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[Federal Register: December 15, 2005 (Volume 70, Number 240)]
[Proposed Rules]
[Page 74246-74259]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15de05-18]

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COMMODITY FUTURES TRADING COMMISSION

17 CFR Parts 15, 16, 17, 18, 19 and 21

RIN 3038-AC22


Market and Large Trader Reporting

AGENCY: Commodity Futures Trading Commission.

ACTION: Proposed rules.

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SUMMARY: The Commodity Futures Trading Commission (Commission or CFTC)
is proposing several amendments to its market and large trader
reporting rules. First, the Commission is proposing to establish a new
reporting level for futures and option contracts based on 3-Year U.S.
Treasury Notes. Second, the Commission is proposing to clarify the
application of the reporting rules to registered derivatives
transaction execution facilities (DTEFs). Third, the Commission is
proposing to require designated contract markets to publicly
disseminate integrated volume data that separately identifies the
volume generated from block trades. Fourth, the Commission is proposing
to adopt a reporting framework for contracts that are exclusively self-
cleared. Finally, the Commission is proposing a number of conforming,
clarifying, and technical amendments.

DATES: Comments must be received by February 13, 2006.

ADDRESSES: Comments should be sent to the Commodity Futures Trading
Commission, Three Lafayette Centre, 1155 21st Street, NW., Washington,
DC 20581, attention: Office of the Secretariat. Comments may be sent by
facsimile to 202.418.5521, or by e-mail to [email protected].
Reference should be made to the ``Market and Large Trader Reporting.''
Comments may also be submitted through the Federal eRulemaking Portal
at  href="http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://www.regulations.gov" shape="rect">http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://www.regulations.gov.


FOR FURTHER INFORMATION CONTACT: Gary Martinaitis, Associate Deputy
Director for Market Information, Market Surveillance Section (telephone
202.418.5209, e-mail [email protected]), or Bruce Fekrat, Special
Counsel, Office of the Director (telephone 202.418.5578, e-mail [email protected]), Division of Market Oversight, Commodity Futures

Trading Commission, Three Lafayette Centre, 1155 21st Street, NW.,
Washington, DC 20581.

SUPPLEMENTARY INFORMATION:

I. The Commission's Authority To Implement the Reporting Rules

    The market and large trader reporting rules (reporting rules) are
contained in parts 15 through 21 of the Commission's regulations.\1\
Together, the reporting rules are structured to ensure that the
Commission receives adequate information to carry out its market and
financial surveillance programs.\2\ The reporting rules are implemented
by the Commission partly pursuant to the authority of sections 4a,
4c(b), 4g, and 4i of the Commodity Exchange Act (CEA or Act).\3\
Section 4a of the Act permits the Commission to set, approve exchange-
set, and enforce speculative position limits.\4\ Section 4c(b) of the
Act gives the Commission plenary authority to regulate transactions
that involve commodity options.\5\ Section 4g of the Act imposes
reporting and recordkeeping obligations on registered entities, and
requires each registrant, whether a futures commission merchant (FCM),
introducing broker, floor broker, or floor trader, to file such reports
as the Commission may require on proprietary and customer positions
executed on any board of trade in the United States or elsewhere.\6\
Lastly, section 4i of the Act requires the filing of such reports as
the Commission may require when positions made or obtained on contract
markets or DTEFs equal or exceed Commission-set levels.\7\
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    \1\ 17 CFR parts 15 to 21.
    \2\ The market surveillance programs analyze market information
to detect and prevent market disruptions and enforce speculative
position limits. The financial surveillance programs combine market
information with financial data to assess the financial risks
presented by large customer positions to Commission registrants and
clearing organizations. See 69 FR 76392 (December 21, 2004).
    \3\ 7 U.S.C. 1 et seq.
    \4\ 7 U.S.C. 6a.
    \5\ 7 U.S.C. 6c(b).
    \6\ 7 U.S.C. 6g.
    \7\ 7 U.S.C. 6i. In addition, CEA section 8a(5) is an enabling
provision that grants to the Commission the authority to adopt rules
that in its judgment are reasonably necessary to accomplish any of
the purposes of the Act. 7 U.S.C. 12a(5). Pursuant to CEA section
3(b), the Act seeks to ensure the financial integrity of regulated
transactions and to prevent price manipulation and other disruptions
to market integrity. 7 U.S.C. 5(b). Collectively, these purposes
warrant the maintenance of an effective and vigorous system of
market and financial surveillance.
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II. Establishing a Reporting Level for Contracts Based on 3-Year U.S.
Treasury Notes

    The Commission's reporting rules, among other things, require FCMs,
foreign brokers, and clearing members (collectively reporting firms) to
report position and identifying information of the largest futures and
option traders to the Commission.\8\ Upon special call, traders must
separately provide position and identifying information to the
Commission.\9\ For both reporting firms and traders, the obligation to
report under parts 17 and 18 of the Commission's regulations is
triggered when traders hold or control reportable positions.\10\
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    \8\ See 17 CFR part 17.
    \9\ See 17 CFR part 18.
    \10\ A reportable position is any open contract position, as
further defined in the rules, that at the close of the market equals
or exceeds the quantity specified in Commission rule 15.03. See 17
CFR 15.00 and 15.03. The firms that carry accounts for traders
holding reportable positions are required to identify those accounts
on Form 102 and to report positions in the accounts to the
Commission. See 17 CFR 17.00 and 17.01. The individual traders who
hold or control reportable positions are required to report position
and identifying information to the Commission only in response to a
special call. See 17 CFR part 18.
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    Commission rule 15.03(b) delineates contract reporting levels for
commodity futures and option contracts.\11\ Rule 15.03(b) applies a
default reporting level of 25 contracts to contracts not specifically
itemized by the rule. Notably, rule 15.03 does not specify a reporting
level for futures or option contracts based on 3-Year U.S. Treasury
Notes (3-Year T-Notes).
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    \11\ The Commission typically calibrates contract reporting
levels to ensure that the aggregate of all positions reported to the
Commission represents approximately 70 to 90 percent of the open
interest in any given contract. The Commission periodically analyzes
contract terms, trading volume, open interest, the number and
position sizes of individual traders, and its surveillance
experience with specific contracts, to determine if coverage of open
interest is adequate for effective market surveillance. 69 FR 76392,
76393 (December 21, 2004).
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    At the present time, 3-Year T-Notes are listed solely by the U.S.
Futures Exchange, LLC (Eurex US). On January 26, 2005, the Division of
Market Oversight (staff) issued no-action relief to Eurex US, FCMs,
foreign brokers, clearing members, and traders that complied with all
regulatory obligations arising from a contract reporting level of 750
contracts instead of the otherwise applicable default reporting level
of 25 contracts.\12\ The staff based its grant of relief primarily on
the conclusion that historical trading in 2-Year T-Notes served as
precedent for trading in 3-Year

[[Page 74247]]

T-Notes.\13\ Based upon the staff's surveillance experience with 2-Year
T-Notes, the liquidity of the securities underlying treasury futures
and option contracts, and the securities available for delivery against
3-Year T-Notes,\14\ the Commission is herein proposing to adopt a 3-
Year T-Notes reporting level of 750 contracts.
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    \12\ CFTC Staff Letter 05-03 Comm. Fut. L. Rep. (CCH) ] 30,024
(January 26, 2005).
    \13\ Id. The contract reporting level for 2-Year T-Notes is
currently 1,000 contracts. 17 CFR 15.03.
    \14\ The deliverable supply for the March 2005 3-Year T-Notes
had a value of approximately $95 billion.
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III. Derivatives Transaction Execution Facilities

A. The Commission's Authority To Subject DTEFs to the Reporting Rules

    The CEA, as amended by the Commodity Futures Modernization Act of
2000 (CFMA),\15\ gives the Commission the statutory authority to
subject DTEFs and transactions on DTEFs to the reporting rules.\16\
First, as noted above, section 4c(b) of the Act, regardless of the
venue of trading, gives the Commission plenary authority to regulate
transactions that involve commodity options. Second, sections 4a and 4i
of the Act explicitly reference transactions executed on or subject to
the rules of DTEFs. Finally, section 4g of the Act imposes reporting
and recordkeeping obligations on registered entities and certain
Commission registrants trading on registered entities and boards of
trade. A registered entity is defined by CEA section 1a(29) to include
DTEFs.\17\ A board of trade is defined by section 1a(2) of the Act to
include ``any organized exchange or other trading facility.'' \18\
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    \15\ CFMA, Appendix E of Pub. L. 106-554, 114 Stat. 2763.
    \16\ Although the Commission has received indications of
interest from potential DTEF applicants, no board of trade has
registered with the Commission as a DTEF, and there are no presently
pending applications for such registration.
    \17\ 7 U.S.C. 1a(29).
    \18\ 7 U.S.C. 1a(2).
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B. Proposed Rules

1. Current Commission Rule 37.2
    The current language of Commission rule 37.2, which is designed to
exempt DTEFs from the bulk of Commission regulations otherwise
pertinent to trading facilities, reserves the applicability of parts 15
to 21 to DTEFs, but does so through incorporation by reference and
without substantial clarity.\19\ Specifically, rule 37.2 provides that
DTEFs are not, as applicable to the market, exempt from parts 15 to 21,
and further provides that parts 15 to 21, when applicable to DTEFs,
shall be viewed as though they were set forth in rule 37.2 and included
specific reference to DTEFs.
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    \19\ 17 CFR 37.2.
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    As part of the Commission's continuing effort to better implement
the amendments introduced to the Act by the CFMA, the Commission is now
proposing to define DTEFs directly into rules 15.00 to 15.04 and parts
16 through 21 of the Commission's regulations. The proposed amendments
are not in any way designed to alter the existing reporting obligations
of DTEFs or their market participants.
2. The Replacement of Terms
    The current provisions of parts 15 to 21, with the exception of
Commission rule 15.05, focus only on contract markets.\20\ The
Commission is proposing to define the new term reporting market in
Commission rule 15.00(m) to include DTEFs in addition to designated
contract markets. In order to directly effectuate the applicability of
rules 15.00 to 15.04 and parts 16 through 21 of the Commission's
regulations to DTEFs, the Commission is next proposing to replace
certain references to contract markets in those rules and parts with
references to reporting markets.\21\
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    \20\ Commission rule 15.05 relates to the appointment of an
agent for service of process for foreign persons. 17 CFR 15.05. Rule
15.05 is self-effectuating and permits the Commission to
expeditiously communicate with foreign persons and entities that
trade on the domestic commodity exchanges. See 45 FR 30426 (May 8,
1980). The rule was amended in 2001 to explicitly apply to
designated contract markets and registered derivatives transaction
execution facilities. See 66 FR 42256 (August 10, 2001).
    \21\ Specifically, the Commission is proposing to replace the
term contract market with the term reporting market in the rule
15.00 definition of a reportable position, in rules 15.01(a), 16.06,
18.05, and 21.01, and throughout the provisions of rules 16.00,
16.01, 16.07, 17.00, 17.04, 18.00, 21.02, and 21.03. In addition,
the Commission is proposing to replace the term contract market with
the term reporting market in the heading of part 16, part 17, and
the heading of sections 21.02 and 21.03. Other proposed amendments
reconciling existing rules with the proposed replacement of terms
are discussed in Section VI of this notice of rulemaking.
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3. Operational Flexibility and the Definition of Reporting Market
    In comparison with designated contract markets, DTEFs are required
to comply with a less comprehensive set of Core Principles.\22\ Thus,
in certain respects, DTEFs have greater operational flexibility than
designated contract markets. For example, pursuant to section 5(d)(11)
of the Act, transactions on designated contract markets, with the
exception of security futures products, must be cleared through
Commission registered derivatives clearing organizations.\23\ In
contrast, pursuant to section 5a(c)(4) of the Act, transactions on
DTEFs may be cleared through clearing organizations other than
Commission registered clearing organizations.\24\
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    \22\ Compare 7 U.S.C. 7(d) (Core Principles for designated
contract markets) with 7a(d) (Core Principles for DTEFs).
    \23\ See 7 U.S.C. 7(d)(11) and guidance on Core Principle 11 in
Appendix B to 17 CFR part 38.
    \24\ See 7 U.S.C. 7a(c)(4) and guidance on Registration
Criterion 4 in Appendix A to 17 CFR part 37.
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    Despite this potential for greater operational flexibility, DTEFs
must comply with statutory safeguards that restrict the contracts that
they may list and the manner in which certain market participants may
exercise trading privileges.\25\ For example, a DTEF may permit trading
access to all eligible contract participants, as that term is defined
by section 1a(13) of the Act,\26\ and all retail traders that trade
through FCMs having at least $20 million in net capital, but only in
futures and option contracts that are based on commodities that have no
cash market, are security futures products, or are highly unlikely to
be susceptible to the threat of manipulation.\27\ As an additional
example, a DTEF may list any futures or option contract on any
underlying commodity, except one based on the agricultural commodities
enumerated in section 1a(4) of the Act,\28\ but only if trading access
is limited to eligible commercial entities, as that term is defined by
section 1a(11) of the Act.\29\
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    \25\ 7 See U.S.C. 7a(b).
    \26\ 7 U.S.C. 1a(13).
    \27\ See 7 U.S.C. 7a(b). Pursuant to section 5a(b)(2)(E) of the
Act, the Commission may also make contract suitability
determinations on an individualized basis. 7 U.S.C. 7a(b)(2)(E).
    \28\ 7 U.S.C. 1a(4).
    \29\ 7 U.S.C. 1a(11) and 7a(b)(2)(F).
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    As proposed, rule 15.00(m) would define a reporting market to mean
a designated contract market and, unless determined otherwise by the
Commission with respect to the facility or a specific contract listed
by the facility, a DTEF. The determination requirement in the proposed
definition of reporting market is designed to reconcile the
Commission's responsibility to adequately surveil transactions on DTEFs
with the Congressional directive to permit DTEFs to operate, in certain
respects, more flexibly than designated contract markets. Accordingly,
in determining that a DTEF is not a reporting market, and thereby
rendering some or all of the provisions of the reporting rules
inapplicable to the facility or a specific contract listed by the
facility, the Commission would consider on a case by case basis,
several non-exhaustive

[[Page 74248]]

factors.\30\ These factors include a DTEF's surveillance capabilities,
the characteristics of commodities underlying specific DTEF
transactions, the surveillance history of trading with precedential
value, potential defects in the pricing of DTEF transactions, the value
of market data to market participants, the value of market data to
commercial entities, and the impact that market disruptions may have on
Commission registrants and other registered entities.
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    \30\ When the Commission adopted rule 37.2 in August of 2001, it
specifically determined to defer the extension of routine large
trader reporting requirements to DTEF transactions involving
Treasury instruments. See 66 FR 42256, 42261 (August 10, 2001). When
the Commission adopted rule 41.25 in November of 2001, it
specifically determined to require part 16 reports from all DTEFs
listing security futures products. See 66 FR 55078 (November 1,
2001). Under the proposed rules, the Commission would, without
exception, deem such DTEFs to be part 16 reporting markets for
security futures products.
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4. Market Data
    Commission rule 16.01 requires that contract markets submit
directly to the Commission data on trading volume, open interest,
futures delivery notices, exchanges of futures, option deltas, prices,
and critical dates on a daily basis.\31\ As with the other provisions
of the reporting rules, and with the exception of the public
dissemination requirement of rule 16.01 that is discussed below, the
proposed amendments to rule 16.01 would require DTEFs to submit market
data to the Commission unless determined otherwise by the Commission.
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    \31\ 17 CFR 16.01.
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    As mentioned above, in addition to submitting data directly to the
Commission, rule 16.01 requires contract markets to publicly
disseminate data on trading volume, open interest, futures delivery
notices, exchanges of futures, option deltas, and prices on a daily
basis. Unlike designated contract markets, however, DTEFs are
statutorily obligated to publicly disseminate information on settlement
prices, volume, open interest, and opening and closing ranges on a
daily basis when the Commission determines that a DTEF contract
performs a significant price discovery function for transactions in the
cash market for the commodity underlying the contract.\32\
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    \32\ Compare 7 U.S.C. 7(d)(8) (designated contract market Core
Principle 8), with 7 U.S.C. 7a(d)(5) (DTEF Core Principle 5).
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    The language triggering the public dissemination requirement for
DTEFs is similar to the language triggering the same requirement for
exempt boards of trade \33\ and exempt commercial markets.\34\ The
Commission therefore believes that DTEFs should not of necessity be
subject to the same public dissemination requirement as designated
contract markets.\35\ The proposed amendments to rule 16.01 would
require both designated contract markets and DTEFs to record and submit
market data to the Commission, but would only obligate designated
contract markets to comply with the rule's public dissemination
requirement. As a result, the public dissemination requirement for DTEF
contracts would be implemented under the rubric of DTEF Core Principle
5, including any Commission regulation adopted thereunder and
subsequent Commission statements providing additional guidance and
establishing acceptable practices for the manner of compliance with
that core principle.\36\ Proposed paragraph (e) of Commission rule
16.01 emphasizes this result.
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    \33\ 7 U.S.C. 7a-3(d).
    \34\ 7 U.S.C. 2(h)(4)(D). Aside from the requirement to comply
with minimal notice and reporting obligations, exempt boards of
trade and exempt commercial markets are generally not subject to
Commission oversight. See 17 CFR part 36.
    \35\ The Commission recently proposed to apply to DTEFs and
exempt boards of trade the same standard that currently applies to
exempt commercial markets for determining whether a contract
performs a significant price discovery function for transactions in
the cash market for an underlying commodity. 70 FR 39672, 39674
(July 11, 2005). Specifically, in making such a determination with
respect to DTEFs and exempt boards of trades, the Commission has
proposed to consider (1) whether cash market bids, offers or
transactions are directly based on, or quoted at a differential to,
the prices generated on the market on a more than occasional basis;
or (2) whether market prices are routinely disseminated in a widely
distributed industry publication and are routinely consulted by
industry participants in pricing cash market transactions. Id.
    \36\ See Commission rule 37.6(d)(4) and guidance on DTEF Core
Principle 5 in Appendix B to part 37 of the Commission's
regulations. 17 CFR 37.6(d)(4) and Appendix B to 17 CFR part 37.
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IV. Block Trade Volume and the Publication of Market Data

    On December 21, 2000, the President signed into law the CFMA,
extensively revising the Act, and facilitating the availability of
transactions, such as block trades, that are subject to the rules of an
exchange, but lawfully negotiated and executed away from the
centralized marketplace.\37\ Block trades are typically subject to
exchange rules that establish minimum size thresholds, participant
eligibility requirements, pricing limits, and trade reporting
parameters.\38\ It is generally believed that market participants
execute large orders through block trades in order to achieve greater
price and execution certainty than otherwise attainable in the
centralized marketplace.
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    \37\ For example, the CFMA specifically permitted designated
contract markets to establish trading rules that authorize the
exchange of futures for swaps, or allow a futures commission
merchant, acting as principal or agent, to enter into or confirm the
execution of a contract for the purchase or sale of a commodity for
future delivery if the contract is reported, recorded, or cleared in
accordance with the rules of a designated contract market or
derivatives clearing organization. See 7 U.S.C. 7(b)(3).
    \38\ See 69 FR 39880, 39882 (July 1, 2004).
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    In order to recognize the growing importance and use of off-
centralized market transactions, the Commission adopted final rules in
December of 2004 that required designated contract markets to
separately identify, report, and publish the volume generated from
trades involving the exchange of futures for a commodity or for a
derivatives position.\39\ To more comprehensively recognize the growing
use and importance of off-centralized market transactions, the
Commission is now similarly proposing to amend rule 16.01 to require
designated contract markets to record and make readily available to the
news media and the general public, as part of the total mix of market
data publicly disseminated pursuant to rule 16.01, the volume generated
from trades that are block trades.
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    \39\ 69 FR 76392, 76394 (December 21, 2004).
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    Commission rule 1.38(b) currently requires designated contract
markets to separately identify and mark all off-centralized market
transactions, including block trades.\40\ In addition, several
designated contract markets disseminate public reports that separately
account for the volume generated from block trades.\41\ The proposed
amendments to rule 16.01 seek to codify this industry practice, and
require all designated contract markets to record the volume generated
from block trades for each contract, and make that information readily
available to the news media and the general public as a part of the
total mix of market data publicly disseminated on a daily basis.\42\
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    \40\ 17 CFR 1.38(b).
    \41\ For example, the Chicago Board of Trade publicly
disseminates daily block trade volume data for eligible contracts in
a category of volume termed Wholesale Trades. See CBOT Delayed
Charts, available at  href="http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://cbt.com/cbot/pub/page/0" shape="rect">http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://cbt.com/cbot/pub/page/0
,3181,801,00.html. The Chicago Mercantile Exchange also

disseminates daily volume data through its Web site that separately
accounts for the volume generated from block trades.
    \42\ As previously discussed, DTEFs, unlike designated contract
markets, are statutorily obligated to publicly disseminate volume
data on a daily basis when the Commission determines that a DTEF
contract performs a significant price discovery function for
transactions in the cash market for the commodity underlying the
contract. Under the proposed rules, the public dissemination
requirement for DTEF contracts, including the reporting of
particularized block trade volume data, would be implemented under
the rubric of DTEF Core Principle 5.

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[[Page 74249]]

    Given the current stage of technological development, the
Commission believes that designated contract markets must generally
satisfy their obligation to make market data readily available to the
news media and the general public through the Internet and on Web pages
that are conveniently accessed and easily navigable. In order to
further emphasize the obligation to disseminate market data in a manner
that is both useful and accessible, proposed rule 16.01(e) would
introduce two additional requirements. First, proposed rule 16.01(e)
would specifically require the integrated publication of volume data.
The Commission believes that the integrated publication of volume data,
along with the public dissemination of block trade volume data, will
enhance the ability of market participants and the general public to
effectively analyze the determinants of market prices, the depth of
market liquidity, and the utility of contracts as hedging and pricing
tools. Second, proposed rule 16.01(e) would require designated contract
markets to present market data in a format that would readily enable
members of the news media and the general public to consider such data.
This presentation requirement would ensure that designated contract
markets are fully aware of their present obligation to publicly
disseminate market data in a user friendly format.
    With regard to the publication of volume data, the Commission notes
that the proposed amendments to rule 16.01 would require the
publication of data on the total volume of trading, the volume
generated by exchanges of futures, and the volume generated from block
trades, for each contract. The Commission herein solicits comment on
whether using a catch-all category to identify trading volume generated
from all off-centralized market trades that are not exchanges of
futures is preferable to identifying the volume generated from specific
off-centralized market transactions such as block trades. The
Commission also solicits comment on whether, in the alternative, any
further refinement of volume data, beyond the proposed breakdown into
the categories listed above, is desirable, or necessary, for the proper
analysis of market prices and liquidity.
    In addition, as proposed, the amendments to rule 16.01 would
require designated contract markets to publicly disseminate separate
block trade volume data, but would not require the submission of such
data to the Commission. The Commission has assessed the cost to the
Commission of integrating separate block trade volume data into its
information systems, and has determined that cost to be considerable.
The Commission will therefore independently derive or compile such data
as necessary to fulfill its market and financial surveillance
responsibilities.

V. Self-Cleared Contracts

A. Market Structure

    In February of 2004, the Commission designated HedgeStreet, Inc.
(HedgeStreet or Exchange) as a contract market pursuant to sections 5
and 6(a) of the Act.\43\ In its application for designation,
HedgeStreet presented a market structure that was substantially
different from other active designated contract markets. For example,
the market structure presented by HedgeStreet did not permit
intermediaries to handle the orders or funds of traders in connection
with the purchase or sale of listed contracts.\44\ Consequently, the
Exchange sought to directly hold, at all times, sufficient trader funds
to cover the maximum possible loss that could be sustained by market
participants.\45\ The Exchange also offered products with appeal to
members of the general public. For example, HedgeStreet sought to
offer, and currently does offer, European style binary options on
various commodities that pay a fixed $10.00 if in the money upon
expiration.\46\
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    \43\ 7 U.S.C. 7 and 8(a); Order of Designation as a Contract
Market (February 18, 2004).
    \44\ See Order of Registration as a Derivatives Clearing
Organization (February 18, 2004); see also Staff Designation
Memorandum from the Division of Market Oversight (Staff Memorandum)
at 47 (February 10, 2004).
    \45\ Id.
    \46\ Staff Memorandum at 29. In September of 2005, HedgeStreet
submitted to the Commission new and amended rules to support a
request to offer larger size contracts that could be intermediated
and cleared by members of The Clearing Corporation. Letter and
related submissions from Stephanie Ford, Vice-President,
HedgeStreet, Inc. to Jean A. Webb, Secretary of the Commission
(September 6, 2005)(on file with the Commission), available at
 href="http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://www.cftc.gov/dea/deapendingindustryfilings.htm" shape="rect">http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://www.cftc.gov/dea/deapendingindustryfilings.htm.

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    The market structure initially established by HedgeStreet does not,
in certain respects, comport well with the obligations imposed by the
Commission's reporting rules. Presently, the reporting rules are
designed to collect information from heavily intermediated markets that
permit un-intermediated trading and clearing access only to well
capitalized members.\47\ In anticipation of the adoption of comparable
market structures by other exchanges, the Commission is herein
proposing an alternative reporting approach that would apply to markets
that do not permit intermediaries to handle the funds of traders in
connection with the sale or purchase of specific contracts. For ease of
reference, the term exclusively self-cleared contracts is used herein,
and defined by proposed Commission rule 15.00(f), to refer to such
contracts.\48\
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    \47\ See 17 CFR parts 16 to 18.
    \48\ The term exclusively self-cleared contract is devised for
use in parts 15 through 21 only and is not meant to give meaning to
the terms intermediary or intermediation (or any variant of those
terms) in any way as used by the Commission, in the Act, or in
Commission regulations promulgated under the Act.
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B. Proposed Rules

1. Background on Commission Rules 17.00 and 17.01
    The Commission employs a comprehensive reporting system to enforce
speculative position limits and assess the activities and potential
market power of traders. Pursuant to Commission rule 17.00, FCMs,
foreign brokers, and clearing members file daily reports with the
Commission particularizing futures and option positions when such
positions are at or above the contract reporting levels delineated in
rule 15.03.\49\ If, at the close of the market on any business day, an
FCM, foreign broker, or clearing member carries a position at or above
the Commission's reporting level in any single futures month or option
expiration, the firm reports the entire position on the same exchange
in all futures and option expiration months in that commodity,
regardless of size.\50\ Since traders frequently hold positions through
multiple brokers and have financial interests in multiple accounts, the
Commission, pursuant to rule 17.01, routinely collects information that
enables its surveillance staff to aggregate related accounts.\51\
Specifically, FCMs, foreign brokers, and clearing members file Forms
102 to identify the name, address, and occupation of the person or
persons who own each new account that acquires a reportable
position.\52\
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    \49\ See 17 CFR 15.00, 15.03 and 17.00.
    \50\ 17 CFR 17.00(a).
    \51\ 17 CFR 17.01.
    \52\ See id.
---------------------------------------------------------------------------

2. Exclusively Self-cleared Contracts
    An FCM, by definition, is a person that accepts the property of
customers to ``margin, guarantee, or secure'' customer trades.\53\
Likewise, a foreign broker is a person located outside the United
States or its territories ``who carries an account'' for any other
person.\54\ With respect to transactions in exclusively

[[Page 74250]]

self-cleared contracts, there are no intermediaries who handle customer
funds, and therefore, there are no FCMs or foreign brokers with
reporting obligations under part 17 of the Commission's regulations.
---------------------------------------------------------------------------

    \53\ 7 U.S.C. 1a(20).
    \54\ 17 CFR 15.00(a)(1).
---------------------------------------------------------------------------

    In contrast, the term clearing member is defined by Commission rule
1.3(c) to include ``any person who is a member of, or enjoys the
privileges of clearing trades in his own name through, the clearing
organization of a contract market.'' \55\ As such, all traders of
exclusively self-cleared contracts squarely fit within the regulatory
definition of a clearing member, and thereby have reporting obligations
under part 17 of the Commission's regulations.
---------------------------------------------------------------------------

    \55\ 17 CFR 1.3(h). The Commission herein is proposing to amend
the regulatory definition of a clearing member in rule 1.3 to
explicitly extend to members of DTEFs.
---------------------------------------------------------------------------

    Pursuant to rule 17.00, clearing members, including all traders who
are clearing members, must file daily reports with the Commission
particularizing futures and option positions when such positions are at
or above the contract reporting levels set by rule 15.03. Pursuant to
rule 17.01, clearing members, including all traders who are clearing
members, must file Forms 102 with the Commission to identify the name,
address, and occupation of the person or persons who own each new
account that acquires a reportable position. With respect to
exclusively self-cleared contracts, all traders, by virtue of their
status as clearing members, have to submit large trader position and
identifying data to the Commission in compliance with rules 17.00 and
17.01 on a daily basis.
    The reporting rules, however, are not designed to impose routine
position and identifying reporting obligations on traders.\56\ In 1981,
the Commission explicitly disposed of routine trader reporting
obligations in order to ``substantially decrease certain paperwork
burdens on large traders and on the Commission itself.''\57\ Instead,
the Commission looked to intermediaries and well capitalized clearing
members to ``facilitate the Commission's market surveillance efforts''
in the absence of routine trader reporting.\58\ Since 1981, the design
of the reporting rules has been to place the burden of reporting
particularized position and identifying data on a routine basis in the
first instance on market intermediaries and well capitalized persons
that clear customer or proprietary positions.\59\
---------------------------------------------------------------------------

    \56\ See 17 CFR parts 16 to 18.
    \57\ 46 FR 59960 (December 8, 1981).
    \58\ Id.
    \59\ See id.
---------------------------------------------------------------------------

    In accordance with the system of reporting fashioned by the
reporting rules, the Commission believes that routine reporting
obligations should not be placed on persons trading in exclusively
self-cleared contracts. Intermediaries and clearing members typically
are Commission registrants with vigorous internal controls, substantial
resources, and extensive experience with regulatory compliance. With
respect to exclusively self-cleared contracts, and in particular with
respect to retail oriented exclusively self-cleared contracts, traders
in general would not have the resources or regulatory experience to
comply with large trader reporting obligations as a matter of routine.
    In order to not place any daily reporting burden on traders of
exclusively self-cleared contracts, the Commission is herein proposing
rules that would effectively place the exchange listing exclusively
self-cleared contracts in the regulatory position of its clearing
members with respect to compliance with part 17 of the Commission's
regulations.\60\ As discussed above, all traders in exclusively self-
cleared contracts are effectively clearing members. Under the proposed
rules, reporting markets, a term which includes designated contract
markets and DTEFs, with respect to exclusively self-cleared contracts,
would be obligated to submit reportable position data under rule 17.00,
and reportable identifying data under rule 17.01, on behalf of all
clearing members.\61\
---------------------------------------------------------------------------

    \60\ The Commission, through an order, has employed this
approach for HedgeStreet. See Order of Designation as a Contract
Market, paragraph 5 (February 18, 2004).
    \61\ The proposed reporting scheme for exclusively self-cleared
contracts is narrowly tailored to be contract specific. In other
words, a reporting market may list both exclusively self-cleared and
other contracts. The alternative reporting approach, however, would
apply only to exclusively self-cleared contracts.
---------------------------------------------------------------------------

    The Commission believes that this is a desirable result since
reporting markets, by virtue of their regulated status, substantial
resources, systems of regulatory compliance, and lines of communication
with the Commission are in better position to routinely submit position
and identifying data to the Commission.\62\ As proposed by rules
17.00(i) and 17.01(h), reporting markets listing exclusively self-
cleared contracts would be required, unless determined otherwise by the
Commission, to provide the data required by rule 17.00(a) through (h)
and 17.01(a) through (g) to the Commission on behalf of all traders of
these contracts. Traders, nevertheless, would still be required to
submit position and identifying data upon special call under part 18 of
the Commission's regulations.
---------------------------------------------------------------------------

    \62\ The Commission may, at some future date, consider amending
the reporting obligations of clearing members with respect to
contracts with low notional values that are not exclusively self-
cleared. The Commission would consider amending these reporting
obligations when retail market participants that self-clear are
responsible for a substantial proportion of a contract's trading
volume.
---------------------------------------------------------------------------

3. Clearing Member Reports
    Pursuant to Commission rule 16.00, exchanges must submit
confidential information to the Commission on the aggregate positions
and trading activity of each clearing member. The exchanges, on a daily
basis, report each clearing member's open long and short positions,
purchases and sales, exchanges of futures, and futures delivery
notices.\63\ The data is reported separately by proprietary and
customer accounts by futures month and, for options, by puts and calls
by expiration date and strike price.\64\
---------------------------------------------------------------------------

    \63\ 17 CFR 16.00(a).
    \64\ Id.
---------------------------------------------------------------------------

    As proposed, all traders holding positions in exclusively self-
cleared contracts on reporting markets would squarely fit within the
regulatory definition of a clearing member. Hence, reporting markets
listing such contracts would be required by rule 16.00 to submit
position data for every single trader on a daily basis, regardless of
the position size of a trader. The Commission believes that the
submission of voluminous disaggregated clearing member data pursuant to
rule 16.00(a), with respect to exclusively self-cleared contracts,
could place an undue burden on reporting markets, and would not
generally further the Commission's market or financial surveillance
efforts.
    The Commission's staff uses clearing member data submitted by the
exchanges to identify large cleared positions, to audit large trader
reports filed by intermediaries and clearing members, and to identify
account aggregation issues. Under the proposed alternative reporting
scheme, clearing member reports for exclusively self-cleared contracts
typically would not serve an audit function since clearing member and
large trader reports would be submitted by the same person.
Furthermore, under the proposed alternative reporting approach,
reporting markets would be submitting disaggregated large trader
reports in the

[[Page 74251]]

place of traders pursuant to Commission rules 17.00 and 17.01. Clearing
member reports would therefore be generally unnecessary for the purpose
of identifying large cleared positions. Lastly, clearing member reports
would not normally assist in the identification of account aggregation
issues. For exclusively self-cleared contracts, account aggregation
issues may be analyzed by directly issuing appropriately worded special
calls to traders for further position and identifying data pursuant to
part 18 of the Commission's regulations. Based upon the foregoing
reasons, proposed rule 16.00(c) provides that no clearing member
reports need be submitted to the Commission for exclusively self-
cleared contracts, unless the Commission determines otherwise.

VI. Conforming, Clarifying and Technical Amendments

    The Commission has identified a number of other provisions and sets
of provisions that should be revised to reconcile them with the
substantive rules proposed herein, to update and better organize the
layout of the reporting rules, or to correct certain non-substantive
errors. These proposed amendments are categorized below by their
respective parts.

A. Part 1 of the Commission's Regulations

    Commission rule 1.3(c) defines clearing member in terms of a member
of a contract market. Commission rule 1.3(d) defines a clearing
organization in terms of an entity associated with a contract market.
In conformity with the intent of this proposed rulemaking, the
Commission is proposing to amend rules 1.3(c) and 1.3(d) to make
specific reference to DTEFs.

B. Part 15 of the Commission's Regulations

    The Commission is proposing to further amend rule 15.00, the
definitional section for parts 15 through 21 of the Commission's
regulations, to present the definitions contained in that section
alphabetically. The Commission is proposing to enumerate the contract
reporting levels and categories delineated in rule 15.03, for certain
reporting levels and categories, in alphabetical order. The Commission
is proposing to amend paragraph (a) of rule 15.05 to clarify that the
provisions of that rule currently apply to all regulated transactions
executed on or subject to the rules of DTEFs.\65\ Since the thrust of
rule 15.05 relates to the appointment of an agent for service of
process on foreign brokers and foreign customers, the term foreign
broker in proposed rule 15.00(g) has been defined to explicitly extend
to transactions on DTEFs.
---------------------------------------------------------------------------

    \65\ See note 20, supra.
---------------------------------------------------------------------------

    Commission rule 15.01 provides a list of the persons that may be
required to report pursuant to parts 15 through 21 of the Commission's
regulations. Proposed paragraph (a) of rule 15.01 clarifies that both
designated contract markets, and when applicable DTEFs, are required to
provide reports to the Commission pursuant to part 16, and that
pursuant to this proposed rulemaking, reporting markets may be required
to provide reports under part 17 if they list exclusively self-cleared
contracts. Proposed paragraph (b) of rule 15.01 clarifies that part 17
applies to all clearing members and that part 21 may require reports
from introducing brokers and traders in addition to FCMs, clearing
members, and foreign brokers. Proposed paragraph (b) of rule 15.01 also
deletes the reference to part 20 since that part is reserved and
contains no operative provisions.

C. Part 16 of the Commission's Regulations

    The current heading for part 16 only references contract markets.
As proposed, the heading for part 16 would specifically refer to
reporting markets. Current rule 16.07(b) incorrectly references rule
16.00(d)(1) as a provision that gives the Commission the authority to
approve the form and manner of filing reports with the Commission. The
correct reference, as provided in proposed rule 16.07(b), is Commission
rule 16.01(d)(1). Paragraph (a) of current rule 16.01 refers to the
total quantity of futures exchanged for commodities or for derivatives
positions. Since exchanges of futures generate trading volume, proposed
rule 16.01(a)(5) now refers to the total volume of futures exchanged
for commodities or for derivatives positions instead of the total
quantity of such transactions.

D. Part 17 of the Commission's Regulations

    The Commission is proposing to conform the capitalization format of
rule 17.00(b)(2) and 17.00(g)(2)(iv) with the format used in the other
paragraphs of that rule, and to capitalize the word form when used to
refer to Form 102 throughout the provisions of rules 17.01, 17.02, and
17.03. Proposed rule 17.01(f) clarifies that Form 102 is alternatively
referred to as a report. Proposed rules 17.01(a), 17.01(b), and
17.01(d) provide the appropriate italicization format for each rule's
introductory phrase. The proposed heading to part 17 and proposed rule
17.02 reflect the possibility that under the alternative reporting
approach for exclusively self-cleared contracts, reporting markets may
be required to file reports with the Commission on behalf of their
clearing members. Proposed rule 17.01(a) also replaces the second
instance of the term identifier with the term designator. Lastly, the
Commission is proposing to amend the introductory text of rule 17.03 to
correctly refer to paragraph (d) of that section.

E. Part 19 of the Commission's Regulations

    As a result of the proposed alphabetization of rule 15.00, the
Commission is proposing to amend paragraph (a) of rule 19.00 to
correctly refer to the re-ordered sections defining the term reportable
position in rule 15.00. The proposed amendment to rule 19.00(b)
correctly refers to rule 19.01 instead of rule 19.10, which is
inoperative and reserved. Lastly, paragraph (a) of rule 19.01
capitalizes the word form when used to refer to Form 204.

F. Part 21 of the Commission's Regulations

    A proposed amendment to rule 21.01, which was last updated in 1983,
extends the rule's requirement that each FCM and introducing broker
file with the Commission upon special call the names and addresses of
all persons who exercise trading control over a customer's account in
commodity futures to all persons who also exercise trading control over
a customer's account in commodity options. A proposed amendment to
paragraph (d) of rule 21.03 replaces the phrase ``by telex or a
similarly expeditious means of communication'' with the phrase ``by e-
mail or a similarly expeditious means of communication''.

VII. Related Matters

A. Cost Benefit Analysis

    Section 15(a) of the Act requires the Commission to consider the
costs and benefits of its actions before issuing new regulations under
the Act. By its terms, section 15(a) does not require the Commission to
quantify the costs and benefits of new regulations or to determine
whether the benefits of the proposed regulations outweigh their costs.
Rather, section 15(a) requires the Commission to ``consider the cost
and benefits'' of the subject rules.

[[Page 74252]]

    Section 15(a) further specifies that the costs and benefits of the
proposed rules shall be evaluated in light of five broad areas of
market and public concern: (1) Protection of market participants and
the public; (2) efficiency, competitiveness, and financial integrity of
futures markets; (3) price discovery; (4) sound risk management
practices; and (5) other public interest considerations. The Commission
may, in its discretion, give greater weight to any one of the five
enumerated areas of concern and may, in its discretion, determine that,
notwithstanding its costs, a particular rule is necessary or
appropriate to protect the public interest or to effectuate any of the
provisions or to accomplish any of the purposes of the Act.
    Collectively, the proposed rules tend to reduce the aggregate
burden associated with the reporting obligations of parts 15 through 21
of the Commissions regulations. The proposed contract reporting level
of 750 contracts for 3-Year T-Notes, for example, is significantly
higher than the default reporting level that would be applicable in the
absence of Commission rulemaking or regulatory relief. Contract
reporting levels trigger reporting obligations that permit the
Commission to be aware of significant positions that may affect the
integrity and efficiency of the marketplace. The information collected
develops the Commission's understanding of the marketplace, and gives
the Commission the opportunity to prevent the occurrence, and contain
the effects, of financial disturbances. Based upon the staff's
surveillance experience with 2-Year T-Notes, the liquidity of the
securities underlying treasury futures and option contracts, and the
securities available for delivery against 3-Year T-Notes, the
Commission believes that a 3-Year T-Notes reporting level of 750
contracts will allow it to adequately protect market participants and
the integrity of the marketplace, while limiting the regulatory burden
of reporting.
    With respect to transactions executed on or subject to the rules of
DTEFs, the proposed rules merely clarify the existing reporting
obligations of exchanges, intermediaries, and traders and are not
intended to in any way alter their existing reporting obligations. The
current language of Commission rule 37.2 reserves the applicability of
parts 15 to 21 to DTEFs, but does so through incorporation by reference
and without clarity. As part of the Commission's continuing effort to
better implement the amendments introduced to the Act by the CFMA, the
Commission has proposed amendments that define DTEFs directly into
rules 15.00 to 15.04 and parts 16 through 21 without generally altering
the present reporting obligations of DTEFs or their market
participants. The Commission believes that the proposed amendments
serve the public's interest by enhancing regulatory clarity.
    The proposed amendments to rule 16.01 relating to block trades and
contract volume recognize the growing importance and use of off-
centralized market transactions in general, and block trades in
particular. The proposed rules require all reporting markets to record
the volume generated from block trades for each contract, and require
designated contract markets to make that information readily available
to the news media and the general public as a part of the total mix of
market data publicly disseminated on a daily basis. In order to
emphasize the obligation to disseminate market data in a manner that is
both useful and accessible, the proposed rules would also require
designated contract markets to publish integrated volume data, and
present all market data in a format that would readily enable members
of the news media and the general public to consider such data. The
Commission believes that the format requirement would ensure that
designated contract markets are fully aware of their present obligation
to publicly disseminate market data in a user friendly manner. In
addition, the integrated publication of volume data, along with the
public dissemination of block trade volume data, would benefit market
participants and the general public by facilitating their ability to
effectively analyze the key determinants of market prices and market
depth.
    Pursuant to paragraphs (a) and (b) of rule 16.01, designated
contract markets are presently required to publicly disseminate certain
market data, including the volume generated from trades involving the
exchange of futures for a commodity or for a derivatives position, on a
daily basis. Commission rule 1.38(b) also requires designated contract
markets to separately identify and mark all block trades. In addition,
several designated contract markets publicly disseminate integrated
volume data that separately accounts for contract volume generated from
block trades. In light of this, the cost of compliance with the
proposed amendments to rule 16.01 is likely to be minimal.
    Finally, the Commission has proposed rules that concern exclusively
self-cleared contracts. The proposed rules protect market participants
and strengthen the financial integrity of the futures marketplace by
shifting the reporting responsibilities of traders, who are also
clearing members, onto regulated markets that are able to comply with
routine reporting obligations. The reporting rules are presently
designed to collect information from heavily intermediated markets that
permit un-intermediated trading and clearing access only to well
capitalized members. Intermediaries and clearing members typically are
Commission registrants with vigorous internal controls, substantial
resources, and extensive experience with regulatory compliance. Traders
of exclusively self-cleared contracts, and in particular traders of
retail oriented exclusively self-cleared contracts, would not in
general have the resources or regulatory experience to comply with
large trader reporting obligations as a matter of routine. In the
absence of rulemaking or Commission relief, reporting obligations for
exclusively self-cleared contracts would be placed on individual
traders that do not have the ability to comply with those requirements.
The Commission's proposed rulemaking addresses this deficiency and
ensures that the Commission will receive the trading data it needs in a
timely manner to protect market participants, the public, and the
integrity of the futures marketplace.
    After considering these factors, the Commission has determined to
propose the revisions to parts 15, 16, 17, 18, 19, and 21 as set forth
below. The Commission specifically invites public comment on its
application of the criteria contained in section 15(a) of the Act for
consideration. Commenters are also invited to submit any quantifiable
data that they may have concerning the costs and benefits of the
proposed rule with their comment letters.

B. The Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq.,
requires that agencies consider the impact of their rules on small
businesses. The Commission has previously determined that exchanges,
futures commission merchants and large traders are not ``small
entities'' for the purposes of the RFA.\66\ The requirements related to
the proposed amendments fall mainly on exchanges and FCMs. Similarly,
foreign brokers and traders report only if carrying or holding large
positions. In addition, these proposed amendments, collectively, tend
to relieve regulatory burdens. Accordingly, the Chairman, on behalf of
the Commission, hereby

[[Page 74253]]

certifies, pursuant to 5 U.S.C. 605(b), that the actions proposed to be
taken herein will not have a significant economic impact on a
substantial number of small entities.
---------------------------------------------------------------------------

    \66\ 47 FR 18618 (April 30, 1982).
---------------------------------------------------------------------------

C. The Paperwork Reduction Act

    When publicizing proposed rules, the Paperwork Reduction Act (PRA)
\67\ imposes certain requirements on Federal agencies, including the
Commission, in connection with conducting or sponsoring any collection
of information as defined by the PRA. In compliance with the PRA, the
Commission through these proposed rules solicits comments to: (1)
Evaluate whether the proposed collection of information is necessary
for the proper performance of the functions of the agency, including
the validity of the methodology and assumptions used; (2) evaluate the
accuracy of the agency's estimate of the burden of the proposed
collection of information including the validity of the methodology and
assumptions used; (3) enhance the quality, utility, and clarity of the
information to be collected; and (4) minimize the burden of the
collection on those who are to respond, including through the use of
appropriate automated, electronic, mechanical, or other technological
collection techniques or other forms of information technology. The
Commission has submitted the proposed rules and its associated
information collection requirements to the Office of Management and
Budget (OMB). The proposed rules are a part of two approved collections
of information. The estimated burden associated with large trader
reporting obligations (OMB Control No. 3038-0009) is as follows:
---------------------------------------------------------------------------

    \67\ Public Law 104-13 (May 13, 1995).
---------------------------------------------------------------------------

    Average Burden Hour Per Response: .29.
    Number of Respondents: 2,946.
    Frequency of Response: Daily.
    The estimated burden associated with the reporting obligations of
the exchanges (OMB Control No. 3038-0012) is as follows:
    Average Burden Hour Per Response: .5.
    Number of Respondents: 12.
    Frequency of Response: Daily.
    Persons wishing to comment on the information which would be
required by these proposed rules should contact the Desk Officer, CFTC,
Office of Management and Budget, Room 10202, NEOB, Washington, DC
20503, 202.395.7340. Copies of the information collection submission to
OMB are available from the CFTC Clearance Officer, 1155 21st Street,
NW., Washington, DC 20581, 202.418.5160. Copies of the OMB-approved
information collection package associated with the rulemaking may be
obtained from the Desk Officer, Commodity Futures Trading Commission,
Office of Management and Budget, Room 10202, NEOB, Washington, DC
20503, 202.395.7340.

List of Subjects

17 CFR Part 15

    Brokers, Commodity futures, Reporting and recordkeeping
requirements.

17 CFR Part 16

    Commodity futures, Reporting and recordkeeping requirements.

17 CFR Part 17

    Commodity futures, Reporting and recordkeeping requirements.

17 CFR Part 18

    Commodity futures, Reporting and recordkeeping requirements.

17 CFR Part 19

    Brokers, Commodity futures, Reporting and recordkeeping
requirements.

17 CFR Part 21

    Brokers, Commodity futures, Reporting and recordkeeping
requirements.

    In consideration of the foregoing, and pursuant to the authority
contained in the Act, and, in particular, sections 4a, 4c, 4g, 4i, 5,
5a and 8a of the Act, the Commission hereby proposes to amend Chapter I
of Title 17 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, 5, 6, 6a, 6b, 6c, 6d, 6e, 6f, 6g, 6h,
6i, 6j, 6k, 6l, 6m, 6n, 6o, 6p, 7, 7a, 7b, 8, 9, 12, 12a, 12c, 13a,
13a-1, 16, 16a, 19, 21, 23, and 24, as amended by the Commodity
Futures Modernization Act of 2000, Appendix E of Pub. L. 106-554,
114 Stat. 2763 (2000).

    2. Revise paragraphs (c) and (d) of Sec.  1.3 to read as follows:


Sec.  1.3  Definitions.

* * * * *
    (c) Clearing member. This term means any person who is a member of,
or enjoys the privilege of clearing trades in his own name through, the
clearing organization of a designated contract market or registered
derivatives transaction execution facility.
    (d) Clearing organization. This term means the person or
organization which acts as a medium for clearing transactions in
commodities for future delivery or commodity option transactions, or
for effecting settlements of contracts for future delivery or commodity
option transactions, for and between members of any designated contract
market or registered derivatives transaction execution facility.
* * * * *

PART 15--REPORTS--GENERAL PROVISIONS

    3. The authority citation for part 15 continues to read as follows:

    Authority: 7 U.S.C. 2, 5, 6, 6a, 6c, 6f, 6g, 6i, 6k, 6m, 6n, 7,
7a, 9, 12a, 19 and 21, as amended by the Commodity Futures
Modernization Act of 2000, Appendix E of Pub. L. 106-554, 114 Stat.
2763 (2000); 5 U.S.C. 552 and 552(b).

    4. Revise Sec.  15.00 to read as follows:


Sec.  15.00  Definitions of terms used in parts 15 to 21 of this
chapter.

    As used in parts 15 to 21 of this chapter:
    (a) Cash or Spot, when used in connection with any commodity, means
the actual commodity as distinguished from a futures or option contract
in such commodity.
    (b) Compatible data processing media means data processing media
approved by the Commission or its designee. The Commission hereby
delegates, until the Commission orders otherwise, the authority to
approve data processing media for data submissions to the Executive
Director to be exercised by such Director or by such other employee or
employees of such Director as designated from time to time by the
Director. The Executive Director may submit to the Commission for its
consideration any matter which has been delegated in this paragraph.
Nothing in this paragraph prohibits the Commission, at its election,
from exercising the authority delegated in this paragraph.
    (c) Customer means ``customer'' (as defined in Sec.  1.3(k)) and
``option customer'' (as defined in Sec.  1.3(jj)).
    (d) Customer trading program means any system of trading offered,
sponsored, promoted, managed or in any other way supported by, or
affiliated with, a futures commission merchant, an introducing broker,
a commodity trading advisor, a commodity pool operator, or other
trader, or any of its officers, partners or employees, and which by
agreement, recommendations, advice or otherwise, directly or indirectly
controls trading

[[Page 74254]]

done and positions held by any other person. The term includes, but is
not limited to, arrangements where a program participant enters into an
expressed or implied agreement not obtained from other customers and
makes a minimum deposit in excess of that required of other customers
for the purpose of receiving specific advice or recommendations which
are not made available to other customers. The term includes any
program which is of the character of, or is commonly known to the trade
as, a managed account, guided account, discretionary account, commodity
pool or partnership account.
    (e) Discretionary account means a commodity futures or commodity
option trading account for which buying or selling orders can be placed
or originated, or for which transactions can be effected, under a
general authorization and without the specific consent of the customer,
whether the general authorization for such orders or transactions is
pursuant to a written agreement, power of attorney, or otherwise.
    (f) Exclusively self-cleared contract means a contract that in
connection with its purchase or sale intermediaries are not permitted
to handle customer funds.
    (g) Foreign broker means any person located outside the United
States or its territories that carries an account in commodity futures
or commodity options on any designated contract market or registered
derivatives transaction execution facility for any other person.
    (h) Foreign trader means any trader (as defined in paragraph (o) of
this section) who resides or is domiciled outside of the United States,
its territories or possessions.
    (i) Guided account program means any customer trading program which
limits trading to the purchase or sale of a particular contract for
future delivery of a commodity or a particular commodity option that is
advised or recommended to the participant in the program.
    (j) Managed Account Program means a customer trading program which
includes two or more discretionary accounts traded pursuant to a common
plan, advice or recommendations.
    (k) Open contracts means ``open contracts'' (as defined in Sec.
1.3(t)) and commodity option positions held by any person on or subject
to the rules of a designated contract market or registered derivatives
transaction execution facility which have not expired, been exercised,
or offset.
    (l) Reportable position means:
    (1) For reports specified in parts 17, 18 and Sec.  19.00(a)(2) and
(a)(3) of this chapter, any open contract position that at the close of
the market on any business day equals or exceeds the quantity specified
in Sec.  15.03 of this part in either:
    (i) Any one future of any commodity on any one reporting market,
excluding future contracts against which notices of delivery have been
stopped by a trader or issued by the clearing organization of a
reporting market; or
    (ii) Long or short put or call options that exercise into the same
future of any commodity, or long or short put or call options for
options on physicals that have identical expirations and exercise into
the same physical, on any one reporting market.
    (2) For the purposes of reports specified in Sec.  19.00(a)(1) of
this chapter, any combined futures and futures-equivalent option open
contract position as defined in part 150 of this chapter in any one
month or in all months combined, either net long or net short in any
commodity on any one reporting market, excluding futures positions
against which notices of delivery have been stopped by a trader or
issued by the clearing organization of a reporting market, which at the
close of the market on the last business day of the week exceeds the
net quantity limit in spot, single or in all-months fixed in Sec.
150.2 of this chapter for the particular commodity and reporting
market.
    (m) Reporting market means a designated contract market and, unless
determined otherwise by the Commission with respect to the facility or
a specific contract listed by the facility, a registered derivatives
transaction execution facility.
    (n) Special account means any commodity futures or option account
in which there is a reportable position.
    (o) Trader means a person who, for his own account or for an
account which he controls, makes transactions in commodity futures or
options, or has such transactions made.
    5. Revise paragraphs (a) and (b) in Sec.  15.01 to read as follows:


Sec.  15.01  Persons required to report.

* * * * *
    (a) Reporting markets--as specified in part 16, 17, and 21 of this
chapter.
    (b) Futures commission merchants, clearing members, foreign
brokers, introducing brokers, and traders--as specified in parts 17 and
21 of this chapter.
* * * * *
    6. Revise paragraph (b) in Sec.  15.03 to read as follows:


Sec.  15.03  Reporting levels.

* * * * *
    (b) The quantities for the purpose of reports filed under parts 17
and 18 of this chapter are as follows:

------------------------------------------------------------------------
                                                               Number of
                          Commodity                            contracts
------------------------------------------------------------------------
Agricultural:
  Cocoa......................................................        100
  Coffee.....................................................         50
  Corn.......................................................        250
  Cotton.....................................................        100
  Feeder Cattle..............................................         50
  Frozen Concentrated Orange Juice...........................         50
  Lean Hogs..................................................        100
  Live Cattle................................................        100
  Milk, Class III............................................         50
  Oats.......................................................         60
  Rough Rice.................................................         50
  Soybeans...................................................        150
  Soybean Meal...............................................        200
  Soybean Oil................................................        200
  Sugar No. 11...............................................        500
  Sugar No. 14...............................................        100
  Wheat......................................................        150
Broad-Based Security Indexes:
  Municipal Bond Index.......................................        300
  S&P 500 Stock Price Index..................................      1,000
  Other Broad-Based Securities Indexes.......................        200
Financial:
  30-Day Fed Funds...........................................        600
  3-Month (13-Week) U.S. Treasury Bills......................        150
  2-Year U.S. Treasury Notes.................................      1,000
  3-Year U.S. Treasury Notes.................................        750
  5-Year U.S. Treasury Notes.................................      2,000
  10-Year U.S. Treasury Notes................................      2,000
  30-Year U.S. Treasury Bonds................................      1,500
  1-Month LIBOR Rates........................................        600
  3-Month Eurodollar Time Deposit Rates......................      3,000
  3-Month Euroyen............................................        100
  2-Year German Federal Government Debt......................        500
  5-Year German Federal Government Debt......................        800
  10-Year German Federal Government Debt.....................      1,000
  Goldman Sachs Commodity Index..............................        100
  Major Foreign Currencies...................................        400
  Other Foreign Currencies...................................        100
  U.S. Dollar Index..........................................         50
Natural Resources:
  Copper.....................................................        100
  Crude Oil, Sweet...........................................        350
  Crude Oil, Sweet--No. 2 Heating Oil Crack Spread...........        250
  Crude Oil, Sweet--Unleaded Gasoline Crack Spread...........        150
  Gold.......................................................        200
  Natural Gas................................................        200
  No. 2 Heating Oil..........................................        250
  Platinum...................................................         50
  Silver Bullion.............................................        150
  Unleaded Gasoline..........................................        150
  Unleaded Gasoline--No. 2 Heating Oil Spread Swap...........        150
Security Futures Products:
  Individual Equity Security.................................      1,000
  Narrow-Based Security Index................................        200

[[Page 74255]]


Hedge Street Products........................................        \1\
                                                                 125,000
TRAKRS.......................................................        \1\
                                                                  50,000
All Other Commodities........................................        25
------------------------------------------------------------------------
\1\ For purposes of part 17, positions in HedgeStreet Products and
  TRAKRS should be reported by rounding down to the nearest 1,000
  contracts and dividing by 1,000.

    7. Revise paragraphs (a) and (h) in Sec.  15.05 to read as follows:


Sec.  15.05  Designation of agent for foreign brokers, customers of a
foreign broker and foreign traders.

    (a) For purposes of this section, the term ``futures contract''
means any contract for the purchase or sale of any commodity for future
delivery traded or executed on or subject to the rules of any
designated contract market or registered derivatives transaction
execution facility; the term ``option contract'' means any contract for
the purchase or sale of a commodity option, or as applicable, any other
instrument subject to the Act pursuant to section 5a(g) of the Act,
traded or executed on or subject to the rules of any designated
contract market or registered derivatives transaction execution
facility; the term ``customer'' means any person for whose benefit a
foreign broker makes or causes to be made any futures contract or
option contract; and the term ``communication'' means any summons,
complaint, order, subpoena, special call, request for information, or
notice, as well as any other written document or correspondence.
* * * * *
    (h) The provisions of paragraphs (e), (f) and (g) of this section
shall not apply to a designated contract market or registered
derivatives transaction execution facility on which all transactions of
foreign brokers, their customers or foreign traders in futures or
option contracts are executed through, or the resulting transactions
are maintained in, accounts carried by a registered futures commission
merchant or introduced by a registered introducing broker subject to
the provisions of paragraphs (a), (b), (c) and (d) of this section.
* * * * *

PART 16--REPORTS BY REPORTING MARKETS

    8. Revise the heading of part 16 as set forth above.
    9. The authority citation for part 16 is revised to read as
follows:

    Authority: 7 U.S.C. 6a, 6c, 6g, 6i, 7, 7a and 12a, unless
otherwise noted.

    10. In Sec.  16.00, revise paragraphs (a) introductory text,
(a)(1), (a)(5), and (b) introductory text; and add paragraph (c) to
read as follows:


Sec.  16.00  Clearing member reports.

    (a) Information to be provided. Each reporting market shall submit
to the Commission, in accordance with paragraph (b) of this section, a
report for each business day, showing for each clearing member, by
proprietary and customer account, the following information separately
for futures by commodity and by future, and, for options, by underlying
futures contract for options on futures contracts or by underlying
physical for options on physicals, and by put, by call, by expiration
date and by strike price:
    (1) The total of all long open contracts and the total of all short
open contracts carried at the end of the day covered by the report,
excluding from open futures contracts the number of contracts against
which delivery notices have been stopped or against which delivery
notices have been issued by the clearing organization of the reporting
market;
* * * * *
    (5) For futures, the quantity of the commodity for which delivery
notices have been issued by the clearing organization of the reporting
market and the quantity for which notices have been stopped during the
day covered by the report.
    (b) Form, manner and time of filing reports. Unless otherwise
approved by the Commission or its designee, reporting markets shall
submit the information required by paragraph (a) of this section as
follows:
* * * * *
    (c) Exclusively self-cleared contracts. Unless determined otherwise
by the Commission, paragraph (a) of this section shall not apply to
transactions involving exclusively self-cleared contracts.
* * * * *
    11. In Sec.  16.01 revise paragraphs (a), (b), (c), and (d)
introductory text and add paragraph (e) to read as follows:


Sec.  16.01  Trading volume, open contracts, prices, and critical
dates.

    (a) Trading volume and open contracts. Each reporting market shall
record for each business day the following information separately for
futures by commodity and by future, and, for options, by underlying
futures contract for options on futures contracts or by underlying
physical for options on physicals, and by put, by call, by expiration
date and by strike price:
    (1) The option delta, where a delta system is used;
    (2) The total gross open contracts, excluding from futures those
contracts against which notices have been stopped;
    (3) For futures, open contracts against which delivery notices have
been stopped on that business day;
    (4) The total volume of trading, excluding transfer trades or
office trades;
    (5) The total volume of futures exchanged for commodities or for
derivatives positions which are included in the total volume of
trading;
    (6) The total volume of block trades which are included in the
total volume of trading.
    (b) Prices. Each reporting market shall record the following
information separately for futures, by commodity and by future, and,
for options, by underlying futures contract for options on futures
contracts or by underlying physical for options on physicals, and by
put, by call, by expiration date and by strike price:
    (1) For the trading session and for the opening and closing periods
of trading as determined by each reporting market:
    (i) The lowest price of a sale or offer, whichever is lower, and
the highest price of a sale or bid, whichever is higher, that the
reporting market reasonably determines accurately reflect market
conditions. If vacated or withdrawn, bids and offers shall not be used
in making this determination. A bid is vacated if followed by a higher
bid or price and an offer is vacated if followed by a lower offer or
price.
    (ii) If there are no transactions, bids, or offers during the
opening or closing periods, the reporting market may record as
appropriate:
    (A) The first price (in lieu of opening price data) or the last
price (in lieu of closing price data) occurring during the trading
session, clearly indicating that such prices are the first and the last
price; or
    (B) Nominal opening or nominal closing prices which the reporting
market reasonably determines accurately reflect market conditions,
clearly indicating that such prices are nominal.
    (2) The settlement price established by each reporting market or
its clearing organization.
    (3) Additional information. Each reporting market shall record the
following information with respect to transactions in commodity futures
and commodity options on that reporting market:
    (i) The method used by the reporting market in determining nominal
prices and settlement prices; and

[[Page 74256]]

    (ii) If discretion is used by the reporting market in determining
the opening and closing ranges or the settlement prices, an explanation
that certain discretion may be employed by the reporting market and a
description of the manner in which that discretion may be employed.
    (c) Critical dates. Each reporting market shall report to the
Commission for each futures contract the first notice date and the last
trading date and for each option contract the expiration date in
accordance with paragraph (d) of this section.
    (d) Form, manner and time of filing reports. Unless otherwise
approved by the Commission or its designee, reporting markets shall
submit to the Commission the information specified in paragraphs (a)(1)
through (a)(5), (b), and (c) of this section as follows:
* * * * *
    (e) Publication of recorded information. (1) Designated contract
markets shall make the information in paragraph (a) of this section
readily available to the news media and the general public without
charge, in a format that readily enables the consideration of such
data, no later than the business day following the day to which the
information pertains. The information in paragraphs (a)(4) through
(a)(6) of this section shall be made readily available in a format that
presents the information together.
    (2) Designated contract markets shall make the information in
paragraphs (b)(1) and (b)(2) of this section readily available to the
news media and the general public, and the information in paragraph
(b)(3) of this section readily available to the general public, in a
format that readily enables the consideration of such data, no later
than the business day following the day to which the information
pertains.
    (3) Registered derivatives transaction execution facilities shall
comply with the publication of trading information requirement of
section 5a(d)(5) of the Act and any Commission regulation adopted
thereunder.
* * * * *
    12. Revise Sec.  16.06 to read as follows:


Sec.  16.06  Errors or omissions.

    Unless otherwise approved by the Commission or its designee,
reporting markets shall file corrections to errors or omissions in data
previously filed with the Commission pursuant to Sec. Sec.  16.00 and
16.01 in the format and using the coding structure and electronic data
submission procedures approved in writing by the Commission or its
designee.
    13. In Sec.  16.07, revise paragraphs (a) and (b) to read as
follows:


Sec.  16.07  Delegation of authority to the Director of the Division of
Market Oversight and the Executive Director.

* * * * *
    (a) Pursuant to Sec. Sec.  16.00(b) and 16.01(d), as applicable,
the authority to determine whether reporting markets must submit data
in hard copy, and the time that such data may be submitted where the
Director determines that a reporting market is unable to meet the
requirements set forth in the regulations;
    (b) Pursuant to Sec. Sec.  16.00(b)(1), 16.01(d)(1), and 16.06, the
authority to approve the format, coding structure and electronic data
transmission procedures used by reporting markets.

PART 17--REPORTS BY REPORTING MARKETS, FUTURES COMMISSION
MERCHANTS, MEMBERS OF REPORTING MARKETS, AND FOREIGN BROKERS

    14. Revise the heading of part 17 as set forth above.
    15. The authority citation for part 17 is revised to read as
follows:

    Authority: 7 U.S.C. 6a, 6c, 6d, 6f, 6g, 6i, 7, 7a and 12a,
unless otherwise noted.

    16. In Sec.  17.00, revise paragraphs (a)(1), (b)(2), and
(g)(2)(iv); and add paragraph (i) to read as follows:


Sec.  17.00  Information to be furnished by futures commission
merchants, clearing members and foreign brokers.

    (a) * * *
    (1) Each futures commission merchant, clearing member and foreign
broker shall submit a report to the Commission for each business day
with respect to all special accounts carried by the futures commission
merchant, clearing member or foreign broker, except for accounts
carried on the books of another futures commission merchant on a fully-
disclosed basis. Except as otherwise authorized by the Commission or
its designee, such report shall be made in accordance with the format
and coding provisions set forth in paragraph (g) of this section. The
report shall show each futures position, separately for each reporting
market and for each future, and each put and call options position
separately for each reporting market, expiration and strike price in
each special account as of the close of market on the day covered by
the report and, in addition, the quantity of exchanges of futures for
commodities or for derivatives positions and the number of delivery
notices issued for each such account by the clearing organization of a
reporting market and the number stopped by the account. The report
shall also show all positions in all futures months and option
expirations of that same commodity on the same reporting market for
which the special account is reportable.
* * * * *
    (b) * * *
    (2) Accounts controlled by two or more persons--Accounts that are
subject to day-to-day trading control by two or more persons shall,
together with other accounts subject to control by exactly the same
persons, be considered a single account.
* * * * *
    (g) * * *
    (2) * * *
    (iv) Report date. The format is YYYYMMDD, where YYYY is the year,
MM is the month, and DD is the day of the month.
* * * * *
    (i) Exclusively self-cleared contracts. Unless determined otherwise
by the Commission, reporting markets that list exclusively self-cleared
contracts shall meet the requirements of paragraphs (a) through (h) of
this section, as they apply to trading in such contracts by all
clearing members, on behalf of all clearing members.
* * * * *
    17. In Sec.  17.01, revise the introductory text and paragraphs
(a), (b) introductory text, (d), (f) and (g); and add paragraph (h) to
read as follows:


Sec.  17.01  Special account designation and identification.

    When a special account is reported for the first time, the futures
commission merchant, clearing member, or foreign broker shall identify
the account to the Commission on Form 102, in the form and manner
specified in Sec.  17.02, showing the information in paragraphs (a)
through (f) of this section.
    (a) Special account designator. A unique identifier for the
account, provided, that the same designator is assigned for option and
futures reporting, and the designator is not changed or assigned to
another account without prior approval of the Commission or its
designee.
    (b) Special account identification. The name, address, business
phone, and for individuals, the person's job title and employer for the
following:
* * * * *
    (d) Commercial use. For futures or options, commodities in which
positions or transactions in the account are associated with a
commercial activity of the account owner in a related cash commodity or
activity (i.e.,

[[Page 74257]]

those considered as hedging, risk-reducing, or otherwise off-setting
with respect to the cash commodity or activity).
* * * * *
    (f) Reporting firms. The name and address of the futures commission
merchant, clearing member, or foreign broker carrying the account, and
the name, title and business phone of the authorized representative of
the firm filing the Form 102 and the date of the Form 102. The
authorized representative shall sign the Form 102 or satisfy such other
requirements for authenticating the report as instructed in writing by
the Commission or its designee.
    (g) Form 102 updates. If, at the time an account is in special
account status and a Form 102 filed by a futures commission merchant,
clearing member, or foreign broker is then no longer accurate because
there has been a change in the information required under paragraph (b)
of this section since the previous filing, the futures commission
merchant, clearing member, or foreign broker shall file an updated Form
102 with the Commission within three business days after such change
occurs.
    (h) Exclusively self-cleared contracts. Unless determined otherwise
by the Commission, reporting markets that list exclusively self-cleared
contracts shall meet the requirements of paragraphs (a) through (g) of
this section, as they apply to trading in such contracts by all
clearing members, on behalf of all clearing members.
    18. Revise Sec.  17.02 to read as follows:


Sec.  17.02  Form, manner and time of filing reports.

    Unless otherwise instructed by the Commission or its designee, the
reports required to be filed by reporting markets, futures commission
merchants, clearing members and foreign brokers under Sec. Sec.  17.00
and 17.01 shall be filed as specified in paragraphs (a) and (b) of this
section.
    (a) Section 17.00(a) reports. Reports filed under Sec.  17.00(a)
shall be submitted through electronic data transmission procedures
approved in writing by the Commission or its designee not later than 9
a.m. on the business day following that to which the information
pertains. Unless otherwise specified by the Commission or its designee,
the stated time is eastern time for information concerning markets
located in that time zone, and central time for information concerning
all other markets.
    (b) Section 17.01 reports. For data submitted pursuant to Sec.
17.01 on Form 102:
    (1) On call by the Commission or its designee, identify the type of
special account specified by items 1(a), 1(b), or 1(c) of Form 102, and
the name and location of the person to be identified in item 1(d) on
the Form 102, and submit such information by facsimile or telephone, in
accordance with instructions by the Commission or its designee, on the
same day that the special account in question is first reported to the
Commission; and
    (2) Submit a completed Form 102 within three business days of the
first day that the special account in question is reported to the
Commission in accordance with instructions by the Commission or its
designee.
    19. In Sec.  17.03, revise the introductory text and paragraph (c)
to read as follows:


Sec.  17.03  Delegation of authority to the Director of the Division of
Market Oversight and to the Executive Director.

    The Commission hereby delegates, until the Commission orders
otherwise, the authority set forth in paragraphs (a) and (b) of this
section to the Director of the Division of Market Oversight and the
authority set forth in paragraphs (c) and (d) of this section to the
Executive Director to be exercised by such Director or by such other
employee or employees of such Director as designated from time to time
by the Director. The Director of the Division of Market Oversight or
the Executive Director may submit to the Commission for its
consideration any matter which has been delegated in this paragraph.
Nothing in this paragraph prohibits the Commission, at its election,
from exercising the authority delegated in this paragraph.
* * * * *
    (c) Pursuant to Sec.  17.01(f), the authority to determine whether
to permit an authorized representative of a firm filing the Form 102 to
use a means of authenticating the report other than by signing the Form
102 and, if so, to determine the alternative means of authentication
that shall be used.
* * * * *
    20. In Sec.  17.04, revise paragraphs (a), (b)(1)(i), and (b)(2) to
read as follows:


Sec.  17.04  Reporting omnibus accounts to the carrying futures
commission merchant or foreign broker.

    (a) Any futures commission merchant, clearing member or foreign
broker who establishes an omnibus account with another futures
commission merchant or foreign broker shall report to that futures
commission merchant or foreign broker the total open long positions and
the total open short positions in each future of a commodity and, for
commodity options transactions, the total open long put options, the
total open short put options, the total open long call options, and the
total open short call options for each commodity options expiration
date and each strike price in such account at the close of trading each
day. The information required by this section shall be reported in
sufficient time to enable the futures commission merchant or foreign
broker with whom the omnibus account is established to comply with part
17 of these regulations and reporting requirements established by the
reporting market.
    (b) * * *
    (1) * * *
    (i) The positions represent transactions on a reporting market
which requires long and short positions in the same future or option
held in accounts for the same trader to be recorded and reported on a
gross basis; or
* * * * *
    (2) Include only the net long or net short positions of the trader
if the positions represent transactions on a reporting market which
does not require long and short positions in the same future or option
held in accounts for the same trader to be recorded and reported on a
gross basis.
* * * * *

PART 18--REPORTS BY TRADERS

    21. The authority citation for part 18 continues to read as
follows:

    Authority: 7 U.S.C. 2, 4, 6a, 6c, 6f, 6g, 6i, 6k, 6m, 6n, 12a
and 19; 5 U.S.C. 552 and 552(b), unless otherwise noted.

    22. In Sec.  18.00 revise the introductory text to read as follows:


Sec.  18.00  Information to be furnished by traders.

    Every trader who owns, holds or controls, or has held, owned or
controlled, a reportable futures or options position in a commodity
shall within one business day after a special call upon such trader by
the Commission or its designee file reports to the Commission
concerning transactions and positions in such futures or options.
Reports shall be filed for the period of time that the trader held or
controlled a reportable position and shall be prepared and submitted as
instructed in the call. The report shall show for each day covered by
the report the following information, as specified in the call,
separately for each future or option and for each reporting market:
* * * * *

[[Page 74258]]

    23. Revise Sec.  18.05 to read as follows:


Sec.  18.05  Maintenance of books and records.

    Every trader who holds or controls a reportable futures or option
position shall keep books and records showing all details concerning
all positions and transactions for future delivery in the commodity on
all reporting markets, all positions and transactions in the commodity
option, and all positions and transactions in the cash commodity, its
products and byproducts and, in addition, commercial activities that
the trader hedges in the commodity underlying the futures contract in
which the trader is reportable, and shall upon request furnish to the
Commission any pertinent information concerning such positions,
transactions or activities.

(Approved by the Office of Management and Budget under control
number 3038-0007)

PART 19--REPORTS BY PERSONS HOLDING BONA FIDE HEDGE POSITIONS
PURSUANT TO Sec.  1.3(Z) OF THIS CHAPTER AND BY MERCHANTS AND
DEALERS IN COTTON

    24. The authority citation for part 19 continues to read as
follows:

    Authority: 7 U.S.C. 6g(a), 6i and 12a(5), unless otherwise
noted.

    25. In Sec.  19.00, revise paragraphs (a) and (b) introductory text
to read as follows:


Sec.  19.00  General provisions.

    (a) Who must file series '04 reports. The following persons are
required to file series '04 reports:
    (1) All persons holding or controlling futures and option positions
that are reportable pursuant to Sec.  15.00(l)(2) of this chapter and
any part of which constitute bona fide hedging positions as defined in
Sec.  1.3(z) of this chapter;
    (2) Merchants and dealers of cotton holding or controlling
positions for futures delivery in cotton that are reportable pursuant
to Sec.  15.00(l)(1)(i) of this chapter, or
    (3) All persons holding or controlling positions for future
delivery that are reportable pursuant to Sec.  15.00(l)(1) of this
chapter who have received a special call for series '04 reports from
the Commission or its designee. Filings in response to a special call
shall be made within one business day of receipt of the special call
unless otherwise specified in the call. For the purposes of this
paragraph, the Commission hereby delegates to the Director of the
Division of Market Oversight, or to such other person designated by the
Director, authority to issue calls for series '04 reports.
    (b) Manner of reporting. The manner of reporting the information
required in Sec.  19.01 is subject to the following:
* * * * *
    26. In Sec.  19.01, revise paragraph (a) introductory text to read
as follows:


Sec.  19.01  Reports on stocks and fixed price purchases and sales
pertaining to futures positions in wheat, corn, oats, soybeans, soybean
oil, soybean meal or cotton.

    (a) Information required. Persons required to file '04 reports
under Sec.  19.00(a)(1) or Sec.  19.00(a)(3) of this chapter shall file
CFTC Form 304 reports for cotton and Form 204 reports for other
commodities showing the composition of the fixed price cash position of
each commodity hedged including:
* * * * *

PART 21--SPECIAL CALLS

    27. The authority for part 21 continues to read as follows:

    Authority: 7 U.S.C. 1a, 2, 2a, 4, 6a, 6c, 6f, 6g, 6i, 6k, 6m,
6n, 7, 7a, 12a, 19 and 21; 5 U.S.C. 552 and 552(b), unless otherwise
noted.

    28. Revise Sec.  21.01 to read as follows:


Sec.  21.01  Special calls for information on controlled accounts from
futures commission merchants and introducing brokers.

    Upon call by the Commission, each futures commission merchant and
introducing broker shall file with the Commission the names and
addresses of all persons who, by power of attorney or otherwise,
exercise trading control over any customer's account in commodity
futures or commodity options on any reporting market.

(Approved by the Office of Management and Budget under control
number 3038-0009)

    29. Revise the heading and introductory text of Sec.  21.02 to read
as follows:


Sec.  21.02  Special calls for information on open contracts in
accounts carried or introduced by futures commission merchants, members
of reporting markets, introducing brokers, and foreign brokers.

    Upon special call by the Commission for information relating to
futures or option positions held or introduced on the dates specified
in the call, each futures commission merchant, member of a reporting
market, introducing broker, or foreign broker, and, in addition, for
option information, each reporting market, shall furnish to the
Commission the following information concerning accounts of traders
owning or controlling such futures or option positions, except for
accounts carried on a fully disclosed basis by another futures
commission merchant, as may be specified in the call:
* * * * *
    30. Revise the heading and paragraphs (c), (d), (e) introductory
text, and (f) of Sec.  21.03 to read as follows:


Sec.  21.03  Selected special calls--duties of foreign brokers,
domestic and foreign traders, futures commission merchants, introducing
brokers, and reporting markets.

* * * * *
    (c) Upon a determination by the Commission that information
concerning accounts may be relevant information in enabling the
Commission to determine whether the threat of a market manipulation,
corner, squeeze, or other market disorder exists on any reporting
market, the Commission may issue a call for information from a futures
commission merchant or customer pursuant to the provisions of this
section.
    (d) In the event the call is issued to a foreign broker or foreign
trader, its agent, designated pursuant to Sec.  15.05 of this chapter,
shall, if directed, promptly transmit calls made by the Commission
pursuant to this section by electronic mail or a similarly expeditious
means of communication.
    (e) The futures commission merchant, introducing broker, or
customer to whom the special call is issued must provide to the
Commission the information specified below for the commodity, reporting
market and delivery months or option expiration dates named in the
call. Such information shall be filed at the place and within the time
specified by the Commission.
* * * * *
    (f) If the Commission has reason to believe that a futures
commission merchant or customer has not responded as required to a call
made pursuant to this section, the Commission in writing may inform the
reporting market specified in the call and that reporting market shall
prohibit the execution of, and no futures commission merchant,
introducing broker, or foreign broker shall accept an order for, trades
on the reporting market and in the months or expiration dates specified
in the call for or on behalf of the futures commission merchant or
customer named in the call, unless such trades offset existing open
contracts of such futures commission merchant or customer.
* * * * *


[[Page 74259]]


    Issued in Washington, DC, on December 7, 2005, by the
Commission.
Jean A. Webb,
Secretary of the Commission.
[FR Doc. 05-23977 Filed 12-14-05; 8:45 am]

BILLING CODE 6351-01-P
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