31890 Federal Register / Vol. 78, No. 102 / Tuesday, May 28, 2013 / Notices 

1See Dodd-Frank Wall Street Reform and 

Consumer Protection Act of 2010, Public Law 111– 

203, 124 Stat. 1376 (2010). The text of the DoddFrank Act may be accessed at http://www.cftc.gov./ 

LawRegulation/OTCDERIVATIVES/index.htm. 

2Pursuant to section 701 of the Dodd-Frank Act, 

Title VII may be cited as the ‘‘Wall Street 

Transparency and Accountability Act of 2010.’’ 

3 7 U.S.C. 1 et seq. 

4 7 U.S.C. 4(a)(6). At this time, the Commission 

is only providing interpretive guidance on the 

disruptive trading, practices, or conduct discussed 

herein. The Commission does not foreclose 

subsequent promulgation of rules and regulations 

pursuant to CEA section 4c(a)(6). The Commission 

also notes that new CEA section 4c(a)(5) is selfeffectuating. 

consultations are requested, the 

statement of the reasons and 

justifications for the determination 

subsequent to the delivery of the 

statement to Panama. 

Request for Comment on the Interim 

Procedures 

Comments must be received no later 

than June 27, 2013, and in the following 

format: 

(1) Comments must be in English. 

(2) Comments must be submitted 

electronically or in hard copy, with 

original signatures. 

(3) Comments submitted 

electronically, via email, must be either 

in PDF or Word format, and sent to the 

following email address: 

OTEXA_PANAMA@trade.gov. The 

email version of the comments must 

include an original electronic signature. 

Further, the comments must have a 

bolded heading stating ‘‘Public 

Version’’, and no business confidential 

information may be included. The email 

version of the comments will be posted 

for public review on the Panama TPA 

Safeguard Web site. 

(4) Comments submitted in hard copy 

must include original signatures and 

must be mailed to the Chairman, 

Committee for the Implementation of 

Textile Agreements, Room 30003, U.S. 

Department of Commerce, 14th Street 

and Constitution Avenue NW., 

Washington, DC 20230. All comments 

submitted in hard copy will be made 

available for public inspection at the 

Office of Textiles and Apparel, Room 

30003, U.S. Department of Commerce, 

14th Street and Constitution Avenue 

NW., Washington, DC, between the 

hours of 8:30 a.m. and 5:00 p.m. on 

business days. In addition, comments 

submitted in hard copy will also be 

posted for public review on the Panama 

TPA Safeguard Web site. 

(5) Any business confidential 

information upon which an interested 

person wishes to rely may only be 

included in a hard copy version of the 

comments. Brackets must be placed 

around all business confidential 

information. Comments containing 

business confidential information must 

have a bolded heading stating 

‘‘Confidential Version.’’ Attachments 

considered business confidential 

information must have a heading stating 

‘‘Business Confidential Information’’. 

The Committee will protect from 

disclosure any business confidential 

information that is marked ‘‘Business 

Confidential Information’’ to the full 

extent permitted by law. 

Janet E. Heinzen, 

Acting Chairman, Committee for the 

Implementation of Textile Agreements. 

[FR Doc. 2013–12630 Filed 5–24–13; 8:45 am] 

BILLING CODE 3510–DS–P 

COMMODITY FUTURES TRADING 

COMMISSION 

RIN 3038–AD96 

Antidisruptive Practices Authority 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Interpretive guidance and policy 

statement. 

SUMMARY: The Commodity Futures 

Trading Commission (the 

‘‘Commission’’ or ‘‘CFTC’’) is issuing 

this interpretive guidance and policy 

statement (‘‘interpretive statement’’) to 

provide guidance on section 747 of the 

Dodd-Frank Wall Street Reform and 

Consumer Protection Act (the ‘‘DoddFrank Act’’), which prohibits certain 

disruptive trading, practices, or conduct 

as set forth in new section 4c(a)(5) of the 

Commodity Exchange Act (the ‘‘CEA’’). 

This interpretive statement will provide 

market participants and the public with 

guidance on the scope and application 

of the statutory prohibitions set forth in 

CEA section 4c(a)(5). 

DATES: This interpretive statement will 

become effective May 28, 2013. 

FOR FURTHER INFORMATION CONTACT: 

David Meister, Director, Division of 

Enforcement, dmeister@cftc.gov, 

Vincent McGonagle, Senior Deputy 

Director, Division of Enforcement, 

vmcgonagle@cftc.gov or Robert Pease, 

Counsel to the Director of Enforcement, 

202–418–5863, rpease@cftc.gov; Three 

Lafayette Centre, 1151 21st Street NW., 

Washington, DC 20581. 

SUPPLEMENTARY INFORMATION: 

Prohibition of Disruptive Practices 

I. Statutory and Regulatory Authorities 

On July 21, 2010, President Obama 

signed the Dodd-Frank Wall Street 

Reform and Consumer Protection Act 

(‘‘Dodd-Frank Act’’).1 Title VII of the 

Dodd-Frank Act 2 amended the 

Commodity Exchange Act (‘‘CEA’’) 3 to 

establish a comprehensive new 

regulatory framework for swaps and 

security-based swaps. The legislation 

was enacted to reduce risk, increase 

transparency, and promote market 

integrity within the financial system by 

doing, among other things, the 

following: (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 realtime reporting regimes; and (4) 

enhancing the Commission’s 

rulemaking and enforcement authorities 

with respect to, among others, all 

registered entities and intermediaries 

subject to the Commission’s oversight. 

Section 747 of the Dodd-Frank Act 

amends section 4c(a) of the CEA 

(‘‘Prohibited Transactions’’) to add a 

new section entitled ‘‘Disruptive 

Practices.’’ New CEA section 4c(a)(5) 

makes it unlawful for any person to 

engage in any trading, practice, or 

conduct on or subject to the rules of a 

registered entity that—(A) violates bids 

or offers; (B) demonstrates intentional or 

reckless disregard for the orderly 

execution of transactions during the 

closing period; or (C) is, is of the 

character of, or is commonly known to 

the trade as, ‘‘spoofing’’ (bidding or 

offering with the intent to cancel the bid 

or offer before execution). 

Dodd-Frank Act section 747 also 

amends section 4c(a) of the CEA by 

granting the Commission authority 

under new section 4c(a)(6) of the CEA 

to promulgate such ‘‘rules and 

regulations as, in the judgment of the 

Commission, are reasonably necessary 

to prohibit the trading practices’’ 

enumerated therein ‘‘and any other 

trading practice that is disruptive of fair 

and equitable trading.’’ 4

The Commission is issuing this 

interpretive guidance and policy 

statement (‘‘interpretive statement’’) to 

provide market participants and the 

public with guidance on the manner in 

which it intends to apply the statutory 

prohibitions set forth in section 4c(a)(5) 

of the CEA. The public has the ability 

to present facts and circumstances that 

would inform the application of these 

policies. 

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Federal Register / Vol. 78, No. 102 / Tuesday, May 28, 2013 / Notices 31891 

5 76 FR 14943 (Mar. 18, 2011). On November 2, 

2010, the Commission issued an Advance Notice of 

Proposed Rulemaking (the ‘‘ANPR’’) asking for 

public comment on section 747 of the Dodd-Frank 

Act. 75 FR 67301 (Nov. 2, 2010). The ANPR formed 

the basis for a roundtable held on December 2, 

2010, by Commission staff in Washington, DC. The 

Commission subsequently terminated the ANPR on 

March 18, 2011. 76 FR 14826 (Mar. 18, 2011). 6 76 FR at 14945. The Commission also stated that 

a trade does not become subject to CEA section 

4c(a)(5) because it is reported to a swap data 

repository, even though such swap data repository 

is a registered entity. 7 Id. at 14946. 8 Id. 

9 Id. 

10 Id. 11 Id. 

12 Id. 

13 Id. 

14 Id. 

15 Id. 

16 Id. 

17 Id. 

18 Id. 

19 Id. 

20 Id. 

21 Id. 

22 Id. 

23 Id. 

24 Id. 

25The Proposed Order described ‘‘spoofing’’ to 

include the following: (i) Submitting or cancelling 

bids or offers to overload the quotation system of 

a registered entity, (ii) submitting or cancelling bids 

or offers to delay another person’s execution of 

trades, and (iii) submitting or cancelling multiple 

bids or offers to create an appearance of false 

market depth. 76 FR at 14946. 

26 76 FR at 14946. 

27 Id. 

28Appendix 3 contains the list of commenters 

that responded to the Proposed Order. The 

comment letters may be accessed through http://

comments.cftc.gov/PublicComments/CommentList.

aspx?id=893. 

II. Proposed Interpretive Order 

On March 18, 2011, the Commission 

issued a proposed interpretive order 

(‘‘Proposed Order’’) providing proposed 

interpretive guidance on the three new 

statutory provisions of section 4c(a)(5) 

of the CEA.5 In the Proposed Order, the 

Commission stated that CEA section 

4c(a)(5) applied to trading, practices, or 

conduct on registered entities, including 

designated contract markets (‘‘DCMs’’) 

and swap execution facilities (‘‘SEFs’’).6

The Proposed Order also provided that 

CEA section 4c(a)(5) would not apply to 

block trades, bilaterally negotiated swap 

transactions, or exchanges for related 

positions (‘‘EFRPs’’) transacted in 

accordance with the rules of a DCM or 

SEF.7

With respect to CEA section 

4c(a)(5)(A)’s prohibition on violating 

bids and offers, the Proposed Order 

stated that a person is prohibited from 

buying a contract at a price that is 

higher than the lowest available offer 

price and/or from selling a contract at a 

price that is lower than the highest 

available bid price.8 Such conduct, 

regardless of intent, disrupts the 

foundation of fair and equitable trading. 

The Commission further proposed that 

CEA section 4c(a)(5)(A) was a per se 

offense where the Commission would 

not be required to show that a person 

violating bids or offers did so with any 

intent to disrupt fair and equitable 

trading.9

In the Proposed Order, the 

Commission also stated that CEA 

section 4c(a)(5)(A) is applicable in any 

trading environment where a person 

exercises some control over the 

selection of bids and offers against 

which they transact, including when 

using an automated trading system that 

operates without pre-determined 

matching algorithms.10 The Commission 

further explained that CEA section 

4c(a)(5)(A) does not apply where a 

person is unable to violate a bid or 

offer—i.e., when a person is using an 

order matching algorithm.11 The 

Commission also proposed that CEA 

section 4c(a)(5)(A) would not apply 

where an individual is executing a 

sequence of trades to buy all available 

bids or sell to all available offers on an 

order book in accordance with the rules 

of the facility on which the trades were 

executed.12

In regard to CEA section 4c(a)(5)(B), 

the provision for orderly execution 

during the closing period, the 

Commission interpreted the provisions 

as requiring that a market participant 

must at least act recklessly to violate 

CEA section 4c(a)(5)(B).13 The Proposed 

Order stated that accidental, or even 

negligent trading, is not a sufficient 

basis for the Commission to claim a 

violation has occurred under CEA 

section 4c(a)(5)(B). The Proposed Order 

also generally defined the closing period 

as the period in the contract or trade 

when the settlement price is determined 

under the rules of that registered 

entity.14

The Proposed Order also explained 

that while CEA section 4c(a)(5)(B) 

encompasses any trading, practices, or 

conduct inside the closing period that 

affects the orderly execution of 

transactions during the closing period, 

disruptive conduct outside the closing 

period may also form the basis for 

investigations of potential CEA section 

4c(a)(5)(B) violations.15 Section 

4c(a)(5)(B) violations may also include 

executed orders, as well as bids and 

offers submitted by market participants 

for the purpose of disrupting fair and 

equitable trading.16

When determining whether a person 

violated CEA section 4c(a)(5)(B), the 

Commission proposed to evaluate the 

facts and circumstances as of the time 

the person engaged in the trading, 

practices, or conduct.17 The 

Commission proposed to use existing 

concepts of orderliness when assessing 

whether trades were executed, or orders 

were submitted, in an orderly fashion in 

the time periods prior to and during the 

closing period.18 The Proposed Order 

also expressed that market participants 

should assess market conditions and 

consider how their trading practices and 

conduct would affect the orderly 

execution of transactions during the 

closing period.19

With respect to CEA section 

4c(a)(5)(C), the Proposed Order stated 

that a market participant must act with 

some degree of intent to violate the 

‘‘spoofing’’ provision.20 Reckless 

trading, practices, or conduct would not 

violate CEA section 4c(a)(5)(C); instead, 

a person must intend to cancel a bid or 

offer before execution.21 Additionally, 

orders, modifications, or cancellations 

would not be considered ‘‘spoofing’’ if 

they were submitted as part of a 

legitimate, good-faith attempt to 

consummate a trade.22 While the 

Proposed Order did not exempt partial 

fills from CEA section 4c(a)(5)(C), 

legitimate, good-faith cancellations of 

partially filled orders would not violate 

CEA section 4c(a)(5)(C).23 Similar to the 

Commission’s proposed approach to 

CEA section 4c(a)(5)(B), the Commission 

proposed to evaluate the facts and 

circumstances when distinguishing 

between legitimate trading and 

‘‘spoofing’’ behavior.24

Under the Proposed Order, CEA 

section 4c(a)(5)(C) covers bid and offer 

activity on all registered entities, 

including all bids and offers in pre-open 

periods or during exchange-controlled 

trading halts. The Proposed Order also 

provided three non-exclusive examples 

of ‘‘spoofing’’ behavior.25 The 

Commission further proposed that CEA 

section 4c(a)(5)(C) does not cover nonexecutable market communications 

such as requests for quotes and other 

authorized pre-trade communications.26

Finally, the Commission proposed that 

a violation of CEA section 4c(a)(5)(C) 

does not require a pattern of activity, 

even a single instance of trading activity 

can be disruptive of fair and equitable 

trading.27

The Commission requested comment 

on all aspects of the Proposed Order, 

with the comment period ending on 

May 17, 2011. In response to the 

Proposed Order, the Commission 

received 16 comments from industry 

members, trade associations, exchanges, 

and other members of the public.28 In 

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31892 Federal Register / Vol. 78, No. 102 / Tuesday, May 28, 2013 / Notices 

29 76 FR 1214 (Jan. 7, 2011). 

30See, e.g., FIA at 2 (‘‘The Proposed Order does 

not go far enough in offering guidance to market 

participants.’’); ICE at 2 (‘‘Additional clarity is 

required with respect to the Commission’s 

interpretation and guidance regarding paragraphs 

(A) through (C) of Section 747.’’). 

31See, e.g., ISDA at 2 (‘‘ISDA supports the 

Commission’s effort to facilitate fair and equitable 

trading on registered entities by issuing guidance as 

to the parameters of the three statutory disruptive 

practices found in Subsection 5.’’); ICE at 2 (‘‘ICE 

continues to support the Commission’s efforts to 

promote open and competitive markets while 

improving the ability to deter improper trading 

practices that are disruptive to legitimate trading 

and orderly markets.’’); Barnard at 2 (‘‘I welcome 

and support your proposed interpretive order. It 

brings clarity to the antidisruptive practices 

authority, and strikes the right balance between 

rules- and principles-based regulation.’’). 

32See, e.g., ICE at 5 (‘‘ICE respectfully suggests 

that the Commission continue to rely on exchange 

SRO authority to identify and pursue trading 

practices that are determined to be manipulative or 

detrimental to the exchange’s markets, including 

practices that are the character of spoofing.’’); FIA 

at 7 (‘‘The Associations believe that any rulemaking 

under 747 must reinforce the distinct yet 

complementary roles of the Commission and the 

exchanges.’’); and CMC at 2 (‘‘SROs and the 

Commission historically have served distinct but 

largely complementary roles.’’). 

33See, e.g., ISDA at 2 (‘‘Subsection 5, though 

stated to apply to all ‘‘registered entities’’—that is 

. . . swap execution facilities (‘SEFs’) and 

designated contract markets (‘DCMs’)—should be 

clearly limited at the outset only to those orderbook trading facilities within the Commission’s 

proposed regulation, 17 CFR 37.9(a)(1)(i)(C), for the 

definition of ‘order book.’’’). 

34See, e.g., FIA at 5 (‘‘Unfortunately, the 

antidisruptive practices authority captures many 

legitimate trading practices which, without a 

manipulative intent requirement, are objectively 

indistinguishable from the proposed prohibited 

conduct.’’). 

35Section 1a(40) of the CEA defines ‘‘registered 

entity’’ as ‘‘(A) a board of trade designated as a 

contract market under section 5; (B) a derivatives 

clearing organization registered under section 5b; 

(C) a board of trade designated as a contract market 

under section 5f; (D) a swap execution facility 

registered under section 5h; (E) a swap data 

repository registered under section 21; and (F) with 

respect to a contract that the Commission 

determines is a significant price discovery contract, 

any electronic trading facility on which the contract 

is executed or traded.’’ 7 U.S.C. 1a(40). 

36The Commission confirms that a trade does not 

become subject to CEA section 4c(a)(5) solely 

because it is reported on a swap data repository, 

even though a swap data repository is a registered 

entity. 

37See, e.g., Working Group at 3 (‘‘The Working 

Group strongly recommends that the Commission 

interpret new CEA Section 4c(a)(5)(A) as requiring 

an intent to disrupt the market.’’). 

38See, e.g., CME at 4 (‘‘Contrary to the 

Commission’s assertion, this broad construction is 

not consistent with exchange rules, which only 

proscribe market participants’ intentional violation 

of bids and offers.’’). 

39See, e.g., CMC at 3 (‘‘The Commission should 

clarify that only intentional or extremely reckless 

action to violate transparent bids or offers 

contravenes this prohibition.’’). 

40See, e.g., FIA at 4 (‘‘The Associations 

recommend that the Commission provide further 

clarification. One example is the application to 

swap execution facilities (‘SEFs’)’’); BF at 14 (‘‘We 

further recommend that the CFTC confirm that 

transactions executed other than on a SEF’s central 

order book will not be deemed to ‘‘violate bids or 

offers’’ for purposes of CEA Section 4c(a)(5)(A), 

regardless of their price level.’’ 

drafting this interpretive statement, the 

Commission also considered the ANPR 

and December 2, 2010 roundtable 

comments, as well as comments related 

to section 747 of the Dodd-Frank Act 

that were filed in response to the SEF 

notice of proposed rulemaking (the 

‘‘SEF NPRM’’).29

III. Comments on the Proposed Order 

A. General Applicability of CEA Section 

4c(a)(5) 

1. Comments 

In response to the Proposed Order, 

several commenters requested 

additional guidance and suggested that 

additional clarity was needed regarding 

how the Commission would interpret 

and apply new CEA section 4c(a)(5).30

Some commenters supported the 

statutory requirement in new CEA 

section 4c(a)(5) to prohibit the 

enumerated trading practices and 

prevent the disruption of fair and 

equitable trading.31 Other commenters 

noted that the Commission should 

recognize the complementary role of the 

exchanges and continue relying on the 

exchanges’ self-regulatory organization 

(‘‘SRO’’) authority to identify and 

pursue trading practices that are 

manipulative or detrimental to the 

exchange’s markets.32 Commenters also 

requested that CEA section 4c(a)(5) 

violations be limited to those trading 

platforms on DCMs or SEFs that have 

order book functionality.33 Lastly, some 

commenters requested that the 

Commission incorporate a manipulative 

intent requirement into its new 

antidisruptive practices authority to 

ensure that the prohibitions in CEA 

section 4c(a)(5) do not capture 

legitimate trading practices that may be 

indistinguishable from the proposed 

prohibited conduct.34

2. Commission Guidance 

The Commission recognizes 

commenters’ requests for additional 

guidance on CEA section 4c(a)(5) and is 

issuing this interpretive statement to 

clarify how the Commission interprets 

and intends to apply the three statutory 

provisions of CEA section 4c(a)(5). With 

respect to the role of exchanges in 

ensuring fair and equitable markets, the 

Commission agrees with commenters 

that exchanges serve an important role 

in preventing the disruptive practices 

prohibited in CEA section 4c(a)(5) and 

ensuring fair and equitable trading in 

CFTC-regulated markets. 

The Commission declines the request 

by commenters to interpret CEA section 

4c(a)(5) as applying to only those 

trading platforms or venues that have 

order book functionality. In accordance 

with the statutory language of CEA 

section 4c(a)(5), the Commission 

interprets CEA section 4c(a)(5) to apply 

to any trading, practices or conduct on 

a registered entity 35 such as a DCM or 

SEF.36 Depending on the particular facts 

and circumstances, CEA section 4c(a)(5) 

violations may also occur on trading 

platforms or venues that are distinct 

from order books, even if such platforms 

or venues may have similar 

functionality. 

The Commission also declines 

commenters’ requests to read a 

manipulative intent requirement into 

the CEA section 4c(a)(5) prohibitions. 

The Commission interprets the 

prohibitions in CEA section 4c(a)(5) 

provisions to be distinct statutory 

provisions from the anti-manipulation 

provisions in section 753 of the DoddFrank Act; the Commission does not 

interpret the CEA section 4c(a)(5) 

violations as including any 

manipulative intent requirement. 

Including such a manipulative intent 

requirement is contrary to the statutory 

language. 

The Commission does not intend to 

apply CEA section 4c(a)(5) to either 

block trades or exchanges for related 

positions (‘‘EFRPs’’) that are transacted 

in accordance with Commission 

regulation 1.38. 

In addition to these general comments 

on CEA section 4c(a)(5), commenters 

provided comments on the three new 

statutory provisions, which are 

discussed in the following sections. 

B. Violating Bids and Offers 

1. Comments to the Proposed 

Interpretive Order 

Commenters requested that the 

Commission modify its interpretation 

that a CEA section 4c(a)(5)(A) violation 

is a per se offense and incorporate a 

requirement that a person must intend 

to disrupt fair and equitable trading.37

Commenters noted that the 

Commission’s interpretation that the 

violation of bids or offers is a per se 

offense conflicts with exchange rules.38

Other commenters requested that the 

Commission adopt either a ‘‘specific’’ 

intent or ‘‘extreme recklessness’’ 

standard for CEA section 4c(a)(5)(A).39

Commenters to the Proposed Order also 

requested guidance on how CEA section 

4c(a)(5)(A) would apply to the trading of 

swaps on SEFs.40 In particular, 

commenters stated that end-users 

should have discretion when choosing a 

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Federal Register / Vol. 78, No. 102 / Tuesday, May 28, 2013 / Notices 31893 

41See, e.g., Coalition at 4 (‘‘An interpretation that 

precludes end-users from exercising discretion in 

its counterparty selection could force end-users to 

make sub-optimal decisions when determining the 

most suitable swap counterparty on a given 

transaction.’’). 

42See, e.g., MarketAxess at 3 (‘‘The final order 

should make clear that the CFTC’s interpretation of 

new CEA § 4c(a)(5)(A) does not apply to uncleared 

swaps.’’). 

43See, e.g., Consolidated Banks at 14 (‘‘Nor 

should swaps with different bilateral counterparties 

or clearing destinations be deemed comparable to 

each other for such purposes.’’). 

44See, e.g., MarketAxess at 3 (‘‘We ask that the 

Commission confirm in its final Interpretive Order 

that a person would not violate bids or offers by 

buying or selling a contract on a SEF’s Request for 

Quote System when that contract is available to buy 

or sell at a ‘better’ price through another permitted 

execution method offered by that SEF such as an 

Order Book or a centralized electronic screen.’’). 

45See, e.g., GFI at 2 (‘‘GFI believes that the 

Proposed Interpretation would effectively impose a 

trade-through rule on SEFs that utilize trading 

methods that are not strictly automated, and that 

such a requirement is neither required by the DoddFrank Act nor furthers the purposes of the CEA.’’). 

46See, e.g., Working Group at 3 (‘‘The Working 

Group supports the Commission’s statement 

‘section 4c(a)(5)(A) does not create any sort of best 

execution standard across multiple trading 

platforms and markets; rather, a person’s obligation 

to not violate bids or offers is confined to the 

specific trading venue which he or she is utilizing 

at a particular time’ and strongly recommends that 

such interpretation of new CEA Section 4c(a)(5)(A) 

be adopted in any final interpretive order.’’). 

47See CME at 3 (‘‘We also concur with the 

Commission’s determination that this section does 

not apply where an individual is ‘buying the 

board.’ ’’). 

48See, e.g., New York Mercantile Exchange Rule 

514.A.3; Minneapolis Grain Exchange Rule 731.00. 

49See, e.g., Coalition at 3 (‘‘To understand the 

impact of applying section 4c(a)(5)(A) to noncleared transactions executed off-facility, we have 

to understand how corporate treasurers have a 

fiduciary duty to optimize numerous factors—not 

solely the transaction price of a particular 

derivative—in achieving ‘best execution’ ’’). 

50As stated previously, the Commission 

interprets new CEA section 4c(a)(5)(A) as applying 

to any cleared swap traded on a SEF’s order book, 

regardless of whether such cleared swap is subject 

to the mandatory trade execution requirement of 

new CEA section 2(h). 

51See, e.g., GFI at 2 (‘‘Because market participants 

that execute transactions on a SEF may clear their 

transactions at different clearinghouses, they must 

have the flexibility to take factors other than price 

into account when executing transactions on a 

SEF.’’). 

counterparty and also requested 

clarification on whether market 

participants may consider additional 

non-price factors when trading on a 

SEF.41 Commenters also requested 

guidance on whether CEA section 

4c(a)(5)(A)’s prohibition applies to bids 

and offers on non-cleared swaps.42

Commenters also stated that swaps with 

different clearing destinations should 

not be deemed comparable for the 

purposes of CEA section 4c(a)(5)(A).43

Commenters further asked whether 

CEA section 4c(a)(5)(A) requires market 

participants to transact at the best price 

across a particular SEF’s different 

trading systems or platforms, such as 

the SEF’s order book and request-forquote system. Commenters also asked 

for clarification on how CEA section 

4c(a)(5)(A) applies to request-for-quote 

systems on SEFs and whether requestfor-quotes (‘‘RFQs’’) must interact with 

the SEF’s order book or centralized 

electronic screen.44 One commenter 

stated that the Proposed Order would 

effectively impose a ‘‘trade through’’ 

requirement on market participants 

executing swap transactions across a 

particular SEF’s trading systems or 

platforms.45 Commenters further 

requested that the Commission confirm 

that the final order would not create a 

best execution requirement across 

multiple SEFs.46

A commenter also agreed with the 

statement in the Proposed Order that 

CEA section 4c(a)(5)(A) should not 

apply where an individual is ‘‘buying 

the board’’ and executing a sequence of 

trades to buy all available bids or sell to 

all available offers on the order book in 

accordance with the rules of the facility 

executing the trades.47

2. Commission Guidance 

The Commission declines requests to 

interpret CEA section 4c(a)(5)(A) as 

applying only where a person intends to 

disrupt fair and equitable trading. The 

Commission interprets CEA section 

4c(a)(5)(A) as a per se offense. Congress 

did not include an intent requirement in 

CEA section 4c(a)(5)(A) as it did in both 

CEA sections 4c(a)(5)(B) and 4c(a)(5)(C). 

Therefore, the Commission does not 

interpret CEA section 4c(a)(5)(A) as 

requiring the Commission to show that 

a person acted with scienter in violating 

bids and offers (e.g., that a person acted 

with either the intent to disrupt fair and 

equitable trading or with the intent to 

violate bids and offers). Unlike certain 

exchange rules that prohibit the 

intentional violation of bids and offers, 

the statutory language of CEA section 

4c(a)(5)(A) does not contain a similar 

intent requirement.48 While the 

Commission’s determination of whether 

to bring an enforcement action depends 

on facts and circumstances, the 

Commission does not, for example, 

intend to exercise its discretion to bring 

an enforcement action against an 

individual who, purely by accident, 

makes a one-off trade in violation of 

CEA section 4c(a)(5)(A). Whether such 

an accidental violation gives rise to 

some other violation of the CEA or 

Commission regulations depends, again, 

on the facts and circumstances of the 

particular situation. 

As a general matter, the Commission 

interprets CEA section 4c(a)(5)(A) as 

operating in any trading environment 

where a person is not utilizing trading 

algorithms that automatically match the 

best price for bids and offers. With 

respect to SEFs, the Commission 

interprets CEA section 4c(a)(5)(A) as 

being applicable only when a person is 

using a SEF’s ‘‘order book,’’ and not 

when a person uses a SEF’s other 

execution methods (such as the RFQ 

system in conjunction with the order 

book). The Commission recognizes that 

market participants may consider a 

number of factors in addition to price 

when trading or executing less liquid 

swaps, which are more likely to be 

traded on a SEF’s RFQ system or a 

different execution method. However, as 

SEFs and the swaps markets evolve, the 

Commission may revisit these issues in 

the future. The Commission agrees with 

commenters that parties trading noncleared swaps may take into 

consideration factors other than price, 

such as counterparty risk, when 

determining how to best execute their 

trades.49 Therefore, the Commission 

interprets CEA section 4c(a)(5)(A) as not 

applying to non-cleared swap 

transactions, even if they are transacted 

on or through a registered entity. In 

such swap transactions, the credit 

considerations of the counterparties are 

important components of choosing 

which bid or offer to accept. 

The Commission also agrees with 

commenters that parties may take into 

account clearing considerations, such as 

the use of a particular clearing house, 

when trading cleared swaps on certain 

platforms on a SEF or on a DCM.50 The 

Commission interprets CEA section 

4c(a)(5)(A)’s prohibition as not applying 

to bids or offers on swaps that would be 

cleared at different clearing houses 

because each clearing house may have 

different cost, risk, and material clearing 

features.51 For example, the choice of a 

clearing house may affect a party’s net 

and gross outstanding exposures, which 

may result in differing capital and cost 

of financing effects. Additionally, the 

pricing of swaps may also incorporate 

other potential considerations such as 

the available credit capacity at the 

clearing member or clearing house, 

margining arrangements, or post-trade 

market risk. 

Therefore, the Commission interprets 

CEA section 4(c)(a)(5)(A) as prohibiting 

a person from buying a contract on a 

registered entity at a price that is higher 

than the lowest available price offered 

for such contract or selling a contract on 

a registered entity at a price that is 

lower than the highest available price 

bid for such contract subject to the 

situations described above. Such 

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52A person’s obligation to not violate bids or 

offers is confined to the particular SEF or DCM he 

is utilizing at a particular time and does not extend 

across multiple SEFs or DCMs or between different 

trading systems or platforms within a particular 

SEF or DCM, such as between a pit and any 

electronic trading platform within a DCM or a SEF’s 

‘‘order book’’ and RFQ system in conjunction with 

the order book. However, as the swaps and SEF 

markets evolve, the Commission may revisit these 

issues in other Commission regulations. For 

example, the Commission may consider whether a 

person’s obligation to not violate bids or offers 

when trading swaps should extend across multiple 

SEFs or DCMs or across a particular SEF’s different 

trading systems or platforms, including whether the 

CEA section 4c(a)(5)(A) prohibition should apply to 

the scenario where market participants can access 

multiple SEFs through one trading platform. 

53See, e.g., CME at 4 (‘‘We commend the 

Commission for clarifying that, consistent with the 

plain language of Section 747, accidental or 

negligent conduct does not constitute a violation of 

subsection (B).’’). 54See id. (‘‘We believe that the Commission 

should provide in its final order that a violation of 

subsection (B) requires a showing of scienter—that 

is, that the person acted knowingly, intentionally, 

or with extreme recklessness to commit the 

prohibited conduct.’’). 55See, e.g., FIA at 5 (‘‘The Commission should 

clarify that traditionally accepted types of market 

manipulation, such as ‘banging the close,’ ‘marking 

the close’ and pricing window manipulation fall 

under Section 4c(a)(5)(B). . . . Additionally, the 

Commission should clarify that manipulative intent 

is required to violate Section 4c(a)(5)(B)’’). 56See, e.g., BGA at 3 (‘‘BGA is concerned that the 

Commission has not provided sufficient clarity 

around the terms ‘orderly execution,’ ‘disruptive 

conduct,’ or ‘closing period.’ ’’); CME at 5 (‘‘We 

understand that the Commission cannot precisely 

define the parameters of ‘orderly execution’ and 

whether certain executions during the closing 

period are ‘orderly’ must necessarily be inferred 

from the totality of the facts and circumstances. 

Indeed, we noted in our comment letter in response 

to the ANPR that ‘orderly execution’ can be 

evaluated only in the context of the specific 

instrument, market conditions, and participant 

circumstances at the time in question.’’). 57See id. (‘‘It appears that the Commission is 

changing the definition of ‘closing period’ relating 

to physical products that are pricing using indices 

or benchmarks. These products do not have defined 

closing periods; therefore, it is inappropriate to 

apply a ‘closing period’ concept to them.’’). 58See, e.g., CME at 6 (‘‘It is unclear how trading 

practices or conduct outside of the ‘closing period’ 

would demonstrate intentional or reckless disregard 

for the orderly execution of transactions during the 

closing period.’’). 

59See, e.g., BGA at 3 (‘‘BGA is concerned that the 

Commission has not provided sufficient clarity 

around the terms ‘orderly execution,’ ‘disruptive 

conduct,’ or ‘closing period.’ ’’); CME at 5 (‘‘We 

understand that the Commission cannot precisely 

define the parameters of ‘orderly execution’ and 

whether certain executions during the closing 

period are ‘orderly’ must necessarily be inferred 

from the totality of the facts and circumstances. 

Indeed, we noted in our comment letter in response 

to the ANPR that ‘orderly execution’ can be 

evaluated only in the context of the specific 

instrument, market conditions, and participant 

circumstances at the time in question.’’). 

60See, e.g., MFA at 4 (‘‘The definition of the term 

‘orderly’ is not only vague, but also subjective and 

would allow for post hoc judgments as to what 

constitutes violative, disruptive conduct.’’); FIA at 

5 (‘‘Market participants should not fear that their 

trading activity may be the subject of a post hoc 

analysis which labels a trade or a series of trades 

‘‘disruptive.’ ’’). 

61See, e.g., CME at 6–7 (‘‘In light of these and 

other significant differences that exist in their 

respective market and regulatory structures, as well 

as the fundamental purposes of the markets, we 

caution the Commission against importing 

securities-based concepts to the derivatives 

markets.’’). 

62See id. (Requiring participants to assess market 

conditions and consider how their trading may 

affect orderly execution during the closing period 

is ‘‘at odds with the Commission’s assertion that 

this section ‘will not capture legitimate trading 

behavior and is not a trade for those who act in 

good faith.’ ’’). 

63See, e.g., CME at 4 (‘‘Given today’s highly 

automated environment and the millisecond speed 

with which liquidity can be sourced, consumed and 

withdrawn, it is impractical to require such analysis 

prior to the entry of each order, much less presume 

that market participants can always accurately 

assess market conditions or divine market impact, 

particularly during the closing period which is 

often the most volatile period of the day and a 

period in which certainty of execution may be a 

more material consideration than price.’’). 

conduct, regardless of intent, disrupts 

fair and equitable trading by damaging 

the price discovery function of CFTCregulated markets. By adopting a policy 

that market participants cannot execute 

trades at prices that do not accurately 

reflect the best price for such contracts, 

this interpretive statement furthers the 

CEA’s purpose of ensuring the integrity 

of the price discovery process by 

helping ensure that the prices 

disseminated to market users and the 

public reflect bona fide prices that 

accurately reflect the normal forces of 

supply and demand. 

The Commission further recognizes 

that at any particular time the best price 

in one trading environment such as a 

particular SEF may differ from the best 

price in a different trading environment 

such as a second, distinct SEF. 

Accordingly, the Commission does not 

interpret CEA section 4c(a)(5)(A) as 

creating any sort of best execution 

standard across multiple registered 

entities, including SEFs or DCMs; 

rather, the Commission interprets a 

person’s obligation to not violate bids or 

offers as applying only to the specific 

registered entity being utilized at a 

particular time.52

The Commission does not interpret 

CEA section 4c(a)(5)(A) as applying 

where an individual is executing a 

sequence of trades to buy all available 

offers or sell to all available bids on an 

order book in accordance with the rules 

of the facility on which the trades were 

executed. Similar to the treatment of 

block trades and EFRPs described 

above, the Commission expects that 

‘‘buying the board’’ transactions, absent 

other facts and circumstances, would 

not violate CEA section 4c(a)(5) or 

disrupt fair and equitable trading. 

C. Disregard for the Orderly Execution 

of Transactions During the Closing 

Period 

1. Comments to the Proposed 

Interpretive Order 

Commenters supported the 

Commission’s proposed guidance that 

accidental or negligent conduct does not 

constitute a violation of new CEA 

section 4c(a)(5)(B).53 With respect to the 

scienter required for a CEA section 

4c(a)(5)(B) violation, commenters 

requested that the Commission require, 

at a minimum, a scienter of ‘‘extreme 

recklessness.’’ 54 Commenters also 

stated that manipulative intent should 

be required to violate CEA section 

4(c)(a)(5)(B) and that these prohibitions 

should be limited to manipulative 

conduct such as ‘‘banging’’ or ‘‘marking 

the close.’’ 55

Commenters requested that the 

Commission provide additional clarity 

regarding the meaning of the term 

‘‘closing period’’ as used in CEA section 

4c(a)(5)(B).56 Commenters expressed the 

view that, unlike futures, certain swaps, 

such as physical products that are 

priced using indices, do not have 

defined closing periods.57 Some 

commenters disagreed with the 

Commission’s view that the prohibition 

on disorderly execution of transactions 

should extend to conduct occurring 

outside the closing period.58

Commenters also requested that the 

Commission further clarify the term 

‘‘orderly execution’’ as set forth in 

section CEA section 4c(a)(5)(B).59

Commenters stated that the Commission 

should not engage in post hoc 

evaluations as to what types of trading, 

conduct, or practices violate CEA 

section 4c(a)(5)(B).60 Commenters also 

claimed that having the Commission 

rely on concepts of orderliness as 

developed in securities law precedent 

was problematic because of the 

significant differences between the 

securities and CFTC-regulated 

markets.61 Commenters further stated 

that requiring market participants to 

assess market conditions before trading 

conflicts with the Commission’s 

assertion that CEA section 4c(a)(5)(B) 

will not capture legitimate trading 

behavior.62 Commenters also noted that 

in today’s highly automated trading 

environments, it is impractical for 

market participants to assess market 

conditions prior to the entry of each 

order.63

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64See, e.g., Hammond v. Smith Barney, Harris 

Upham & Company, Inc., [1990–1992 Transfer 

Binder] Comm. Fut. L. Rep. (CCH) ¶ 24,617 (CFTC 

Mar. 1, 1990) (scienter requires proof that a 

defendant committed the alleged wrongful acts 

‘‘intentionally or with reckless disregard for his 

duties under the Act’’); Drexel Burnham Lambert, 

Inc. v. CFTC, 850 F.2d 742, 748 (DC Cir. 1988) 

(holding that recklessness is sufficient to satisfy 

scienter requirement and that a reckless act is one 

where there is so little care that it is ‘‘difficult to 

believe the [actor] was not aware of what he was 

doing’’) (quoting First Commodity Corp. v. CFTC, 

676 F.2d 1, 7 (1st Cir. 1982)). 

65 7 U.S.C. 4c(a)(5)(B). 

66 Drexel Burnham Lambert Inc. at 748; see also 

Sundstrand Corp. v. Sun Chem. Corp., 553 F.2d 

1033, 1045 (7th Cir. 1977), cert. denied, 434 U.S. 

875 (1977) (holding that recklessness under SEC 

Rule 10b–5 means ‘‘an extreme departure from the 

standards of ordinary care, and which presents a 

danger of misleading buyers or sellers that is either 

known to the defendant or is so obvious that the 

actor must have been aware of it’’) (internal 

quotation marks and citation omitted); SEC v. 

Platforms Wireless Int’l Corp., 617 F.3d 1072, 1093– 

94 (9th Cir. 2010) (‘‘scienter [under SEC Rule 10b– 

5] requires either deliberate recklessness or 

conscious recklessness, and [ ] it includes a 

subjective inquiry turning on the defendant’s actual 

state of mind’’) (internal quotation marks and 

citations omitted). See also, the final rules issued 

by the Commission on July 14, 2011 (Prohibition on 

the Employment, or Attempted Employment, of 

Manipulation and Deceptive Devices and 

Prohibition on Price Manipulation), 76 FR, July 14, 

2011. 

67The Commission disagrees with commenters 

that physical products priced using indices or 

benchmarks do not have defined closing periods. 

For physical products priced using indices, price 

reporting agencies may use the transaction prices 

during a certain window of time to calculate price 

indexes. Market participants have the same ability 

to disrupt trading during these windows of time as 

they do during the closing periods as defined by the 

DCM or SEF. 

2. Commission Guidance 

The Commission interprets Congress’s 

inclusion of a scienter requirement in 

CEA section 4c(a)(5)(B) as meaning that 

accidental, or even negligent, trading, 

practices, or conduct will not be a 

sufficient basis for the Commission to 

claim a violation under CEA section 

4c(a)(5)(B). The Commission interprets 

CEA section 4c(a)(5)(B) as requiring a 

market participant to at least act 

recklessly to violate CEA section 

4c(a)(5)(B).64 The Commission declines 

to interpret CEA section 4c(a)(5)(B) to 

include either an extreme recklessness 

standard or a manipulative intent 

requirement because this modification 

would alter the scienter standard 

mandated by the statute, which 

prohibits conduct that demonstrates 

‘‘intentional or reckless disregard for the 

orderly execution of transactions during 

the closing period.’’ 65 Recklessness is a 

well-established scienter standard, 

which has consistently been defined as 

conduct that ‘‘departs so far from the 

standards of ordinary care that it is very 

difficult to believe the actor was not 

aware of what he or she was doing.’’ 66

Consistent with long-standing precedent 

under commodities and securities law, 

the Commission intends to apply this 

commonly-known definition of 

recklessness to CEA section 4c(a)(5)(B). 

A person with manipulative intent, such 

as one attempting to ‘‘bang’’ or ‘‘mark 

the close’’ may also intend to disrupt 

the orderly execution of transactions 

during the closing period, but the 

finding of a manipulative intent is not 

a prerequisite for a finding of a violation 

of CEA section 4c(a)(5)(B). 

The Commission interprets the 

prohibition in CEA section 4c(a)(5)(B) to 

apply to any trading, conduct, or 

practices occurring within the closing 

period that demonstrates an intentional 

or reckless disregard for the orderly 

execution of transactions during the 

closing period. The Commission 

interprets the closing period to be 

defined generally as the period in the 

contract or trade when the settlement 

price is determined under the rules of 

a trading facility such as a DCM or SEF. 

Closing periods may include the time 

period in which a daily settlement price 

is determined, the expiration day for a 

futures contract, and any period of time 

in which the cash-market transaction 

prices for a physical commodity are 

used in establishing a settlement price 

for a futures contract, option, or swap 

(as defined by the CEA). With respect to 

swaps, the Commission interprets a 

swap as being subject to the provisions 

of section 4c(a)(5)(B) if a DCM or SEF 

determines that a settlement or pricing 

period exists for that particular swap.67

Additionally, the Commission’s policy 

is that conduct outside the closing 

period may also disrupt the orderly 

execution of transactions during the 

closing period and may thus form the 

basis of a violation under CEA section 

4c(a)(5)(B) and any other applicable 

CEA sections. For example, a CEA 

section 4c(a)(5)(B) violation may occur 

when a market participant accumulates 

a large position in a product or contract 

in the period immediately preceding the 

closing period with the intent (or 

reckless disregard) to disrupt the orderly 

execution of transactions during that 

product’s, or a similar product’s, 

defined closing period. 

The Commission interprets CEA 

section 4c(a)(5)(B) violations as 

including not only executed orders by 

market participants that disrupt the 

orderly execution of transactions during 

the closing period, but also any bids and 

offers submitted by market participants 

that disrupt the orderly execution of 

transactions during the closing period. 

For example, bids and offers submitted 

by a person, even if they are not 

executed against by other market 

participants, may disrupt orderly 

trading in the closing period by sending 

false signals to the marketplace that 

consequently affect the trading behavior 

of market participants in the closing 

period. As such, bids and offers 

submitted by a person who intends to 

cancel the bid or offer before execution 

may have violations of both CEA section 

4c(a)(5)(B), a disruption of orderly 

trading in the closing period, and CEA 

section 4c(a)(5)(C), ‘‘spoofing.’’ 

Similar to other scienter-based 

violations of the CEA, the Commission 

intends to consider all of the relevant 

facts and circumstances when 

determining whether a person violated 

CEA section 4c(a)(5)(B). The 

Commission recognizes that an 

evaluation of ‘‘orderly execution’’ 

should be based on the totality of the 

facts and circumstances as of the time 

the person engaged in the relevant 

trading, practices, or conduct—i.e., the 

Commission intends to consider what 

the person knew or should have known, 

and the information available at the 

time he or she was engaging in the 

conduct at issue. For example, a CEA 

section 4c(a)(5)(B) violation would not 

occur simply because a person’s 

execution of orders during the closing 

period had a substantial effect on a 

contract’s settlement price; rather, such 

person’s conduct must also demonstrate 

an intentional or reckless disregard for 

the orderly execution of transactions 

during the closing period. 

While the Commission recognizes 

there are differences between securities 

markets and CFTC-regulated markets, 

fundamental concepts of how an orderly 

market should function are similar in 

both markets. In light of the differences 

between these two markets, the 

Commission will be guided, but not 

controlled, by the substantial body of 

judicial precedent applying the 

concepts of orderly markets established 

by the courts with respect to the 

securities markets. To this end, the 

Commission’s policy is that an orderly 

market may be characterized by, among 

other things, parameters such as a 

rational relationship between 

consecutive prices, a strong correlation 

between price changes and the volume 

of trades, levels of volatility that do not 

dramatically reduce liquidity, accurate 

relationships between the price of a 

derivative and the underlying such as a 

physical commodity or financial 

instrument, and reasonable spreads 

between contracts for near months and 

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68While the role of market specialists is unique 

to the securities markets as of this time, the 

economic concepts applicable to orderly markets in 

securities markets may help guide the Commission 

when analyzing orderly trading in CFTC-regulated 

markets. 

69See, e.g., ICE at 4 (‘‘The Commission should 

provide additional guidance as to what specific 

types of improper trading practices or activity 

would be broadly characterized as being spoofing 

and ‘of the character of’ spoofing.’’). 

70See, e.g., CMC at 4 (‘‘The distinguishing 

characteristic between ‘spoofing’ that should be 

covered by Section 747(C) and the legitimate 

cancellation of other unfilled or partially filled 

orders is that ‘spoofing’ involves the intent to enter 

non bona fide orders for the purpose of misleading 

market participants and exploiting that deception 

for the spoofing entity’s benefit.’’). 

71See, e.g., BGA at 4 (‘‘BGA recommends the 

Commission clarify that, if a bid or offer has the risk 

of being hit or lifted by the market, for any period 

of time, this activity be deemed legitimate conduct 

and not be deemed ‘spoofing.’ ’’). 72See, e.g., FIA at 6 (‘‘Traders engage in 

legitimate trading practices that are unintentionally 

captured by Section 747’s definition of ‘spoofing.’ 

For example, traders may enter larger than 

necessary orders to ensure their hedging or delivery 

needs are met and, once met, they may then cancel 

part of the original order.’’). 

73See, e.g., ISDA at 4 (‘‘The entire Proposed 

Guidance discussion of spoofing is in exchange 

terminology and facially applicable only in an 

exchange environment. Again, we believe this is, if 

applicable at all, applicable at this time only to 

Order-Book facilities.’’). 

74Similar to violations under CEA section 

4c(a)(5)(B), the Commission does not interpret CEA 

section 4c(a)(5)(C) as reaching accidental or 

negligent trading, practices, or conduct. 75See 76 FR at 14947. 

for remote months.68 For example, 

trading in a manner that intentionally or 

recklessly causes the price relationships 

between the price of a derivative and 

the underlying commodity to diverge, or 

cause spreads between contracts for 

near months and for remote months to 

diverge could constitute a violation of 

the statute. 

Finally, the Commission recommends 

that market participants should assess 

market conditions and consider how 

their trading practices and conduct 

affect the orderly execution of 

transactions during the closing period. 

Market participants should assess 

market conditions before placing a bid 

or offer, or executing an order, because 

this will help prevent market 

participants from engaging in trading, 

practices, or conduct that disrupts fair 

and equitable trading in CFTC-regulated 

markets. 

D. ‘‘Spoofing’’ 

1. Comments to the Proposed 

Interpretive Order 

Commenters requested additional 

Commission guidance on the definition 

of ‘‘spoofing’’ as set forth in CEA section 

4c(a)(5)(C).69 Commenters stated that 

any violations should not capture 

legitimate trading behavior. For 

example, to differentiate ‘‘spoofing’’ 

from legitimate trading behavior, 

commenters state that any person 

violating CEA section 4c(a)(5)(C) must 

also intend to mislead market 

participants and to exploit that 

deception for the spoofing entity’s 

benefit.70 Commenters further requested 

that if a bid or offer has the risk of being 

hit or lifted by the market, for any 

period of time, such trading activity 

should be exempt from being classified 

as a ‘‘spoofing’’ violation.71 Commenters 

expressed a similar view that partial 

fills should also be exempt from the 

definition of ‘‘spoofing.’’ 72 Lastly, one 

commenter stated CEA section 

4c(a)(5)(C) violations should only be 

applicable to order-book facilities.73

2. Commission Guidance 

The Commission interprets a CEA 

section 4c(a)(5)(C) violation as requiring 

a market participant to act with some 

degree of intent, or scienter, beyond 

recklessness to engage in the ‘‘spoofing’’ 

trading practices prohibited by CEA 

section 4c(a)(5)(C). Because CEA section 

4c(a)(5)(C) requires that a person intend 

to cancel a bid or offer before execution, 

the Commission does not interpret 

reckless trading, practices, or conduct as 

constituting a ‘‘spoofing’’ violation.74

Additionally, the Commission interprets 

that a spoofing violation will not occur 

when the person’s intent when 

cancelling a bid or offer before 

execution was to cancel such bid or 

offer as part of a legitimate, good-faith 

attempt to consummate a trade. Thus, 

the Commission interprets the statute to 

mean that a legitimate, good-faith 

cancellation or modification of orders 

(e.g., partially filled orders or properly 

placed stop-loss orders) would not 

violate section CEA 4c(a)(5)(C). 

However, the Commission does not 

interpret a partial fill as automatically 

exempt from being classified as 

‘‘spoofing’’ and violating CEA section 

4c(a)(5)(C). 

When distinguishing between 

legitimate trading (such as trading 

involving partial executions) and 

‘‘spoofing,’’ the Commission intends to 

evaluate the market context, the 

person’s pattern of trading activity 

(including fill characteristics), and other 

relevant facts and circumstances. For 

example, if a person’s intent when 

placing a bid or offer was to cancel the 

entire bid or offer prior to execution and 

not attempt to consummate a legitimate 

trade, regardless of whether such bid or 

offer was subsequently partially filled, 

that conduct may violate CEA section 

4c(a)(5)(C). 

The Commission interprets and 

intends to apply CEA section 4c(a)(5)(C) 

as covering bid and offer activity on all 

products traded on all registered 

entities, including DCMs and SEFs. The 

Commission further interprets CEA 

section 4c(a)(5)(C) to include all bids 

and offers in pre-open periods or during 

other exchange-controlled trading halts. 

As noted earlier, the Commission does 

not interpret CEA section 4c(a)(5)(C) as 

restricting ‘‘spoofing’’ violations to 

trading platforms and venues only 

having order book functionality. 

‘‘Spoofing’’ may possibly occur on any 

trading platform or venue where a 

market participant has the ability to 

either (a) send executable bids and 

offers to market participants or (b) 

transact against resting orders. 

The Commission provides four nonexclusive examples of possible 

situations for when market participants 

are engaged in ‘‘spoofing’’ behavior,75

including: (i) Submitting or cancelling 

bids or offers to overload the quotation 

system of a registered entity, (ii) 

submitting or cancelling bids or offers to 

delay another person’s execution of 

trades, (iii) submitting or cancelling 

multiple bids or offers to create an 

appearance of false market depth, and 

(iv) submitting or canceling bids or 

offers with intent to create artificial 

price movements upwards or 

downwards. The Commission also does 

not intend to apply the ‘‘spoofing’’ 

provision as covering market 

communications such as authorized pretrade communications. 

As with other intent-based violations, 

the Commission intends to distinguish 

between legitimate trading and 

‘‘spoofing’’ by evaluating all of the facts 

and circumstances of each particular 

case, including a person’s trading 

practices and patterns. The Commission 

does not interpret a CEA section 

4c(a)(5)(C) violation as requiring a 

pattern of activity; the Commission 

interprets CEA section 4c(a)(5)(C) such 

that even a single instance of trading 

activity can violate CEA section 

4c(a)(5)(C), provided that the activity is 

conducted with the prohibited intent. 

Issued in Washington, DC, on May 20, 

2013, by the Commission. 

Christopher J. Kirkpatrick, 

Deputy Secretary of the Commission. 

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Appendices to Antidisruptive Practices 

Authority—Commission Voting 

Summary; Statements of 

Commissioners; and List of Roundtable 

Participants and Commenters 

Appendix 1—Commission Voting 

Summary 

On this matter, Chairman Gensler and 

Commissioners Sommers, Chilton, O’Malia, 

and Wetjen voted in the affirmative. No 

Commissioners voted in the negative. 

Appendix 2—Statement of Chairman 

Gary Gensler 

I support the Interpretive Guidance and 

Policy Statement regarding disruptive 

practices on swap execution facilities and 

designated contract markets. As part of 

market reform, Congress expressly prohibited 

certain trading practices that were deemed 

disruptive of fair and equitable trading on 

CFTC-registered entities, such as swap 

execution facilities and designated contract 

markets. 

These provisions are important because it 

is a core mission of the CFTC to protect the 

markets against abusive and disruptive 

practices, particularly those that impede 

critical price discovery functions. 

The Interpretive Guidance and Policy 

Statement provides additional guidance to 

market participants regarding the scope of 

conduct and trading practices that would 

violate the law. For instance, the Commission 

interprets this provision, section 747 of the 

Dodd-Frank Wall Street Reform and 

Consumer Protection Act, to apply to any 

trading, practices or conduct on registered 

SEFs or DCMs. 

The guidance addresses the comments the 

Commission received in response to the 

proposal, including a roundtable. 

Appendix 3—Parties Submitting 

Comment Letters in Response To 

Disruptive Trading Practices Proposed 

Interpretive Order 

Banking Firms Consolidated (‘‘BF’’) 

Better Markets (‘‘BM’’) 

BG Americas & Global LNG (‘‘BGA’’) 

Chris Barnard 

Coalition for Derivatives End Users 

(‘‘Coalition’’) 

CME Group (‘‘CME’’) 

Commodity Markets Council (‘‘CMC’’) 

Futures Industry Association/Securities 

Industry and Financial Markets 

Association (‘‘FIA’’) 

GFI Group, Inc. (‘‘GFI’’) 

Hampton Technology Resources (‘‘HTR’’) 

InterContinentalExchange (‘‘ICE’’) 

International Swaps and Derivatives 

Association (‘‘ISDA’’) 

Managed Funds Association (‘‘MFA’’) 

MarketAxess 

Minneapolis Grain Exchange (‘‘MGE’’) 

Working Group of Commercial Energy Firms 

(‘‘Working Group’’) 

[FR Doc. 2013–12365 Filed 5–24–13; 8:45 am] 

BILLING CODE 6351–01–P 

CONSUMER PRODUCT SAFETY 

COMMISSION 

[Docket No. CPSC–2011–0074] 

Agency Information Collection 

Activities; Proposed Collection; 

Comment Request; CPSC Table Saw 

User Survey 

AGENCY: Consumer Product Safety 

Commission. 

ACTION: Notice. 

SUMMARY: The Consumer Product Safety 

Commission (CPSC or Commission) is 

announcing an opportunity for public 

comment on the proposed collection of 

certain information by the agency. 

Under the Paperwork Reduction Act of 

1995 (PRA), federal agencies are 

required to publish notice in the 

Federal Register concerning each 

proposed collection of information and 

to allow 60 days for public comment in 

response to the notice. This notice 

solicits comments on a survey of table 

saw users to determine the effectiveness 

of modular blade guards. 

DATES: Submit written or electronic 

comments on the collection of 

information by July 29, 2013. 

ADDRESSES: You may submit comments, 

identified by Docket No. CPSC–2011– 

0074, by any of the following methods: 

Electronic Submissions: Submit 

electronic comments to the Federal 

eRulemaking Portal at: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

The Commission does not accept 

comments submitted by electronic mail 

(email), except through 

www.regulations.gov. The Commission 

encourages you to submit electronic 

comments by using the Federal 

eRulemaking Portal, as described above. 

Written Submissions: Submit written 

submissions in the following way: Mail/ 

Hand delivery/Courier (for paper, disk, 

or CD–ROM submissions), preferably in 

five copies, to: Office of the Secretary, 

Consumer Product Safety Commission, 

Room 820, 4330 East West Highway, 

Bethesda, MD 20814; telephone (301) 

504–7923. 

Instructions: All submissions received 

must include the agency name and 

docket number for this notice. All 

comments received may be posted 

without change, including any personal 

identifiers, contact information, or other 

personal information provided, to: 

http://www.regulations.gov. Do not 

submit confidential business 

information, trade secret information, or 

other sensitive or protected information 

that you do not want to be available to 

the public. If furnished at all, such 

information should be submitted in 

writing. 

Docket: For access to the docket to 

read background documents or 

comments received, go to: http:// 

www.regulations.gov, and insert the 

docket number, CPSC–2011–0074, into 

the ‘‘Search’’ box, and follow the 

prompts. A copy of the draft survey is 

available at http://www.regulations.gov 

under Docket No. CPSC–2011–0074, 

Supporting and Related Materials. 

FOR FURTHER INFORMATION CONTACT: 

Robert H. Squibb, Consumer Product 

Safety Commission, 4330 East-West 

Highway, Bethesda, MD 20814; (301) 

504–7815, or by email to: 

rsquibb@cpsc.gov. 

SUPPLEMENTARY INFORMATION: Under the 

PRA (44 U.S.C. 3501–3520), federal 

agencies must obtain approval from the 

Office of Management and Budget 

(OMB) for each collection of 

information they conduct or sponsor. 

‘‘Collection of information’’ is defined 

in 44 U.S.C. 3502(3) and 5 CFR 

1320.3(c) and includes agency requests 

or requirements that members of the 

public submit reports, keep records, or 

provide information to a third party. 

Section 3506(c)(2)(A) of the PRA (44 

U.S.C. 3506(c)(2)(A)) requires federal 

agencies to provide a 60-day notice in 

the Federal Register concerning each 

proposed collection of information 

before submitting the collection to OMB 

for approval. Accordingly, the CPSC is 

publishing notice of the proposed 

collection of information set forth in 

this document. 

A. Table Saw User Survey 

The CPSC is considering whether a 

new performance safety standard is 

needed to address an unreasonable risk 

of injury associated with table saws. On 

October 11, 2011, the Commission 

published an advance notice of 

proposed rulemaking (ANPR) for table 

saws, under the Consumer Product 

Safety Act (CPSA), 15 U.S.C. 2051– 

2084. (76 FR 62678). The ANPR 

explained that under the current 

voluntary standard, UL 987, Stationary 

and Fixed Electric Tools, published in 

November 2007, a new modular blade 

guard design, developed by a joint 

venture of the leading table saw 

manufacturers, expanded the table saw 

guarding requirements. The new blade 

guard did not consist of a hood, but 

rather, a top-barrier guarding element 

and two side-barrier guarding elements. 

The new modular guard design was 

intended to be an improvement over 

traditional hood guard designs, by 

providing better visibility, by being 

easier to remove and install, and by 

mstockstill on DSK4VPTVN1PROD with NOTICES