18982 Federal Register / Vol. 74, No. 79 / Monday, April 27, 2009 / Rules and Regulations 

1The Act is codified at 7 U.S.C. 1 et seq. (2000). 

The acceptable practices for the DCM core 

principles reside in Appendix B to Part 38 of the 

Commission’s Regulations, 17 CFR Part 38, App. B. 

Core Principle 15 states: ‘‘CONFLICTS OF 

INTEREST—The board of trade shall establish and 

enforce rules to minimize conflicts of interest in the 

decision making process of the contract market and 

establish a process for resolving such conflicts of 

interest.’’ CEA Section 5(d)(15). 7 U.S.C. 7(d)(15). 

1. Is not a ‘‘significant regulatory 

action’’ under Executive Order 12866; 

2. Is not a ‘‘significant rule’’ under the 

DOT Regulatory Policies and Procedures 

(44 FR 11034, February 26, 1979); and 

3. Will not have a significant 

economic impact, positive or negative, 

on a substantial number of small entities 

under the criteria of the Regulatory 

Flexibility Act. 

We prepared a regulatory evaluation 

of the estimated costs to comply with 

this AD and placed it in the AD docket. 

Examining the AD Docket 

You may examine the AD docket on 

the Internet at http:// 

www.regulations.gov; or in person at the 

Docket Operations office between 9 a.m. 

and 5 p.m., Monday through Friday, 

except Federal holidays. The AD docket 

contains this AD, the regulatory 

evaluation, any comments received, and 

other information. The street address for 

the Docket Operations office (telephone 

(800) 647–5527) is provided in the 

ADDRESSES section. Comments will be 

available in the AD docket shortly after 

receipt. 

List of Subjects in 14 CFR Part 39 

Air transportation, Aircraft, Aviation 

safety, Incorporation by reference, 

Safety. 

Adoption of the Amendment 

■ Accordingly, under the authority 

delegated to me by the Administrator, 

the FAA amends 14 CFR part 39 as 

follows: 

PART 39—AIRWORTHINESS 

DIRECTIVES 

■ 1. The authority citation for part 39 

continues to read as follows: 

Authority: 49 U.S.C. 106(g), 40113, 44701. 

§ 39.13 [Amended] 

■ 2. The FAA amends § 39.13 by adding 

the following new AD: 

2009–09–03 Turbomeca S.A.: Amendment 

39–15889. Docket No. FAA–2007–28077; 

Directorate Identifier 2007–NE–20–AD. 

Effective Date 

(a) This airworthiness directive (AD) 

becomes effective June 1, 2009. 

Affected ADs 

(b) None. 

Applicability 

(c) This AD applies to Turbomeca S.A. 

Arriel 2B and 2B1 turboshaft engines. These 

engines are installed on, but not limited to, 

Eurocopter AS 350 B3 and EC 130 B4 

helicopters. 

Reason 

(d) Several cases of Gas Generator Turbine 

(HP Turbine) blade rearward displacement 

have been detected during borescope 

inspection or in repair centre following 

engine disassembly. Two of them resulted in 

blade rubs between the rear face of the firtree roots and the rear bearing support cover. 

High HP blade rearward displacement can 

potentially result in blade release due to 

fatigue of the blade, which would cause an 

uncommanded in-flight engine shutdown. 

We are issuing this AD to prevent an 

uncommanded in-flight engine shutdown 

which could result in an emergency 

autorotation landing or, at worst, an accident. 

Actions and Compliance 

(e) Unless already done, do the following 

actions: 

Initial Inspection 

(1) Perform an initial HP turbine borescope 

inspection according to Turbomeca S.A. 

Mandatory Service Bulletin (MSB) No. 292 

72 2825, dated April 5, 2007 as follows: 

(i) For engines with fewer than 500 hours 

and 450 cycles since new or since the last HP 

turbine borescope inspection, inspect before 

reaching 600 hours or 500 cycles, whichever 

occurs first. Replace HP turbine modules 

with rearward turbine blade displacement 

greater than 0.5 mm. 

(ii) For the remaining engines, inspect 

within the next 100 hours. Replace HP 

turbine modules with rearward turbine blade 

displacement greater than 0.5 mm. 

Repetitive Inspections 

(2) Perform repetitive HP turbine borescope 

inspections according to Turbomeca S.A. 

MSB No. 292 72 2825, dated April 5, 2007: 

(i) Within 600 hours or 500 cycles from the 

previous inspection, whichever occurs first, 

if the rearward displacement of the turbine 

blades was less than 0.2 mm. Replace HP 

turbine modules with rearward turbine blade 

displacement greater than 0.5 mm. 

(ii) Within 100 hours of the previous 

inspection if the rearward displacement of 

the turbine blades was between 0.2 mm and 

0.5 mm. Replace HP turbine modules with 

rearward turbine blade displacement greater 

than 0.5 mm. 

FAA AD Differences 

(f) For clarification, we restructured the 

actions and compliance wording of this AD. 

(g) We deleted the Turbomeca reporting 

requirement from the AD, since we 

determined that the reporting requirement 

was unnecessary. 

Alternative Methods of Compliance 

(AMOCs) 

(h) The Manager, Engine Certification 

Office, FAA, has the authority to approve 

AMOCs for this AD, if requested using the 

procedures found in 14 CFR 39.19. 

Related Information 

(i) Refer to EASA Airworthiness Directive 

2007–0109, dated April 19, 2007, and 

Turbomeca S.A. MSB No. 292 72 2825, dated 

April 5, 2007, for related information. 

(j) Contact James Lawrence, Aerospace 

Engineer, Engine Certification Office, FAA, 

Engine & Propeller Directorate, 12 New 

England Executive Park, Burlington, MA 

01803; e-mail: james.lawrence@faa.gov; 

telephone (781) 238–7176; fax (781) 238– 

7199, for more information about this AD. 

Material Incorporated by Reference 

(k) You must use Turbomeca S.A. 

Mandatory Service Bulletin No. 292 72 2825, 

dated April 5, 2007, to do the actions 

required by this AD, unless the AD specifies 

otherwise. 

(l) For service information identified in 

this AD, contact Turbomeca, 40220 Tarnos, 

France; telephone 33 05 59 74 40 00, fax 33 

05 59 74 45 15. 

(m) You may review copies at the FAA, 

New England Region, 12 New England 

Executive Park, Burlington, MA; or at the 

National Archives and Records 

Administration (NARA). For information on 

the availability of this material at NARA, call 

(202) 741–6030, or go to: http:// 

www.archives.gov/federal-register/cfr/ibrlocations.html. 

Issued in Burlington, Massachusetts, on 

April 16, 2009. 

Peter A. White, 

Assistant Manager, Engine and Propeller 

Directorate, Aircraft Certification Service. 

[FR Doc. E9–9333 Filed 4–24–09; 8:45 am] 

BILLING CODE 4910–13–P 

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Part 38 

RIN 3038–AC28 

Conflicts of Interest in Self-Regulation 

and Self-Regulatory Organizations 

AGENCY: Commodity Futures Trading 

Commission (‘‘Commission’’). 

ACTION: Final rule. 

SUMMARY: The Commission hereby 

adopts its final definition of ‘‘public 

director’’ for the acceptable practices to 

Section 5(d)(15) (‘‘Core Principle 15’’) of 

the Commodity Exchange Act (‘‘CEA’’ or 

‘‘Act’’).1 In addition, the Commission is 

lifting the stay it had previously placed 

on these acceptable practices. All 

designated contract markets (‘‘DCMs’’) 

must demonstrate full compliance with 

Core Principle 15, via the acceptable 

practices or otherwise, within one year 

of this document’s publication in the 

Federal Register. The acceptable 

practices and their procedural history 


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Federal Register / Vol. 74, No. 79 / Monday, April 27, 2009 / Rules and Regulations 18983 

2As explained in the procedural history below, 

the Commission stayed the entire acceptable 

practices for Core Principle 15 in November of 

2007. See Section B (‘‘Procedural History of the 

Acceptable Practices and the Definition of Public 

Director’’). 

3While not required under these acceptable 

practices, the Commission believes that DCMs 

benefit from endeavoring to recruit their public 

directors from a broad and culturally diverse pool 

of qualified candidates. 

4 72 FR 6936 at 6937 (February 14, 2007). 

5 17 CFR Part 38, App. B, Core Principle 15 

(Acceptable Practices). 

6 Id. 

7 72 FR at 6937. 

8 Id. 

9 72 FR at 6947. 

10A public person is not required for cases 

limited to decorum, attire, or the timely submission 

of accurate records required for clearing or verifying 

each day’s transactions. 

are summarized below, as is the final 

definition of public director. 

DATES: Effective date: The stay is lifted 

on paragraph (b) of Core Principle 15 in 

Appendix B to 17 CFR Part 38 effective 

May 27, 2009. The amendments to the 

acceptable practices in appendix B to 

part 38 are effective May 27, 2009. 

Compliance date: All DCMs must 

demonstrate full compliance with Core 

Principle 15 by April 27, 2010. 

FOR FURTHER INFORMATION CONTACT: 

Rachel F. Berdansky, Deputy Director 

for Market Compliance, 202–418–5429, 

or Sebastian Pujol Schott, Special 

Counsel, 202–418–5641, Division of 

Market Oversight, Commodity Futures 

Trading Commission, Three Lafayette 

Centre, 1155 21st Street, Washington, 

DC 20581. 

SUPPLEMENTARY INFORMATION: 

I. Background 

A. Summary of the Acceptable Practices 

As noted above, the Commission 

hereby adopts its final definition of 

public director and lifts its stay on the 

acceptable practices for Core Principle 

15.2 These important acceptable 

practices consist of four interrelated 

provisions, including three operating 

provisions (sections (1), (3), and (4)) and 

one which provides necessary 

definitions (section (2)). The operating 

provisions pertain to DCM boards of 

directors, the insulation and oversight of 

self-regulatory functions through 

regulatory oversight committees 

(‘‘ROCs’’), and the composition of 

disciplinary panels. More specifically, 

section (1) requires that a DCM’s board 

and any executive committee of the 

board be composed of at least 35% 

public directors. Section (3) requires 

that a DCM’s regulatory programs fall 

under the authority of a board-level 

ROC consisting exclusively of public 

directors. Section (4) requires that a 

DCM’s disciplinary panels include at 

least one public person. To fully 

implement the acceptable practices, 

DCMs must enact all three sections. 

Sections (1), (3), and (4) of the 

acceptable practices are each dependent 

on the presence of one or more ‘‘public’’ 

persons, either public directors serving 

on the board, public directors serving on 

the ROC, or public members serving on 

disciplinary panels. Thus, the 

acceptable practices include an 

important fourth provision—section 

(2)—that defines ‘‘public director’’ and 

also impacts disciplinary panel 

members. The definition of public 

director includes several subsections. 

The first and most important, subsection 

(2)(i), is an overarching materiality test 

which requires that a public director 

‘‘have no material relationship with the 

contract market.’’ The definition also 

includes a series of bright-line tests in 

subsections (2)(ii)(A)–(2)(ii)(D), with 

specific relationships defined as per se 

material. Finally, subsections (2)(iii), 

(2)(iv) and (2)(v) pertain to a one-year 

look back period, affiliate relationships, 

and disclosure requirement, 

respectively.3

Given the acceptable practices’ long 

procedural history, outlined below, 

industry participants may benefit from a 

brief review of their underlying 

rationale, purpose, and importance. 

Above all, the Commission emphasizes 

its full commitment to Core Principle 

15’s acceptable practices in their 

entirety. As the Commission noted 

when it adopted them, the acceptable 

practices ‘‘recognize DCMs’ unique 

public interest responsibilities as selfregulatory organizations (‘‘SROs’’) in the 

U.S. futures industry.’’ 4 They remind 

all DCMs that they ‘‘bear special 

responsibility to regulate effectively, 

impartially, and with due consideration 

of the public interest.’’ 5 They also 

clearly enumerate certain conflicts of 

interest for which DCMs must be alert. 

To comply with Core Principle 15, all 

DCMs must be ‘‘particularly vigilant’’ 

for ‘‘conflicts between and among any of 

their self-regulatory responsibilities, 

their commercial interests, and the 

several interests of their management, 

members, owners, customers and 

market participants, other industry 

participants, and other 

constituencies.’’ 6

When the Commission adopted the 

acceptable practices on January 31, 

2007, it noted new structural conflicts of 

interest in self-regulation as for-profit 

DCMs operate in a competitive, global 

environment. The Commission 

expressed concern with the presence of 

potentially conflicting demands— 

regulatory responsibility vs. commercial 

imperatives—within a single for-profit 

entity. It concluded that such conflicts, 

arising from new business models, new 

ownership structures, and increased 

competition, could be addressed 

through ‘‘reforms within the DCMs 

themselves, including reforms of DCMs’ 

governing bodies.’’ 7 The acceptable 

practices reflect both concrete measures 

that DCMs may implement and 

principles of modern self-regulation 

based on public representation and the 

insulation of regulatory functions. They 

embody the Commission’s settled 

position that ‘‘additional public 

directors on governing bodies, greater 

independence at key levels of decision 

making, and careful insulation of 

regulatory functions and personnel from 

commercial pressures are important 

elements in ensuring vigorous, effective, 

and impartial self-regulation now and in 

the future.’’ 8

One principle embodied in the 

acceptable practices is the inclusion of 

public persons on DCM boards, 

executive committees, and disciplinary 

panels. Subsection (1)(i) of the 

acceptable practices requires that at 

least 35% of a DCM’s directors be public 

directors, with an identical minimum 

ratio of public directors required for 

executive committees of the board or 

similarly empowered bodies under 

subsection (1)(ii). As the Commission 

explained when adopting the acceptable 

practices, it ‘‘strongly believes that 

DCMs are best able to meet their 

statutory obligations if their boards and 

executive committees include a 

sufficient number of public directors. 

* * * Such boards and committees will 

gain an independent perspective that is 

best provided by directors with no 

current industry ties or other 

relationships which may pose a conflict 

of interest.’’ 9 The principle of public 

representation is also present in section 

(4) of the acceptable practices, which 

requires at least one public person on all 

disciplinary panels.10

A second principle embodied in the 

acceptable practices is the ROC required 

under subsections (3)(i) and (3)(ii). 

ROCs are tasked with overseeing DCM 

regulatory programs, including 

monitoring those programs for 

sufficiency, effectiveness, and 

independence. Their responsibilities 

also include reviewing the size and 

allocation of DCMs’ regulatory budgets 

and resources; reviewing the number, 

hiring, termination, and compensation 

of regulatory personnel; and supervising 

DCMs’ chief regulatory officers, who 

should report directly to their ROCs. As 

described by the Commission, ‘‘properly 


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11 72 FR at 6950. 

12 Id. at 6950–6951. 

13 Id. at 6951. 

14 72 FR 6936 (February 14, 2007). 

15 72 FR 14051 (March 26, 2007). In addition to 

the clarifying amendments, the Commission also 

proposed to correct a technical drafting error. 

16The six comment letters are summarized in 74 

FR 3475 (January 21, 2009). 

17 72 FR 65658 (November 23, 2007). 

18 74 FR 3475. 

19 74 FR at 3476–3477. 

20 Id. at 3477. 

functioning ROCs should be robust 

oversight bodies * * *.’’ 11 They should 

also ‘‘represent the interests and needs 

of regulatory officers and staff; the 

resource needs of regulatory functions; 

and the independence of regulatory 

decisions.’’ 12 ROCs should consist 

exclusively of public directors. 

‘‘[A]nything less invites into regulatory 

oversight operations precisely those 

directors whose industry affiliations 

lend themselves to conflicts of interest 

in decision making.’’ 13

The three operating provisions 

described above—board composition, 

disciplinary panel composition, and 

ROC—are all dependent upon the 

definition of public director in section 

(2). Now, as that definition is finalized 

and the stay on the acceptable practices 

is lifted, all industry participants should 

be aware that the Commission’s highest 

goal for self-regulation remains 

unchanged: Self-regulation must be 

vigorous, effective, and impartial. 

DCMs, in particular, are reminded that 

although they are free to comply with 

Core Principle 15 by means other than 

the acceptable practices, they must 

address the specific conflicts of interest 

that the Commission has identified and 

adopt measures that are substantive and 

responsive. 

B. Procedural History of the Acceptable 

Practices and the Definition of Public 

Director 

On January 31, 2007, the Commission 

adopted its first acceptable practices for 

Core Principle 15, which requires all 

DCMs to minimize conflicts of interest 

in their decision making process. The 

acceptable practices focus on conflicts 

between DCMs’ regulatory 

responsibilities and their commercial 

interests, and they offer all DCMs a safe 

harbor by which they may demonstrate 

core principle compliance. The 

acceptable practices for Core Principle 

15 contain four provisions, including 

three ‘‘operating’’ provisions and one 

provision which primarily defines 

public director. All four provisions were 

published in the Federal Register on 

February 14, 2007.14 Existing DCMs 

were given a two-year phase-in period 

to implement the acceptable practices or 

otherwise demonstrate full compliance 

with Core Principle 15. 

On March 26, 2007, the Commission 

published the ‘‘2007 proposed 

amendments,’’ which made certain 

clarifications and other changes to the 

definition of public director.15 The 

proposed amendments did not alter the 

acceptable practices in any other 

respect. In proposing the amendments, 

the Commission emphasized that they 

should not be read as a diminution of 

the public representation, conflict-ofinterest mitigation, and self-regulatory 

insulation intended by the acceptable 

practices. To that end, all three 

operating provisions in the acceptable 

practices remained as originally 

adopted. 

The Commission received six 

comment letters in response to the 2007 

proposed amendments, but after careful 

consideration determined not to act 

upon them.16 Instead, on November 23, 

2007, the Commission gave notice via 

the Federal Register that the acceptable 

practices for Core Principle 15 were 

stayed indefinitely and in their 

entirety.17 Likewise, the two-year 

compliance period for existing DCMs 

also was stayed. With the definition of 

public director in flux, the Commission 

concluded that a stay was an 

appropriate measure while it arrived at 

a final definition of public director. 

Finally, on January 21, 2009, the 

Commission proposed and sought 

public comment on the ‘‘2009 

amendments,’’ which also apply only to 

the definition of public director, and 

which are adopted herein.18 In 

publishing the 2009 amendments, the 

Commission asserted its continued 

commitment to ‘‘the fundamental 

philosophy underpinning the acceptable 

practices for Core Principle 15: that 

potential conflicts of interest in selfregulation by for-profit and publiclytraded DCMs * * * can be addressed 

successfully through appropriate 

measures embedded in DCMs’ 

governance structures.’’ 19 The 

Commission also reaffirmed ‘‘its support 

for public representation on DCM 

boards of directors and disciplinary 

panels, including the 35% public board 

standard first enunciated in the 

acceptable practices,’’ and its ‘‘strong 

commitment to ROCs, consisting 

exclusively of public directors, to 

oversee all facets of DCMs’ selfregulatory programs and staff.’’ 20 The 

2009 amendments and public comments 

thereon are summarized below. As 

stated previously, the Commission is 

adopting the 2009 amendments in their 

entirety. 

C. Summary of the 2009 Amendments 

The 2009 amendments fall into four 

broad categories, all of which pertain to 

section (2) of the acceptable practices— 

the definition of public director. First, 

the Commission has amended 

subsection (2)(ii) to make its vocabulary 

more consistent with that in subsection 

(2)(i), but without altering its meaning. 

As originally adopted, the provision 

stated that ‘‘* * * a director shall not be 

considered public if [the bright-line 

tests are not met].’’ Now, subsection 

(2)(ii) reads ‘‘* * * a director shall be 

considered to have a ‘material 

relationship’ with the contract market if 

[the bright-line tests are not met].’’ 

Because the overarching material 

relationship test in subsection (2)(i) 

precludes a person with a material 

relationship from serving as a public 

director, the purpose and effect of the 

provision remains unchanged. 

Second, the Commission has 

amended subsections (2)(ii)(A) and 

(2)(iv) to save a DCM’s public directors 

from bright-line tests that they would 

have failed if they also served as 

directors of the DCM’s affiliates. For this 

purpose, ‘‘affiliate’’ is now defined in 

subsection (2)(ii)(A) to include ‘‘parents 

or subsidiaries of the contract market or 

entities that share a common parent 

with the contract market’’ (‘‘sister 

companies’’). Previously, a DCM’s 

public directors could also serve as 

directors of its parent company, but not 

as directors of its subsidiary or sister 

companies. With this amendment, the 

latter two relationships no longer suffer 

automatic exclusion. 

Third, the Commission has amended 

subsection (2)(ii)(B). As originally 

adopted, this subsection precluded 

DCM members, employees of members, 

and persons affiliated with members 

from service as public directors. 

‘‘[A]ffiliated with a member’’ was 

defined as being an officer or director of 

a member, or having ‘‘any other 

relationship with the member such that 

his or her impartiality could be called 

into question in matters concerning the 

member.’’ Under that original text, 

subsection (2)(ii)(B) effectively inserted 

another material relationship 

determination in what was an otherwise 

bright-line test. 

Now, the Commission has 

streamlined subsection (2)(ii)(B) in three 

ways. First, any material relationship 

determination made pursuant to section 

(2) takes place under the overarching 

material relationship test of subsection 

(2)(i), and not under the bright-line tests 

of subsection (2)(ii). Second, subsection 


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21 72 FR at 6949. 

(2)(ii)(B) sets forth the exact 

membership relationships that are 

automatically precluded. Finally, the 

subsection allows a DCM to conduct a 

material relationship analysis to 

determine whether employment by a 

member should preclude a specific 

individual from serving as a public 

director. 

Finally, the Commission has amended 

subsection (2)(ii)(C) and its bright-line 

tests. Here again, the Commission has 

simplified the provision to ensure that 

the bright-line tests are clearly 

articulated. As originally adopted, 

subsection (2)(ii)(C) created a $100,000 

combined annual payments test for 

potential public directors and the firms 

with which they may be affiliated 

(‘‘payment recipients’’). A particular 

payment’s relevance to the $100,000 

bright-line test depends upon the source 

(‘‘payment provider’’) and nature of the 

payment. In this regard, the subsection 

did not specify which payments should 

count towards the $100,000 annual 

cap—all payments or only those for 

certain types of services. In addition, the 

subsection also contained potential 

ambiguity with respect to the universe 

of potential payment providers and 

payment recipients. 

The first amendment to subsection 

(2)(ii)(C) defines the nature of 

‘‘payment,’’ specifying that it is 

payment for ‘‘legal, accounting, or 

consulting services.’’ The second 

amendment clarifies that the relevant 

payment recipients include the 

potential public director and any firm in 

which the director is an officer, partner, 

or director (‘‘direct’’ and ‘‘indirect’’ 

compensation, respectively). The third 

amendment to subsection (2)(ii)(C) 

clarifies that the relevant payment 

providers include the DCM and any 

parent, sister, or subsidiary company of 

the DCM. Notably, the new payment 

providers provision no longer captures 

DCM members or persons or entities 

affiliated with members, although such 

relationships should still be scrutinized 

carefully under the overarching 

materiality test of subsection (2)(i). 

Finally, the Commission has amended 

subsection (2)(ii)(C) to take into account 

payments to a public director in excess 

of $100,000 by sister and subsidiary 

companies of the DCM. This is 

consistent with the Commission’s 

intent, previously articulated, not to 

automatically prohibit overlapping 

public directors between DCMs and 

their affiliates. 

D. The 2009 Amendments and the 

Material Relationship Test 

As described above, the 2009 

amendments touch only on the brightline tests for public director. The most 

important element of the definition—the 

overarching ‘‘material relationship’’ test 

in subsection (2)(i)—remains 

unchanged. As before, ‘‘[t]o qualify as a 

public director of a contract market, an 

individual must first be found, by the 

board of directors, on the record, to have 

no material relationship with the 

contract market.’’ And, as before, ‘‘[a] 

material relationship is one that 

reasonably could affect the independent 

judgment or decision making of the 

director.’’ 

The practical consequence of the 

amended bright-line tests is that 

formerly disqualifying bright-line 

relationships must now be analyzed 

under the material relationship test 

recited above. However, DCMs should 

be aware that shifting the point of 

analysis in no way diminishes the 

importance of the relationships under 

review, nor does it mean that a formerly 

disqualifying relationship is now 

generally permissible. Instead, the 

amended bright-line tests make it 

incumbent upon DCMs to carefully 

evaluate the facts to determine whether 

a potential public director’s 

relationships could reasonably affect his 

or her independent judgment or 

decision making as a director of a DCM. 

The Commission will carefully review 

those determinations in evaluating 

DCMs’ compliance with Core Principle 

15. 

Finally, while reemphasizing the 

importance of the material relationship 

test in the definition of public director, 

the Commission also notes its continued 

commitment to specific bright-line tests 

for director-DCM relationships that are 

clearly material. Accordingly, the 2009 

amendments to the bright-line tests 

retain most of the original tests’ 

substantive content. As with the original 

bright-lines, those adopted herein touch 

on a potential public director’s (A) 

Employment relationships with the 

contract market; (B) direct and indirect 

membership relationships with the 

contract market; (C) direct and indirect 

compensation relationships with the 

contract market; and (D) familial 

relationships with the contract market. 

The one-year look back period also 

remains intact, as does the requirement 

that a DCM disclose to the Commission 

those members of its board that are 

public directors and the basis for those 

determinations. Commission staff will 

also closely scrutinize the 

implementation of the material 

relationship and bright-line tests when 

conducting future reviews of DCM 

governance. 

E. Public Comments on the 2009 

Amendments 

Before summarizing and responding 

to individual comment letters, the 

Commission wishes to address a 

recurring theme in the comments made 

by DCMs throughout the development 

of these bright-line tests for public 

director. DCMs have regularly argued 

that the tests will exclude otherwise 

desirable candidates from serving on 

their boards, or that it will be too 

difficult to determine with certainty 

whether an individual qualifies as a 

public director under the acceptable 

practices. The Commission has been 

responsive to DCMs’ concerns, even 

proposing alternative bright-line tests on 

two occasions after the acceptable 

practices were adopted. However, after 

these efforts, some DCMs continue to 

repeat this same criticism, including in 

their comments on the 2009 

amendments. 

The Commission is confident that the 

definition of public director adopted 

herein can be used effectively by all 

DCMs. Armed with this streamlined 

definition, DCMs should be able to 

implement the acceptable practices fully 

and easily. Moreover, if for some reason 

it is unclear whether a person qualifies 

as a public director, a solution is readily 

available: He or she is free to serve as 

a non-public director. Under the 

acceptable practices, almost two-thirds 

of a DCM’s board is filled at its 

discretion, subject to the fitness 

requirements of Core Principle 14. Thus, 

if a DCM believes that an individual 

adds exceptional value, it is free to 

install him or her as a non-public 

director. Furthermore, with respect to 

the 35% of directors who must be 

public under the acceptable practices, 

the difficulties alleged by DCMs might 

arise only if they attempt to seat 

directors who are too close to the DCM 

or to the futures industry, rather than 

authentically public persons. 

The Commission has previously 

stated that ‘‘the most significant 

contribution made by public directors 

* * * is precisely their outside, nonindustry perspective.’’ 21 Directors who 

are truly unrelated to the futures 

industry and its participants should 

have little difficulty qualifying as public 

directors, and DCMs should have little 

difficulty in implementing the 

acceptable practices if they avoid public 

director candidates who are in the 

professional or personal orbit of the 

futures industry. 


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22As explained below, CME Group is the parent 

company of four DCMs: the Chicago Board of Trade, 

the Chicago Mercantile Exchange, the Commodity 

Exchange, and the New York Mercantile Exchange. 

23CFE comment letter (‘‘CL’’) at 1. 

24While ICE Futures and CME Group also 

support the amendments pertaining to payment for 

services rendered, CFE’s support is offered in a very 

specific context, as explained below. 

25CFE CL at 1. 

26 Id. 

27CFE CL at 2. 

28 Id. 

29 74 FR at 3478. 

30 Id. 

31CFE CL at 1. 

1. Specific Comments Received and the 

Commission’s Response 

The Commission received five 

comment letters in response to the 2009 

amendments, including comments from 

ICE Futures U.S., Inc. (‘‘ICE Futures’’), 

the Futures Industry Association 

(‘‘FIA’’), CBOE Futures Exchange, LLC 

(‘‘CFE’’), CME Group, Inc. (‘‘CME 

Group’’), and the Kansas City Board of 

Trade (‘‘KCBT’’).22 Commission staff 

reviewed all five letters carefully. Most 

were generally supportive of the 

proposed amendments, while also 

suggesting further changes. The five 

letters and the Commission’s responses 

thereto are summarized below. 

a. CBOE Futures Exchange, LLC. 

CFE’s comment letter reiterates the 

exchange’s belief that the acceptable 

practices will have a ‘‘positive impact’’ 

with respect to futures exchange 

governance and minimizing conflicts of 

interest, and that they ‘‘will serve to 

enhance the self-regulatory process.’’ 23

The comment letter also summarizes the 

2009 amendments and affirms the 

exchange’s agreement with most of 

them. CFE states that it supports those 

amendments that ‘‘clarify (i) The types 

of payments that would disqualify a 

person from serving as a public 

director,24 (ii) that a person who serves 

as a director of a futures exchange 

affiliate is not disqualified from serving 

as a public director of the futures 

exchange if the person otherwise 

qualifies to serve in that capacity, and 

(iii) that receipt of director 

compensation from a futures exchange 

affiliate does not disqualify the recipient 

from serving as a public director of the 

futures exchange if the person otherwise 

qualifies to serve in that capacity.’’ 25

While generally supportive of the 

2009 amendments, CFE’s comment 

letter also raises certain concerns, both 

from the exchange’s perspective and 

from the Commission’s. First, CFE 

declares its opposition to an amendment 

in subsection (2)(ii)(B) removing 

employees of DCM member firms from 

automatic disqualification. In addition, 

the exchange offers certain 

interpretations with respect to the 

potential adverse impact of this 

amendment. Second, CFE states its 

support for the amendments to 

subsection (2)(ii)(C) (pertaining to a 

bright-line test for payment for services 

rendered). Here again, CFE offers its 

own interpretation as to what the 

subsection now permits. The 

Commission believes that both of CFE’s 

comments and interpretations merit 

further discussion. They are treated 

below, in order. 

CFE disagrees ‘‘with the elimination 

by the CFTC’s proposal of the previous 

disqualification of an employee of a 

member of a futures exchange from 

serving as a public director of that 

futures exchange.’’ 26 This comment 

refers to amended subsection (2)(ii)(B), 

which no longer subjects a DCM 

member’s employees to automatic 

disqualification from service as a public 

director (unless they are officers or 

directors). CFE observes, accurately, that 

‘‘the CFTC has stated that one of the 

primary objectives of the Acceptable 

Practices is to insulate the regulatory 

functions of a futures exchange via 

public directors who are not conflicted 

by industry ties * * *.’’ 27 The 

exchange argues that ‘‘permitting a 

member employee to serve as a futures 

exchange public director, and allowing 

the possibility that all 35% of the public 

directors of a futures exchange could be 

member employees, is inconsistent with 

that goal * * *.’’ 28

The Commission agrees with CFE’s 

overall sentiment, and although it 

stands by the amendments to subsection 

(2)(ii)(B), it is vital that no DCM 

misinterpret them. The Commission is 

concerned with any suggestion that the 

acceptable practices now allow a DCM’s 

public directors to consist exclusively of 

members’ employees. While the 

Commission is not prejudging any 

potential relationship that might be 

presented to it in the future, it is 

difficult to imagine that employees of 

member firms will routinely pass the 

material relationship test of subsection 

(2)(i). 

DCMs are reminded that all director 

relationships, including employment, 

remain subject to the acceptable 

practices’ overarching material 

relationship test. They should also be 

aware that the removal of a relationship 

from the bright-line tests does not mean 

that such relationship is now always 

permitted. Indeed, in the example 

offered by CFE, the Commission agrees 

that a board whose public directors are 

all employees of member firms is 

inconsistent with the intent of the 

acceptable practices. In that regard, the 

Commission emphasizes the language 

with which it proposed to amend 

subsection (2)(ii)(B), stating ‘‘the 

amendments merely shift the point of 

analysis from the bright-lines of 

subsection (2)(ii) to the overarching 

material relationship test of subsection 

(2)(i).’’ 29 The Commission further 

affirmed—and this is of special 

importance with respect to member 

employees—that it ‘‘remains concerned 

about any relationship between 

potential public directors and DCM 

members that could ‘affect the 

independent judgment or decision 

making of the director’ ’’ (emphasis 

added).30 Accordingly, no DCM should 

interpret the removal of member 

employment from the bright-line tests as 

an invitation to seat a member’s 

employee as a public director without 

careful consideration. Any finding that 

a member’s employee qualifies as public 

will require full disclosure and 

explanation under subsection (2)(v) of 

the acceptable practices, which requires 

DCMs to disclose to the Commission the 

basis for any determination that a 

director qualifies as public. 

CFE’s second comment and 

interpretation relates to subsection 

(2)(ii)(C). There, the exchange asserts 

that the amendments ‘‘make clear that a 

public director of the National Futures 

Association (‘‘NFA’’) is not disqualified 

as serving as a public director of CFE 

because NFA provides regulatory 

services to CFE * * *.’’ 31 CFE is correct 

that amended subsection (2)(ii)(C) now 

limits the bright-line definition of 

‘‘payment’’ to payment for legal, 

accounting, or consulting services. 

Previously, the term was undefined and 

thus potentially broader in scope, to 

include payment for regulatory services 

to a regulatory service provider (‘‘RSP’’) 

such as NFA. 

The Commission cautions, however, 

that subsection (2)(ii)(C) is just one 

element in a multi-prong test for 

evaluating whether an individual is 

qualified to serve as a public director. 

While the clarification of subsection 

(2)(ii)(C) is this instance may leave RSP 

directors outside the scope of one 

bright-line test, such directors remain 

subject to other elements in the 

definition of public director. Most 

significant among these is the 

overarching material relationship test of 

subsection (2)(i). As with other potential 

relationships, the Commission will not 

prejudge what might be presented to it 

in the future. However, a DCM should 

move cautiously in any scenario where 

it outsources its regulatory functions to 

an RSP and seeks to install a director of 


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32FIA CL at 1. 

33 Id. 

34FIA CL at 1 and 2. 

35 Id. 

36FIA CL at 2. 

37 KCBT CL at 1. 

38 Id. 

39 ICE Futures CL at 2. 

40CME Group states, for example, ‘‘[t]he 

Commission has appropriately recognized that an 

individual may be a director of both a DCM and its 

parent, subsidiary, or entity that shares a common 

parent with the DCM, and not lose his or her status 

as a public director.’’ CME CL at 3. 

41Subsection (2)(ii)(A) is also relevant, as it 

defines ‘‘affiliate’’ as used in subsection (2)(iv). 

42 ICE Futures CL at 2. 

43 ICE Futures CL at 3. 

44 Id. 

45While the Commission understands the 

attraction of adopting a single payment cap based 

on the more widely used listing standards of the 

NYSE, it does not believe that the listing standards 

are an appropriate guide. The Commission 

continues to think that the listing standards serve 

a distinct purpose—the protection of shareholders 

through boards of directors that are sufficiently 

independent from management. In contrast, the 

acceptable practices for Core Principle 15, 

including the bright-line tests for public director, 

seek to protect self-regulation through DCM boards 

of directors and other bodies that include a 

sufficient number of truly public persons. 

its RSP as public director on its board, 

including its ROC. In this context, the 

DCM should recall that ROC members 

are charged with evaluating the quality 

of regulatory services provided to the 

DCM. Certain questions naturally arise 

under these circumstances. Would the 

RSP director be able to evaluate the 

RSP’s performance objectively? Would 

he or she be able to impartially counsel 

the exchange to seek regulatory services 

elsewhere if the RSP, on whose board 

he/she also sits, was underperforming? 

Even if the RSP director was only being 

considered for service on the board, and 

not for the ROC, would his or her board 

actions with respect to the RSP be as 

objective as those of a public director 

with no RSP ties? Questions such as 

these must be addressed fully in any 

material relationship analysis. 

b. The Futures Industry Association 

and the Kansas City Board of Trade. 

The FIA’s comment letter expresses 

its support for the 2009 amendments.32

Echoing the Commission’s own 

sentiments, the FIA notes that ‘‘it is 

vitally important that DCMs include a 

significant number of Board Members 

that are recognized to be independent of 

the DCM and its members.’’ 33 FIA also 

maintains that ‘‘no one could fairly 

contest the Commission’s definition of a 

public director as someone with no 

material relationship with the DCM,’’ 

and that ‘‘the Commission has proposed 

a workable and effective set of 

automatically disqualifying 

relationships’’ for potential public 

directors.34 FIA’s positive comments are 

balanced with the observation that it 

and others might ‘‘quibble’’ with the 

35% standard for public directors on 

DCM boards, and that it might 

‘‘recommend expanding the [bright-line 

tests] in some areas or restricting it in 

others.’’ 35 Overall, however, FIA 

‘‘urge[s] the Commission to adopt the 

[2009 amendments] quickly and to make 

its Acceptable Practices effective as 

soon as practicable.’’ 36

KCBT’s brief comment letter notes its 

‘‘support for the revised public director 

definition published for comment in 

connection with the SRO governance 

core principle guidelines.’’ 37 The 

exchange is ‘‘appreciative of the 

Commission narrowing the applicability 

of the $100,000 in professional services 

payments to a public director (or the 

firm such public director represents) by 

a DCM or its affiliates.’’ 38

c. ICE Futures U.S., Inc. 

ICE Futures’ comment letter contains 

both supportive statements and 

suggestions for further modifications to 

the 2009 amendments. First, the 

exchange ‘‘commend[s] the decision to 

free a DCM’s public directors from 

bright-line tests that would have been 

failed if the directors also served on the 

board of the DCM’s affiliates.’’ 39 This 

comment, which pertains to 

‘‘interlocking directorships’’ under 

subsection (2)(iv), was echoed by CFE 

and CME Group.40

The amendments to subsection (2)(iv) 

expand the universe of DCM affiliates 

on whose board public directors may 

serve.41 Previously, public directors 

could only serve on the board of a 

DCM’s parent, but the 2009 

amendments also permit interlocking 

directorships with a DCM’s subsidiaries 

or entities sharing a common parent 

with the DCM. While ICE Futures and 

others find this amendment helpful, 

DCMs are reminded that as with all 

other public director relationships, the 

materiality test is still in place. In 

addition, interlocking public 

directorships are permitted only if the 

DCM director otherwise meets the 

definition of public director. DCMs 

should be particularly vigilant for 

circumstances where the interlocking 

directorship involves an entity that 

could come under the DCM’s regulatory 

authority. An affiliate that trades or 

brokers in the DCM’s markets, for 

example, could pose a conflict of 

interest. 

In addition to the comments 

summarized above, ICE Futures also 

suggests further amendments to the 

bright-line tests for public director. The 

exchange’s concerns center around 

subsection (2)(ii)(C), which, as 

amended, defines a bright-line test for 

potential public directors based on 

direct and indirect compensation in 

excess of $100,000 for legal, accounting, 

and consulting services rendered. ICE 

Futures argues that, ‘‘[b]ecause this 

prohibition is so broad, and the dollar 

threshold so low, it needlessly sweeps 

into its net payments that would be 

considered de minimis by the firm being 

compensated and relationships that 

might not automatically create a conflict 

of interest.’’ 42

It should be noted that ICE Futures’ 

comment seems limited to indirect 

compensation to a public director via 

the firm with which he or she is 

associated; the exchange’s apparent 

preference is that indirect compensation 

not constitute part of the bright-line 

tests at all. It contends that ‘‘[t]he DCM 

should be entrusted to evaluate all the 

relevant facts and circumstances * * * 

and determine whether the independent 

judgment of a public director would be 

compromised by the indirect 

compensation arrangements.’’ 43

If indirect compensation is not 

removed from the bright-line tests, then 

the exchange argues that the 

Commission should at least 

‘‘significantly increase the dollar 

threshold for indirect compensation.’’ 44

ICE Futures offers the listing standards 

of the New York Stock Exchange 

(‘‘NYSE’’) as an ‘‘instructive’’ guide in 

establishing what it considers a more 

appropriate cut-off on payments for 

services rendered.45

The Commission understands that the 

$100,000 threshold in subsection 

(2)(ii)(C) is a significant bright-line test, 

and that others might have chosen to 

draw the line at a higher dollar value or 

as a percentage of revenues. However, it 

continues to believe that $100,000 in 

combined annual payments is an 

appropriate cap in compensation for a 

public director or a firm on which he or 

she serves as an officer, director, or 

partner. The $100,000 cap applies to 

payments from the DCM or any affiliate 

of the DCM for legal, accounting, or 

consulting services. As the Commission 

explained when it reduced the ratio of 

public directors required by the 

acceptable practices from 50% (as 

originally proposed) to 35% (as 

adopted), ‘‘the Commission believes that 

a strict definition of public director is 

especially necessary now that it will 

apply to 35% of a DCM’s directors, 

rather than the 50% originally 


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46 72 FR at 6949. 

47Subsection (2)(v) of the acceptable practices. 

48CME Group CL at 4. 

49However, as explained previously, employees 

of DCM members, while no longer automatically 

disqualified from serving as public directors, are 

not automatically permitted to do so either. Instead, 

each one faces a robust and individualized material 

relationship analysis which must be disclosed to 

the Commission. In this regard, the Commission 

notes that blanket determinations by a DCM that 

particular categories of persons qualify as public 

directors without individual examination is 

insufficient to satisfy the acceptable practices for 

Core Principle 15. 

50CME Group CL at 3. 

51 Id. 52CME Group CL at 2. 

proposed.’’ 46 The Commission also 

reiterates its previous observation that a 

potential public director who fails one 

or more bright-line tests—the $100,000 

payment cap, for example—is free to 

serve as a non-public director if the 

DCM deems it important. 

Finally, the Commission reminds 

DCMs that other relationships involving 

payment for services rendered—even 

those not specifically listed in 

subsection (2)(ii)(C)—should be 

scrutinized closely under the material 

relationship test. Such other 

relationships could include payments 

from other sources (e.g., a DCM member 

firm rather than the DCM itself); 

payments based on other relationships 

(e.g., employee rather than director or 

partner); and payments for lesser 

amounts (e.g., $95,000 to a firm where 

the DCM director serves as partner and 

to which $95,000 represents significant 

revenue). In short, DCMs must continue 

to consider the payment provider, the 

payment recipient, and the services 

provided when making materiality 

determinations under subsection 

(2)(ii)(C). DCMs also must disclose to 

the Commission which members of its 

board are public directors, and the basis 

for those determinations.47 The 

Commission expects that all potentially 

material relationships will have been 

examined carefully. 

d. CME Group Inc. 

CME Group is the publicly-traded 

parent company of four DCMs: the 

Chicago Board of Trade (‘‘CBOT’’), the 

Chicago Mercantile Exchange (‘‘CME’’), 

the Commodity Exchange (‘‘COMEX’’), 

and the New York Mercantile Exchange 

(‘‘NYMEX’’). Its comment letter includes 

a brief history of the acceptable 

practices for Core Principle 15 and the 

amendments to the bright-line tests for 

public director. CME Group closes its 

comment letter by stating, ‘‘[i]n sum, we 

believe that the Commission has 

substantially improved its proposed 

definition of public director, in 

connection with the non-exclusive safe 

harbor acceptable practices for 

compliance with Core Principle 15.’’ 48

Like CFE and ICE Futures, CME 

Group approves of provisions in the 

2009 amendments that allow for 

interlocking public directors across a 

DCM, its subsidiaries, and entities 

sharing a common parent with the DCM. 

CME Group also approves of provisions 

in the amendments that eliminate the 

bright-line test for employees of DCM 

member firms.49 Finally, CME Group 

supports amendments to subsection 

(2)(ii)(C) with respectto direct and 

indirect payments to directors for 

services rendered. All three 

amendments have already been 

discussed above in the context of CFE’s 

and ICE Futures’ comment letters. As 

the Commission noted there, potential 

public directors remain subject to the 

material relationship test of subsection 

(2)(i) in all three circumstances. 

In addition to the supportive 

statements summarized above, CME 

Group also requests that the 

Commission ‘‘consider a further 

refinement [to the bright-line tests] with 

respect to immediate family 

members.’’ 50 Referring to subsection 

(2)(ii)(D), it argues ‘‘we do not believe 

that an individual should be considered 

to have a per se material relationship 

with a DCM merely because his 

immediate family member is a director 

or an officer of a member.’’ 51 The 

Commission’s response is similar to that 

given ICE Futures’ request for a more 

relaxed bright-line test for indirect 

payments for services rendered. Because 

the final acceptable practices require 

that only 35% of a DCM’s directors be 

public, a strict definition of public 

director is appropriate. In this regard, 

the Commission believes that a close 

family bond certainly could affect the 

independent judgment or decision 

making of the director and should 

therefore be precluded automatically. 

The acceptable practices’ material 

relationship test is instructive: the 

Commission is concerned with 

relationships that ‘‘reasonably could 

affect’’ the director; proof of certain 

effect is not required. 

CME Group’s comment letter also 

includes broader legal and policy 

arguments that the Commission has 

previously addressed at length. 

Nonetheless, they require a brief 

response here so that no DCM is 

confused as to what is required under 

Core Principle 15. DCMs should be 

aware that the acceptable practices are 

voluntary safe harbors which they may 

use to demonstrate compliance with 

Core Principle 15, and that they are free 

to comply by other means. The 

Commission will fairly evaluate any 

alternatives presented to it. What DCMs 

are not free to do, however, is to 

substitute their interpretations of Core 

Principle 15 for the Commission’s. 

CME Group argues that it ‘‘continues 

to believe that the board composition 

acceptable practices are not related to 

Core Principle 15 and conflict with the 

clear Congressional intent in the 

Commodity Futures Modernization Act 

of 2000 (‘‘CFMA’’) to impose no 

composition requirements on the boards 

of publicly owned futures 

exchanges.’’ 52 CME Group’s beliefs 

notwithstanding, the Commission has 

interpreted its statutory authority and 

acted upon it. CME Group’s four 

regulated DCMs are required to comply 

with Core Principle 15, and all the core 

principles, as they are interpreted by the 

Commission. 

To comply with Core Principle 15, 

DCMs must specifically address the 

conflicts of interest discussed at length 

during the development of these 

acceptable practices. The Commission 

has been clear in its requirements, and 

the preamble to the acceptable practices 

explains them as well. As stated in the 

acceptable practices, ‘‘[all DCMs] bear 

special responsibility to regulate 

effectively, impartially, and with due 

consideration of the public interest. 

* * * Under Core Principle 15, they are 

also required to minimize conflicts of 

interest in their decision-making 

process. To comply with this core 

principle, [DCMs] should be particularly 

vigilant for such conflicts between and 

among their self-regulatory 

responsibilities, their commercial 

interests, and the several interests of 

their management, members, owners, 

customers and market participants, and 

other constituencies.’’ 

Within these boundaries, DCMs may 

demonstrate compliance with Core 

Principle 15 as they deem best. The 

Commission has repeatedly affirmed 

that the acceptable practices are not 

mandatory. What is mandatory, 

however, is that all DCMs mitigate 

conflicts of interest in their decision 

making process, including the conflicts 

that the Commission has identified 

between their commercial interests and 

their regulatory responsibilities. 

Indeed, CME Group’s own comment 

letter expresses the potential conflict of 

interest between regulatory and 

commercial decision making. Referring 

to commercial interests, CME Group 

claims, ‘‘[w]e believe that each publicly 

traded DCM has an obligation to its 

shareholders to follow the listing rules 


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53CME Group CL at 2. 

54 72 FR 6936, 6949. 

55 7 U.S.C. 19(a). 

56E.g., Fishermen’s Dock Co-op., Inc. v. Brown, 75 

F.3d 164 (4th Cir. 1996); Center for Auto Safety v. 

Peck, 751 F.2d 1336 (D.C. Cir. 1985) (agency has 

discretion to weigh factors in undertaking cost 

benefit analyses). 

57 7 U.S.C. 7(d)(15). 

58See Policy Statement and Establishment of 

Definitions of ‘‘Small Entities’’ for Purposes of the 

Regulatory Flexibility Act, 47 FR 18618, 18619 

(Apr. 30, 1982). 

of the relevant securities exchange and 

to nominate for election as directors a 

mix of individuals based on their ability 

to create value for the corporation.’’ 53

While the Commission acknowledges all 

DCMs’ commercial interests, it also 

reminds them of their regulatory 

responsibilities. 

In the case of CME Group, the 

Commission notes that its subsidiary 

DCMs—CBOT, CME, COMEX, and 

NYMEX—are not traded on national 

securities exchanges or subject to listing 

standards. While CME Group may be 

required to comply with certain listing 

rules and to maximize shareholder 

value, its regulated DCMs have 

additional statutory and regulatory 

obligations. Above all, regardless of 

their corporate structures, all DCMs 

must regulate effectively, impartially, 

and with due consideration of the 

national public interest as provided for 

in the Act. 

The Commission is confident that 

regulatory and commercial interests can 

be reconciled in effective selfregulation. However, continued success 

depends on all DCMs recognizing the 

potential for conflicts; acknowledging 

the primacy of regulatory interests; and 

implementing effective solutions to 

protect self-regulatory functions, 

decisions, and personnel from improper 

commercial influence and 

considerations. As the Commission 

stated when it adopted the acceptable 

practices for Core Principle 15, and as 

it continues to believe now: 

[I]t is crucial for all DCMs and their owners 

to understand that DCMs have two 

responsibilities: A responsibility to their 

ownership and a responsibility to the public 

interest as defined in the Act. Whereas the 

[listing standards] serve those with a direct 

fiduciary claim upon a company * * * the 

new acceptable practices serve the public, 

whose claim upon DCMs is entirely 

independent of ownership, membership, or 

any other DCM affiliation. In short, through 

the new acceptable practices for Core 

Principle 15, the Commission seeks to ensure 

adequate representation of a public voice that 

otherwise is not guaranteed any formal 

standing within a DCM, and which receives 

no effective representation under any 

regulatory regime other than the 

Commission’s.54

II. 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 a 

new regulation or order under the Act.55

By its terms, Section 15(a) requires the 

Commission to ‘‘consider the costs and 

benefits’’ of a subject rule or order, 

without requiring it to quantify the costs 

and benefits of its action or to determine 

whether the benefits of the action 

outweigh its costs. Section 15(a) 

requires that the costs and benefits of 

new regulations 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 futures markets; (3) 

price discovery; (4) sound risk 

management practices; and (5) other 

public interest considerations. In 

conducting its analysis, the Commission 

may, in its discretion, give greater 

weight to any one of the five 

enumerated areas of concerns and may 

determine that, notwithstanding its 

costs, a particular rule is necessary or 

appropriate to protect the public interest 

or to effectuate any of the provisions or 

to accomplish any of the purposes of the 

CEA.56

On February 14, 2007, the 

Commission published final acceptable 

practices for Core Principle 15 that 

included prophylactic measures 

designed to minimize conflicts of 

interest in DCMs’ decision making 

processes. The final rulemaking 

thoroughly considered the costs and 

benefits of the acceptable practices and 

responded to comments relating to the 

costs of adhering to their requirements. 

The 2009 amendments to the 

definition of public director bring 

further clarity and finality to the 

acceptable practices for Core Principle 

15. The Commission believes that the 

amendments are fully consistent with 

the design and purpose of the 

acceptable practices as originally 

conceived. Furthermore, through more 

consistent, streamlined, and precise 

articulations, the amendments will 

facilitate DCMs’ implementation of the 

acceptable practices and thereby 

advance important public interest 

considerations with respect to conflicts 

of interest in DCM self-regulation. In 

particular, the acceptable practices offer 

all DCMs a safe harbor for compliance 

with Core Principle 15, which requires 

them to ‘‘establish and enforce rules to 

minimize conflicts of interest in the 

decision making process of the contract 

market * * *.’’ 57 The acceptable 

practices’ safe harbor is based on the 

inclusion of public directors on their 

boards; the creation and empowerment 

of ROCs consisting exclusively of public 

directors; and the presence of public 

persons on DCM disciplinary panels. 

Thus, each of these provisions depends 

heavily on a clear and settled definition 

of public director. The Commission 

believes that the 2009 amendments will 

not impose any additional costs upon 

DCMs. To the contrary, they may reduce 

the costs of compliance through 

improvements in the bright-line tests for 

public director, such that the tests truly 

operate as bright-lines and the 

definition of public director is wellsettled. 

After considering the above 

mentioned factors and issues, the 

Commission has determined to adopt 

these amendments to the acceptable 

practices for Core Principle 15. The 

Commission received no comments on 

its Section 15(a) analysis of the 

amendments and hereby adopts them as 

proposed. 

B. Regulatory Flexibility Act 

The Regulatory Flexibility Act, 5 

U.S.C. 601 et seq. requires federal 

agencies, in promulgating rules, to 

consider the impact of those rules on 

small entities. The 2009 amendments 

affect DCMs, which the Commission has 

previously determined are not small 

entities for purposes of the Regulatory 

Flexibility Act.58 Accordingly, the 

Acting Chairman, on behalf of the 

Commission, hereby certifies pursuant 

to 5 U.S.C. 605(b) that the 2009 

amendments will not have a significant 

economic impact on a substantial 

number of small entities. 

C. Paperwork Reduction Act of 1995 

The 2009 amendments to the 

acceptable practices for Core Principle 

15 will not impose any new 

recordkeeping or information collection 

requirements, or other collections of 

information that require approval of the 

Office of Management and Budget, 

under 44 U.S.C. 3501 et seq. 

Additionally, the Commission received 

no comments on the accuracy of the 

estimate of additional recordkeeping or 

information collection requirements. 

Accordingly, the Paperwork Reduction 

Act does not apply. 

III. Text of Amendments 

List of Subjects in 17 CFR Part 38 

Commodity futures, Reporting and 

recordkeeping requirements. 

In light of the foregoing, and pursuant 

to the authority in the Act, and in 


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18990 Federal Register / Vol. 74, No. 79 / Monday, April 27, 2009 / Rules and Regulations 

particular, Sections 3, 5, 5c(a) and 8a(5) 

of the Act, the Commission hereby 

amends Part 38 of Title 17 of the Code 

of Federal Regulations as follows: 

PART 38—DESIGNATED CONTRACT 

MARKETS 

■ 1. The authority citation for part 38 

continues to read as follows: 

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

12a, as amended by Appendix E of Public 

Law 106–554, 114 Stat. 2763A–365. 

■ 2. The stay is lifted on paragraph (b) 

of Core Principle 15 in Appendix B to 

17 CFR Part 38. 

■ 3. In Appendix B to Part 38 revise 

paragraphs (b)(2)(ii) through (b)(2)(v) of 

Core Principle 15 to read as follows: 

Appendix B to Part 38—Guidance on, 

and Acceptable Practices in, 

Compliance With Core Principles 

* * * * * 

Core Principle 15 of section 5(d) of the Act: 

CONFLICTS OF INTEREST 

* * * * * 

(b) * * * 

(2) * * * 

(ii) In addition, a director shall be 

considered to have a ‘‘material relationship’’ 

with the contract market if any of the 

following circumstances exist: 

(A) The director is an officer or employee 

of the contract market or an officer or 

employee of its affiliate. In this context, 

‘‘affiliate’’ includes parents or subsidiaries of 

the contract market or entities that share a 

common parent with the contract market; 

(B) The director is a member of the contract 

market, or an officer or director of a member. 

‘‘Member’’ is defined according to Section 

1a(24) of the Commodity Exchange Act and 

Commission Regulation 1.3(q); 

(C) The director, or a firm with which the 

director is an officer, director, or partner, 

receives more than $100,000 in combined 

annual payments from the contract market, or 

any affiliate of the contract market (as 

defined in Subsection (2)(ii)(A)), for legal, 

accounting, or consulting services. 

Compensation for services as a director of the 

contract market or as a director of an affiliate 

of the contract market does not count toward 

the $100,000 payment limit, nor does 

deferred compensation for services prior to 

becoming a director, so long as such 

compensation is in no way contingent, 

conditioned, or revocable; 

(D) Any of the relationships above apply to 

a member of the director’s ‘‘immediate 

family,’’ i.e., spouse, parents, children and 

siblings. 

(iii) All of the disqualifying circumstances 

described in Subsection (2)(ii) shall be 

subject to a one-year look back. 

(iv) A contract market’s public directors 

may also serve as directors of the contract 

market’s affiliate (as defined in Subsection 

(2)(ii)(A)) if they otherwise meet the 

definition of public director in this Section 

(2). 

(v) A contract market shall disclose to the 

Commission which members of its board are 

public directors, and the basis for those 

determinations. 

* * * * * 

Issued in Washington, DC, on April 21, 

2009 by the Commission. 

David A. Stawick, 

Secretary to the Commission. 

[FR Doc. E9–9508 Filed 4–24–09; 8:45 am] 

BILLING CODE P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Food and Drug Administration 

21 CFR Part 526 

[Docket No. FDA–2009–N–0665] 

Intramammary Dosage Forms; Change 

of Sponsor 

AGENCY: Food and Drug Administration, 

HHS. 

ACTION: Final rule. 

SUMMARY: The Food and Drug 

Administration (FDA) is amending the 

animal drug regulations to reflect a 

change of sponsor for an approved new 

animal drug application (NADA) from 

Merial Ltd. to Cross Vetpharm Group 

Ltd. 

DATES: This rule is effective April 27, 

2009. 

FOR FURTHER INFORMATION CONTACT: 

David R. Newkirk, Center for Veterinary 

Medicine (HFV–100), Food and Drug 

Administration, 7500 Standish Pl., 

Rockville, MD 20855, 240–276–8307, 

e-mail: david.newkirk@fda.hhs.gov. 

SUPPLEMENTARY INFORMATION: Merial 

Ltd., 3239 Satellite Blvd., Bldg. 500, 

Duluth, GA 30096–4640, has informed 

FDA that it has transferred ownership 

of, and all rights and interest in, NADA 

065–383 for Formula A–34 (procaine 

penicillin G) mastitis infusion tube to 

Cross Vetpharm Group Ltd., Broomhill 

Rd., Tallaght, Dublin 24, Ireland. 

Accordingly, the agency is amending 

the regulations in 21 CFR 526.1696a to 

reflect the transfer of ownership. 

This rule does not meet the definition 

of ‘‘rule’’ in 5 U.S.C. 804(3)(A) because 

it is a rule of ‘‘particular applicability.’’ 

Therefore, it is not subject to the 

congressional review requirements in 5 

U.S.C. 801–808. 

List of Subjects in 21 CFR Part 526 

Animal drugs. 

■ Therefore, under the Federal Food, 

Drug, and Cosmetic Act and under 

authority delegated to the Commissioner 

of Food and Drugs and redelegated to 

the Center for Veterinary Medicine, 21 

CFR part 526 is amended as follows: 

PART 526—INTRAMAMMARY DOSAGE 

FORMS 

■ 1. The authority citation for 21 CFR 

part 526 continues to read as follows: 

Authority: 21 U.S.C. 360b. 

§ 526.1696a [Amended] 

■ 2. In paragraph (c) of § 526.1696a, 

remove ‘‘050604’’ and add in its place 

‘‘061623’’. 

Dated: April 17, 2009. 

Bernadette Dunham, 

Director, Center for Veterinary Medicine. 

[FR Doc. E9–9527 Filed 4–24–09; 8:45 am] 

BILLING CODE 4160–01–S 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

33 CFR Part 165 

[Docket No. USCG–2009–0119] 

RIN 1625–AA00 

Safety Zone; Red Bull Air Races; San 

Diego Bay, San Diego, CA 

AGENCY: Coast Guard, DHS. 

ACTION: Temporary final rule. 

SUMMARY: The Coast Guard is 

establishing a temporary safety zone on 

the navigable waters of the San Diego 

Bay in support of the Red Bull Air 

Races. The safety zone is necessary to 

provide for the safety of the crew, 

spectators, participants and other 

vessels and users of the waterway. 

Persons and vessels will be prohibited 

from entering into, transiting through, or 

anchoring within this safety zone unless 

authorized to do so by the Captain of the 

Port or his designated representative. 

DATES: This rule is effective from 10 

a.m. on May 7, 2009 through 6 p.m. on 

May 10, 2009. 

ADDRESSES: Documents indicated in this 

preamble as being available in the 

docket are part of docket USCG–2009– 

0119 and are available Online by going 

to http://www.regulations.gov, selecting 

the Advanced Docket Search option on 

the right side of the screen, inserting 

USCG–2009–0119 in the Docket ID box, 

pressing Enter, and then clicking on the 

item in the Docket ID column. They are 

also available for inspection or copying 

at two locations: the Docket 

Management Facility (M–30), U.S. 

Department of Transportation, West 


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