Federal Register / Vol. 76, No. 247 / Friday, December 23, 2011 / Rules and Regulations 80233 

1See Dodd-Frank Wall Street Reform and 

Consumer Protection Act, Public Law 111–203, 124 

Stat. 1376 (2010). 

2 7 U.S.C. 1 et seq. 

3Title VII also includes amendments to the 

federal securities laws to establish a similar 

regulatory framework for security-based swaps 

under the authority of the Securities and Exchange 

Commission (‘‘SEC’’). 

4All of the amendments to the CEA in title VII 

are contained in subtitle A. Accordingly, for 

convenience, references to ‘‘title VII’’ in this Notice 

shall refer only to subtitle A of title VII. 

5These exclusions and exemptions were 

contained in former CEA sections 2(d), 2(e), 2(g), 

2(h), and 5d, 7 U.S.C. 2(d), 2(e), 2(g), 2(h), 

and 7a–3. 

6Section 712(d)(1) provides: ‘‘Notwithstanding 

any other provision of this title and subsections (b) 

Continued 

‘‘significant rule’’ under DOT 

Regulatory Policies and Procedures 

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

(3) does not warrant preparation of a 

Regulatory Evaluation as the anticipated 

impact is so minimal. Since this is a 

routine matter that will only affect air 

traffic procedures and air navigation, it 

is certified that this rule, when 

promulgated, will not have a significant 

economic impact on a substantial 

number of small entities under the 

criteria of the Regulatory Flexibility Act. 

The FAA’s authority to issue rules 

regarding aviation safety is found in 

Title 49 of the United States Code. 

Subtitle I, Section 106 describes the 

authority of the FAA Administrator. 

Subtitle VII, Aviation Programs, 

describes in more detail the scope of the 

agency’s authority. 

This rulemaking is promulgated 

under the authority described in 

Subtitle VII, Part A, Subpart I, Section 

40103. Under that section, the FAA is 

charged with prescribing regulations to 

assign the use of airspace necessary to 

ensure the safety of aircraft and the 

efficient use of airspace. This regulation 

is within the scope of that authority as 

it establishes controlled airspace at 

Robbins Field, Oneonta, AL. 

List of Subjects in 14 CFR Part 71 

Airspace, Incorporation by reference, 

Navigation (air). 

Adoption of the Amendment 

In consideration of the foregoing, the 

Federal Aviation Administration 

amends 14 CFR Part 71 as follows: 

PART 71—DESIGNATION OF CLASS A, 

B, C, D AND E AIRSPACE AREAS; AIR 

TRAFFIC SERVICE ROUTES; AND 

REPORTING POINTS 

■ 1. The authority citation for Part 71 

continues to read as follows: 

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

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

1963 Comp., p. 389. 

§ 71.1 [Amended] 

■ 2. The incorporation by reference in 

14 CFR 71.1 of Federal Aviation 

Administration Order 7400.9V, Airspace 

Designations and Reporting Points, 

dated August 9, 2011, effective 

September 15, 2011, is amended as 

follows: 

Paragraph 6005 Class E airspace areas 

extending upward from 700 feet or more 

above the surface of the earth. 

* * * * * 

ASO AL E5 Oneonta, AL [New] 

Robbins Field, AL 

(Lat. 33°58′17′′ N., long. 86°22′49′′ W.) 

That airspace extending upward from 700 

feet above the surface within an 8.5- mile 

radius of Robbins Field. 

Issued in College Park, Georgia, on 

December 13, 2011. 

Michael Vermuth, 

Acting Manager, Operations Support Group, 

Eastern Service Center, Air Traffic 

Organization. 

[FR Doc. 2011–32854 Filed 12–22–11; 8:45 am] 

BILLING CODE 4910–13–P 

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Chapter 1 

Amendment to July 14, 2011 Order for 

Swap Regulation 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Final order. 

SUMMARY: On October 25, 2011, the 

Commodity Futures Trading 

Commission (‘‘CFTC’’ or the 

‘‘Commission’’) published in the 

Federal Register a Notice of Proposed 

Amendment (‘‘Notice’’) to extend the 

temporary exemptive relief the 

Commission granted on July 14, 2011 

(‘‘July 14 Order’’) from certain 

provisions of the Commodity Exchange 

Act (‘‘CEA’’) that otherwise would have 

taken effect on the general effective date 

of title VII of the Dodd-Frank Wall 

Street Reform and Consumer Protection 

Act (‘‘the Dodd-Frank Act’’)—July 16, 

2011. This final order extends the July 

14 Order with certain modifications. 

Specifically, it extends the potential 

latest expiration date of the July 14 

Order from December 31, 2011 to July 

16, 2012; and adds provisions to 

account for the repeal and replacement 

(as of December 31, 2011) of part 35 of 

the Commission’s regulations. 

DATES: This final order will be effective 

on December 23, 2011. 

FOR FURTHER INFORMATION CONTACT: 

Mark D. Higgins, Counsel, (202) 418– 

5864, mhiggins@cftc.gov, Office of the 

General Counsel; Jocelyn Partridge, 

Special Counsel, (202) 418–5926, 

jpartridge@cftc.gov, Division of Clearing 

and Risk; Ryne Miller, Attorney 

Advisor, (202) 418–5921, rmiller@cftc.

gov, Division of Market Oversight; 

Commodity Futures Trading 

Commission, Three Lafayette Centre, 

1155 21st Street NW., Washington, DC 

20581. 

SUPPLEMENTARY INFORMATION: 

I. Background 

On July 21, 2010, President Obama 

signed the Dodd-Frank Act into law.1

Title VII of the Dodd-Frank Act amends 

the CEA 2 to establish a comprehensive 

new regulatory framework for swaps. 

The legislation was enacted to reduce 

risk, increase transparency, and promote 

market integrity within the financial 

system by, among other things: (1) 

Providing for the registration and 

comprehensive regulation of swap 

dealers and major swap participants; (2) 

imposing clearing and trade execution 

requirements on standardized derivative 

products; (3) creating robust 

recordkeeping and real-time reporting 

regimes; and (4) enhancing the 

rulemaking and enforcement authorities 

of the Commission with respect to, 

among others, all registered entities and 

intermediaries subject to the 

Commission’s oversight.3

Section 754 of the Dodd-Frank Act 

states that, unless otherwise provided, 

the provisions of subtitle A of title VII 

of the Dodd-Frank Act 4 ‘‘shall take 

effect on the later of 360 days after the 

date of the enactment of this subtitle or, 

to the extent a provision of this subtitle 

requires a rulemaking, not less than 60 

days after publication of the final rule 

or regulation implementing such 

provision of this subtitle.’’ Thus, the 

general effective date for provisions of 

title VII that do not require a rulemaking 

was July 16, 2011. This includes the 

provisions that repealed several 

provisions of the CEA as in effect prior 

to the Dodd-Frank Act that excluded or 

exempted, in whole or in part, certain 

transactions from Commission 

oversight.5

Section 712(d)(1) of the Dodd-Frank 

Act requires the Commission and the 

SEC to undertake a joint rulemaking to 

‘‘further define’’ certain terms used in 

title VII, including the terms ‘‘swap,’’ 

‘‘swap dealer,’’ ‘‘major swap 

participant,’’ and ‘‘eligible contract 

participant.’’ 6 Section 721(c) requires 


srobinson on DSK4SPTVN1PROD with RULES
80234 Federal Register / Vol. 76, No. 247 / Friday, December 23, 2011 / Rules and Regulations 

and (c), the Commodity Futures Trading 

Commission and the Securities and Exchange 

Commission, in consultation with the Board of 

Governors [of the Federal Reserve System], shall 

further define the terms ‘swap’, ‘security-based 

swap’, ‘swap dealer’, ‘security-based swap dealer’, 

‘major swap participant’, ‘major security-based 

swap participant’, and ‘security-based swap 

agreement’ in section 1a(47)(A)(v) of the 

Commodity Exchange Act (7 U.S.C. 1a(47)(A)(v)) 

and section 3(a)(78) of the Securities Exchange Act 

of 1934 (15 U.S.C. 78c(a)(78)).’’ 7Section 721(c) provides: ‘‘To include 

transactions and entities that have been structured 

to evade this subtitle (or an amendment made by 

this subtitle), the Commodity Futures Trading 

Commission shall adopt a rule to further define the 

terms ‘swap’, ‘swap dealer’, ‘major swap 

participant’, and ‘eligible contract participant’.’’ 8See Further Definition of ‘‘Swap Dealer,’’ 

‘‘Security-Based Swap Dealer,’’ ‘‘Major Swap 

Participant,’’ ‘‘Major Security-Based Swap 

Participant’’ and ‘‘Eligible Contract Participant,’’ 75 

FR 80174, Dec. 21, 2010 and Further Definition of 

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

29818, May 23, 2011. 9 7 U.S.C. 6(c). 

10Effective Date for Swap Regulation, 76 FR 

42508 (issued and made effective by the 

Commission on July 14, 2011; published in the 

Federal Register on July 19, 2011). Section 712(f) 

of the Dodd-Frank Act states that ‘‘in order to 

prepare for the effective dates of the provisions of 

this Act,’’ including the general effective date set 

forth in section 754, the Commission may ‘‘exempt 

persons, agreements, contracts, or transactions from 

provisions of this Act, under the terms contained 

in this Act.’’ Section 754 specifies that unless 

otherwise provided in Title VII, provisions 

requiring a rulemaking become effective ‘‘not less 

than 60 days after publication of the final rule’’ (but 

not before July 16, 2011). 

11Concurrent with the July 14 Order, the 

Commission’s Division of Clearing and 

Intermediary Oversight and the Division of Market 

Oversight (together ‘‘the Divisions’’) identified 

certain provisions of the Dodd-Frank Act and CEA 

as amended that would take effect on July 16, 2011, 

but that may not be eligible for the exemptive relief 

provided by the Commission in its July 14 Order— 

specifically, the amendments made to the CEA by 

Dodd-Frank Act sections 724(c), 725(a), and 731. 

On July 14, 2011, the Divisions issued Staff NoAction Relief addressing the application of these 

provisions after July 16, 2011. The Commission staff 

has informed the Commission that it is separately 

considering whether to issue a no-action letter in 

which the staff would state that it would not 

recommend that the Commission commence an 

enforcement action against markets or market 

participants for failure to comply with the abovereferenced provisions over a period of time coextensive with that set forth in this final order. 

12 76 FR at 42514. The July 14 Order did not 

extend to agreements, contracts, or transactions that 

fully met the conditions of part 35, since in such 

circumstances further relief was unnecessary. 

13 7 U.S.C. 6c(b). 

14As noted in the July 14 Order, the parties 

covered under the ESP definition, while very broad, 

are not coextensive with those covered by the terms 

‘‘eligible commercial entity’’ or ‘‘eligible contract 

participant.’’ Therefore, it is possible that a small 

segment of persons or entities that are currently 

relying on one or more of the CEA exclusions or 

exemptions cited above might not qualify as an ESP 

and consequently would not be eligible for part 35. 

76 FR at 42511, n. 40. 

the Commission to adopt a rule to 

‘‘further define’’ the terms ‘‘swap,’’ 

‘‘swap dealer,’’ ‘‘major swap 

participant,’’ and ‘‘eligible contract 

participant’’ to prevent evasion of 

statutory and regulatory obligations.7

The Commission and the SEC have 

jointly issued two notices of proposed 

rulemaking that address these further 

definitions.8

The Commission’s final rulemakings 

further defining the terms in sections 

712(d) and 721(c) were not expected to 

be in effect as of July 16, 2011 (i.e., the 

general effective date set forth in section 

754 of the Dodd-Frank Act). 

Accordingly, on July 14, 2011 the 

Commission exercised its exemptive 

authority under CEA section 4(c) 9 and 

its authority under section 712(f) of the 

Dodd-Frank Act by issuing the July 14 

Order.10 In so doing, the Commission 

sought to address concerns that had 

been raised about the applicability of 

various regulatory requirements to 

certain agreements, contracts, and 

transactions after July 16, 2011, and 

thereby ensure that current practices 

will not be unduly disrupted during the 

transition to the new regulatory 

regime.11

II. Description of Relief Provided in 

July 14 Order 

The July 14 Order groups the relevant 

provisions of the Dodd-Frank Act into 

four categories and provides temporary 

exemptive relief, set to expire no later 

than December 31, 2011, with respect to 

Categories 2 and 3. A summary of the 

four categories of provisions follows. 

Category 1 covers statutory provisions 

which by their express terms require a 

rulemaking. Because, under section 754 

of the Dodd-Frank Act, these provisions 

do not become effective until at least 60 

days after the final rule is published, no 

exemptive relief from the general 

effective date is necessary. Category 1 

provisions include, among others, the 

further definitions of terms regarding 

swap entities or instruments as required 

by the Dodd-Frank Act (such as the 

terms ‘‘swap,’’ ‘‘swap dealer,’’ ‘‘major 

swap participant,’’ or ‘‘eligible contract 

participant’’). Category 1 also includes, 

among others: (1) Registration, capital 

and margin requirements, and business 

conduct standards for swap dealers and 

major swap participants; (2) provisions 

prohibiting agricultural swaps except 

pursuant to CFTC rules; (3) rules 

regarding swap execution facilities; and 

(4) various swap data recordkeeping and 

reporting requirements. A complete list 

of the Category 1 provisions is included 

in the appendix to the July 14 Order. 

The first part of the relief provided for 

in the July 14 Order reaches those DoddFrank Act provisions (‘‘Category 2 

provisions’’) that are self-effectuating 

(i.e., do not require a rulemaking) and 

that reference one or more of the terms 

for which the Commission and SEC are 

required to provide further definition, 

including ‘‘swap,’’ ‘‘swap dealer,’’ 

‘‘major swap participant,’’ ‘‘eligible 

contract participant,’’ and ‘‘securitybased swap agreement’’ (collectively, 

the ‘‘referenced terms’’). These Category 

2 provisions include, for example, the 

trade execution requirement of CEA 

section 2(h)(8), as amended by DoddFrank Act section 723. A complete list 

of the Category 2 provisions is included 

in the appendix to the July 14 Order. 

Because the Category 2 provisions 

would have taken effect on July 16, 2011 

pursuant to section 754, the 

Commission granted temporary relief 

from those provisions, but only to the 

extent that the requirements in such 

provisions specifically relate to a 

referenced term that is not yet further 

defined. Thus, if a Category 2 provision 

also applies to futures or options on 

futures, the provision took effect on July 

16 with respect to futures or options on 

futures. The exemption for Category 2 

provisions expires on the earlier of: (1) 

The effective date of the applicable final 

rule further defining the relevant term; 

or (2) December 31, 2011. 

In part two of the July 14 Order, the 

Commission provides temporary 

exemptive relief from the provisions of 

the CEA that may apply to certain 

agreements, contracts, and transactions 

in exempt or excluded commodities 

(generally, financial, energy and metals 

commodities) as a result of the repeal of 

the CEA exemptions and exclusions in 

former CEA sections 2(d), 2(e), 2(g), 

2(h), and 5d as of July 16, 2011 pursuant 

to sections 723(a)(1) and 734(a) of the 

Dodd-Frank Act (the ‘‘Category 3 

provisions’’). As explained in the July 

14 Order, this relief is based on the 

Commission’s existing ‘‘part 35’’ 

exemptive rules.12

Part 35 originally was promulgated in 

1993 pursuant to, among others, the 

Commission’s general exemptive 

authority in CEA section 4(c) and its 

plenary options authority under section 

4c(b),13 and provides a broad-based 

exemption from the CEA for ‘‘swap 

agreements’’ in any commodity. 

Specifically, part 35 exempts ‘‘swap 

agreements,’’ as defined therein, from 

most of the provisions of the CEA if: (1) 

They are entered into by ‘‘eligible swap 

participants’’ (‘‘ESPs’’); 14 (2) they are 

not part of a fungible class of 

agreements standardized as to their 

material economic terms; (3) the 

creditworthiness of any party having an 

actual or potential obligation under the 

swap agreement would be a material 


srobinson on DSK4SPTVN1PROD with RULES
Federal Register / Vol. 76, No. 247 / Friday, December 23, 2011 / Rules and Regulations 80235 

15 76 FR at 42514. With respect to commodity 

options, the Commission clarified that options 

identified in the swap agreement definition in 

paragraph (b)(1)(i) of § 35.1 of the Commission’s 

regulations and any options captured by the 

concluding catch-all language in that paragraph, as 

well as any options described in paragraphs 

(b)(1)(ii) and/or (iii) of § 35.1, involving excluded or 

exempt commodities are within the scope of the 

July 14 Order. 76 FR at 42514–15. 

16The Commission also stated, though, that 

because part 35 remained in effect at the time of the 

July 14 Order, market participants could continue 

to rely on part 35 with respect to swaps (other than 

commodity options) on enumerated agricultural 

commodities as defined in CEA section 1a(4) or 

§ 32.2 of the Commission’s regulations, as well as 

swaps and commodity options on non-enumerated 

agricultural commodities, to the extent these 

transactions fully comply with part 35. Under the 

July 14 Order, market participants also may 

continue to rely on part 32 for options on 

enumerated agricultural commodities to the extent 

these transactions are conducted in accordance 

with § 32.13(g) of the Commission’s regulations. 

Rule 32.13(g) permits off-exchange options offered 

to producers, processors, commercial users or 

merchants of the commodity or its products or byproducts that have a net worth of at least $10 

million, provided the offeree also has a net worth 

of at least $10 million. 

17 76 FR at 42522. 

18Effective Date for Swap Regulation, 76 FR 

65999, Oct. 25, 2011. 

19The date of July 16, 2012, is consistent with the 

potential transitional period provided in section 

723(c) of the Dodd-Frank Act regarding former CEA 

section 2(h) and section 734(c) of the Dodd-Frank 

Act regarding former CEA section 5d (i.e., for ‘‘not 

longer than a 1-year period’’ following the general 

effective date of title VII). 

20 76 FR at 42513. 

21The Commission recently promulgated a rule 

pursuant to section 723(c)(3) of the Dodd-Frank Act, 

and CEA sections 4(c) and 4c(b), that, effective 

December 31, 2011, will repeal the existing part 35 

relief and replace it with new § 35.1 of the 

Commission’s regulations. See Agricultural Swaps, 

76 FR 49291, Aug. 10, 2011. Rule 35.1 provides, in 

pertinent part, that ‘‘agricultural swaps may be 

transacted subject to all provisions of the CEA, and 

any Commission rule, regulation or order 

thereunder, that is otherwise applicable to swaps. 

[It] also clarifies that by issuing a rule allowing 

agricultural swaps to transact subject to the laws 

and rules applicable to all other swaps, the 

Commission is allowing agricultural swaps to 

transact on [designated contract markets (‘‘DCMs’’), 

swap execution facilities (‘‘SEFs’’)], or otherwise to 

the same extent that all other swaps are allowed to 

trade on DCMs, SEFs, or otherwise.’’ Id. at 49296. 

consideration in entering into or 

determining the terms of the swap 

agreement, including pricing, cost, or 

credit enhancement terms; and (4) they 

are not entered into or traded on a 

multilateral transaction execution 

facility. 

Under part two of the relief provided 

for in the July 14 Order, the Commission 

stated that transactions in exempt or 

excluded commodities (and persons 

offering, entering into, or rendering 

advice or rendering other services with 

respect to such transactions) are 

temporarily exempt from provisions of 

the CEA that may apply to such 

transactions if such transactions comply 

with part 35, notwithstanding that: (1) 

The transaction may be executed on a 

multilateral transaction execution 

facility; (2) the transaction may be 

cleared; (3) persons offering or entering 

into the transaction may be eligible 

contract participants as defined in the 

CEA (prior to the enactment of the 

Dodd-Frank Act); (4) the transaction 

may be part of a fungible class of 

agreements that are standardized as to 

their material economic terms; and/or 

(5) no more than one of the parties to 

the transaction is entering into the 

transaction in conjunction with its line 

of business, but is neither an eligible 

contract participant nor an ESP, and the 

transaction was not and is not marketed 

to the public.15

Thus, for certain transactions, the July 

14 Order provides relief 

notwithstanding that the transaction 

may not satisfy certain part 35 

requirements (e.g., cleared, executed on 

a multilateral trade execution facility, 

entered into by certain persons that are 

not eligible contract participants, etc.). 

The Commission stated in the July 14 

Order that this relief is limited to 

transactions in exempt and excluded 

commodities, and does not extend to 

transactions in agricultural 

commodities, because transactions in 

agricultural commodities were not 

covered by the applicable statutory 

exclusions and exemptions in effect 

prior to July 16, 2011.16 The exemption 

in part two of the July 14 Order expires 

on the earlier of: (1) The repeal, 

withdrawal or replacement of part 35; or 

(2) December 31, 2011. 

Category 4 contains those Dodd-Frank 

Act provisions for which the 

Commission determined not to issue 

relief, and which therefore went into 

effect on July 16, 2011. A complete list 

of the Category 4 provisions is included 

in the appendix to the July 14 Order. 

The temporary exemptions issued in 

the July 14 Order are subject to several 

conditions. These conditions provide 

that the July 14 Order shall not: (1) 

Limit in any way the Commission’s antifraud or anti-manipulation authority 

under the CEA; (2) apply to any 

provision of the Dodd-Frank Act or the 

CEA that became effective prior to July 

16, 2011; (3) affect any effective date or 

compliance date set forth in any 

rulemaking issued by the Commission 

to implement provisions of the DoddFrank Act; (4) limit the Commission’s 

authority under Dodd-Frank Act section 

712(f) to issue rules, orders, or 

exemptions prior to the effective date of 

any provision of the Dodd-Frank Act 

and the CEA, in order to prepare for 

such effective date; and (5) affect the 

applicability of any provision of the 

CEA to futures contracts or options on 

futures contracts, or to cash markets.17

III. Discussion of the Proposed 

Amendments to the July 14 Order 

On October 25, 2011, the Commission 

published in the Federal Register a 

Notice to amend the July 14 Order in 

two ways.18 First, the Commission 

proposed to amend the July 14 Order to 

extend the potential latest expiry dates. 

With respect to provisions covered in 

the first part of the relief in the July 14 

Order, the Commission proposed that 

the temporary exemptive relief expire 

upon the earlier of: (1) The effective 

date of the applicable final rule further 

defining the relevant referenced term; or 

(2) July 16, 2012.19 This proposed 

amendment addressed the potential 

that, as of December 31, 2011, the 

CFTC–SEC joint rulemakings ‘‘further 

defining’’ the referenced terms will not 

yet be effective. The Commission also 

proposed to amend the July 14 Order to 

extend the expiry date of the second 

part of the relief in the July 14 Order 

until the earlier of: (1) July 16, 2012; or 

(2) such other compliance date as may 

be determined by the Commission. For 

the same reason stated by the 

Commission in issuing the second part 

of the relief provided in the July 14 

Order, the Commission proposed 

extending this exemptive relief to 

‘‘allow markets and market participants 

to continue to operate under the 

regulatory regime as in effect prior to 

July 16, 2011, but subject to various 

implementing regulations that the 

Commission promulgates and applies to 

the subject transactions, market 

participants, or markets.’’ 20

Second, the Commission proposed to 

include within the second part of the 

relief any agreement, contract or 

transaction that fully meets the 

conditions in part 35 as in effect prior 

to December 31, 2011. This proposed 

amendment addressed the fact that such 

transactions, which were not included 

within the scope of the July 14 Order 

because the exemptive rules in part 35 

covered them at that time, now require 

temporary relief because part 35 will no 

longer be available as of December 31, 

2011.21 Accordingly, to ensure that the 

exemptive relief currently available for 

these transactions continues to be 

available after December 31, 2011, the 

Commission proposed to amend the July 

14 Order to incorporate by reference the 

part 35 relief available prior to 

December 31, 2011. Whereas the relief 

provided in part two of the July 14 

Order was (and would remain) limited 

to transactions in excluded or exempt 


srobinson on DSK4SPTVN1PROD with RULES
80236 Federal Register / Vol. 76, No. 247 / Friday, December 23, 2011 / Rules and Regulations 

22The Commission also clarified that, by 

operation of new § 35.1 of the Commission’s 

regulations, the Commission’s statement in 

adopting the July 14 Order that a DCM may list and 

trade swaps ‘‘under the DCM’s rules related to 

futures contracts, without exemptive relief,’’ 76 FR 

at 42518, would apply, as of December 31, 2011, to 

swaps in agricultural commodities. 

23See Order Regarding the Treatment of Petitions 

Seeking Grandfather Relief for Exempt Commercial 

Markets and Exempt Boards of Trade, 75 FR 56513, 

Sept. 16, 2010. 

24The Commission received comments from 

Better Markets, CME Group (CME); LCH.Clearnet 

Limited (LCH); Nodal Exchange LLC (Nodal 

Exchange or Nodal); and the Securities Industry and 

Financial Market Association (SIFMA). The 

comment file is available on the Commission’s Web 

site at http://comments.cftc.gov/PublicComments/ 

CommentList.aspx?id=1102 (last visited Dec. 2, 

2011). 

25Better Markets at 2. 

26CME at 2; SIFMA at 2. 

27SIFMA at 2. 

28SIFMA at 2–3. Although beyond the scope of 

the Notice, SIFMA also reiterated its request that 

the Commission provide a comprehensive 

rulemaking schedule and implementation plan, as 

well as clear positions on the extraterritorial scope 

of Title VII and treatment of inter-affiliate 

transactions, as set forth in its November 4 Letter 

on the Commission’s proposed compliance and 

implementation schedules for clearing, trade 

execution, documentation and margin. SIFMA at 3. 

29The Commission’s position in this regard is 

unchanged from the first Effective Date for Swap 

Regulation proposal, 76 FR 35372, 35374, June 17, 

2011. 

30See Orders Regarding the Treatment of 

Petitions Seeking Grandfather Relief for Exempt 

Commercial Markets and Exempt Boards of Trade, 

75 FR 56513, Sept. 16, 2010. 

31 76 FR at 66002. 

32CME at 2–3. 

commodities, the proposed amendment 

also would include, beginning on 

January 1, 2012, transactions in 

agricultural commodities that fully meet 

the conditions in part 35 as in effect 

prior to December 31, 2011.22 The 

Commission proposed that this further 

amendment to the July 14 Order is 

necessary to ensure that the same scope 

of the exemptive relief available before 

December 31, 2011 is available to all 

swaps and extends through July 16, 

2012, at the latest. 

In proposing these amendments, the 

Commission sought to ensure that 

current practices will not be unduly 

disrupted during the transition to the 

new regulatory regime. As stated above, 

the proposed July 16, 2012 date 

coincides with the potential transitional 

period provided in sections 723(c) and 

734(c) of the Dodd-Frank Act.23 Further, 

the Commission stated that, should the 

Commission deem it appropriate to 

terminate or extend any exemptive relief 

under part two of the July 14 Order, it 

would be in a better position to 

comprehensively evaluate and consider 

any tailored exemption at that time. 

IV. Discussion of the Final Order 

The Commission received five 

comments in response to the Notice 

proposing to amend the July 14 Order.24

The comments generally focused upon 

three issues: (1) The general expiration 

date of the relief to be provided by the 

proposed amendment; (2) the 

application of the proposed amendment 

to agricultural swaps; and, (3) the expiry 

date applicable to exempt commercial 

markets (‘‘ECMs’’) operating pursuant to 

grandfather relief authorized by section 

723(c)(l)–(2) of the Dodd-Frank Act and 

their market participants and clearing 

organizations. The comments and 

Commission determinations regarding 

each of these issues is discussed in the 

sections that follow. In addition, the 

final order includes other technical, 

non-substantive changes to the wording 

of the proposed amended order. 

A. Expiry Date of July 16, 2012 

1. Comments 

Commenters were divided on whether 

the Commission should include an 

expiry or ‘‘sunset’’ date of July 16, 2012. 

For example, Better Markets stated that 

continuing to set outside dates for the 

exemptive relief, rather than granting 

open-ended exemptive relief, 

establishes important deadlines so that 

work can be prioritized and completed 

as quickly as prudently possible.25 In 

contrast, CME Group and SIFMA 

recommended the Commission avoid 

setting a sunset provision date for the 

expiration of the temporary exemptive 

relief.26 SIFMA stated that the 

Commission should instead provide 

exemptive relief that lasts on a 

provision-by-provision basis until 

related substantive requirements of the 

Dodd-Frank Act are implemented, as the 

SEC provided for in its parallel relief 

under subtitle B of title VII.27 SIFMA 

said that avoiding the imposition of a 

sunset date would allow the 

Commission to adopt its final rules in a 

logical order that provides market 

participants with necessary legal 

certainty.28

2. Commission Determination 

The Commission has determined to 

retain, as proposed, an outmost expiry 

date of July 16, 2012 for two reasons. 

First, the Commission continues to 

believe that it is appropriate and 

prudent to periodically review the 

extent and scope of any relief provided 

from the CEA, as amended by the DoddFrank Act.29 The Commission 

anticipates that additional rulemakings 

to implement the Dodd-Frank Act will 

be completed during the extended 

period of exemptive relief between 

December 31, 2011 and July 16, 2012. 

During this period the Commission also 

will be considering the appropriate 

phase-in of the various regulatory 

requirements under the Dodd-Frank 

rulemakings. Accordingly, the 

Commission believes it appropriate to 

periodically re-examine the scope and 

extent of the proposed exemptive relief 

in order to ensure that the scope of relief 

is appropriately tailored to the schedule 

of implementation of the Dodd-Frank 

Act requirements. Second, particularly 

with respect to part two of the July 14 

Order, the limitation of this extension of 

exemptive relief to no later than July 16, 

2012 is consistent with the transitional 

relief provided by the Congress in 

section 723(c) of the Dodd-Frank Act 

regarding former CEA section 2(h) and 

section 734(c) of the Dodd-Frank Act 

regarding former CEA section 5d (i.e., 

for ‘‘not longer than a 1-year period’’ 

following the general effective date of 

title VII).30 As stated in the Notice, 

should the Commission deem it 

appropriate to terminate or extend any 

exemptive relief under part two of the 

July 14 Order, the Commission will be 

in a better position to comprehensively 

evaluate and consider any tailored 

exemption at that time.31

B. Application to Agricultural Swaps 

1. Comments 

CME sought clarification on the 

application of the proposed amendment 

to agricultural swaps.32 CME stated that 

it was not clear from the Notice whether 

the proposed relief: (1) Would apply 

only to agricultural swaps that meet part 

35 as in effect prior to December 31, 

2011; or (2) includes agricultural swaps 

that meet part 35 as in effect prior to 

December 31, 2011 notwithstanding 

that: (i) The transaction may be 

executed on a multilateral transaction 

execution facility; (ii) the transaction 

may be cleared; (iii) persons offering or 

entering into the transaction may be 

eligible contract participants as defined 

in the CEA prior to July 16; (iv) the 

transaction may be part of a fungible 

class of agreements that are 

standardized as to their material 

economic terms; and/or (v) no more 

than one of the parties to the transaction 

is entering into the transaction in 

conjunction with its line of business, 

but is neither an eligible contract 

participant nor an ESP), and the 

transaction was not and is not marketed 

to the public. CME believes the latter is 

consistent with new Commission 

regulation § 35.1, and that the 

Commission should make this clear in 


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33 Id. 

34CME at 3. 

35Specifically, the statutory provisions 

authorizing ECMs (pre Dodd-Frank CEA section 

2(h)) applied to transactions in exempt 

commodities, and the statutory provisions 

authorizing EBOTs (pre Dodd-Frank CEA section 

5d) applied to transactions in excluded 

commodities. Agricultural commodities are neither 

exempt nor excluded commodities. 

36See Agricultural Swaps, 76 FR 49291, Aug. 10, 

2011. 

37 Id. at 49296. 

38The Notice stated: ‘‘[T]he proposed extension 

of this exemptive relief ‘will allow markets and 

market participants to continue to operate under the 

regulatory regime as in effect prior to 

July 16, 2011 * * * ’ ’’ 76 FR 65999, at 66001. The 

regulatory regime as in effect prior to July 16, 2011, 

did not permit transactions in agricultural 

commodities on ECMs or EBOTs. 

39See footnote 36, above. 

40As noted above, part two of the July 14 Order 

provides temporary exemptive relief from the 

provisions of the CEA that apply, or may apply, to 

certain agreements, contracts, and transactions in 

exempt or excluded commodities as a result of the 

repeal of the exemptions and exclusions contained 

in former CEA sections 2(d), 2(e), 2(g), 2(h), and 5d 

as of July 16, 2011. See sections 723(a)(1) and 734(a) 

of the Dodd-Frank Act. 

41Section 723(c) of the Dodd-Frank Act permitted 

persons to submit to the Commission, within 60 

days of the enactment of the Dodd-Frank Act, a 

petition to remain subject to former section 2(h) of 

the CEA and authorized the Commission to allow 

such persons to continue to operate subject to 

former section 2(h) of the CEA for not longer than 

a one year period. 

42See Orders Regarding the Treatment of 

Petitions Seeking Grandfather Relief for Exempt 

Commercial Markets and Exempt Boards of Trade, 

75 FR 56513, Sept. 16, 2010. 

43Sections 733 and 735 of the Dodd-Frank Act 

include Core Principles and other statutory 

requirements applicable to SEFs and DCMs, 

respectively. 

44Nodal at 2 (emphasis in the original). 

45 Id. at 1. 

46 Id. at 2. 

47 Id. 

the text of any final order issued 

pursuant to the Notice.33

CME further stated that pursuant to 

the Notice and new regulation § 35.1, 

starting on January 1, 2012, swaps based 

on agricultural commodities, like swaps 

based on exempt and excluded 

commodities, may trade on either a 

DCM, ECM or exempt board of trade 

(‘‘EBOT’’) (until such time as status as 

a swap execution facility (‘‘SEF’’) is 

available). CME believes the 

Commission should make this clear in 

the text of any final order issued 

pursuant to the Notice.34

2. Commission Determination 

Prior to the Dodd-Frank Act, the CEA 

did not permit transactions in 

agricultural commodities on ECMs or 

EBOTs.35 Nothing in the Notice or the 

Commission’s recently promulgated 

§ 35.136 provide that agricultural swaps 

may trade on an ECM or EBOT. Rather, 

regulation § 35.1 allows agricultural 

swaps to transact subject to the laws and 

rules applicable to all other swaps, and 

to transact on DCMs, SEFs, ‘‘or 

otherwise’’ to the same extent that all 

other swaps are allowed to trade on 

DCMs, SEFs, ‘‘or otherwise.’’ 37 To 

interpret the phrase ‘‘or otherwise’’, in 

conjunction with the exemptive relief 

issued herein, as expanding the 

permissible role for ECMs and EBOTs to 

agricultural commodities would be: (1) 

Contrary to the plain language of the 

pre-Dodd-Frank exemptions for ECMs 

and EBOTs; and (2) inconsistent with 

the intent underlying the July 14 Order 

to preserve the status quo during 

implementation of the new swap 

regulatory regime.38 Accordingly, the 

Commission now clarifies that new part 

35 39 and the exemptive relief issued 

herein, and any interaction of the two, 

do not operate to expand the pre-DoddFrank scope of transactions eligible to 

be transacted on either an ECM or EBOT 

to include transactions in agricultural 

commodities. 

To clarify this point, and as compared 

to the proposed amended order, the 

Commission has reformatted this final 

order by moving the text addressing 

transactions that meet part 35 as in 

effect prior to December 31, 2011, to a 

paragraph separate from the text 

addressing transactions that meet part 

35 as in effect prior to December 31, 

2011 notwithstanding that: (i) The 

transaction may be executed on a 

multilateral transaction execution 

facility; (ii) the transaction may be 

cleared; (iii) persons offering or entering 

into the transaction may be eligible 

contract participants as defined in the 

CEA prior to July 16; (iv) the transaction 

may be part of a fungible class of 

agreements that are standardized as to 

their material economic terms; and/or 

(v) no more than one of the parties to 

the transaction is entering into the 

transaction in conjunction with its line 

of business, but is neither an eligible 

contract participant nor an ESP, and the 

transaction was not and is not marketed 

to the public. 

C. Expiry Date Applicable to ECMs and 

EBOTs Operating Pursuant to 

Grandfather Relief Authorized by 

Section 723(c)(1)–(2) of the Dodd-Frank 

Act and Their Market Participants and 

Clearing Organizations 

1. Comments 

Two commenters, Nodal Exchange 

and LCH, expressed concern with the 

expiry date of the second part of the 

relief contained in the proposed 

amended order 40 as it applies to ECMs 

that have petitioned for the grandfather 

relief authorized by section 723(c)(1)–(2) 

of the Dodd-Frank Act 41 and/or to such 

ECMs’ market participants or clearing 

organizations. As set forth above, the 

Commission proposed to amend the July 

14 Order to extend the expiry date of the 

second part of the relief until the earlier 

of: (1) July 16, 2012; or (2) such other 

compliance date as may be determined 

by the Commission. 

Nodal Exchange is an ECM that has 

filed for grandfather relief under the 

ECM ‘‘Grandfather Order’’ issued by the 

Commission pursuant to the authority 

provided by section 723(c)(1)–(2) of the 

Dodd-Frank Act.42 The ECM 

Grandfather Order permits ECMs that 

satisfy specified conditions to continue 

to operate pursuant to the provisions of 

former CEA section 2(h)(3)–(7) until July 

15, 2012. Among the applicable 

conditions are the requirements that the 

ECM must have filed a formal SEF or 

DCM application with the Commission 

within sixty days after the effective date 

of final regulations implementing the 

provisions of either section 733 or 

section 735 of the Dodd-Frank Act,43

whichever is applicable, and that the 

ECM’s SEF or DCM application be 

pending before the Commission. 

Nodal Exchange requested that the 

proposed amended order be modified in 

two ways. First, Nodal requested that 

‘‘the Commission provide relief to ECMs 

compliant with the grandfathering 

provisions by extending the second part 

of the July 14 Order for these compliant 

ECMs until the latter of (1) July 16, 

2012; or (2) such other compliance date 

as may be determined by the 

Commission.’’ 44 In support of its 

request, Nodal stated that ‘‘[s]ince the 

Dodd-Frank Act eliminates ECMs by no 

later than July 16, 2012, it would appear 

that Nodal Exchange must become a 

registered DCM or SEF by July 16, 

2012.’’ 45 Nodal asserted, however, that 

it ‘‘appears highly unlikely that Nodal 

Exchange will be able to be either a 

registered DCM or SEF by July 16, 2012 

because the rules for neither DCMs nor 

SEFs have been finalized’’ and because 

‘‘based on the proposed rules for DCMs, 

the 180-day statutory review period will 

probably govern the application review 

process.’’ 46

Nodal claimed that its ‘‘markets will 

be disrupted if Nodal Exchange cannot 

be registered as a DCM or SEF by July 

16, 2012, unless Nodal Exchange can be 

permitted to continue to operate as an 

ECM until the Commission grants 

appropriate registration.’’ 47 Nodal also 

claimed that ‘‘[w]ithout further 

guidance from the Commission 

consistent with the ECM transition 


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48Nodal represents that all of its contracts are 

cleared by LCH.Clearnet. Id. at 1, fn. 1. 

49 Id. at 2. 

50 Id. 

51 Id. 

52LCH at 1. 

53 Id. at 2. 

54 Id. 

55 Id. (emphasis in the original). 

56 Id. 57 Id. 58See Orders Regarding the Treatment of 

Petitions Seeking Grandfather Relief for Exempt 

Commercial Markets and Exempt Boards of Trade, 

75 FR 56513, Sept. 16, 2010. 

59This modification does not affect the 

applicability of general provisions applicable to 

DCOs or clearing requirements that the Commission 

may promulgate under the Dodd-Frank Act that 

may become effective before July 16, 2012. Such 

requirements would still apply to the DCO and 

transactions that are not executed on an ECM or 

EBOT. 

60See, e.g., 76 FR at 66002. 

61 Id. 

period of section 723(c) of the DoddFrank Act,’’ the proposed amended 

order ‘‘creates unnecessary uncertainty 

for Nodal Exchange, its participants, its 

clearing house LCH.Clearnet,48 and the 

LCH.Clearnet clearing members for 

Nodal Exchange participants.’’ 49

Second, Nodal asserted that with 

respect to non-ECM entities such as 

Nodal Exchange participants and their 

LCH clearing members, extending the 

relief in the July 14 Order until the 

earlier of: (1) July 16, 2012; or (2) such 

other compliance date as may be 

determined by the Commission ‘‘creates 

uncertainty in the timeline for 

compliance with the new regulatory 

regime,’’ noting that it is ‘‘unclear what 

circumstances could cause ‘such other 

compliance date’ to be determined by 

the Commission.’’ 50 Accordingly, Nodal 

Exchange requested that the 

Commission provide exemptive relief to 

‘‘non-ECM market participants’’ by 

extending the second part of the July 14 

Order until July 16, 2012 without 

qualification.51

In a related comment, LCH similarly 

requested that the Commission extend 

the exemptive relief in the second part 

of the July 14 Order to July 16, 2012 

‘‘without any qualification.’’ 52

LCH.Clearnet Limited, one of the LCH’s 

operating companies, is registered with 

the Commission as a derivatives 

clearing organization (‘‘DCO’’) and 

provides clearing services for Nodal 

Exchange. According to LCH, the 

second part of the Commission’s July 14 

Order permits LCH.Clearnet Limited to 

continue to clear transactions for Nodal 

Exchange.53 LCH acknowledged that 

LCH.Clearnet’s ‘‘DCO designation must 

be amended before Nodal Exchange’s 

change in registration [to a DCM or SEF] 

occurs.’’ 54

LCH commented that the Commission 

‘‘created unnecessary uncertainty for 

LCH.Clearnet Limited, Nodal, and 

LCH.Clearnet clearing members for 

firms trading on Nodal by proposing 

that the extension of the July 14 Order 

would expire ‘upon the earlier of: (I) 

July 16, 2012; or (II) such other 

compliance date as may be determined 

by the Commission.’ ’’ 55 Stating that ‘‘no 

explanation for the ‘other compliance 

date’ language’’ was provided, LCH 

maintained that the addition of this 

language ‘‘raises the spectre that the 

Commission could rescind the 

exemptive relief at any time for any 

reason or without allowing sufficient 

time for LCH.Clearnet Limited to apply 

for and receive an amended order of 

registration.’’ 56 LCH stated that 

extending the expiration date of the 

second part of the July 14 Order to July 

16, 2012 without qualification would be 

‘‘consistent with the transitional period 

for ECMs provided in section 723(c) of 

Dodd-Frank’’ and the Commission’s goal 

of striving ‘‘to ensure that current 

practices will not be unduly disrupted 

during the transition to the new 

regulatory regime.’’ 57

2. Commission Determination 

Although these comments came from 

an ECM and its clearing organization, 

the points raised in these comments also 

are applicable to EBOTs that are 

operating under essentially the same 

Grandfather Order requirements as 

ECMs.58 Accordingly, in modifying the 

proposed amended order to address the 

comments received regarding ECMs, the 

Commission also has determined to 

modify the proposed amended order to 

address EBOTs. 

While the final order continues to 

provide that the exemption set forth in 

the second part of the order generally 

shall expire upon the earlier of July 16, 

2012 or such other compliance date as 

may be determined by the Commission, 

it has been modified to provide that the 

exemption will not expire prior to July 

16, 2012 in certain circumstances. 

Specifically, no other compliance date 

will be determined (and thus, the 

exemption will remain in effect until 

July 16, 2012) for agreements, contracts, 

and transactions (and for persons 

offering, entering into, or rendering 

advice or rendering other services with 

respect to, such agreements, contracts or 

transactions) that: (1) Are executed on 

an ECM or EBOT that is operating under 

the terms of the Commission’s ECM/ 

EBOT Grandfather Order and that 

complies with all of the applicable 

conditions of the ECM/EBOT 

Grandfather Order; and (2) are cleared 

by a Commission-registered DCO. This 

modification is narrow. It applies only 

to agreements, contracts, and 

transactions that are executed on a 

grandfathered ECM or EBOT and are 

cleared by a registered DCO, and it is 

restricted in scope to those specific 

requirements or provisions of the CEA 

(and relevant implementing regulations) 

that otherwise would apply to such 

agreements, contracts, and transactions 

and that are inconsistent with the ECM 

or EBOT Grandfather Order.59

As noted by the commenters, the 

Commission, in proposing the 

amendments to the July 14 Order, 

sought to ensure that current practices 

will not be unduly disrupted during the 

transition to the new regulatory 

regime.60 The Commission also stated 

that it believes it is in the interest of the 

public and market participants to 

continue to provide regulatory certainty 

regarding the applicability of title VII of 

the Dodd-Frank Act.61 The modification 

contained in the final order will further 

these objectives by providing greater 

consistency between the expiration of 

this exemptive relief and the terms of 

the ECM/EBOT Grandfather Order 

authorized by Congress in sections 

723(c) and 734(c) of the Dodd-Frank 

Act. It also will reduce the likelihood of 

legal uncertainty that could arise were 

the exemptive relief applicable to 

grandfathered ECMs and EBOTs that 

execute particular transactions and the 

DCOs that clear those same transactions 

subject to disparate expiration dates. In 

this way, ECMs and EBOTs that are 

compliant with the conditions 

contained in the ECM/EBOT 

Grandfather Order, their market 

participants, and their DCOs and 

clearing members, are more likely to 

operate without disruption through the 

end of the grandfather relief period 

authorized by the Dodd-Frank Act—July 

16, 2012. 

The Commission, though, has 

determined not to modify the expiration 

date of the second part of the proposed 

amended order to permit the relief to 

expire later than July 16, 2012 for the 

same reasons that it has decided to 

retain a ‘‘sunset’’ or expiration provision 

generally. First, the Commission 

continues to believe that it is 

appropriate and prudent to periodically 

review the extent and scope of any 

exemptive relief provided from the CEA, 

as amended by the Dodd-Frank Act. 

Second, the limitation of this exemptive 

relief to no later than July 16, 2012 is 

consistent with the transitional relief 

provided by Congress (i.e., for ‘‘not 

longer than a 1-year period’’). Finally, 

should the Commission deem it 


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62See 76 FR at 66002. 

63 44 U.S.C. 3507(d). 

64 7 U.S.C. 19(a). 

65See 76 FR 42521. 

appropriate to terminate or extend any 

exemptive relief under part two of the 

July 14 Order, the Commission will be 

in a better position to comprehensively 

evaluate and consider any tailored 

exemption at that time.62

V. Related Matters 

A. Paperwork Reduction Act 

The Paperwork Reduction Act 

(‘‘PRA’’) 63 imposes certain 

requirements on Federal agencies 

(including the Commission) in 

connection with conducting or 

sponsoring any collection of 

information as defined by the PRA. 

These amendments to the July 14 Order 

will not require a new collection of 

information from any persons or entities 

that will be subject to the final order. 

B. Cost-Benefit Considerations 

Section 15(a) of the CEA 64 requires 

the Commission to consider the costs 

and benefits of its action before issuing 

an order under the CEA. CEA section 

15(a) further specifies that 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 may in its discretion give 

greater weight to any one of the five 

enumerated areas and could in its 

discretion determine that, 

notwithstanding its costs, a particular 

order is necessary or appropriate to 

protect the public interest or to 

effectuate any of the provisions or to 

accomplish any of the purposes of the 

CEA. 

The Commission requested but 

received no comments on the 

consideration of costs and benefits of 

the proposed amendments discussed in 

the Notice. In the Notice, the 

Commission stated that the proposed 

amendments to the existing July 14 

Order would not change the nature or 

limit the scope of relief granted.65 The 

Commission continues to believe that 

these amendments do not change the 

nature or scope of the relief granted and, 

as such, impose no costs beyond the 

costs imposed by the July 14 Order. 

Rather, this final order confers an added 

benefit to market participants and the 

public by extending the relief provided 

for in the July 14 Order through no later 

than July 16, 2012. Accordingly, the 

consideration of costs and benefits set 

forth in the July 14 Order may be 

incorporated by reference in this final 

order. 

VI. Amendments to the July 14 Order 

The Commission amends the July 14 

Order to read as follows: 

The Commission, to provide for the 

orderly implementation of the 

requirements of Title VII of the DoddFrank Act, pursuant to sections 4(c) and 

4c(b) of the CEA and section 712(f) of 

the Dodd-Frank Act, hereby issues this 

Order consistent with the 

determinations set forth above, which 

are incorporated in this final order, as 

amended, by reference, and: 

(1) Exempts, subject to the conditions 

set forth in paragraph (4), all 

agreements, contracts, and transactions, 

and any person or entity offering, 

entering into, or rendering advice or 

rendering other services with respect to, 

any such agreement, contract, or 

transaction, from the provisions of the 

CEA, as added or amended by the DoddFrank Act, that reference one or more of 

the terms regarding entities or 

instruments subject to further definition 

under sections 712(d) and 721(c) of the 

Dodd-Frank Act, which provisions are 

listed in Category 2 of the Appendix to 

this Order; provided, however, that the 

foregoing exemption: 

a. Applies only with respect to those 

requirements or portions of such 

provisions that specifically relate to 

such referenced terms; and 

b. With respect to any such provision 

of the CEA, shall expire upon the earlier 

of: (i) the effective date of the applicable 

final rule further defining the relevant 

term referenced in the provision; or (ii) 

July 16, 2012. 

(2) Exempts, subject to the conditions 

set forth in paragraph (4), all 

agreements, contracts, and transactions, 

and any person or entity offering, 

entering into, or rendering advice or 

rendering other services with respect to, 

any such agreement, contract, or 

transaction, from the provisions of the 

CEA, if the agreement, contract, or 

transaction complies with part 35 of the 

Commission’s regulations as in effect 

prior to December 31, 2011. This 

exemption shall expire upon the earlier 

of (i) July 16, 2012; or (ii) such other 

compliance date as may be determined 

by the Commission. 

(3) Exempts, subject to the conditions 

set forth in paragraph (4), all 

agreements, contracts, and transactions, 

and any person or entity offering, 

entering into, or rendering advice or 

rendering other services with respect to, 

any such agreement, contract, or 

transaction, from the provisions of the 

CEA, if the agreement, contract, or 

transaction complies with part 35 of the 

Commission’s regulations as in effect 

prior to December 31, 2011, including 

any agreement, contract, or transaction 

in an exempt or excluded (but not 

agricultural) commodity that complies 

with such provisions then in effect 

notwithstanding that: 

a. The agreement, contract, or 

transaction may be executed on a 

multilateral transaction execution 

facility; 

b. The agreement, contract, or 

transaction may be cleared; 

c. Persons offering or entering into the 

agreement, contract or transaction may 

not be eligible swap participants, 

provided that all parties are eligible 

contract participants as defined in the 

CEA prior to the date of enactment of 

the Dodd-Frank Act; 

d. The agreement, contract, or 

transaction may be part of a fungible 

class of agreements that are 

standardized as to their material 

economic terms; and/or 

e. No more than one of the parties to 

the agreement, contract, or transaction is 

entering into the agreement, contract, or 

transaction in conjunction with its line 

of business, but is neither an eligible 

contract participant nor an eligible swap 

participant, and the agreement, contract, 

or transaction was not and is not 

marketed to the public; 

Provided, however, that: 

a. Such agreements, contracts, and 

transactions in exempt or excluded 

commodities (and persons offering, 

entering into, or rendering advice or 

rendering other services with respect to, 

any such agreement, contract, or 

transaction) fall within the scope of any 

of the CEA sections 2(d), 2(e), 2(g), 2(h), 

and 5d provisions or the line of business 

provision as in effect prior to July 16, 

2011; and 

b. This exemption shall expire upon 

the earlier of: (i) July 16, 2012; or (ii) 

such other compliance date as may be 

determined by the Commission, except 

that the exemption shall not expire prior 

to July 16, 2012 with limited respect to 

the specific requirements or provisions 

of the CEA and regulations promulgated 

thereunder that otherwise would apply 

to such agreements, contracts, and 

transactions (and the persons offering, 

entering into, or rendering advice or 

rendering other services with respect to 

them) and that are inconsistent with the 

exempt commercial market (‘‘ECM’’)/ 

exempt board of trade (‘‘EBOT’’) 

Grandfather Order if (I) such 

agreements, contracts, and transactions 

are executed on an ECM or an EBOT 

that is operating under the terms of, and 


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80240 Federal Register / Vol. 76, No. 247 / Friday, December 23, 2011 / Rules and Regulations 

66See ‘‘Do What You Can’’, Opening Statement 

for the June 14, 2011 Commission Meeting, 

available at: http://www.cftc.gov/PressRoom/ 

SpeechesTestimony/omaliastatement061411; 

Concurring Statement on the Order Regarding the 

Effective Date for Swap Regulation, dated July 14, 

2011, available at: http://www.cftc.gov/PressRoom/ 

SpeechesTestimony/omaliastatement071411; 

Concurring Statement, Second Extension of 

Temporary Exemptive Relief, dated October 18, 

2011, available at: http://www.cftc.gov/PressRoom/ 

SpeechesTestimony/omaliastatement101811c. 

67To provide such relief, the Commission is 

relying on its exemptive authority under section 

4(c) of the Commodity Exchange Act and its 

authority under section 712(f) of the Dodd-Frank 

Act. 

68See H.R. Rep. No. 112–101, at 54 (2011), 

available at http://www.gpo.gov/fdsys/pkg/CRPT112hrpt101/pdf/CRPT-112hrpt101.pdf. 

69The proposed order for Effective Date for Swap 

Regulation, 76 FR 35372, 35375 (Jun. 17, 2011). See 

the final order for Effective Date for Swap 

Regulation, 76 FR 42508, 42514 (Jul. 19, 2011) 

(stating that ‘‘[t]he Commission has determined, for 

the reasons discussed in the proposed order, not to 

alter the expiration date(s) contained in the 

proposed order.’’). 

In both the First and Second Iterations, the 

Commission advanced another reason for a sunset. 

Essentially, the Commission argued that, with 

respect to the Category 3 provisions, ‘‘limiting 

exemptive relief to a fixed period is consistent with 

the approach to transitional relief provided in 

sections 723(c) and 734 of the Dodd-Frank Act.’’ 76 

FR at 42514. See Section IV(A)(2) of the Second 

Iteration. With respect to the First Iteration, this 

statement was somewhat odd, since the December 

Sunset was earlier—by six months—than the end 

date for transitional relief specified by those two 

Dodd-Frank sections. With respect to the Second 

Iteration, this statement is accurate. However, the 

transitional relief specified by those two DoddFrank sections may have been predicated on the 

Commission completing its Dodd-Frank 

rulemakings by the general effective date of July 16, 

2011. If the Commission assumes otherwise, then it 

would be imputing to Congress the intent to place 

market participants in a Catch-22. Specifically, the 

Commission would be stating that Congress 

intended to withdraw transitional relief from 

market participants before the Commission 

completes the Dodd-Frank structures to which 

market participants are explicitly supposed to 

transition. This imputation may be somewhat 

ungenerous. I believe that sections 723(c) and 

734(c) of the Dodd-Frank Act, when interpreted in 

the proper context, do not support a sunset in the 

Second Iteration. 

70Section V(B) of the Second Iteration. 

compliant with the applicable 

conditions of, the Commission’s ECM/ 

EBOT Grandfather Order which became 

effective September 20, 2010; (II) such 

agreements, contracts, and transactions 

are cleared by a registered derivatives 

clearing organization; and (III) such 

ECM or EBOT complies with all other 

Commission regulations implementing 

the provisions of the Dodd-Frank Act 

that are listed in Category 1 of the 

Appendix to this Order. 

(4) Provides that the foregoing 

exemptions in paragraphs (1), (2) and (3) 

above shall not: 

a. Limit in any way the Commission’s 

authority with respect to any person, 

entity, or transaction pursuant to CEA 

sections 2(a)(1)(B), 4b, 4o, 6(c), 6(d), 6c, 

8(a), 9(a)(2), or 13, or the regulations of 

the Commission promulgated pursuant 

to such authorities, including 

regulations pursuant to CEA section 

4c(b) proscribing fraud; 

b. Apply to any provision of the 

Dodd-Frank Act or the CEA that became 

effective prior to July 16, 2011; 

c. Affect any effective or compliance 

date set forth in any rulemaking issued 

by the Commission to implement 

provisions of the Dodd-Frank Act; 

d. Limit in any way the Commission’s 

authority under section 712(f) of the 

Dodd-Frank Act to issue rules, orders, or 

exemptions prior to the effective date of 

any provision of the Dodd-Frank Act 

and the CEA, in order to prepare for the 

effective date of such provision, 

provided that such rule, order, or 

exemption shall not become effective 

prior to the effective date of the 

provision; and 

e. Affect the applicability of any 

provision of the CEA to futures 

contracts or options on futures 

contracts, or to cash markets. 

In its discretion, the Commission may 

condition, suspend, terminate, or 

otherwise modify this Order, as 

appropriate, on its own motion. This 

final order, as amended, shall be 

effective immediately. 

Issued in Washington, DC, on December 

19, 2011 by the Commission. 

David A. Stawick, 

Secretary of the Commission. 

Note: The following appendix will not 

appear in the Code of Federal Regulations. 

Statement of Commissioner Scott D. 

O’Malia 

For the fourth time this year,66 I am 

concurring with the Commission’s 

decision to provide market participants 

with temporary relief from certain 

provisions of the Dodd-Frank Act.67

Again, I am concurring despite my 

belief that this iteration of the final 

exemptive order (the ‘‘Second 

Iteration’’) is deeply flawed—just like 

the July 14, 2011 final order (the ‘‘First 

Iteration’’). By now, it is well known 

that I object to arbitrary sunsets. It is 

also well known that I object to the 

Commission’s recalcitrance—despite 

Congressional direction—to set forth 

comprehensive rulemaking and 

implementation schedules.68 I will not 

expound upon such objections here. 

Instead, I would like to focus on the 

Commission’s dogmatic adherence to 

the exemptive approach taken by the 

First Iteration, even in light of known 

facts. Such adherence sets a troubling 

precedent for our Dodd-Frank 

outstanding proposals. 

The Goal 

The First Iteration provided for the 

termination of exemptive relief on 

December 31, 2011, absent further 

Commission action (the ‘‘December 

Sunset’’). The primary reason that the 

Commission advanced for the December 

Sunset was that ‘‘it would be 

appropriate to periodically re-examine 

the scope and extent of the proposed 

exemptive relief in order to ensure that 

the scope of relief is appropriately 

tailored to the schedule of 

implementation of the Dodd-Frank Act 

requirements.’’ 69

The Facts 

Let us now examine the facts. After 

all, hindsight should be 20/20. First, the 

December Sunset has done nothing to 

ensure that the Commission completes 

its Dodd-Frank rulemakings more 

expeditiously. Specifically, the 

Commission has not completed the 

definitional rulemakings that Category 2 

provisions (as the First and Second 

Iterations define such term) require to 

become effective. Additionally, the 

Commission has not completed the 

rulemakings on designated contract 

markets and swap execution facilities 

that would enable Category 3 provisions 

(as the First and Second Iterations 

define such term) to become effective 

without disrupting existing markets. 

Second, the December Sunset has not 

permitted the Commission to tailor the 

scope and extent of the current 

exemption. This is unsurprising. Market 

participants cannot reasonably comply 

with Category 2 or 3 provisions unless 

the Commission completes predicate 

rulemakings. An arbitrary sunset cannot 

change this fact. Hence, the Second 

Iteration emphasizes that ‘‘the proposed 

amendments to the existing July 14 

Order would not change the nature or 

limit the scope of relief granted.’’ 70

Commission Response 

As demonstrated above, the December 

Sunset achieved none of its goals. 

However, in formulating the Second 

Iteration, the Commission appears to 

have ignored inconvenient truths. The 

Second Iteration extends the December 

Sunset to July 16, 2012. Simultaneously, 

the Commission continues its refusal to 

provide market participants with its 

plan for the completion of Dodd-Frank 

rulemakings by July 16, 2012. In fact, at 

least one market participant has already 

indicated that—based on reasonable 

estimates of Commission progress—it 

would need exemptive relief beyond the 


srobinson on DSK4SPTVN1PROD with RULES
Federal Register / Vol. 76, No. 247 / Friday, December 23, 2011 / Rules and Regulations 80241 

71See comment letter from Nodal Exchange, LLC, 

dated November 23, 2011, to the proposed order on 

Effective Date for Swap Regulation, 76 FR 65999 

(Oct. 25, 2011), available at: http:// 

comments.cftc.gov/PublicComments/ 

CommentList.aspx?id=1102 (stating ‘‘[i]t appears 

highly unlikely that Nodal Exchange will be able to 

be either a registered DCM or SEF by July 16, 2012 

because the rules for neither DCMs nor SEFs have 

been finalized. Furthermore, based on the proposed 

rules for DCMs, the 180-day statutory review period 

will probably govern the application review 

process. Without further guidance from the 

Commission * * * the CFTC Proposed Release 

created unnecessary uncertainty for Nodal 

Exchange, its participants, its clearing house 

LCH.Clearnet, and the LCH.Clearnet clearing 

members for Nodal Exchange participants.’’). 

72According to the Office of Management and 

Budget, we have promulgated five final rulemakings 

that would each result in an annual effect on the 

American economy of more than $100 million a 

year. If the Commission continues to adhere to its 

Dodd-Frank approach, without consideration of 

new and applicable facts, then the Commission may 

impose substantial and unnecessary costs on the 

American economy—costs that we all can ill-afford. 

new sunset.71 I am already anticipating 

fifth and sixth votes on exemptive relief. 

Let’s Figure Out the Best Way to Reach 

the Goal 

I support the Second Iteration because 

some certainty is better than no 

certainty. However, if the Commission 

is truly open to reconsidering its DoddFrank proposals—as some have 

indicated—the Second Iteration should 

have contained no arbitrary sunset. In 

the Second Iteration, the Commission 

displays a troubling willingness to 

adhere to prior convention.72 By the 

fifth and sixth times I have to vote on 

temporary relief, I hope that the 

Commission will have agreed to grant 

market participants much-deserved 

certainty until applicable rulemakings 

become effective. Additionally, I hope 

that the Commission will have provided 

rulemaking and implementation 

schedules to market participants, so that 

they can plan to be in compliance when 

such rulemakings become effective. As 

Martin Luther King, Jr. has said: ‘‘We 

must accept finite disappointment, but 

never lose infinite hope.’’ 

[FR Doc. 2011–32841 Filed 12–22–11; 8:45 am] 

BILLING CODE 6351–01–P 

SOCIAL SECURITY ADMINISTRATION 

20 CFR Parts 404 and 416 

[Docket No. SSA–2011–0016] 

RIN 0960–AH32 

Revisions to Rules of Conduct and 

Standards of Responsibility for 

Representatives 

AGENCY: Social Security Administration. 

ACTION: Final rules. 

SUMMARY: We are revising our rules of 

conduct and standards of responsibility 

for representatives. These revisions 

further clarify our expectations 

regarding representatives’ obligations to 

competently represent their clients and 

constitute official notice concerning our 

requirements and procedures. We are 

also updating other rules about the 

representation of parties. These changes 

are necessary because our current 

regulations are insufficient to address 

some representative conduct that is 

inappropriate, but has technically fallen 

outside the scope of our regulations. 

These changes will allow us to better 

protect the integrity of our 

administrative process, ensure that 

claimants receive competent and 

effective representation, and further 

clarify representatives’ responsibilities 

in their dealings with us and with 

claimants. 

DATES: These final rules are effective on 

January 23, 2012. 

FOR FURTHER INFORMATION CONTACT: 

Andrew Maunz, Office of the General 

Counsel, Social Security 

Administration, P.O. Box 17788, 

Baltimore, MD 21235–7788, (410) 965– 

3196. For information on eligibility or 

filing for benefits, call our national tollfree number, 1–(800) 772–1213 or TTY 

1–(800) 325–0778, or visit our Internet 

site, Social Security Online, at http:// 

www.socialsecurity.gov. 

SUPPLEMENTARY INFORMATION: 

Background 

We may issue rules and regulations to 

administer the Social Security Act (Act). 

42 U.S.C. 405(a), 902(a)(5), 810(a), and 

1383(d)(1). We may issue regulations to 

recognize agents or other persons, other 

than attorneys, as claimant 

representatives. 42 U.S.C. 406(a)(1) and 

1383(d)(2). Under the cited authority, 

we are revising our rules of conduct and 

standards of responsibility for 

representatives and other rules about 

the representation of parties in 20 CFR 

part 404 subparts J and R and part 416 

subparts N and O. 

We published a notice of proposed 

rulemaking (NPRM), Revisions to Rules 

on Representation of Parties, in the 

Federal Register on September 8, 2008. 

73 FR 51963. We gave the public 60 

days to comment on the NPRM. In these 

final rules, we are finalizing some of our 

proposed regulatory changes. We 

continue to consider the rest of our 

proposed regulatory changes, and we 

may publish additional final rules that 

address them. 

Recognition of Representatives 

We are revising our rules to state that 

we will notify a claimant and the person 

the claimant chooses to represent him or 

her if we decide not to recognize the 

person as a representative. We are also 

adding language to clarify our existing 

policy that we may refuse to recognize 

a person as a representative if he or she 

does not meet our requirements. We are 

adding this text in final 20 CFR 

404.1705 and 416.1505. 

We are also revising our rules in final 

20 CFR 404.903(f) and 416.1403(f) to 

state that when we decide not to 

recognize a person as a representative, 

our action is not an initial 

determination that would allow the 

person the right to further 

administrative action and judicial 

review. 

New Rules of Conduct for 

Representatives 

The vast majority of representatives 

conduct their business before us 

ethically and do a conscientious job in 

assisting their clients. Unfortunately, 

there are a few representatives whose 

behavior requires us to take action to 

prevent them from representing 

claimants before us. The number of 

representatives sanctioned each year is 

small when compared to the entire 

universe of representatives. For 

example, over 27,000 representatives 

were involved at the hearings level in 

Fiscal Year 2011, but we have 

sanctioned, on average, only 11 

representatives per year since 2007. 

Nevertheless, our experience has 

convinced us that there are sufficient 

instances of questionable conduct to 

warrant additional regulatory authority 

to address representative conduct that is 

inappropriate. 

In the NPRM, we proposed to revise 

our list of prohibited actions to include: 

(1) Violating any section of the Act for 

which a criminal or civil monetary 

penalty is prescribed; (2) refusing to 

comply with any of our rules or 

regulations; (3) suggesting, assisting, or 

directing another person to violate our 

rules or regulations; (4) advising any 

claimant or beneficiary not to comply 

with any of our rules or regulations; and 

(5) failing to comply with our decision 

about sanctions. We are adopting these 

revisions because they will help us 

ensure that representatives comply with 

our rules. 

We are also adding an additional 

prohibited action: a representative may 

not help a suspended or disqualified 

person provide representational 

services. Specifically, the representative 

may not knowingly assist a suspended 


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