Federal Register / Vol. 73, No. 149 / Friday, August 1, 2008 / Proposed Rules 44939 

1 72 FR 39764 (July 20, 2007). 

2Letter dated August 20, 2007 from CME Group 

(CME); Letter dated August 20, 2007 from CBOE 

Futures Exchange (CFE); Letter dated August 23, 

2007 from New York Mercantile Exchange, Inc. 

(NYMEX). 

3A registered entity is defined in section 1a(29) 

of the Commodity Exchange Act (Act) as a DCM 

under section 5 of the Act (including section 5f), a 

DTEF registered under section 5a of the Act, and 

a DCO registered under section 5b of the Act. 

Section 5f of the Act, along with part 41 of the 

Commission’s regulations, establishes requirements 

for national securities exchanges, national securities 

associations and alternative trading systems 

registered with the Securities and Exchange 

Commission to notice register with the Commission 

in order to list security futures products (i.e., 

futures on a single equity security and futures on 

narrow-based security indexes). 

4 Incentive programs typically are created by a 

registered entity to increase volume of trading and 

liquidity for new product launches or in markets 

that for other reasons have low trading volume. In 

general, registered entities have requested 

confidential treatment for the name of the market 

maker(s), the compensation arrangements provided 

by the registered entity, trade priorities (i.e., 

percentage of the order flow), and the bid/ask 

spread level. 

notify your appropriate principal inspector 

(PI) in the FAA Flight Standards District 

Office (FSDO), or lacking a PI, your local 

FSDO. 

Issued in Renton, Washington, on July 23, 

2008. 

Ali Bahrami, 

Manager, Transport Airplane Directorate, 

Aircraft Certification Service. 

[FR Doc. E8–17620 Filed 7–31–08; 8:45 am] 

BILLING CODE 4910–13–P 

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Parts 40, 41, and 145 

RIN 3038–AC44 

Confidential Information and 

Commission Records and Information 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Notice of proposed rulemaking, 

reproposal. 

SUMMARY: On July 20, 2007, the 

Commission published in the Federal 

Register a notice of proposed 

rulemaking to amend the procedures 

under which designated contract 

markets (DCMs), derivatives clearing 

organizations (DCOs), and derivatives 

transaction execution facilities (DTEFs) 

(collectively, ‘‘registered entities’’) may 

request confidential treatment for 

products and rules submitted via 

certification procedures or for 

Commission review and approval under 

parts 40 and 41 of the Commission’s 

regulations.1 Under the proposed 

amendments to Commission regulation 

40.8, registered entities filing product 

and rule submissions would follow a 

procedure separate from the customary 

Freedom of Information Act (FOIA) 

confidential treatment procedures 

specified in Commission regulation 

145.9, 17 CFR 145.9. As proposed to be 

amended, regulation 40.8(c) provided 

that: registered entities submitting 

material under parts 40 and 41 would be 

required to file a detailed written 

justification simultaneously with the 

request for confidential treatment; 

registered entities submitting material 

under parts 40 and 41 would be 

required to segregate material for which 

confidential treatment is requested in an 

appendix to the submission; and 

Commission staff may make an initial 

determination to grant or deny 

confidential treatment to such material 

before receiving a request under the 

FOIA. Regulation 40.8(c) is being 

reproposed to clarify that an initial 

determination by staff to deny 

confidential treatment may be appealed 

to the Commission’s Office of General 

Counsel and that such an appeal will 

stay release of the material. The 

Commission believes these 

amendments, by creating a separate 

confidential treatment review process 

for filings under parts 40 and 41, will 

enhance the Commission’s ability to 

provide the public with immediate 

access to non-confidential information. 

The Commission received comments 

from three registered entities in 

response to the proposed rulemaking.2

Two commenters expressed concerns 

with the amendments themselves and 

questioned the adequacy of the 

Commission’s explanation for proposing 

the changes. In response to those 

comments, the Commission has 

determined to re-propose the 

amendments to regulation 40.8 to: 

clarify the procedure for seeking review 

of an adverse determination; amend 

appendix D to part 40 by adding to the 

submission cover sheet a box to be 

checked if confidential treatment is 

requested for any part of the underlying 

submission, in order to assist staff in 

efficiently and accurately posting 

publicly available information on the 

Commission’s Web site; and amend 

Commission regulation 145.9(b) to 

clarify that its procedures for requesting 

confidential treatment do not apply to 

submissions filed under parts 40 and 41. 

The Commission further intends in this 

reproposal to more fully address its 

reasons for the proposed amendments 

and to explain the distinction between 

the proposed procedure and the 

procedures specified in regulation 

145.9. 

DATES: Submit comments on or before 

September 2, 2008. Comments 

previously submitted need not be 

resubmitted. 

ADDRESSES: You may submit comments 

by any of the following methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. 

• Mail/Hand Deliver: David Stawick, 

Secretary of the Commission, 

Commodity Futures Trading 

Commission, Three Lafayette Centre, 

1155 21st Street, NW., Washington, DC 

20581. 

• E-mail: secretary@cftc.gov. 

FOR FURTHER INFORMATION CONTACT: 

Susan Nathan, Senior Special Counsel, 

(202) 418–5133, Division of Market 

Oversight, Commodity Futures Trading 

Commission, Three Lafayette Centre, 

1155 21st Street, NW., Washington, DC 

20581. Electronic mail: 

snathan@cftc.gov. This document is also 

available at http://www.regulations.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background 

A. Overview 

Part 40 of the Commission’s 

regulations sets forth the standards and 

procedures to be followed by registered 

entities 3 for listing products for trading 

by certification to the Commission; 

voluntary submission of new products 

for Commission review and approval; 

amendments to terms or conditions of 

enumerated agricultural contracts; 

voluntary submission of rules for 

Commission review and approval; and 

self-certification of rules by DCMs and 

DCOs. Part 41 of the regulations 

provides standards and procedures for 

filing required information with respect 

to security futures products. Although 

much of the information required by 

parts 40 and 41 is made public by 

statute, regulation or agency practice, 

the Commission has observed an 

increase over the past several years in 

the number of confidential treatment 

requests for filings submitted under 

these parts. Most, but not all of these 

requests for confidential treatment have 

been submitted to the Commission in 

connection with market maker and 

other incentive programs (collectively, 

incentive programs).4

B. Freedom of Information Act 

Most requests for confidential 

treatment are made pursuant to the 

Freedom of Information Act, 5 U.S.C. 

552 (FOIA), which provides generally 

that the public has a right of access to 

federal agency records except to the 

extent such records, or portions of them, 

are protected from disclosure by one or 


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5 5 U.S.C. 552(b)(1)–(9). 6Exemption (b)(4) of the FOIA protects trade 

secrets and commercial or financial information 

obtained from a person that is privileged or 

confidential. See also Commission regulation 

145.9(d)(ii). 7The FOIA requires that each agency promulgate 

regulations governing, inter alia, the methods 

whereby the public may obtain information, make 

submissions or obtain decisions as well as other 

substantive and procedural FOIA regulations. 5 

U.S.C. 552(a). 8See 17 CFR 145.9(d)(10). 

9The guidelines and standards for preparing and 

filing a detailed written justification are found in 

Commission regulation 145.9(e). 

10Commission regulation 145.9(b). 

11The proposal also would add new regulations 

40.2(a)(3)(iv), 40.6(a)(3)(vi), 41.23(a)(7), and 

41.24(a)(6), and amend regulations 40.3(a)(7) and 

40.5(a)(8) to direct the registered entity requesting 

confidential treatment for submissions made under 

part 40 or 41 to follow the new procedures specified 

in Commission regulation 40.8(c). 

12See Commission regulation 145.9(e)(1), 17 CFR 

145.9(e)(1). 13See section 5(a)(7) (DCM Core Principle 7); 

section 5b(2)(L) (DCO Core Principle L); and section 

5a(d)(5) (DTEF Core Principle 5). 14See regulation 40.8(a). 15See regulation 145.9(g), 17 CFR 145.9(g). 16The Commission’s policy is to provide public 

availability of submission information by posting 

submissions filed under parts 40 and 41 on the 

Commission’s Web site as efficiently and accurately 

as possible. 

more of nine exemptions.5 A registered 

entity requesting confidential treatment 

under the FOIA typically asserts that the 

information submitted to the 

Commission should be protected from 

disclosure pursuant to FOIA exemption 

(b)(4), 5 U.S.C. 552(b)(4), because its 

release will cause commercial or 

competitive harm to the submitter.6

C. The Commission’s Implementing 

Regulations 

All agencies subject to the FOIA are 

required to establish rules, procedures 

and standards for implementing that 

statute.7 The Commission’s FOIA rules 

are codified in part 145 of its 

regulations. Commission regulation 

145.9 sets forth the procedures for 

requesting confidential treatment under 

the FOIA for information furnished to 

the Commission and for challenging 

adverse determinations of such requests. 

Under these provisions, a submitter 

must make, at the time of submission, 

a written request for confidential 

treatment which specifies the basis on 

which it believes confidential treatment 

is warranted. Unless and until a FOIA 

request is made for the material, 

however, no determination is made with 

respect to any request for confidential 

treatment.8 When a FOIA request is 

received, the submitter of the requested 

information is required to file a detailed 

written justification of the confidential 

treatment request.9 If staff initially 

determines that the request should be 

denied, regulation 145.9 permits the 

submitter to file an appeal of that initial 

decision with the Commission’s Office 

of General Counsel. Likewise, if staff 

initially determines to grant the request 

for confidential treatment, a subsequent 

FOIA requester may appeal that 

decision to the Office of General 

Counsel. 

Commission regulation 145.9 also 

permits the Commission to specify 

‘‘alternative procedures’’ for ‘‘a 

particular study, report, investigation, or 

other matter.’’10 Consistent with that 

authority, the Commission is proposing 

to specify alternative procedures for 

processing requests for confidential 

treatment of filings submitted under 

parts 40 and 41 of the Commission’s 

regulations. 

II. The Proposed Amendments 

A. Procedures for Requesting 

Confidential Treatment Under Parts 40 

and 41 

The Commission is proposing to add 

paragraph (c) to Commission regulation 

40.8 to establish the exclusive 

procedure to be followed by registered 

entities when requesting confidential 

treatment for information required to be 

filed under parts 40 and 41.11 The 

Commission is also proposing to add 

paragraph (d) to regulation 40.8 to make 

clear the circumstances under which 

requests for confidential treatment will 

not be considered. Under the new 

procedure, the request for confidential 

treatment and a detailed written 

justification must be filed 

simultaneously with the submission, in 

the form and manner prescribed by 

Commission regulation 145.9(e). 

Further, the material for which 

confidentiality is claimed must be 

separated from the remainder of the 

submission and filed as an appendix. 

Proposed regulation 40.8(c) would 

permit Commission staff immediately to 

make an initial determination to grant or 

deny confidential treatment rather than 

deferring consideration until a FOIA 

request is received for the information, 

and would allow the submitter to appeal 

an adverse decision to the Commission’s 

Office of General Counsel in the manner 

prescribed by Commission regulation 

145.9(g). Proposed regulation 40.8(c) 

would not preclude reconsideration of a 

confidential treatment decision made 

under this regulation if a request for the 

material is subsequently made under the 

FOIA. In such circumstances, the 

process would be governed by the part 

145 regulations. 

The FOIA addresses tensions between 

the public’s interest in access to certain 

information and the government’s (or in 

some circumstances, the submitter’s) 

interest in nondisclosure of sensitive 

information. Accordingly, that statute 

generally is triggered by a request for 

information from a member of the 

public, and the Commission’s FOIA 

regulation provides that submitters of 

information who have properly 

requested confidential treatment need 

not file a detailed written justification 

supporting that request unless they 

receive notice from the Commission that 

it has received a FOIA request for that 

information.12 Those tensions are not 

present here. On the contrary, Congress 

included in the Act’s core principles 

applicable to registered entities 

requirements that DCMs, DCOs and 

DTEFs make certain information 

available to the public,13 and the 

Commission demonstrated its 

commitment to transparency by 

adopting a regulation describing the 

types of information it considered 

publicly available.14 In the 

Commission’s view, the FOIA does not 

protect public information, and the 

absence of a FOIA request should not be 

permitted to delay or hinder its release 

of such information to the public. 

Accordingly, under proposed regulation 

40.8(c), Commission staff may 

immediately analyze the merits of a 

detailed written justification and 

balance the submitter’s interest in 

confidentiality against the 

Commission’s interest in fostering 

transparency. The Commission intends, 

and the re-proposed regulation clarifies, 

that the procedure described in 

proposed regulation 40.8(c)(1) would 

expedite the release of information to 

the public while continuing to afford a 

registered entity the opportunity to 

challenge the denial of a confidential 

treatment request. As re-proposed, 

regulation 40.8(c) makes plain that the 

registered entity may follow the 

procedures outlined in the 

Commission’s general FOIA regulation 

to appeal a staff denial of confidential 

treatment to the Commission’s Office of 

General Counsel.15 The re-proposed 

regulation further clarifies that a grant of 

any part of a request for confidential 

treatment may be reconsidered if a FOIA 

request for the same material 

subsequently is received by the 

Commission. 

When a registered entity requests 

confidential treatment for an entire 

submission filed under part 40 or 41, 

Commission staff frequently asks the 

entity to amend its original submission 

by segregating out the material for 

which it claims confidentiality so that 

remaining materials can be made public 

without delay.16 Registered entities 


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17Mechanisms for executing transactions 

generally include such information as trading 

algorithms, market maker programs and information 

from an exchange’s rulebook that pertain to or 

impact trading. 

18Publicly available portions include: 

Transmittal letter, proposed rules, the applicant’s 

regulatory compliance chart, documents 

establishing the applicant’s legal status, and 

documents setting forth the applicant’s governance 

structure. The Commission noted that regulation 

40.8(a) is not intended to limit the information that 

may be released, but to specify the portions of an 

application that are automatically public and 

therefore would not be granted confidential 

treatment under any circumstances. 69 FR 67503 

(Nov. 18, 2004). 

19 In cases of new products for which 

Commission approval has been requested, the 

Commission generally intends to continue its longstanding practice of requesting public comment on 

the terms and conditions by publication of notices 

in the Federal Register. Where notice in the Federal 

Register is impracticable or otherwise unnecessary, 

notice of a submission for voluntary approval and 

of the public availability of the proposed product’s 

terms and conditions will be through the 

Commission’s internet Web site (http:// 

www.cftc.gov). The terms and conditions of 

products eligible for trading by self-certification 

will be available from the Commission at the time 

that the exchange legally could commence trading: 

The beginning of the business day following 

certification to the Commission. 

20As CFE observed, the Commission’s Office of 

General Counsel so reasoned in rejecting an 

exchange’s claim that its market maker information 

was proprietary and protected under FOIA 

exemption (b)(4), which protects under certain 

circumstances commercial or financial information 

where its release could cause competitive harm to 

the submitter. Letter dated October 27, 2005 from 

Office of General Counsel regarding Freedom of 

Information Act Nos. 05–0138 and 05–0139. 

21See Section 7(d)(8) of the CEA, 7 U.S.C. 7(d)(8) 

(DCM Core Principle 8). 

generally have been receptive to these 

informal staff requests. Proposed 

regulation 40.8(c)(2), which would 

require that material deemed 

confidential be segregated in an 

appendix to the submission, would 

codify this staff practice and enable the 

Commission to make plainly nonconfidential material immediately 

available to the public while staff 

evaluates the registered entity’s claims 

of confidentiality for the segregated 

material. 

B. Public Availability of Terms and 

Conditions of Products and Mechanisms 

for Executing Transactions on or 

Through the Facilities of the Contract 

Market 

As noted, substantial portions of the 

material filed pursuant to parts 40 and 

41 are required by statute to be made 

publicly available by registered entities. 

Section 5(d)(7) of the Act—DCM Core 

Principle 7—requires that the terms and 

conditions of contracts and the 

mechanisms for executing transactions 

on or through a DCM be made available 

by the DCM to market authorities, 

market participants, and the public.17

Similarly, DTEF Core Principle 5 

requires that boards of trade publicly 

disclose specified information, and Core 

Principle L requires that DCOs make 

available to market participants 

information concerning the rules and 

operating systems of clearing and 

settlement systems. In 2004, the 

Commission added paragraph (a) to 

regulation 40.8 to specify the portions of 

DTEF, DCO and DCM applications 

which are publicly available.18

Furthermore, regulations 40.3(a)(7) 

and 40.5(a)(8) specify that a product’s 

terms and conditions are publicly 

available at the time of their submission. 

Product terms and conditions made 

publicly available at the time of 

submission enable the Commission to 

obtain the views of market participants 

and others to ascertain whether the 

proposed product would be readily 

susceptible to manipulation or would 

otherwise violate the Act. To this end, 

Commission staff routinely conduct 

trade interviews when reviewing novel 

instruments to ascertain the relative 

susceptibility of a product to 

manipulation. To be meaningful, these 

interviews require the release of the 

proposed instrument’s terms and 

conditions.19

The Commission wishes to ensure 

that registered entities are fully aware 

that staff will summarily deny requests 

for confidential treatment of information 

that is publicly-available pursuant to 

statute or regulation. Accordingly, the 

Commission proposes also to amend 

part 40 by adding new paragraph (d) to 

regulation 40.8 to provide that staff will 

not consider requests for confidential 

treatment of information that is subject 

to section 5(d)(7) or regulations 

40.3(a)(7) and 40.5(a)(8). 

C. Comments Received 

In response to its original proposal, 

the Commission received comment 

letters from CME Group, CBOE Futures 

Exchange (CFE), and the New York 

Mercantile Exchange (NYMEX). These 

comments raised several related 

concerns. 

1. Market Maker Programs and 

Mechanisms for Executing Transactions 

CFE generally supported proposed 

regulation 40.8(c) but urged that it be 

further amended to specify that the 

terms and conditions of market maker 

programs and other compensation and 

incentive plans will be denied 

confidential treatment because they are 

rules as defined in Commission 

regulation 40.1. The CME, on the other 

hand, asserted that DCMs have a 

legitimate commercial and competitive 

interest in maintaining the 

confidentiality of specific information 

about the contractual obligations of, and 

incentives offered to, their market 

makers. 

Market maker and incentive programs 

are considered ‘‘rules’’ under 

Commission regulations and are 

presumptively public. Accordingly, it is 

agency practice to post compensation 

and incentive information promptly on 

the Commission’s Web site. The 

Commission believes that market 

participants should have the 

opportunity to evaluate the 

compensation structures of incentive 

programs since these arrangements may 

affect the quality of price quotations 

provided by market makers as well as 

liquidity in the market. Because 

material of this kind routinely is made 

public, disclosure will not create a 

competitive disadvantage for any 

exchange.20 Incentive programs may, 

however, include information for which 

confidential treatment is appropriate. 

Commission staff has, for example, 

withheld information relating to 

participant names, bid-ask spreads and 

minimum size requirements of bid/ask 

spreads because access to this 

information could give an unfair 

advantage to potential counterparties of 

market makers as well as providing 

other markets with a competitive edge 

when setting up their own market maker 

programs and negotiating agreements 

with potential market makers. In these 

circumstances, the Commission believes 

that while incentive programs may 

presumptively be public, those 

programs may from time to time include 

commercially valuable information 

which may be entitled to protection. 

Accordingly, summary denial of 

confidential treatment to all information 

in incentive programs would be 

inappropriate. 

NYMEX made a similar argument in 

connection with the Commission’s 

determination not to process 

confidential treatment requests 

covering, inter alia, the mechanisms for 

executing transactions on or through the 

facilities of the contract market. NYMEX 

claims that a trading tool could 

potentially qualify as proprietary 

intellectual property for which a 

registered entity may seek protection 

under patent or trademark laws. The 

Commission notes that mechanisms for 

executing transactions on or through the 

facilities of a contract market are 

required by statute to be made publicly 

available.21 The Commission also 

recognizes the importance to a 

registered entity of protecting what it 

believes to be commercially sensitive 


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22The CME similarly cites a perceived burden on 

Commission staff, which may be ‘‘inundated’’ with 

detailed written justifications for every confidential 

treatment request where no FOIA request is 

pending. 

23The Commission notes that the SEC specifies 

one procedure for requesting confidential treatment 

under the FOIA (17 CFR 200.83) and a separate 

procedure where the FOIA is not implicated. (17 

CFR 240.24b–2) The latter applies to such filings as 

registration statements, reports, applications, 

statements or other documents filed pursuant to the 

Securities Exchange Act of 1934. Like the rule 

proposed by the Commission, the SEC regulation 

requires that a written justification be submitted 

simultaneously with the filing. An initial decision 

to grant or disallow a request for nondisclosure of 

information is not triggered by a FOIA request, and 

a submitter objecting to an initial decision to deny 

confidential treatment may petition the SEC for 

review of that decision. 24Letter dated August 20, 2007 from CME Group, 

at 2 and 3. 25 Id. at 3. 

information, and invites public 

comment with respect to specific types 

of trading tools that should be given 

consideration under a request for 

confidential treatment. 

2. Limited Applicability of Proposed 

Regulation to Registered Entities 

In its comment letter, NYMEX 

questioned why the proposed regulation 

singles out registered exchanges and 

clearing organizations for the new 

requirements, while other submitters of 

information would continue to follow 

the FOIA procedures in regulation 145.9 

when requesting confidential treatment 

of submissions to the Commission. On 

the contrary, the proposed rule does not 

target a specific group of submitters but 

rather is directed toward specific 

categories of submissions—those filed 

pursuant to parts 40 and 41—for which 

confidential treatment is frequently 

claimed despite requirements in the 

Commodity Exchange Act and 

Commission regulations that those 

submissions be made available to the 

public. The harm to be remedied is the 

frequently unwarranted delay in making 

public information filed pursuant to 

these regulations. When registered 

entities have occasion to submit other 

types of information to the Commission, 

they would continue to follow the 

procedures provided in Commission 

regulation 145.9 for requesting 

confidential treatment under the FOIA 

of those submissions. 

3. Relationship of the Proposed 

Procedures to the FOIA Process 

Other concerns raised by the 

commenters may spring from a 

misunderstanding of the relationship 

between the proposed regulation and 

the FOIA. NYMEX, for example, appears 

to believe that all confidentiality issues 

arise in the context of the FOIA and 

must be made ‘‘ripe’’ by a FOIA 

request.22 On the contrary, 

confidentiality issues frequently arise 

outside the scope of the FOIA and are 

resolved without reference to that 

statute.23 As noted above, the 

Commission’s responsibility to provide 

transparency with respect to certain 

information exists separately from its 

duty to implement the FOIA. The latter 

obligation is addressed by the 

Commission’s part 145 regulations, 

which deal with disclosure issues in the 

context of public requests for 

information under the FOIA and are not 

necessarily relevant or useful outside 

that context. In contrast, while 

registered entities’ interest in having 

their part 40 and 41 submissions 

protected from disclosure may implicate 

the FOIA, it is separately in tension 

with their statutory responsibility to 

make certain information publicly 

available and with the Commission’s 

commitment to providing transparency 

where appropriate. It is this tension, not 

the filing of a FOIA request, that 

signifies ‘‘ripeness.’’ As discussed 

above, the Commission’s obligations are 

in some instances statutory. In other 

circumstances, the Commission has 

concluded as a matter of policy that 

public access information about 

products and trading mechanisms 

generally outweighs the asserted right of 

a registered entity to keep its 

information confidential. Without the 

measures provided by the proposed 

rulemaking, the Commission’s ability 

fully to consider the impact of a rule on 

the public would continue to be 

dependent on the filing of a FOIA 

request to trigger the resolution of 

confidentiality and disclosure issues. 

CME’s observation that such a request 

‘‘is likely never to be received’’ 24

highlights the necessity for the proposed 

regulation. The Commission frequently 

has been hobbled in its efforts to make 

information public by confidential 

treatment requests which, while 

perhaps not calculated to do so, can 

create a lengthy delay in the disclosure 

of information the Commission believes 

should be publicly available. The 

amendments we have proposed will 

permit the Commission to quickly 

resolve confidentiality issues in 

connection with material submitted 

pursuant to parts 40 and 41. 

In that regard, the CME questioned 

the fairness of the proposed regulation, 

asserting that it would prejudice FOIA 

requesters who would not have an 

opportunity to respond to an appeal 

under the procedures specified in the 

proposal. Similarly, the exchange 

expressed concern that because the 

Commission may reconsider a grant of 

confidential treatment if a FOIA request 

is subsequently made for the material, 

the registered entity would be required 

to submit a ‘‘new updated detailed 

written justification based on possible 

changed circumstances at the time of 

the appeal.’’ 25

The Commission believes these 

concerns are unwarranted. If an appeal 

were filed by a registered entity under 

the procedures specified in proposed 

regulation 40.8(c), no FOIA requester’s 

rights would be compromised, because 

the appeal would be based on staff’s 

initial determination to disclose the 

subject information prior to the filing of 

a FOIA request. Should a FOIA 

requester subsequently seek information 

given confidential treatment under 

regulation 40.8(c), the process would be 

governed by FOIA regulation 145.9, and 

both the FOIA requester and the 

submitter would have the appeal rights 

provided by regulation 145.9. In these 

circumstances, the Commission believes 

that fairness requires that the registered 

entity be given an opportunity to update 

its detailed written justification based 

on ‘‘possible changed circumstances at 

the time of the appeal’’ and to respond 

to specific arguments raised by the 

requester. An updated detailed written 

justification is not required, however, 

and the registered entity may opt 

instead to rely on its original 

justification. In such cases, the 

Commission’s decision would consider 

the registered entity’s detailed written 

justification submitted under regulation 

40.8(c) and the FOIA requester’s 

response to it, if any. Because the 

comments reflect some confusion in this 

regard, the Commission proposes to 

further amend proposed regulation 

40.8(c) to clarify that appeal rights and 

subsequent FOIA requests in which 

confidential treatment is an issue will 

continue to be governed by regulation 

145.9. 

Finally, the Commission is not 

persuaded by CME’s argument that the 

proposed regulation would impose 

numerous costs on the Commission, 

registered entities and FOIA requesters. 

All of the purported costs and burdens 

cited by the exchange appear to be 

premised on its misunderstanding that 

issues of disclosure exist only in the 

context of the FOIA and that their 

resolution prior to receipt of a FOIA 

request would be premature as well as 

duplicative. As discussed above, it is 

the Commission’s view that its ability to 

make information publicly available 

cannot depend upon circumstances 

outside its control—such as receipt of a 

FOIA request. Further, the registered 


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26 69 FR 67503 (Nov. 18, 2004). 

27 47 FR 18618, 18619 (April 30, 1982), 

discussing contract markets; 66 FR 42256, 42268 

(August 10, 2001), discussing exempt boards of 

trade, exempt commercial markets and derivatives 

transaction execution facilities; 66 FR 45605, 45609 

(August 29, 2001), discussing derivatives clearing 

organizations. 

entity may choose not to assume the 

burden and cost, if any, of updating its 

original detailed written justification in 

the event a subsequent FOIA request is 

received. The Commission nonetheless 

believes that fundamental fairness 

dictates that the registered entity be 

given the opportunity to do so. Finally, 

the exchange has not explained its claim 

that the proposed procedures would 

disadvantage FOIA requesters, either 

financially or otherwise. 

D. Proposed Amendment to Appendix 

D—Submission Cover Sheet and 

Instructions 

In 2004, the Commission amended the 

part 40 and 41 regulations to specify the 

portions of DTEF, DCO and DCM 

applications that are publicly available. 

At that time, the Commission also 

added Appendix D to the part 40 

regulations prescribing a Submission 

Cover Sheet to accompany all selfcertified rules, self-certified products, 

rules submitted for Commission 

approval, notifications of rule 

amendments, and non-material 

agricultural rule changes.26 To this end, 

Appendix D included a copy of the 

Submission Cover Sheet along with 

step-by-step instructions for completing 

and returning the form to the 

Commission. The cover sheet assists 

Commission staff in preparing and 

maintaining the accuracy of the 

submissions being published on the 

Commission’s Web site. In order to alert 

staff that a submission contains material 

that should not be published, the 

Commission proposes to amend the 

Submission Cover Sheet to include a 

prominently placed box to be checked 

when confidential treatment is being 

requested for any part of a submission 

filed pursuant to part 40 or 41. The 

Commission also proposes to amend 

Appendix D to part 40 to add an 

instruction to ensure that registered 

entities are fully aware that checking the 

‘‘confidential treatment requested’’ box 

on the Submission Cover Sheet in no 

way obviates the submitter’s 

responsibility to comply with the 

confidential treatment requirements 

established in proposed regulation 

40.8(c) and will not substitute either for 

notice or for full compliance with those 

requirements. 

E. Freedom of Information Act 

Amendments 

Commission regulation 145.9(b) 

defines the scope of the Commission’s 

confidential treatment regulations: Its 

provisions apply only where the 

Commission has not specified that an 

alternative procedure be utilized in 

connection with a particular study, 

report, investigation, or other matter. 

The Commission proposes to amend 

regulation 145.9(b) to reference the 

alternative procedure provided in 

regulation 40.8(c) for submissions filed 

under parts 40 and 41. 

III. Cost-Benefit Analysis 

Section 15(a) of the Act, as amended 

by section 119 of the CFMA, requires 

the Commission to consider the costs 

and benefits of its action before issuing 

a new regulation under the Act. By its 

terms, section 15(a) as amended does 

not require the Commission to quantify 

the costs and benefits of a new 

regulation or to determine whether the 

benefits of a regulation outweigh its 

costs. Rather, section 15(a) simply 

requires the Commission to ‘‘consider 

the costs and benefits’’ of its action. 

Section 15(a) of the Act further 

specifies that costs and benefits shall be 

evaluated in light of five broad areas of 

market and public concern: Protection 

of market participants and the public; 

efficiency, competitiveness, and 

financial integrity of futures markets; 

price discovery; sound risk management 

practices; and other public interest 

considerations. Accordingly, the 

Commission could, in its discretion, 

give greater weight to any one of the five 

enumerated areas and could, in its 

discretion, determine that, 

notwithstanding its costs, a particular 

regulation was 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. 

The Commission is considering the 

costs and benefits of these proposed 

regulations in light of the specified 

provisions of section 15(a) of the Act: 

1. Protection of market participants 

and the public. The proposed 

amendments should have no effect on 

the Commission’s ability to protect 

market participants and the public. 

2. Efficiency and competition. The 

proposed amendments are expected to 

benefit efficiency by making the nonconfidential information from registered 

entity submissions available to the 

public in a more timely manner. The 

Commission anticipates that the costs of 

compliance with the confidential 

treatment procedures will be minimal. 

The proposed amendments should have 

no effect, from the standpoint of 

imposing costs or creating benefits, on 

competition in the futures and options 

markets. 

3. Financial integrity of futures 

markets and price discovery. The 

amendments should have no effect, 

from the standpoint of imposing costs or 

creating benefits, on the financial 

integrity or price discovery function of 

the futures and options markets. 

4. Sound risk management practices. 

The amendments being proposed herein 

should have no effect on the risk 

management practices of the futures and 

options industry. 

5. Other public considerations. No 

additional public considerations could 

be determined. 

After considering these factors, the 

Commission has determined to propose 

the rules and rule amendments set forth 

below. The Commission invites public 

comment on its application of the costbenefit provision. Commenters also are 

invited to submit with their comment 

letters any data that they may have 

quantifying the costs and benefits of the 

proposal. 

IV. Related Matters 

A. Regulatory Flexibility Act 

The Regulatory Flexibility Act (RFA), 

5 U.S.C. 601 et seq. (2000), requires 

federal agencies, in proposing 

regulations, to consider the impact of 

those regulations on small entities. The 

regulations proposed herein would 

affect derivatives transaction execution 

facilities, designated contract markets, 

and derivatives clearing organizations. 

The Commission previously has 

determined that the foregoing entities 

are not small entities for purposes of the 

RFA.27 Accordingly, the Acting 

Chairman, on behalf of the Commission, 

hereby certifies pursuant to 5 U.S.C. 

605(b) that the proposed regulations 

will not have a significant economic 

impact on a substantial number of small 

entities. 

B. Paperwork Reduction Act of 1995 

This proposed rulemaking contains 

information collection requirements. As 

required by the Paperwork Reduction 

Act (PRA) of 1995, 44 U.S.C. 3504(h), 

the Commission has submitted a copy of 

this section to the Office of Management 

and Budget (OMB) for its review. 

Collection of Information: Rules 

Relating to part 40, Provisions Common 

to DCMs, DTEFs and DCOs, OMB 

Control Number 3038–0022. 

The expected effect of the proposed 

amended regulations will be to increase 

the burden previously approved by 

OMB for this collection of information 

by 16 hours as it will result in the filing 


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44944 Federal Register / Vol. 73, No. 149 / Friday, August 1, 2008 / Proposed Rules 

of approximately five additional pages 

when a registered entity files a detailed 

written justification and confidential 

appendix under Commission 

Regulations 40.2, 40.4, 40.5, and 40.6. 

The estimated burden was calculated 

as follows: 

Estimated number of respondents: 12. 

Annual responses by each 

respondent: .30. 

Total annual responses: 4. 

Estimated average hours per response: 

4. 

Annual reporting burden: 16. 

Collection of Information: Rules 

Relating to part 41, Security Futures 

Products, OMB Control Number 3038–

0059. 

The expected effect of the proposed 

amended regulations will be to increase 

the burden previously approved by 

OMB for this collection of information 

by 3.6 hours as it will result in the filing 

of approximately five additional pages 

when a registered entity files a detailed 

written justification and confidential 

appendix under Commission 

regulations 41.23 and 41.24. 

Estimated number of respondents: 3. 

Annual responses by each 

respondent: .30. 

Total annual responses: .90. 

Estimated average hours per response: 

4. 

Annual reporting burden: 3.6. 

Organizations and individuals 

desiring to submit comments on the 

information collection requirements 

should direct them to the Office of 

Information and Regulatory Affairs, 

Office of Management and Budget, 

Room 10202, New Executive Office 

Building, 725 17th Street, NW., 

Washington, DC 20503; Attention: Desk 

Officer for the Commodity Futures 

Trading Commission. 

In Compliance with the PRA, the 

Commission, through these proposed 

regulations, solicits comments to: (1) 

Evaluate whether the proposed 

collection of information is necessary 

for the proper performance of the 

functions of the Commission, including 

whether the information will have a 

practical use; (2) evaluate the accuracy 

of the Commission’s estimate of the 

burden of the proposed collection of 

information, including the validity of 

the methodology and assumptions used; 

(3) enhance the quality, usefulness, and 

clarity of the information to be 

collected; and (4) minimize the burden 

of collecting information 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, e.g., permitting 

electronic submission responses. 

OMB is required to make a decision 

concerning the collection of information 

contained in these proposed regulations 

between 30 and 60 days after 

publication of this document in the 

Federal Register. This does not affect 

the deadline for the public to comment 

to the Commission on the proposed 

regulations. 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. 

List of Subjects 

17 CFR Part 40 

Commodity futures, Contract markets, 

Designation application, Reporting and 

recordkeeping requirements. 

17 CFR Part 41 

Security Futures. 

17 CFR Part 145 

Commission records and information. 

For the reasons stated in the 

preamble, the Commission proposes to 

amend 17 CFR parts 40, 41, and 145 as 

follows: 

PART 40—PROVISIONS COMMON TO 

CONTRACT MARKETS, DERIVATIVES 

TRANSACTION EXECUTION 

FACILITIES AND DERIVATIVES 

CLEARING ORGANIZATIONS 

1. The authority citation for part 40 

continues to read as follows: 

Authority: 7 U.S.C. 1a, 2, 5, 6, 6c, 7, 7a, 

8 and 12a, as amended by appendix E of Pub. 

L. 106–554, 114 Stat. 2763A–365. 

2. Section 40.2 is amended by adding 

paragraph (a)(3)(v) to read as follows: 

§ 40.2 Listing Products for trading by 

certification. 

(a) * * * 

(3) * * * 

(v) A request for confidential 

treatment as permitted under the 

procedures of § 40.8. 

* * * * * 

3. Section 40.3 is amended by revising 

paragraph (a)(7) to read as follows: 

§ 40.3 Voluntary submission of new 

products for Commission review and 

approval. 

(a) * * * 

(7) Include a request for confidential 

treatment as permitted under the 

procedures of § 40.8. 

* * * * * 

4. Section 40.5 is amended by revising 

paragraph (a)(8) to read as follows: 

§ 40.5 Voluntary submission of rules for 

Commission review and approval. 

(a) * * * 

(8) Include a request for confidential 

treatment as permitted under the 

procedures of § 40.8. 

* * * * * 

5. Section 40.6 is amended by adding 

new paragraph (a)(3)(vi) to read as 

follows: 

§ 40.6 Self-certification of rules by 

designated contract markets and registered 

derivatives clearing organizations. 

(a) * * * 

(3) * * * 

(vi) A request for confidential 

treatment as permitted under the 

procedures of § 40.8. 

* * * * * 

6. Section 40.8 is amended by adding 

new paragraphs (c) and (d) to read as 

follows: 

§ 40.8 Availability of public information. 

* * * * * 

(c) A registered entity’s filing of new 

products under the self-certification 

procedures, new products for 

Commission review and approval, new 

rules and rule amendments for 

Commission review and approval, and 

new rules and rule amendments 

submitted under the self-certification 

procedures will be treated as public 

information unless covered by a request 

for confidential treatment. If a registered 

entity files a request for confidential 

treatment, the following procedures will 

apply: 

(1) A detailed written justification of 

the confidential treatment request must 

be filed simultaneously with the request 

for confidential treatment. The form and 

content of the detailed written 

justification shall be governed by 

§ 145.9(e) of this chapter; 

(2) All material for which confidential 

treatment is requested must be 

segregated in an appendix to the 

submission; 

(3) The submission itself must 

indicate that material has been 

segregated and, as appropriate, redacted; 

(4) Commission staff may make an 

initial determination with respect to the 

request for confidential treatment 

without regard to whether a request for 

the information has been sought under 

the Freedom of Information Act; 

(5) A submitter of information under 

this Part may appeal an adverse 

decision by staff to the Commission’s 

Office of General Counsel. The form and 

content of such appeal shall be 

governed by § 145.9(g) of this chapter. 

(6) The grant of any part of a request 

for confidential treatment under this 

section may be reconsidered if a 

subsequent request under the Freedom 

of Information Act is made for the 

information. 


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Federal Register / Vol. 73, No. 149 / Friday, August 1, 2008 / Proposed Rules 44945 

(d) Commission staff will not consider 

requests for confidential treatment of 

information that is required to be made 

public under Section 5(d)(7) of the Act 

or Commission Regulations 40.3(a)(7) or 

40.5(a)(8). 

6. Appendix D is amended by adding 

a new sentence to the end of section 8, 

‘‘Other requirements,’’ to read as 

follows: 

Appendix D to Part 40—Submission 

Cover Sheet and Instructions 

* * * * * 

(8) Other requirements—* * * Checking 

the box marked ‘‘confidential treatment 

requested’’ on the Submission Cover Sheet 

does not obviate the submitter’s 

responsibility to comply with all applicable 

requirements for requesting confidential 

treatment in Rule 40.8(c) and, where 

appropriate, Rule 145.9, and will not 

substitute for notice or full compliance with 

such requirements. 

* * * * * 

PART 41—SECURITY FUTURES 

PRODUCTS 

7. The authority citation for part 41 

continues to read as follows: 

Authority: Sections 206, 251 and 252, Pub. 

L. 106–554, 114 Stat. 2763, 7 U.S.C. 1a, 2, 6f, 

6j, 7a–2, 12a; 15 U.S.C. 78g(c)(2). 

8. Section 41.23 is amended by 

adding new paragraph (a)(7) to read as 

follows: 

§ 41.23 Listing of security futures 

products for trading. 

(a) * * * 

(7) Includes a request for confidential 

treatment as permitted under the 

procedures of § 40.8. 

* * * * * 

9. Section 41.24 is amended by 

adding new paragraph (a)(6) to read as 

follows: 

§ 41.24 Rule amendments to security 

futures products. 

(a) * * * 

(6) Includes a request for confidential 

treatment as permitted under the 

procedures of § 40.8. 

* * * * * 

PART 145—COMMISSION RECORDS 

AND INFORMATION 

10. The authority for part 145 

continues to read as follows: 

Authority: Pub. L. 99–570, 100 Stat. 3207; 

Pub. L. 89–554, 80 Stat. 383; Pub. L. 90–23, 

81 Stat. 54; Pub. L. 98–502, 88 Stat. 1561–

1564 (5 U.S.C. 552); Sec. 101(a), Pub. L. 93–

463, 88 Stat. 1389 (5 U.S.C. 4a(j)); unless 

otherwise noted. 

11. Section 145.9 is amended by 

revising paragraph (b) to read as follows: 

§ 145.9 Petition for confidential treatment 

of information submitted to the 

Commission. 

* * * * * 

(b) Scope. The provisions of this 

section shall apply only where the 

Commission has not specified that an 

alternative procedure be utilized in 

connection with a particular study, 

report, investigation, or other matter. 

See § 40.8 for procedures to be utilized 

in connection with filing information 

required to be filed pursuant to 17 CFR 

parts 40 and 41. 

* * * * * 

Issued in Washington, DC on July 23, 2008, 

by the Commission. 

David Stawick, 

Secretary of the Commission. 

[FR Doc. E8–17529 Filed 7–31–08; 8:45 am] 

BILLING CODE 6351–01–P 

DELAWARE RIVER BASIN 

COMMISSION 

18 CFR Part 410 

Proposed Amendments to the Water 

Code and Comprehensive Plan To 

Implement a Revised Water Audit 

Approach to Identify and Control Water 

Loss 

AGENCY: Delaware River Basin 

Commission. 

ACTION: Proposed rule; notice of public 

hearing. 

SUMMARY: The Delaware River Basin 

Commission (‘‘Commission’’ or 

‘‘DRBC’’) will hold a public hearing to 

receive comments on proposed 

amendments to the Commission’s Water 

Code and Comprehensive Plan to phase 

in a requirement for water purveyors to 

follow a revised water audit approach to 

identify and control water loss. 

DATES: Comments: Written comments 

must be received by 5 p.m. October 3, 

2008. 

Meeting and public hearing: The 

Commission will hold an informational 

meeting on Wednesday, September 10, 

2008 from 4 p.m. to 6 p.m. The 

Commission also will hold a public 

hearing on Thursday, September 25, 

2008 at the Commission’s office 

building. The hearing will begin at 1:30 

p.m. and will continue until all those 

who wish to testify are afforded an 

opportunity to do so. For more 

information regarding the procedures 

for these hearings and comments, see 

SUPPLEMENTARY INFORMATION. 

ADDRESSES: The informational meeting 

and public hearing will be held at the 

Commission’s office building, which is 

located at 25 State Police Drive, West 

Trenton, New Jersey. Driving directions 

are available on the Commission’s Web 

site—http://www.drbc.net. Please do not 

rely on Internet mapping services as 

they may not provide accurate 

directions to the DRBC. 

FOR FURTHER INFORMATION, CONTACT: For 

further information, please contact 

Pamela Bush, Commission Secretary 

and Assistant General Counsel, 

Delaware River Basin Commission, at 

609–883–9500 ext. 203. 

SUPPLEMENTARY INFORMATION: Persons 

wishing to testify at the public hearing 

are asked to register in advance by 

phoning Ms. Paula Schmitt at 609–883–

9500, ext. 224. 

Written comments may be submitted 

as follows: If by e-mail, to 

paula.schmitt@drbc.state.nj.us; if by fax, 

to Commission Secretary at 609–883–

9522; if by U.S. Mail, to Commission 

Secretary, DRBC, P.O. Box 7360, West 

Trenton, NJ 08628–0360; or if by 

overnight mail, to Commission 

Secretary, DRBC, 25 State Police Drive, 

West Trenton, NJ 08628–0360. In all 

cases, please include the commenter’s 

name, address and affiliation, if any, in 

the comment document and include 

‘‘Water Audit’’ in the subject line. 

Background. An estimated 150 

million gallons of treated and 

pressurized water is physically lost from 

public water supply distribution 

systems in the Delaware River Basin per 

day and current methods to account for, 

track and reduce this loss are 

inadequate. 

The purpose of the proposed 

amendments is to phase in a program 

requiring water purveyors to perform a 

water audit and report their findings in 

accordance with a new audit structure 

established by the American Water 

Works Association (AWWA) and the 

International Water Association (IWA). 

These new methods are widely regarded 

as superior to the existing approach, 

which entails tracking ‘‘unaccounted for 

water,’’ which is no longer considered 

best practice. 

The new water audit methodology 

provides a rational approach that will 

facilitate more consistent tracking and 

reporting than the existing approach 

allows. It will help water managers and 

regulators, including the Commission, 

state agencies, and utility managers, 

target their efforts to improve water 

supply efficiency, thereby reducing 

water withdrawals. Improving water 

accountability will contribute to 

achieving objective 1.3.C of the Water 

Resources Plan for the Delaware River 

Basin, which calls for ensuring 


jlentini on PROD1PC65 with PROPOSALS