[Federal Register Volume 62, Number 70 (Friday, April 11, 1997)]
[Rules and Regulations]
[Pages 17700-17702]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-9398]



[[Page 17700]]

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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 1


Contract Market Rule Review Procedures

AGENCY: Commodity Futures Trading Commission.

ACTION: Final rules.

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SUMMARY: The Commodity Futures Trading Commission (``Commission'') is 
amending Regulation 1.41a to revise certain procedures relating to the 
review of contract market rules. Related amendments revising the 
procedures and time periods applicable to the Commission's review of 
contract market rules previously have been adopted.<SUP>1</SUP> The 
instant amendments revise Regulation 1.41a, which governs the authority 
delegated to the Director of the Division of Trading and Markets and 
the Director of the Division of Economic Analysis for purposes of 
processing certain contract market rule submissions. Specifically, the 
instant amendments revise Regulation 1.41a to conform to the procedures 
and time periods previously adopted by the Commission. The instant 
amendments also include several clarifying revisions of Regulation 
1.41a.
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    \1\ See 62 FR 10427. That notice announced the adoption of 
amendments to Commission Regulations 1.41(a) and 1.41(b). These 
amendments, which revise the procedures for the review of contract 
market rules, will become effective on April 7, 1997.

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EFFECTIVE DATE: April 11, 1997.

FOR FURTHER INFORMATION CONTACT: Clarence Sanders, Attorney, Division 
of Trading and Markets, Commodity Futures Trading Commission, Three 
Lafayette Centre, 1155 21st Street NW, Washington, D.C. 20581. 
Telephone: (202) 418-5484.

SUPPLEMENTARY INFORMATION:

I. Introduction

    Section 5a(a)(12)(A) of the Commodity Exchange Act (``Act''), 7 
U.S.C. Sec. 7a(a)(12)(A), provides that all rules <SUP>2</SUP> of a 
contract market that relate to terms and conditions <SUP>3</SUP> in 
futures or options contracts traded on or subject to the rules of a 
contract market must be submitted to the Commission for its prior 
approval. Section 5a(a)(12)(A) further requires that contract markets 
submit all other rules to the Commission. Such other rules may be made 
effective ten days after Commission receipt unless, within the ten-day 
period, the Exchange requests Commission approval or the Commission 
notifies the Exchange that it intends to review the rules for approval.
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    \2\ Commission Regulation 1.41(a)(1) defines ``rule'' of a 
contract market to mean:
    * * * any constitutional provision, article of incorporation, 
bylaw, rule, regulation, resolution, interpretation, stated policy, 
or instrument corresponding thereto, in whatever form adopted, and 
any amendment or addition thereto or repeal thereof, made or issued 
by a contract market, or by the governing board thereof or any 
committee thereof.
    \3\ Commission Regulation 1.41(a)(2) defines ``terms and 
conditions'' to mean:
    * * * any definition of the trading unit or the specific 
commodity underlying a contract for future delivery of a commodity 
or commodity option contract, specification of settlement or 
delivery standards and procedures, and establishment of buyers' and 
sellers' rights and obligations under the contract. Terms and 
conditions shall be deemed to include provisions relating to the 
following:
    (i) Quality or quantity standards for a commodity and any 
applicable exemptions or discounts;
    (ii) Trading hours, trading months and the listing of contracts:
    (iii) Minimum and maximum price limits and the establishment of 
settlement prices;
    (iv) Position limits and position reporting requirements;
    (v) Delivery points and locational price differentials;
    (vi) Delivery standards and procedures, including alternatives 
to delivery and applicable penalties or sanctions for failure to 
perform;
    (vii) Settlement of the contract;
    (viii) Payment or collection of commodity option premiums or 
margins.
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    As noted above, the Commission recently revised the procedures 
under which it conducts reviews of contract market rules. These 
revisions generally streamline the procedures and shorten the review 
periods applicable to the Commission's review of contract market rules. 
The Commission is now revising its rules applicable to the delegation 
of authority to the Director of the Division of Trading and Markets and 
the Director of the Division of Economic Analysis (collectively, ``the 
Directors'') as set out in Commission Regulation 1.41a. Specifically, 
Regulation 1.41a delegates to the Directors the authority to make 
certain decisions regarding rule submissions. The primary effect of the 
instant amendments is to delegate additional authority to the Directors 
in order to apply the revised procedures and time periods for 
Commission review of contract market rules in an effective manner.

II. Amendments to Regulation 1.41a

A. Regulation 1.41a(2)(ii)--Notification That Rules Require Approval

    Several provisions of the Act other than Section 5a(a)(12)(A) 
require Commission approval of contract market rules: Section 4b(b) 
(crossing of orders); Section 4c(a) (exchange of futures for physicals, 
transfer trades and office trades); and Section 4f(b) (financial 
requirements for futures commission merchants). Paragraph (a)(2) is 
being amended to state that the Directors have delegated authority to 
determine and to notify a contract market that a rule submitted 
pursuant to Section 5a(a)(12)(A) of the Act and Regulation 1.41(c) for 
implementation without Commission approval constitutes a rule that 
requires prior Commission approval pursuant to a specific Section of 
the Act or under a Commission regulation other than Regulation 1.41(b). 
Current Regulation 1.41a delegates to the Directors the authority to 
remit such a rule but does not expressly state that the Directors may 
notify a contract market of their determination to review such rule for 
Commission approval.

B. Regulation 1.41a(3) (i) and (ii)--Notification That Rules May be 
Placed into Effect Without Approval

    Currently, paragraph (a)(3) states that the Directors may determine 
whether rules submitted under Regulation 1.41(c) do not require prior 
Commission approval under Section 5a(a)(12)(A) of the Act and 
Regulation 1.41(b) and that such rules may become effective prior to 
the expiration of the ten day period following the Commission's receipt 
of such rules. Under the amendments, paragraph (a)(3) is being divided 
into three subparagraphs in order to incorporate the revised procedures 
and time periods previously adopted by the Commission for the review of 
contract market rules.
    New paragraph (a)(3)(i), which includes the pre-existing provisions 
of paragraph (a)(3), is being amended to provide that the Directors may 
notify a contract market, as well as determine, that rules submitted 
for implementation without Commission approval do not require such 
approval under either Regulation 1.41(b) or 1.41(c). This change simply 
incorporates the condition that contract market rules that do not 
relate to terms and conditions, but that require approval under another 
provision of the Act or regulations, are to be submitted pursuant to 
Regulation 1.41(c) under the Commission's revised procedures for 
reviewing contract market rules instead of Regulation 1.41(b), as was 
formerly the case.
    New paragraph (a)(3)(ii) provides that the Directors may determine 
and notify a contract market that rules submitted for Commission 
approval under Regulation 1.41(c) do not require prior Commission 
approval under Section 5a(a)(12)(A) of the Act and Regulation 1.41(b) 
or Regulation 1.41(c) and may be made effective at the expiration of 
the applicable review period. As in the case of paragraph (a)(3)(i), 
paragraph (a)(3)(ii)

[[Page 17701]]

is being added to Regulation 1.41a to incorporate the requirement that 
rules which do not relate to terms and conditions, but which 
nonetheless require Commission approval under another provision of the 
Act or regulations, must be submitted pursuant to Commission Regulation 
1.41(c).
    More significantly, paragraph (a)(3)(ii) delegates to the Directors 
the authority to determine whether a rule submitted for Commission 
approval, but which neither the Act nor the Commission's regulations 
require to be reviewed for approval prior to implementation, should be 
implemented without Commission approval at the expiration of the 
applicable review period. Previously, absent Commission approval, such 
implementation was only available at the expiration of 180 days 
following Commission receipt of the contract market rule. Thus, the 
amendments enable the Directors to make this determination in 
conformity with the Commission's previously revised review procedures 
and time periods, prior to the expiration of the 180 day 
period.<SUP>4</SUP>
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    \4\ This amendment of Regulation 1.41a, combined with the 
Commission's revised contract market rule review procedures, 
authorize the Directors to make the determination to notify a 
contract market that a rule voluntarily submitted by a contract 
market for Commission approval could be implemented without 
Commission approval at the expiration of ten, 45, or 75 days, 
whichever was applicable. Absent such amendment, the contract market 
rule could not be implemented absent Commission approval until the 
expiration of the 180 day period following Commission receipt of the 
rule.
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C. Regulation 1.41a(3)(iii)--Notification that Rules Raise Novel or 
Complex Issues

    New paragraph (a)(3)(iii) delegates authority to the Directors to 
administer those contract market rules submitted for Commission 
approval under Regulation 1.41(c) but which raise novel or complex 
issues, or are of major economic significance. This amendment simply 
provides that the Directors may determine and notify a contract market 
that the review period for the rule submission is being extended per 
the applicable review periods set out in Regulation 1.41(c)(1)(iii).

III. Related Matters

A. Notice and Comment

    The Administrative Procedure Act, 5 U.S.C. Sec. 553(b), requires in 
most instances that a notice of proposed rulemaking be published in the 
Federal Register and that opportunity for comment be provided when an 
agency promulgates new regulations. Section 553(b) sets forth an 
exception, however, for rules of agency organization, procedure, or 
practice. The instant amendments apply expedited procedures to the 
authority delegated to the Directors of the Divisions of Trading and 
Markets and Economic Analysis for the review of certain contract market 
rules. The Commission has determined that these amendments relate to 
internal Commission procedure and therefore that notice and comment is 
not required.
    Section 553(b) also sets forth an exception to the requirement of 
notice and opportunity for public comment when the Commission for good 
cause finds such notice and public comment are unnecessary or contrary 
to the public interest. Section 553(d) provides that publication of a 
substantive rule shall be made not less than thirty days before its 
effective date unless as otherwise provided by the agency for good 
cause found. The Commission finds that notice and public comment on the 
rule changes announced herein are unnecessary and they can be made 
effective immediately because the changes do not limit any person's 
substantive rights and do not establish any new obligations under the 
Act. To the contrary, these changes simplify compliance with the Act by 
delegating authority to the Directors to process contract market rules 
according to standards which shorten the time periods applicable to the 
review of contract market rules and which have been previously adopted 
following notice and comment.

B. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA''), 5 U.S.C. Sec. 601 et 
seq., requires that agencies, in adopting rules, consider the impact of 
those rules on small businesses. The RFA defines the term ``rule'' to 
mean ``any rule for which the agency publishes a general notice of 
proposed rulemaking pursuant to [5 U.S.C.] Sec. 553(b).'' As noted 
above, however, Sec. 553(b) does not require that the Commission 
publish a notice of proposed rulemaking for the amendments to 
Regulation 1.41a, and a flexibility analysis of these amendments is 
therefore not required. See Sec. 601(2). See also Secs. 603 and 
604.<SUP>5</SUP>
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    \5\ A flexibility analysis would not be required in any case in 
this matter, since the amendments would affect contract markets, 
which the Commission previously has determined are not ``small 
entities'' for purposes of the RFA. Thus, these rule amendments 
would not have a significant economic impact on a substantial number 
of ``small entities.'' See Sec. 605(b).
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C. Paperwork Reduction Act

    The Paperwork Reduction Act of 1980 (``PRA''), 44 U.S.C. Sec. 3501 
et seq., imposes certain requirements on federal agencies (including 
the Commission) in connection with their conducting or sponsoring any 
collection of information as defined by the PRA. While the rule 
amendments adopted herein have no burden, the group of rules (3038-
0022) of which this is a part has the following burden:

Average burden hours per response.......  3,546.26                      
Number of respondents...................  10,971.00                     
Frequency of response...................  On Occasion                   
                                                                        

    Persons wishing to comment on the information that would be 
required by the proposed rulemaking should contact David Rostker, 
Office of Management and Budget (``OMB''), Room 3228, NEOB, Washington, 
D.C. 20503, (202) 395-7340. Copies of the information collection 
submission to OMB are available from Gerald P. Smith, Clearance 
Officer, Commodity Futures Trading Commission, Three Lafayette Center, 
1155 21st Street N.W., Washington D.C. 20581. Telephone: (202) 418-
5160.

List of Subjects in 17 CFR Part 1

    Commodity exchanges, Contract markets, Rule review procedures.

    In consideration of the foregoing and pursuant to the authority 
contained in the Commodity Exchange Act and, in particular, sections 
4c, 5, 5a, 6 and 8a thereof, 7 U.S.C. Secs. 6c, 7, 7a, 8 and 12a, the 
Commission hereby amends Title 17, Chapter I, Part 1 of the Code of 
Federal Regulations as follows:

PART 1--GENERAL REGULATIONS UNDER THE COMMODITY EXCHANGE ACT

    1. The authority citation for Part 1 continues to read as follows:

    Authority: 7 U.S.C. 1a, 2, 2a, 4, 4a, 6, 6a, 6b, 6c, 6d, 6e, 6f, 
6g, 6h, 6i, 6j, 6k, 6l, 6m, 6n, 6o, 6p, 7, 7a, 8, 9, 12, 12a, 12c, 
13a, 13a-1, 16, 16a, 19, 21, 23, and 24.

    2. Section 1.41a is amended by revising paragraphs (a)(2) and 
(a)(3) to read as follows:


Sec. 1.41a  Delegation of authority to the Directors of the Division of 
Trading and Markets and the Division of Economic Analysis to process 
certain contract market rules.

    (a) * * *
    (2) Pursuant to Secs. 1.41(b) or 1.41(c) to determine, and to 
notify a contract market, that:
    (i) Pursuant to Sec. 1.41(b), a rule submitted pursuant to section 
5a(a)(12)(A) of the Act and Sec. 1.41(c) relates to terms and 
conditions, as defined in Sec. 1.41(a)(2);

[[Page 17702]]

    (ii) Pursuant to Sec. 1.41(c), a rule submitted pursuant to section 
5a(a)(12)(A) of the Act and Sec. 1.41(c) for implementation without 
Commission approval constitutes a rule that requires prior Commission 
approval pursuant to a specific section of the Act or Commission 
regulations;
    (3) Pursuant to Sec. 1.41(c) to determine, and to notify a contract 
market, that:
    (i) Rules submitted for implementation without Commission approval 
under Sec. 1.41(c) do not require prior Commission approval under 
section 5a(a)(12)(A) of the Act and Sec. 1.41(b) or Sec. 1.41(c) and 
that such rules may become effective prior to the expiration of the ten 
day period following the receipt of such rules by the Commission;
    (ii) Rules submitted for Commission approval under Sec. 1.41(c) do 
not require prior Commission approval under section 5a(a)(12)(A) of the 
Act and Sec. 1.41(b) or Sec. 1.41(c) and may be made effective at the 
expiration of the applicable review period;
    (iii) Rules submitted for Commission approval under Sec. 1.41(c) 
raise novel or complex issues, or are of major economic significance, 
and that the review period has been extended pursuant to 
Sec. 1.41(c)(1)(iii); and
* * * * *
    Issued in Washington, D.C., on April 7, 1997, by the Commission.
Jean A. Webb,
Secretary of the Commission.
[FR Doc. 97-9398 Filed 4-10-97; 8:45 am]
BILLING CODE 6351-01-P