specified in SEC Rule 15c3–1(e) (17 CFR

240.15c3–1(e)).

The Joint Audit Committee (‘‘JAC’’)

has petitioned the Commission to

amend the restriction in (2) above to

permit the withdrawal of equity capital

from an FCM provided that, after giving

effect to the withdrawal, the FCM’s

adjusted net capital is in excess of six

percent of the customer segregated and

secured amount. 4 The JAC’s petition

did not address the other withdrawal

restrictions listed above.

In its petition, the JAC stated that

prohibiting capital withdrawals that

result in an FCM having adjusted net

capital that is less than seven percent of

the customer segregated and secured

amount is an unnecessary regulatory

burden. In support of its position, the

JAC claimed that other provisions of the

Commission’s regulations also impose

effective restraints on the excessive

withdrawal of capital from an FCM by

an equity holder. Specifically, the JAC

noted that: (1) FCMs are required to

maintain minimum adjusted net capital

of at least four percent of the customer

segregated and secured amount funds

requirements in order to operate and to

handle customer positions and funds;

(2) the Commission’s ‘‘early warning’’

notice and financial reporting

requirements provide the Commission

and the FCMs’ designated selfregulatory organizations (‘‘DSRO’’) with

the ability to monitor the financial

condition and operations, including

capital withdrawals, of an FCM that

fails to maintain adjusted net capital at

a level that exceeds six percent of the

customer segregated and secured

amount; and (3) the Commission’s debtequity ratio requirement imposes an

effective restraint on the excessive

withdrawal of equity capital.

Furthermore, the JAC stated that the

changes it requested would provide

greater harmony between the

Commission’s capital rules and the

capital rules of the SEC. In this regard,

the JAC noted that the SEC’s capital

rules permit withdrawals of capital from

a broker or dealer provided that, after

giving effect to the withdrawal, the

broker’s or dealer’s net capital equals or

exceeds the SEC’s early warning level.

Each of the reasons set forth by the JAC

is discussed below.

B. Proposed Rule Amendments

After careful consideration of the

JAC’s petition and the issues that the

petition presents, the Commission is

proposing to amend Regulation 1.17(e)

to permit equity capital withdrawals

provided that, after giving effect to the

withdrawals, the FCM’s adjusted net

capital is in excess of six percent of the

customer segregated and secured

amount. The Commission is not

proposing to amend any of the other

capital withdrawal restrictions set forth

in the regulation.

An FCM is required to maintain

minimum adjusted net capital of the

greatest of: (A) $250,000; (B) four

percent of the customer segregated and

secured amount; (C) the amount of

adjusted net capital required by a

registered futures association of which it

is a member; or (D) for securities brokers

and dealers, the amount of net capital

required by SEC Rule 15c3–1(a) (17 CFR

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Proposed Rules 6571

5See Regulations 1.17(a)(2)(i) and 1.52.

6See Regulation 1.17(a)(4).

7See Regulation 1.12(b)(4).

8Equity capital is defined by Regulation

1.17(d)(1) to include certain loans subject to

qualifying satisfactory subordination agreements

and the following:

(1) In the case of a corporation, the sum of its par

or stated value of capital stock, paid in capital in

excess of par, retained earnings, unrealized profit

and loss, and other capital accounts;

(2) In the case of a partnership, the sum of its

capital accounts of partners (inclusive of such

partners’ commodity interest and securities

accounts subject to the provisions of Rule 1.17(e)

concerning restrictions on withdrawals of equity

capital), and unrealized profit and loss; and

(3) In the case of a sole proprietorship, the sum

of its capital accounts and unrealized profit and

loss.

‘‘Debt-equity total’’ is defined by Regulation

1.17(d)(2) and encompasses equity capital as

defined above plus loans subject to satisfactory

subordination agreements that do not qualify as

equity capital under Regulation 1.17(d)(1).

9SEC Rule 15c3–1(a)(1)(ii) (17 CFR 240.15c3–

1(a)(1)(ii)) requires a securities broker or dealer

computing its minimum net capital requirement

under the alternative method to maintain minimum

net capital of not less than the greater of $250,000

or 2 percent of aggregate debit items computed in

accordance with the Formula for Determination of

Reserve Requirement for Brokers and Dealers

(Exhibit A to Rule 15c3–3).

10 17 CFR 240.17a–11(c)(2).

11The value of the collateral, after applicable

haircuts, must exceed the full outstanding face

amount of the secured demand note.

12 43 FR 39956 (September 8, 1978).

13 57 FR 56984 (December 2, 1992).

240.15c3–1(a)). FCMs that are members

of commodity exchanges must comply

with the net capital requirements of

those exchanges, which are required to

be at least as stringent as the

Commission’s. 5 Generally, FCMs that

handle customer accounts are required

to maintain adjusted net capital in

excess of four percent of the customer

segregated and secured amount.

An FCM that is not in compliance

with the minimum net capital

requirement must transfer all customer

accounts and immediately cease doing

business as an FCM. 6 Therefore, each

FCM must ensure that a capital

withdrawal does not cause the FCM’s

adjusted net capital to fall below four

percent of the customer segregated and

secured amount.

In addition, the Commission’s ‘‘early

warning’’ notice and financial reporting

requirements deter excessive equity

withdrawals. Commission Regulation

1.12(b)(2) requires an FCM to notify its

DSRO and the Commission in writing if

its adjusted net capital does not equal or

exceed six percent of the customer

segregated and secured amount. These

early warning notices must be filed

within five business days of the FCM’s

adjusted net capital falling below the

early warning level. Moreover,

Commission Regulation 1.12(g)(2)

requires an FCM to give the Commission

written notice at least two business days

prior to a planned withdrawal of equity

capital if the withdrawal would reduce

excess net capital by 30 percent or more

from that most recently reported in a

financial report filed with the

Commission.

An FCM that hits the early warning

trigger is also required to file a financial

report on Form 1–FR–FCM with the

Commission and its DSRO as of the

close of the month during which its

adjusted net capital does not exceed the

early warning level and for each month

thereafter until three successive months

have elapsed during which its adjusted

net capital is at all times equal to or in

excess of the early warning level. 7 This

early warning notice is intended to

bring to the Commission’s and DSRO’s

attention firms that should be subjected

to closer monitoring because of their

minimal regulatory capital.

Furthermore, the Commission’s ‘‘debtequity ratio’’ requirement also limits the

amount of capital that may be

withdrawn from an FCM. Commission

Regulation 1.17(d) prohibits the

withdrawal of capital from an FCM if,

after giving effect to the withdrawal, the

FCM’s equity capital would be less than

30 percent of its debt-equity total. 8

Finally, setting the capital withdrawal

limit at the Commission’s early warning

level is supported by the capital

withdrawal rules adopted by the SEC for

securities brokers or dealers that

compute their minimum net capital

requirement in accordance with the

SEC’s ‘‘alternative’’ method. 9 SEC Rule

15c3–1(e)(2)(vi) (17 CFR 240.15c3–

1(e)(2)(vi)) prohibits a capital

withdrawal from a broker or dealer that

computes its minimum net capital

requirement under the alternative

method if, after giving effect to the

withdrawal, the broker’s or dealer’s

minimum net capital would be less than

five percent of the aggregate debit items

as determined by the Reserve Formula.

The SEC’s early warning requirement

for such brokers and dealers is also set

at five percent of aggregate debit

items. 10

II. Equity Securities Pledged as

Collateral for Secured Demand Notes

A. Background

Commission Regulation 1.17(h) sets

forth the minimum requirements for

satisfactory subordination agreements.

An FCM or IB may enhance its

regulatory capital by borrowing cash

pursuant to subordinated loan

agreements or by accepting secured

demand notes. A secured demand note

must be collateralized by cash or readily

marketable securities. 11 The securities

collateralizing a secured demand note

are subject to percentage deductions

(i.e., haircuts) to provide protection

against a potential decrease in the

market values of the securities.

Commission regulations, however, do

not specify the specific haircuts to be

applied. Instead, the Commission’s

regulations provide that an FCM or IB

must apply the haircuts that are set forth

in SEC Rule 15c3–1(c)(2)(vi) (17 CFR

240. 15c3–1(c)(2)(vi)), which are the

haircuts that a broker or dealer must

apply to securities that it includes in its

capital computation.

When the Commission adopted its

current capital rules in September 1978,

the haircut for an equity security under

SEC Rule 15c3–1(c)(2)(vi) was 30

percent. Therefore, an FCM or IB was

required to apply a 30 percent haircut

to an equity security collateralizing a

secured demand note. 12

In December 1992, the SEC amended

its capital rules. As part of these

amendments, the SEC amended Rule

15c3–1(c)(2)(vi) by reducing the haircut

on equity securities from 30 percent to

15 percent. 13 Since the Commission’s

capital rules incorporated the haircuts

in SEC Rule 15c3–1(c)(2)(vi), the

Commission’s capital rules were

effectively amended and the haircut

applied to equity securities

collateralizing a secured demand note

was reduced from 30 percent to 15

percent. In the December 1992

amendments, however, the SEC also

explicitly retained the 30 percent

haircut on equity securities

collateralizing secured demand notes

included in adjusted net capital by

brokers or dealers. Thus, an unintended

difference developed between the

Commission’s capital rules and the

capital rules of the SEC. The difference

stems from the Commission

incorporating the SEC’s regulation

imposing haircuts on securities that a

broker or dealer includes in its capital

computation (Rule 15c3–1(c)(2)(vi)) as

opposed to the regulation imposing

haircuts on securities that a broker or

dealer receives as collateral for a

secured demand note that was

contributed as capital (Rule 15c3–1d)

(17 CFR 240.15c3–1(d)).

B. Proposed Rule Amendment

The Commission attempts to

maintain, to the extent practicable,

uniformity between its capital rules and

those of the SEC. Uniform capital rules

more readily permit dually-registered

FCMs (i.e., FCMs that are also SECregistered securities brokers or dealers)

that comply with the Commission’s

6572 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Proposed Rules

14 47 FR 18618, 18619–18620 (April 30, 1982).

15 48 FR 35248, 35275–78 (August 3, 1983).

capital rules to comply with the SEC’s

capital rules. As set forth above, the

Commission’s capital rules were

originally consistent with the SEC’s

capital rules with respect to the haircuts

to be applied to equity securities

collateralizing secured demand notes

and the current difference is

unintended. Accordingly, in order to

provide greater uniformity between the

Commission and SEC capital rules, the

Commission proposes increasing to 30

percent from 15 percent the haircut on

the market value of equity securities

pledged as collateral for a secured

demand note.

III. Technical Amendment

Commission Regulation 1.17(c)(5)(v)

requires an FCM or IB, in computing its

adjusted net capital, to apply haircuts to

securities positions carried in the FCM’s

or IB’s proprietary accounts and to

securities purchased with customer

funds that are required to be segregated

or set aside in separate accounts. The

regulation directs the FCM or IB to

apply the specific haircut percentages

that are set forth in SEC Rule 15c3–

1(c)(2)(vi) for equity securities and Rule

15c3–1(c)(2)(vii) (17 CFR 240.15c3–

1(c)(2)(vii)) for non-marketable

securities, or Rule 15c3–1(f) (17 CFR

240. 15c3–1(f)) for dually registered

securities brokers or dealers and FCMs

that compute their minimum net capital

requirements in accordance with the

SEC’s ‘‘alternative, or aggregate debit

items,’’ method.

In December 1992, the SEC amended

its capital rules by, among other things,

revising the securities haircuts that a

broker or dealer subject to the

alternative capital method had to apply

to securities positions in the broker’s or

dealer’s proprietary accounts.

Specifically, the amendments made the

haircuts consistent regardless of the

method that a broker or dealer used in

computing its minimum net capital. The

SEC effected the revisions by

consolidating the haircuts in Rule 15c3–

1(f) into Rules 15c3–1(c)(2)(vi) and

15c3–1(c)(2)(vii) and repealing15c3–1(f).

Accordingly, the Commission proposes

deleting the reference to Rule 15c3–1(f)

in its Rule 1.17(c)(5)(v).

IV. Related Matters

A. Regulatory Flexibility Act

The Regulatory Flexibility Act

(‘‘RFA’’), 5 U.S.C. 601–611, requires that

agencies, in proposing rules, consider

the impact of those rules on small

businesses. The proposed rule

amendments discussed herein would

affect FCMs and IBs. The Commission

has previously determined that, based

upon the fiduciary nature of FCM/

customer relationships, as well as the

requirement that FCMs meet minimum

financial requirements, FCMs should be

excluded from the definition of small

entity.14

With respect to IBs, the Commission

stated that it is appropriate to evaluate

within the context of a particular rule

whether some or all IBs should be

considered to be small entities and, if

so, to analyze the economic impact on

such entities at that time.15 The

proposed technical amendment to

Regulation 1.17(c)(5)(v) and the

proposed amendment to Regulation

1.17(e) easing the restriction on the

withdrawal of equity capital from an

FCM do not impose additional

requirements on an IB. The proposed

amendment to Regulation 1.17(h)(1)(iii)

increasing the haircut on equity

securities submitted as collateral for a

secured demand note may impact an

IB’s financial operations. The proposal,

however, conforms the Commission’s

rules to those of the SEC and restores

the haircut to its previous level prior to

the SEC amendment of its capital rules

in December 1992. Thus, on behalf of

the Commission, the Chairman certifies

that the proposed rule amendments will

not have a significant economic impact

on a substantial number of small

entities. The Commission, however,

invites comments from registered FCMs

or IBs who believe that the proposed

amendments would have a significant

impact on their operations.

B. Paperwork Reduction Act

The Paperwork Reduction Act of 1995

(PRA), 44 U.S.C. 3501 et seq. (Supp. I

1995), requires federal agencies

(including the Commission) to review

rules and rule amendments to evaluate

the information collection burden that

they impose on the public. The

Commission believes that paragraphs

(c)(5)(v), (e)(1)(ii), and (h)(1)(iii) of Rule

1.17, as proposed, do not impose an

information collection burden on the

public.

List of Subjects in 17 CFR Part 1

Brokers, Commodity futures.

In consideration of the foregoing and

pursuant to the authority contained in

the Commodity Exchange Act and, in

particular, Sections 4f, 4g and 8a(5)

thereof, 7 U.S.C. 6d, 6g and 12a(5), the

Commission hereby proposes to amend

Chapter I of Title 17 of the Code of

Federal Regulations as follows:

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, 2a, 4, 4a, 6, 6a,

6b, 6c, 6d, 6e, 6f, 6g, 6h, 6i, 6j, 6k, 6l, 6m,

6n, 6o, 6p, 7, 7a, 7b, 8, 9, 12, 12a, 12c, 13a,

13a–1, 16, 16a, 19, 21, 23, and 24.

2. Section 1.17 is amended by revising

paragraphs (c)(5)(v), (e)(1)(ii), and

(h)(1)(iii) to read as follows:

§ 1.17 Minimum financial requirements for

futures commission merchants and

introducing brokers.

* * * * *

(c) * * *

(5) * * *

(v) In the case of securities and

obligations used by the applicant or

registrant in computing net capital, and

in the case of a futures commission

merchant with securities in segregation

pursuant to Section 4d(2) of the Act and

these regulations which were not

deposited by customers, the percentages

specified in Rule 240.15c3–1(c)(2)(vi) of

the Securities and Exchange

Commission (17 CFR 240.15c3–

1(c)(2)(vi)) (‘‘securities haircuts’’) and

100 percent of the value of

‘‘nonmarketable securities’’ as specified

in Rule 240.15c3–1(c)(2)(vii) of the

Securities and Exchange Commission

(17 CFR 240.15c3–1(c)(2)(vii));

* * * * *

(e) * * *

(1) * * *

(ii) For a futures commission

merchant or applicant therefor, 6

percent of the following amount: The

customer funds required to be

segregated pursuant to the Act and the

regulations in this part and the foreign

futures or foreign options secured

amount, less the market value of

commodity options purchased by

customers on or subject to the rules of

a contract market or a foreign board of

trade for which the full premiums have

been paid: Provided, however, That the

deduction for each customer shall be

limited to the amount of customer funds

in such customer’s account(s) and

foreign futures and foreign options

secured amounts;

* * * * *

(h) * * *

(1) * * *

(iii) The term ‘‘collateral value’’ of any

securities pledged to secure a secured

demand note means the market value of

such securities after giving effect to the

percentage deductions specified in Rule

240.15c3–1d(a)(2)(iii) of the Securities

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Proposed Rules 6573

and Exchange Commission (17 CFR

240.15c3–1d(a)(2)(iii)).

* * * * *

Issued in Washington D.C. on February 3,

2000 by the Commission.

Catherine D. Dixon,

Assistant Secretary of the Commission.

[FR Doc. 00–2917 Filed 2–9–00; 8:45 am]

BILLING CODE 6351–01–P

LIBRARY OF CONGRESS

Copyright Office

37 CFR Part 201

[Docket No. RM 99–7A]

Exemption to Prohibition on

Circumvention of Copyright Protection

Systems for Access Control

Technologies

AGENCY: Copyright Office, Library of

Congress.

ACTION: Extension of initial comment

period and reply comment period.

Expansion of file formats acceptable for

electronic submission of comments.

SUMMARY: The Copyright Office is

extending the comment period and the

reply comment period in the rulemaking

on possible exemptions to the

prohibition against circumvention of

technological measures that control

access to copyrighted works. The Office

is also expanding the list of formats in

which acceptable comments may be

submitted electronically.

DATES: Written comments are due

February 17, 2000. Reply comments are

due March 20, 2000.

ADDRESSES: Submissions by electronic

mail should be made to

‘‘1201@loc.gov’’. See SUPPLEMENTARY

INFORMATION section for file formats and

other information about electronic

filing. If delivered by hand, comments

should be delivered to the Office of the

General Counsel, Copyright Office, LM–

403, James Madison Memorial Building,

101 Independence Avenue, S.E.,

Washington, DC. If delivered by mail,

comments should be addressed to David

O. Carson, General Counsel, Copyright

GC/I&R, P.O. Box 70400, Southwest

Station, Washington, DC 20024. See

SUPPLEMENTARY INFORMATION section for

information about formats of

submissions.

FOR FURTHER INFORMATION CONTACT:

David O. Carson, General Counsel,

Charlotte Douglass, Principal Legal

Advisor, or Robert Kasunic, Senior

Attorney Advisor, Copyright GC/I&R,

P.O. Box 70400, Southwest Station,

Washington, DC 20024. Telephone (202)

707–8380; telefax (202) 707–8366.

SUPPLEMENTARY INFORMATION: On

November 24, 1999, the Copyright

Office published a Notice of Inquiry

seeking comment in connection with a

rulemaking pursuant to section

1201(a)(1) of the Copyright Act, 17

U.S.C. 1201(a)(1), which provides that

the Librarian of Congress may exempt

certain classes of works from the

prohibition against circumventing a

technological measure that controls

access to a copyrighted work. 64 FR

66139 (November 24, 1999). Comments

were due on February 10, 2000; reply

comments were due on March 13, 2000.

The Office has, however, received a

request for a one-week extension of the

filing deadline for initial comments.

Moreover, the Office has already

received a number of comments

submitted in electronic form, and a

number of those comments have not met

the format requirements for electronic

submissions. The Office has, therefore,

decided to extend the deadlines for

filing of initial and reply comments by

one week in order to accommodate the

request for additional time and in order

to provide those persons who have

submitted comments in unacceptable

formats an opportunity to correct their

submissions.

The new deadlines are: February 17,

2000 for initial comments and March

20, 2000 for reply comments.

As stated in the Notice of Inquiry, the

Office will be placing all comments and

reply comments that are submitted in

electronic form on its website (http://

lcweb.loc.gov/copyright/1201). Because

of this, the Office prefers that comments

and reply comments be submitted in

electronic form. The Office has already

received a large number of comments in

this form, and many have not been in

acceptable formats. The Notice of

Inquiry required that comments sent by

e-mail must be sent in the form of a

MIME attachment to an e-mail message,

and the attachment must be in a single

file in either (1) Adobe Portable

Document File (PDF) format (preferred);

(2) Microsoft Word Version 7.0 or

earlier; or (3) WordPerfect 7 or earlier.

It also stated that comments may be

submitted in electronic form on 3.5-inch

write-protected diskettes or in

traditional written (hard copy print)

form.

The Office has received some

complaints that restricting electronic

comments to these three proprietary

formats (Adobe PDF, Microsoft Word

and WordPerfect) has created

difficulties for some persons who wish

to submit comments electronically. The

Office is, therefore, expanding the list of

acceptable formats for comments in

electronic form. If submitted by e-mail,

such comments must still be submitted

as MIME file attachments to e-mail

messages. Whether submitted by e-mail

or on diskettes, comments may also be

submitted in ASCII text file format or

RTF (Rich Text File) format.

Concern has also been expressed

about the requirement that comments

include not only the name of the person

making the submission, but also the

submitter’s mailing address, telephone

number, telefax number and e-mail

address. All comments submitted in

electronic form will be posted on the

Office’s website, and some persons

making comments may prefer that such

personal information not be made

available on the Internet. The Office is,

therefore, amending the requirements

relating to identifying information that

must be included in a comment. At the

same time it is affirming that the filer’s

name must be on a comment. Persons

submitting electronic comments in

electronic form must also include, in the

e-mail message to which the comment is

attached or in a cover letter

accompanying the diskette, all such

identifying information. Persons

submitting comments in traditional

written form should note that the Office

may post some or all of those comments

on its website; therefore, such persons

who do not wish to have such

identifying information made available

on the website should include that

information in a separate cover letter

accompanying the comments.

The Office is amending its

instructions concerning formats for

comments as follows:

Comments and reply comments may

be submitted in electronic form, in one

of the following formats:

1. If by electronic mail: Send to

‘‘1201@loc.gov’’ a message containing

the name of the person making the

submission, his or her title and

organization (if the submission is on

behalf of an organization), mailing

address, telephone number, telefax

number (if any) and e-mail address. The

message should also identify the

document clearly as either a comment

or reply comment. The document itself

must be sent as a MIME attachment, and

must be in a single file in either: (1)

Adobe Portable Document File (PDF)

format (preferred); (2) Microsoft Word

Version 7.0 or earlier; (3) WordPerfect 7

or earlier; (4) ASCII text file format; or

(5) Rich Text File (RTF) format.

2. If by regular mail or hand delivery:

Send, to the appropriate address listed

above, two copies of the comment, each

on a 3.5-inch write-protected diskette,