[Federal Register Volume 83, Number 9 (Friday, January 12, 2018)]
[Rules and Regulations]
[Pages 1538-1548]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-00467]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Parts 3 and 9

RIN 3038-AE15


Technical Amendments to Rules on Registration and Review of 
Exchange Disciplinary, Access Denial, or Other Adverse Actions

AGENCY: Commodity Futures Trading Commission.

ACTION: Final rule.

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SUMMARY: The Commodity Futures Trading Commission (``CFTC'' or 
``Commission'') is adopting certain amendments to its rules that, 
respectively, govern registration of intermediaries and relate to the 
Commission's review of exchange disciplinary, access denial, or other 
adverse actions. Generally speaking, these amendments are technical in 
nature. The amendments to both areas of the rules integrate existing 
advisory guidance. The amendments to the rules on review of exchange 
disciplinary, access denial, or other adverse actions also incorporate 
swap execution facilities (``SEFs'') and update provisions currently 
applicable to designated contract markets (``DCMs''). These final rules 
also remove numerous outdated cross-references, and add citations to 
applicable parallel provisions contained in other Commission 
regulations pertaining to SEFs and DCMs. Additionally, the final rules 
address the publication of final disciplinary and access denial actions 
taken by the SEFs and DCMs on their exchange websites.

DATES: This final rule is effective March 13, 2018.

FOR FURTHER INFORMATION CONTACT: Rachel Berdansky, Deputy Director, 
202-418-5429 or <a href="/cdn-cgi/l/email-protection#6614040314020708150d1f260500120548010910"><span class="__cf_email__" data-cfemail="c1b3a3a4b3a5a0afb2aab881a2a7b5a2efa6aeb7">[email protected]</span></a>; David Steinberg, Associate 
Director, 202-418-5102 or <a href="/cdn-cgi/l/email-protection#84e0f7f0e1edeae6e1f6e3c4e7e2f0e7aae3ebf2"><span class="__cf_email__" data-cfemail="6c081f180905020e091e0b2c0f0a180f420b031a">[email protected]</span></a>; Division of Market 
Oversight, Commodity Futures Trading Commission, Three Lafayette 
Centre, 1151 21st Street NW, Washington, DC 20581.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Background
    A. Description of Part 9
    B. DCM Final Rules and Part 8 Removal
    C. SEF Final Rules
II. Summary of the Proposal
    A. Amendments to Part 9: Rules Relating to Review of Exchange 
Disciplinary, Access Denial or Other Adverse Actions
    B. Amendment to Regulation 3.31: Deficiencies, Inaccuracies, and 
Changes To Be Reported
III. Comments on the Proposal
IV. Final Rules and Notice and Order
    A. Final Rules
    B. Deletion of References to Commission Form 3-R
    C. Notice and Order
V. Related Matters
    A. Regulatory Flexibility Act
    B. Paperwork Reduction Act
    C. Cost-Benefit Considerations
    D. Antitrust Considerations

[[Page 1539]]

I. Background

A. Description of Part 9

    On December 20, 1978, the Commission adopted part 9 rules relating 
to the Commission's review of exchange disciplinary, access denial, or 
other adverse actions.\1\ These rules detail the process and procedures 
for Commission review, including the appellate process in cases where a 
person applies to the Commission for review. The rules also address the 
procedures and standards governing filing and service, motions, and 
settlement; the process that exchanges must follow in providing notice 
of the final disciplinary action to the subject of the action and to 
the Commission; and the publication of such notice. As discussed below, 
DCMs and SEFs are already required to comply with the part 9 
regulations.
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    \1\ 43 FR 59343 (Dec. 20, 1978).
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B. DCM Final Rules and Part 8 Removal

    In June 2012, the Commission adopted final regulations for DCMs 
(``DCM Final Rules'').\2\ Commission regulation 38.2 of the DCM Final 
Rules provides that DCMs ``shall comply with all applicable regulations 
under Title 17 of the Code of Federal Regulations,'' except for certain 
exempt provisions.\3\ Part 9 applies to DCMs by defining ``exchange'' 
in Commission regulation 9.2(c) for purposes of the rules as ``any 
board of trade which has been designated as a contract market.'' \4\
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    \2\ Core Principles and Other Requirements for Designated 
Contract Markets, 77 FR 36612 (June 19, 2012).
    \3\ Id. at 36697; 17 CFR 38.2. Part 9 is not included in the 
list of exempt provisions.
    \4\ 17 CFR 9.2(c).
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    Additionally, in the DCM Final Rules, the Commission adopted 
regulations in Subpart N--Disciplinary Procedures of part 38 to amend 
the disciplinary procedures applicable to DCMs.\5\ Several of the 
regulations adopted in subpart N of part 38 are similar to the text of 
the disciplinary procedures found in former part 8--exchange procedures 
for disciplinary, summary, and membership denial actions.\6\ The 
Commission removed part 8 from the regulations in order to avoid any 
confusion from having two sets of disciplinary procedures for DCMs.\7\ 
As a result of this removal, the current part 9 rules, which contain 
cross-references to part 8 throughout, are being updated in the final 
rules to instead cite to parallel provisions now contained in part 37 
for SEFs and part 38 for DCMs.
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    \5\ 17 CFR 38.700 through 38.712.
    \6\ 43 FR 41950 (Sept. 19, 1978); 17 CFR 38.700 through 38.712. 
For example, part 8 contained regulations 8.05 (Enforcement staff); 
8.08 (Disciplinary committee); and 8.20 (Final decision). Subpart N 
of part 38 has corresponding provisions: 38.701 (Enforcement staff); 
38.702 (Disciplinary panels); and 38.709 (Final decisions).
    \7\ Although Commission regulation 38.2 of the DCM Final Rules 
specifies that DCMs are not required to comply with part 8, the 
Commission removed part 8 to avoid any confusion resulting from the 
regulations containing two sets of exchange disciplinary procedures 
as part of the Adaptation of Regulations to Incorporate Swaps 
Rulemaking. 17 CFR 38.2; and removal of part 8 at 77 FR 66304 (Nov. 
2, 2012).
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C. SEF Final Rules

    On June 4, 2013, the Commission adopted new rules in part 37 for 
SEFs (``SEF Final Rules'').\8\ In regulation 37.2 of the SEF Final 
Rules, the Commission specified that SEFs shall comply with the 
requirements of part 9.\9\ Accordingly, for clarity purposes, the final 
rules amend certain part 9 definitions and language which have not yet 
been addressed, to integrate them into the post-Dodd-Frank regulatory 
regime.
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    \8\ Core Principles and Other Requirements for Swap Execution 
Facilities, 78 FR 33476 (June 4, 2013).
    \9\ See id. 33479; 17 CFR 37.2.
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II. Summary of the Proposal

A. Amendments to Part 9: Rules Relating to Review of Exchange 
Disciplinary, Access Denial or Other Adverse Actions

    On January 23, 2017, the Commission published a Notice of Proposed 
Rulemaking (``NPRM'' or ``Proposal'') to amend certain part 3 and part 
9 rules.\10\ As discussed in the NPRM, most of the amendments are 
purely ministerial--for instance, some of the proposed changes updated 
definitions in Commission regulation 9.2 to conform them to the 
Commodity Exchange Act (``CEA'' or ``Act'') as amended by the Dodd-
Frank Act as well as other sections of the Commission's 
regulations.\11\
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    \10\ 82 FR 7738 (Jan. 23, 2017).
    \11\ Id. at 7740.
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    The Commission proposed to amend the definitions of four terms in 
regulation 9.2. First, the Commission proposed to amend the definition 
of ``disciplinary action'' by removing the reference to ``member of an 
exchange'' and inserting ``person'' in its place.\12\ The Commission 
explained in the NPRM that it is necessary to expand the ``disciplinary 
action'' definition to account for instances where an exchange imposes 
sanctions against a person that is not a member of the exchange.\13\ 
The proposed language to include ``person'' in the ``disciplinary 
action'' definition is consistent with the statutory language found in 
Core Principle 2 for DCMs and section 8c(b) of the CEA, as amended by 
the Dodd-Frank Act.\14\ Second, the Commission proposed to amend the 
definition of ``exchange'' in regulation 9.2(c) to include SEFs. This 
change makes it clear that the Commission has the discretion to review 
adverse actions imposed by a SEF and clarify that SEFs are subject to 
all of the part 9 requirements.\15\ Third, the Commission proposed to 
amend regulation 9.2(f) to expand the definition of ``member of an 
exchange'' to include any person who has trading privileges on an 
exchange. This change is necessary to conform the part 9 definition of 
``member'' to the meaning set forth in section 1a(34) of the CEA and in 
1.3(q) of the Commission's regulations.\16\ Fourth, the Commission 
proposed to amend the definition of ``summary action'' in regulation 
9.2(k) by adding references to part 37 for SEFs and replacing the part 
8 references with the relevant provisions from part 38.\17\
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    \12\ The Commission also proposed to amend the disciplinary 
action definition by removing the reference to regulation 8.03(i).
    \13\ 82 FR 7741 (Jan. 23, 2017).
    \14\ Section 735 of the Dodd-Frank Act amends section 5 of the 
CEA, including DCM Core Principle 2. Paragraph (B)--Capacity of 
Contract Market--of Core Principle 2 specifically requires that the 
board of trade shall have the capacity to detect, investigate, and 
apply appropriate sanctions to any person that violates any rule of 
the contract market. Section 8c(b) of the CEA, 7 U.S.C. 12c(b), 
provides that the Commission may, in its discretion and in 
accordance with such standards and procedures as it deems 
appropriate, review any decision by an exchange whereby a person is 
suspended, expelled, disciplined, or denied access to the exchange. 
In addition, section 8c(b) of the CEA provides that the Commission 
may, in its discretion and upon application of any person who is 
adversely affected by any other exchange action, review such action.
    \15\ Id. The Commission notes that regulation 37.2 requires, 
among other things, that a SEF shall comply with the part 9 
regulations. 17 CFR 37.2. Additionally, footnote 40 of the SEF Final 
Rules states ``the term `exchange' used in part 9 of the 
Commission's regulations should be interpreted to include a SEF for 
purposes of applying the requirements of part 9 to a SEF.'' 78 FR 
33476, 33479 (June 4, 2013).
    \16\ Section 1a(34) of the CEA provides that the term ``member'' 
means, among other things, an individual, association, partnership, 
corporation, or trust having trading privileges on the registered 
entity. See also 17 CFR 1.3(q). By amending the definition of 
``member of an exchange'' to include all persons with trading 
privileges, the Commission is clarifying that the appellate process 
and Commission review, as defined in part 9, applies to all persons 
with trading privileges.
    \17\ Specifically, the proposed definition of ``summary action'' 
means a disciplinary action resulting in the imposition of a penalty 
on a person for violation of rules of the exchange permitted under 
the provisions of part 37, appendix B, Core Principle 2, section 
(a)(10)(vi) or part 38, appendix B, Core Principle 13, section 
(a)(4) (penalty for impeding progress of hearing); part 37, appendix 
B, Core Principle 2, section (a)(14) or part 38, appendix B, Core 
Principle 13, section (a)(7) (emergency disciplinary actions); part 
37, appendix B, Core Principle 2, section (a)(13) (summary fines for 
violations of rules regarding timely submission of records); or part 
38, appendix B, Core Principle 13, section (a)(6) (summary fines for 
violations of rules regarding timely submission of records, decorum, 
or other similar activities).

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[[Page 1540]]

    The Commission also proposed to amend regulation 9.11(a) to remove 
the requirement that an exchange provide written notice to the 
Commission of a final disciplinary action or access denial action and 
replace it with a requirement to provide notice to the National Futures 
Association (``NFA''). As explained in the NPRM, the Commission 
delegated authority to the NFA in 1999 to receive and process exchange 
disciplinary and access denial information (``Part 9 Delegation'').\18\ 
Consequently, the NFA currently serves as the official custodian of 
records for exchange disciplinary filings. The Commission noted in the 
NPRM that it intends to amend the Part 9 Delegation order, consistent 
with the requirement that exchanges provide exchange disciplinary and 
access denial information to the NFA.\19\ In 1999, concurrent with the 
Part 9 Delegation, the Commission also published an advisory permitting 
exchanges to file Sec.  9.11 notices with the Commission or the NFA 
(``Part 9 Advisory'').\20\ The Commission proposed to codify the Part 9 
Advisory and formally replace the regulation 9.11 requirement that 
written notice be provided to the Commission by amending Sec.  9.11 to 
require that notice be provided to the NFA via the NFA's BASIC system 
and eliminate the option of filing the notice with the Commission.
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    \18\ 82 FR 7741 (Jan. 23, 2017). The NFA created the Background 
Affiliation Status Information Center (``BASIC'') system through 
which the public can access information pertaining to the types of 
violations committed, penalties imposed, the effective date of the 
action, and, in some cases, the text from the exchange's decision.
    \19\ Id.
    \20\ 64 FR 39915 (July 23, 1999) (``Part 9 Advisory'').
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    The Commission proposed an amendment to regulation 9.11(b)(3)(ii) 
by adding the type of product (as applicable) involved in the adverse 
action as an additional element required to be included in the contents 
of the notice. The Commission stated in the NPRM that requiring 
exchanges to provide this information in the Sec.  9.11 notice will 
provide the Commission, market participants, the public, and other 
exchanges with greater transparency concerning where market abuses 
originate and whether the abuses are concentrated among certain product 
types.\21\ The Commission also proposed to amend regulation 
9.11(b)(3)(ii) by codifying the clarification contained in the Part 9 
Advisory that an exchange indicate in its notice of disciplinary or 
access denial actions whether the violation underlying the notice 
resulted in financial harm to any customers.\22\
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    \21\ For example, a product trading on a DCM might be specified 
as a July 2016 Eurodollar future; while a product trading on a SEF 
may be a CDX North American High Yield Series 26 5 year.
    \22\ 64 FR 39917 (July 23, 1999).
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    The Commission also proposed to amend regulation 9.11(c) by 
deleting instructions for filing notice with the Commission and 
replacing them with instructions for filing notice with the NFA given 
the proposed changes to regulation 9.11(a) discussed above. The NPRM 
provided that filing of the notice with the NFA is accomplished when an 
authorized exchange employee verifies the accuracy of the information 
entered into BASIC.
    The Commission proposed to amend regulation 9.11(d), which sets 
forth the effect of delivery and filing by mail, by deleting 
instructions related to filing notices with the Commission by mail 
since proposed regulation 9.11(c) calls for notice filings to be made 
to the NFA via BASIC instead of with the Commission by mail.
    Pursuant to Commission regulation 9.12(b), an exchange that 
determines that a disciplinary action will become effective prior to 
the expiration of 15 days after written notice to the person that is 
the subject of such action must provide notification in writing either 
personally or by telegram or other means of written telecommunication. 
The exchange also must immediately notify the Commission by telegram or 
other means of written telecommunication. The Commission proposed to 
modernize regulation 9.12(b) by replacing references to ``telegram or 
other means of written telecommunication'' with the term ``email'' and 
provide a Commission email address for Commission notification.
    Commission regulation 9.13 provides that whenever an exchange 
suspends, expels or otherwise disciplines, or denies any person access 
to the exchange, it must make its findings public by disclosing at 
least the information contained in the Commission regulation 9.11(b) 
notice. An exchange also must make such findings public as soon as the 
disciplinary action or access denial action becomes effective by 
posting a notice in a conspicuous place on its premises. As noted in 
the NPRM, posting a notice of disciplinary action on the premises of an 
exchange does little to publicize the action.\23\ Accordingly, the 
Commission proposed to modernize regulation 9.13 by requiring the 
notice to be posted on an exchange's website to which its members, 
market participants, and the public regularly have access.\24\ The 
Commission also proposed to amend regulation 9.13 by requiring the 
notice to be maintained and readily available on an exchange's 
website.\25\ As a result, the existing requirement to maintain and make 
available for public inspection a record of the information contained 
in the disciplinary or access denial notice would be eliminated.
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    \23\ 82 FR 7743 (Jan. 23, 2017).
    \24\ The Commission noted in the NPRM that many DCMs have 
already adopted more modern methods to publicize notices of 
disciplinary action. 82 FR 7743 (Jan. 23, 2017). For example, the 
CME Group DCMs (Chicago Board of Trade (``CBOT''), Chicago 
Mercantile Exchange (``CME''), Commodity Exchange, Inc., 
(``COMEX''), and New York Mercantile Exchange, Inc. (``NYMEX'')) and 
ICE Futures U.S. notify subscribers of exchange disciplinary 
postings via email. The Commission also noted that the amendment 
generally tracks the Securities and Exchange Commission's (``SEC'') 
standards for Release of Disciplinary Complaints, Decisions and 
Other Information in Financial Industry Regulatory Authority, Inc. 
(``FINRA'') Rule 8313, in which FINRA, with SEC approval, has 
established its standard for releasing to the public a copy of FINRA 
issued disciplinary complaints, decisions, and other disciplinary 
information. See FINRA Rule 8313 ``Release of Disciplinary 
Complaints, Decisions and Other Information,'' available at http://finra.complinet.com/en/display/display_main.html?rbid=2403&element_id=3892. See also SEC Release 
No. 34-69825; File No. SR-FINRA-2013-018 (June 21, 2013).
    \25\ Some DCMs currently maintain records of disciplinary action 
on their websites. For example, CBOE Futures Exchange, LLC maintains 
a disciplinary decision database on its website that allows the 
public to review disciplinary decisions dating back to 2012. The 
Commission notes that in the securities industry, the New York Stock 
Exchange maintains disciplinary notices as far back as 1972.
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    The Commission also noted in the NPRM that it anticipates that upon 
the effective date of the final part 9 rules, it will include links on 
its SmartCheck website to each exchange's website for posting notice of 
disciplinary action or access denial action.\26\
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    \26\ 82 FR 7743 (Jan. 23, 2017). In November 2014, the CFTC 
launched the SmartCheck website. It connects investors to tools to 
check the registration, license, and disciplinary history of certain 
financial professionals. This collection of tools allows the 
responsible investor to confirm the credentials of investment 
professionals, uncover any past disciplinary history, and stay ahead 
of scam artists with news and alerts.
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B. Amendment to Regulation 3.31: Deficiencies, Inaccuracies, and 
Changes To Be Reported

    Pursuant to Commission regulation 3.31, an applicant or registrant 
as a futures commission merchant (``FCM''), retail foreign exchange 
dealer (``RFED''), swap dealer (``SD''), major swap participant 
(``MSP''), commodity trading advisor (``CTA''), commodity pool operator 
(``CPO''), introducing broker

[[Page 1541]]

(``IB''), or floor trader (``FT'') that is a non-natural person or 
leverage transaction merchant (``LTM'') must promptly correct any 
deficiency or inaccuracy in Form 7-R or Form 8-R which has rendered the 
information contained therein non-current or inaccurate. These 
corrections must be made in accordance with the instructions of each 
form to create a Form 3-R record of such change.
    In 1999, concurrent with the Part 9 Delegation and Part 9 Advisory, 
the Commission issued an advisory pertaining to part 3 of the 
Commission's regulations (``Part 3 Advisory''). The Part 3 Advisory 
relieves registrants and applicants for registrant status from filing 
the Form 3-R if the information to be reported is solely the result of 
an exchange disciplinary or access denial action.\27\ In 2012, the 
Commission eliminated the requirement that registrants and individuals 
use Form 3-R to update their existing Form 7-R or 8-R and provided that 
an update to a registrant's online Form 7-R or 8-R would automatically 
create a record of changes equivalent to a completed Form 3-R.\28\ The 
Commission proposed to codify the Part 3 Advisory by amending 
regulation 3.31(a)(1) with language that relieves applicants or 
registrants from the obligation to update their Form 7-R or 8-R if the 
information to be reported is solely the result of an exchange 
disciplinary or access denial action.
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    \27\ The Part 3 Advisory also explains that the Commission has: 
(1) Permitted exchanges (via the Part 9 Advisory) to file either 
electronic or written Sec.  9.11 notices with the NFA instead of the 
Commission and (2) delegated to the NFA (via the Part 9 Delegation) 
the duty to receive and process exchange disciplinary and access 
denial action information filed by the exchanges in accordance with 
Commission regulation 9.11. The Commission further explained that, 
as a result of the Part 9 Advisory and Part 9 Delegation, the NFA 
possesses the exchange disciplinary and access denial action 
information that registrants and applicants for registrant status 
would otherwise be required to include in Form 3-R. Therefore, to 
avoid duplicative reporting, the Part 3 Advisory advises all 
individuals and entities subject to Commission regulation 3.31 that 
they are relieved from Commission regulation 3.31 reporting 
obligations resulting from an exchange disciplinary or access denial 
action and reported by an exchange pursuant to a Sec.  9.11 notice. 
64 FR 39912 (July 23, 1999).
    \28\ 77 FR 51898 (Aug. 28, 2012).
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III. Comments on the Proposal

    The comment period for the Proposal ended on March 24, 2017. The 
Commission received one comment letter.\29\ The Minneapolis Grain 
Exchange (``MGEX'') generally supported the Proposal while offering 
some suggestions for certain provisions. MGEX agreed with the 
Commission's general approach to modernize permitted methods of 
communication. For example, MGEX cited the language in proposed 
regulation 9.11(c) that would require an exchange only to verify that 
information entered into NFA's BASIC system instead of mailing a notice 
to the Commission as a positive change. MGEX also favorably cited 
proposed regulation 9.12(b) that would permit an exchange to email 
notice of an early effective date of disciplinary action instead of 
mailing it or by telegram. MGEX noted these changes reduce burdens and 
suggested that the Commission make similar changes to proposed 
regulations 9.11(c) and (d) to allow an exchange to email a 
disciplinary or access denial notice to the person subject to the 
action.
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    \29\ See https://comments.cftc.gov/PublicComments/CommentList.aspx?id=1776.
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    MGEX agreed that an exchange should publish notices of certain 
disciplinary actions on its website. However, MGEX requested that an 
exchange have flexibility regarding how it fulfills this obligation. In 
particular, MGEX requested that regulation 9.13 be amended to ensure 
that an exchange has flexibility over the format, style, and location 
of the notice on its website, as well as any ancillary website relating 
to the publication of such notices. MGEX stated that an exchange should 
be able to archive notices on its website after a reasonable period of 
time. MGEX noted that archived notices should be accessible, but an 
exchange should have discretion to maintain them separately on its 
website. In addition, MGEX indicated that there may be situations where 
removing a notice from its website would be appropriate and exchanges 
should be provided with this discretion. In support of its position, 
MGEX stated that the regulatory environment or exchange rules could 
change over time such that certain notices no longer provide 
educational or informative value. MGEX commented that having notices 
that are predicated on antiquated rules may actually confuse members, 
market participants, or the public. Finally, MGEX requested guidance 
that regulation 9.13 will be limited to disciplinary actions that were 
finalized after the effective date of any final rulemaking.

IV. Final Rules and Notice and Order

A. Final Rules

    The Commission, in consideration of the MGEX comment, is adopting 
the part 9 rules as proposed subject to the minor modifications 
described below. The Commission agrees with MGEX's suggestion to amend 
regulations 9.11(c) and (d) to allow an exchange to use email as a 
permitted method of delivering notice of the disciplinary or access 
denial action to the person subject to the action. Accordingly, the 
Commission is modifying 9.11(c) to allow delivery of the notice to the 
person's last known email address. The Commission is also amending 
9.11(d) to provide that delivery of the disciplinary notice will be 
complete upon transmission of the email.
    The Commission also agrees with MGEX that an exchange should have 
flexibility over the format, style, and location of the notice on its 
website including any indexing or search functionality. The Commission 
believes that adopting the rule as proposed provides sufficient 
flexibility for exchanges in this regard, although the Commission notes 
that an exchange must ensure that access to all disciplinary notices 
remain readily accessible regardless of whether the exchange decides to 
archive notices after a reasonable period of time.
    In response to MGEX's comment requesting that exchanges should be 
given discretion in certain situations to remove a disciplinary notice 
from its website, the Commission acknowledges MGEX's concern that the 
regulatory environment or exchange rules could change over time and 
having notices that are predicated on antiquated rules may confuse 
members, market participants, or the public. However, the Commission 
believes that all disciplinary and access denial notices must be 
maintained on the exchange's website without the possibility of 
removal. Access to information regarding all exchange disciplinary and 
access denial actions provides valuable guidance and information to 
exchange members, market participants, and the public regardless of 
whether the regulatory environment or an exchange rule has changed. For 
example, the notices allow customers to consider member firms' and 
traders' disciplinary histories when considering whether to engage in 
business with them. This includes conduct by firms and traders that 
violated an exchange rule at the time the rule was in effect. The final 
rule also enables customers to consider an exchange's propensity to 
sanction firms and traders for rule violations when considering whether 
to trade on the exchange. In the limited circumstances where an 
exchange believes that a disciplinary notice may confuse its members, 
market participants, or the public as a result of a regulatory 
environment or exchange rule change, an exchange could address this 
concern by posting an attachment to

[[Page 1542]]

the disciplinary notice that explains the nature of any such change.
    The Commission agrees with MGEX that the rulemaking should not be 
applied retroactively to final exchange disciplinary actions. 
Therefore, exchanges only will be required to publish disciplinary 
actions that are finalized after the effective date of the final rules.
    As discussed above, the Commission proposed to amend regulation 
9.2(f) to expand the definition of ``member of an exchange'' to include 
any person who has trading privileges on an exchange. The Commission 
explained that this change is necessary to conform the part 9 
definition of ``member'' to the meaning set forth in section 1a(34) of 
the CEA and in 1.3(q) of the Commission's regulations. The Commission 
is adopting the amendment to regulation 9.2(f) as proposed. The 
Commission notes that 9.2(f)(1) preserves the prior definition of 
``member of an exchange,'' while the inclusion of ``any person who has 
trading privileges on an exchange'' under 9.2(f)(2) conforms the 
``member of an exchange'' definition with the meaning set forth in 
section 1a(34)(B) of the CEA and regulation 1.3(q)(1)(ii).
    The Commission is also adopting the amendment to regulation 
3.31(a)(1) as proposed. Therefore, the final rule relieves applicants 
and registrants from the obligation to update their Form 7-R or 8-R if 
the information to be reported is solely the result of an exchange 
disciplinary or access denial action.

B. Deletion of References to Commission Form 3-R

    The Commission is making an additional technical change to 
regulation 3.31. As reflected in the amended text of the rule, the 
Commission is eliminating the references to Form 3-R from subsections 
(a)(1), (a)(3), (b), and (c)(1) of regulation 3.31 by deleting from 
these subsections the phrase ``to create a Form 3-R record of change.'' 
\30\ The Commission no longer requires market participants to use the 
Form 3-R.\31\ Additionally, by separate Notice, the Commission formally 
proposed to cancel the Form 3-R and transfer the administrative burdens 
associated with that form to Forms 7-R and 8-R.\32\ Accordingly, the 
Commission is updating regulation 3.31 to reflect the retirement of 
Form 3-R. For these same reasons, the Commission is making a similar 
technical change to regulation 3.11. As reflected in the amended text 
of the rule, the Commission is deleting the reference to Form 3-R from 
subsection (b) of regulation 3.11. The Commission notes that these 
changes to regulations 3.11 and 3.31 are purely technical and do not 
affect the obligations of the individuals and entities subject to these 
rules.
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    \30\ The phrase being deleted from subsection (a)(1) of 
regulation 3.31 is ``to create a Form 3-R record of such change.''
    \31\ Registration of Intermediaries, 77 FR 51898 (Aug. 28, 
2012).
    \32\ Agency Information Collection Activities: Proposed 
Collection Revision, Comment Request: Adoption of Revised 
Registration Form 8-R and Cancellation of Form 3-R, 82 FR 19663, 
19664 (Apr. 28, 2017).
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C. Notice and Order

    In a separate document published elsewhere in this issue of the 
Federal Register, the Commission issued an updated Notice and Order to 
replace the Part 9 Delegation from 1999 regarding the specific duties 
delegated by the Commission to the NFA for receiving and processing 
exchange disciplinary and access denial information. Among other 
things, the Notice and Order is being updated to account for the 
amendment to regulation 9.11(a) that will require exchanges to file 
disciplinary and access denial actions with the NFA. As discussed 
above, prior to this amendment, exchanges were only encouraged to file 
the notifications with the NFA, but not required. In addition, the 
updated Notice and Order includes SEFs now filing the required notices 
with the NFA as SEFs did not exist when the Commission issued the Part 
9 Delegation and Advisory in 1999.
    Consistent with the Part 9 Delegation, the updated Notice and Order 
delegates to the NFA the authority to perform the following functions: 
(1) To process exchange disciplinary information filed by an exchange 
or the Commission in the BASIC system; (2) to provide the Commission 
with access to a Management Report summarizing all recent exchange 
disciplinary information and to provide the Commission with the 
capability to generate standardized reports on the BASIC system; (3) to 
assist the Commission in enforcing exchange compliance with regulation 
9.11 filing requirements; and (4) to serve as the official custodian of 
a database containing records of all exchange disciplinary and access 
denial actions filed with the NFA for inclusion in the BASIC system.

V. Related Matters

A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA'') requires federal agencies, 
in promulgating rules, to consider the impact of those rules on small 
entities.\33\ The Commission did not receive any comments with respect 
to the RFA. The part 9 rules adopted herein will affect all SEFs and 
DCMs. The Commission previously established certain definitions of 
``small entities'' to be used by the Commission in evaluating the 
impact of its regulations on small entities in accordance with the 
RFA.\34\ The Commission previously determined that DCMs and SEFs are 
not small entities for purposes of the RFA.\35\
---------------------------------------------------------------------------

    \33\ 5 U.S.C. 601 et seq.
    \34\ See 47 FR 18618 through 18621 (Apr. 30, 1982).
    \35\ See 47 FR 18618, 18619 (Apr. 30, 1982) (DCMs); 78 FR 33548 
(June 4, 2013) (SEFs).
---------------------------------------------------------------------------

    The part 3 rules adopted herein will affect certain applicant or 
registrant FCMs, RFEDs, SDs, MSPs, CTAs, CPOs, IBs, FTs who are non-
natural persons, and LTMs who will no longer have to file a Form 7-R or 
8-R if the information to be reported is solely the result of an 
exchange disciplinary or access denial action. The Commission 
previously determined that FCMs, RFEDs, SDs, MSPs, CPOs, and LTMs are 
not small entities for purposes of the RFA.\36\ Therefore, the 
requirements of the RFA do not apply to those entities. With respect to 
CTAs, FTs, and IBs, the Commission has found it appropriate to consider 
whether such registrants should be deemed small entities for purposes 
of the RFA on a case-by-case basis, in the context of the particular 
Commission regulation at issue.\37\ As certain of these registrants may 
be small entities for purposes of the RFA, the Commission has 
considered whether the final rules will have a significant impact on 
these registrants.
---------------------------------------------------------------------------

    \36\ See Policy Statement and Establishment of Definitions of 
``Small Entities'' for Purposes of the Regulatory Flexibility Act, 
47 FR 18618 (Apr. 30, 1982) (FCMs and CPOs); Leverage Transactions, 
54 FR 41068 (Oct. 5, 1989) (LTMs); Regulation of Off-Exchange Retail 
Foreign Exchange Transactions and Intermediaries, 75 FR 55410, 55416 
(Sept. 10, 2010) (RFEDs); and Registration of Swap Dealers and Major 
Swap Participants, 77 FR 2613, 2620 (Jan. 19, 2012) (SDs and MSPs).
    \37\ See 47 FR 18620 (Apr. 30, 1982) (CTAs); Registration of 
Floor Traders; Mandatory Ethics Training for Registrants; Suspension 
of Registrants Charged With Felonies, 58 FR 19575, 19588 (Apr. 15, 
1993) (FTs); and Introducing Brokers and Associated Persons of 
Introducing Brokers, Commodity Trading Advisors and Commodity Pool 
Operators; Registration and Other Regulatory Requirements, 48 FR 
35248, 35276 (Aug. 3, 1983) (IBs).
---------------------------------------------------------------------------

    The amendment to Commission regulation 3.31 is not substantive in 
nature. In 1999, the Commission published the Part 3 Advisory which 
relieved all applicants and registrants from filing a Form 3-R if the 
information to be reported is solely the result of an exchange 
disciplinary or

[[Page 1543]]

access denial action.\38\ Beyond conforming the regulation to an 
established agency policy provided for in the Part 3 Advisory, the 
conforming amendments to regulation 3.31 will not affect the current 
processes or impose any new costs on small entities. The final rule 
codifies the filing relief set forth in the Part 3 Advisory and will 
not impose any new regulatory obligations on any registrant, including 
CTAs, FTs, and IBs.
---------------------------------------------------------------------------

    \38\ 64 FR 39912 (July 23, 1999).
---------------------------------------------------------------------------

    The Commission does not, therefore, expect small entities to incur 
any additional costs as a result of the final rules. Consequently, the 
Commission finds that no significant economic impact on small entities 
will result from the final rules.
    Accordingly, the Chairman, on behalf of the Commission pursuant to 
5 U.S.C. 605(b), certifies that the final rules will not have a 
significant economic impact on a substantial number of small entities.

B. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (``PRA'') imposes certain 
requirements on Federal agencies, including the Commission, in 
connection with their conducting or sponsoring any collection of 
information, as defined by the PRA.\39\ 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 issued 
by the Office of Management and Budget (``OMB''). The final rules 
contain provisions that qualify as collections of information, for 
which the Commission has already sought and obtained control numbers 
from the OMB. The titles for these collections of information are 
``Part 38--Core Principles and Other Requirements for Designated 
Contract Markets'' (OMB Control Number 3038-0052) and ``Part 37--Core 
Principles and Other Requirements for Swap Execution Facilities'' (OMB 
Control Number 3038-0074).
---------------------------------------------------------------------------

    \39\ 44 U.S.C. 3501 et seq.
---------------------------------------------------------------------------

    As explained in the NPRM, the Commission did not seek to amend 
information collections 3038-0052 or 3038-0074 because the Commission 
believes that the rule modifications proposed would not impose any new 
information collection requirements that require approval from OMB 
under the PRA.\40\ The Commission invited public comment on the 
accuracy of its determination that no additional recordkeeping or 
information collection requirements or changes to existing collection 
requirements would result from the Proposal.\41\ The Commission did not 
receive any such comments. Accordingly, the Commission believes the 
final rules will not impact the current burden estimates for 
collections 3038-0052 and 3038-0074. The Commission will nevertheless, 
by separate action, publish in the Federal Register a notice and 
request for comment on the additional elements to be included as part 
of exchange notices, and submit to OMB an information collection 
request to amend the relevant information collection, in accordance 
with 44 U.S.C. 3506(c)(2)(A) and 5 CFR 1320.8(d). As noted previously, 
by separate Notice published in the Federal Register, the Commission 
provided notice that the Form 3-R was being cancelled, and that the PRA 
burdens associated with Form 3-R under collections 3038-0023 and 3038-
0072 were being reassigned to Forms 7-R and 8-R.\42\
---------------------------------------------------------------------------

    \40\ 82 FR 7745-46 (Jan. 23, 2017).
    \41\ For collection 3038-0052, see OMB Control No. 3038-0052, 
available at http://www.reginfo.gov/public/do/PRAOMBHistory?ombControlNumber= 3038-0052. For collection 3038-0074, 
see OMB Control No. 3038-0074, available at http://www.reginfo.gov/public/do/PRAOMBHistory?ombControlNumber= 3038-0074.
    \42\ 82 FR 19663 (Apr. 28, 2017).
---------------------------------------------------------------------------

C. Cost-Benefit Considerations

1. Introduction
    Section 15(a) of the CEA requires the Commission to consider the 
costs and benefits of its actions before promulgating a regulation 
under the CEA or issuing certain orders.\43\ Section 15(a) further 
specifies that the costs and benefits shall be evaluated in light of 
five broad areas of market and public concern: (1) Protection of market 
participants and the public; (2) efficiency, competitiveness, and 
financial integrity of the markets; (3) price discovery; (4) sound risk 
management practices; and (5) other public interest considerations. The 
Commission considers the costs and benefits resulting from its 
discretionary determinations with respect to the section 15(a) factors.
---------------------------------------------------------------------------

    \43\ 7 U.S.C. 19(a).
---------------------------------------------------------------------------

    The Commission considers the costs and benefits associated with the 
final rules, including updating the pre-existing regulatory framework 
to incorporate SEFs, removing references to part 8 of the Commission's 
regulations, and revising the reporting and notice requirements for 
DCMs and SEFs. The Commission compares the costs and benefits of this 
rulemaking against a baseline of the status quo, the current 
requirements under part 3 and part 9. As explained in the NPRM, and as 
adopted, the rules are primarily technical in nature that clarify the 
obligations under the current rules and generally do not impose any new 
costs on DCMs, SEFs, or market participants.\44\ Regulation 
9.11(b)(3)(ii) will require the exchanges to specify in the 
disciplinary notices the product involved in the disciplinary action 
and whether the rule violation resulted in financial harm to any 
customers. The Commission acknowledges that these additional elements 
in the disciplinary notices may result in additional costs, but any 
such costs would be de minimis. Accordingly, the Commission addresses 
below the costs associated with Commission regulation 9.13 requirement 
for DCMs and SEFs to publish and maintain disciplinary notices on their 
respective websites.
---------------------------------------------------------------------------

    \44\ 82 FR 7746 (Jan. 23, 2017).
---------------------------------------------------------------------------

    In the Proposal, the Commission sought comment concerning all 
aspects of the costs and benefits. The Commission did not receive any 
comments that specifically addressed the Cost-Benefit Considerations 
section of the Proposal. However, MGEX commented that the proposed 
amendment to regulation 9.11(c) that would allow an exchange to only 
have to verify that information has been entered into NFA BASIC instead 
of mailing a notice to the Commission, and the amendment to 9.12(b) 
that would permit an exchange to satisfy its obligations to deliver 
notice of the disciplinary or access denial action by email reduces the 
burden to exchanges, albeit in nominal ways. As discussed above, the 
Commission is amending regulations 9.11(c) and (d) to allow exchanges 
to satisfy their delivery obligations of the disciplinary or access 
denial action to the person subject to the action by email.
    Finally, in light of NFA's role and experience in performing 
registration functions on behalf of the Commission and as the custodian 
of related records (including exchange disciplinary filings), the 
Commission believes that it is appropriate to remove the requirement 
that an exchange provide written notice to the Commission of a final 
disciplinary action or access denial action and replace it with a 
requirement to provide notice to the NFA. NFA performs registration 
processing functions with respect to applicants and registrants and an 
individual's or firm's disciplinary history is a factor that must be 
considered in any fitness determination. Delegating to the NFA the 
responsibility for processing such filings and generating reports with 
the

[[Page 1544]]

information amassed, should ensure that the NFA has the necessary 
information to continue to make appropriate registration 
determinations. The Commission also believes this delegation will 
enhance efficiency by permitting the Commission to carry out its 
statutory responsibilities under the CEA, while also freeing up 
Commission resources to be directed to other parts of its regulatory 
mandate.
2. Commission Regulation 9.13--Publication of Notice
    Commission regulation 9.13 requires all DCMs and SEFs to maintain 
and make readily accessible final notices of exchange disciplinary and 
access denial actions on their websites.\45\ This new requirement 
replaces the existing requirement in Commission regulation 9.13 that 
exchanges publish the notice in a conspicuous place on the exchange's 
premises.
---------------------------------------------------------------------------

    \45\ 17 CFR 9.13.
---------------------------------------------------------------------------

a. Costs
    The Commission continues to believe that requiring exchanges to 
post final disciplinary and access denial notices to their websites 
will slightly increase the costs for DCMs and SEFs. The Commission 
notes that the additional costs incurred by DCMs and SEFs will be 
offset in part due to the amendment in Commission regulation 9.13 that 
removes the requirement of posting disciplinary and access denial 
notices on the premises of the respective DCM or SEF. In order to 
estimate the additional costs, the Commission queried the NFA's BASIC 
system to determine the total number of disciplinary and access denial 
actions filed by DCMs and SEFs in 2016.\46\
---------------------------------------------------------------------------

    \46\ The Commission's cost estimates in the NPRM were based on 
the 452 disciplinary and access denial actions filed by DCMs in 
2015. Because SEFs did not post any such actions with BASIC in 2015, 
the cost estimates for SEFs were based on the disciplinary and 
access denial actions filed by DCMs in 2015, excluding the four DCMs 
with the largest number of reported disciplinary and access denial 
actions. The Commission explained that the average number of 
disciplinary and access denial actions by the other 11 DCMs provide 
a more appropriate comparison with respect to estimating the number 
of actions filed by SEFs annually. This average resulted in an 
estimate of eight disciplinary and access denial actions filed in 
BASIC for each SEF annually. The Commission noted that as the SEFs 
mature, in terms of the number of participants and volume, the 
number of disciplinary and access denial actions may increase 
accordingly. 82 FR 7746 (Jan. 23, 2017).
---------------------------------------------------------------------------

    Total number of reported disciplinary and access denial actions in 
BASIC by all DCMs: 296.
    Total number of reported disciplinary and access denial actions in 
BASIC by all SEFs: 15.
    The total number of exchange disciplinary and access denial actions 
per year for all DCMs and SEFs is estimated to be 311 (296 actions for 
DCMs plus 15 actions for SEFs equals 311 total actions per year). The 
Commission anticipates each DCM and SEF will spend an additional 15 
minutes per disciplinary notice to post on the exchange's website above 
the current requirement of posting the notice on the exchange's 
premises. Accordingly, the aggregate new burden of Commission 
regulation 9.13 is estimated to be 77.75 hours per year for the 15 DCMs 
and 24 SEFs (15 minutes multiplied by 311 anticipated actions per year 
equals 77.75 burden hours).
    The Commission expects that a compliance officer employed by the 
exchange will post the disciplinary or access denial action notices to 
the exchange website. According to recent Bureau of Labor Statistics 
National Occupational Employment and Wage Estimates, the mean hourly 
wage of an employee under occupation code 13-1041, ``Compliance 
Officers,'' that is employed by the ``Securities and Commodity 
Exchanges'' industry is $46.01. Because DCMs and SEFs can be large, 
specialized entities that may engage employees with wages above the 
mean, the Commission has conservatively chosen to use a mean hourly 
wage of $50 per hour.\47\ Accordingly, the burden associated with 
posting the disciplinary notices on exchange websites is approximately 
$3,887.50 per year for all of the 15 DCMs and 24 SEFs, ($50 multiplied 
by the anticipated 77.75 burden hours equals $3,887.50 per year).\48\
---------------------------------------------------------------------------

    \47\ Bureau of Labor Statistics, Occupational Employment and 
Wages: 13-1041 Compliance Officers, (May 2014), available at http://www.bls.gov/oes/current/oes131041.htm.
    \48\ As noted in the NPRM, the Commission acknowledges that 
requiring exchanges to post final notices of disciplinary and access 
denial actions on their websites may necessitate additional 
bandwidth. The Commission anticipates that any increased costs due 
to added bandwidth will be insignificant in its calculation of the 
total annual burden associated with the final rules. 82 FR 7747 
(Jan. 23, 2017).
---------------------------------------------------------------------------

b. Benefits
    The Commission continues to believe that greater access to 
information regarding exchange disciplinary and access denial actions 
provides valuable guidance and information to exchange members, market 
participants, and the public. Releasing disciplinary information to the 
public serves to deter and prevent future misconduct and to improve 
overall compliance standards in the futures and swaps industry. It also 
allows customers to consider member firms' and traders' disciplinary 
histories when considering whether to engage in business with them. In 
addition, firms may use such information to educate their traders and 
associated persons as to compliance matters, highlighting potential 
violations and related sanctions. Further, any firm or individual 
facing allegations of rule violations may access existing disciplinary 
decisions to gain greater insight on related facts and sanctions. The 
Commission believes that the added deterrence of publishing 
disciplinary notices on exchange websites and the enhanced 
investigative and educational benefits of making such information 
public will ultimately decrease the incidents of wrongdoing and market 
abuses which benefits both market participants and the general public.
c. Section 15(a) Factors
    As noted above, section 15(a) of the CEA requires the Commission to 
consider the effects of its actions in light of the following five 
factors:
    (1) Protection of market participants and the public. The 
Commission believes that market participants and the public will 
benefit from the ministerial and conforming amendments since they 
eliminate obsolete, vestigial provisions and references that otherwise 
could be construed to give rise to confusing inconsistencies between 
the Commission's regulations and the provisions of the CEA. 
Furthermore, the Commission believes that the amendment to regulation 
9.13, which requires exchanges to publish notice of final disciplinary 
and access denial actions on exchange websites, increases transparency 
of exchange disciplinary actions and serves as a deterrence of future 
market abuses. These enhancements allow for operational efficiencies in 
oversight, increased deterrence from market abuses, and greater 
transparency of the exchange disciplinary process. Therefore, the 
Commission anticipates that the amendment to regulation 9.13 will 
result in improved protection of market participants and the public.
    (2) The efficiency, competitiveness, and financial integrity of the 
markets. The requirement that exchanges publish disciplinary notices 
and access denial actions on their websites is intended to improve the 
operational efficiency and financial integrity of the futures and swaps 
markets by enabling the public and those who access an exchange website 
to be made aware of any disciplinary and access denial actions imposed 
by the exchange. By publishing

[[Page 1545]]

the notice on the exchange's website, the Commission believes that the 
efficiency and financial integrity of the markets will be bolstered by 
the deterrent effect achieved by posting the notice in a publicly 
accessible medium.
    (3) Price discovery. The Commission did not identify any impact on 
price discovery as a result of the proposed regulations, and did not 
believe there would be one, but sought comment as to any potential 
impact. The Commission did not receive any comments on this issue. 
Accordingly, the Commission believes that the final regulations will 
not impact price discovery.
    (4) Sound risk management practices. The Commission did not 
identify any impact on sound risk management practices as a result of 
the proposed regulations, and did not believe there would be one, but 
sought comment as to any potential impact. The Commission did not 
receive any comments on this issue. Accordingly, the Commission 
believes that the final regulations will not impact sound risk 
management practices.
    (5) Other public interest considerations. The Commission has not 
identified any other public interest considerations.

D. Antitrust Considerations

    Section 15(b) of the CEA requires the Commission to take into 
consideration the public interest to be protected by the antitrust laws 
and endeavor to take the least anticompetitive means of achieving the 
objectives of the CEA in issuing any order or adopting any Commission 
rule or regulation. The Commission does not anticipate that the 
amendments adopted herein would promote or result in anticompetitive 
consequences or behavior.

List of Subjects

17 CFR Part 3

    Administrative practice and procedure, Brokers, Commodity futures, 
Major swap participants, Reporting and recordkeeping requirements, Swap 
dealers.

17 CFR Part 9

    Administrative practice and procedure, Commodity exchanges, 
Commodity futures.

    For the reasons stated in the preamble, the Commodity Futures 
Trading Commission amends 17 CFR chapter I as follows:

PART 3--REGISTRATION

0
1. The authority citation for part 3 is revised to read as follows:

    Authority:  5 U.S.C. 552, 552b; 7 U.S.C. 1a, 2, 6a, 6b, 6b-1, 
6c, 6d, 6e, 6f, 6g, 6h, 6i, 6k, 6m, 6n, 6o, 6p, 6s, 8, 9, 9a, 12, 
12a, 13b, 13c, 16a, 18, 19, 21, and 23.


0
2. In Sec.  3.11, revise paragraph (b) to read as follows:


Sec.  3.11  Registration of floor brokers and floor traders.

* * * * *
    (b) Duration of registration. A person registered as a floor broker 
or floor trader in accordance with paragraph (a) of this section, and 
whose registration has neither been revoked nor withdrawn, will 
continue to be so registered unless such person's trading privileges on 
all contract markets and swap execution facilities have ceased: 
Provided, that if a floor broker or floor trader whose trading 
privileges on all contract markets and swap execution facilities have 
ceased for reasons unrelated to any Commission action or any contract 
market or swap execution facility disciplinary proceeding and whose 
registration is not revoked, suspended or withdrawn is granted trading 
privileges as a floor broker or floor trader, respectively, by any 
contract market or swap execution facility where such person held such 
privileges within the preceding sixty days, such registration as a 
floor broker or floor trader, respectively, shall be deemed to continue 
and no new Form 7-R, Form 8-R or change to Form 7-R or Form 8-R need be 
filed solely on the basis of the resumption of trading privileges. A 
floor broker or floor trader is prohibited from engaging in activities 
requiring registration under the Act or from representing such person 
to be a registrant under the Act or the representative or agent of any 
registrant during the pendency of any suspension of such registration 
or of all such trading privileges. Each contract market and swap 
execution facility that has granted trading privileges to a person who 
is registered, or has applied for registration, as a floor broker or 
floor trader, must provide notice in accordance with Sec.  3.31(d) 
after such person's trading privileges on such contract market or swap 
execution facility have ceased.
* * * * *

0
3. In Sec.  3.31, revise paragraphs (a)(1), (a)(3)(i), (b), and (c)(1) 
to read as follows:


Sec.  3.31  Deficiencies, inaccuracies, and changes, to be reported.

    (a)(1) Each applicant or registrant as a futures commission 
merchant, retail foreign exchange dealer, swap dealer, major swap 
participant, commodity trading advisor, commodity pool operator, 
introducing broker, floor trader that is a non-natural person or 
leverage transaction merchant shall, in accordance with the 
instructions thereto, promptly correct any deficiency or inaccuracy in 
Form 7-R or Form 8-R that no longer renders accurate and current the 
information contained therein, with the exception of any change that 
requires withdrawal from registration under Sec.  3.33 or any change 
resulting from an exchange disciplinary or access denial action. Each 
such correction shall be prepared and filed in accordance with the 
instructions thereto.
* * * * *
    (3) * * *
    (i) If the new principal is not a natural person, the registrant 
shall update such Form 7-R.
* * * * *
    (b) Each applicant or registrant as a floor broker, floor trader or 
associated person, and each principal of a futures commission merchant, 
retail foreign exchange dealer, swap dealer, major swap participant, 
commodity trading advisor, commodity pool operator, introducing broker, 
floor trader that is a non-natural person, or leverage transaction 
merchant must, in accordance with the instructions thereto, promptly 
correct any deficiency or inaccuracy in the Form 8-R or supplemental 
statement thereto.
    (c)(1) After the filing of a Form 8-R or updating a Form 8-R by or 
on behalf of any person for the purpose of permitting that person to be 
an associated person of a futures commission merchant, retail foreign 
exchange dealer, commodity trading advisor, commodity pool operator, 
introducing broker, or a leverage transaction merchant, that futures 
commission merchant, retail foreign exchange dealer, commodity trading 
advisor, commodity pool operator, introducing broker or leverage 
transaction merchant must, within thirty days after the occurrence of 
either of the following, file a notice thereof with the National 
Futures Association indicating:
    (i) The failure of that person to become associated with the 
futures commission merchant, retail foreign exchange dealer, commodity 
trading advisor, commodity pool operator, introducing broker, or 
leverage transaction merchant, and the reasons therefor; or
    (ii) The termination of the association of the associated person 
with the futures commission merchant, retail foreign exchange dealer, 
commodity trading advisor, commodity pool operator,

[[Page 1546]]

introducing broker, or leverage transaction merchant, and the reasons 
therefor.
* * * * *

PART 9--RULES RELATING TO REVIEW OF EXCHANGE DISCIPLINARY, ACCESS 
DENIAL OR OTHER ADVERSE ACTIONS

0
4. The authority citation for part 9 is revised to read as follows:

    Authority:  7 U.S.C. 1a, 2, 6b-1, 6c, 7, 7a-2, 7b-3, 8, 9, 9a, 
12, 12a, 12c, 13b, 16a, 18, 19, and 21.


0
5. In Sec.  9.1, revise paragraphs (b) and (c) to read as follows:


Sec.  9.1  Scope of rules.

* * * * *
    (b) Matters excluded. This part does not apply to and the 
Commission will not accept notices of appeal, or petitions for stay 
pending review, of:
    (1) Any arbitration proceeding, regardless of whether the 
proceeding involved a controversy between members of an exchange;
    (2) Except as provided in Sec. Sec.  9.11(a), (b)(3)(i) through 
(v), and (c), and 9.12(a) and 9.13 (concerning the notice, effective 
date and publication of a disciplinary or access denial action), any 
summary action permitted under the provisions of part 37, appendix B, 
Core Principle 2, paragraph (a)(13) of this chapter or part 38, 
appendix B, Core Principle 13, paragraph (a)(6) of this chapter 
imposing a minor penalty for the violation of exchange rules relating 
to decorum or attire, or relating to the timely submission of accurate 
records required for clearing or verifying each day's transactions or 
other similar activities; and
    (3) Any exchange action arising from a claim, grievance, or dispute 
involving cash market transactions which are not a part of, or directly 
connected with, any transaction for the purchase, sale, delivery or 
exercise of a commodity for future delivery, a commodity option, or a 
swap.
    (4) The Commission will, upon its own motion or upon motion filed 
pursuant to Sec.  9.21(b), promptly notify the appellant and the 
exchange that it will not accept the notice of appeal or petition for 
stay of matters specified in this paragraph. The determination to 
decline to accept a notice of appeal will be without prejudice to the 
appellant's right to seek alternate forms of relief that may be 
available in any other forum.
    (c) Applicability of these part 9 rules. Unless otherwise ordered, 
these rules will apply in their entirety to all appeals, and matters 
relating thereto.

0
6. In Sec.  9.2, revise paragraphs (b), (c), (f), and (k) to read as 
follows:


Sec.  9.2  Definitions.

* * * * *
    (b) Disciplinary action means any suspension, expulsion or other 
penalty imposed on a person by an exchange for violations of rules of 
the exchange, including summary actions.
    (c) Exchange means a swap execution facility or any board of trade 
which has been designated as a contract market.
* * * * *
    (f) Member of an exchange means:
    (1) Any person who is admitted to membership or has been granted 
membership privileges on an exchange; any employee, officer, partner, 
director or affiliate of such member or person with membership 
privileges including any associated person; and any other person under 
the supervision or control of such member or person with membership 
privileges; or
    (2) Any person who has trading privileges on an exchange.
* * * * *
    (k) Summary action means a disciplinary action resulting in the 
imposition of a penalty on a person for violation of rules of the 
exchange permitted under the provisions of part 37, appendix B, Core 
Principle 2, paragraph (a)(10)(vi) of this chapter or part 38, appendix 
B, Core Principle 13, paragraph (a)(4) of this chapter (penalty for 
impeding progress of hearing); part 37, appendix B, Core Principle 2, 
paragraph (a)(14) of this chapter or part 38, appendix B, Core 
Principle 13, paragraph (a)(7) of this chapter (emergency disciplinary 
actions); part 37, appendix B, Core Principle 2, paragraph (a)(13) of 
this chapter (summary fines for violations of rules regarding timely 
submission of records); or part 38, appendix B, Core Principle 13, 
paragraph (a)(6) of this chapter (summary fines for violations of rules 
regarding timely submission of records, decorum, or other similar 
activities).

0
7. Revise Sec.  9.3 to read as follows:


Sec.  9.3  Provisions referenced.

    Except as otherwise provided in this part, the following provisions 
of the Commission's rules relating to reparations contained in part 12 
of this chapter apply to this part: Sec.  12.3 (Business address; 
hours); Sec.  12.5 (Computation of time); Sec.  12.6 (Extensions of 
time; adjournments; postponements); Sec.  12.7 (Ex parte communications 
in reparation proceedings); and Sec.  12.12 (Signature).

0
8. In Sec.  9.4, revise paragraphs (a), (b), and (c) to read as 
follows:


Sec.  9.4  Filing and service; official docket.

    (a) Filing with the Proceedings Clerk; proof of filing; proof of 
service. Any document that is required by this part to be filed with 
the Proceedings Clerk must be filed by delivering it in person or by 
mail to: Proceedings Clerk, Office of Proceedings, Commodity Futures 
Trading Commission, Three Lafayette Centre, 1155 21st Street NW, 
Washington, DC 20581. To be timely filed under this part, a document 
must be delivered or mailed to the Proceedings Clerk within the time 
prescribed for filing. A party must use a means of filing which is at 
least as expeditious as that used in serving that document upon the 
other parties. Proof of filing must be made by attaching to the 
document for filing a statement of service as provided in Sec.  
10.12(a)(6) of this chapter.
    (b) Formalities of filing--(1) Number of copies. Unless otherwise 
specifically provided, an original and one conformed copy of all 
documents filed with the Commission in accordance with the provisions 
of this part must be filed with the Proceedings Clerk.
    (2) Title page. All documents filed with the Proceedings Clerk must 
include at the head thereof, or on a title page, the name of the 
Commission, the title of the proceeding, the docket number (if one has 
been assigned by the Proceedings Clerk), the subject of the particular 
document and the name of the person on whose behalf the document is 
being filed.
    (3) Paper, spacing, type. All documents filed with the Proceedings 
Clerk must be typewritten, must be on one grade of good white paper no 
less than 8 or more than 8\1/2\ inches wide and no less than 10\1/2\ or 
more than 11\1/2\ inches long, and must be bound on the top only. They 
must be double-spaced, except for long quotations (3 or more lines) and 
footnotes which should be single-spaced.
    (4) Signature. The original copy of all papers must be signed in 
ink by the person filing the same or by his or her duly authorized 
agent or attorney.
    (c) Service--(1) General requirements. All documents filed with the 
Proceedings Clerk must, at or before the time of filing, be served upon 
all parties. A party must use a means of service which is at least as 
expeditious as that used in filing that document with the Proceedings 
Clerk. One copy of all motions, petitions or applications made in the 
course of the proceeding, all notices of appeal, all briefs, and 
letters to the Commission or an employee thereof must be served by a 
party upon all other parties.

[[Page 1547]]

    (2) Manner of service. Service may be either personal or by mail. 
Service by mail is complete upon deposit of the document in the mail. 
Where service is effected by mail, the time within which the person 
served may respond thereto will be increased by three days.
    (3) Designation of person to receive service. The first document 
filed in a proceeding by or on behalf of any party must state on the 
first page the name and postal address of the person who is authorized 
to receive service for the party of all documents filed in the 
proceeding. Thereafter, service of documents must be made upon the 
person authorized unless service on a different authorized person or on 
the party himself or herself is ordered by the Commission, or unless 
pursuant to Sec.  9.8 the person authorized is changed by the party 
upon due notice to all other parties. Parties must file and serve 
notification of any changes in the information provided pursuant to 
this subparagraph as soon as practicable after the change occurs.
* * * * *

0
9. In Sec.  9.8, revise paragraph (a)(1) to read as follows:


Sec.  9.8  Practice before the Commission.

    (a) * * *
    (1) By non-attorneys. An individual may appear pro se (on his or 
her own behalf); a general partner may represent the partnership; a 
bona fide officer of a corporation, trust or association may represent 
the corporation, trust or association.
* * * * *

0
10. In Sec.  9.9, revise paragraphs (b)(3) and (4) to read as follows:


Sec.  9.9  Waiver of rules; delegation of authority.

* * * * *
    (b) * * *
    (3) The General Counsel, or his or her designee, may submit to the 
Commission for its consideration any matter which has been delegated 
pursuant to paragraph (b)(1) of this section.
    (4) Nothing in this section will be deemed to prohibit the 
Commission, at its election, from exercising the authority delegated to 
the General Counsel, or his or her designee, under this section.

0
11. Revise Sec.  9.11 to read as follows:


Sec.  9.11  Form, contents and delivery of notice of disciplinary or 
access denial action.

    (a) When required. Whenever an exchange decision pursuant to which 
a disciplinary action or access denial action is to be imposed has 
become final, the exchange must, within thirty days thereafter, provide 
written notice of such action to the person against whom the action was 
taken and notice to the National Futures Association (``NFA'') through 
the NFA's Background Affiliation Status Information Center (``BASIC'') 
system: Provided, That a designated contract market is not required to 
notify the NFA of any summary action, as permitted under the provisions 
of part 38, appendix B, Core Principle 13, paragraph (a)(6) of this 
chapter, which results in the imposition of minor penalties for the 
violation of exchange rules relating to decorum or attire. No final 
disciplinary or access denial action may be made effective by the 
exchange except as provided in Sec.  9.12.
    (b) Contents of notice. For purposes of this part:
    (1) The written notice of a disciplinary action or access denial 
action provided to the person against whom the action was taken by a 
designated contract market must be a copy of a written decision which 
accords with:
    (i) Part 38, appendix B, Core Principle 13, paragraph (a)(3) of 
this chapter in the case of settlement offers;
    (ii) Section 38.708 of this chapter in the case of decisions; or
    (iii) Part 38, appendix B, Core Principle 13, paragraph (a)(5)(iv) 
of this chapter in the case of appeal decisions (including copies of 
any materials incorporated by reference) or other written notice which 
must include items listed in paragraphs (b)(3)(i)--(vi) of this 
section.
    (2) The written notice of a disciplinary action or access denial 
action provided to the person against whom the action was taken by a 
swap execution facility must be a copy of a written decision which 
accords with:
    (i) Part 37, appendix B, Core Principle 2, paragraph (a)(9) of this 
chapter in the case of settlement offers;
    (ii) Section 37.206(d) of this chapter in the case of decisions; or
    (iii) Part 37, appendix B, Core Principle 2, paragraph (a)(11)(iv) 
of this chapter in the case of appeal decisions (including copies of 
any materials incorporated by reference) or other written notice which 
must include items listed in paragraphs (b)(3)(i) through (vi) of this 
section.
    (3) The notice of a disciplinary action or access denial action 
provided to the NFA must include only the items listed in the following 
paragraphs (b)(3)(i) through (v):
    (i) The name of the person against whom the disciplinary action or 
access denial action was taken;
    (ii) A statement of the reasons for the disciplinary action or 
access denial action, detailing the exchange product which was 
involved, as applicable, and whether the violation that resulted in the 
action also resulted in financial harm to any customers together with a 
listing of any rules which the person who was the subject of the 
disciplinary action or access denial action was charged with having 
violated or which otherwise serve as the basis of the exchange action;
    (iii) A statement of the conclusions and findings made by the 
exchange with regard to each rule violation charged or, in the event of 
settlement, a statement specifying those rule violations which the 
exchange has reason to believe were committed;
    (iv) The terms of the disciplinary action or access denial action;
    (v) The date on which the action was taken and the date the 
exchange intends to make the disciplinary or access denial action 
effective; and
    (vi) Except as otherwise provided in Sec.  9.1(b), a statement 
informing the party subject to the disciplinary action or access denial 
action of the availability of Commission review of the exchange action 
pursuant to section 8c of the Act and this part.
    (c) Delivery and filing of the notice. Delivery of the notice must 
be made personally to the person who was the subject of the 
disciplinary action or access denial action, by mail to such person at 
that person's last known address, or by email to the person's last 
known email address. Filing of the notice with the NFA is accomplished 
when an authorized exchange employee verifies the accuracy of the 
information entered into BASIC.
    (d) Effect of delivery by mail or email. Delivery by mail to the 
person disciplined or denied access will be complete upon deposit in 
the mail of a properly addressed and postpaid document. Where delivery 
to the person disciplined or denied access is effected by such mail, 
the time within which a notice of appeal or petition for stay may be 
filed will be increased by three days. Delivery by email will be 
complete upon transmission of the email.
    (e) Certification. Copies of the notice and the submission of any 
additional information provided pursuant to this section must be 
certified as true and correct by a duly authorized officer, agent or 
employee of the exchange. Notice filed with the NFA is deemed certified 
when an authorized exchange employee verifies the accuracy of the 
information entered into BASIC.

0
12. Revise Sec.  9.12 to read as follows:

[[Page 1548]]

Sec.  9.12  Effective date of disciplinary or access denial action.

    (a) Effective date. Any disciplinary or access denial action taken 
by an exchange will not become effective until at least fifteen days 
after the written notice prescribed by Sec.  9.11 is delivered to the 
person disciplined or denied access; Provided, however, That the 
exchange may cause a disciplinary action to become effective prior to 
that time if:
    (1) As permitted by part 37, appendix B, Core Principle 2, 
paragraph (a)(14) of this chapter or part 38, appendix B, Core 
Principle 13, paragraph (a)(7) of this chapter (emergency disciplinary 
actions), the exchange reasonably believes, and so states in its 
written decision, that immediate action is necessary to protect the 
best interests of the marketplace; or
    (2) As permitted by part 37, appendix B, Core Principle 2, 
paragraph (a)(10)(vi) of this chapter or part 38, appendix B, Core 
Principle 13, paragraph (a)(4) of this chapter (hearings), the exchange 
determines, and so states in its written decision, that the actions of 
a person who is within the exchange's jurisdiction has impeded the 
progress of a disciplinary hearing; or
    (3) As permitted by part 37, appendix B, Core Principle 2, 
paragraph (a)(13) of this chapter (summary fines for violations of 
rules regarding timely submission of records) or part 38, appendix B, 
Core Principle 13, paragraph (a)(6) of this chapter (summary fines for 
violations of rules regarding timely submission of records, decorum, or 
other similar activities), the exchange determines that a person has 
violated exchange rules relating to decorum or attire, or timely 
submission of accurate records required for clearing or verifying each 
day's transactions or other similar activities; or
    (4) The person against whom the action is taken has consented to 
the penalty to be imposed and to the timing of its effectiveness.
    (b) Notice of early effective date. If the exchange determines in 
accordance with paragraph (a)(1) of this section that a disciplinary 
action will become effective prior to the expiration of fifteen days 
after written notice thereof, it must notify the person disciplined in 
writing, either personally or by email to the person's last known email 
address, stating the reasons for the determination. The exchange must 
also immediately notify the Commission by email to <a href="/cdn-cgi/l/email-protection#8af9efe9f8effeebf8f3cae9ecfee9a4ede5fc"><span class="__cf_email__" data-cfemail="c9baacaabbacbda8bbb089aaafbdaae7aea6bf">[email protected]</span></a>. 
Where notice is delivered by email, the time within which the person so 
notified may file a petition for stay pursuant to Sec.  9.24(a)(2) will 
be increased by one day.

0
13. Revise Sec.  9.13 to read as follows:


Sec.  9.13  Publication of notice.

    Whenever an exchange suspends, expels or otherwise disciplines, or 
denies any person access to the exchange, it must make public its 
findings by disclosing at least the information contained in the notice 
required by Sec.  9.11(b). An exchange must make such findings public 
as soon as the disciplinary action or access denial action becomes 
effective in accordance with the provisions of Sec.  9.12 by posting a 
notice on its website to which its members and the public regularly 
have access. Such notice must be maintained and readily available on 
the exchange's website.

0
14. In Sec.  9.24, revise paragraph (a)(2) to read as follows:


Sec.  9.24  Petition for stay pending review.

    (a) * * *
    (2) Within ten days after a notice of summary action has been 
delivered in accordance with Sec.  9.12(b) to a person who is the 
subject of a summary action permitted by part 37, appendix B, Core 
Principle 2, paragraph (a)(14) of this chapter or part 38, appendix B, 
Core Principle 13, paragraph (a)(7) of this chapter (emergency 
disciplinary actions), that person may petition the Commission to stay 
the effectiveness of the summary action pending completion of the 
exchange proceeding.
* * * * *

0
15. Revise Sec.  9.31 to read as follows:


Sec.  9.31  Commission review of disciplinary or access denial action 
on its own motion.

    (a) Request for additional information. Where a person disciplined 
or denied access has not appealed the exchange decision to the 
Commission, upon review of the notice specified in Sec.  9.11, the 
Division of Market Oversight or the Division of Swap Dealer and 
Intermediary Oversight may request that the exchange file with the 
Division the record of the exchange proceeding, or designated portions 
of the record, a brief statement of the evidence and testimony adduced 
to support the exchange's findings that a rule or rules of the exchange 
were violated and such recordings, transcripts and other documents 
applicable to the particular exchange proceeding as the Division may 
specify. The exchange must promptly advise the person who is the 
subject of the disciplinary or access denial action of the Division's 
request. Within thirty days after service of the Division's request, 
the exchange must file the information requested with the Division in 
the manner requested by the Division and, upon request, deliver that 
information to the person who is the subject of the disciplinary or 
access denial action. Delivery to the person who is the subject of the 
disciplinary or access denial action must be in the manner prescribed 
by Sec.  9.11(c). A person subject to the disciplinary action or access 
denial action requesting a copy of the information furnished to the 
Division must, if the exchange rules so provide, agree to pay the 
exchange reasonable fees for printing the copy.
    (b) Review on motion of the Commission. The Commission may 
institute review of an exchange disciplinary or access denial action on 
its own motion. Other than in extraordinary circumstances, such review 
will be initiated within 180 days after the NFA has received the notice 
of exchange action provided for in Sec.  9.11. If the Commission should 
institute review on its own motion, it will issue an order permitting 
the person who is the subject of the disciplinary or access denial 
action an opportunity to file an appropriate submission, and the 
exchange an opportunity to file a reply thereto.

    Issued in Washington, DC, on January 9, 2018, by the Commission.
Christopher J. Kirkpatrick,
Secretary of the Commission.

    Note: The following appendix will not appear in the Code of 
Federal Regulations.

Appendix to Technical Amendments to Rules on Registration and Review of 
Exchange Disciplinary, Access Denial or Other Adverse Actions--
Commission Voting Summary

    On this matter, Chairman Giancarlo and Commissioners Quintenz 
and Behnam voted in the affirmative. No Commissioner voted in the 
negative.

[FR Doc. 2018-00467 Filed 1-11-18; 8:45 am]
BILLING CODE 6351-01-P


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