30668 Federal Register / Vol. 63, No. 108 / Friday, June 5, 1998 / Proposed Rules

1For example, Regulation 1.31(a) provides that all

required records shall be open to inspection by

such representatives and imposes on the person

required to maintain the records a duty to provide

a copy (at the person’s expense) of any required

record requested by such representatives. In

addition, the regulation states that the person shall

provide all copies or originals ‘‘promptly.’’

2The regulation requires that all paper required

records be maintained in hard-copy form for the

first two years of the mandated five-year period,

after which they may be transferred to microfilm

and microfiche, except for trading cards and written

customers orders, which must be maintained in

hard-copy form and for the full five-year period.

3The regulation permits immediate transfer of

computer or machine generated records to

microfilm/microfiche media and permits immediate

transfer of computer generated records to defined

class of optical storage media.

4For Example, persons maintaining records in

these media must maintain indexes of the records

as well as facilities that permit representatives of

the Commission and the Department of Justice to

view and obtain hard copies of the records

immediately. For records stored on the specified

optical storage media, Regulation 1.31(c)(1)(iii) also

mandates that a copy of each record be immediately

provided ‘‘on Commission compatible machinereadable media as defined in [Commission

Regulation] 15.00(1) . . . .’’

5See, e.g., 62 FR 39104 (July 22, 1997)

(interpreting Commission requirements affecting

the use of electronic media by commodity pool

operators (‘‘CPOs’’) and commodity trading advisors

(‘‘CTAs’’) and amending Part 4 of the Commission’s

Rules in light of the interpretion); 62 FR 31507

(June 10, 1997) (issuing guidance regarding a

futures commission merchant’s (‘’FCM’s’’)

electronic delivery of confirmation, purchase-andsale, and monthly statements to customers and the

related recordkeeping requirements); 62 FR 18265

(April 15, 1997) (adopting a voluntary program for

CPOs and CTAs to use electronic means to file

disclosure with the Commission); 62 FR 10441

(March 7, 1997) (providing for use of personal

identification numbers for FCMs and introducing

brokers (‘‘IBs’’) that use electronic means to file

attested financial reports with the Commission); 62

FR 7675 (February 20, 1997) (permitting the use of

electronic records of customer orders generated by

an electronic order-routing system).

6 62 FR 7677, n. 26.

7 62 FR 6469. The SEC’s rulemaking involved

reporting requirements for brokers or dealers under

the Securities Exchange Act of 1934.

8 62 FR 39104.

9The Commission adopted a similar approach in

its advisory permitting FCMs to deliver

confirmations, purchase and sale statements, and

monthly statements electronically. 62 FR 31507

(June 10, 1997), and its advisory concerning

compliance with the ‘‘written’’ record requirements

of Commission Regulations 1.35. 62 FR 7675

(February 20, 1997).

10 62 FR 39112. The Commission’s concern about

the regulatory cost imposed on dual registrants is

consistent with its traditional focus on minimizing

unnecessary regulatory costs. For example, the

Commission has adopted several rules that permit

dual-registrant FCMs to fulfill Commission

regulatory requirements in the same manner they

fulfill SEC regulatory requirements. See, e.g.,

Commission Rules 1.10(h), 1.12(b)(4), 1.14(b)(1),

1.15(d)(1), 1.16(c)(5), 1.17(a)(1)(ii)(C), 1.18(a),

1.52(a).

COMMODITY FUTURES TRADING

COMMISSION

17 CFR Part 1

Recordkeeping

AGENCY: Commodity Futures Trading

Commission.

ACTION: Proposed rules.

SUMMARY: The Commodity Futures

Trading Commission (‘‘CFTC’’ or

‘‘Commission’’) is proposing to amend

its Regulation 1.31 to maximize the costreduction and time-savings arising from

technological developments in the area

of electronic storage media while

maintaining necessary safeguards to

ensure the reliability of the

recordkeeping process. Specifically, the

Commission proposes to expand the

category of required records for which

an affected person may employ

electronic storage media to meet the

recordkeeping obligations imposed by

the Commodity Exchange Act (‘‘Act’’ or

‘‘CEA’’) and Commission regulations. In

addition, the Commission proposes to

eliminate the current requirement that

paper records eligible for transfer to

micrographic storage media be

maintained in hard copy form for two

years. The Commission is also seeking

comment on several recordkeepingrelated issues.

DATES: Comments must be received on

or before August 4, 1998.

ADDRESSES: Comments should be

mailed to Jean A. Webb, Secretary,

Commodity Futures Trading

Commission, Three Lafayette Centre,

1155 21st Street, NW, Washington, DC

20581; transmitted by facsimile to (202)

418–5521; or transmitted electronically

to (secretary@cftc.gov). Reference

should be made to ‘‘Recordkeeping’’.

FOR FURTHER INFORMATION CONTACT:

Edson G. Case, Counsel, or Robert B.

Wasserman, Special Counsel, Division

of Trading and Markets, Commodity

Futures Trading Commission, Three

Lafayette Centre, 1155 21st Street, NW,

Washington, DC 20581. Telephone (202)

418–5430.

SUPPLEMENTARY INFORMATION:

I. Background

Commission Regulation 1.31 sets forth

certain recordkeeping requirements

imposed by the CEA or Commission

regulations. For example, it mandates

that record required to be kept by the

Act or Commission regulations

(‘‘required records’’) be maintained for a

period of five years and be kept in a

‘‘readily accessible’’ manner for the first

two years of this period. Regulation 1.31

also defines the rights of representatives

of the Commission and Department of

Justice to inspect and obtain copies of

required records.1

Regulation 1.31 takes into account

some technological advances in the

development of recordkeeping systems.

For example, it defines the

circumstances under which a

reproduction of a paper record on

microfilm or microfiche may be

substituted for the original paper

record,2 as well as the circumstances

under which a computer, accounting

machine or business machine generated

record nay be transferred to and

retained on optical disk media or

microfilm/microfiche media.3 It also

imposes special inspection-related

requirements for persons who choose to

maintain their records on these media.4

The Commission has recently

undertaken a series of steps to facilitate

the use of electronic media technology

where adequate measures exist to

safeguard regulatory interests.5 Various

issues implicating the Commission’s

recordkeeping requirements under

Regulation 1.31 have arisen in the

context of these Commission initiatives.

Indeed, in a February 20, 1997 Federal

Register release, the Commission

specifically acknowledged that ‘‘it may

be necessary to amend Regulation 1.31

to account for further technological

developments.’’ 6

In recognition of both the need for

interim relief and the number of

Commission registrants that are also

subject to the recordkeeping

requirements of the Securities and

Exchange Commission (‘‘SEC’’), the

Commission has had occasion to rely on

the recordkeeping rules the SEC

adopted in February 1997.7 For

example, in August 1997, the

Commission adopted revisions to Part 4

addressing the use of electronic media

by commodity pool operators (‘‘CPOs’’)

and commodity trading advisors

(‘‘CTAs’’) for delivery of disclosure

documents and other materials.8 Several

of the comments during this rulemaking

raised questions about the practicality of

the Commission’s current recordkeeping

requirements in the context of electronic

media. In response to these comments,

the Commission permitted CPOs and

CTAs to use the guidelines set forth in

the SEC’s rulemaking in lieu of the

requirements of Regulation 1.31.9 The

Commission took this step ‘‘[t]o

facilitate CPOs’ and CTAs’ use of

electronic media when possible and to

avoid imposing duplicative or

inconsistent requirements on registrants

who may also be registered with the

SEC. . . .’’10

Consistent with these goals,

experience with registrants’ maintaining

records in accordance with the SEC’s

rules, and a commitment to maximizing

the cost-reduction and time-savings

arising from technological

developments in the area of electronic
Federal Register / Vol. 63, No. 108 / Friday, June 5, 1998 / Proposed Rules 30669

11The proposal does not specify how ‘‘separate’’

the location of the original records must be from the

location of the duplicate records. The Commission

anticipates that persons required to maintain

records will use their business judgment in

selecting a location for the duplicate records that is

sufficiently distant to make it unlikely that both sets

of documents could be destroyed by a single

catastrophic event (such as a fire or flood) but

sufficiently close to ensure that duplicate records

may be accessed and retrieved promptly should the

original documents be destroyed.

12 During the week of October 28, 1996, a fire

destroyed a Chicago warehouse operated by

Brambles Information Services. As a result, records

that Commission registrants were required to

maintain under Regulation 1.31 were damaged and

destroyed, and the Commission developed a special

procedure for the affected registrants to obtain relief

from their obligations under that regulation. See

Commission Advisory 96–62, [Current Transfer

Binder] Comm. Fut. L. Rep. (CCH) ¶ 26,907

(December 18, 1996).

13See 17 C.F.R. 3.30(b), 3.33(b)(4).

14To ‘‘serialize’’ a unit of storage media (such as

a disk or a trading ticket) is to assign it a unique,

consecutive number so that (1) an additional, forged

unit cannot be surreptitiously inserted and (2) a

‘‘true’’ unit cannot be surreptitiously removed.

15The Commission is not proposing an approval

process for persons who wish to convert from their

current storage format to a system that maintains

records on electronic storage media. Prior to any

conversion to an electronic storage system,

however, an affected person must submit a

representation to the Commission that the selected

electronic storage system meets the requirements

set forth in paragraph (b) of Regulation 1.31.

16The copies must use a format and coding

structure (e.g., ASCII) specified in the request.

ASCII is the American Standard Code For

Information Interchange, a scheme for arranging bits

(one or zero) in groupings of eight-bit ‘‘bytes,’’ each

of which represents a character.

17The Commission is not specifying the contents

of this audit system, but data regarding the

inputting of records and changes to existing records

will be a part of the system. Data must be captured

systematically on a computer or in hard copy form.

The Commission envisions that the identities of

individuals actually inputting records and making

particular changes, and the identity of both new

documents created and documents changed, are the

kind of information that must be collected either

automatically or systematically.

storage media while maintaining

necessary safeguards to assure the

reliability of the recordkeeping process,

the Commission is proposing

amendments to Regulation 1.31.

II. Discussion

The proposed rules would make

several changes to the current

requirements of Regulation 1.31. The

proposed rules would shift the

Commission’s approach to

recordkeeping technology from the

current rule’s focused specification of a

particular class of optical disk or

micrographic media to a more generic,

performance-based approach to the

definition of permissible technology. As

a result, persons subject to the

Commission’s recordkeeping

requirements would have more freedom

to take advantage of technological

advances and to tailor their

recordkeeping systems to individual

business needs. The proposed rules

would also expand the class of required

records that may be maintained on

micrographic or electronic storage

media for the full five-year period. The

Commission anticipates that this change

will permit the type of simplification

and streamlining of recordkeeping

systems likely to result in both a

reduction in costs and improvements in

system reliability. The Commission also

anticipates that the proposed rules will

foster improvements in the security and

availability of required records. For

example, the proposed rules would

require that there be a duplicate copy of

all records maintained on micrographic

or electronic storage media and that the

duplicate be stored at a location

separate from the original.11 As a result,

incidents of loss of access to required

records due to fire, flood, or other

catastrophic circumstances should be

reduced to a minimum.12 The proposed

regulation would also create a

procedure that should allow the

Commission to obtain access to required

records maintained on electronic storage

media even if the owner of the records

has ceased doing business and, despite

Commission regulations,13 cannot be

located.

A. Definitions of Micrographic and

Electronic Storage Median

The proposed rules would include

new definitions of both micrographic

media and electronic storage media. The

former definition would include

microfilm and microfiche, which are

permitted under the current regulation,

but would open the definition to

additional developments in this area by

including ‘‘any similar medium.’’ The

latter definition would extend to any

digital storage system that meets four

general criteria: (1) it preserves records

exclusively in a non-rewritable, nonerasable format; (2) it verifies

automatically the quality and accuracy

of the recording process; (3) it

serializes 14 the units of storage media

and creates a time-date record whenever

information is placed on the storage

media; and (4) it permits the immediate

downloading of indexes and records

maintained on the storage media to any

of the media permitted by the regulation

(paper, micrographic media or

electronic media). These generic

requirements (which establish

performance criteria similar to those in

the present rule) are designed to permit

the use of the broadest range of available

technology while maintaining

safeguards necessary to assure both the

reliability of the stored information and

immediate access to the stored

information by representatives of the

Commission and the Department of

Justice.15

B. Conditions on the Use of

Micrographic and Electronic Storage

Media

The proposed conditions on the use of

micrographic and electronic storage

media are intended to maintain the ease

of access necessary to the Commission’s

regulatory interests and to ensure that

the Commission’s access will not be

compromised by catastrophic events.

Affected persons who wish to use these

types of storage media must index all

stored information and keep available

facilities allowing for immediate

production of both easily readable

images of the stored records and easily

readable hard-copy images. Affected

persons must also waive any privilege,

claim of confidentiality or other

objection to disclosure of nonCommission-required information

stored on the same individual medium

(e.g., the same disk or sheet of

microfiche) with Commission-required

records. In addition, such persons must

store a duplicate of each record, in any

of the media acceptable under the

regulation, as well as a duplicate of each

index, at a location separate from the

original.

C. Additional Conditions on the Use of

Electronic Storage Media

The nature and capabilities of

electronic storage media foster an

efficient approach to record production

that can benefit both the Commission

and persons subject to Regulation 1.31’s

record-production requirements. The

Commission is proposing to retain the

current requirement that, upon request

by an appropriate representative,

persons maintaining required records on

electronic storage media immediately

provide copies of such records on

Commission compatible machinereadable media (as defined by

Commission Regulation 15.00(1)).16

The nature and capabilities of

electronic storage media raise special

concerns about the Commission’s ability

to detect both inadvertent errors during

the transfer and storage process and

intentional alteration of the stored

record. To address these concerns, the

Commission is proposing that persons

who maintain documents on electronic

storage media develop and maintain

written operational procedures and

controls (an ‘‘audit system’’) 17 designed

to provide accountability over both the

initial storage of data on the electronic

storage media and the entry of any
30670 Federal Register / Vol. 63, No. 108 / Friday, June 5, 1998 / Proposed Rules

18Because an eligible electronic storage medium

creates records that are non-rewritable and nonerasable, both the original input transaction and the

correcting transaction will be retained.

19The proposal does not specify a list of

information that the Commission will invariably

consider ‘‘necessary.’’ However, the Commission

envisions that the necessary information will

include the physical and logical format of the

electronic storage media, the file format of all

different information types maintained on the

electronic storage media, and any source code,

related documentation, and other information

necessary to access the records and indexes

maintained on the electronic storage media. The

term ‘‘physical format’’ refers to the physical

characteristics of the media and the equipment from

which the information was transferred to the media

(e.g., a 3.5’’ high-density diskette created on an

IBM-compatible personal computer). The term

‘‘logical format’’ refers to the type and version of

the data management software, such as a database

management system (e.g., Oracle version 8) or file

storage system (e.g., DOS file allocation table,

Windows-NT file store (NTFS)). The term ‘‘file

format of all information types’’ refers to record

from format information, descriptions of data fields,

and the relationships between fields and/or records.

The term ‘‘source code’’ refers to a computer

program in a format that can be understood by

humans. Source code is read by a specialized

program, known as a compiler, and converted into

‘‘object code,’’ which is the format in which the

program is understood by a computer. Other

information which may be necessary to access the

records and indexes stored on electronic storage

media might include password information

required to access either the equipment or the

information, or the type and version of the

operating system used on the equipment which

created the media (e.g., Solaris version 2.6).

20Escrow arrangements are a common feature of

software licensing agreements. For example, in a

‘‘source code escrow,’’ the licensor deposits with an

independent third party escrow company a copy of

the software’s sources code and system

documentation and covenants to update the code

and documentation as necessary. The escrow

agreement describes in detail the situations which

will trigger release by the escrow company to the

licensee of the materials deposited in escrow. See

D. Bender, ‘‘Software Development, Licensing, and

Protection: Strategies for Evolving Technology,’’ 9

No. 1 J. Proprietary Rts. 9 (Jan. 1997).

21The level of difficulty would vary with the

nature of the electronic storage system used and the

availability of the information such as the physical

and logical file format of the electronic storage

media, the file format of all different information

types maintained on the electronic storage media,

and the source code and related documentation.

While the proposed rule would requires that the

listed information be kept available to the

Commission, a recordkeeper which has ceased

doing business and (in violation of Commission

regulations) disappeared may also fail to meet this

requirement.

22Because the conversion to an electronic storage

system is voluntary, and the requirement at issue

would only apply to persons which maintain some

or all of their records solely on electronic storage

media, the Commission expects that an affected

person would only convert to a recordkeeping

system based solely on electronic storage media

when the cost of obtaining the services of a

qualified third party is less than the cost of

maintaining a duplicate hard copy of all required

records. Given these circumstances, the

Commission invites comment on both the cost of

obtaining the services of a qualified third party and

the cost of maintaining a duplicate hard copy of

required records

23 58 FR 27465, 27466 (May 10, 1993).

24 Id.

25See generally 62 FR 7675.

26 62 FR 6471.

27 Id.

subsequent change to such data.18 Both

the written procedures and the results of

the audit system must be available to

representatives of the Commission and

the Department of Justice at all times for

immediate examination and must be

maintained for the time period

applicable to the records stored on the

electronic storage media.

The range of available electronic

storage media raises concerns about the

Commission’s ability to access stored

information when a person who

maintains documents on electronic

storage media fails to comply as

required by Regulation 1.31. Paper

records and records maintained on

micrographic storage can usually be

accessed and understood without

specific cooperation from the originator.

In contrast, electronically stored data

may be difficult to access or understand

without information concerning the

format in which the data has been

stored. To address this concern, the

Commission is proposing that persons

who maintain required records on

electronic storage media take steps to

ensure that the Commission has a

continuous source of the information

necessary to access the records and

indexes stored on that media.19 Such

persons must either (1) maintain, keep

current, and make available such

information to representatives of the

Commission and the Department of

Justice or (2) place in escrow and keep

current a copy of the necessary

information.20

The issue of ready access takes on

particular importance when electronic

storage media are the sole media used

to maintain required records. For

example, if a recordkeeper ceases doing

business and cannot be located, gaining

access to records maintained solely on

electronic storage media would be

costly and time-consuming, if not

particularly impossible.21 To ensure

access to records in the circumstances,

the SEC’s current rules requires that

records be available through an

alternative source whenever a

recordkeeper maintains documents

solely on electronic storage media.

Specifically, those rules require that

brokers and dealers using electronic

storage media as their sole media to

maintain require records enter into an

arrangement with a third-party that has

access to such persons’ electronic

storage media and the ability to

download information from such media

to any medium acceptable to the SEC.

The third party must undertake to take

reasonable steps to provide the SEC

with access to the information

contained on the recordkeeper’s

electronic storage media including, as

appropriate, arrangements for the

downloading of required records in a

format designated by the SEC.

The Commission is proposing a

similar requirement for persons required

to maintain records under the Act or

Commission regulations. The

Commission invites comments

regarding the likely cost of this

requirement.22 The Commission also

invites comment on any practical

alternative that will ensure access to the

records of uncooperative recordkeepers

without imposing undue costs on

recordkeepers that cooperate in the

manner contemplated by Regulation

1.31.

D. Retention of Trading Cards and

Written Customer Orders

The Commission intends to maintain

the current requirement that trading

cards and written customer orders be

retained in hard-copy form for the full

five-year period. When the Commission

considered issues related to the unique

status of these records in 1993, there

was a consensus that transferring these

records to alternative media for storage

was not common in the industry.23

Moreover, the three futures exchanges

that commented at that time agreed that

electronic storage media should have

limited application to trading cards and

written customer orders.24

There have been significant changes

in the industry since 1993, including an

increase in order flow through

electronic order routing systems.25

Similar changes in the securities

industry led to the SEC’s 1997 decision

to permit almost all handwritten

records, including customer orders, to

be maintained on either micrographic or

electronic storage media.26 The SEC

acknowledged the need for caution in

this area, however, and rested its

decision largely on its conclusion that

‘‘many of the larger broker-dealers no

longer create traditional order tickets

(with or without handwritten notations)

because such broker-dealers enter most

orders directly through electronic

systems which automatically retain an

electronic record of the trade entry.’’ 27

At the present time, electronic order

routing in the futures industry is not as

prevalent as in the securities industry.

Moreover, the Commission has only

limited experience with the transfer of

written records to electronic storage

media. Given these circumstances and

the importance of trading cards and

written order tickets to an effective
Federal Register / Vol. 63, No. 108 / Friday, June 5, 1998 / Proposed Rules 30671

28 In the alternative, the regulation provides that

the affected person may promptly provide the

original book or record for reproduction.

29See generally 41 FR 3192 (Jan. 21, 1976).

30 46 FR 21 (Jan. 2, 1981).

31 43 FR 50699 (Oct. 31, 1978).

32 46 FR 21 n. 6.

33 46 FR 21 (footnote omitted).

34 46 FR 21 n. 6.

audit trail for trades, the Commission

believes it would be premature to

permit these records to be stored on

either micrographic or electronic storage

media.

The Commission proposes to clarify

the description of the class of records

that must be retained in hard copy form

for the full five-year period. Currently,

Regulation 1.31 refers to ‘‘written

customer orders’’ required to be kept

pursuant to Regulation 1.35(a–1)(1), (a–

1)(2) and (d) (emphasis supplied).

Written order tickets for trades initiated

by persons who may not be regarded as

customers under these provisions can

plan an important role in an effective

audit system. Regulation 1.35(a)

currently requires future commission

merchants, introducing brokers, and

members of contract markets to retain

‘‘all orders (filled, unfilled or canceled)

* * *’’ Given these circumstances, the

Commission proposes that the class of

records that must be retained in hard

copy form for the full five-year period

be clarified by referring to ‘‘written

orders’’ rather than ‘‘written customer

orders.’’

Regulation 1.31 also refers to ‘‘trading

cards’’ in its description of the class of

records that must be retained in hard

copy form for the full five-year period.

The Commission proposes to clarify this

reference by also including documents

on which trade information is originally

recorded in writing. These documents

fall within the class of ‘‘original source

documents’’ that Commission

Regulation 1.35(a) requires to be

retained and produced. The purpose of

this clarification is to ensure that the

Commission has access to written hard

copy documents necessary to assure an

effective audit trail.

E. Related Issues for Comment

The Commission invites comment on

the issues raised by its proposed

amendments to Regulation 1.31. The

Commission also seeks comments on

several related issues. The first involves

the scope of the duty to permit

inspection imposed by Regulation 1.31.

As noted above, subsection (a)(1)

provides that all required records shall

be ‘‘readily accessible’’ during the first

two years of the five-year maintenance

period. Subsection (a)(2) mandates that

an affected person promptly provide (at

the affected person’s expense) a copy of

any required record requested by a

representative of the Commission or the

Department of Justice.28 Nothing in

these subsections, however, specifies

how ‘‘readily accessible’’ a record must

be to ensure prompt production in

response to a request by a representative

of the Commission or the Department of

Justice.

Subsections (b), (c), and (d) of

Regulation 1.31 govern the use of

eligible ‘‘reproductions’’ as substitutes

for hard copy records. As discussed

above, the current regulations provide

that, under appropriate circumstances,

reproductions on microfilm, microfiche

and optical disk may be substituted for

hard copy records. As one of the

conditions for permitting such a

substitution, subsection (c) requires that

affected persons, among other things,

have on their premises ‘‘facilities for

immediately producing complete,

accurate and easily readable’’ hard copy

images of the required records. Again,

nothing in this subsection specifies how

‘‘readily accessible’’ a record must be to

ensure immediate production in

response to a request by a representative

of the Commission or the Department of

Justice.

The regulatory history of Regulation

1.31 does provide limited guidance

regarding the difference between the

standard governing production under

subsection (a)—promptly—and the

standard governing production under

subsections (b), (c), and (d)—

immediately. The requirement that

copies of eligible reproductions be

provided ‘‘immediately’’ was inherited

from regulations promulgated by the

Commission’s regulatory predecessors,

the Department of Agriculture and the

Commodity Exchange Commission.29

Subsection (a)’s requirement that an

original hard copy record (or a copy of

the record) be provided ‘‘promptly’’

upon request was adopted by the

Commission in January 1981.30 The

Commission had initially proposed to

permit a representative of the

Commission or Department of Justice to

remove an original hard copy record for

reproduction unless the person required

to maintain the record provided a copy

‘‘immediately.’’ 31 In amending the

proposal to substitute the standard

‘‘promptly,’’ the Commission noted that,

in some circumstances, hard copy

records might not be ‘‘readily

accessible’’ for the final three years of

the five-year storage period. The

Commission acknowledged that this

factor should be taken into account in

formulating an appropriate standard and

explained that, in such circumstances,

production would be deemed prompt if

the affected person ‘‘retrieve[d] the

documents requested as expeditiously

as is reasonable in light of the

circumstances.’’ 32 The Commission also

noted that the extent and nature of a

document request could be appropriate

factors in assessing the promptness of a

production, explaining that:

The recordkeeper is obligated by this

requirement to furnish a copy of the original

of a book or record as expeditiously as

reasonably can be expected. This

modification is not intended to permit any

person to avoid the responsibility to provide

any member of the Commission staff with

prompt, complete access to any books and

records required to be maintained. Rather, it

is a recognition that in practice a requirement

to furnish copies immediately in all

instances, depending upon the extent or

nature of a staff request, could impose an

unwarranted burden upon the

recordkeeper.33

Finally, the Commission specifically

stated that the adoption of the

‘‘promptly’’ standard in subsection (a)

did not affect a ‘‘recordkeeper’s

obligation under [subsection (c)]

immediately to provide a ‘facsimile

enlargement’ of any records kept on

microfilm as permitted by Rule 1.31.’’ 34

In a letter addressing technology

issues facing the futures industry, the

National Futures Association (‘‘NFA’’)

has recommended that the Commission

eliminate the timing standards from

subsections (b), (c), and (d) of

Regulation 1.31 and substitute a general

standard providing that an affected

person must be able to retrieve required

records in a usable form by the next

business day. Under this definition of

‘‘readily accessible,’’ production of both

hard copy documents and eligible

reproductions would be deemed prompt

if copies were provided on the business

day following the affected person’s

receipt of a request. In addition, NFA

requests that the facility and equipmentrelated conditions subsections (c) and

(d) impose on the substitution of eligible

reproductions for hard copy records be

limited to the two years when the

original records must be readily

accessible.

NFA proposes a uniform standard

which would eliminate the distinction

in the existing regulation between

records maintained in hard copy and

those maintained in electronic or

micrographic media. The regulatory

history discussed above shows that, in

establishing production requirements

under regulation 1.31, the Commission

always has distinguished between

records maintained in hard copy form

and records maintained in electronic or
30672 Federal Register / Vol. 63, No. 108 / Friday, June 5, 1998 / Proposed Rules

35The Commission addressed the security/

integrity issue when it amended Rule 1.31 in 1993.

The Commission explained that: The Commission’s

concern in this area relates to the trustworthiness

of documents that may be relied upon by the

Commission in conducting investigations and

entered into evidence in administrative and judicial

proceedings. In this respect, microfilm records are

considered trustworthy, since the image cannot be

readily altered and firms use documented

procedures that are performed in the ordinary

course of business. The Commission believes under

specified conditions, optical disk storage can be as

trustworthy as microfilm and paper records. 58 FR

27460.

36Regulation 166.3 requires each Commission

registrant other than associated persons with no

supervisory duties to diligently supervise the

‘‘handling by its partners, officers, employees and

agents (or persons occupying a similar status or

performing a similar function ) of * * * all * * *

activities of its partners, officers, employees and

agents (or persons occupying a similar status or

performing a similar function) relating to its

business as a Commission registrant.’’

37Commission Regulation 1.35 requires that

written customer orders be time-stamped with the

date and time ‘‘to the nearest minute.’’ In this

regard, the Division’s no-action letters for two

specific electronic order-routing systems noted that

the systems had the capacity to capture execution

times to the nearest second.

38 62 FR 7677.

39 62 FR 7678.

micrographic format by requiring

‘‘prompt’’ production of hard copies and

‘‘immediate’’ production of copies of

electronic and micrographic records.

This distinction recognizes that the

reduced space and storage requirements

for electronic and micrographic records,

as compared with hard copy records,

enable recordkeepers to keep such

required records on their premises,

rather than in a separate storage facility,

and accordingly, to make immediate

production of such records upon request

of a representative of the Commission or

the Department of Justice.

Indeed, electronic recordkeeping

technology continues to improve,

enhancing the ability of registrants to

meet their recordkeeping obligations,

while further reducing their costs. Thus,

it may remain appropriate to impose

different production standards for hard

copy records and electronic or

micrographic records. Similarly, it may

remain appropriate to require

immediate production of electronic

records, rather than next day

production, acknowledging the

technological improvements that make

compliance with that standard

reasonable.

Moreover, the Commission is unaware

of any practical problems arising out of

the production standards currently set

forth in Regulation 1.31. Nevertheless,

the Commission invites comment on

NFA’s recommendation, with particular

attention to the existence of such

problems, the benefits that might be

incident to a uniform standard and how

such a uniform standard could be

implemented without compromising the

Commission’s regulatory interest in

expeditious production of required

records.

NFA’s letter also raises questions

about current Regulation 1.31’s selective

treatment of security/integrity issues

raised by records maintained on

electronic storage media. NFA correctly

notes that current Regulation 1.31 does

not include any requirements for the

security/integrity of paper records, but

has fairly detailed requirements for

records stored on optical disks.35 It

recommends that the Commission move

to a unified approach that mandates that

all affected persons have and enforce

reasonable procedures to keep their

records from being altered or destroyed.

The Commission agrees that all

affected persons must have and enforce

procedures to keep their records from

being altered or destroyed. Even apart

from regulatory duties, maintenance of

such a system serves important business

interests of Commission registrants. As

a regulatory duty, it is implicit in

registrants’ duty to supervise pursuant

to Commission Regulation 166.3.36 The

Commission solicits comment on

whether Regulation 1.31 could be

improved by specifying the nature of

this duty in the context of records

maintained in hard copy form or on

micrographic media.

The Commission believes that it is

important that Regulation 1.31 take into

account the special security/integrity

issues raised by electronic storage

media. Given the variety of electronic

storage systems available and the pace

of technological change in such systems,

the Commission believes that it is

prudent to require that persons who

utilize such systems meet specific

security/integrity standards, at least

until the Commission gains more

experience with such systems. The

Commission solicits comment on

whether the security/integrity standards

in the proposed amendments to

Regulation 1.31 can be made more

practical or cost-effective while serving

the Commission’s regulatory interest in

the maintenance of secure and accurate

records.

Finally, NFA’s letter raises an issue

arising out of the Commission’s

February 1997 advisory on alternatives

for complying with the written record

requirements of Commission Regulation

1.35. In that advisory’s discussion of

electronic order-routing systems, the

Commission referred to several ‘‘noaction’’ letters issued by the

Commission’s Division of Trading and

Markets (‘‘Division’’). Those letters, in

turn, discussed the capacity of

particular electronic order-routing

systems to capture the time a particular

order was executed.37 When the

Commission described the general

criteria for systems covered by the

advisory in the latter portion of the

document, it made the following

statement:

All order-related times required under

Commission Regulation 1.35, as well as the

times for all modifications, are to be captured

to the highest level of precision achievable by

the operating system. In this regard, the

Commission’s experience is that these

systems have the capability, at a minimum,

to capture times to the second. Therefore, the

Commission is requiring that such times

must be accurate at least to the second.38

In its conclusion, the Commission’s

advisory again described the time an

eligible system should capture as ‘‘at

least to the second.’’ 39

In its letter, NFA notes that this

guidance does not sufficiently specify

the appropriate increment of time a

registrant’s system must capture. It

recommends that the Commission

determine the appropriate increment of

time all electronic time-recording

systems should meet and apply this

increment without regard to the

particular system’s capacity. In this

regard, NFA contends that the

regulatory benefit to mandating more

precise time-stamping diminishes as the

time increment approaches a fraction of

a second.

The Commission intends that

electronic time-recording systems

covered by the advisory meet a onesecond performance standard. However,

for business-related reasons, affected

persons may choose to operate systems

that capture times at a more-refined

level. If an affected person does operate

its system in a manner that captures

time increments of less than a second,

it must make that information available

at the request of a representative of the

Commission or the Department of

Justice. Put simply, an affected person

may not fulfill its recordkeeping duties

by providing the Commission with

timing data less refined than the data its

system has actually captured.

While the Commission believes this

clarification addresses the issue raised

by NFA, comment is invited on the role

system capacity should play in

assessing an affected person’s

recordkeeping responsibilities under the

Act and Commission regulations.

III. Related Matters

A. Regulatory Flexibility Act

The Regulatory Flexibility Act

(‘‘RFA’’), 5 U.S.C. § 601, et seq., 611,
Federal Register / Vol. 63, No. 108 / Friday, June 5, 1998 / Proposed Rules 30673

40The Commission subsequently clarified some

of the definitions. See 48 FR 35276 (Aug. 3, 1983);

55 FR 13550 (Apr. 11, 1990); 58 FR 40347 (Jul. 28,

1993). 41Pub. L. 104–13 (May 13, 1995).

requires that, in adopting rules and

regulations, all federal agencies consider

their impact on small entities. In

accordance with Section 601(3) of the

RFA, the Commission published a

‘‘Policy Statement of Definitions of

Small Entities for Purposes of the

Regulatory Flexibility Act,’’ 47 FR

18618 (Apr. 30, 1982). In that

statement,40 the Commission indicated

that some classes of persons were

excluded from the definition of small

entities. These include: futures

commission merchants registered or

required to be registered; floor brokers

employed by registered futures

commission merchants; commodity

pool operators registered or required to

be registered and large traders in the

futures market. The Commission

considers other entities to be small

under particular facts and

circumstances. These may include:

futures commission merchants exempt

from registration; commodity pool

operators exempt from registration;

introducing brokers; floor brokers not

employed by futures commission

merchants; floor traders and commodity

trading advisors. Because the rules

discussed herein will affect the full

spectrum of Commission registrants, it

is likely that small entities within the

meaning of the RFA will be affected.

The proposed regulation amendments

would generally expand the category of

record storage systems permissible

under the Commission’s rules. The

Commission anticipates that, if the

proposed rules are adopted, small

entities will have more freedom to tailor

their record storage systems to the

overall needs of their businesses. For

example, the proposed rules would have

no impact on a small entity that chooses

to maintain a paper-based record storage

system. For a small entity that chooses

to use micrographic storage media for its

record storage system, the proposed

rules would permit the small entity to

take advantage of technological

advances. The only additional cost

would be that of creating a duplicate

record and storing it at a location

separate from the original record. The

bulk of this cost could be avoided by

moving the hard copies of the records

transferred to micrographic media to a

separate location.

For a small entity that chooses to use

electronic storage media, the proposed

regulation would eliminate the current

rule’s requirement that the small entity

use a limited class of optical storage

technology. This change would permit

small entities to select electronic storage

systems that may be less costly and

simpler to manage. The proposed rules

would impose limited additional costs

on small entities that use electronic

storage technology. The new costs

would include requirements that the

affected person: (1) provide a

representation that the system meets

pertinent regulatory requirements prior

to converting to an electronic storage

system; (2) create a duplicate of both

required records and an index of those

records, and maintain the duplicate at a

separate location; (3) create and

maintain an audit system for

transferring records to electronic storage

media; (4) take steps to ensure

Commission access to information

necessary to download records from the

electronic storage media; and (5)

provide an independent source for the

downloading of records that are

maintained solely on electronic storage

media. The Commission anticipates that

small entities will not convert their

recordkeeping systems to electronic

storage media unless the accompanying

costs are outweighed by the financial

savings and operational efficiency that

would result from the change to

electronic storage media.

The Chairperson, on behalf of the

Commission, hereby certifies, pursuant

to 5 U.S.C. 605(b), that the action taken

herein will not have a significant

economic impact on a substantial

number of small entities.

B. Paperwork Reduction Act

When publishing proposed rules, the

Paperwork Reduction Act of 1995 41

(‘‘PRA’’) 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. In

compliance with the PRA, the

Commission through this rule proposal,

solicits comments to:

(1) evaluate whether the proposed

collection of information is necessary for the

proper performance of the functions of the

agency, including the validity of the

methodology and assumptions used; (2)

evaluate the accuracy of the agency’s

estimate of the burden of the proposed

collection of information, including the

validity of the methodology and assumptions

used; (3) enhance the quality, utility and

clarity of the information to be collected; and

(4) minimize the burden of the collection of

information on those who are to respond,

including through the use of appropriate

automated, electronic, mechanical or other

technological collection techniques or other

forms of information technology (e.g.,

permitting electronic submission of

responses.

The Commission has submitted this

proposal and its associated information

collection requirements to the Office of

Management and Budget. The burden

associated with this entire collection

(3038–0022), including the proposed

rule, is as follows:

Average burden hours per response:

3,551.89

Number of respondents: 15,682

Frequency of response: On occasion

The burden associated with this

specific proposed rule, is as follows:

Average burden hours per response:

17.50

Number of respondents: 3412

Frequency of response: On occasion

Persons wishing to comment on the

information that would be required by

this proposal should contact the Desk

Officer, CFTC, Office of Management

and Budget, Room 10202, NEOB,

Washington, DC 20503, (202) 395–7340.

Copies of the information collection

submission to OMB are available from

the CFTC Clearance Officer, 1155 21st

Street N.W., Washington DC 20581,

(202) 418–5160.

List of Subjects in 17 CFR Part 1

Recordkeeping requirements.

Accordingly, 17 CFR part 1 is

proposed to be amended as follows:

PART 1—GENERAL REGULATIONS

UNDER THE COMMODITY EXCHANGE

ACT

1. The authority citation for Part 1

continues to read as follows:

Authority: 7 U.S.C. 1a, 2, 2a, 4, 4a, 6, 6a,

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

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

13a–1, 16, 16a, 19, 21, 23, 24.

2. Section 1.31 is amended by revising

paragraphs (b), (c), and (d) to read as

follows:

§ 1.31 Books and records, keeping and

inspection.

* * * * *

(b) Except as provided in paragraph

(d) of this section, immediate

reproductions on either ‘‘micrographic

media’’ (as defined in paragraph (b)(1)(i)

of this section) or ‘‘electronic storage

media’’ (as defined in paragraph

(b)(1)(ii) this section) may be kept in

that form for the required time period

under the conditions set forth in this

paragraph (b).

(1) For purposes of this section:

(i) The term ‘‘micrographic media’’

means microfilm or microfiche or any

similar medium.
30674 Federal Register / Vol. 63, No. 108 / Friday, June 5, 1998 / Proposed Rules

(ii) The term ‘‘electronic storage

media’’ means any digital storage

medium or system that:

(A) Preserves the records exclusively

in a non-rewritable, non-erasable

format;

(B) Verifies automatically the quality

and accuracy of the storage media

recording process;

(C) Serializes the original and, if

applicable, duplicate units of storage

media and creates a time-date record for

the required period of retention for the

information placed on such electronic

storage media; and

(D) Permits the immediate

downloading of indexes and records

preserved on the electronic storage

media onto paper, microfilm, microfiche

or other medium acceptable under this

paragraph upon the request of

representatives of the Commission or

the Department of Justice.

(2) Persons who use either

micrographic media or electronic

storage media to maintain records in

accordance with this section must:

(i) Have available at all times, for

examination by representatives of the

Commission or the Department of

Justice, facilities for immediate, easily

readable projection or production of

micrographic media or electronic

storage media images;

(ii) Be ready at all times to provide,

and immediately provide at the expense

of the person required to keep such

records, any easily readable hard-copy

image that representatives of the

Commission or Department of Justice

may request.

(iii) Waive any privilege, claim of

confidentiality, or other objection to

disclosure of non-Commission-required

information stored on the same

individual medium (e.g. the same disk

or sheet of microfiche) as Commissionrequired records;

(iv) Store a duplicate of the record, in

any medium acceptable under this

section, at a location separate from the

original for the period of time required

for maintenance of the original; and

(v) Organize and maintain an accurate

index of all information maintained on

both the original and duplicate storage

media such that:

(A) The location of any particular

record stored on the media may be

immediately ascertained;

(B) The index is available at all times

for immediate examination by

representatives of the Commission or

the Department of Justice;

(C) A duplicate of the index is stored

at a location separate from the original

index; and

(D) Both the original index and the

duplicate index are preserved for the

time period required for the records

included in the index.

(3) In addition to the conditions in

paragraph (b)(2) of this section, persons

using electronic storage media must:

(i) Be ready at all times to provide,

and immediately provide at the expense

of the person required to keep such

records, copies of such records on such

approved machine-readable media as

defined in § 15.00(l) of this chapter

which any representative of the

Commission or the Department of

Justice may request. Records must use a

format and coding structure specified in

the request.

(ii) Develop and maintain written

operational procedures and controls (an

‘‘audit system’’) designed to provide

accountability over both the initial entry

of required records to the electronic

storage media and the entry of each

change made to any original or

duplicate record maintained on the

electronic storage media such that:

(A) The results of such audit system

are available at all times for immediate

examination by representatives of the

Commission or the Department of

Justice;

(B) The audit results are preserved for

the time period required for the records

maintained on the electronic storage

media; and

(C) The written operational

procedures and controls are available at

all times for immediate examination by

representatives of the Commission or

the Department of Justice.

(iii) Either:

(A) Maintain, keep current, and make

available at all times for immediate

examination by representatives of the

Commission or Department of Justice all

information necessary to access records

and indexes maintained on the

electronic storage media; or

(B) Place in escrow and keep current

a copy of the physical and logical format

of the electronic storage media, the file

format of all different information types

maintained on the electronic storage

media and the source code,

documentation, and information

necessary to access the records and

indexes maintained on the electronic

storage media.

(4) In addition to the foregoing

conditions, any person who uses only

electronic storage media to preserve

some or all of its required records

(‘‘Electronic Recordkeeper’’) shall, prior

to the media’s use, enter into an

arrangement with at least one third

party technical consultant (‘‘Technical

Consultant’’) who has the technical and

financial capability to perform the

undertakings described in this

paragraph (b)(4). The arrangement shall

provide that the Technical Consultant

will have access to and the ability to

download information from the

Electronic Recordkeeper’s electronic

storage media to any media to any

medium acceptable under this section.

(i) The Technical Consultant must file

with the Commission on undertaking in

a form acceptable to the Commission,

signed by the Technical Consultant or a

person duly authorized by the Technical

Consultant. An acceptable undertaking

must include the following provision

with respect to the Electronic

Recordkeeper:

With respect to any books and records

maintained or preserved on behalf of the

Recordkeeper, the undersigned hereby

undertakes to furnish promptly to any

representative of the United States

Commodity Futures Trading Commission or

the United States Department of Justice (the

‘‘Representative’’), upon reasonable request,

such information as is deemed necessary by

the Representative to download information

kept on the Electronic Recordkeeper’s

electronic storage media to any medium

acceptable under 17 CFR 1.31. The

undersigned also undertakes to take

reasonable steps to provide access to

information contained on the Electronic

Recordkeeper’s electronic storage media,

including, as appropriate, arrangements for

the downloading of any record required to be

maintained under the Commodity Exchange

Act or the rules, regulations, or orders of the

United States Commodity Futures Trading

Commission, in a format acceptable to the

Representative. Such arrangements will

provide specifically that in the event the

Electronic Recordkeeper fails to download a

record into a readable format and after

reasonable notice to the Electronic

Recordkeeper, upon being provided with the

appropriate electronic storage medium, the

undersigned will undertake to do so, at no

charge to the United States, as the

Representative may request.

(c) Persons employing an electronic

storage system shall provide a

representation to the Commission prior

to the initial use of the system. The

representation shall be made by the

person required to maintain the records,

the storage system vendor, or another

third party with appropriate expertise

and shall state that the selected

electronic storage system meets the

requirements set forth in paragraph

(b)(1)(ii) of this section. Persons

employing an electronic storage system

using media other than optical disk or

CD–ROM technology shall so state. The

representation shall be accompanied by

the type of oath or affirmation described

in § 1.10(d)(4) of this chapter.

(d) Trading cards, documents on

which trade information is originally

recorded in writing, and written orders

required to be kept pursuant to § 1.35(a),

(a–1)(1), (a–1)(2) and (d), must be
Federal Register / Vol. 63, No. 108 / Friday, June 5, 1998 / Proposed Rules 30675

1 Gas Pipeline Facilities and Services on the Outer

Continental Shelf—Issues related to the

Commission’s Jurisdiction Under the Natural Gas

Act and the Outer Continental Shelf Land’s Act

(Policy Statement), 74 FERC ¶ 61,222 (Feb. 26,

1996).

retained in hard-copy for the required

time period.

Issued in Washington, DC on may 29, 1998

by the Commission.

Jean A. Webb,

Secretary of the Commission.

[FR Doc. 98–14805 Filed 6–4–98; 8:45 am]

BILLING CODE 6351–01–M

COMMODITY FUTURES TRADING

COMMISSION

17 CFR Part 10

Rules of Practice; Proposed

Amendments

AGENCY: Commodity Futures Trading

Commission.

ACTION: Extension of comment period.

SUMMARY: On April 3, 1998, the

Commission published in the Federal

Register a notice requesting comments

on proposed amendments to its Rules of

Practice, which govern most

adjudicatory proceedings brought under

the Commodity Exchange Act, as

amended, except for reparations actions.

The original comment period expires on

June 2, 1998. 63 FR 16453 (April 3,

1998). In a letter dated May 28, 1998,

the Committee on Commodities and

Futures Law of the New York State Bar

Association requested an extension of

the comment period. To assure that an

adequate opportunity is provided for the

submission of meaningful comments,

the Commission has determined to

extend the comment period by an

additional thirty (30) days.

DATES: Comments must be received on

or before July 2, 1998.

ADDRESSES: Comments on the proposed

amendments should be sent to Jean A.

Webb, Secretary, Commodity Futures

Trading Commission, Three Lafayette

Center, 1155 21st Street, NW.,

Washington, DC 20581. Comments may

be sent by electronic mail to

secretary@cftc.gov. Reference should be

made to ‘‘Proposed Amendments to the

Rules of Practice.’’

FOR FURTHER INFORMATION CONTACT:

Stephen Mihans, Office of Chief

Counsel, Division of Enforcement, at

(202) 418–5399 or David Merrill, Office

of Chief Counsel, at (202) 5120,

Commodity Futures Trading

Commission, Three Lafayette Centre,

1155 21st Street, NW., Washington, DC

20581.

Issued at Washington, DC, on this 1st day

of June, 1998, by the Commodity Futures

Trading Commission.

Jean A. Webb,

Secretary of the Commission.

[FR Doc. 98–14961 Filed 6–2–98; 2:33 pm]

BILLING CODE 6351–01–M

DEPARTMENT OF ENERGY

Federal Energy Regulatory

Commission

18 CFR Ch. I

[Docket No. RM98–8–000]

Alternative Methods for Regulating

Natural Gas Pipeline Facilities and

Services on the Outer Continental

Shelf; June 1, 1998

AGENCY: Federal Energy Regulatory

Commission, DOE.

ACTION: Notice of inquiry.

SUMMARY: The Federal Energy

Regulatory Commission is initiating an

inquiry into alternatives to the

Commission’s recent methods of

exercising its jurisdiction over natural

gas pipeline facilities and services on

the Outer Continental Shelf.

The goal of the notice of inquiry is to

generate public comment that will assist

the Commission in exploring possible

alternatives to the application of the

existing ‘‘primary function’’ test to

offshore pipeline facilities—as well as

possible complimentary and/or

alternative modes of regulation under

the Outer Continental Shelf Lands Act.

The notice of inquiry invites all

interested persons to participate in the

inquiry and to submit answers to several

specific questions.

DATES: Written comments must be

received on or before July 16, 1998; an

original and 14 copies should be filed.

ADDRESSES: All comments should refer

to Docket No. RM98–8–000 and should

be addressed to: Office of the Secretary,

Federal Energy Regulatory Commission,

888 First Street, NE, Washington, DC

20426.

FOR FURTHER INFORMATION CONTACT:

Robert Wolfe, Office of the General

Counsel, Federal Energy Regulatory

Commission, 888 First Street, NE,

Washington, DC 20426, (202) 208–2098.

SUPPLEMENTARY INFORMATION: In

addition to publishing the full text of

this document in the Federal Register,

the Commission also provides all

interested persons an opportunity to

inspect or copy the contents of this

document during normal business hours

in the Public Reference Room at 888

First Street, NE, Room 2A, Washington,

DC 20426.

The Commission Issuance Posting

System (CIPS) provides access to the

texts of formal documents issued by the

Commission. CIPS can be accessed via

Internet through FERC’s Homepage

(http://www.ferc.fed.us) using the CIPS

Link or the Energy Information Online

icon. The full text of this document will

be available on CIPS in ASCII and

WordPerfect 6.1 format. CIPS is also

available through the Commission’s

electronic bulletin board service at no

charge to the user and may be accessed

using a personal computer with a

modem by dialing 202–208–1397, if

dialing locally, or 1–800–856–3920, if

dialing long distance. To access CIPS,

set your communications software to

19200, 14400, 12000, 9600, 7200, 4800,

2400, or 1200 bps, full duplex, no

parity, 8 data bits and 1 stop bit. User

assistance is available at 202–208–2474

or by E-mail to

CipsMaster@FERC.fed.us.

This document is also available

through the Commission’s Records and

Information Management System

(RIMS), an electronic storage and

retrieval system of documents submitted

to and issued by the Commission after

November 16, 1981. Documents from

November 1995 to the present can be

viewed and printed. RIMS is available

in the Public Reference Room or

remotely via Internet through FERC’s

Homepage using the RIMS link or the

Energy Information Online icon. User

assistance is available at 202–208–2222,

or by E-mail to

RimsMaster@FERC.fed.us.

Finally, the complete text on diskette

in WordPerfect format may be

purchased from the Commission’s copy

contractor, La Dorn System Corporation.

La Dorn Systems Corporation is located

in the Public Reference Room at 888

First Street, NE, Washington, DC 20426.

I. Introduction

In 1995, in response to heightened

interest in Outer Continental Shelf

(OCS) exploration and development, the

Commission undertook a review of its

OCS gathering policy through a notice

of inquiry in Docket No. RM96–5–000.

On February 28, 1996, the Commission

issued a statement of policy respecting

pipeline facilities on the OCS.1 The

policy statement concluded that

facilities located in deep water (a depth

of 200 meters or more) would be