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[Federal Register: December 17, 1996 (Volume 61, Number 243)]
[Proposed Rules]
[Page 66241-66246]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17de96-23]


[[Page 66241]]

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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 1


Proposed Rulemaking Concerning Contract Market Rule Review
Procedures

AGENCY: Commodity Futures Trading Commission.

ACTION: Proposed rulemaking.

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SUMMARY: The Commodity Futures Trading Commission (``Commission'') is
proposing a rulemaking which would amend the Commission's procedures
relating to its review of those contract market rules that do not
relate to contract terms and conditions. A separate proposal is
currently pending for rules relating to terms and conditions. The
instant proposal would shorten the Commission's time frame for
reviewing complex rules and streamline the review process so that such
rule changes generally could be deemed approved or be permitted to be
put into effect without Commission approval.
    Specifically, all such rule changes meeting the form and content
requirements would be deemed approved or be permitted to be put into
effect without approval ten days after Commission receipt, unless the
Commission took action to commence review of the proposal for a 45-day
period (or a 75-day period in the case of rules published for comment
in the Federal Register) or the contract market agreed to another,
specified review period. At the end of such a period, a proposed rule
meeting the form and content requirements would be deemed approved or
become effective without approval unless the Commission informed the
submitting contract market of its intention to initiate disapproval
proceedings, the contract market withdrew the proposal, or the contract
market requested that the review period be extended to the current 180-
day period.

DATE: Comments on the proposed rulemaking must be received by January
16, 1997.

ADDRESSES: Comments should be mailed to Jean A. Webb, Secretary,
Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st
Street, NW., Washington, DC 20581; transmitted by facsimile to (202)
418-5521; or transmitted electronically to [[email protected]].

FOR FURTHER INFORMATION CONTACT: David P. Van Wagner, Special Counsel,
Division of Trading and Markets, Commodity Futures Trading Commission,
Three Lafayette Centre, 1155 21st Street, NW., Washington, DC 20581.
Telephone: (202) 418-5490.

SUPPLEMENTARY INFORMATION

I. Current Statutory and Regulatory Requirements

    Section 5a(a)(12)(A) of the Commodity Exchange Act (``Act''), 7
U.S.C. 7a(a)(12)(A), provides that all rules \1\ of a contract market
that relate to terms and conditions \2\ in futures or option contracts
traded on or subject to the rules of a contract market must be
submitted to the Commission for its prior approval. If the Commission
does not approve or begin disapproval proceedings for such a proposed
rule within 180 days of the Commission's receipt of the submission, the
contract market may make the rule effective.\3\
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    \1\ Commission Regulation 1.41(a)(1) defines ``rule'' of a
contract market to mean:
    * * * any constitutional provision, article of incorporation,
bylaw, rule, regulation, resolution, interpretation, stated policy,
or instrument corresponding thereto, in whatever form adopted, and
any amendment or addition thereto or repeal thereof, made or issued
by a contract market, or by the governing board thereof or any
committee thereof.
    \2\ Commission Regulation 1.41(a)(2) defines ``terms and
conditions'' to mean:
    * * * any definition of the trading unit or the specific
commodity underlying a contract for the future delivery of a
commodity or commodity option contract, specification of settlement
or delivery standards and procedures, and establishment of buyers'
and sellers' rights and obligations under the contract. Terms and
conditions shall be deemed to include provisions relating to the
following:
    (i) Quality or quantity standards for a commodity and any
applicable exemptions or discounts;
    (ii) Trading hours, trading months and the listing of contracts;
    (iii) Minimum and maximum price limits and the establishment of
settlement prices;
    (iv) Position limits and position reporting requirements;
    (v) Delivery points and locational price differentials;
    (vi) Delivery standards and procedures, including alternatives
to delivery and applicable penalties or sanctions for failure to
perform;
    (vii) Settlement of the contract; and
    (viii) Payment or collection of commodity option premiums or
margins.
    \3\ In addition, if the Commission institutes a disapproval
proceeding for a proposed rule within 180 days of receipt, but does
not conclude the disapproval proceeding within one year of receipt,
the contract market may make the rule effective until such time as
the Commission disapproves the rule.
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    Section 5a(a)(12)(A) further requires that contract markets submit
all other rules to the Commission. Such other rules may be made
effective ten days after Commission receipt unless, within the ten-day
period, the contract market requests Commission approval or the
Commission notifies the contract market that it intends to review the
rules for approval. Section 5a(a)(12)(A) also provides that at least
thirty days before approving any rules of major economic significance,
as determined by the Commission, the Commission shall publish a notice
of such rules in the Federal Register.
    Commission Regulation 1.41 sets forth procedures for submitting
proposed contract market rules for Commission approval, permitting
proposed contract market rules to go into effect without Commission
approval, and dealing with contract market emergency rules. All
proposed contract market rules relating to the terms and conditions of
a commodity futures or option contract must, and any other rule may, be
submitted for prior Commission approval, under section 5a(a)(12)(A) of
the Act, pursuant to procedures set forth in Commission Regulation
1.41(b). (Significantly, certain other sections of the Act require
rules addressing specified matters to be explicitly approved by the
Commission.) Commission Regulation 1.41(c) sets forth the submission
requirements for rules that do not require Commission approval and that
may be placed into effect ten days after receipt by the Commission.
    On November 22, 1996, the Commission published a proposed
rulemaking which would revise the procedures for contract market
designations and the review of rules relating to contract terms and
conditions under Regulation 1.41(b).<SUP>4 Specifically, that proposed
rulemaking would establish ``fast-track'' review procedures which would
permit certain contract market rules to be deemed approved 45 days
after receipt by the Commission (or 75 days after receipt in cases
where the Commission decided to extend the review period). These fast-
track review procedures would be an alternative to the current 180-day
review procedures under section 5a(a)(12)(A) of the Act and Commission
Regulation 1.41(b).
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    \4\ 61 FR 59386.
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    The instant rulemaking would revise the review procedures for rules
that do not relate to contract terms and conditions. It addresses those
rules that, although they do not relate to terms and conditions,
nevertheless require approval under a specific provision of the Act and
those rules that do not require approval and for which the review
period has been extended by the contract market or the
Commission.<SUP>5 The different review periods set forth in the two
proposed rulemakings reflect differences established in the statute
between terms and conditions and other types of rules and the volume of
contract market rulemakings that are not terms and conditions.<SUP>6
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    \5\ In the past three fiscal years, the Commission has processed
866 non-term and condition submissions. The Commission handled 587
of these in ten days or fewer. This represents approximately 68% of
all such submissions received. The Commission processed 613
submissions in 30 days or fewer. This represents approximately 71%
of all

[[Page 66242]]

such submissions. In many of the instances where the review period
exceeded thirty days, in lieu of commencing disapproval proceedings
or remitting the rules, the Commission kept such rules under review
while the contract market addressed relevant issues or the
Commission undertook changes to regulations that otherwise precluded
the immediate implementation of the proposed rule.
    \6\ See section 5a(a)(12)(A) of the Act. Submissions related to
terms and conditions constitute approximately 40% of all
submissions. Other types of rules constitute approximately 60% of
all submissions.
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II. Description of Proposed Rulemaking

A. Overview

    The Commission believes that the rule review process is essential
to ensure the integrity of the markets and to ensure that the public
interest is protected. At the same time, the Commission wants to
encourage innovation by the contract markets. The proposed rulemaking
is designed to expedite the Commission's existing two-track procedures
for the review of contract market rule proposals that do not relate to
contract terms and conditions. As described in more detail below, the
proposal would:

--Permit certain rules to be deemed approved within ten days of receipt
that currently are subject to a 180-day deadline;
--Require the Commission to identify the issues raised by novel or
complex proposals within 10 days of receipt;
--Reduce by up to 75% the time within which the Commission was required
to act on the small portion of rules not handled during the ten-day
review period;
--Make clear that a contract market could choose to extend the review
period rather than be subject to a disapproval proceeding; and
--Require disapproval proceedings to be initiated no later than 15 days
after the submitting contract market advised the Commission that it did
not wish to withdraw the proposed rule.

    The Commission believes that under the proposed procedures, the
Commission would identify issues early in the process and make
decisions on proposed rules in an expeditious manner.<SUP>7 Similarly,
the compressed time frames would increase the incentive for contract
markets to ensure that their initial submissions fully articulated the
operation, purpose, and effect of their proposals and to attempt to
resolve open issues more quickly.<SUP>8
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    \7\ The rulemaking would not alter the existing statutory
requirement that any determination to extend the ten-day review
period for certain rules is not delegable to staff. See section
5a(a)(12)(A) of the Act. The Commission would continue to make this
determination. Upon implementation of the proposed rulemaking, the
Commission anticipates it would adjust its internal processes, as
appropriate, to accommodate the new procedures.
    \8\ For example, under current procedures, contract markets may
have an incentive to submit proposals before all the details have
been finalized in order to start the running of the 180-day review
period. In such cases, the submission would be supplemented during
the course of the review. Under the proposal, there would be an
incentive to make the initial submission as complete as possible in
order to obtain approval within the initial ten-day period.
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    The Commission expects that the proposed procedures would increase
the percentage of submissions handled within ten days. Moreover, by
simplifying the procedures for routine submissions and by imposing
stricter deadlines at various stages, the proposal would enable the
Commission and the contract markets to focus resources on the smaller
subset of novel and complex submissions that require additional time
for review. This would result in quicker identification and resolution
of issues in such cases.
    The following description consists of a section-by-section analysis
of the Commission's proposed rulemaking. In addition to explaining the
rationale and operation of the proposal, this description is intended
to provide interested persons with a framework for addressing issues
which may be raised by particular provisions of the rulemaking.

B. Proposed Regulation 1.41(b)--Rules That Relate to Terms and
Conditions

    Current Commission Regulation 1.41(b) establishes approval
procedures for proposed contract market rules relating to contract
terms and conditions, other rules that require approval under a
specific provision of the Act, rules for which the submitting contract
market requests approval, and rules the Commission determines to review
for approval. The Commission is proposing to amend Regulation 1.41(b)
so that it would apply only to proposed rules relating to terms and
conditions. The procedures for the review of such rules are addressed
in the related proposed rulemaking mentioned above.<SUP>9
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    \9\ 61 FR 59386 (November 22, 1996).
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C. Proposed Regulation 1.41(c)--Rules That Do Not Relate to Terms and
Conditions

    Current Commission Regulation 1.41(c) establishes review procedures
for proposed contract market rules which do not require Commission
approval and may be placed into effect ten days after receipt by the
Commission. The Commission's proposed rulemaking would revise
Regulation 1.41(c) in two significant respects.
    First, the rulemaking would expand the scope of rules eligible to
be reviewed pursuant to Regulation 1.41(c) to include all proposed
rules, other than terms and conditions, that the Commission reviews for
approval. These types of rules would include rules that required
approval under a provision of the Act other than Section
5a(a)(12)(A),<SUP>10 rules that the Commission decided to review for
approval, and rules that the submitting contract market requested be
reviewed for approval.
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    \10\ Several provisions of the Act other than section
5a(a)(12)(A) require Commission approval of contract market rules:
Section 4b(b) (crossing of orders); Section 4c(a) (exchange of
futures for physicals, transfer trades and office trades); and
Section 4f(b) (financial requirements for futures commission
merchants). Several provisions of the Commission's regulations also
require Commission approval of contract market rules: Regulation
8.02 (disciplinary proceedings); Regulation 155.2 (trading standards
for floor brokers); and Regulation 190.05(b) (deliveries on behalf
of a customer of a bankrupt firm).
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    Second, the rulemaking would compress the time for review. Under
the proposal, the Commission would be required to act on all non-term
and condition rule changes within ten days of receipt. Unless the
Commission found that a rule proposal involved complex or novel issues
or was of major economic significance and affirmatively decided to
retain it for further review, all non-term and condition rule changes
would be deemed approved or be permitted to be placed into effect
without approval, as appropriate, ten days after the Commission's
receipt.
    For those rule proposals that the Commission decided merited
further review, the proposed rulemaking would reduce the Commission's
maximum review time from the current 180 days to 45 or 75 days, unless
the submitting contract market requested otherwise. Finally,
disapproval proceedings for a proposed rule would have to be instituted
within 75 or 105 days rather than the current 180 days.
1. Proposed Regulation 1.41(c)(1)(i)--Form and Content of Submissions
    Under proposed Regulation 1.41(c)(1)(i), contract markets would be
required to submit to the Commission for review all proposed rules that
did not relate to terms and conditions and were not otherwise
exempt.<SUP>11 Because

[[Page 66243]]

this rulemaking would substantially reduce the period of time the
Commission would have to review and dispose of rule proposals, it would
be very important for contract markets to ensure that their submissions
fully complied with the form and content requirements.
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    \11\ Commission Regulations 1.41(d) and 1.41(f), respectively,
set forth the submission requirements for contract market rules that
are exempt from the requirements of section 5a(a)(12)(A) of the Act
and that relate to temporary emergencies. These regulations are not
affected by the subject rulemaking.
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    Each submission would have to comply with all the form and content
requirements that currently apply to rules submitted to the Commission
pursuant to Regulation 1.41(b) and Regulation 1.41(c). In addition,
because proposed Regulation 1.41(c) would establish review procedures
for both rules that receive Commission approval and rules that may be
put into effect without Commission approval, the proposed rulemaking
would require that Regulation 1.41(c) submissions included certain
other information to facilitate the Commission's review of both these
categories of rules.
    Proposed Regulation 1.41(c)(1)(i)(F) would require that contract
markets specified in their submissions any sections of the Act or the
Commission's regulations that were related to a proposed rule,
particularly citing any such provisions that required Commission
approval of the rule. To the extent a submission was potentially
inconsistent with a provision of the Act or the Commission's
regulations, the proposal would require that the submission contained a
reasoned analysis addressing that issue and supporting adoption of the
rule.
    Proposed Regulation 1.41(c)(1)(i)(G) would require that contract
markets indicated in their submissions whether they were requesting
Commission approval for a proposed rule. This requirement would help
the Commission to distinguish rules which did not require Commission
approval but for which a submitting contract market was requesting
approval from rules that a contract market wished to put into effect
without Commission approval.<SUP>12
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    \12\ With the exception of certain emergency actions, contract
markets may request Commission approval of proposed rules that
otherwise could be put into effect without Commission approval. In
some cases, contract markets request approval in order to receive
some degree of immunity from the antitrust or other relevant laws.
See Johnson and Hazen, Commodities Regulation, Sec. 2.56.
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    The proposed rulemaking also would amend the current requirement of
Commission Regulation 1.41 that contract markets include in their rule
submissions any substantive views expressed by their members or others
in opposition to a proposed rule.<SUP>13 As a clarification of this
requirement, the proposed rulemaking would specify that the views of
opposing governing board members also must be included in proposed rule
submissions.<SUP>14 In addition, the proposed rulemaking would provide
that the currently-required description of opposing views must indicate
the membership interest categories of persons who were opposed to the
proposed contract market rule.
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    \13\ Current Commission Regulation 1.41(b)(5) requires that rule
submissions ``[n]ote and briefly describe any substantive views
expressed by the members of the contract market or others with
respect to the proposed rule.''
    \14\ The Commission believes that the disclosure of the views
and categories of board members who opposed a proposed rule during
board deliberations would aid the Commission in its oversight of the
self-governance processes of the contract markets and in determining
whether rules should be subject to public comment.
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    Identification of the actual individual would not be required. The
Commission believes that information about the views and categories of
persons who opposed a rule would help the Commission to ascertain
quickly any issues which were raised by the proposal and, thus,
generally would benefit the rule review process.<SUP>15
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    \15\ The proposed revisions to Regulation 1.41's form and
content requirements merely would reflect information that
Commission staff customarily requests from contract markets
submitting rule proposals that potentially raise regulatory
concerns. By clarifying that such information must be included in a
contract market's original submission of a rule, the proposed
rulemaking would ensure that the Commission would have such
information at the outset of the rule review process and, thus,
should facilitate the Commission's review of proposed rules within
the compressed time frames of this rulemaking.
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2. Proposed Regulation 1.41(c)(1)(ii)--Failure to Meet Form and Content
Requirements
    Under proposed Regulation 1.41(c)(1)(ii), the Commission would
retain the authority to remit rule proposals which did not comply with
the form and content requirements of Regulation 1.41(c)(1)(i). This
provision would simply replicate the remittal provisions of current
Regulation 1.41(b) and Regulation 1.41(c).
3. Proposed Regulation 1.41(c)(1)(iii)--Extension of Review Period
    Proposed Regulation 1.41(c)(1)(iii) specifies that the Commission
might extend the ten-day review period to 45 or 75 days for a proposed
rule if it determined within ten days of receipt that the rule ``raises
novel or complex issues which require additional time for review or is
of major economic significance'' and so notified the submitting
contract market.<SUP>16 Such rules frequently generate inquiries or
comments from the public, the industry, or government agencies. In some
cases, the views of such commenters may not have been taken into
account in the contract market decision-making process. A review period
longer than ten days is often necessary to address such concerns
adequately.
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    \16\ Examples of the types of rules that might require more than
ten days for review would include:
    --Rules relating to the financial integrity of markets or their
participants;
    --Rules establishing novel trading procedures or providing for
non-competitive trading;
    --Rules providing for the differential treatment of different
classes of market participants;
    --Rules establishing linkages among exchanges; and,
    --Rules relating to the application of new technology to the
marketplace.
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    The provision would require the Commission's notification to
specify the nature of the issues that necessitated additional review of
a rule proposal. The standard is essentially the same as that set forth
in the Commission's proposed rulemaking relating to term and condition
rule changes for extending the 45-day review period to 75 days.<SUP>17
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    \17\ See 61 FR 59386 (November 22, 1996).
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4. Proposed Regulation 1.41(c)(2)--Action Within Ten Days
    Proposed Regulation 1.41(c)(2) would provide that proposed rules
(other than terms and conditions) that required approval or that could
be placed into effect without approval would be deemed approved or
allowed to go into effect without approval, as appropriate, ten days
after their receipt by the Commission unless the Commission notified
the submitting contract market otherwise. As previously noted, the ten-
day period within which rules would be deemed approved is much shorter
than the 180-day period provided for in the Act.
    Under this provision, the only bases for such notification would be
if the submission did not comply with Regulation 1.41(c)(1)(i)'s form
and content requirements, the Commission decided to extend the review
period pursuant to Regulation 1.41(c)(1)(iii), or the contract market
agreed to another, specified review period. The last provision reflects
an informal procedure that has been followed in the past with respect
to ten day rules where a contract market grants an extension or tolls
the time period while it amends the proposed rule, rather than having
the Commission remit the rule or convert it to a 180-day track.

[[Page 66244]]

5. Proposed Regulation 1.41(c)(3)--Action Within 45 or 75 days
    Generally, under proposed Regulation 1.41(c)(3), any proposed rule
which the Commission retained for further review under Regulation
1.41(c)(1)(iii) would be deemed approved or allowed to go into effect,
as determined by the Commission, 45 days after Commission receipt (or
75 days in the case of rules which were published for comment in the
Federal Register).<SUP>18 By providing the Commission with the
discretion to approve a proposed rule or to allow it into effect at the
end of the 45- or 75-day review period, the rulemaking would replicate
the options currently available to the Commission under section
5a(a)(12)(A) of the Act at the end of 180 days. The proposed rulemaking
would simply compress the time frame to 45 or 75 days.
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    \18\ Under section 5a(a)(12)(A) of the Act, the Commission is
required to publish in the Federal Register for public comment any
proposed rule of major economic significance. In addition, the
Commission generally publishes significant rule changes when it
believes that it is in the public interest to do so and that it
would be beneficial to ascertain the views of persons or entities
that might be affected by the proposal. While section 5a(a)(12)(A)
of the Act specifies that rules of major economic significance must
be published at least 30 days prior to approval of any such rules,
neither the Act nor the Commission's regulations specify any minimum
length for public comment periods.
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    Proposed Regulation 1.41(c)(3) provides for two exceptions to this
deadline: rule submissions that have not satisfied the form and content
requirements of Regulation 1.41(c)(1)(i) <SUP>19 or proposed rules as
to which the Commission notified the contract market of its intention
to initiate a disapproval proceeding. Again, both the 45-day and 75-day
time periods are considerably shorter than the 180-day period currently
provided for rules reviewed pursuant to Commission Regulation 1.41(b).
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    \19\ Historically, the Commission and its staff have always
attempted to have contract markets cure defects in the form and
content of their submissions as early as possible in the rule review
process. However, the Commission's experience also has been that
questions about the operation, purpose and effect of significant
rule proposals can arise at any point in the review process,
especially when issues are raised during the course of a public
comment period. For example, other government agencies such as the
Securities and Exchange Commission (``SEC''), the Department of the
Treasury, the Federal Reserve Board, and the Department of Justice
have expressed their regulatory interests in or identified issues
relating to contract market rule proposals during the course of
Commission review. Moreover, in some circumstances, such as the
development of capital or reporting requirements, the gathering of
information from the SEC and commodities and securities self-
regulatory organizations may be necessary to avoid duplicative
requirements and to assure adequate coverage. Accordingly, under
proposed Regulation 1.41(c)(3)(i), the Commission would retain the
discretion to remit a proposal for failure to satisfy form and
content requirements throughout the specified review period.
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6. Proposed Regulation 1.41(c)(4)--Disapproval Proceedings
    Under proposed Regulation 1.41(c)(4), any Commission notice to a
contract market that the Commission intended to commence disapproval
proceedings with respect to a proposed rule change would be required to
specify the nature of the issues raised by the proposal and the
sections of the Act or the Commission's regulations that the rule
appeared to violate. Under the provision, the submitting contract
market would have 15 days from the issuance of the notification either
to withdraw the proposal or to request that the Commission consider the
proposal pursuant to the regular 180-day review procedures of section
5a(a)(12)(A) of the Act. If the submitting contract market chose
neither of these options, the Commission would commence disapproval
proceedings no later than 30 days after its issuance of the
notification. Section 5a(a)(A)(12) sets forth procedures for Commission
disapproval of proposed rules and provides, among other things, an
opportunity for the submitting contract market to appear on its own
behalf at a Commission hearing.
    Under the proposed rulemaking, disapproval proceedings would
commence within 75 days of a rule's submission (or 105 days in the case
of rules which were published for comment in the Federal Register).
Currently, the Commission may institute disapproval proceedings up to
180 days after a rule's submission. The Commission's proposed shortened
time frame for rule disapproval is intended to advance the general
purpose of this proposed rulemaking: to accelerate the Commission's
review of proposed rule changes and to allow contract markets to
implement rule changes in a more timely manner than is the case under
the current rule review scheme of Regulation 1.41.

III. Conclusion

    The Commission believes that the proposed amendments to Regulation
1.41 would shorten the review time for non-term and condition rule
changes and streamline the rule review process. Accordingly, the
proposed rulemaking should enable contract markets to implement rule
proposals in a more timely manner than can be done at the present time,
without sacrificing the ability of the Commission to assure an adequate
public comment process and consistency of a proposed rule with the Act
and the regulations. The proposal also would provide the Commission
with the necessary experience to determine whether further streamlining
could be achieved. The Commission invites public comment on any aspect
of its proposed rulemaking and, in particular, on the appropriateness
of the proposed time frames.

IV. Related Matters

A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA''), 5 U.S.C. 601 et seq.,
requires that agencies, in proposing rules, consider the impact of
those rules on small businesses. The Commission has previously
determined that contract markets are not ``small entities'' for
purposes of the RFA, and that the Commission, therefore, need not
consider the effect of proposed rules on contract markets.<SUP>20
Accordingly, the Chairperson, on behalf of the Commission, hereby
certifies, pursuant to section 3(a) of the RFA, 5 U.S.C. 605(b), that
the proposed rulemaking, if adopted, would not have a significant
economic impact on a substantial number of small entities.
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    \20\ See 47 FR 18618, 18619 (April 30, 1982).
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B. Agency Information Activities: Proposed Collection; Comment Request

    The Paperwork Reduction Act of 1980 (``PRA''), 44 U.S.C. 3501 et
seq., 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. While the proposed
rulemaking has no burden, the group of rules (3038-0022) of which this
is a part has the following burden:

Average burden hours per response..............................3,546.26
Number of respondents.........................................10,971.00
Frequency of response.......................................On Occasion

    Persons wishing to comment on the information that would be
required by the proposed rulemaking should contact David Rostker,
Office of Management and Budget (``OMB''), Room 3228, NEOB, Washington,
DC 20503, (202) 395-7340. Copies of the information collection
submission to OMB are available from Gerald P. Smith, Clearance
Officer, Commodity Futures Trading Commission, Three Lafayette Centre,
1155 21st Street, N.W., Washington, DC 20581. Telephone: (202) 418-
5160.

List of Subjects in 17 CFR Part 1

    Commodity exchanges, Contract markets, Rule review procedures.

    In consideration of the foregoing, and based on the authority
contained in the

[[Page 66245]]

Commodity Exchange Act and, in particular, sections 4c, 5, 5a, 6 and 8a
thereof, 7 U.S.C. 6c, 7, 7a, 8 and 12a, the Commission is hereby
proposing to amend title 17, chapter I, part 1 of the Code of Federal
Regulations as follows:

PART 1--GENERAL REGULATIONS UNDER THE COMMODITY EXCHANGE ACT

    1. The authority citation for part 1 continues to read as follows:

    Authority: 7 U.S.C. 1a, 2, 2a, 4, 4a, 6, 6a, 6b, 6c, 6d, 6e, 6f,
6g, 6h, 6i, 6j, 6k, 6l, 6m, 6n, 6o, 6p, 7, 7a, 8, 9, 12, 12a, 12c,
13a, 13a-1, 16, 16a, 19, 21, 23, and 24.

    2. Section 1.41 would be proposed to be amended be revising the
first sentence of paragraph (b) and paragraph (c) to read as follows:


Sec. 1.41  Contract market rules; submission of rules to the
Commission; exemption of certain rules.

* * * * *
    (b) Rules that relate to terms and conditions. Except as provided
herein and in paragraph (f) of this section, all proposed contract
market rules that relate to terms and conditions must be submitted to
the Commission for approval pursuant to section 5a(a)(12)(A) of the Act
prior to their proposed effective dates. * * *
    (c) Rules that do not relate to terms and conditions. (1)(i) Except
as provided in paragraphs (d) and (f) of this section (exempt or
temporary emergency rules), each contract market shall submit to the
Commission pursuant to section 5a(a)(12)(A) of the Act prior to the
proposed effective dates all proposed rules that do not relate to terms
and conditions. One copy of the rule shall be furnished to the
Commission at its Washington, DC headquarters, and one copy shall be
transmitted by the contract market to the regional office of the
Commission having local jurisdiction over the contract market. Each
such submission under this paragraph (c) shall, in the following order:
    (A) State that it is being submitted pursuant to Commission
regulation 1.41(c);
    (B) Set forth the text of the proposed rule (in the case of any
change in, addition to, or deletion from any current rule of the
contact market, the current rule shall be fully set forth, with
brackets used to indicate words to be deleted and underscoring used to
indicate words to be added);
    (C) Describe the proposed effective date of the proposed rule and
any action taken or anticipated to be taken to adopt the proposed rule
by the contract market, or by the governing board thereof or any
committee thereof, and cite the rules of the contract market which
authorize the adoption of the proposed rule;
    (D) Explain the operation, purpose, and effect of the proposed
rule, including, as applicable, a description of the anticipated
benefits to market participants or others, any potential
anticompetitive effects on market participants, or others, how the rule
fits into the contract market's scheme of self-regulation, information
which demonstrates that the proposed rule is not inconsistent with the
policies and purposes of the Act, and any other information which may
be beneficial to the Commission in analyzing the proposed rule. If a
proposed rule affects, directly or indirectly, the application of any
other rule of the contract market, set forth the pertinent text of any
such rule and describe the anticipated effect;
    (E) Note and briefly describe any substantive opposing views
expressed by governing board members, members of the contract market,
or others with respect to the proposed rule which were not incorporated
into the proposed rule prior to its submission to the Commission. Any
such description also should identify the membership interest
categories, as that term is defined by Commission regulation
1.64(a)(4), of persons who were opposed to the proposed rule;
    (F) Identify any sections of the Act or the Commission's
regulations that are related to the rule, including any provisions that
require Commission approval of the rule, and, to the extent of any
potential inconsistency between the proposed rule and the Act or the
Commission's regulations, provide a reasoned analysis addressing the
issue and supporting the submission; and
    (G) State whether the contract market is requesting approval of the
proposed rule by the Commission.
    (ii) The Commission may remit to the contract market, with an
appropriate explanation where practicable, and not accept for review
any rule submission that does not comply with the form and content
requirements of paragraphs (c)(1)(i) (A)-(F) of this section.
    (iii) The Commission may notify the contract market within ten days
after receipt of a submission filed pursuant to paragraph (c)(1) of
this section, that the proposed rule raises novel or complex issues
which require additional time for review or is of major economic
significance and therefore that the review period has been extended as
specified in paragraph (c)(3) of this section. This notification will
briefly specify the nature of the issues for which additional time for
review is required.
    (2) All proposed contract market rules submitted for review under
paragraph (c) of this section may be deemed approved or be placed into
effect, as appropriate, ten days after Commission receipt (or at such
earlier time as may be determined by the Commission) unless:
    (i) The Commission notifies the contract market that the submission
does not comply with the form and content requirements of paragraphs
(c)(1)(i) (A)-(F) of this section;
    (ii) The Commission notifies the contract market that the review
period for the submission has been extended pursuant to paragraph
(c)(1)(iii) of this section; or
    (iii) The contract market agrees to another, specified review
period.
    (3) Any rule for which the Commission extends the review period
pursuant to paragraph (c)(1)(iii) of this section may be deemed
approved or be placed into effect, as determined by the Commission,
forty-five days after Commission receipt of such rule or seventy-five
days after Commission receipt in the case of rules that have been
published for comment in the Federal Register (or at such earlier time
as may be determined by the Commission) unless the Commission notifies
the contract market that:
    (i) The submission, including any supplementary materials and in
consideration of any comments from the public or other government
agencies, does not comply with the form and content requirements of
paragraphs (c)(1)(i) (A)-(F) of this section; or
    (ii) The Commission intends to institute a proceeding to disapprove
the rule pursuant to the procedures specified in section 5a(a)(12)(A)
of the Act.
    (4) A notice of intention to commence a disapproval proceeding
issued pursuant to paragraph (c)(3) of this section will:
    (i) Identify the nature of the issues raised by the proposed rule
and the specific sections of the Act or the Commission's regulations
that the rule appears to violate; and,
    (ii) State that the Commission will commence disapproval
proceedings for the proposed rule within thirty days after the
Commission's issuance of the notification, unless within fifteen days
of such issuance the contract market:
    (A) Withdraws the rule, or
    (B) Requests the Commission to review the rule pursuant to the one
hundred and eighty day review procedures set forth in section
5a(a)(12)(A) of the Act.


[[Page 66246]]


    Issued in Washington, DC, on December 10, 1996, by the
Commission.
Jean A. Webb,
Secretary of the Commission.
[FR Doc. 96-31836 Filed 12-16-96; 8:45 am]
BILLING CODE 6351-01-P
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