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[Federal Register: June 18, 2001 (Volume 66, Number 117)]
[Rules and Regulations]
[Page 32737-32739]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18jn01-12]

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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 1


Fees for Reviews of the Rule Enforcement Programs of Contract
Markets and Registered Futures Association

AGENCY: Commodity Futures Trading Commission.

ACTION: Establish a new schedule of fees.

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SUMMARY: The Commission charges fees to designated contract markets and
the National Futures Association (NFA) to recover the costs incurred by
the Commission in the operation of a program which provides a service
to these entities. The fees are charged for the Commission's conduct of
its program of oversight of self-regulatory rule enforcement programs
(17 CFR part 1 appendix B) (NFA and the contract markets are referred
to as SROs).
    The calculation of the fee amounts to be charged for the upcoming
year is based on an average of actual program costs incurred in the
most recent three full fiscal years, as explained below. The new fee
schedule is set forth in the Supplementary Information and information
is provided on the effective date of the fees and the due date for
payment.

EFFECTIVE DATES: The fees for Commission oversight of each SRO rule
enforcement program must be paid by each of the named SROs in the
amount specified by no later than August 17, 2001.

[[Page 32738]]


FOR FURTHER INFORMATION CONTACT: Donald L. Tendick, Acting Executive
Director, Office of the Executive Director, Commodity Futures Trading
Commission, Three Lafayette Centre, 1155 21st Street, NW, Washington,
DC 20581, (202) 418-5160.

SUPPLEMENTARY INFORMATION:

I. General

    This notice only relates to fees for the Commission's review of the
rule enforcement programs at the registered futures associations and
contract markets regulated by the Commission. Fees for designation will
be set forth in rules implementing the Commodity Futures Modernization
Act of 2000, Appendix E of Pub. L. No. 106-554, 114 Stat. 2763, and the
Commission's new regulatory framework. The Commission has proposed
rules to implement the Commodity Futures Modernization Act of 2000,
Appendix E of Pub. L. No. 106-554, 114 Stat. 2763, and the Commission's
new regulatory framework. The proposed rules (66 FR 14262, Mar. 9,
2001) establish three new market categories, including exempt markets
and two categories of markets subject to Commission regulatory
oversight--designated contract markets and registered derivatives
transaction execution facilities. The Commission proposed also to
charge a fee for product review where approval has been requested by a
designated contract market or registered derivatives transaction
execution facility. See 66 FR 14262, 14286 (Mar. 9, 2001). No fee was
proposed for the initial designation of a contract market or
registration of a derivatives transaction execution facility. The new
rules will amend the Schedule of Fees found in appendix B to part 5 of
the Commission's rules.

II. Schedule of Fees

    Fees for the Commission's review of the rule enforcement programs
at the registered futures associations and contract markets regulated
by the Commission:

------------------------------------------------------------------------
                          Entity                             Fee amount
------------------------------------------------------------------------
Chicago Board of Trade....................................      $187,396
Chicago Mercantile Exchange...............................       224,912
New York Mercantile Exchange/COMEX........................       173,156
New York Board of Trade...................................        73,730
Minneapolis Grain Exchange................................         3,269
National Futures Association..............................       213,421
                                                           -------------
    Total.................................................       889,738
------------------------------------------------------------------------

III. Background Information

A. General

    The Commission recalculates the fees charged each year with the
intention of recovering the costs of operating this Commission
program.\1\ All costs are accounted for by the Commission's Management
Accounting Structure Codes (MASC) system, which records each employee's
time for each pay period. The fees are set each year based on direct
program costs, plus an overhead factor.
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    \1\ See Section 237 of the Futures Trading Act of 1982, 7 U.S.C.
16a and 31 U.S.C. 9701. For a broader discussion of the history of
Commission fees, see 52 FR 46070 (Dec. 4, 1987).
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B. Overhead Rate

    The fees charged by the Commission to the SROs are designed to
recover program costs, including direct labor costs and overhead. The
overhead rate is calculated by dividing total Commission-wide direct
program labor costs into the total amount of the Commission-wide
overhead pool. For this purpose, direct program labor costs are the
salary costs of personnel working in all Commission programs. Overhead
costs consist generally of the following Commission-wide costs:
Indirect personnel costs (leave and benefits), rent, communications,
contract services, utilities, equipment, and supplies. This formula has
resulted in the following overhead rates for the most recent three
years (rounded to the nearest whole percent): 104 percent for fiscal
year 1998, 105 percent for fiscal year 1999, and 105 percent for fiscal
year 2000. These overhead rates are applied to the direct labor costs
to calculate the costs of oversight of SRO rule enforcement programs.

C. Conduct of SRO Rule Enforcement Reviews

    Under the formula adopted in 1993 (58 FR 42643, Aug. 11, 1993)
which appears at 17 CFR part 1 appendix B, the Commission calculates
the fee to recover the costs of its review of rule enforcement
programs, based on a three-year average of the actual cost of
performing reviews at each SRO. The cost of operation of the
Commission's program of SRO oversight varies from SRO to SRO, according
to the size and complexity of each SRO's program. The three-year
averaging is intended to smooth out year-to-year variations in cost.
Timing of reviews may affect costs--a review may span two fiscal years
and reviews are not conducted at each SRO each year. Adjustments to
actual costs may be made to relieve the burden on an SRO with a
disproportionately large share of program costs.
    The Commission's formula provides for a reduction in the assessed
fee if an SRO has a smaller percentage of United States industry
contract volume than its percentage of overall Commission oversight
program costs. This adjustment reduces the costs so that as a
percentage of total Commission SRO oversight program costs, they are in
line with the pro rata percentage for that SRO of United States
industry-wide contract volume.
    The calculation made is as follows: The fee required to be paid to
the Commission by each contract market is equal to the lesser of actual
costs based on the three-year historical average of costs for that
contract market or one-half of average costs incurred by the Commission
for each contract market for the most recent three years, plus a pro
rata share (based on average trading volume for the most recent three
years) of the aggregate of average annual costs of all contract markets
for the most recent three years. The formula for calculating the second
factor is: 0.5a + 0.5vt=current fee. In this formula, ``a'' equals the
average annual costs, ``v'' equals the percentage of total volume
across exchanges over the last three years, and ``t'' equals the
average annual cost for all exchanges. NFA, the only registered futures
association regulated by the Commission, has no contracts traded; hence
its fee is based simply on costs for the most recent three fiscal
years.
    This table summarizes the data used in the calculations and the
resulting fee for each entity:

----------------------------------------------------------------------------------------------------------------
                                                                    Three-year      Three-year
                                                                  average actual   percentage of   Average  year
                                                                       costs          volume         2001 fee
----------------------------------------------------------------------------------------------------------------
Chicago Board of Trade..........................................        $187,396         43.3411        $187,396
Chicago Mercantile Exchange.....................................         224,912         35.7562         224,912
NYMEX/COMEX.....................................................         215,703         16.7928         173,156

[[Page 32739]]


New York Board of Trade.........................................         120,068          3.5220          73,730
Kansas City Board of Trade......................................          24,582           .4019          13,854
Minneapolis Grain Exchange......................................           5,102           .1845           3,269
Philadelphia Board of Trade.....................................               0           .0004               0
                                                                 ===============================================
    Subtotal....................................................         777,760        100.0000         676,317
National Futures Association....................................         213,421             N/A         213,421
                                                                 -----------------------------------------------
    Total.......................................................         991,184        100.0000         889,738
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    An example of how the fee is calculated for one exchange, the
Minneapolis Grain Exchange, is set forth here:
    a. Actual three-year average costs equal $5,102.
    b. The alternative computation is:

(.5)($5,102) + (.5)(.001845)($777,760) = $3,269.

c. The fee is the lesser of a or b; in this case $3,269.
    As noted above, the alternative calculation based on contracts
traded, is not applicable to the NFA because it is not a contract
market and has no contracts traded. The Commission's average annual
cost for conducting oversight review of the NFA rule enforcement
program during fiscal years 1998 through 2000 was $213,421 (one-third
of $640,263). The fee to be paid by the NFA for the current fiscal year
is $213,421.

IV. Regulatory Flexibility Act

    The Regulatory Flexibility Act, 5 U.S.C. 601, et seq., requires
agencies to consider the impact of rules on small business. The fees
implemented in this release affect contract markets (also referred to
as exchanges) and registered futures associations. The Commission has
previously determined that contract markets and registered futures
associations are not ``small entities'' for purposes of the Regulatory
Flexibility Act. Accordingly, the Acting Chairman on behalf of the
Commission, certifies pursuant to 5 U.S.C. 605(b), that the fees
implemented here will not have a significant economic impact on a
substantial number of small entities.

    Issued in Washington, DC on June 6, 2001 by the Commission.
Catherine D. Dixon,
Assistant Secretary of the Commission.
[FR Doc. 01-15272 Filed 6-15-01; 8:45 am]
BILLING CODE 6351-01-P
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