12178 Federal Register / Vol. 74, No. 54 / Monday, March 23, 2009 / Rules and Regulations 

1 Incorporated as Title XIII of the Food, 

Conservation and Energy Act of 2008, Public Law 

110–246, 122 Stat. 1624 (June 18, 2008). 

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

3 Designated Contract Markets (‘‘DCMs’’) are open 

to all participants and may offer all types of 

commodities; Derivatives Transaction Execution 

Facilities (‘‘DTEFs’’) generally are open only to 

sophisticated participants and are limited as to the 

types of commodities that may be traded; and 

Exempt Boards of Trade (‘‘EBOTs’’) may trade only 

excluded commodities and are open only to eligible 

contract participants and are subject to no 

regulatory oversight, exempt from most provisions 

of the CEA and not registered with or designated 

by the CFTC. 

4The CFMA established the ECM exemption in 

section 2(h)(3) of the CEA, 7 U.S.C. 2(h)(3). 

5Section 2(h)(5)(B)(iii) of the Act, 7 U.S.C. 

2(h)(5)(B)(iii), requires that an ECM relying on the 

exemption provided in section 2(h)(3) must, upon 

a special call by the Commission, provide such 

information related to its business as the 

Commission may determine appropriate to enforce 

the antifraud provisions of the Act, to evaluate a 

systemic market event, or to obtain information 

requested by a Federal financial regulatory 

authority in connection with its regulatory or 

supervisory responsibilities. 

6 Joint Explanatory Statement of the Committee of 

Conference, H.R. Rep. No. 110–627, 110 Cong., 2d 

Sess. at 985 (2008) (‘‘Conference Committee 

Report’’). The core principles and designation 

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Parts 15, 16, 17, 18, 19, 21, 36, 

40 

RIN 3038–AC76 

Significant Price Discovery Contracts 

on Exempt Commercial Markets 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Final Rules. 

SUMMARY: The Commodity Futures 

Trading Commission (‘‘CFTC’’ or 

‘‘Commission’’) is promulgating final 

rules to implement those provisions of 

the CFTC Reauthorization Act of 2008 

(‘‘Reauthorization Act’’) 1 relating to 

exempt commercial markets (‘‘ECMs’’) 

on which significant price discovery 

contracts (‘‘SPDCs’’) are traded or 

executed. In addition to promulgating 

regulations mandated by the 

Reauthorization Act, the Commission 

also is amending existing regulations 

applicable to registered entities in order 

to clarify that such regulations are now 

applicable to ECMs with SPDCs. 

DATES: Effective Date: April 22, 2009. 

FOR FURTHER INFORMATION CONTACT: 

Susan Nathan, Senior Special Counsel, 

Division of Market Oversight, 

Commodity Futures Trading 

Commission, Three Lafayette Centre, 

1155 21st Street, NW., Washington, DC 

20581. Telephone: (202) 418–5133. Email: snathan@cftc.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background 

A. Overview 

The Commodity Futures 

Modernization Act of 2000 (‘‘CFMA’’) 

amended the Commodity Exchange Act 

(‘‘CEA’’ or the ‘‘Act’’) 2 to replace the 

Act’s ‘‘one-size-fits-all’’ supervisory 

framework for futures trading with a 

multi-tiered approach to oversight of 

derivatives markets. The CFMA applies 

different levels of oversight to markets 

based primarily on the nature of the 

underlying commodity being traded, the 

participants who are trading, and the 

manner in which trading is conducted. 

In general, the more sophisticated the 

traders or commercial participants, or 

the less susceptible a commodity is to 

manipulation or other market or trading 

abuses, the less regulatory oversight is 

required under the CFMA. In addition 

to creating three new categories of 

trading facility,3 the CFMA created a 

number of exemptions and exclusions 

from regulation for certain swaps and 

other derivative products traded either 

bilaterally or on electronic trading 

facilities-including an exemption for 

transactions in exempt commodities 

traded on electronic trading facilities, 

also known as exempt commercial 

markets (‘‘ECMs’’).4

Since the adoption of the CFMA, 

ECMs have evolved such that some no 

longer are simple trading platforms with 

low trading volumes relative to DCMs. 

Also over time, these facilities began to 

offer ‘‘look-alike’’ contracts that are 

linked to the settlement prices of their 

exchange-traded counterparts, and in at 

least one case these look-alike contracts 

began to garner significant volumes. 

More recently, several active ECMs 

began to offer the option of centralized 

clearing for their contracts—an option 

which became widely utilized by their 

customers to manage counterparty risk. 

This evolution, particularly the linkage 

of ECM contract settlement prices to 

DCM futures contract settlement prices, 

began to raise questions about whether 

ECM trading activity could impact 

trading on DCMs and whether the CFTC 

had adequate authority to address that 

impact and protect markets from 

manipulation and abuse. 

The Commission responded to these 

changing markets in a variety of ways. 

Its Office of the Chief Economist 

(‘‘OCE’’) conducted a study of the 

relationship between the natural gas 

contracts that trade on the New York 

Mercantile Exchange (‘‘NYMEX’’), a 

DCM, and the InterContinental 

Exchange (‘‘ICE’’), an ECM. 

Concurrently, the Commission’s 

Division of Market Oversight issued a 

series of special calls 5 for information 

related to ICE’s cleared natural gas swap 

contracts that are cash-settled based on 

the settlement price of the NYMEX 

physical delivery natural gas contract. 

Following the OCE study and the 

special calls, the Commission held a 

public hearing in September 2007 to 

further explore a number of issues, 

including the adequacy of the CFMA’s 

regulatory approach; the similarities and 

differences between ECMs and DCMs; 

the associated regulatory risks of each 

market category; the types of regulatory 

changes that might be appropriate to 

address identified risks; and the impact 

that regulatory or legislative changes 

might have on the U.S. futures industry 

and the global competitiveness of the 

U.S. financial industry. Based on 

information developed as a result of 

these efforts, the Commission published 

its October 2007 ‘‘Report on the 

Oversight of Trading on Regulated 

Futures Exchanges and Exempt 

Commercial Markets’’ (‘‘ECM Report’’). 

The ECM Report, which was provided 

to the Commission’s Congressional 

oversight committees, recommended, 

among other things, that the CEA be 

amended to grant the CFTC additional 

authority over ECM contracts serving a 

significant price discovery function and 

that certain self-regulatory 

responsibilities be assigned to ECMs 

offering such contracts. 

The Reauthorization Act’s provisions 

regarding ECMs were based largely on 

the Commission’s recommendations for 

improving oversight of ECMs whose 

contracts perform a significant price 

discovery function. The legislation 

significantly expanded the CFTC’s 

regulatory authority over ECMs by 

adding a new section 2(h)(7) to the CEA 

establishing criteria for the Commission 

to consider in determining whether a 

particular ECM contract performs a 

significant price discovery function and 

providing for greater regulation of 

SPDCs traded on ECMs. In addition to 

extending the CFTC’s regulatory 

oversight to the trading of SPDCs, the 

Reauthorization Act requires ECMs to 

adopt position limit and accountability 

level provisions for SPDCs; authorizes 

the Commission to require the reporting 

of large trader positions in SPDCs; and 

establishes core principles governing 

ECMs with SPDCs. The core principles 

applicable to ECMs with SPDCs are 

derived from selected DCM core 

principles and designation criteria set 

forth in the CEA, and Congress intended 

that they be construed in a like 

manner.6


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Federal Register / Vol. 74, No. 54 / Monday, March 23, 2009 / Rules and Regulations 12179 

criteria for DCMs are contained in section 5 of the 

CEA, 7 U.S.C. 7. 7Public Law 110–246, sec. 13204(b)(1). 

8Part 36 of the Commission’s rules contains the 

provisions that apply to exempt markets regardless 

of whether the markets are a significant source for 

price discovery. Rule 36.3 imposes a number of 

requirements on ECMs, including required 

notification of intent to rely on the exemption in 

section 2(h)(3) of the Act; initial and ongoing 

information submission requirements; prohibited 

representations; required price discovery 

notification; and price dissemination requirements. 

9Specifically, section 4a of the CEA permits the 

Commission to set, approve exchange-set, and 

enforce speculative position limits. 7 U.S.C. 6a. 

Section 4c(b) of the Act, 7 U.S.C. 6c(b), gives the 

Commission plenary authority to establish rules 

pursuant to which the terms and conditions on 

which commodity options transactions may be 

conducted and provides the basis for the 

Commission’s authority to establish a large trader 

reporting system for transactions on ECMs that 

involve commodity options. Section 4g of the Act 

imposes reporting and recordkeeping obligations on 

registered persons and requires them to file reports 

on positions executed on any board of trade and in 

any SPDC traded or executed on an ECM. 7 U.S.C. 

6g. Finally, section 4i of the Act requires the filing 

of such reports as the Commission may require 

when positions made or obtained on DCMs, DTEFs 

or ECMs with respect to SPDCs equal or exceed 

Commission-set levels. 7 U.S.C. 6i. 

10Consistent with ECM Core Principle IV’s 

directive that ECMs take into account contracts that 

are treated by DCOs as fungible with a SPDC when 

establishing position limits or accountability levels 

for SPDCs, in this section the term SPDC will 

include any contracts that are fungible and cleared 

by DCOs together with SPDCs. 

The legislation directed the 

Commission to issue rules 

implementing the provisions of new 

section 2(h)(7) and to include in such 

rules the conditions under which an 

ECM will have the responsibility to 

notify the Commission that an 

agreement, contract or transaction 

conducted in reliance on section 2(h)(3) 

of the Act may perform a significant 

price discovery function. The 

Reauthorization Act mandated that the 

‘‘significant price discovery standards’’ 

rules be proposed not later than 180 

days after the date of enactment of the 

Reauthorization Act, and that the 

Commission issue final rules not later 

than 270 days after the date of 

implementation of that Act.7

Consistent with Congress’ directive, 

the Commission on December 12, 2008 

issued a notice of proposed rulemaking 

(‘‘NPRM’’ or ‘‘proposing release’’) to 

substantially amend rule 36.3 8 of the 

Commission’s rules applicable to ECMs 

to implement the broadened regulatory 

authority conferred by section 2(h)(7) of 

the CEA over ECMs with SPDCs. In 

addition, the proposed rules implicated 

parts 16 through 21 (market, transaction 

and large trader reporting rules) and 

part 40 (provisions common to contract 

markets, derivatives transaction 

execution facilities and derivatives 

clearing organizations). In promulgating 

these final rules, the Commission 

recognizes that these are rapidly 

evolving markets. We are mindful that, 

as we carry out Congressional directives 

in the present context, we continue to 

maintain careful scrutiny of the 

marketplace with regard to new 

products and trading platforms in the 

future. As markets evolve, we 

acknowledge our obligation to continue 

to adapt our regulatory oversight to 

protect consumers and ensure the 

integrity of the core risk management 

and price discovery functions of our 

markets. 

B. The Proposed Rules 

1. Part 36: Exempt Markets—Rules 

Applicable to ECMs 

The Commission proposed to amend 

rule 36.3(b) to: (1) Specify the 

information submission requirements, 

both initially and on an ongoing basis, 

for all ECMs and also for ECMs with 

respect to agreements, contracts or 

transactions that have not been 

determined to perform a significant 

price discovery function; and (2) to 

enumerate separately the enhanced 

information submission obligations for 

ECMs with SPDCs. Consistent with the 

Reauthorization Act’s directive that the 

Commission’s rulemaking address 

specific statutory criteria for identifying 

a SPDC and the conditions under which 

an ECM will be responsible for notifying 

the Commission of a possible SPDC, 

proposed rule 36.3(c) addressed (1) The 

criteria on which the Commission will 

rely in making a determination that an 

agreement, contract or transaction 

performs a significant price discovery 

function; (2) the factors that will trigger 

an ECM’s obligation to notify the 

Commission of a possible SPDC; (3) the 

procedures the Commission will follow 

in reaching its determination whether a 

contract is a SPDC; and (4) the 

procedures, standards and timetables by 

which an ECM with a SPDC must 

demonstrate compliance with the core 

principles. Because the criteria 

mandated by Congress for determining 

the existence of a SPDC do not lend 

themselves to bright-line rules or 

formulas, proposed Appendix A to Part 

36 explains how the Commission 

anticipates applying the criteria, on a 

case-by-case basis, to the facts and 

circumstances under consideration. 

Consistent with the Reauthorization 

Act, the CFTC’s proposed rules required 

ECMs with SPDCs to establish a selfregulatory regime with respect to those 

contracts. Those responsibilities 

generally are set forth in nine core 

principles, largely derived from 

counterpart provisions for DCMs, 

including core principles that require 

the ECM to implement an acceptable 

trade monitoring program; to develop an 

audit trail in order to detect and deter 

market abuses; to adopt position 

limitations or position accountability 

levels for speculators in SPDCs; to 

develop and implement procedures for 

the exercise of emergency authority; to 

make public daily trading information; 

to develop a program to monitor 

compliance with the ECM’s rules; to 

establish rules to minimize conflicts of 

interest in the decision-making process 

of the ECM; and to avoid taking any 

actions or adopting any rules that result 

in any unreasonable restraints of trade 

or impose any material anticompetitive 

burden on trading on the ECM. 

Proposed Appendix B to Part 36 offers 

guidance and non-exclusive safe harbors 

for compliance with the core principles. 

In proposing this guidance, the 

Commission made every effort to 

construe the ECM core principles in a 

like manner as it construes the DCM 

core principles. 

Parts 15–21: Market, Transaction and 

Large Trader Reporting Rules 

Collectively, the Commission’s 

market, transaction, and large trader 

reporting rules (‘‘reporting rules’’) 

effectuate the Commission’s market and 

financial surveillance programs. The 

market surveillance program analyzes 

market data to detect and prevent 

market manipulation and disruptions 

and to enforce speculative position 

limits. The financial surveillance 

program uses market data to measure 

the financial and systemic risks that 

large contract positions may pose to 

Commission registrants and clearing 

organizations. The Reauthorization Act 

authorized the Commission to establish 

a comprehensive transaction and 

position reporting system for SPDCs 

when it defined ECMs with SPDCs as 

registered entities and made certain 

provisions of the Act directly applicable 

to SPDCs.9 In addition to proposing 

technical and conforming amendments 

to parts 15 through 21 of its rules, the 

Commission sought in the proposed 

rules to extend to SPDCs the reporting 

rules that currently apply to DCMs and 

DTEFs by defining clearing member and 

clearing organization and amending the 

definition of reporting market in 

Commission rule 15.00 to apply to 

positions in, and the trading and 

clearing of, SPDCs.10

Specifically, the NPRM proposed that 

ECMs be required to provide clearing 

member reports for SPDCs pursuant to 

rule16.00. Under proposed rule 16.01, 

ECMs, like DCMs, would be required to 


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12180 Federal Register / Vol. 74, No. 54 / Monday, March 23, 2009 / Rules and Regulations 

11The NPRM also proposed to uniformly apply 

the public dissemination requirement of 

Commission rule 16.01(e) to DCMs, DTEFs, and 

ECMs with SPDCs. 

12The Commission’s Division of Market 

Oversight (‘‘DMO’’) increasingly has been charged 

with administering the procedural requirements of 

the reporting rules. Accordingly, the Commission 

proposed to shift the delegation of the 

Commission’s authority to determine the format of 

reports and the manner of reporting under parts 15 

to 21 of the Commission’s rules from the Executive 

Director to the Director of DMO. 

13Part 21 of the Commission’s rules establishes 

the Commission’s ability to request information on 

persons that exercise trading control over 

commodity futures and options accounts along with 

additional account-related information for positions 

that may or may not be reportable under 

Commission rule 15.03(b). The final rules amend 

paragraphs (i)(1) and (i)(2) of rule 21.02 to ensure 

that any special call to an intermediary for 

information that classifies a trader as commercial or 

noncommercial, and the positions of the trader as 

speculative, spread positions, or positions held to 

hedge commercial risks, can be made with respect 

to both commodity futures and commodity options 

contracts. 17 CFR 21.02)(i). 

14For some time, DCMs consistently have 

provided transaction level data on request by the 

Commission pursuant to rule 38.5(a). Proposed rule 

16.02 would make such submissions mandatory. 

15Such reports would include time and sales 

data, reference files and other information as the 

Commission or its designee may request; upon 

request, this information could be accompanied by 

data that identifies or facilitates the identification 

of each trader for each transaction or order included 

in a submitted report. The Commission noted in the 

NPRM that recent acquisitions of technology have 

enabled the agency to more effectively integrate 

trade data and related orders into its trade practice, 

market, and financial surveillance programs. 

Accordingly, new rule 16.02 would make the 

submission of such information mandatory. 

16 In particular, the proposed amendments to part 

40 made rules 40.1, 40.2 and 40.5–40.8 and 

Appendix D specifically applicable to ECMs with 

SPDCs. 

17 In this NPRM, comment letters (‘‘CL’’) are 

referenced by the letter’s author and/or file number 

and page. These letters are available through the 

Commission’s Internet Web site: http:// 

www.cftc.gov/lawandregulation/federalregister/ 

federalregistercomments/2008/08-012.html. 

18The Federal Energy Regulatory Commission 

(‘‘FERC’’) (CL 05) responded to the CFTC’s request 

for comments but did not comment on the 

particulars of the proposed rules. 

19American Feed Industry Association (‘‘AFIA’’) 

(CL 04) (representing animal feed interests); 

International Swaps and Derivatives Association, 

Inc. (‘‘ISDA’’) (CL 06) (representing participants in 

the privately negotiated derivatives industry); 

American Public Gas Association (‘‘APGA’’) (CL 07) 

(the national association for publicly-owned natural 

gas distribution systems); Society of Independent 

Gasoline Marketers of America (‘‘SIGMA’’) (CL 08) 

(a national trade association representing 

independent chain retailers and marketers of motor 

fuel); Air Transport Association of America, Inc. 

(‘‘ATA’’) (CL 09) (airline trade association); 

Managed Funds Association (‘‘MFA’’) (CL 10) 

(representing the global alternative investment 

community). 

20HoustonStreet Exchange (CL 01); 

InterContinental Exchange, Inc. (‘‘ICE’’) (CL 03). 

21OTC Global Holdings, Inc. (CL 11) OTC Global 

Holdings has submitted notification to the 

Commission of its intent to operate a market 

pursuant to the exemption found in section 2(h)(3) 

of the Act. 

22CME Group (CL 02). 

submit to the Commission and publicly 

disseminate option deltas and 

aggregated trading data on a daily 

basis.11 ECM clearing members that 

clear SPDCs would, regardless of their 

registration status with the Commission 

or their status as domestic or foreign 

persons, be required to file reports for 

large SPDC positions when the positions 

meet or exceed the contract reporting 

levels of Commission rule 15.03(b). In 

addition, the NPRM proposed to require 

clearing members to identify the owners 

of reportable SPDC positions on Form 

102.12 Under the proposed rules, SPDC 

traders likewise would be subject to the 

special call provisions of the 

Commission’s part 18 rules for 

reportable positions. Furthermore, the 

Commission proposed that clearing 

members clearing SPDCs, SPDC traders, 

and ECMs listing SPDCs would each be 

subject to the special call provisions of 

the part 21 rules.13

In order to communicate effectively 

with foreign clearing members and 

foreign traders and to properly 

administer the proposed special call 

provisions of parts 17, 18 and 21 of the 

Commission’s rules, the Commission 

also proposed to amend the designation 

of agent provisions of rule 15.05 to 

require ECMs that list SPDCs to act as 

the agent of foreign clearing members 

and foreign traders for the purpose of 

accepting service or delivery of any 

communication, including special calls, 

issued by the Commission to a foreign 

clearing member or trader. The 

Commission also proposed new rule 

16.02 to require all reporting markets, 

including ECMs listing SPDCs, to report 

on a daily basis trade data and related 

order information for each transaction 

that is executed on the market,14 and to 

specify the information to be included 

in such reports.15 In this regard, while 

the Commission proposed amendments 

to its part 17 rules dealing with 

reportable positions, it did not extend 

those proposals to SPDC transactions 

that are not cleared for the simple 

reason that no clearing members are 

involved in clearing such transactions. 

For purposes of enforcing SPDC 

position limits and monitoring large 

SPDC positions, the Commission 

anticipated using proposed rule 16.02 to 

access transaction information and 

trader identification to enforce position 

limits and monitor large positions for 

market and financial surveillance 

purposes. 

Part 40: Provisions Common to 

Registered Entities 

The Reauthorization Act amended the 

definition of ‘‘registered entity’’ in 

section 1a(29) of the CEA to include 

ECMs with SPDCs. Because certain 

provisions in part 40 of the 

Commission’s rules apply to registered 

entities—and, accordingly, to ECMs 

with SPDCs—the Commission proposed 

to amend part 40 to specify the 

provisions which would be applicable 

to all registered entities.16 The 

Commission emphasized in its NPRM 

that although not all provisions of part 

40 will be applicable to ECMs with 

SPDCs, even sections that are not being 

amended in this rulemaking may be de 

facto amended by virtue of the fact that 

the term ‘‘registered entity’’ now 

includes ECMs with SPDCs. 

C. Overview of Comments Received 17

General. The Commission received a 

total of eleven comments from a range 

of commenters, including a government 

agency,18 several trade associations,19

two ECMs,20 an interdealer broker in 

over-the-counter (‘‘OTC’’) energy 

markets,21 and a DCM.22 Most 

commenters expressed support for the 

proposed rules and several particularly 

commended the Commission’s 

adherence to the letter and spirit of the 

Reauthorization Act. Several 

commenters offered specific 

recommendations for clarification or 

modification of certain provisions. 

These comments will be addressed more 

fully below. The Commission notes that 

some commenters requested that 

particular rules and core principle 

guidance proposed for ECMs be 

modified to mirror analogous provisions 

for DCMs. In this regard, the 

Commission reminds interested parties 

that the Reauthorization Act did not 

mandate identical rules for ECMs and 

DCMs, and the Commission has 

attempted to craft rules tailored to the 

special concerns raised by SPDCs. In 

that same vein, interested parties should 

bear in mind that Commission 

acceptable practices for all core 

principles do not denote requirements 

under the Act; rather, they offer safe 

harbors. Registered entities always have 

the option of crafting alternate means of 

complying with core principles than 

those set forth in the Commission’s 

acceptable practices. 

Core Principle IV. Several 

commenters expressed substantive 

concerns with respect to the 

Commission’s proposed guidance and 

acceptable practices for compliance 

with Core Principle IV (Position 

Limitations or Accountability). 

Specifically, these commenters objected 

to the Commission’s proposal that ECM 

market surveillance programs account 


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23Congress has directed that the Commission 

issue proposed rules implementing section 2(h)(7) 

of the CEA not later than 180 days after the date 

of enactment of the Reauthorization Act (June 18, 

2008), and that the Commission issue final rules no 

later than 270 days after the date of enactment. 

Public Law 110–246 at section 13204. 

24 5 U.S.C. 553. 

25See also Conference Committee Report at 985– 

86. 

26Subparagraph (B)(2) required that the ECM 

maintain a record of allegations and complaints; 

subparagraph (B)(3) direct the ECM to provide the 

CFTC with a copy of the record of each complaint 

relating to violations of the CEA; pursuant to 

subparagraph (B)(4) the ECM must provide the 

Commission with a quarterly list of transactions 

executed in reliance on the section 2(h)(3) 

exemption and indicate the terms and conditions, 

average daily trading volume, and most recent open 

interest figures for each such transaction. 

27To complete this technical correction, 

proposed rule 36.3(b)(2)(i)(B)(1) is properly 

numbered as 36.3(b)(2)(i)(B) in the final rules. 

for uncleared transactions through 

volume accountability levels (based on 

a measure of net uncleared trading 

calculated by netting each trader’s long 

and short uncleared transactions against 

the same counterparty). As more fully 

discussed below, the Commission 

believes the issues and 

recommendations raised by these 

commenters merit further attention and 

study. The Commission is mindful, 

however, that the time constraints 

imposed by the Reauthorization Act for 

issuing final rules implementing section 

2(h)(7) do not permit the level of study 

necessary to properly address and 

resolve these issues.23 Moreover, even if 

the Commission was prepared 

immediately to adopt some or all of the 

suggested changes, they reflect a 

substantial departure from the proposed 

guidance that might warrant re-proposal 

under the Administrative Procedure 

Act.24

For these reasons, the Commission, in 

an abundance of caution, has 

determined not to make final its Core 

Principle IV proposed guidance and 

acceptable practices relating to 

uncleared trades pending a full and 

complete evaluation of the issues raised 

in these comments. Accordingly, upon 

publication of this notice of final 

rulemaking, the Commission intends to 

immediately examine these issues and 

to issue a notice of proposed rulemaking 

that specifically addresses appropriate 

guidance and acceptable practices for 

uncleared trades on ECMs. 

Like all core principles, Core 

Principle IV is statutory, and the 

Commission’s decision not to provide 

particular guidance or safe harbors with 

respect to ECM uncleared trades at this 

time does not diminish an ECM’s 

obligation to comply with the core 

principle itself. In that regard, the 

Commission reminds interested parties 

that section 2(h)(7)(C)(ii) of the CEA 

gives an electronic trading facility 

explicit discretion to take into account 

differences between cleared and 

uncleared SPDCs in applying the 

position limits and accountability core 

principle.25 Likewise, the Commission 

will take these differences into account 

when reviewing an ECM’s 

implementation of a core principle, as 

directed by section 2(h)(7)(D)(i). 

II. The Final Rules 

A. Part 36—Exempt Markets 

Part 36 of the Commission’s rules 

governs both exempt boards of trade and 

ECMs, regardless of whether any 

individual contract traded thereon is a 

significant source for price discovery. 

As described infra, Rule 36.3 more 

particularly imposes a number of 

requirements and restrictions on ECMs, 

including notification of the ECM’s 

intent to rely on the section 2(h)(3) 

exemption; initial and ongoing 

information submission requirements; 

prohibited representations; price 

discovery notification; and price 

dissemination requirements. The 

Commission is adopting as proposed the 

provisions of Rule 36.3(b) that 

separately specify the information 

submission requirements, both initially 

and on an ongoing basis, for all ECMs 

and for ECMs with respect to 

agreements, contracts or transactions 

that have not been determined to 

perform a significant price discovery 

function. 

The Commission is adopting as 

proposed the substance of that 

provision’s enhanced reporting 

requirements for ECMs with SPDCs. 

However, the final rules will correct an 

error in numbering in rule 36.3(b)(2). As 

proposed, rule 36.3(b)(2)(i) provided 

that ECMs, with respect to contracts that 

have not been determined to be SPDCs, 

must identify to the CFTC those 

contracts that averaged five trades per 

day or more over the most recent 

calendar quarter, and for each such 

contract, either: pursuant to 

subparagraph (A), submit a weekly 

report to the CFTC showing specific 

information; or, pursuant to 

subparagraph (B)(1), provide the 

Commission with electronic access 

sufficient to allow it to compile the 

same information. The rule then also 

required in subparagraph (B)(2) through 

(B)(4) that the ECM maintain and 

provide the CFTC with other records.26

These last three requirements were 

incorrectly numbered. Because they 

apply regardless of whether the ECM 

has elected the weekly reporting path of 

rule 36.3(b)(2)(i)(A) or to provide access 

to the CFTC pursuant to rule 

36.3(b)(2)(i)(B), these requirements 

properly are numbered as 36.3(b)(2)(ii)– 

(iv) rather than as 36.3(b)(2)(i)(B)(2)– 

(4).27

Proposed rule 36.3(c) and Appendix 

A to Part 36 set forth the procedures and 

guidance, respectively, which the 

Commission will use in determining 

whether an ECM agreement, contract or 

transaction is a SPDC. The Commission 

is adopting, substantially as proposed, 

Appendix A and its general guidance as 

to how the Commission expects flexibly 

to apply the four criteria specified in 

section 2(h)(7) of the CEA for 

determining a SPDC—price linkage, 

arbitrage, material price reference and 

material liquidity. Although much of 

rule 36.3(c) and its SPDC-determination 

procedures are being adopted as 

proposed, some provisions have been 

modified in response to comments and 

some have been modified to reflect 

technical and clarifying changes. 

The Commission has made a technical 

correction to proposed new rule 

36.3(c)(1)(i). This rule is intended to 

track the statutory language added to the 

CEA by the Reauthorization Act as 

section 2(h)(7)(B)(i), which provides 

that in determining a SPDC, the 

Commission shall consider, as 

appropriate, 

PRICE LINKAGE—The extent to which the 

agreement, contract, or transaction uses or 

otherwise relies on a daily or final settlement 

price, or other major price parameter, of a 

contract or contracts listed for trading on or 

subject to the rules of a designated contract 

market or a derivatives transaction execution 

facility, or a significant price discovery 

contract traded on an electronic trading 

facility, to value a position, transfer or 

convert a position, cash or financially settle 

a position, or close out a position. 

As proposed, section 36.3(c)(1)(i) 

inadvertently dropped a portion of the 

statutory language. The final rules have 

been corrected to reflect the complete 

statutory provision. 

As proposed, rule 36.3(c)(3) provides 

that the Commission will issue an order 

determining whether a contract is a 

SPDC after consideration of all relevant 

information, including any ‘‘data, views 

and arguments’’ submitted to the 

Commission in response to Federal 

Register notification of the 

Commission’s intent to so evaluate the 

contract. The proposed rule did not 

include a timeframe for issuance of such 

an order. CME Group suggests that the 

public interests underlying the 

regulatory oversight requirements for 


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28CME Group CL 02 at 7–8. 

29The ATA urged the Commission to revise 

proposed rule 36.3(c)(3) ‘‘to provide 14 calendar 

days notice, not 30, of its intention to designate a 

contract as an SPDC.’’ CL 09 at 5. The Commission 

wishes to clarify that rule 36.3(c)(3) establishes a 

30-day notice and comment period following the 

Commission’s notice of its intention to undertake a 

determination whether a particular contract is a 

SPDC. ATA further urges the Commission to specify 

that it will issue a final determination no later than 

14 days from the end of the comment period. As 

discussed supra, while the Commission is 

committed to reviewing potential SPDCs as 

expeditiously as possible, in our view 14 days is 

inadequate to review and issue a determination on 

any SPDC and in most cases would preclude an 

adequate evaluation of complex matters. 

30 ISDA CL 06 at 3. 

31 Id. ISDA’s comment did not recommend a 

specific time period. 

32As proposed, the relevant phrase reads as 

follows: ‘‘* * * the electronic trading facility’s 

agreement, contract or transaction performs a 

significant price discovery function* * *’’ See 73 

FR 75888 at 75911. 

33 ISDA CL 06 at 2. 

34 Id. 

35Conference Committee Report at 985–86; 

Public Law 110–246 at 13201. 

36Where the plain language of a statute is clear, 

courts generally will presume that Congress meant 

precisely what it said absent a showing that ‘‘as a 

matter of historical fact, Congress did not mean 

what it appears to have said, or that, as a matter 

of logic and statutory structure, it almost surely 

could not have meant it.’’ Engine Mfrs. Ass’n v. 

EPA, 88 F.3d 1075, 1089 (D.C. Cir. 1996), quoted 

in National Public Radio, Inc. et al. v. FCC, 254 

F.3d 226, 230 (D.C. Cir. 2001). 

SPDCs dictate that such determinations 

be issued within a reasonable timeframe 

following the close of the comment 

period for the Federal Register 

notification.28 The Commission is 

committed to the prompt and thorough 

processing of SPDC determinations and 

agrees, as CME Group suggests, that 

absent special circumstances, its order 

generally should issue within 60 days of 

the closing of the comment period. We 

are aware, however, that the term 

‘‘special circumstances’’ may take its 

meaning from the particular context, 

including but not limited to the volume 

of work before the agency and the 

complexity of the submission under 

review, and we are reluctant to define 

those circumstances by rule. The 

Commission instead has modified rule 

36.3(c)(3) to specify that the 

Commission shall promptly consider 

relevant information and shall issue an 

order explaining its determination 

within a reasonable period of time after 

the close of the comment period.29

Proposed rule 36.3(c)(4) established 

the timetables for compliance with the 

core principles by ECMs that have been 

determined to have a SPDC, providing 

a 90-day grace period for an ECM’s 

initial SPDC and a 15-day grace period 

for subsequently-identified SPDCs 

traded on the same ECM. CME Group 

suggests that the passage of the 

Reauthorization Act put ECMs on notice 

that one or more of their contracts may 

become a SPDC at some future date; in 

its view, a 45-day grace period should 

be sufficient for all ECMs. ATA also 

views a 90-day grace period as excessive 

in light of ECMs’ sophistication and 

suggests that ECMs can demonstrate 

compliance with the core principles in 

60 days. With due regard for the market 

integrity interests associated with the 

core principles, we disagree that all 

ECMs will be able, in every 

circumstance, to demonstrate 

compliance with all the core principles 

within 45 or 60 days. While larger, 

established ECMs may be prepared to 

develop core principle compliance 

strategies in anticipation of a SPDC 

determination, the grace period must 

also permit ECMs that are less wellestablished sufficient time to develop 

and implement programs responsive to 

the core principles. Accordingly, the 

Commission has adopted as final the 90- 

day grace period for initial compliance 

with the core principles. 

Although ISDA found the 90-day time 

frame reasonable, noting that it allows 

market participants to make necessary 

changes to their trading system to 

ensure compliance with the core 

principles,30 it objected to the 15-day 

grace period for subsequently-identified 

SPDCs and urged the Commission to 

extend the timeframe in recognition of 

the additional obligations compliance 

imposes and the likely system changes 

required of ECMs.31 ICE noted that both 

the 90-day and 15-day grace periods 

generally allow sufficient time for an 

ECM to comply with the core principles, 

but warned that 15 calendar days may 

not be sufficient time for clearing firms 

that outsource large trader reporting to 

meet the reporting requirements. The 

Commission has considered these 

suggestions and believes that 30 

calendar days should be sufficient to 

ensure that clearing firms can meet the 

reporting requirements and avoid 

market disruptions. Rule 36.3(c)(4) has 

been modified accordingly to grant a 30- 

day period for ECMs to come into core 

principle compliance for their 

subsequent SPDCs. In addition to this 

change, the Commission has determined 

to clarify rule 36.3(c)(4) by changing the 

second sentence of this provision 32 to 

read ‘‘* * * one of the electronic 

trading facility’s agreements, contracts 

or transactions performs a significant 

price discovery function* * *’’ 

In order to clarify its intent and 

eliminate a redundancy in paragraph 

(B)(4) of Appendix A, the Commission 

is amending Appendix A to part 36 as 

follows: Paragraph (B)(4) is deleted in 

its entirety as repetitive of paragraph 

(B)(3). In paragraph (B)(3), the language 

beginning with ‘‘In combination with 

this volume level’’ will become new 

paragraph (B)(4). 

B. Substantive Compliance With Core 

Principle IV: Guidance and Acceptable 

Practices 

Although comments addressing the 

nine ECM SPDC core principles 

generally expressed satisfaction with the 

Commission’s proposed guidance and 

acceptable practices, the Commission’s 

guidance for substantive compliance 

with Core Principle IV—particularly 

with respect to speculative position 

limits and the treatment of uncleared 

contracts—was a cause for concern 

among several commenters. Their 

comments are summarized below. 

1. The Commission’s authority with 

respect to uncleared trades. In its 

comment letter, ISDA questioned the 

Commission’s authority under the 

Reauthorization Act to address limits for 

uncleared SPDC transactions in its Core 

Principle IV acceptable practices.33 In 

support, ISDA cites Core Principle IV’s 

direction that ECMs take into account 

positions in other ‘‘agreements, 

contracts, and transactions that are 

treated by a derivatives clearing 

organization, whether registered or not 

registered, as fungible’’ with a SPDC 

when determining appropriate position 

limitations or accountability for the 

SPDC.34 The Commission believes that 

Congress did not so limit the 

Commission’s authority with respect to 

uncleared SPDC transactions; on the 

contrary, both the statutory language 

and the legislative history make plain 

that Congress intended for new CEA 

section 2(h)(7) to apply to all SPDCs, 

whether cleared or uncleared. The 

Conference Committee report 

emphasizes that the legislation gives 

electronic trading facilities ‘‘the explicit 

discretion to take into account 

differences between cleared and 

uncleared SPDCs in applying the 

position limits or accountability core 

principle.’’ 35 And CEA section 

2(h)(7)(D) directs the Commission to 

‘‘take into consideration the 

differences’’ between cleared and 

uncleared trades in reviewing an ECM’s 

implementation of the core principles. 

Under principles of statutory 

construction, Congress must be 

presumed to have said what it meant.36

The Commission believes that the ECM 

SPDC Core Principle IV clause cited by 

ISDA in support of its argument stands 

for a different proposition altogether. 

Specifically, the clause pertains to 


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37 7 U.S.C. 6a(b)(2). 

38MFA CL 10 at 6. 

39 Id. 

40 ‘‘(5) Position Limitations or Accountability.— 

To reduce the potential threat of market 

manipulation or congestion, especially during 

trading in the delivery month, the board of trade 

shall adopt position limitations or position 

accountability for speculators, where necessary and 

appropriate.’’ 7 U.S.C. 7(d)(5). 

41 17 CFR 38.2. 

42 In part for the reasons discussed in this section, 

the Commission expects in the near future to revisit 

and clarify Core Principle 5 for DCMs. 

43MFA CL 10 at 4. 44MFA points to the directive in the Core 

Principle IV acceptable practices that an ECM 

‘‘should initiate’’ an inquiry once a trader exceeds 

a position accountability level as an indication that 

action is mandated in every case. The Commission 

does not view this language as a mandate; as noted 

above, acceptable practices serve as safe harbors 

and do not represent the only means of compliance 

with the core principles. 45MFA CL 10 at 4. 

transactions in ‘‘other agreements, 

contracts and transactions.’’ 

Accordingly, Congress directed ECMs to 

include certain non-SPDC transactions 

when applying position limitations and/ 

or accountability levels to a SPDC. So, 

for example, if another non-SPDC ECM 

contract or even a contract executed off 

of a trading facility pursuant to CEA 

Section 2(h)(1) is fungible and cleared 

together with a SPDC, the subject ECM 

should take those non-SPDC positions 

‘‘into account’’ when administering the 

SPDC’s position limit or accountability 

regime. 

2. Grace period for open positions. As 

proposed, the acceptable practices for 

Core Principle IV permitted a grace 

period of 90 calendar days from the 

ECM’s implementation of speculative 

position limit rules for traders to 

comply with those rules unless a hedge 

exemption is granted by the ECM. MFA 

has recommended that the Commission, 

rather than creating a new grace period 

applicable only to SPDCs, should rely 

on the existing standards of section 

4a(b)(2) of the CEA37 and the standards 

applied to exchange-set speculative 

position limits under rule 150.5(f).38

The Commission believes that this 

recommendation is premised on a 

misunderstanding of the statutory and 

regulatory structures governing 

exchange-set speculative position limits. 

As MFA notes, section 4a(b)(2) applies 

to Commission-set speculation limits, 

not exchange-set limits.39

Furthermore, Rule 150.5(f) no longer 

has direct application to DCM-set 

position limits. The statutory authority 

governing DCM-set limits is found in 

CEA section 5(d)(5)— DCM Core 

Principle 5.40 That core principle does 

not contain any aspect of the exemptive 

language found in either CEA section 4a 

or Rule 150.5(f). Moreover, it should be 

noted that the part 38 rules explicitly 

exempt agreements, contracts or 

transactions traded on a DCM from all 

Commission rules other than those 

specifically referenced in Rule 38.2. 

That provision did not retain Rule 

150.5(f).41 Further, although the 

acceptable practices for Core Principle 5 

(which are found in Appendix B to part 

38) contain many of rule 150.5’s 

provisions, they do not specify the rule 

150.5(f) good faith exemption. 

Accordingly, the part 150 rules 

essentially constitute guidance for 

DCMs administering position limit 

regimes, Commission staff in overseeing 

such regimes has not required that 

position limits include an exemption for 

positions acquired in good faith. 

The Reauthorization Act established 

Core Principle IV as part of new CEA 

section 2(h)(7) to require the 

establishment of position limitations or 

accountability levels for SPDCs listed on 

ECMs. As with DCM Core Principle 5, 

ECM Core Principle IV does not contain 

the exemptive provision for positions 

established in good faith—nor do its 

acceptable practices rely for authority 

on section 4a of the CEA. For this 

reason, the Commission was not obliged 

to adopt such a good faith exemption.42

In the Commission’s view, the primary 

goal for an ECM with a SPDC should be 

to ensure that large positions not be 

disruptive to the market. Indeed, a 

sudden decrease in a position to meet 

an ECM’s newly-adopted position limit 

could itself be disruptive. The 

Commission’s proposed acceptable 

practice was crafted to permit market 

participants to make any necessary 

adjustments to their positions in an 

orderly fashion, thus reducing market 

disruptions and avoiding, as much as 

possible, an unfair impact on position 

holders. For the reasons discussed in 

these sections, the Commission has 

determined to adopt the acceptable 

practice as proposed (except with 

respect to uncleared trades, as discussed 

infra), and reminds interested parties 

that acceptable practices serve as a safe 

harbor and do not represent the only 

means of compliance with the core 

principles. 

3. Position Accountability 

MFA also encourages the Commission 

to bring its Core Principle IV acceptable 

practices with respect to position 

accountability into closer alignment 

with its acceptable practices for DCMs. 

Although perfect symmetry between the 

DCM and ECM core principles and 

acceptable practices was not mandated 

by the Reauthorization Act and is not a 

primary goal of this rulemaking, it is the 

Commission’s view that its expectations 

for DCMs and ECMs in this regard are 

not significantly different. MFA argues 

that ‘‘DCMs are not mandated to 

conduct an inquiry in response to every 

breach of a position accountability level. 

Rather, DCMs have the discretion to 

determine whether to open an inquiry 

in particular cases.’’ 43 So, too, do ECMs 

under the Core Principle IV acceptable 

practices.44 Unlike position limits, 

accountability levels are not limitations 

on position sizes, as traders are 

permitted to take positions in excess of 

the established accountability levels. 

ECMs are obliged to monitor trading in 

their markets and to discourage 

manipulative activity in the spot month 

as well as in back months; the purpose 

of accountability levels is to provide the 

ECM with additional information and 

authority to address positions that 

threaten to create disorderly trading or 

market abuses. For positions that exceed 

a position accountability level, 

appropriate action by the ECM may be 

dictated by a number of factors, 

including characteristics of the market 

and the size of the position relative to 

the market. For smaller positions that 

exceed the accountability level, the 

ECM may find that placing such 

positions on a ‘‘close watch’’ is 

appropriate. For larger positions, 

depending on the potential threat to the 

market, it may be appropriate for the 

ECM to request that the trader not 

further increase (or even reduce) a 

position. Market liquidity also should 

be considered when monitoring traders 

with positions above the accountability 

level; an ECM may find it appropriate to 

more aggressively limit positions in 

markets that are relatively illiquid. In 

any event, ECMs are reminded that the 

acceptable practices serve as safe 

harbors; alternative methods to monitor 

trading may be sufficient. 

Also in connection with the ECM’s 

monitoring of positions, the 

Commission has considered MFA’s 

concern that the term ‘‘investigation’’ 

may connote a level of wrongdoing 

which, in turn, might inadvertently 

render a commodity pool ineligible to 

receive investor funds45 or otherwise 

have an adverse effect on a trader’s 

business. Although the Commission 

believes such a misimpression is 

unlikely, we have modified the 

acceptable practice to replace the word 

‘‘investigation’’ with ‘‘inquiry.’’ 

With regard to establishing position 

accountability levels in non-spot 

months and all months combined, MFA 

questioned why ECMs are given specific 

guidance—that is, the ‘‘10% of open 


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46 Id. at 4–5. 

47With regard to ICE and ISDA’s concern that 

economic equivalence is subjective (ICE CL 03 at 5; 

ISDA CL 06 at 2–3); the Commission believes the 

concept of economic equivalence is relatively 

straightforward. Essentially, the concept is designed 

to capture SPDCs that replicate or serve as a close 

substitute for a corresponding DCM, DTEF or 

second ECM SPDC contract. In this regard, any 

SPDC that is cash settled based on another 

contract’s settlement price will be considered 

economically equivalent, assuming sufficient 

volume. In addition, SPDCs that can be used to 

arbitrage price discrepancies may be considered 

economically equivalent to DCM contracts. For 

arbitragable contracts to be considered 

economically equivalent, both the prices and the 

contract terms would have to be highly correlated. 

As part of its determination whether a particular 

contract is an SPDC, the Commission will indicate 

whether it considers the SPDC economically 

equivalent to another contract. 

48 ICE and ISDA warned that requiring an ECM 

to adopt a DCM’s position limits for its 

economically-equivalent SPDCs may have 

anticompetitive implications for trading on an ECM 

(ICE CL 03 at 6; ISDA CL 06 at 3): a DCM could 

set an artificially low position limit for its own 

contract in order to squeeze out an ECM. The 

Commission does not believe this is a likely 

consequence of its acceptable practice. First, 

assuming that the DCM contract is the dominant 

market, setting the spot-month limit at an 

extraordinarily low level would limit trading in its 

own contract, which would be self-defeating. 

Secondly, the instant procedures are acceptable 

practices that provide a safe harbor; they are not 

rules or requirements, and they do not comprise all 

possible means of satisfying Core Principle IV. If an 

ECM believes that a DCM is engaging in 

anticompetitive behavior (which is itself the subject 

of a core principle for both ECMs and DCMs), it 

should notify the Commission and should propose 

alternative position limits and/or accountability 

levels that are reasonable and based on economic 

analysis. 

49 ISDA CL 06 at 3. 

50 ICE CL 03 at 5–6. 

51CME Group CL 02 at 6; APGA CL 07 at 3–4. 

52MFA CL 10 at 6. AFIA requests that as part of 

the final rule the Commission exercise its authority 

to remove the exemption for position limits that has 

been given to Index Speculator Funds. CL 04 at 2– 

3. The Commission appreciates AFIA’s concern but 

notes that such an action is beyond the scope of the 

instant rulemaking. 

53APGA CL 07 at 2–3. APGA also suggested that 

the Commission set federal speculative limits for 

exempt commodities and that such limits should be 

applied to a given trader’s aggregate position in 

economically-equivalent contracts across all 

registered entities. While innovative and worthy of 

further consideration in the future, the Commission 

believes these recommendations are beyond the 

scope of the instant rulemaking. 

54APGA CL 07 at 2–3. 

55 Id. at 5–6. APGA argues that the separate 

volume accountability category potentially would 

enable speculative traders to amass a larger position 

before prompting an inquiry by the ECM. More 

critically, where there is a separate volume 

accountability level in the spot-month, APGA stated 

that a trader can readily avoid a spot month 

speculative position limit by holding a combination 

of cleared and uncleared positions, even on the 

same market. 

56CME Group CL 02 at 6. 

interest’’ standard—while DCMs are free 

to determine their own methodology.46

Again, the Commission wishes to 

emphasize that its guidance for ECMs 

need not follow precisely the guidance 

it has offered—or not offered—for 

DCMs. The Commission believes it is 

sound practice for DCMs and ECMs to 

adopt non-spot month and all-monthscombined position accountability levels 

or position limits and believes the 

specific guidance offered in this 

acceptable practice will be beneficial to 

ECMs wishing to take advantage of the 

safe harbor. Moreover, the Commission 

intends shortly to revisit DCM Core 

Principle 5 with a view to providing 

more specific guidance with respect to 

non-spot month and all-monthscombined position accountability levels. 

Finally, the Commission wishes to 

remind interested parties that the ‘‘10% 

of open interest’’ standard for 

determining position accountability 

levels applies to unique SPDCs (i.e., 

cleared ECM contracts that are 

determined to be SPDCs based on 

material price reference grounds, rather 

than on the basis of economic 

equivalence 47 with another contract 

through a price linkage or arbitrage 

relationship). The acceptable practices 

for non-unique, economicallyequivalent SPDCs provide that the ECM 

may adopt the accountability levels 

adopted by the DCM for the underlying 

contract.48 As noted, the Commission 

expects to further consider the treatment 

of uncleared trades and anticipates 

proposing rule amendments as well as 

guidance and acceptable practices in the 

near future. 

Speculative Position Limits: 

Accountability Levels for Uncleared 

Trades. 

Both ISDA49 and ICE 50 opined that 

requiring ECMs to adopt the same 

speculative position limits as an 

‘‘unaffiliated’’ DCM would be 

anticompetitive since the DCM would 

have the authority to dictate the ECM’s 

position limits even where an ECM is 

the dominant, more liquid market. CME 

Group and APGA suggest that the 

Commission should propose 

comprehensive, industry-wide 

speculative position limits that would 

apply to both cleared and uncleared 

transactions.51 Similarly, MFA 

suggested that SPDCs should be 

incorporated into the existing regulatory 

framework because a separate category 

for uncleared trades could impede a 

trader’s ability to reflect the true net 

economic exposure of a position and 

could chill legitimate economic 

activity.52

APGA supports the use of spot month 

speculative position limits as an 

effective tool for addressing contracts on 

commodities—such as natural gas— 

with constrained deliverable supplies.53

It urges, however, that the Commission 

modify its proposed guidance such that 

an ECM must account for positions that 

may be held on another registered entity 

in economically-related SPDCs in 

setting such limits. Without such a 

revision, APGA believes that traders 

will be able to amass a far larger 

speculative position in the spot month 

by dividing its position among several 

markets or market segments for 

SPDCs.54 Accordingly APGA urges that 

the volume accountability level for 

uncleared contracts should be included 

in calculating the size of a trader’s 

position for speculative position limits 

purposes. APGA expresses similar 

concerns with respect to the 

Commission’s proposal in the Core 

Principle IV guidance, and similarly 

suggests the establishment of separate 

accountability levels for cleared and 

uncleared trades and a separate volume 

accountability level in the spot month.55

CME Group agrees that the proposed 

guidance should be reconsidered, and 

pointed out that the disparate standards 

provided by the acceptable practices 

make it possible for a trader to maintain 

double the position permitted for an 

economically equivalent contract on a 

DCM. CME Group believes that there 

should be one position limit and one 

associated set of accountability levels 

for non-spot contracts that apply across 

all activities for a SPDC, including 

cleared and uncleared trades.56

As noted above, these and other 

recommendations related to the 

proposed guidance and acceptable 

practices for Core Principle IV with 

respect to uncleared trades raise 

complex issues which, in the 

Commission’s view, warrant further 

serious consideration before a decision 

can be made whether, and to what 

extent, they should be implemented. For 

this reason, the Commission has 

determined not to make final those 

aspects of the Core Principle IV 

guidance and acceptable practices 

relating to uncleared trades pending 

additional study of these comments and 

consultation with the commenters and 

others, culminating in a subsequent 

rulemaking proposing guidance and 

acceptable practices applicable to 

uncleared trades. As part of this process, 

and in the course of formulating that 

proposed guidance, the Commission 

will consider the issues raised in the 

comments received in connection with 

the instant rulemaking. 

C. Market, Transaction and Large 

Trader Reporting Rules 

Reporting Rules. With the three 

substantive exceptions noted below, the 


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57 17 CFR parts 15 through 21. 

58ATA CL 09 at 8. 

59CME Group CL 02 at 5. 

60HoustonStreet, CL 01 at 1. 

61A routine trader reporting requirement, 

including the routine reporting of OTC positions, is 

not a current requirement for any contract traded 

on or subject to the rules of a DCM. 

62 ISDA CL 06 at 3–4. 

63APGA CL 07 at 7–8. 

64Unlike SPDCs traded on ECMs, however, all 

contracts on DCMs are funneled through clearing 

members that are subject to the large trader 

reporting rules. Therefore, the Commission need 

Continued 

Commission is promulgating the 

reporting rules as proposed.57 Five 

commenters addressed the proposed 

reporting rules. ATA expresses support 

for the extension of the reporting rules 

to SPDCs—specifically, ATA endorses 

the application of the reporting 

requirements to ECM clearing members 

that clear SPDCs, regardless of their 

registration status with the Commission 

or their status as foreign or domestic 

persons.58 ATA additionally expressed 

support for the use of transaction and 

trader identification data that would be 

collected under new rule 16.02 to 

monitor large SPDC positions. Four 

commenters expressed general concerns 

or recommended the adoption of 

additional or alternative amendments to 

the reporting rules. 

CME Group, for example, observes 

that while the acceptable practices for 

Core Principle IV advise ECMs to 

establish an effective program for 

enforcement of SPDC position limits 

that should include a large trader 

reporting system to monitor and enforce 

daily compliance with position limit 

rules, Appendix B to Part 36 does not 

establish similar acceptable practices 

that tie large trader reporting 

requirements to the daily monitoring of 

volume accountability levels for 

uncleared SPDCs.59 As noted above, the 

Commission intends expeditiously to 

propose rules and acceptable practices 

that will focus on position limit and 

accountability rules for uncleared 

SPDCs. The Commission intends to 

address CME Group’s concern at that 

time. 

HoustonStreet, an ECM, opined that 

voice brokers must be subject to the 

same reporting requirements as ECMs to 

ensure a level playing field in the OTC 

energy markets and to prevent market 

participants from avoiding transparency 

and disclosure obligations.60 The 

Commission does not have authority 

under the CEA to directly extend the 

reporting rules to voice-brokered 

transactions which are not entered into 

in reliance on a section 2(h)(3) 

exemption and are not otherwise 

fungible with SPDCs for clearing 

purposes. Although the Commission 

does have the authority to require the 

reporting of all OTC and cash market 

positions (including voice-brokered 

transactions) under section 4i of the Act 

when traders’ positions in contracts 

executed on or subject to the rules of a 

registered entity exceeds fixed 

thresholds, such an extension of the 

reporting rules is beyond the scope of 

this rulemaking.61

ISDA comments that the reporting 

rules’ references to clearing members 

‘‘carrying’’ large positions may be 

inappropriate in the context of 

transactions that are executed on ECMs, 

which by definition are principal-toprincipal markets that do not permit 

some forms of intermediation.62 With 

respect to ECMs, the Commission 

reiterates that the large trader reporting 

requirements of part 17 place the 

burden of routine position reporting on 

clearing members that clear positions 

for market participants or clear 

proprietary transactions. The term 

‘‘carry’’ is used in the reporting rules to 

refer to and encompass both positions 

that are cleared for market positions and 

those that are cleared for the benefit of 

proprietary accounts. In either instance, 

the reporting rules view the clearing 

member to be carrying positions that, 

when in excess of the levels delineated 

in rule 15.03, would be reportable as 

part of a special account under part 17 

of the Commission’s rules. The 

continued use of the term ‘‘carry’’ in the 

reporting rules is consistent with the 

nature of ECM transactions. In coming 

to this determination, the Commission 

understands that clearing members that 

clear transactions for ECM market 

participants, although not executing 

SPDC or SPDC-fungible transactions on 

behalf of market participants, are in part 

providing clearing intermediation and 

taking on certain responsibilities that 

may be associated with executing 

brokers. In addition, the reporting rules 

generally need a working vocabulary 

that is flexible enough to cover 

transactions that are executed on 

disparate market structures and subject 

to different clearing methods. Because 

the reporting rules heretofore have not 

been applied to ECM transactions, the 

Commission will be mindful of the 

potential for ambiguities in the 

application of the rules to SPDCs and 

SPDC-fungible transactions, will 

monitor for the specific concerns raised 

by ISDA, and will implement 

appropriate amendments should they be 

required. 

APGA raises a number of concerns 

and offered several recommendations. 

APGA noted that as proposed, the 

reporting rules would not routinely 

provide information on a SPDC trader’s 

large uncleared positions and thus 

would leave a gap in the Commission’s 

ability to collect necessary trader and 

market data. APGA initially notes that 

the transaction reporting requirements 

of new rule 16.02, which the 

Commission intends to use in part for 

market surveillance purposes, may not 

significantly improve the Commission’s 

surveillance capability because of the 

possible inability to link the transactionbased information collected under the 

rule with a particular trader.63 The 

language of new rule 16.02 requires all 

reporting markets, including ECMs with 

SPDCs, to report trade data and related 

order information for each transaction 

executed on the market, and upon 

request to accompany such data with 

information that identifies or facilitates 

the identification of each trader for each 

reported transaction. Since rule 16.02 

only extends the identification 

requirement to markets that 

independently maintain such data, 

APGA is concerned that unless ECMs 

are explicitly required to maintain 

identifying information, the 

Commission will be unable to obtain the 

data it needs to construct an accurate 

picture of a trader’s large positions in 

SPDCs. 

Section 2(h)(5)(B)(ii)(I) of the Act 

requires all ECMs to maintain current 

records that include the name and 

address of each participant that is 

authorized to enter into transactions on 

the facility in reliance on section 2(h)(3) 

of the Act. In addition, final rule 

36.3(b)(1) mandates that ECMs 

demonstrate that they require each 

authorized market participant to be an 

eligible commercial entity and that all 

contracts will be entered into solely on 

a principal-to-principal basis. The rule 

also requires that ECMs have in place a 

program to routinely monitor 

participants’ compliance with these 

requirements. The Commission believes 

that the nature of the section 2(h)(3) 

qualified exemption itself, along with 

the above-mentioned statutory and 

regulatory requirements, mandates that 

ECMs know the identity of each trader 

for each transaction effected by such 

trader on or subject to the rules of the 

electronic trading facility regardless of 

whether such transactions are subject to 

centralized clearing or settled bilaterally 

by the executing traders. New rule 16.02 

applies to all reporting markets, 

including DCMs. DCMs do not, as a 

matter of routine practice, collect 

detailed trader identifying data.64


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not rely on new rule 16.02 to conduct DCM market 

surveillance. 

65APGA CL 07 at 10. 

66 Id. at 9–10. 

67 Id. 

68As noted in text, the Commission is utilizing 

these definitions solely to clarify the scope of its 

reporting rules. It does not intend these definitions 

to have any bearing on determining the boundaries 

of futures and options transactions over which it 

has jurisdiction under the CEA. 

Accordingly, rule 16.02 has been drafted 

to take into consideration current DCM 

practice while permitting the 

Commission to collect detailed trader 

identification data—which ECMs are 

required to maintain—from ECMs that 

are reporting markets. 

APGA also argues that even if the 

Commission did collect identifying data 

under rule 16.02 from ECMs that are 

reporting markets, it still would be 

unable to determine a particular trader’s 

ability to impact market prices without 

routinely obtaining information with 

respect to uncleared contracts that are 

economically related to SPDCs but 

effectuated off of a registered entity. 

Accordingly, APGA urges the 

Commission to use its authority under 

section 4i of the Act to require that large 

traders routinely report such 

transactions.65 Alternatively, APGA 

recommends that the Commission at a 

minimum adopt a formal policy of 

aggressively using its special call 

authority under rule 18.05 to request 

information with respect to such 

uncleared transactions. APGA describes 

this policy as one that could require 

staff to issue special calls for 

information regarding uncleared 

positions for all traders that hold 

positions that are below speculative 

position limits but which are large 

enough to be significant.66

As discussed above in connection 

with HoustonStreet’s comment letter, 

the Commission does have the 

authority, under section 4i of the CEA 

and the special call provisions of part 18 

of its rules, to require traders that hold 

reportable SPDC positions to report 

their OTC (cleared and uncleared) and 

cash market positions. An extension of 

routine reporting requirements to such 

positions is, however, beyond the scope 

of this rulemaking and at odds with a 

long-established large trader reporting 

system that places the initial burden of 

reporting on intermediaries that are 

typically regulated and well-versed in 

complying with routine reporting 

requirements. Any routine reporting 

requirement imposed on traders as a 

class would represent a substantial 

departure from the Commission’s 

current reporting system and would 

necessitate careful study and 

consideration prior to a final 

determination. 

Lastly, APGA recommends that for 

the purpose of regulatory clarity the 

Commission’s special call authority 

under rule 18.05 be amended to refer 

directly to traders that hold or control 

reportable futures or option SPDC 

positions on ECMs operating under 

sections 2(h)(3) through 2(h)(5) of the 

Act.67 The language of rule 18.05 

applies directly to traders with 

reportable positions. A reportable 

position, in turn, is defined in rule 

15.00 to include commodity futures and 

options positions on reporting 

markets—including, with respect to a 

contract that the Commission 

determines to be a SPDC—that exceeds 

the reporting levels established by 

Commission rule 15.03. Accordingly, 

the Commission believes that the plain 

language of rule 18.05, as proposed, is 

directly applicable to traders that hold 

or control reportable futures or options 

SPDC positions on ECMs operating 

pursuant to sections 2(h)(3) through 

2(h)(5) of the Act. 

Changes to the Final Rules. For the 

purpose of regulatory clarity and to 

address generally the concerns raised by 

the commenters with respect to the 

scope of the reporting rules, the 

Commission is defining the terms 

futures and options contract solely for 

the purpose of the reporting rules as 

contracts executed on or subject to the 

rules of a reporting market, and all 

agreements, contracts and transactions 

that are treated by DCOs as fungible 

with such contracts.68 The new 

definition impacts all of the operative 

provisions of parts 15 through 21 and 

reinforces and clarifies the applicability 

of the reporting rules, as proposed and 

adopted, to ECMs that list SPDCs, to 

SPDCs and to transactions that are 

treated as fungible with SPDCs by 

DCOs. 

Rule 16.02 as adopted substitutes for 

the phrase ‘‘for each transaction 

executed on the reporting market,’’ the 

phrase ‘‘for each futures or options 

contract.’’ The Commission recognizes 

that certain transactions that are treated 

as fungible with SPDCs by DCOs may 

not clearly be executed on a reporting 

market, and this change is intended to 

address that point. In addition, final 

rule 15.05, which independently defines 

futures and options transactions, differs 

from the proposed rule in that it 

includes a conforming amendment to 

account for defining the terms futures 

and options contract in final rule 15.00. 

Lastly, the final definition of reportable 

position in rule 15.00 and final rule 

19.00 differ from the proposed 

definitions in that they include 

nonsubstantive editorial amendments. 

III. Related Matters 

A. Cost Benefit Analysis 

Section 15(a) of the Act requires the 

Commission to consider the costs and 

benefits of its actions before issuing new 

regulations under the Act. Section 15(a) 

does not require the Commission to 

quantify the costs and benefits of new 

regulations or to determine whether the 

benefits of adopted rules outweigh their 

costs. Rather, section 15(a) requires the 

Commission to consider the costs and 

benefits of the subject rules. Section 

15(a) further specifies that the costs and 

benefits of the rules shall be evaluated 

in light of five broad areas of market and 

public concern: (1) Protection of market 

participants and the public; (2) 

efficiency, competitiveness and 

financial integrity of the market for 

listed derivatives; (3) price discovery; 

(4) sound risk management practices; 

and (5) other public interest 

considerations. The Commission may, 

in its discretion, give greater weight to 

any one of the five enumerated areas of 

concern and may, in its discretion, 

determine that, notwithstanding its 

costs, a particular rule is necessary and 

appropriate to protect the public interest 

or to effectuate any of the provisions or 

to accomplish any of the purposes of the 

Act. 

The final rules implement the 

Reauthorization Act by establishing an 

enhanced level of oversight of ECMs 

and ECM market participants. As a 

result, in certain cases, it is more 

appropriate to attribute the compliance 

costs imposed by the proposed rules to 

requirements that directly arise from the 

provisions of the Reauthorization Act. 

Under the final rules, all DCMs, 

DTEFs (unless the Commission 

determines otherwise) and ECMs with 

SPDCs are required to provide daily 

transaction and related data reports to 

the Commission under rule 16.02. The 

costs associated with the daily 

transaction and related data reporting 

requirements of final rule 16.02, 

however, are ameliorated by the fact 

that DCMs have voluntarily provided 

transactional data to the Commission on 

a daily basis since the mid-1980s. The 

Commission estimates that DCMs would 

account for the substantial majority of 

the markets that likely would be 

required to file such reports under final 

rule 16.02. 

The final rules extend the reporting 

requirements of parts 15 to 21 of the 

Commission’s rules to ECMs with 

SPDCs and to transactions in SPDCs and 

SPDC-fungible contracts. The 


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69 47 FR 18618 (April 30, 1982). 

70 73 FR 75888 at 75900. 

71 44 U.S.C. 3501–3520. 

72 73 FR 75888 at 75903. 

requirements of the adopted rules are 

substantial, involve the submission of 

daily reports, and impose burdens on 

market participants that clear and trade 

SPDCs and SPDC-fungible contracts. 

More specifically, the adopted rules 

require ECMs with SPDCs to provide 

clearing member reports for SPDCs and 

SPDC-fungible contracts to the 

Commission pursuant to CFTC rule 

16.00. Final rule 16.01 requires ECMs to 

submit to the Commission and publicly 

disseminate option deltas and 

aggregated trading data on a daily basis 

for such transactions. Pursuant to rule 

17.00, ECM clearing members that clear 

SPDCs and SPDC-fungible contracts are 

required to file reports with the 

Commission for large positions when 

such positions meet or exceed the 

contract reporting levels of rule 15.03. 

Under rule 17.01, clearing members also 

must identify the owners of reportable 

positions on Form 102. SPDC traders 

likewise are subject to the special call 

provisions of final part 18 of the 

Commission’s rules for reportable 

positions, and clearing members, SPDC 

traders, and ECMs listing SPDCs are 

each subject to the special call 

provisions of final part 21 of the 

Commission’s rules. 

The costs associated with the 

requirements of the reporting rules 

should be reduced in part by the 

substantial overlap between the persons 

that already are subject to the reporting 

rules and the persons that are subject to 

the reporting rules pursuant to the 

Commission’s final rules. For example, 

there is substantial overlap between 

traders of the natural gas contract on ICE 

and traders of the same contract on 

NYMEX. With respect to clearing 

members of ICE, for example, such 

persons often are clearing members or 

affiliates of clearing members of 

NYMEX. 

The benefits of extending the 

reporting rules to SPDCs and SPDCfungible contracts are substantial. As an 

initial matter, it is important to note that 

a significant focus of the 

Reauthorization Act concerned 

amending the CEA with the specific 

intent of giving the CFTC authority to 

extend its reporting rules to SPDC 

markets and market participants. To the 

extent that contracts listed on ECMs 

serve a significant price discovery 

function, the regulatory value of 

enhanced oversight, through the 

application of the reporting rules to 

such contracts, is elevated. The 

Commission analyzes the information 

funneled to it by the requirements of the 

reporting rules to conduct financial, 

market and trade practice surveillance. 

Without such information, the ability of 

the Commission to discharge its 

regulatory responsibilities—including 

the responsibilities to prevent market 

manipulations and commodity price 

distortions and ensure the financial 

integrity of the listed derivatives 

marketplace—would be compromised. 

The bulk of the costs that are imposed 

by the requirements of final rule 36.3 

relate to significant and increased 

submission of information 

requirements. For example, under final 

rule 36.3(b)(1), all ECMs are required to 

file certain basic information (including 

contract terms and conditions) with, 

and to make certain demonstrations 

related to compliance with the terms of 

the CEA section 2(h)(3) exemption to, 

the Commission. Final rule 36.3(b)(2) 

requires ECMs to submit transactional 

information on a weekly basis to the 

Commission for certain traded contracts 

that are not SPDCs and would not be 

subject to the terms of final rule 16.02. 

Likewise, final rule 36.3(c)(4) imposes a 

substantial cost on ECMs with SPDCs as 

a result of the information that such 

markets are required to submit to the 

Commission. 

In enacting the Reauthorization Act, 

Congress directed the Commission to 

take an active role in determining 

whether contracts listed by ECMs 

qualify as SPDCs. Accordingly, the 

Commission has adopted enhanced 

informational requirements for ECMs 

with respect to contracts that have not 

been identified as SPDCs specifically for 

the purpose of acquiring the information 

that it needs to discharge this newlymandated responsibility. In addition, 

the substantial information submission 

and demonstration requirements that 

are imposed on ECMs with SPDCs have 

been adopted because ECMs with 

SPDCs, by statute, acquire certain of the 

self-regulatory responsibilities of fully 

regulated DCMs. The submission 

requirements associated with final rule 

36.3(c)(4) are therefore tailored to enable 

the Commission to ensure that ECMs 

with SPDCs, as entities with the 

elevated status of a registered entity 

under the Act, are in compliance with 

the statutory terms of the core principles 

of section 2(h)(7)(C) of the Act. As with 

the final reporting rules, the primary 

benefit to the public of final rule 36.3 is 

that its requirements enable the 

Commission to discharge its statutory 

responsibility for monitoring for the 

presence of SPDCs and extending its 

oversight to the trading of SPDCs. 

B. Regulatory Flexibility Act 

The Regulatory Flexibility Act 

(‘‘RFA’’), 5 U.S.C. 601 et seq., requires 

that agencies consider the impact of 

their rules on small businesses. As 

noted in the proposing release, the 

requirements related to the proposed 

amendments fall mainly on registered 

entities, exchanges, futures commission 

merchants, clearing members, foreign 

brokers and large traders. The 

Commission previously has determined 

that exchanges, futures commission 

merchants and large traders are not 

‘‘small entities’’ for purposes of the 

RFA.69 Similarly, clearing members, 

foreign brokers and traders would be 

subject to the final rules only if clearing, 

carrying or holding large positions. 

Accordingly, the Acting Chairman, on 

behalf of the Commission, certified in 

the NPRM pursuant to 5 U.S.C. 605(b) 

that the actions to be taken herein will 

not have a significant economic impact 

on a substantial number of small 

entities.70

C. Paperwork Reduction Act 

An agency may not conduct or 

sponsor, and a person is not required to 

respond to, a collection of information 

unless it displays a currently valid 

control number. Final rule 16.02, the 

Commission’s reporting rules, and 

certain provisions of final rule 36.3 

result in information collection 

requirements within the meaning of the 

Paperwork Reduction Act of 1995 

(‘‘PRA’’).71 The Commission submitted 

the proposing release along with 

supporting documentation to the Office 

of Management and Budget (‘‘OMB’’) for 

review in accordance with 44 U.S.C. 

3507(d) and 5 CFR 1320.11. The 

Commission requested that OMB 

approve, and with respect to rules 36.3 

and 16.02 assign a new control number 

for, the collections of information 

covered by the proposing release. The 

information collection burdens created 

by the Commission’s proposed rules, 

which were discussed in detail in the 

proposing release, are identical to the 

collective information collection 

burdens of the final rules. 

The Commission invited the public 

and other Federal agencies to comment 

on any aspect of the information 

collection requirements discussed 

above.72 Pursuant to 44 U.S.C. 

3506(c)(2)(B), the Commission solicited 

comments in order to: (i) Evaluate 

whether the proposed collections of 

information were necessary for the 

proper performance of the functions of 

the Commission, including whether the 

information will have practical utility; 

(ii) evaluate the accuracy of the 

Commission’s estimates of the burden of 


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the proposed collections of information; 

(iii) determine whether there are ways 

to enhance the quality, utility and 

clarity of the information to be 

collected; and (iv) minimize the burden 

of the collections of information on 

those who are to respond, including 

through the use of automated collection 

techniques or other forms of information 

technology. The Commission received 

no comment on its burden estimates or 

on any other aspect of the information 

collection requirements contained in its 

proposing release. 

The title for the collection of 

information under rule 36.3 is 

‘‘Regulation 36.3—Exempt Commercial 

Market Submission Requirements.’’ 

OMB has approved and assigned OMB 

control number 3038–0060 to this 

collection of information. The 

requirements of Commission rule 36.3 

were covered previously by OMB 

control number 3038–0054 which 

applied to both EBOTs and ECMs. As a 

result of the Reauthorization Act, 

EBOTs and ECMs must comply with 

additional, divergent regulatory 

requirements. Accordingly, the 

Commission sought a new and separate 

control number for ECMs operating in 

compliance with the requirements of 

rule 36.3. As a result of OMB’s approval 

of a control number specifically for 

ECMs, the Commission intends to 

submit the necessary documentation to 

OMB to enable it to apply OMB control 

number 3038–0054 exclusively to 

EBOTs. 

The final amendments to parts 15 to 

21 of the Commission’s rules affect two 

existing collections of information titled 

‘‘Large Trader Reports’’ (OMB control 

number 3038–0009) and ‘‘Futures 

Volume, Open Interest, Price, 

Deliveries, and Exchanges of Futures’’ 

(OMB control number 3038–0012). OMB 

has approved the amendments made to 

these two collections of information. 

Finally, the title for the collection of 

information of new rule 16.02 is 

‘‘Regulation 16.02—Daily Trade and 

Supporting Data Reports.’’ OMB has 

approved assigned OMB control number 

3038–0061 to this collection of 

information. 

List of Subjects 

17 CFR Part 15 

Brokers, Commodity futures, 

Reporting and recordkeeping 

requirements 

17 CFR Part 16 

Commodity futures, Reporting and 

recordkeeping requirements. 

17 CFR Part 17 

Brokers, Commodity futures, 

Reporting and recordkeeping 

requirements 

17 CFR Part 18 

Commodity futures, Reporting and 

recordkeeping requirements. 

17 CFR Part 19 

Commodity futures, Cottons, Grains, 

Reporting and recordkeeping 

requirements. 

17 CFR Part 21 

Brokers, Commodity futures, 

Reporting and recordkeeping 

requirements. 

17 CFR Part 36 

Commodity futures, Commodity 

Futures Trading Commission 

17 CFR Part 40 

Commodity futures, Contract markets, 

Designation application, Reporting and 

recordkeeping requirements. 

In consideration of the foregoing, and 

pursuant to the authority contained in 

the Act, as amended by the 

Reauthorization Act of 2008, Title XIII 

of Public Law 110–246, 122 Stat. 1624 

(2008), and in particular sections 2, 5, 

6, 6a, 6c, 6f, 6g, 6i, 6k, 6m, 6n, 7, 7a, 

9, 12a, 19, and 21, the Commodity 

Futures Trading Commission hereby 

amends 17 CFR parts 15, 16, 17, 18, 19, 

21, 36 and 40 as follows: 

PART 15—REPORTS—GENERAL 

PROVISIONS 

■ 1. The authority citation for part 15 is 

revised to read as follows: 

Authority: 7 U.S.C. 2, 5, 6a, 6c, 6f, 6g, 6i, 

6k, 6m, 6n, 7, 7a, 9, 12a, 19, and 21, as 

amended by Title XIII of the Food, 

Conservation and Energy Act of 2008, Public 

Law 110–246, 122 Stat. 1624 (June 18, 2008). 

■ 2. Section 15.00 is revised to read as 

follows: 

§ 15.00 Definitions of terms used in parts 

15 to 21 of this chapter. 

As used in parts 15 to 21 of this 

chapter: 

(a) Cash or Spot, when used in 

connection with any commodity, means 

the actual commodity as distinguished 

from a futures or options contract in 

such commodity. 

(b) Clearing member means any 

person who is a member of, or enjoys 

the privilege of clearing trades in his 

own name through, the clearing 

organization of a designated contract 

market, registered derivatives 

transaction execution facility, or 

registered entity under section 1a(29) of 

the Act. 

(c) Clearing organization means the 

person or organization which acts as a 

medium for clearing transactions in 

commodities for future delivery or 

commodity option transactions, or for 

effecting settlements of contracts for 

future delivery or commodity option 

transactions, for and between members 

of any designated contract market, 

registered derivatives transaction 

execution facility or registered entity 

under section 1a(29) of the Act. 

(d) Compatible data processing media 

means data processing media approved 

by the Commission or its designee. 

(e) Customer means ‘‘customer’’ (as 

defined in § 1.3(k) of this chapter) and 

‘‘options customer’’ (as defined in 

§ 1.3(jj) of this chapter). 

(f) Customer trading program means 

any system of trading offered, 

sponsored, promoted, managed or in 

any other way supported by, or 

affiliated with, a futures commission 

merchant, an introducing broker, a 

commodity trading advisor, a 

commodity pool operator, or other 

trader, or any of its officers, partners or 

employees, and which by agreement, 

recommendations, advice or otherwise, 

directly or indirectly controls trading 

done and positions held by any other 

person. The term includes, but is not 

limited to, arrangements where a 

program participant enters into an 

expressed or implied agreement not 

obtained from other customers and 

makes a minimum deposit in excess of 

that required of other customers for the 

purpose of receiving specific advice or 

recommendations which are not made 

available to other customers. The term 

includes any program which is of the 

character of, or is commonly known to 

the trade as, a managed account, guided 

account, discretionary account, 

commodity pool or partnership account. 

(g) Discretionary account means a 

commodity futures or commodity 

option trading account for which buying 

or selling orders can be placed or 

originated, or for which transactions can 

be effected, under a general 

authorization and without the specific 

consent of the customer, whether the 

general authorization for such orders or 

transactions is pursuant to a written 

agreement, power of attorney, or 

otherwise. 

(h) Exclusively self-cleared contract 

means a cleared contract for which no 

persons, other than a reporting market 

and its clearing organization, are 

permitted to accept any money, 

securities, or property (or extend credit 

in lieu thereof) to margin, guarantee, or 

secure any trade. 

(i) Foreign clearing member means a 

‘‘clearing member’’ (as defined by 


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paragraph (b) of this section) who 

resides or is domiciled outside of the 

United States, its territories or 

possessions. 

(j) Foreign trader means any trader (as 

defined in paragraph (s) of this section) 

who resides or is domiciled outside of 

the United States, its territories or 

possessions. 

(k) Futures, futures contract, future 

delivery or contract for future delivery, 

means any contract for the purchase or 

sale of any commodity for future 

delivery that is executed on or subject 

to the rules of a reporting market, 

including all agreements, contracts and 

transactions that are treated by a 

clearing organization as fungible with 

such contracts. 

(l) Guided account program means 

any customer trading program which 

limits trading to the purchase or sale of 

a particular contract for future delivery 

of a commodity or a particular 

commodity option that is advised or 

recommended to the participant in the 

program. 

(m) Managed account program means 

a customer trading program which 

includes two or more discretionary 

accounts traded pursuant to a common 

plan, advice or recommendations. 

(n) Open contracts means ‘‘open 

contracts’’ (as defined in § 1.3(t) of this 

chapter) and commodity option 

positions held by any person on or 

subject to the rules of a board of trade 

which have not expired, been exercised, 

or offset. 

(o) Option, options, option contract, 

or options contract, unless specifically 

provided otherwise, means any contract 

for the purchase or sale of a commodity 

option that is executed on or subject to 

the rules of a reporting market, 

including all agreements, contracts and 

transactions that are treated by a 

clearing organization as fungible with 

such contracts. 

(p) Reportable position means: 

(1) For reports specified in parts 17, 

18 and § 19.00(a)(2) and (a)(3) of this 

chapter any open contract position that 

at the close of the market on any 

business day equals or exceeds the 

quantity specified in § 15.03 of this part 

in either: 

(i) Any one futures of any commodity 

on any one reporting market, excluding 

futures contracts against which notices 

of delivery have been stopped by a 

trader or issued by the clearing 

organization of a reporting market; or 

(ii) Long or short put or call options 

that exercise into the same future of any 

commodity, or long or short put or call 

options for options on physicals that 

have identical expirations and exercise 

into the same physical, on any one 

reporting market. 

(2) For the purposes of reports 

specified in § 19.00(a)(1) of this chapter, 

any combined futures and futuresequivalent option open contract 

position as defined in part 150 of this 

chapter in any one month or in all 

months combined, either net long or net 

short in any commodity on any one 

reporting market, excluding futures 

positions against which notices of 

delivery have been stopped by a trader 

or issued by the clearing organization of 

a reporting market, which at the close of 

the market on the last business day of 

the week exceeds the net quantity limit 

in spot, single or in all-months fixed in 

§ 150.2 of this chapter for the particular 

commodity and reporting market. 

(q) Reporting market means a 

designated contract market, registered 

entity under section 1a(29) of the Act, 

and unless determined otherwise by the 

Commission with respect to the facility 

or a specific contract listed by the 

facility, a registered derivatives 

transaction execution facility. 

(r) Special account means any 

commodity futures or option account in 

which there is a reportable position. 

(s) Trader means a person who, for his 

own account or for an account which he 

controls, makes transactions in 

commodity futures or options, or has 

such transactions made. 

■ 3. Section 15.01 is amended by 

revising paragraph (a) to read as follows: 

§ 15.01 Persons required to report. 

* * * * * 

(a) Reporting markets—as specified in 

parts 16, 17, and 21 of this chapter. 

* * * * * 

■ 4. Section 15.05 is amended by 

revising the heading and paragraph (a); 

and by adding paragraph (i) to read as 

follows: 

§ 15.05 Designation of agent for foreign 

persons. 

(a) For purposes of this section, the 

term ‘‘futures contract’’ means any 

contract for the purchase or sale of any 

commodity for future delivery, or a 

contract identified under section 

36.3(b)(1)(i) as traded in reliance on the 

exemption in section 2(h)(3) of the Act, 

traded or executed on or subject to the 

rules of any designated contract market 

or registered derivatives transaction 

execution facility, or for the purposes of 

paragraph (i) of this section, a reporting 

market (including all agreements, 

contracts and transactions that are 

treated by a clearing organization as 

fungible with such contracts); the term 

‘‘option contract’’ means any contract 

for the purchase or sale of a commodity 

option, or as applicable, any other 

instrument subject to the Act pursuant 

to section 5a(g) of the Act, traded or 

executed on or subject to the rules of 

any designated contract market or 

registered derivatives transaction 

execution facility, or for the purposes of 

paragraph (i) of this section, a reporting 

market (including all agreements, 

contracts and transactions that are 

treated by a clearing organization as 

fungible with such contracts); the term 

‘‘customer’’ means any person for whose 

benefit a foreign broker makes or causes 

to be made any futures contract or 

option contract; and the term 

‘‘communication’’ means any summons, 

complaint, order, subpoena, special call, 

request for information, or notice, as 

well as any other written document or 

correspondence. 

* * * * * 

(i) Any reporting market that is a 

registered entity under section 1a(29)(E) 

of the Act that permits a foreign clearing 

member or foreign trader to clear or 

effect contracts, agreements or 

transactions on the trading facility or its 

clearing organization, shall be deemed 

to be the agent of the foreign clearing 

member or foreign trader with respect to 

any such contracts, agreements or 

transactions cleared or executed by the 

foreign clearing member or the foreign 

trader. Service or delivery of any 

communication issued by or on behalf 

of the Commission to the reporting 

market shall constitute valid and 

effective service upon the foreign 

clearing member or foreign trader. The 

reporting market which has been served 

with, or to which there has been 

delivered, a communication issued by 

or on behalf of the Commission to a 

foreign clearing member or foreign 

trader shall transmit the communication 

promptly and in a manner which is 

reasonable under the circumstances, or 

in a manner specified by the 

Commission in the communication, to 

the foreign clearing member or foreign 

trader. 

(1) It shall be unlawful for any such 

reporting market to permit a foreign 

clearing member or a foreign trader to 

clear or effect contracts, agreements or 

transactions on the facility or its 

clearing organization unless the 

reporting market prior thereto informs 

the foreign clearing member or foreign 

trader of the requirements of this 

section. 

(2) The requirements of paragraphs (i) 

and (i)(1) of this section shall not apply 

to any contracts, transactions or 

agreements if the foreign clearing 

member or foreign trader has duly 

executed and maintains in effect a 


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written agency agreement in compliance 

with this paragraph with a person 

domiciled in the United States and has 

provided a copy of the agreement to the 

reporting market prior to effecting or 

clearing any contract, agreement or 

transaction on the trading facility or its 

clearing organization. This agreement 

must authorize the person domiciled in 

the United States to serve as the agent 

of the foreign clearing member or 

foreign trader for the purposes of 

accepting delivery and service of all 

communications issued by or on behalf 

of the Commission to the foreign 

clearing member or the foreign trader 

and must provide an address in the 

United States where the agent will 

accept delivery and service of 

communications from the Commission. 

This agreement must be filed with the 

Commission by the reporting market 

prior to permitting the foreign clearing 

member or the foreign trader to clear or 

effect any transactions in futures or 

option contracts. Unless otherwise 

specified by the Commission, the 

agreements required to be filed with the 

Commission shall be filed with the 

Secretary of the Commission at Three 

Lafayette Centre, 1155 21st Street, NW., 

Washington, DC 20581. 

(3) A foreign clearing member or a 

foreign trader shall notify the 

Commission immediately if the written 

agency agreement is terminated, 

revoked, or is otherwise no longer in 

effect. If the reporting market knows or 

should know that the agreement has 

expired, been terminated, or is no longer 

in effect, the reporting market shall 

notify the Secretary of the Commission 

immediately. If the written agency 

agreement expires, terminates, or is not 

in effect, the reporting market, the 

foreign clearing member and the foreign 

trader shall be subject to the provisions 

of paragraphs (i) and (i)(1) of this 

section. 

* * * * * 

■ 5. Section 15.06 is added to read as 

follows: 

§ 15.06 Delegations. 

(a) The Commission hereby delegates, 

until the Commission orders otherwise, 

the authority to approve data processing 

media, as referenced in § 15.00(d), for 

data submissions to the Director of the 

Division of Market Oversight, to be 

exercised by such Director or by such 

other employee or employees of such 

Director as designated from time to time 

by the Director. The Director may 

submit to the Commission for its 

consideration any matter which has 

been delegated in this paragraph. 

Nothing in this paragraph prohibits the 

Commission, at its election, from 

exercising the authority delegated in 

this paragraph. 

(b) [Reserved] 

PART 16—REPORTS BY REPORTING 

MARKETS 

■ 6. The authority citation for part 16 is 

revised to read as follows: 

Authority: 7 U.S.C. 2, 6a, 6c, 6g, 6i, 7, 7a 

and 12a, as amended by Title XIII of the 

Food, Conservation and Energy Act of 2008, 

Public Law 110–246, 122 Stat. 1624 (June 18, 

2008), unless otherwise noted. 

■ 7. Section 16.01 is amended by 

revising paragraph (e) to read as follows: 

§ 16.01 Trading volume, open contracts, 

prices, and critical dates. 

* * * * * 

(e) Publication of recorded 

information. (1) Reporting markets shall 

make the information in paragraph (a) of 

this section readily available to the 

news media and the general public 

without charge, in a format that readily 

enables the consideration of such data, 

no later than the business day following 

the day to which the information 

pertains. The information in paragraphs 

(a)(4) through (a)(6) of this section shall 

be made readily available in a format 

that presents the information together. 

(2) Reporting markets shall make the 

information in paragraphs (b)(1) and 

(b)(2) of this section readily available to 

the news media and the general public, 

and the information in paragraph (b)(3) 

of this section readily available to the 

general public, in a format that readily 

enables the consideration of such data, 

no later than the business day following 

the day to which the information 

pertains. 

* * * * * 

■ 8. Section 16.02 is added to read as 

follows: 

§ 16.02 Daily trade and supporting data 

reports. 

Reporting markets shall provide trade 

and supporting data reports to the 

Commission on a daily basis. Such 

reports shall include transaction-level 

trade data and related order information 

for each futures or options contract. 

Reports shall also include time and 

sales data, reference files and other 

information as the Commission or its 

designee may require. All reports must 

be submitted at the time, and in the 

manner and format, and with the 

specific content specified by the 

Commission or its designee. Upon 

request, such information shall be 

accompanied by data that identifies or 

facilitates the identification of each 

trader for each transaction or order 

included in a submitted trade and 

supporting data report if the reporting 

market maintains such data. 

■ 9. Section 16.07 is amended by 

revising the heading and introductory 

text; and by adding paragraph (c) to read 

as follows: 

§ 16.07 Delegation of authority to the 

Director of the Division of Market Oversight. 

The Commission hereby delegates, 

until the Commission orders otherwise, 

the authority set forth in paragraphs (a), 

(b) and (c) of this section to the Director 

of the Division of Market Oversight, to 

be exercised by such Director or by such 

other employee or employees of such 

Director as may be designated from time 

to time by the Director. The Director of 

the Division of Market Oversight may 

submit to the Commission for its 

consideration any matter which has 

been delegated in this paragraph. 

Nothing in this paragraph prohibits the 

Commission, at its election, from 

exercising the authority delegated in 

this paragraph. 

* * * * * 

(c) Pursuant to § 16.02, the authority 

to determine the specific content of any 

daily trade and supporting data report, 

request that such reports be 

accompanied by data that identifies or 

facilitates the identification of each 

trader for each transaction or order 

included in a submitted trade and 

supporting data report, and establish the 

time for the submission of and the 

manner and format of such reports. 

PART 17—REPORTS BY REPORTING 

MARKETS, FUTURES COMMISSION 

MERCHANTS, CLEARING MEMBERS, 

AND FOREIGN BROKERS 

■ 10. The authority citation for part 17 

is revised to read as follows: 

Authority: 7 U.S.C. 2, 6a, 6c, 6d, 6f, 6g, 6i, 

7, 7a and 12a, as amended by Title XIII of the 

Food, Conservation and Energy Act of 2008, 

Public Law No. 110–246, 122 Stat. 1624 (June 

18, 2008), unless otherwise noted. 

■ 11. Revise the heading of part 17 as set 

forth above. 

■ 12. Section 17.00 is amended by the 

heading of paragraph (a) and paragraphs 

(a)(1), (b)(1), and (f); and by adding and 

reserving paragraph (c) to read as 

follows: 

§ 17.00 Information to be furnished by 

futures commission merchants, clearing 

members and foreign brokers. 

(a) Special accounts—reportable 

futures and options positions, delivery 

notices, and exchanges of futures. (1) 

Each futures commission merchant, 

clearing member and foreign broker 

shall submit a report to the Commission 


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for each business day with respect to all 

special accounts carried by the futures 

commission merchant, clearing member 

or foreign broker, except for accounts 

carried on the books of another futures 

commission merchant or clearing 

member on a fully-disclosed basis. 

Except as otherwise authorized by the 

Commission or its designee, such report 

shall be made in accordance with the 

format and coding provisions set forth 

in paragraph (g) of this section. The 

report shall show each futures position, 

separately for each reporting market and 

for each future, and each put and call 

options position separately for each 

reporting market, expiration and strike 

price en each special account as of the 

close of market on the day covered by 

the report and, in addition, the quantity 

of exchanges of futures for commodities 

or for derivatives positions and the 

number of delivery notices issued for 

each such account by the clearing 

organization of a reporting market and 

the number stopped by the account. The 

report shall also show all positions in 

all contract months and option 

expirations of that same commodity on 

the same reporting market for which the 

special account is reportable. 

* * * * * 

(b) * * * 

(1) Accounts of eligible entities— 

Accounts of eligible entities as defined 

in § 150.1 of this chapter that are traded 

by an independent account controller 

shall, together with other accounts 

traded by the independent account 

controller or in which the independent 

controller has a financial interest, be 

considered a single account. 

* * * * * 

(c) [Reserved] 

* * * * * 

(f) Omnibus accounts. If the total open 

long positions or the total open short 

positions for any future of a commodity 

carried in an omnibus account is a 

reportable position, the omnibus 

account is in Special Account status and 

shall be reported by the futures 

commission merchant or foreign broker 

carrying the account in accordance with 

paragraph (a) of this section. 

* * * * * 

■ 13. Section 17.03 is amended by 

revising the heading, the introductory 

text, and paragraphs (a) and (b) to read 

as follows: 

§ 17.03 Delegation of authority to the 

Director of the Division of Market Oversight. 

The Commission hereby delegates, 

until the Commission orders otherwise, 

the authority set forth in the paragraphs 

below to the Director of the Division of 

Market Oversight to be exercised by 

such Director or by such other employee 

or employees of such Director as 

designated from time to time by the 

Director. The Director of the Division of 

Market Oversight may submit to the 

Commission for its consideration any 

matter which has been delegated in this 

paragraph. Nothing in this paragraph 

prohibits the Commission, at its 

election, from exercising the authority 

delegated in this paragraph. 

(a) Pursuant to § 17.00(a) and (h), the 

authority to determine whether futures 

commission merchants, clearing 

members and foreign brokers can report 

the information required under 

paragraphs (a) and (h) of § 17.00 on 

series ’01 forms or using some other 

format upon a determination that such 

person is unable to report the 

information using the format, coding 

structure or electronic data transmission 

procedures otherwise required. 

(b) Pursuant to § 17.02, the authority 

to instruct or approve the time at which 

the information required under §§ 17.00 

and 17.01 must be submitted by futures 

commission merchants, clearing 

members and foreign brokers provided 

that such persons are unable to meet the 

requirements set forth in §§ 17.01(g) and 

17.02. 

* * * * * 

■ 14. Section 17.04 is amended by 

revising the heading, paragraph (a), and 

paragraph (b)(1)(ii) to read as follows: 

§ 17.04 Reporting omnibus accounts to 

reporting firms. 

(a) Any futures commission merchant, 

clearing member or foreign broker who 

establishes an omnibus account with 

another futures commission merchant, 

clearing member or foreign broker shall 

report to that futures commission 

merchant, clearing member or foreign 

broker the total open long positions and 

the total open short positions in each 

future of a commodity and, for 

commodity options transactions, the 

total open long put options, the total 

open short put options, the total open 

long call options, and the total open 

short call options for each commodity 

options expiration date and each strike 

price in such account at the close of 

trading each day. The information 

required by this section shall be 

reported in sufficient time to enable the 

futures commission merchant, clearing 

member or foreign broker with whom 

the omnibus account is established to 

comply with the regulations of this part 

and the reporting requirements 

established by the reporting markets. 

(b) * * * 

(1) * * * 

(ii) The account is an omnibus 

account of another futures commission 

merchant, clearing member or foreign 

broker; or 

* * * * * 

PART 18—REPORTS BY TRADERS 

■ 15. The authority citation for part 18 

is revised to read as follows: 

Authority: 7 U.S.C. 2, 4, 5, 6a, 6c, 6f, 6g, 

6i, 6k, 6m, 6n, 12a and 19, as amended by 

Title XIII of the Food, Conservation and 

Energy Act of 2008, Public Law 110–246, 122 

Stat. 1624 (June 18, 2008); 5 U.S.C. 552 and 

552(b), unless otherwise noted. 

■ 16. Section 18.01 is revised to read as 

follows: 

§ 18.01 Interest in or control of several 

accounts. 

If any trader holds, has a financial 

interest in or controls positions in more 

than one account, whether carried with 

the same or with different futures 

commission merchants or foreign 

brokers, all such positions and accounts 

shall be considered as a single account 

for the purpose of determining whether 

such trader has a reportable position 

and, unless instructed otherwise in the 

special call to report under § 18.00 for 

the purpose of reporting. 

■ 17. Section 18.04 is amended by 

revising paragraphs (a)(7) and (b)(3)(i) to 

read as follows: 

§ 18.04 Statement of reporting trader. 

* * * * * 

(a) * * * 

(7) The names and locations of all 

futures commission merchants, clearing 

members, introducing brokers, and 

foreign brokers through whom accounts 

owned or controlled by the reporting 

trader are carried or introduced at the 

time of filing a Form 40, if such 

accounts are carried through more than 

one futures commission merchant, 

clearing member or foreign broker or 

carried through more than one office of 

the same futures commission merchant, 

clearing member or foreign broker, or 

introduced by more than one 

introducing broker clearing accounts 

through the same futures commission 

merchant, and the name of the reporting 

trader’s account executive at each firm 

or office of the firm. 

* * * * * 

(b) * * * 

(3) * * * 

(i) Commercial activity associated 

with use of the option or futures market 

(such as and including production, 

merchandising or processing of a cash 

commodity, asset or liability risk 

management by depository institutions, 

or security portfolio risk management). 

* * * * * 


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■ 18. Section 18.05 is amended by 

revising paragraphs (a)(2), (a)(3), and 

(a)(4) to read as follows: 

§ 18.05 Maintenance of books and records. 

(a) * * * 

(2) Over the counter or pursuant to 

sections 2(d), 2(g) or 2(h)(1)–(2) of the 

Act or part 35 of this chapter; 

(3) On exempt commercial markets 

operating pursuant to sections 2(h)(3)– 

(5) of the Act; 

(4) On exempt boards of trade 

operating pursuant to section 5d of the 

Act; and 

* * * * * 

PART 19—REPORTS BY PERSONS 

HOLDING BONA FIDE HEDGE 

POSITIONS PURSUANT TO § 1.3(z) OF 

THIS CHAPTER AND BY MERCHANTS 

AND DEALERS IN COTTON 

■ 19. The authority citation for part 19 

is revised to read as follows: 

Authority: 7 U.S.C. 6g(a), 6i, and 12a(5), as 

amended by Title XIII of the Food, 

Conservation and Energy Act of 2008, Public 

Law 110–246, 122 Stat. 1624 (June 18, 2008), 

unless otherwise noted. 

■ 20. Section 19.00 is amended by 

revising paragraph (a) to read as follows: 

§ 19.00 General provisions. 

(a) Who must file series ’04 reports. 

The following persons are required to 

file series ’04 reports: 

(1) All persons holding or controlling 

futures and option positions that are 

reportable pursuant to § 15.00(p)(2) of 

this chapter and any part of which 

constitute bona fide hedging positions 

as defined in § 1.3(z) of this chapter; 

(2) Merchants and dealers of cotton 

holding or controlling positions for 

futures delivery in cotton that are 

reportable pursuant to § 15.00(p)(1)(i) of 

this chapter, or 

(3) All persons holding or controlling 

positions for future delivery that are 

reportable pursuant to § 15.00(p)(1) of 

this chapter who have received a special 

call for series ’04 reports from the 

Commission or its designee. Filings in 

response to a special call shall be made 

within one business day of receipt of the 

special call unless otherwise specified 

in the call. For the purposes of this 

paragraph, the Commission hereby 

delegates to the Director of the Division 

of Market Oversight, or to such other 

person designated by the Director, 

authority to issue calls for series ’04 

reports. 

* * * * * 

■ 21. Section 19.01 is amended by 

revising paragraph (b) introductory text 

and paragraph (b)(1) to read as follows: 

§ 19.01 Reports on stocks and fixed price 

purchases and sales pertaining to futures 

positions in wheat, corn, oats, soybeans, 

soybean oil, soybean meal or cotton. 

* * * * * 

(b) Time and place of filing reports— 

Except for reports filed in response to 

special calls made under § 19.00(a)(3), 

each report shall be made monthly, as 

of the close of business on the last 

Friday of the month, and filed at the 

appropriate Commission office specified 

in paragraph (b)(1) or (2) of this section 

not later than the second business day 

following the date of the report in the 

case of the 304 report and not later than 

the third business day following the 

date of the report in the case of the 204 

report. Reports may be transmitted by 

facsimile or, alternatively, information 

on the form may be reported to the 

appropriate Commission office by 

telephone and the report mailed to the 

same office, not later than midnight of 

its due date. 

(1) CFTC Form 204 reports with 

respect to transactions in wheat, corn, 

oats, soybeans, soybean meal and 

soybean oil should be sent to the 

Commission’s office in Chicago, IL, 

unless otherwise specifically authorized 

by the Commission or its designee. 

* * * * * 

PART 21—SPECIAL CALLS 

■ 22. The authority citation for part 21 

is revised to read as follows: 

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

6g, 6i, 6k, 6m, 6n, 7, 7a, 12a, 19 and 21, as 

amended by Title XIII of the Food, 

Conservation and Energy Act of 2008, Public 

Law 110–246, 122 Stat. 1624 (June 18, 2008); 

5 U.S.C. 552 and 552(b), unless otherwise 

noted. 

■ 23. Section 21.01 is revised to read as 

follows: 

§ 21.01 Special calls for information on 

controlled accounts from futures 

commission merchants, clearing members 

and introducing brokers. 

Upon call by the Commission, each 

futures commission merchant, clearing 

member and introducing broker shall 

file with the Commission the names and 

addresses of all persons who, by power 

of attorney or otherwise, exercise 

trading control over any customer’s 

account in commodity futures or 

commodity options on any reporting 

market. 

■ 24. Section 21.02 is amended by 

revising the heading, introductory text, 

and paragraphs (f) and (i) to read as 

follows: 

§ 21.02 Special calls for information on 

open contracts in accounts carried or 

introduced by futures commission 

merchants, clearing members, members of 

reporting markets, introducing brokers, and 

foreign brokers. 

Upon special call by the Commission 

for information relating to futures or 

option positions held or introduced on 

the dates specified in the call, each 

futures commission merchant, clearing 

member, member of a reporting market, 

introducing broker, or foreign broker, 

and, in addition, for option information, 

each reporting market, shall furnish to 

the Commission the following 

information concerning accounts of 

traders owning or controlling such 

futures or option positions, except for 

accounts carried on a fully disclosed 

basis by another futures commission 

merchant or clearing member, as may be 

specified in the call: 

* * * * * 

(f) The number of open futures or 

option positions introduced or carried 

in each account, as specified in the call; 

* * * * * 

(i) As applicable, the following 

identifying information: 

(1) Whether a trader who holds 

commodity futures or option positions 

is classified as a commercial or as a 

noncommercial trader for each 

commodity futures or option contract; 

(2) Whether the open commodity 

futures or option contracts are classified 

as speculative, spreading (straddling), or 

hedging; and 

(3) Whether any of the accounts in 

question are omnibus accounts and, if 

so, whether the originator of the 

omnibus account is another futures 

commission merchant, clearing member 

or foreign broker. 

* * * * * 

■ 25. Section 21.03 is amended as 

follows: 

■ A. By revising the heading and 

paragraphs (a), (b), (c) and (d); 

■ B. By revising paragraph (e) 

introductory text and paragraphs (e)(1) 

introductory text, (e)(1)(iv) and (e)(1)(v); 

and 

■ C. By revising paragraphs (f), (g) and 

(h) to read as follows: 

§ 21.03 Selected special calls-duties of 

foreign brokers, domestic and foreign 

traders, futures commission merchants, 

clearing members, introducing brokers, and 

reporting markets. 

(a) For purposes of this section, the 

term ‘‘accounts of a futures commission 

merchant, clearing member or foreign 

broker’’ means all open contracts and 

transactions in futures and options on 

the records of the futures commission 

merchant, clearing member or foreign 


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broker; the term ‘‘beneficial interest’’ 

means having or sharing in any rights, 

obligations or financial interest in any 

futures or options account; the term 

‘‘customer’’ means any futures 

commission merchant, clearing member, 

introducing broker, foreign broker, or 

trader for whom a futures commission 

merchant, clearing member or reporting 

market that is a registered entity under 

section 1a(29) of the Act makes or 

causes to be made a futures or options 

contract. Paragraphs (e), (g) and (h) of 

this section shall not apply to any 

futures commission merchant, clearing 

member or customer whose books and 

records are open at all times to 

inspection in the United States by any 

representative of the Commission. 

(b) It shall be unlawful for a futures 

commission merchant to open a futures 

or options account or to effect 

transactions in futures or options 

contracts for an existing account, or for 

an introducing broker to introduce such 

an account, for any customer for whom 

the futures commission merchant or 

introducing broker is required to 

provide the explanation provided for in 

§ 15.05(c) of this chapter, or for a 

reporting market that is a registered 

entity under section 1a(29)(E) of the Act, 

to cause to open an account in a 

contract traded in reliance on the 

exemption in section 2(h)(3) of the Act 

or to cause to be effected transactions in 

a contract traded in reliance on the 

exemption in section 2(h)(3) of the Act 

for an existing account for any person 

that is a foreign clearing member or 

foreign trader, until the futures 

commission merchant, introducing 

broker, clearing member, or reporting 

market has explained fully to the 

customer, in any manner that such 

persons deem appropriate, the 

provisions of this section. 

(c) Upon a determination by the 

Commission that information 

concerning accounts may be relevant 

information in enabling the Commission 

to determine whether the threat of a 

market manipulation, corner, squeeze, 

or other market disorder exists on any 

reporting market, the Commission may 

issue a call for information from a 

futures commission merchant, clearing 

member, introducing broker or customer 

pursuant to the provisions of this 

section. 

(d) In the event the call is issued to 

a foreign broker, foreign clearing 

member or foreign trader, its agent, 

designated pursuant to § 15.05 of this 

chapter, shall, if directed, promptly 

transmit calls made by the Commission 

pursuant to this section by electronic 

mail or a similarly expeditious means of 

communication. 

(e) The futures commission merchant, 

clearing member, introducing broker, or 

customer to whom the special call is 

issued must provide to the Commission 

the information specified below for the 

commodity, reporting market and 

delivery months or option expiration 

dates named in the call. Such 

information shall be filed at the place 

and within the time specified by the 

Commission. 

(1) For each account of a futures 

commission merchant, clearing member, 

introducing broker, or foreign broker, 

including those accounts in the name of 

the futures commission merchant, 

clearing member or foreign broker, on 

the dates specified in the call issued 

pursuant to this section, such persons 

shall provide the Commission with the 

following information: 

* * * * * 

(iv) Whether the account is carried for 

and in the name of another futures 

commission merchant, clearing member, 

introducing broker, or foreign broker; 

and 

(v) For the accounts which are not 

carried for and in the name of another 

futures commission merchant, clearing 

member, introducing broker, or foreign 

broker, the name and address of any 

other person who controls the trading of 

the account, and the name and address 

of any person who has a ten percent or 

more beneficial interest in the account. 

* * * * * 

(f) If the Commission has reason to 

believe that any person has not 

responded as required to a call made 

pursuant to this section, the 

Commission in writing may inform the 

reporting market specified in the call 

and that reporting market shall prohibit 

the execution of, and no futures 

commission merchant, clearing member, 

introducing broker, or foreign broker 

shall effect a transaction in connection 

with trades on the reporting market and 

in the months or expiration dates 

specified in the call for or on behalf of 

the futures commission merchant or 

customer named in the call, unless such 

trades offset existing open contracts of 

such futures commission merchant or 

customer. 

(g) Any person named in a special call 

that believes he or she is or may be 

adversely affected or aggrieved by action 

taken by the Commission under 

paragraph (f) of this section shall have 

the opportunity for a prompt hearing 

after the Commission acts. That person 

may immediately present in writing to 

the Commission for its consideration 

any comments or arguments concerning 

the Commission’s action and may 

present for Commission consideration 

any documentary or other evidence that 

person deems appropriate. Upon 

request, the Commission may, in its 

discretion, determine that an oral 

hearing be conducted to permit the 

further presentation of information and 

views concerning any matters by any or 

all such persons. The oral hearing may 

be held before the Commission or any 

person designated by the Commission, 

which person shall cause all evidence to 

be reduced to writing and forthwith 

transmit the same and a recommended 

decision to the Commission. The 

Commission’s directive under paragraph 

(f) of this section shall remain in effect 

unless and until modified or withdrawn 

by the Commission. 

(h) If, during the course of or after the 

Commission acts pursuant to paragraph 

(f) of this section, the Commission 

determines that it is appropriate to 

undertake a proceeding pursuant to 

section 6(c) of the Act, the Commission 

shall issue a complaint in accordance 

with the requirements of section 6(c), 

and, upon further determination by the 

Commission that the conditions 

described in paragraph (c) of this 

section still exist, a hearing pursuant to 

section 6(c) of the Act shall commence 

no later than five business days after 

service of the complaint. In the event 

the person served with the complaint 

under section 6(c) of the Act has, prior 

to the commencement of the hearing 

under section 6(c) of the Act, sought a 

hearing pursuant to paragraph (g) of this 

section and the Commission has 

determined to accord him such a 

hearing, the two hearings shall be 

conducted simultaneously. Nothing in 

this section shall preclude the 

Commission from taking other 

appropriate action under the Act or the 

Commission’s regulations thereunder, 

including action under section 6(c) of 

the Act, regardless of whether the 

conditions described in paragraph (c) of 

this section still exist, and no ruling 

issued in the course of a hearing 

pursuant to paragraph (g) or this 

paragraph shall constitute an estoppel 

against the Commission in any other 

action. 

* * * * * 

■ 26. Section 21.04 is revised to read as 

follows: 

§ 21.04 Delegation of authority to the 

Director of the Division of Market Oversight. 

The Commission hereby delegates, 

until the Commission orders otherwise, 

the special call authority set forth in 

§§ 21.01 and 21.02 to the Director of the 

Division of Market Oversight to be 

exercised by such Director or by such 

other employee or employees of such 

Director as designated from time to time 


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by the Director. The Director of the 

Division of Market Oversight may 

submit to the Commission for its 

consideration any matter which has 

been delegated in this paragraph. 

Nothing in this section shall be deemed 

to prohibit the Commission, at its 

election, from exercising the authority 

delegated in this section to the Director. 

PART 36—EXEMPT MARKETS 

■ 27. The authority citation for part 36 

is revised to read as follows: 

Authority: 7 U.S.C. 2, 2(h)(7), 6, 6c and 

12a, as amended by Title XIII of the Food, 

Conservation and Energy Act of 2008, Public 

Law 110–246, 122 Stat. 1624 (June 18, 2008). 

■ 28. Section 36.3 is amended by 

revising paragraph (b) to read as follows: 

§ 36.3 Exempt commercial markets. 

* * * * * 

(b) Required information. 

(1) All electronic trading facilities. A 

facility operating in reliance on the 

exemption in section 2(h)(3) of the Act, 

initially and on an on-going basis, must: 

(i) Provide the Commission with the 

terms and conditions, as defined in 

§ 40.1(i) of this chapter and product 

descriptions for each agreement, 

contract or transaction listed by the 

facility in reliance on the exemption set 

forth in section 2(h)(3) of the Act, as 

well as trading conventions, 

mechanisms and practices; 

(ii) Provide the Commission with 

information explaining how the facility 

meets the definition of ‘‘trading facility’’ 

contained in section 1a(33) of the Act 

and provide the Commission with 

access to the electronic trading facility’s 

trading protocols, in a format specified 

by the Commission; 

(iii) Demonstrate to the Commission 

that the facility requires, and will 

require, with respect to all current and 

future agreements, contracts and 

transactions, that each participant 

agrees to comply with all applicable 

laws; that the authorized participants 

are ‘‘eligible commercial entities’’ as 

defined in section 1a(11) of the Act; that 

all agreements, contracts and 

transactions are and will be entered into 

solely on a principal-to-principal basis; 

and that the facility has in place a 

program to routinely monitor 

participants’ compliance with these 

requirements; 

(iv) At the request of the Commission, 

provide any other information that the 

Commission, in its discretion, deems 

relevant to its determination whether an 

agreement, contract, or transaction 

performs a significant price discovery 

function; and 

(v) File with the Commission 

annually, no later than the end of each 

calendar year, a completed copy of 

CFTC Form 205—Exempt Commercial 

Market Annual Certification. The 

information submitted in Form 205 

shall include: 

(A) A statement indicating whether 

the electronic trading facility continues 

to operate under the exemption; and 

(B) A certification that affirms the 

accuracy of and/or updates the 

information contained in the previous 

Notification of Operation as an Exempt 

Commercial Market. 

(2) Electronic trading facilities trading 

or executing agreements, contracts or 

transactions other than significant price 

discovery contracts. In addition to the 

requirements of paragraph (b)(1) of this 

section, a facility operating in reliance 

on the exemption in section 2(h)(3) of 

the Act, with respect to agreements, 

contracts or transactions that have not 

been determined to perform significant 

price discovery function, initially and 

on an on-going basis, must: 

(i) Identify to the Commission those 

agreements, contracts and transactions 

conducted on the electronic trading 

facility with respect to which it intends, 

in good faith, to rely on the exemption 

in section 2(h)(3) of the Act, and which 

averaged five trades per day or more 

over the most recent calendar quarter; 

and, with respect to such agreements, 

contracts and transactions, either: 

(A) Submit to the Commission, in a 

form and manner acceptable to the 

Commission, a report for each business 

day. Each such report shall be 

electronically transmitted weekly, 

within such time period as is acceptable 

to the Commission after the end of the 

week to which the data applies, and 

shall show for each such agreement, 

contract or transaction executed the 

following information: 

(1) The underlying commodity, the 

delivery or price-basing location 

specified in the agreement, contract or 

transaction maturity date, whether it is 

a financially settled or physically 

delivered instrument, and the date of 

execution, time of execution, price, and 

quantity; 

(2) Total daily volume and, if cleared, 

open interest; 

(3) For an option instrument, in 

addition to the foregoing information, 

the type of option (i.e., call or put) and 

strike prices; and 

(4) Such other information as the 

Commission may determine; or 

(B) Provide to the Commission, in a 

form and manner acceptable to the 

Commission, electronic access to those 

transactions conducted on the electronic 

trading facility in reliance on the 

exemption in section 2(h)(3) of the Act, 

and meeting the average five trades per 

day or more threshold test of this 

section, which would allow the 

Commission to compile the information 

described in paragraph (b)(2)(i)(A) of 

this section and create a permanent 

record thereof. 

(ii) Maintain a record of allegations or 

complaints received by the electronic 

trading facility concerning instances of 

suspected fraud or manipulation in 

trading activity conducted in reliance 

on the exemption set forth in section 

2(h)(3) of the Act. The record shall 

contain the name of the complainant, if 

provided, date of the complaint, market 

instrument, substance of the allegations, 

and name of the person at the electronic 

trading facility who received the 

complaint; 

(iii) Provide to the Commission, in the 

form and manner prescribed by the 

Commission, a copy of the record of 

each complaint received pursuant to 

paragraph (b)(2)(ii) of this section that 

alleges, or relates to, facts that would 

constitute a violation of the Act or 

Commission regulations. Such copy 

shall be provided to the Commission no 

later than 30 calendar days after the 

complaint is received. Provided, 

however, that in the case of a complaint 

alleging, or relating to, facts that would 

constitute an ongoing fraud or market 

manipulation under the Act or 

Commission rules, such copy shall be 

provided to the Commission within 

three business days after the complaint 

is received; and 

(iv) Provide to the Commission on a 

quarterly basis, within 15 calendar days 

of the close of each quarter, a list of each 

agreement, contract or transaction 

executed on the electronic trading 

facility in reliance on the exemption set 

forth in section 2(h)(3) of the Act and 

indicate for each such agreement, 

contract or transaction the contract 

terms and conditions, the contract’s 

average daily trading volume, and the 

most recent open interest figures. 

(3) Electronic trading facilities trading 

or executing significant price discovery 

contracts. In addition to the 

requirements of paragraph (b)(1) of this 

section, if the Commission determines 

that a facility operating in reliance on 

the exemption in section 2(h)(3) of the 

Act trades or executes an agreement, 

contract or transaction that performs a 

significant price discovery function, the 

facility must, with respect to any 

significant price discovery contract, 

publish and provide to the Commission 

the information required by § 16.01 of 

this chapter. 

(4) Delegation of authority. The 

Commission hereby delegates, until the 


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Commission orders otherwise, the 

authority to determine the form and 

manner of submitting the required 

information under paragraphs (b)(1) 

through (3) of this section, to the 

Director of the Division of Market 

Oversight and such members of the 

Commission’s staff as the Director may 

designate. The Director may submit to 

the Commission for its consideration 

any matter that has been delegated by 

this paragraph. Nothing in this 

paragraph prohibits the Commission, at 

its election, from exercising the 

authority delegated in this paragraph. 

(5) Special calls. (i) All information 

required upon special call of the 

Commission under section 2(h)(5)(B)(iii) 

of the Act shall be transmitted at the 

time and to the office of the Commission 

as may be specified in the call. 

(ii) The Commission hereby delegates, 

until the Commission orders otherwise, 

the authority to make special calls as set 

forth in section 2(h)(5)(B)(iii) of the Act 

to the Directors of the Divisions of 

Market Oversight, the Division of 

Clearing and Intermediary Oversight, 

and the Division of Enforcement to be 

exercised by each such Director or by 

such other employee or employees as 

the Director may designate. The 

Directors may submit to the 

Commission for its consideration any 

matter that has been delegated in this 

paragraph. Nothing in this paragraph 

prohibits the Commission, at its 

election, from exercising the authority 

delegated in this paragraph. 

(6) Subpoenas to foreign persons. A 

foreign person whose access to an 

electronic trading facility is limited or 

denied at the direction of the 

Commission based on the Commission’s 

belief that the foreign person has failed 

timely to comply with a subpoena as 

provided under section 2(h)(5)(C)(ii) of 

the Act shall have an opportunity for a 

prompt hearing under the procedures 

provided in § 21.03(b) and (h) of this 

chapter. 

(7) Prohibited representation. An 

electronic trading facility relying upon 

the exemption in section 2(h)(3) of the 

Act, with respect to agreements, 

contracts or transactions that are not 

significant price discovery contracts, 

shall not represent to any person that it 

is registered with, designated, 

recognized, licensed or approved by the 

Commission. 

* * * * * 

■ 29. Section 36.3 is amended by 

revising paragraph (c) to read as follows: 

§ 36.3 Exempt commercial markets. 

* * * * * 

(c) Significant price discovery 

contracts—(1) Criteria for significant 

price discovery determination. The 

Commission may determine, in its 

discretion, that an electronic trading 

facility operating a market in reliance on 

the exemption in section 2(h)(3) of the 

Act performs a significant price 

discovery function for transactions in 

the cash market for a commodity 

underlying any agreement, contract or 

transaction executed or traded on the 

facility. In making such a determination, 

the Commission shall consider, as 

appropriate: 

(i) Price linkage. The extent to which 

the agreement, contract or transaction 

uses or otherwise relies on a daily or 

final settlement price, or other major 

price parameter, of a contract or 

contracts listed for trading on or subject 

to the rules of a designated contract 

market or a derivatives transaction 

execution facility, or a significant price 

discovery contract traded on an 

electronic trading facility, to value a 

position, transfer or convert a position, 

cash or financially settle a position, or 

close out a position; 

(ii) Arbitrage. The extent to which the 

price for the agreement, contract or 

transaction is sufficiently related to the 

price of a contract or contracts listed for 

trading on or subject to the rules of a 

designated contract market or 

derivatives transaction execution 

facility, or a significant price discovery 

contract or contracts trading on or 

subject to the rules of an electronic 

trading facility, so as to permit market 

participants to effectively arbitrage 

between the markets by simultaneously 

maintaining positions or executing 

trades in the contracts on a frequent and 

recurring basis; 

(iii) Material price reference. The 

extent to which, on a frequent and 

recurring basis, bids, offers, or 

transactions in a commodity are directly 

based on, or are determined by 

referencing, the prices generated by 

agreements, contracts or transactions 

being traded or executed on the 

electronic trading facility; 

(iv) Material liquidity. The extent to 

which the volume of agreements, 

contracts or transactions in the 

commodity being traded on the 

electronic trading facility is sufficient to 

have a material effect on other 

agreements, contracts or transactions 

listed for trading on or subject to the 

rules of a designated contract market, a 

derivatives transaction execution 

facility, or an electronic trading facility 

operating in reliance on the exemption 

in section 2(h)(3) of the Act; 

(v) Other material factors [Reserved]. 

(2) Notification of possible significant 

price discovery contract conditions. An 

electronic trading facility operating in 

reliance on section 2(h)(3) of the Act 

shall promptly notify the Commission, 

and such notification shall be 

accompanied by supporting information 

or data concerning any contract that: 

(i) Averaged five trades per day or 

more over the most recent calendar 

quarter; and 

(ii) (A) For which the exchange sells 

its price information regarding the 

contract to market participants or 

industry publications; or 

(B) Whose daily closing or settlement 

prices on 95 percent or more of the days 

in the most recent quarter were within 

2.5 percent of the contemporaneously 

determined closing, settlement or other 

daily price of another agreement, 

contract or transaction. 

(3) Procedure for significant price 

discovery determination. Before making 

a final price discovery determination 

under this paragraph, the Commission 

shall publish notice in the Federal 

Register that it intends to undertake a 

determination with respect to whether a 

particular agreement, contract or 

transaction performs a significant price 

discovery function and to receive 

written data, views and arguments 

relevant to its determination from the 

electronic trading facility and other 

interested persons. Any such written 

data, views and arguments shall be filed 

with the Secretary of the Commission, 

in the form and manner specified by the 

Commission, within 30 calendar days of 

publication of notice in the Federal 

Register or within such other time 

specified by the Commission. After 

prompt consideration of all relevant 

information, the Commission shall, 

within a reasonable period of time after 

the close of the comment period, issue 

an order explaining its determination 

whether the agreement, contract or 

transaction executed or traded by the 

electronic trading facility performs a 

significant price discovery function 

under the criteria specified in paragraph 

(c)(1)(i) through (v) of this section. 

(4) Compliance with core principles. 

Following the issuance of an order by 

the Commission that the electronic 

trading facility executes or trades an 

agreement, contract or transaction that 

performs a significant price discovery 

function, the electronic trading facility 

must demonstrate, with respect to that 

agreement, contract or transaction, 

compliance with the Core Principles 

under section 2(h)(7)(C) of the Act and 

the applicable provisions of this part. If 

the Commission’s order represents the 

first time it has determined that one of 

the electronic trading facility’s 

agreements, contracts or transactions 

performs a significant price discovery 

function, the facility must submit a 


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written demonstration of compliance 

with the Core Principles within 90 

calendar days of the date of the 

Commission’s order. For each 

subsequent determination by the 

Commission that the electronic trading 

facility has an additional agreement, 

contract or transaction that performs a 

significant price discovery function, the 

facility must submit a written 

demonstration of compliance with the 

Core Principles within 30 calendar days 

of the date of the Commission’s order. 

Attention is directed to Appendix B of 

this part for guidance on and acceptable 

practices for complying with the Core 

Principles. Submissions demonstrating 

how the electronic trading facility 

complies with the Core Principles with 

respect to its significant price discovery 

contract must be filed with the Secretary 

of the Commission at its Washington, 

DC headquarters. Submissions must 

include the following: 

(i) A written certification that the 

significant price discovery contract(s) 

complies with the Act and regulations 

thereunder; 

(ii) A copy of the electronic trading 

facility’s rules (as defined in § 40.1 of 

this chapter) and any technical manuals, 

other guides or instructions for users of, 

or participants in, the market, including 

minimum financial standards for 

members or market participants. 

Subsequent rule changes must be 

certified by the electronic trading 

facility pursuant to section 5c(c) of the 

Act and § 40.6 of this chapter. The 

electronic trading facility also may 

request Commission approval of any 

rule changes pursuant to section 5c(c) of 

the Act and § 40.5 of this chapter; 

(iii) A description of the trading 

system, algorithm, security and access 

limitation procedures with a timeline 

for an order from input through 

settlement, and a copy of any system 

test procedures, tests conducted, test 

results and contingency or disaster 

recovery plans; 

(iv) A copy of any documents 

pertaining to or describing the 

electronic trading system’s legal status 

and governance structure, including 

governance fitness information; 

(v) An executed or executable copy of 

any agreements or contracts entered into 

or to be entered into by the electronic 

trading facility, including partnership or 

limited liability company, third-party 

regulatory service, or member or user 

agreements, that enable or empower the 

electronic trading facility to comply 

with a Core Principle; 

(vi) A copy of any manual or other 

document describing, with specificity, 

the manner in which the trading facility 

will conduct trade practice, market and 

financial surveillance; 

(vii) To the extent that any of the 

items in paragraphs (c)(4)(ii) through 

(vi) of this section raise issues that are 

novel, or for which compliance with a 

Core Principle is not self-evident, an 

explanation of how that item satisfies 

the applicable Core Principle or 

Principles. 

The electronic trading facility must 

identify with particularity information 

in the submission that will be subject to 

a request for confidential treatment 

pursuant to § 145.09 of this chapter. The 

electronic trading facility must follow 

the procedures specified in § 40.8 of this 

chapter with respect to any information 

in its submission for which confidential 

treatment is requested. 

(5) Determination of compliance with 

core principles. The Commission shall 

take into consideration differences 

between cleared and uncleared 

significant price discovery contracts 

when reviewing the implementation of 

the Core Principles by an electronic 

trading facility. The electronic facility 

also has reasonable discretion in 

accounting for differences between 

cleared and uncleared significant price 

discovery contracts when establishing 

the manner in which it complies with 

the Core Principles. 

(6) Information relating to compliance 

with core principles. Upon request by 

the Commission, an electronic trading 

facility trading a significant price 

discovery contract shall file with the 

Commission a written demonstration, 

containing such supporting data, 

information and documents, in the form 

and manner and within such time as the 

Commission may specify, that the 

electronic trading facility is in 

compliance with one or more Core 

Principles as specified in the request, or 

that is otherwise requested by the 

Commission to enable the Commission 

to satisfy its obligations under the Act. 

(7) Enforceability. An agreement, 

contract or transaction entered into on 

or pursuant to the rules of an electronic 

trading facility trading or executing a 

significant price discovery contract shall 

not be void, voidable, subject to 

rescission or otherwise invalidated or 

rendered unenforceable as a result of: 

(i) A violation by the electronic 

trading facility of the provisions of 

section 2(h) of the Act or this part; or 

(ii) Any Commission proceeding to 

alter or supplement a rule, term or 

condition under section 8a(7) of the Act, 

to declare an emergency under section 

8a(9) of the Act, or any other proceeding 

the effect of which is to alter, 

supplement or require an electronic 

trading facility to adopt a specific term 

or condition, trading rule or procedure, 

or to take or refrain from taking a 

specific action. 

(8) Procedures for vacating a 

determination of a significant price 

discovery function—(i) By the electronic 

trading facility. An electronic trading 

facility that executes or trades an 

agreement, contract or transaction that 

the Commission has determined 

performs a significant price discovery 

function under paragraph (c)(3) of this 

section may petition the Commission to 

vacate that determination. The petition 

shall demonstrate that the agreement, 

contract or transaction no longer 

performs a significant price discovery 

function under the criteria specified in 

paragraph (c)(1), and has not done so for 

at least the prior 12 months. An 

electronic trading facility shall not 

petition for a vacation of a significant 

price discovery determination more 

frequently than once every 12 months 

for any individual contract. 

(ii) By the Commission. The 

Commission may, on its own initiative, 

begin vacation proceedings if it believes 

that an agreement, contract or 

transaction has not performed a 

significant price discovery function for 

at least the prior 12 months. 

(iii) Procedure. Before making a final 

determination whether an agreement, 

contract or transaction has ceased to 

perform a significant price discovery 

function, the Commission shall publish 

notice in the Federal Register that it 

intends to undertake such a 

determination and to receive written 

data, views and arguments relevant to 

its determination from the electronic 

trading facility and other interested 

persons. Written submissions shall be 

filed with the Secretary of the 

Commission in the form and manner 

specified by the Commission, within 30 

calendar days of publication of notice in 

the Federal Register or within such 

other time specified by the Commission. 

After consideration of all relevant 

information, the Commission shall issue 

an order explaining its determination 

whether the agreement, contract or 

transaction has ceased to perform a 

significant price discovery function and, 

if so, vacating its prior order. If such an 

order issues, and the Commission 

subsequently determines, on its own 

initiative or after notification by the 

electronic trading facility, that the 

agreement, contract or transaction that 

was subject to the vacation order again 

performs a significant price discovery 

function, the electronic trading facility 

must comply with the Core Principles 

within 30 calendar days of the date of 

the Commission’s order. 


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(iv) Automatic vacation of significant 

price discovery determination. 

Regardless of whether a proceeding to 

vacate has been initiated, any significant 

price discovery contract that has no 

open interest and in which no trading 

has occurred for a period of 12 complete 

and consecutive calendar months shall, 

without further proceedings, no longer 

be considered to be a significant price 

discovery contract. 

■ 30. Section 36.3 is amended by adding 

new paragraph (d) to read as follows: 

(d) Commission Review. The 

Commission shall, at least annually, 

evaluate as appropriate agreements, 

contracts or transactions conducted on 

an electronic trading facility in reliance 

on the exemption provided in section 

2(h)(3) of the Act to determine whether 

they serve a significant price discovery 

function as described in § (d)(1) above. 

■ 31. Add a new Appendix A to Part 36 

to read as follows: 

Appendix A to Part 36—Guidance on 

Significant Price Discovery Contracts 

1. Section 2(h)(7) of the CEA specifies four 

factors that the Commission must consider, 

as appropriate, in making a determination 

that a contract is performing a significant 

price discovery function. The four factors 

prescribed by the statute are: Price Linkage; 

Arbitrage; Material Price Reference; and 

Material Liquidity. 

2. Not all listed factors must be present to 

support a determination that a contract 

performs a significant price discovery 

function. Moreover, the statutory language 

neither prioritizes the factors nor specifies 

the degree to which a significant price 

discovery contract must conform to the 

various factors. Congress has indicated that it 

intends that the Commission should not 

make a determination that an agreement, 

contract or transaction performs a significant 

price discovery function on the basis of the 

Price Linkage factor unless the agreement, 

contract or transaction also has sufficient 

volume to impact other regulated contracts or 

to become an independent price reference or 

benchmark that is regularly utilized by the 

public. The Commission believes that the 

Arbitrage and Material Price Reference 

factors can be considered separately from 

each other. That is, the Commission could 

make a determination that a contract serves 

a significant price discovery function based 

on the presence of one of these factors and 

the absence of the other. The presence of any 

of these factors, however, would not 

necessarily be sufficient to establish the 

contract as a significant price discovery 

contract. The fourth factor, Liquidity, would 

be considered in conjunction with the 

arbitrage and linkage factors as a significant 

amount of liquidity presumably would be 

necessary for a contract to perform a 

significant price discovery function in 

conjunction with these factors. 

3. These factors do not lend themselves to 

a mechanical checklist or formulaic analysis. 

Accordingly, this guidance is intended to 

illustrate which factors, or combinations of 

factors, the Commission will look to when 

determining that a contract is performing a 

significant price discovery function, and 

under what circumstances the presence of a 

particular factor or factors would be 

sufficient to support such a determination. 

(A) MATERIAL LIQUIDITY—The extent to 

which the volume of agreements, contracts or 

transactions in the commodity being traded 

on the electronic trading facility is sufficient 

to have a material effect on other agreements, 

contracts or transactions listed for trading on 

or subject to the rules of a designated 

contract market, a derivatives transaction 

execution facility, or an electronic trading 

facility operating in reliance on the 

exemption in section 2(h)(3) of the Act. 

1. Liquidity is a broad concept that 

captures the ability to transact immediately 

with little or no price concession. 

Traditionally, objective measures of trading 

such as volume or open interest have been 

used as measures of liquidity. So, for 

example, a market in which trades occur 

multiple times per minute at prices that 

differ by only fractions of a cent normally 

would be considered highly liquid, since 

presumably a trader could quickly execute a 

trade at a price that was approximately the 

same as the price for other recently executed 

trades. Other factors also will affect the 

characterization of liquidity, such as whether 

a large trade—e.g., 100 contracts versus 1 

contract—could be executed without a 

significant price concession. For example, 

having to wait a day to sell 1000 bushels of 

corn may be considered an illiquid market 

while waiting a day to sell a home may be 

considered quite liquid. Thus, quantifying 

the levels of immediacy and price concession 

that would define material liquidity may 

differ from one market or commodity to 

another. 

2. The Commission believes that material 

liquidity alternatively can be identified by 

the impact liquidity exhibits through 

observed prices. In markets where material 

liquidity exists, a more or less continuous 

stream of prices can be observed and the 

prices should be similar. For example, if the 

trading of a contract occurs on average five 

times a day, there will be on average five 

observed prices for the contract per day. If 

the market is liquid in terms of traders 

having to make little in the way of price 

concessions to execute these trades, the 

prices of this contract should be similar to 

those observed for similar or related contracts 

traded in liquid markets elsewhere. Thus, in 

making determinations that contracts have 

material liquidity, the Commission will look 

to transaction prices, both in terms of how 

often prices are observed and the extent to 

which observed prices tend to correlate with 

other contemporaneous prices. 

3. The Commission anticipates that 

material liquidity will frequently be a 

consideration in evaluating whether a 

contract is a significant price discovery 

contract; however, there may be 

circumstances in which other factors so 

dominate the conclusion that a contract is 

serving a significant price discovery function 

that a finding of material liquidity in the 

contract would not be necessary. 

Circumstances in which this might arise are 

discussed with respect to the assessment of 

other factors below. 

4. Finally, material liquidity itself would 

not be sufficient to make a determination that 

a contract is a significant price discovery 

contract, but combined with other factors it 

can serve as a guidepost indicating which 

contracts are functioning as significant price 

discovery contracts. As further discussed 

below, material liquidity, as reflected 

through the prices of linked or arbitraged 

contracts, will be a primary consideration in 

determining whether such contracts are 

significant price discovery contracts. 

(B) PRICE LINKAGE—The extent to which 

the agreement, contract or transaction uses 

or otherwise relies on a daily or final 

settlement price, or other major price 

parameter, of a contract or contracts listed 

for trading on or subject to the rules of a 

designated contract market or a derivatives 

transaction execution facility, or a significant 

price discovery contract traded on an 

electronic trading facility, to value a position, 

transfer or convert a position, cash or 

financially settle a position, or close out a 

position. 

1. A price-linked contract is a contract that 

relies on a contract traded on another trading 

facility to settle, value or otherwise offset the 

price-linked contract. The link may involve 

a one-to-one linkage, in that the value of the 

linked contract is based on a single contract’s 

price, or it may involve multiple contracts. 

An example of a multiple contract linkage 

might be where the settlement price is 

calculated as an index of prices obtained 

from a basket of contracts traded on other 

exchanges. 

2. For a linked contract, the mere fact that 

a contract is linked to another contract will 

not be sufficient to support a determination 

that a contract performs a significant price 

discovery function. To assess whether such 

a determination is warranted, the 

Commission will examine the relationship 

between transaction prices of the linked 

contract and the prices of the referenced 

contract(s). The Commission believes that 

where material liquidity exists, prices for the 

linked contract would be observed to be 

substantially the same as or move 

substantially in conjunction with the prices 

of the referenced contract(s). Where such 

price characteristics are observed on an 

ongoing basis, the Commission would expect 

to determine that the linked contract is a 

significant price discovery contract. 

3. As an example, where the Commission 

has observed price linkage, it will next 

consider whether transactions were occurring 

on a daily basis for the linked contract in 

material volumes. (Conversely, where 

volume has increased noticeably in a 

particular contract, the Commission would 

look for linkage) The ultimate level of 

volume that would be considered material for 

purposes of deeming a contract a significant 

price discovery contract will likely differ 

from one contract to another depending on 

the characteristics of the underlying 

commodity and the overall size of the 

physical market in which it is traded. At a 

minimum, however, the Commission will 

consider a linked contract which has volume 


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equal to 5% of the volume of trading in the 

contract to which it is linked to have 

sufficient volume potentially to be deemed a 

significant price discovery contract. 

4. In combination with this volume level, 

the Commission will also examine the 

relationship between prices of the linked 

contract and the contract to which it is linked 

to determine whether a contract is serving a 

significant price discovery function. As a 

threshold, the Commission will consider a 

2.5 percent price range for 95 percent of 

contemporaneously determined closing, 

settlement, or other daily prices over the 

most recent quarter to be sufficiently close 

for a linked contract potentially to be deemed 

a significant price discovery contract. For 

example, if, over the most recent quarter, it 

was found that 95 percent of the closing, 

settlement, or other daily prices of the 

contract, which have been calculated using 

transaction prices, were within 2.5 percent of 

the contemporaneously determined closing, 

settlement, or other daily prices of a contract 

to which it was linked, the Commission 

potentially would consider the contract to 

perform a significant price discovery 

function. 

(C) ARBITRAGE CONTRACTS—The extent 

to which the price for the agreement, contract 

or transaction is sufficiently related to the 

price of a contract or contracts listed for 

trading on or subject to the rules of a 

designated contract market or derivatives 

transaction execution facility, or a significant 

price discovery contract or contracts trading 

on or subject to the rules of an electronic 

trading facility, so as to permit market 

participants to effectively arbitrage between 

the markets by simultaneously maintaining 

positions or executing trades in the contracts 

on a frequent and recurring basis. 

1. Arbitrage contracts are those contracts 

that can be combined with other contracts to 

exploit expected economic relationships in 

anticipation of a profit. In assessing whether 

a contract can be incorporated into an 

arbitrage strategy, the Commission will weigh 

the terms and conditions of a contract in 

comparison to contracts that potentially 

could be used in an arbitrage strategy; will 

consult with industry or other sources 

regarding a contract’s viability in an arbitrage 

strategy; and will rely on direct observation 

confirming the use of a contract in arbitrage 

strategies. 

2. As with linked contracts, the mere fact 

that a contract could be employed in an 

arbitrage strategy will not be sufficient to 

make a determination that a contract is a 

significant price discovery contract. In 

addition, the level of liquidity will be 

considered. To assess whether designation as 

a significant price discovery contract is 

warranted, the Commission will examine the 

relationship between transaction prices of an 

arbitrage contract and the prices of the 

contract(s) to which it is related. The 

Commission believes that where material 

liquidity exists, prices for the arbitrage 

contract would be observed to move 

substantially in conjunction with the prices 

of the related contract(s) to which it is 

economically linked. Where such price 

characteristics are observed on an ongoing 

basis, it is likely that the linked contract 

performs a significant price discovery 

function. 

3. The Commission will apply the same 

threshold liquidity and price relationship 

standards for arbitrage contracts as it does for 

linked contracts. That is, the Commission 

will view the average of five trades per day 

or more threshold as the level of activity that 

would potentially meet the material volume 

criterion. With respect to prices, the 

Commission will consider an arbitrage 

contract potentially to be a significant price 

discovery contract if, over the most recent 

quarter, greater than 95 percent of the closing 

or settlement prices of the contract, which 

have been calculated using transaction 

prices, fall within 2.5 percent of the closing 

or settlement price of the contract or 

contracts to which it could be arbitraged. 

(D) MATERIAL PRICE REFERENCE—The 

extent to which, on a frequent and recurring 

basis, bids, offers or transactions in a 

commodity are directly based on, or are 

determined by referencing, the prices 

generated by agreements, contracts or 

transactions being traded or executed on the 

electronic trading facility. 

1. The Commission will rely on one of two 

sources of evidence—direct or indirect—to 

determine that the price of a contract was 

being used as a material price reference and, 

therefore, serving a significant price 

discovery function. The primary source of 

direct evidence is that cash market bids, 

offers or transactions are directly based on, 

or quoted at a differential to, the prices 

generated on the market on a frequent and 

recurring basis. The Commission expects that 

normally only contracts with material 

liquidity will be referenced by the cash 

market; however, the Commission notes that 

it may be possible for a contract to have very 

low liquidity and yet still be used as a price 

reference. In such cases, the simple fact that 

participants in the underlying cash market 

broadly have elected to use the contract price 

as a price reference would be a strong 

indicator that the contract is a significant 

price discovery contract. 

2. In evaluating a contract’s price discovery 

role as a directly referenced price source, the 

Commission will perform an analysis to 

determine whether cash market participants 

are quoting bid or offer prices or entering into 

transactions at prices that are set either 

explicitly or implicitly at a differential to 

prices established for the contract. Cash 

market prices are set explicitly at a 

differential to the section 2(h)(3) contract 

when, for instance, they are quoted in dollars 

and cents above or below the reference 

contract’s price. Cash market prices are set 

implicitly at a differential to a section 2(h)(3) 

contract when, for instance, they are arrived 

at after adding to, or subtracting from the 

section 2(h)(3) contract, but then quoted or 

reported at a flat price. The Commission will 

also consider whether cash market entities 

are quoting cash prices based on a section 

2(h)(3) contract on a frequent and recurring 

basis. 

3. The second source of evidence is that 

the price of the contract is being routinely 

disseminated in widely distributed industry 

publications—or offered by the ECM itself for 

some form of remuneration—and consulted 

on a frequent and recurring basis by industry 

participants in pricing cash market 

transactions. As with contract prices that are 

directly incorporated into cash market prices, 

the Commission assumes that industry 

publications choose to publish prices 

because of the value they transfer to industry 

participants for the purpose of formulating 

prices in the cash market. 

4. In applying this criterion, consideration 

will be given to whether prices established 

by a section 2(h)(3) contract are reported in 

a widely distributed industry publication. In 

making this determination, the Commission 

will consider the reputation of the 

publication within the industry, how 

frequently it is published, and whether the 

information contained in the publication is 

routinely consulted by industry participants 

in pricing cash market transactions. 

5. Under a Material Price Reference 

analysis, the Commission expects that 

material liquidity in the contract likely will 

be the primary motivation for a publisher to 

publish particular prices. In other words, the 

fact that the price of a contract is being used 

as a reference by industry participants 

suggests, prima facie, that the contract 

performs a significant price discovery 

function. But the Commission recognizes that 

trading levels could nonetheless be low for 

the contract while still serving a significant 

price discovery function and that evidence of 

routine publication and consultation by 

industry participants may be sufficient to 

establish the contract as a significant price 

discovery contract. On the other hand, while 

cash market participants may regularly refer 

to published prices of a particular contract 

when establishing cash market prices, it may 

be the case that the contract itself is a niche 

market for a specialized grade of the 

commodity or for delivery at a minor 

geographic location. In such cases, the 

Commission will look to such measures as 

trading volume, open interest, and the 

significance of the underlying cash market to 

make a determination that a contract is 

functioning as a significant price discovery 

contract. If an examination of trading in the 

contract were to reveal that true price 

discovery was occurring in other more 

broadly defined contracts and that this 

contract was itself simply reflective of those 

broader contracts, it is less likely the 

Commission will deem the contract a 

significant price discovery contract. 

6. Because price referencing normally 

occurs out of the view of the electronic 

trading facility, the Commission may have 

difficulty ascertaining the extent to which 

cash market participants actually reference or 

consult a contract’s price when transacting. 

The Commission expects, however, that as a 

contract begins to be relied upon to set a 

reference price, market participants will be 

increasingly willing to purchase price 

information. To the extent, then, that an 

electronic trading facility begins to sell its 

price information regarding a contract to 

market participants or industry publications, 

the contract will meet a threshold standard 

to indicate that the contract potentially is a 

significant price discovery contract. 

■ 32. Add a new Appendix B to Part 36 

to read as follows: 


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Federal Register / Vol. 74, No. 54 / Monday, March 23, 2009 / Rules and Regulations 12199 

Appendix B to Part 36—Guidance on, 

and Acceptable Practices in, 

Compliance With Core Principles 

1. This Appendix provides guidance on 

complying with the core principles under 

section 2(h)(7)(C) of the Act and this part, 

both initially and on an ongoing basis. The 

guidance is provided in paragraph (a) 

following each core principle and can be 

used to demonstrate to the Commission core 

principle compliance under § 36.3(c)(4). The 

guidance for each core principle is 

illustrative only of the types of matters an 

electronic trading facility may address, as 

applicable, and is not intended to be used as 

a mandatory checklist. Addressing the issues 

and questions set forth in this guidance will 

help the Commission in its consideration of 

whether the electronic trading facility is in 

compliance with the core principles. A 

submission pursuant to § 36.3(c)(4) should 

include an explanation or other form of 

documentation demonstrating that the 

electronic trading facility complies with the 

core principles. 

2. Acceptable practices meeting selected 

requirements of the core principles are set 

forth in paragraph (b) following each core 

principle. Electronic trading facilities on 

which significant price discovery contracts 

are traded or executed that follow the 

specific practices outlined under paragraph 

(b) for any core principle in this appendix 

will meet the selected requirements of the 

applicable core principle. Paragraph (b) is for 

illustrative purposes only, and does not state 

the exclusive means for satisfying a core 

principle. 

CORE PRINCIPLE I OF SECTION 

2(h)(7)(C)—CONTRACTS NOT READILY 

SUSCEPTIBLE TO MANIPULATION. The 

electronic trading facility shall list only 

significant price discovery contracts that are 

not readily susceptible to manipulation. 

(a) Guidance. Upon determination by the 

Commission that a contract listed for trading 

on an electronic trading facility is a 

significant price discovery contract, the 

electronic trading facility must self-certify 

the terms and conditions of the significant 

price discovery contract under § 36.3(c)(4) 

within 90 calendar days of the date of the 

Commission’s order, if the contract is the 

electronic trading facility’s first significant 

price discovery contract; or 30 days from the 

date of the Commission’s order if the contract 

is not the electronic trading facility’s first 

significant price discovery contract. Once the 

Commission determines that a contract 

performs a significant price discovery 

function, subsequent rule changes must be 

self-certified to the Commission by the 

electronic trading facility pursuant to § 40.6 

or submitted to the Commission for review 

and approval pursuant to § 40.5. 

(b) Acceptable practices. Guideline No. 1, 

17 CFR part 40, Appendix A may be used as 

guidance in meeting this core principle for 

significant price discovery contracts. 

CORE PRINCIPLE II OF SECTION 

2(h)(7)(C)—MONITORING OF TRADING. 

The electronic trading facility shall monitor 

trading in significant price discovery 

contracts to prevent market manipulation, 

price distortion, and disruptions of the 

delivery of cash-settlement process through 

market surveillance, compliance and 

disciplinary practices and procedures, 

including methods for conducting real-time 

monitoring of trading and comprehensive 

and accurate trade reconstructions. 

(a) Guidance. An electronic trading facility 

on which significant price discovery 

contracts are traded or executed should, with 

respect to those contracts, demonstrate a 

capacity to prevent market manipulation and 

have trading and participation rules to detect 

and deter abuses. The facility should seek to 

prevent market manipulation and other 

trading abuses through a dedicated regulatory 

department or by delegation of that function 

to an appropriate third party. An electronic 

trading facility also should have the authority 

to intervene as necessary to maintain an 

orderly market. 

(b) Acceptable practices—(1) An 

acceptable trade monitoring program. An 

acceptable trade monitoring program should 

facilitate, on both a routine and non-routine 

basis, arrangements and resources to detect 

and deter abuses through direct surveillance 

of each significant price discovery contract. 

Direct surveillance of each significant price 

discovery contract will generally involve the 

collection of various market data, including 

information on participants’ market activity. 

Those data should be evaluated on an 

ongoing basis in order to make an 

appropriate regulatory response to potential 

market disruptions or abusive practices. For 

contracts with a substantial number of 

participants, an effective surveillance 

program should employ a much more 

comprehensive large trader reporting system. 

(2) Authority to collect information and 

documents. The electronic trading facility 

should have the authority to collect 

information and documents in order to 

reconstruct trading for appropriate market 

analysis. Appropriate market analysis should 

enable the electronic trading facility to assess 

whether each significant price discovery 

contract is responding to the forces of supply 

and demand. Appropriate data usually 

include various fundamental data about the 

underlying commodity, its supply, its 

demand, and its movement through market 

channels. Especially important are data 

related to the size and ownership of 

deliverable supplies—the existing supply 

and the future or potential supply—and to 

the pricing of the deliverable commodity 

relative to the futures price and relative to 

similar, but non-deliverable, kinds of the 

commodity. For cash-settled contracts, it is 

more appropriate to pay attention to the 

availability and pricing of the commodity 

making up the index to which the contract 

will be settled, as well as monitoring the 

continued suitability of the methodology for 

deriving the index. 

(3) Ability to assess participants’ market 

activity and power. To assess participants’ 

activity and potential power in a market, 

electronic trading facilities, with respect to 

significant price discovery contracts, at a 

minimum should have routine access to the 

positions and trading of its participants and, 

if applicable, should provide for such access 

through its agreements with its third-party 

provider of clearing services. 

CORE PRINCIPLE III OF SECTION 

2(h)(7)(C)—ABILITY TO OBTAIN 

INFORMATION. The electronic trading 

facility shall establish and enforce rules that 

allow the electronic trading facility to obtain 

any necessary information to perform any of 

the functions described in this subparagraph, 

provide the information to the Commission 

upon request, and have the capacity to carry 

out such international information-sharing 

agreements as the Commission may require. 

(a) Guidance. An electronic trading facility 

on which significant price discovery 

contracts are traded or executed should, with 

respect to those contracts, have the ability 

and authority to collect information and 

documents on both a routine and non-routine 

basis, including the examination of books 

and records kept by participants. This 

includes having arrangements and resources 

for recording full data entry and trade details 

and safely storing audit trail data. An 

electronic trading facility should have 

systems sufficient to enable it to use the 

information for purposes of assisting in the 

prevention of participant and market abuses 

through reconstruction of trading and 

providing evidence of any violations of the 

electronic trading facility’s rules. 

(b) Acceptable practices—(1) The goal of 

an audit trail is to detect and deter market 

abuse. An effective contract audit trail should 

capture and retain sufficient trade-related 

information to permit electronic trading 

facility staff to detect trading abuses and to 

reconstruct all transactions within a 

reasonable period of time. An audit trail 

should include specialized electronic 

surveillance programs that identify 

potentially abusive trades and trade patterns. 

An acceptable audit trail must be able to 

track an order from time of entry into the 

trading system through its fill. The electronic 

trading facility must create and maintain an 

electronic transaction history database that 

contains information with respect to 

transactions executed on each significant 

price discovery contract. 

(2) An acceptable audit trail should 

include the following: original source 

documents, transaction history, electronic 

analysis capability, and safe storage 

capability. An acceptable audit trail system 

would satisfy the following practices. 

(i) Original source documents. Original 

source documents include unalterable, 

sequentially identified records on which 

trade execution information is originally 

recorded. For each order (whether filled, 

unfilled or cancelled, each of which should 

be retained or electronically captured), such 

records reflect the terms of the order, an 

account identifier that relates back to the 

account(s) owner(s), and the time of order 

entry. 

(ii) Transaction history. A transaction 

history consists of an electronic history of 

each transaction, including (a) all the data 

that are input into the trade entry or 

matching system for the transaction to match 

and clear; (b) timing and sequencing data 

adequate to reconstruct trading; and (c) the 

identification of each account to which fills 

are allocated. 

(iii) Electronic analysis capability. An 

electronic analysis capability that permits 


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sorting and presenting data included in the 

transaction history so as to reconstruct 

trading and to identify possible trading 

violations with respect to market abuse. 

(iv) Safe storage capability. Safe storage 

capability provides for a method of storing 

the data included in the transaction history 

in a manner that protects the data from 

unauthorized alteration, as well as from 

accidental erasure or other loss. Data should 

be retained in the form and manner specified 

by the Commission or, where no acceptable 

manner of retention is specified, in 

accordance with the recordkeeping standards 

of Commission rule 1.31. 

(3) Arrangements and resources for the 

disclosure of the obtained information and 

documents to the Commission upon request. 

To satisfy section 2(h)(7)(C)(III)(bb), the 

electronic trading facility should maintain 

records of all information and documents 

related to each significant price discovery 

contract in a form and manner acceptable to 

the Commission. Where no acceptable 

manner of maintenance is specified, records 

should be maintained in accordance with the 

recordkeeping standards of Commission rule 

1.31. 

(4) The capacity to carry out appropriate 

information-sharing agreements as the 

Commission may require. Appropriate 

information-sharing agreements could be 

established with other markets or the 

Commission can act in conjunction with the 

electronic trading facility to carry out such 

information sharing. 

CORE PRINCIPLE IV OF SECTION 

2(h)(7)(C)—POSITION LIMITATIONS OR 

ACCOUNTABILITY. The electronic trading 

facility shall adopt, where necessary and 

appropriate, position limitations or position 

accountability for speculators in significant 

price discovery contracts, taking into account 

positions in other agreements, contracts and 

transactions that are treated by a derivatives 

clearing organization, whether registered or 

not registered, as fungible with such 

significant price discovery contracts to 

reduce the potential threat of market 

manipulation or congestion, especially 

during trading in the delivery month. 

(a) Guidance. [Reserved] 

(b) Acceptable practices for uncleared 

trades [Reserved] 

(c) Acceptable practices for cleared 

trades—(1) Introduction. In order to diminish 

potential problems arising from excessively 

large speculative positions, and to facilitate 

orderly liquidation of expiring contracts, an 

electronic trading facility relying on the 

exemption in section 2(h)(3) should adopt 

rules that set position limits or accountability 

levels on traders’ cleared positions in 

significant price discovery contracts. These 

position limit rules specifically may exempt 

bona fide hedging; permit other exemptions; 

or set limits differently by market, delivery 

month or time period. For the purpose of 

evaluating a significant price discovery 

contract’s speculative-limit program for 

cleared positions, the Commission will 

consider the specified position limits or 

accountability levels, aggregation policies, 

types of exemptions allowed, methods for 

monitoring compliance with the specified 

limits or levels, and procedures for dealing 

with violations. 

(2) Accounting for cleared trades—(i) 

Speculative-limit levels typically should be 

set in terms of a trader’s combined position 

involving cleared trades in a significant price 

discovery contract, plus positions in 

agreements, contracts and transactions that 

are treated by a derivatives clearing 

organization, whether registered or not 

registered, as fungible with such significant 

price discovery contract. (This circumstance 

typically exists where an exempt commercial 

market lists a particular contract for trading 

but also allows for positions in that contract 

to be cleared together with positions 

established through bilateral or off-exchange 

transactions, such as block trades, in the 

same contract. Essentially, both the onfacility and off-facility transactions are 

considered fungible with each other.) In this 

connection, the electronic trading facility 

should make arrangements to ensure that it 

is able to ascertain accurate position data for 

the market. (ii) For significant price 

discovery contracts that are traded on a 

cleared basis, the electronic trading facility 

should apply position limits to cleared 

transactions in the contract. 

(3) Limitations on spot-month positions. 

Spot-month limits should be adopted for 

significant price discovery contracts to 

minimize the susceptibility of the market to 

manipulation or price distortions, including 

squeezes and corners or other abusive trading 

practices. 

(i) Contracts economically equivalent to an 

existing contract. An electronic trading 

facility that lists a significant price discovery 

contract that is economically-equivalent to 

another significant price discovery contract 

or to a contract traded on a designated 

contract market or derivatives transaction 

execution facility should set the spot-month 

limit for its significant price discovery 

contract at the same level as that specified for 

the economically-equivalent contract. 

(ii) Contracts that are not economically 

equivalent to an existing contract. There may 

not be an economically-equivalent significant 

price discovery contract or economicallyequivalent contract traded on a designated 

contract market or derivatives transaction 

execution facility. In this case, the spotmonth speculative position limit should be 

established in the following manner. The 

spot-month limit for a physical delivery 

market should be based upon an analysis of 

deliverable supplies and the history of spotmonth liquidations. The spot-month limit for 

a physical-delivery market is appropriately 

set at no more than 25 percent of the 

estimated deliverable supply. In the case 

where a significant price discovery contract 

has a cash settlement provision, the spotmonth limit should be set at a level that 

minimizes the potential for price 

manipulation or distortion in the significant 

price discovery contract itself; in related 

futures and options contracts traded on a 

designated contract market or derivatives 

transaction execution facility; in other 

significant price discovery contracts; in other 

fungible agreements, contracts and 

transactions; and in the underlying 

commodity. 

(4) Position accountability for non-spotmonth positions. The electronic trading 

facility should establish for its significant 

price discovery contracts non-spot individual 

month position accountability levels and allmonths-combined position accountability 

levels. An electronic trading facility may 

establish non-spot individual month position 

limits and all-months-combined position 

limits for its significant price discovery 

contracts in lieu of position accountability 

levels. 

(i) Definition. Position accountability 

provisions provide a means for an exchange 

to monitor traders’ positions that may 

threaten orderly trading. An acceptable 

accountability provision sets target 

accountability threshold levels that may be 

exceeded, but once a trader breaches such 

accountability levels, the electronic trading 

facility should initiate an inquiry to 

determine whether the individual’s trading 

activity is justified and is not intended to 

manipulate the market. As part of its 

investigation, the electronic trading facility 

may inquire about the trader’s rationale for 

holding a position in excess of the 

accountability levels. An acceptable 

accountability provision should provide the 

electronic trading facility with the authority 

to order the trader not to further increase 

positions. If a trader fails to comply with a 

request for information about positions held, 

provides information that does not 

sufficiently justify the position, or continues 

to increase contract positions after a request 

not to do so is issued by the facility, then the 

accountability provision should enable the 

electronic trading facility to require the 

trader to reduce positions. 

(ii) Contracts economically equivalent to 

an existing contract. When an electronic 

trading facility lists a significant price 

discovery contract that is economically 

equivalent to another significant price 

discovery contract or to a contract traded on 

a designated contract market or derivatives 

transaction execution facility, the electronic 

trading facility should set the non-spot 

individual month position accountability 

level and all-months-combined position 

accountability level for its significant price 

discovery contract at the same levels, or 

lower, as those specified for the 

economically-equivalent contract. 

(iii) Contracts that are not economically 

equivalent to an existing contract. For 

significant price discovery contracts that are 

not economically equivalent to an existing 

contract, the trading facility shall adopt nonspot individual month and all-monthscombined position accountability levels that 

are no greater than 10 percent of the average 

combined futures and delta-adjusted option 

month-end open interest for the most recent 

calendar year. For electronic trading facilities 

that choose to adopt non-spot individual 

month and all-months-combined position 

limits in lieu of position accountability levels 

for their significant price discovery contracts, 

the limits should be set in the same manner 

as the accountability levels. 

(iv) Contracts economically equivalent to 

an existing contract with position limits. If a 

significant price discovery contract is 

economically equivalent to another 

significant price discovery contract or to a 

contract traded on a designated contract 


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market or derivatives transaction execution 

facility that has adopted non-spot or allmonths-combined position limits, the 

electronic trading facility should set non-spot 

month position limits and all-monthscombined position limits for its significant 

price discovery contract at the same (or 

lower) levels as those specified for the 

economically-equivalent contract. 

(5) Account aggregation. An electronic 

trading facility should have aggregation rules 

for significant price discovery contracts that 

apply to accounts under common control, 

those with common ownership, i.e., where 

there is a ten percent or greater financial 

interest, and those traded according to an 

express or implied agreement. Such 

aggregation rules should apply to cleared 

transactions with respect to applicable 

speculative position limits. An electronic 

trading facility will be permitted to set more 

stringent aggregation policies. An electronic 

trading facility may grant exemptions to its 

price discovery contracts’ position limits for 

bona fide hedging (as defined in § 1.3(z) of 

this chapter) and may grant exemptions for 

reduced risk positions, such as spreads, 

straddles and arbitrage positions. 

(6) Implementation deadlines. An 

electronic trading facility with a significant 

price discovery contract is required to 

comply with Core Principle IV as set forth in 

section 2(h)(7)C) of the Act within 90 

calendar days of the date of the 

Commission’s order determining that the 

contract performs a significant price 

discovery function if such contract is the 

electronic trading facility’s first significant 

price discovery contract, or within 30 days of 

the date of the Commission’s order if such 

contract is not the electronic trading facility’s 

first significant price discovery contract. For 

the purpose of applying limits on speculative 

positions in newly-determined significant 

price discovery contracts, the Commission 

will permit a grace period following issuance 

of its order for traders with cleared positions 

in such contracts to become compliant with 

applicable position limit rules. Traders who 

hold cleared positions on a net basis in the 

electronic trading facility’s significant price 

discovery contract must be at or below the 

specified position limit level no later than 90 

calendar days from the date of the electronic 

trading facility’s implementation of position 

limit rules, unless a hedge exemption is 

granted by the electronic trading facility. 

This grace period applies to both initial and 

subsequent price discovery contracts. 

Electronic trading facilities should notify 

traders of this requirement promptly upon 

implementation of such rules. 

(7) Enforcement provisions. The electronic 

trading facility should have appropriate 

procedures in place to monitor its position 

limit and accountability provisions and to 

address violations. 

(i) An electronic trading facility with 

significant price discovery contracts should 

use an automated means of detecting traders’ 

violations of speculative limits or 

exemptions, particularly if the significant 

price discovery contracts have large numbers 

of traders. An electronic trading facility 

should monitor the continuing 

appropriateness of approved exemptions by 

periodically reviewing each trader’s basis for 

exemption or requiring a reapplication. An 

automated system also should be used to 

determine whether a trader has exceeded 

applicable non-spot individual month 

position accountability levels and allmonths-combined position accountability 

levels. 

(ii) An electronic trading facility should 

establish a program for effective enforcement 

of position limits for significant price 

discovery contracts. Electronic trading 

facilities should use a large trader reporting 

system to monitor and enforce daily 

compliance with position limit rules. The 

Commission notes that an electronic trading 

facility may allow traders to periodically 

apply to the electronic trading facility for an 

exemption and, if appropriate, be granted a 

position level higher than the applicable 

speculative limit. The electronic trading 

facility should establish a program to monitor 

approved exemptions from the limits. The 

position levels granted under such hedge 

exemptions generally should be based upon 

the trader’s commercial activity in related 

markets including, but not limited to, 

positions held in related futures and options 

contracts listed for trading on designated 

contract markets, fungible agreements, 

contracts and transactions, as determined by 

either a registered or unregistered derivatives 

clearing organization. Electronic trading 

facilities may allow a brief grace period 

where a qualifying trader may exceed 

speculative limits or an existing exemption 

level pending the submission and approval of 

appropriate justification. An electronic 

trading facility should consider whether it 

wants to restrict exemptions during the last 

several days of trading in a delivery month. 

Acceptable procedures for obtaining and 

granting exemptions include a requirement 

that the electronic trading facility approve a 

specific maximum higher level. 

(iii) An acceptable speculative limit 

program should have specific policies for 

taking regulatory action once a violation of a 

position limit or exemption is detected. The 

electronic trading facility policies should 

consider appropriate actions. 

(8) Violation of Commission rules. A 

violation of position limits for significant 

price discovery contracts that have been selfcertified by an electronic trading facility is 

also a violation of section 4a(e) of the Act. 

CORE PRINCIPLE V OF SECTION 

2(h)(7)(C)—EMERGENCY AUTHORITY—The 

electronic trading facility shall adopt rules to 

provide for the exercise of emergency 

authority, in consultation or cooperation with 

the Commission, where necessary and 

appropriate, including the authority to 

liquidate open positions in significant price 

discovery contracts and to suspend or curtail 

trading in a significant price discovery 

contract. 

(a) Guidance. An electronic trading facility 

on which significant price discovery 

contracts are traded should have clear 

procedures and guidelines for decisionmaking regarding emergency intervention in 

the market, including procedures and 

guidelines to avoid conflicts of interest while 

carrying out such decision-making. An 

electronic trading facility on which 

significant price discovery contracts are 

executed or traded should also have the 

authority to intervene as necessary to 

maintain markets with fair and orderly 

trading as well as procedures for carrying out 

the intervention. Procedures and guidelines 

should include notifying the Commission of 

the exercise of the electronic trading facility’s 

regulatory emergency authority, explaining 

how conflicts of interest are minimized, and 

documenting the electronic trading facility’s 

decision-making process and the reasons for 

using its emergency action authority. 

Information on steps taken under such 

procedures should be included in a 

submission of a certified rule and any related 

submissions for rule approval pursuant to 

part 40 of this chapter, when carried out 

pursuant to an electronic trading facility’s 

emergency authority. To address perceived 

market threats, the electronic trading facility 

on which significant price discovery 

contracts are executed or traded should, 

among other things, be able to impose 

position limits in the delivery month, impose 

or modify price limits, modify circuit 

breakers, call for additional margin either 

from market participants or clearing members 

(for contracts that are cleared through a 

clearinghouse), order the liquidation or 

transfer of open positions, order the fixing of 

a settlement price, order a reduction in 

positions, extend or shorten the expiration 

date or the trading hours, suspend or curtail 

trading on the electronic trading facility, 

order the transfer of contracts and the margin 

for such contracts from one market 

participant to another, or alter the delivery 

terms or conditions or, if applicable, should 

provide for such actions through its 

agreements with its third-party provider of 

clearing services. 

(b) Acceptable practices. [Reserved] 

CORE PRINCIPLE VI OF SECTION 

2(h)(7)(C)—DAILY PUBLICATION OF 

TRADING INFORMATION. The electronic 

trading facility shall make public daily 

information on price, trading volume, and 

other trading data to the extent appropriate 

for significant price discovery contracts. 

(a) Guidance. An electronic trading facility, 

with respect to significant price discovery 

contracts, should provide to the public 

information regarding settlement prices, 

price range, volume, open interest, and other 

related market information for all applicable 

contracts as determined by the Commission 

on a fair, equitable and timely basis. 

Provision of information for any applicable 

contract can be through such means as 

provision of the information to a financial 

information service or by timely placement of 

the information on the electronic trading 

facility’s public Web site. 

(b) Acceptable practices. Compliance with 

§ 16.01 of this chapter, which is mandatory, 

is an acceptable practice that satisfies the 

requirements of Core Principle VI. 

CORE PRINCIPLE VII OF SECTION 

2(h)(7)(C)—COMPLIANCE WITH RULES. The 

electronic trading facility shall monitor and 

enforce compliance with the rules of the 

electronic trading facility, including the 

terms and conditions of any contracts to be 

traded and any limitations on access to the 

electronic trading facility. 


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12202 Federal Register / Vol. 74, No. 54 / Monday, March 23, 2009 / Rules and Regulations 

(a) Guidance—(1) An electronic trading 

facility on which significant price discovery 

contracts are executed or traded should have 

appropriate arrangements and resources for 

effective trade practice surveillance 

programs, with the authority to collect 

information and documents on both a routine 

and non-routine basis, including the 

examination of books and records kept by its 

market participants. The arrangements and 

resources should facilitate the direct 

supervision of the market and the analysis of 

data collected. Trade practice surveillance 

programs may be carried out by the 

electronic trading facility itself or through 

delegation or contracting-out to a third party. 

If the electronic trading facility on which 

significant price discovery contracts are 

executed or traded delegates or contracts-out 

the trade practice surveillance responsibility 

to a third party, such third party should have 

the capacity and authority to carry out such 

programs, and the electronic trading facility 

should retain appropriate supervisory 

authority over the third party. 

(2) An electronic trading facility on which 

significant price discovery contracts are 

executed or traded should have 

arrangements, resources and authority for 

effective rule enforcement. The Commission 

believes that this should include the 

authority and ability to discipline and limit 

or suspend the activities of a market 

participant as well as the authority and 

ability to terminate the activities of a market 

participant pursuant to clear and fair 

standards. The electronic trading facility can 

satisfy this criterion for market participants 

by expelling or denying such person’s future 

access upon a determination that such a 

person has violated the electronic trading 

facility’s rules. 

(b) Acceptable practices. An acceptable 

trade practice surveillance program generally 

would include: 

(1) Maintenance of data reflecting the 

details of each transaction executed on the 

electronic trading facility; 

(2) Electronic analysis of this data 

routinely to detect potential trading 

violations; 

(3) Appropriate and thorough investigative 

analysis of these and other potential trading 

violations brought to the electronic trading 

facility’s attention; and 

(4) Prompt and effective disciplinary action 

for any violation that is found to have been 

committed. The Commission believes that 

the latter element should include the 

authority and ability to discipline and limit 

or suspend the activities of a market 

participant pursuant to clear and fair 

standards that are available to market 

participants. See, e.g., 17 CFR part 8. 

CORE PRINCIPLE VIII OF SECTION 

2(h)(7)(C)—CONFLICTS OF INTEREST. The 

electronic trading facility on which 

significant price discovery contracts are 

executed or traded shall establish and 

enforce rules to minimize conflicts of interest 

in the decision-making process of the 

electronic trading facility and establish a 

process for resolving such conflicts of 

interest. 

(a) Guidance. 

(1) The means to address conflicts of 

interest in the decision-making of an 

electronic trading facility on which 

significant price discovery contracts are 

executed or traded should include methods 

to ascertain the presence of conflicts of 

interest and to make decisions in the event 

of such a conflict. In addition, the 

Commission believes that the electronic 

trading facility on which significant price 

discovery contracts are executed or traded 

should provide for appropriate limitations on 

the use or disclosure of material non-public 

information gained through the performance 

of official duties by board members, 

committee members and electronic trading 

facility employees or gained through an 

ownership interest in the electronic trading 

facility or its parent organization(s). 

(2) All electronic trading facilities on 

which significant price discovery contracts 

are traded bear special responsibility to 

regulate effectively, impartially, and with 

due consideration of the public interest, as 

provided in section 3 of the Act. Under Core 

Principle VIII, they are also required to 

minimize conflicts of interest in their 

decision-making processes. To comply with 

this core principle, electronic trading 

facilities on which significant price discovery 

contracts are traded should be particularly 

vigilant for such conflicts between and 

among any of their self-regulatory 

responsibilities, their commercial interests, 

and the several interests of their 

management, members, owners, market 

participants, other industry participants and 

other constituencies. 

(b) Acceptable practices. [Reserved] 

CORE PRINCIPLE IX OF SECTION 

2(h)(7)(C)—ANTITRUST CONSIDERATIONS. 

Unless necessary or appropriate to achieve 

the purposes of this Act, the electronic 

trading facility, with respect to any 

significant price discovery contracts, shall 

endeavor to avoid adopting any rules or 

taking any actions that result in any 

unreasonable restraints of trade or imposing 

any material anticompetitive burden on 

trading on the electronic trading facility. 

(a) Guidance. An electronic trading facility, 

with respect to a significant price discovery 

contract, may at any time request that the 

Commission consider under the provisions of 

section 15(b) of the Act any of the electronic 

trading facility’s rules, which may be trading 

protocols or policies, operational rules, or 

terms or conditions of any significant price 

discovery contract. The Commission intends 

to apply section 15(b) of the Act to its 

consideration of issues under this core 

principle in a manner consistent with that 

previously applied to contract markets. 

(b) Acceptable practices. [Reserved] 

PART 40—PROVISIONS COMMON TO 

REGISTERED ENTITIES 

■ 33. The authority citation for part 40 

is revised to read as follows: 

Authority: 7 U.S.C. 1a, 2, 5, 6, 6c, 7, 7a, 

8 and 12a, as amended by Title XIII of the 

Food, Conservation and Energy Act of 2008, 

Public Law No. 110–246, 122 Stat. 1624 (June 

18, 2008). 

■ 34. Revise the heading of part 40 as set 

forth above. 

§ 40.1 [Amended] 

■ 35. Section 40.1 is amended as 

follows: 

■ A. The term ‘‘registered entity’’ is 

removed and the term ‘‘designated 

contract market, derivatives transaction 

execution facility or derivatives clearing 

organization’’ is added in its place in 

paragraphs (b)(2), (b)(3), and (f)(2); and 

■ B. The term ‘‘contract market, 

derivatives transaction execution 

facility or derivatives clearing 

organization’’ is removed and the term 

‘‘registered entity’’ is added in its place 

in paragraph (h). 

■ 36. Section 40.2 is amended as 

follows: 

■ A. The term ‘‘registered entity’’ is 

removed and ‘‘designated contract 

market, derivatives transaction 

execution facility or derivatives clearing 

organization’’ is added in its place in 

paragraph (a) introductory text; 

■ B. The term ‘‘registered entity’’ is 

removed and ‘‘designated contract 

market or derivatives transaction 

execution facility’’ is added in its place 

in paragraphs (a)(1) and (a)(3)(iv); and 

■ C. Paragraph (b) is revised to read as 

follows: 

§ 40.2 Listing and accepting products for 

trading or clearing by certification. 

* * * * * 

(b) A registered entity shall provide, 

if requested by Commission staff, 

additional evidence, information or data 

relating to whether any contract meets, 

initially or on a continuing basis, any of 

the requirements of the Act or 

Commission rules or policies 

thereunder which may be beneficial to 

the Commission in conducting a due 

diligence assessment of the product and 

the entity’s compliance with these 

requirements. 

* * * * * 

§ 40.3 [Amended] 

■ 37. Section 40.3 is amended by 

removing the term ‘‘registered entity’’ 

and adding in its place the term 

‘‘designated contract market or 

registered derivatives transaction 

execution facility’’ in paragraphs (a)(1), 

(c)(1), (c)(2), and (e)(2). 

§ 40.6 [Amended] 

■ 38. Section 40.4 is amended by 

removing the term ‘‘registered entity’’ 

and adding in its place the term 

‘‘designated contract market’’ in 

paragraph (b)(9)(ii). 

■ 39. Section 40.6 is amended by 

revising paragraphs (a)(2), (c)(3)(ii)(G), 

and (c)(3)(ii)(H) to read as follows: 

§ 40.6 Self-certification of rules. 

(a) * * * 


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Federal Register / Vol. 74, No. 54 / Monday, March 23, 2009 / Rules and Regulations 12203 

(2) The registered entity has filed its 

submission electronically in a format 

specified by the Secretary of the 

Commission with the Secretary of the 

Commission at submissions@cftc.gov, 

the relevant branch chief at the regional 

office having local jurisdiction over the 

registered entity, and, for filings 

submitted by a designated contract 

market, registered derivatives 

transaction execution facility, or 

electronic trading facility on which 

significant price discovery contracts are 

traded or executed, the Division of 

Market Oversight at 

DMOSubmissions@cftc.gov, and the 

Commission has received the 

submission at its headquarters by the 

open of business on the business day 

preceding implementation of the rule; 

provided, however, rules or rule 

amendments implemented under 

procedures of the governing board to 

respond to an emergency as defined in 

§ 40.1, shall, if practicable, be filed with 

the Commission prior to the 

implementation or, if not practicable, be 

filed with the Commission at the earliest 

possible time after implementation, but 

in no event more than twenty-four hours 

after implementation; and 

* * * * * 

(c) * * * 

(3) * * * 

(ii) * * * 

(G) Option contract terms. For 

registered entities that are in 

compliance with the daily reporting 

requirements of § 16.01 of this chapter, 

changes to option contract rules relating 

to the strike price listing procedures, 

strike price intervals, and the listing of 

strike prices on a discretionary basis. 

(H) Trading Months. For registered 

entities that are in compliance with the 

daily reporting requirements of § 16.01 

of this chapter, the initial listing of 

trading months which are within the 

currently established cycle of trading 

months. 

* * * * * 

§ 40.7 [Amended] 

■ 40. Section 40.7 is amended by 

removing the term ‘‘designated contract 

market, registered derivatives 

transaction execution facility or 

registered derivatives clearing 

organization’’ and adding in its place 

the term ‘‘registered entity’’ in 

paragraph (b). 

■ 41. Section 40.8 is amended by 

revising paragraph (a), redesignating 

paragraph (b) as paragraph (c), and 

adding new paragraph (b) to read as 

follows: 

§ 40.8 Availability of public information. 

(a) The following sections of all 

applications to become a designated 

contract market, derivatives execution 

transaction facility or designated 

clearing organization will be public: 

transmittal letter, proposed rules, the 

applicant’s regulatory compliance chart, 

documents establishing the applicant’s 

legal status, documents setting forth the 

applicant’s governance structure, and 

any other part of the application not 

covered by a request for confidential 

treatment. 

(b) The following submissions 

required by § 36.3(c)(4) of this chapter 

by an electronic trading facility on 

which significant price discovery 

contracts are traded or executed will be 

public: rulebook, the facility’s 

regulatory compliance chart, documents 

establishing the facility’s legal status, 

documents setting forth the facility’s 

governance structure, and any other 

parts of the submissions not covered by 

a request for confidential treatment. 

* * * * * 

■ 42. Appendix D to part 40 is revised 

to read as follows: 

Appendix D to Part 40—Submission 

Cover Sheet and Instructions 

A properly completed submission cover 

sheet must accompany all rule submissions 

submitted electronically by a registered 

entity to the Secretary of the Commodity 

Futures Trading Commission, at 

submissions@cftc.gov in a format specified by 

the Secretary of the Commission. 

Each submission should include the 

following: 

1. Identifier Code (optional)—If applicable, 

the exchange or clearing organization 

Identifier Code at the top of the cover sheet. 

Such codes are commonly generated by the 

exchanges or clearing organizations to 

provide an identifier that is unique to each 

filing (e.g., NYMEX Submission 03–116). 

2. Date—The date of the filing. 

3. Organization—The name of the 

organization filing the submission (e.g., 

CBOT). 

4. Filing as a—Check the appropriate box 

for a designated contract market (DCM), 

derivatives clearing organization (DCO), 

derivatives transaction execution facility 

(DTEF), or electronic trading facility with a 

significant price discovery contract (ECM– 

SPDC). 

5. Type of Filing—Indicate whether the 

filing is a rule amendment or new product 

and the applicable category under that 

heading. 

6. Rule Numbers—For rule filings only, 

identify rule number(s) being adopted or 

modified in the case of rule amendment 

filings. 

7. Description—For rule or rule 

amendment filings only, enter a brief 

description of the new rule or rule 

amendment. This narrative should describe 

the substance of the submission with enough 

specificity to characterize all essential 

aspects of the filing. 

8. Other Requirements—Comply with all 

filing requirements for the underlying 

proposed rule or rule amendment. The filing 

of the submission cover sheet does not 

obviate the responsibility to comply with any 

applicable filing requirement (e.g., rules 

submitted for Commission approval under 

§ 40.5 must be accompanied by an 

explanation of the purpose and effect of the 

proposed rule along with a description of any 

substantive opposing views). Rules submitted 

for Commission approval under § 40.5 must 

be accompanied by an explanation of the 

purpose and effect of the proposed rule along 

with a description of any substantive 

opposing views). 

Issued in Washington, DC, this 16th day of 

March, 2009, by the Commission. 

David Stawick, 

Secretary of the Commission. 

[FR Doc. E9–6044 Filed 3–20–09; 8:45 am] 

BILLING CODE 6351–01–P 


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