Federal Register / Vol. 74, No. 250 / Thursday, December 31, 2009 / Rules and Regulations 69279 

1 74 FR 21290 (May 7, 2009). Copies of the 

Proposing Release and the comment letters received 

by the Commission are also available on the 

Commission’s Web site at http://www.cftc.gov. 

2The Act is codified at 7 U.S.C. 1 et seq. 

3The Commission regulations cited herein may 

be found at 17 CFR Ch. I (2009). 

4The Proposing Release also included a query 

soliciting comment on a topic for which no 

amendments to Commission regulations have yet 

been proposed. Specifically, the Commission asked 

for comment on the advisability of expanding ANC 

requirements for FCMs that are also securities 

brokers and dealers, by increasing their ANC by the 

amount of net capital required by SEC Rule 15c3– 

1(a). No commenter supported this potential 

revision of FCM/BD capital requirements. 

Long. 112°37′54′′ W; to point of 

beginning. 

§ 93.177 Operations in the Special Air 

Traffic Rule Area. 

(a) Unless otherwise authorized by 

Air Traffic Control (ATC), no person 

may operate an aircraft in flight within 

the Luke Terminal Area designated in 

§ 93.176 unless— 

(1) Before operating within the Luke 

Terminal area, that person establishes 

radio contact with the Luke RAPCON; 

and 

(2) That person maintains two-way 

radio communication with the Luke 

RAPCON or an appropriate ATC facility 

while within the designated area. 

(b) Requests for deviation from the 

provisions of this section apply only to 

aircraft not equipped with an 

operational radio. The request must be 

submitted at least 24 hours before the 

proposed operation to Luke RAPCON. 

Issued in Washington, DC, on December 

18, 2009. 

J. Randolph Babbitt, 

Administrator. 

[FR Doc. E9–30938 Filed 12–30–09; 8:45 am] 

BILLING CODE 4910–13–P 

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Part 1 

RIN 3038–AC66 

Revised Adjusted Net Capital 

Requirements for Futures Commission 

Merchants and Introducing Brokers 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Final rules. 

SUMMARY: The Commodity Futures 

Trading Commission (‘‘Commission’’) is 

amending its regulations that prescribe 

minimum adjusted net capital 

requirements for futures commission 

merchants (‘‘FCMs’’) and introducing 

brokers (‘‘IBs’’). The amendments: 

increase the required minimum dollar 

amount of adjusted net capital that an 

IB must maintain from $30,000 to 

$45,000; increase the required minimum 

dollar amount of adjusted net capital 

that an FCM must maintain from 

$250,000 to $1,000,000; amend the 

computation of an FCM’s margin-based 

minimum adjusted net capital 

requirement to incorporate into the 

calculation customer and noncustomer 

positions in over-the-counter derivative 

instruments that are submitted for 

clearing by the FCM to derivatives 

clearing organizations (‘‘DCOs’’) or other 

clearing organizations (‘‘cleared OTC 

derivative positions’’); specify capital 

deductions for FCM proprietary cleared 

OTC derivative positions based on the 

deductions required by the 

Commission’s regulations for FCM 

proprietary positions in exchangetraded futures contracts and options 

contracts; and amend the FCM capital 

computation to increase the applicable 

percentage of the total margin-based 

requirement for futures, options and 

cleared OTC derivative positions in 

noncustomer accounts to eight percent. 

DATES: Effective March 31, 2010. 

FOR FURTHER INFORMATION CONTACT: 

Thelma Diaz, Associate Director, 

Division of Clearing and Intermediary 

Oversight, 1155 21st Street, NW., 

Washington, DC 20581. Telephone 

number: 202–418–5137; facsimile 

number: 202–418–5547; and electronic 

mail: tdiaz@cftc.gov or Mark Bretscher, 

Attorney-Advisor, Division of Clearing 

and Intermediary Oversight, Commodity 

Futures Trading Commission, 525 W. 

Monroe, Suite 1100, Chicago, Illinois 

60661. Telephone number: 312–596– 

0529; facsimile number: 312–596–0714; 

and electronic mail: 

mbretscher@cftc.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background 

On May 7, 2009, the Commission 

published in the Federal Register for 

public comment proposed amendments 

to the minimum financial requirements 

applicable to FCMs and IBs (‘‘Proposing 

Release).1 As noted in the Proposing 

Release, Section 4f(b) of the Commodity 

Exchange Act (‘‘Act’’) provides that 

FCMs and IBs must meet such 

minimum financial requirements as the 

Commission may prescribe to insure 

that FCMs and IBs meet their 

obligations as registrants.2 FCMs are 

subject to greater capital requirements 

than IBs because the Act permits FCMs, 

but not IBs, to hold funds of customers 

trading on designated contract markets 

and to clear such customer positions 

with a DCO. CFTC Regulation 1.17 

currently requires IBs and FCMs to 

maintain adjusted net capital of $30,000 

and $250,000 respectively, or to 

maintain some greater amount as 

determined under other calculations 

required by the regulation.3

Specifically, Commission Regulation 

1.17(a)(1)(iii) requires that IBs maintain 

adjusted net capital in an amount that 

equals or exceeds the greatest of: 

$30,000; the amount of adjusted net 

capital required by a registered futures 

association of which the IB is a member; 

or, if the FCM is also a securities broker 

and dealer registered with the U.S. 

Securities and Exchange Commission 

(‘‘SEC’’), the amount of net capital 

required by SEC Rule 15c3–1(a), 17 CFR 

§ 240.15c3–1(a). Regulation 1.17(a)(1)(i) 

requires FCMs to maintain adjusted net 

capital equal to or in excess of the 

greatest of: $250,000; the FCM’s marginbased or ‘‘risk-based’’ capital 

requirement, which is determined by 

adding together eight percent of the total 

risk margin requirement for positions in 

customer accounts, plus four percent of 

the total risk margin requirement for 

positions carried in noncustomer 

accounts; the amount of adjusted net 

capital required by a registered futures 

association of which the FCM is a 

member; or, for an FCM also registered 

with the SEC as securities broker and 

dealer, the amount of net capital 

required by SEC Rule 15c3–1(a). 

As described in the Proposing 

Release, the Commission proposed 

several amendments to Regulation 

1.17(a) that generally would increase the 

adjusted net capital requirements of 

FCMs and IBs. The comment period 

closed 60 days after publication in the 

Federal Register of the Proposing 

Release, during which nine comment 

letters were received. Responses were 

submitted by Mindy Yost (‘‘Yost’’), an 

individual non-registrant; Newedge 

USA, LLC (‘‘Newedge’’), an FCM/ 

broker-dealer; MF Global, Inc. (‘‘MF 

Global’’), an FCM; R.J. O’Brien & 

Associates, LLC (‘‘RJO’’), an FCM; 

FCStone, LLC (‘‘FC Stone’’), an FCM; 

the Securities Industry and Financial 

Markets Association (‘‘SIFMA’’); CME 

Group, Inc. (‘‘CME’’); the Futures 

Industry Association (‘‘FIA’’); and the 

National Futures Association (‘‘NFA’’). 

The concerns and suggestions of each of 

the commenters are addressed below, in 

connection with the description of the 

amendments being adopted by the 

Commission.4


erowe on DSK5CLS3C1PROD with RULES
69280 Federal Register / Vol. 74, No. 250 / Thursday, December 31, 2009 / Rules and Regulations 

5The objections in Yost’s letter were directed 

primarily to the requirement for her to register as 

an IB. 

6The term noncustomer refers generally to 

affiliated persons of the FCM, including certain 

officers and other employees. 

7The term ‘‘risk margin’’ is defined at 

Commission Regulation 1.17(b)(8). 

8 In general, an FCM’s proprietary futures and 

granted options positions are subject to a deduction 

equal to 100 percent of the maintenance margin 

requirement for positions that are cleared by 

clearing organizations of which the FCM is a 

clearing member, and 150 percent of the 

maintenance margin requirement for positions that 

are cleared by clearing organizations of which the 

FCM is not a clearing member. 

9OTC derivative instrument is defined by Section 

408(2) of the Federal Deposit Insurance Corporation 

Improvement Act, 12 U.S.C.A. § 4421. As defined 

there, the term ‘‘over-the-counter derivative 

instrument’’ includes ‘‘(A) any agreement, contract, 

or transaction, including the terms and conditions 

incorporated by reference in any such agreement, 

contract, or transaction, which is an interest rate 

swap, option, or forward agreement, including a 

rate floor, rate cap, rate collar, cross-currency rate 

swap, basis swap, and forward rate agreement; a 

same day-tomorrow, tomorrow-next, forward, or 

other foreign exchange or precious metals 

agreement; a currency swap, option, or forward 

agreement; an equity index or equity swap, option, 

or forward agreement; a debt index or debt swap, 

option, or forward agreement; a credit spread or 

credit swap, option, or forward agreement; a 

commodity index or commodity swap, option, or 

forward agreement; and a weather swap, weather 

derivative, or weather option; (B) any agreement, 

contract or transaction similar to any other 

agreement, contract, or transaction referred to in 

this clause that is presently, or in the future 

becomes, regularly entered into by parties that 

participate in swap transactions (including terms 

and conditions incorporated by reference in the 

agreement) and that is a forward, swap, or option 

on one or more occurrences of any event, rates, 

currencies, commodities, equity securities or other 

equity instruments, debt securities or other debt 

instruments, economic or other indices or measures 

of economic or other risk or value; (C) any 

agreement, contract, or transaction excluded from 

the Commodity Exchange Act under section 2(c), 

2(d), 2(f), or 2(g) of such Act, or exempted under 

section 2(h) or 4(c) of such Act; and (D) any option 

to enter into any, or any combination of, 

agreements, contracts or transactions referred to in 

this subparagraph.’’ 

10Examples of Commission orders under Section 

4d of the Act related to OTC clearing by DCOs 

include an Order dated May 30, 2002 regarding 

Treatment of Funds Held in Connection with the 

Clearing of Over-the-Counter Products by the New 

York Mercantile Exchange, and also Orders dated 

March 3, 2006 and September 26, 2008 regarding 

Treatment of Funds Held in Connection with the 

Clearing of Over-the-Counter Products by Chicago 

Mercantile Exchange, Inc. 

II. Required Minimum Dollar Amount 

of Adjusted Net Capital for IBs and 

FCMs 

As noted above, Regulation 1.17(a) 

includes the capital requirements 

established by registered futures 

associations when determining the level 

of adjusted net capital that FCM and IBs 

must maintain. On July 31, 2006, the 

NFA, the sole registered futures 

association, adopted minimum dollar 

amount requirements of $45,000 for IBs 

and $500,000 for FCMs. These same 

amounts therefore were effectively 

applied in 2006 as adjusted net capital 

requirements for IBs and FCMs under 

CFTC Regulation 1.17(a). 

The Proposing Release proposed 

amending Regulation 1.17(a)(1) to revise 

the specified dollar amounts in CFTC 

Regulation 1.17(a)(1) from $30,000 to 

$45,000 for IBs and from $250,000 to $1 

million for FCMs. In light of existing 

NFA requirements, only the proposal to 

increase the minimum dollar amount 

requirement for FCMs would result in 

an actual change in adjusted net capital 

requirements. The effect of such a 

change also would be minimized 

because, as of September 30, 2009, all 

but two FCMs holding customer funds 

already maintain adjusted net capital of 

$1 million or more. 

As noted in the Proposing Release, the 

adjusted net capital requirements 

adopted in 1996 of $30,000 for IBs and 

$250,000 for FCMs do not reflect 

inflation and generally are no longer 

consistent with the regulatory objective 

of requiring registrants to maintain a 

minimum base of liquid capital from 

which to meet their financial 

obligations, including their obligations 

to customers. Comparing certain aspects 

of the industry then and now, the 

Commission noted that as of August 31, 

1995, there were 255 FCMs, which in 

total were required to hold 

approximately $30 billion of segregated 

and secured amount funds for their 

customers. By June 30, 2009, the total 

amount of such funds had escalated to 

approximately $175 billion, which 132 

FCMs were required to hold for their 

customers. Thus, not only has there 

been a dramatic increase in the amounts 

that FCMs must hold for their 

customers, but those funds have become 

concentrated among far fewer FCMs. As 

an additional measure to ensure the 

sound financial strength of FCMs and 

IBs, the Commission therefore proposed 

revising the minimum dollar amount 

requirements for FCMs and IBs in CFTC 

Regulation 1.17(a). 

The comments received by the 

Commission generally supported the 

revised minimum dollar amounts or 

offered no comment regarding such 

amounts.5 RJO, CME and the NFA 

expressly supported the proposal to 

increase the minimum dollar amount 

capital requirement for FCMs and IBs. 

FIA also supported the increase in the 

minimum dollar amount for FCM 

capital requirements, and noted that IBs 

were already required by the NFA to 

maintain adjusted net capital of at least 

$45,000. SIFMA’s comment was that it 

lacked sufficient information, either 

from the CFTC or derived on its own, 

on which to base a comment, while the 

letters from FC Stone and Newedge 

were silent on the proposed 

amendments to revise the specified 

dollar amounts in CFTC Regulation 

1.17(a)(1). For the reasons described 

above, the Commission has determined 

to adopt the revised minimum dollar 

amounts as proposed in the Proposing 

Release. 

III. Cleared OTC Positions in FCM 

Capital Calculations 

In 2004, the Commission amended 

Regulation 1.17(a)(1)(i)(B) to include a 

‘‘risk-based’’ capital computation based 

on margin, or performance bond, 

requirements applicable to positions 

carried by the FCM for its customers 

and noncustomers.6 Specifically, 

Commission Regulation 1.17(a)(1)(i)(B) 

was amended to require an FCM to 

compute its risk-based capital 

requirement as the sum of: (1) Eight 

percent of the total risk margin 7

requirement for positions carried by the 

FCM in customer accounts and (2) four 

percent of the total risk margin 

requirement for positions carried by the 

FCM in noncustomer accounts. The 

Commission did not revise its 

regulations with respect to proprietary 

futures and granted options positions of 

FCMs, as such positions were already 

subject to capital deductions under 

Commission Regulation 1.17(c)(5)(x).8

The Proposing Release noted that the 

risk-based calculations of FCMs include 

margin requirements for positions in 

cleared OTC derivative instruments 9

held in customer segregated accounts 

governed by Section 4d of the Act and 

Commission regulations. Various DCOs, 

as part of their increasing efforts to clear 

OTC derivative instruments, have 

requested Commission orders 

authorizing their clearing FCMs to 

commingle customers’ money, 

securities, and other property margining 

OTC-cleared derivative positions with 

the money, securities, and other 

property deposited by said customers to 

margin futures and options positions in 

segregated accounts established 

pursuant to Section 4d of the Act.10

Therefore, the risk exposure of clearing 

OTC derivative instruments extends not 

only to the FCM, but also to the 

segregated funds of its OTC, futures and 

options customers. Where OTC 

customer funds are commingled with 

the funds of futures and options 

customers, the Commission has deemed 

it necessary to include OTC customer 

positions in the definition of ‘‘customer 


erowe on DSK5CLS3C1PROD with RULES
Federal Register / Vol. 74, No. 250 / Thursday, December 31, 2009 / Rules and Regulations 69281 

11 Included in such continued review and 

analysis is the possible revision of the definition of 

‘‘cover’’ in 1.17(j) with respect to cleared OTC 

derivative instruments, for which the Commission 

requested comment but did not propose any 

specific amendments in the Proposing Release. 

Only the CME and NFA commented on this 

question, and both agreed with the general 

proposition that the definition should be revised to 

reflect that proprietary positions in cleared OTC 

derivatives instruments may be covered by 

positions that would qualify as cover for proprietary 

futures and option positions. 

12The term ‘‘person’’ is defined in CFTC 

Regulation 1.3(u). 

accounts’’ for purposes of computing an 

FCM’s risk-based capital requirement. 

FCMs may also, however, clear OTC 

derivative instruments for which the 

margin received from customers is not 

held in segregated accounts under 

Section 4d of the Act. The Proposing 

Release therefore included amendments 

to enhance and update the provisions of 

Regulation 1.17 to reflect the increase in 

clearing by FCMs of OTC derivative 

instruments. Under the proposed 

amendments to paragraphs (b) and (c) of 

Regulation 1.17, the capital treatment 

for all cleared OTC derivative 

instrument positions would be similar 

to the capital treatment applicable to 

exchange-traded futures and options 

positions that are carried by the FCM for 

itself, its customers, or its 

noncustomers. 

Five commenters (RJO, MF Global, 

CME, FIA and the NFA) supported the 

Commission’s proposal to require FCMs 

to account for all cleared OTC derivative 

positions carried for customers and 

noncustomers in their risk-based capital 

calculations. They also supported the 

Commission’s proposal to require FCMs 

to take proprietary capital deductions 

for their cleared OTC derivative 

positions similar to the capital 

deductions required for their 

proprietary futures and options 

positions. Yost, FC Stone and Newedge 

made no comments regarding either 

proposal, and SIFMA stated that it was 

unable to offer a definitive view on the 

appropriateness of the proposed 

changes and suggested that the 

Commission refrain from taking action 

pending further analysis of the issue. 

SIFMA also expressed concern that the 

capital requirements for cleared OTC 

positions be coordinated among 

regulators to prevent regulatory 

arbitrage or capital disincentives to clear 

such transactions. 

The adoption of the proposed 

amendments will neither prohibit nor 

inhibit the existing interaction among 

Commission staff and the staff members 

of other regulators of financial 

institutions regarding matters of 

common interest and concern. To the 

extent that new developments related to 

clearing suggest that further 

modification of the Commission’s 

capital regulations may be appropriate, 

the Commission may proceed, as 

applicable, by issuing appropriate 

interpretive guidance to FCMs or by 

requesting notice and comment on other 

proposed amendments to its 

regulations.11

The Commission has therefore 

adopted the amendments to 1.17(b) and 

(c) as proposed in the Proposing 

Release. As hereby amended, the terms 

proprietary account, noncustomer 

account, and customer account, as 

defined in Regulations 1.17(b)(3), (b)(4), 

and (b)(7), are expanded to include 

‘‘cleared OTC derivative positions’’, 

which are defined in Regulation 

1.17(b)(9) as the over the counter 

derivative instrument positions of any 

person 12 in accounts carried on the 

books of the FCM and cleared by any 

organization permitted to clear such 

instruments under the laws of the 

relevant jurisdiction. Additionally, the 

term ‘‘cleared OTC customers’’ is 

defined in paragraph (b)(10), and such 

customers have been included among 

the FCM customers listed in paragraph 

(b)(2) of Regulation 1.17. Finally, the 

Commission has amended Regulation 

1.17(c)(5)(x) to require FCMs to take 

proprietary capital deductions for their 

cleared OTC derivative positions similar 

to the capital deductions required for 

their proprietary futures and options 

positions. 

III. Increasing Risk Margin Percentage 

for Noncustomer Positions 

The Commission also proposed 

amending Regulation 1.17 so that an 

FCM’s risk-based capital requirement 

would be ten percent of the total risk 

margin requirement for positions carried 

by the FCM in both customer accounts 

and noncustomer accounts. The 

proposed increase represented a more 

significant increase with respect to 

noncustomer accounts, as the FCM’s 

risk-based capital calculations currently 

includes a lower required percentage of 

risk maintenance margin for 

noncustomer positions (four percent) 

than the required percentage for the 

same positions in customer accounts 

(eight percent). 

The Commission received no 

comments supporting the general 

increase for all margin-based capital 

calculations to ten percent. The reasons 

cited for this lack of support varied 

among the commenters, but the 

Commission is mindful that a common 

underlying theme was that such an 

indiscriminate, broad-brush approach 

may be inconsistent with the current 

financial environment’s continuing 

shifts and alterations. In contrast, the 

majority of commenters (RJO, MF 

Global, CME, FIA and the NFA) 

endorsed the Commission’s proposed 

amendment to increase from four 

percent to eight percent the required 

percentage applicable to noncustomer 

accounts in the risk-based capital 

calculations of FCMs. In proposing this 

amendment, the Commission had noted 

that when the lower risk margin 

percentage for noncustomer positions 

had been adopted in 2004, the 

Commission and the self-regulatory 

organizations believed that 

noncustomers’ accounts reflected less 

credit risk to FCMs and the clearing 

system because they were guaranteed by 

a parent organization or other affiliated 

entity. However, the majority of the 

commenters agreed with the 

Commission’s conclusion in the 

Proposing Release that recent events 

had demonstrated that the risk 

associated with noncustomer accounts 

may not necessarily be less than the risk 

associated with customer accounts. The 

Commission has therefore adopted as 

proposed the amendment to Regulation 

1.17(a) that requires the application of 

the same percentage with respect to the 

noncustomer and customer risk margin 

requirements, thus requiring the FCM’s 

total risk margin requirement to be 

multiplied by eight percent. 

IV. Effective Date 

The Commission stated in the 

Proposing Release that it was 

contemplating an effective date of sixty 

days after publication in the Federal 

Register of any of the amendments 

adopted as final by the Commission. 

The Commission received comments 

from both the FIA and NFA on this 

topic, each of whom urged a longer 

period of time before the effective date, 

in order to avoid a potential undue 

burden as a result of the increased 

capital requirements being adopted for 

FCMs. FIA suggested a period of 120 

days after publication before the 

effective date, while NFA stated only 

that the period should be longer than 60 

days. Taking into consideration these 

comments and the purposes of the 

capital requirements adopted by this 

final rulemaking, the amendments 

adopted herein will be effective as of the 

date 90 days after their publication in 

the Federal Register. 

V. Related Matters 

A. Regulatory Flexibility Act 

The Regulatory Flexibility Act 

(‘‘RFA’’), 5 U.S.C. 601 et seq., requires 


erowe on DSK5CLS3C1PROD with RULES
69282 Federal Register / Vol. 74, No. 250 / Thursday, December 31, 2009 / Rules and Regulations 

13See 47 FR 18618, 18619 (Apr. 30, 1982). 

14 74 FR 21293 (May 7, 2009). 

15 7 U.S.C. 19(a). 

that agencies, in amending their rules, 

consider the impact of those 

amendments on small businesses. The 

Commission has previously determined 

that, based upon the fiduciary nature of 

FCM/customer relationships, as well as 

the requirement that FCMs meet 

minimum financial requirements, FCMs 

should be excluded from the definition 

of small entity.13 With respect to IBs, 

the amendment to the minimum 

adjusted net capital requirement for an 

IB merely conforms the Commission’s 

requirement to that of the NFA and, 

therefore, should have no impact on an 

IB’s financial operations. Thus, the 

proposal has no significant economic 

impact on IBs. Accordingly, the 

Chairman, on behalf of the Commission, 

hereby certifies, pursuant to 5 U.S.C. 

§ 605(b), that the action it is taking 

herein will not have a significant 

economic impact on a substantial 

number of small entities. 

B. Paperwork Reduction Act 

The Paperwork Reduction Act of 

1995, (‘‘PRA’’) 44 U.S.C. 3501 et seq., 

imposes certain requirements on 

Federal agencies (including the 

Commission) in connection with their 

conducting or sponsoring any collection 

of information as defined by the PRA. 

This rulemaking does not include any 

increase in information collection 

requirements. The increase in the 

percentage requirements applicable to 

risk margin requirements for customer 

and noncustomer positions included in 

risk-based capital calculation 

constitutes a minor change to line item 

22 of the Form 1–FR–FCM, as does the 

minor change to Line 16 to include 

OTC-cleared products, but neither 

change would alter the related reporting 

burden. The above analysis was 

included in the proposing release, and 

as required by the PRA, the Commission 

submitted a copy of this section to the 

Office of Management and Budget 

(‘‘OMB’’) for its review. No comments 

were received in response to the 

Commission’s invitation in the notice of 

proposed rulemaking 14 to comment on 

any change in the potential paperwork 

burden associated with these rule 

amendments. 

C. Cost-Benefit Analysis 

Section 15(a) of the Act, as amended 

by Section 119 of the Commodity 

Futures Modernization Act,15 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 the proposed regulation 

outweigh its costs. Rather, Section 15(a) 

simply requires the Commission to 

‘‘consider the costs and benefits’’ of its 

action. 

Section 15(a) 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. The 

Commission, in its discretion, can 

choose to give greater weight to any one 

of the five enumerated areas and 

determine that, notwithstanding its 

costs, a particular regulation 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. 

The Commission has considered the 

costs and benefits of the proposed 

amendments and determined that the 

amendments will result in additional 

protection of market participants and 

the public, enhancements to sound risk 

management practices, enhanced 

financial integrity of futures markets 

and other public interest considerations 

and should have minimal or no effect on 

the following areas: efficiency, 

competitiveness or price discovery. 

After considering these factors, the 

Commission has determined to adopt 

the amendments to Regulation 1.17 as 

discussed herein. 

List of Subjects in 17 CFR Part 1 

Brokers, Commodity futures, 

Minimum financial requirements, 

Reporting and recordkeeping 

requirements. 

■ Accordingly, 17 CFR Chapter I is 

amended 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. Section 1.17 is amended by: 

■ a. Revising paragraphs (a)(1)(i)(A), 

(a)(1)(i)(B), and (a)(1)(iii)(A); 

■ b. Revising paragraphs (b)(2), (b)(3), 

introductory text of (b)(4), introductory 

text of (b)(7) and introductory text of 

(b)(8); 

■ c. Adding new paragraphs (b)(9) and 

(b)(10); and 

■ d. Revising the introductory text of 

paragraph (c)(5)(x) to read as follows: 

§ 1.17 Minimum financial requirements for 

futures commission merchants and 

introducing brokers. 

(a)(1)(i) * * * 

(A) $1,000,000; 

(B) The futures commission 

merchant’s risk-based capital 

requirement, computed as eight percent 

of the total risk margin requirement for 

positions carried by the futures 

commission merchant in customer 

accounts and noncustomer accounts. 

* * * * * 

(iii) * * * 

(A) $45,000; 

* * * * * 

(b) * * * 

(1) * * * 

(2) Customer means customer (as 

defined in § 1.3(k)), option customer (as 

defined in § 1.3(jj) and in § 32.1(c) of 

this chapter), cleared over the counter 

customer (as defined in § 1.17(b)(10)), 

and includes a foreign futures, foreign 

options customer (as defined in § 30.1(c) 

of this chapter). 

(3) Proprietary account means an 

account in which commodity futures, 

options or cleared over the counter 

derivative positions are carried on the 

books of the applicant or registrant for 

the applicant or registrant itself, or for 

general partners in the applicant or 

registrant. 

(4) Noncustomer account means an 

account in which commodity futures, 

options or cleared over the counter 

derivative positions are carried on the 

books of the applicant or registrant 

which is either: 

* * * * * 

(7) Customer account means an 

account in which commodity futures, 

options or cleared over the counter 

derivative positions are carried on the 

books of the applicant or registrant 

which is either: 

* * * * * 

(8) Risk margin for an account means 

the level of maintenance margin or 

performance bond required for the 

customer or noncustomer positions by 

the applicable exchanges or clearing 

organizations, and, where margin or 

performance bond is required only for 

accounts at the clearing organization, for 

purposes of the FCM’s risk-based capital 

calculations applying the same margin 

or performance bond requirements to 


erowe on DSK5CLS3C1PROD with RULES
Federal Register / Vol. 74, No. 250 / Thursday, December 31, 2009 / Rules and Regulations 69283 

customer and noncustomer positions in 

accounts carried by the FCM, subject to 

the following. 

* * * * * 

(9) Cleared over the counter derivative 

positions means ‘‘over the counter 

derivative instrument’’ (as defined in 12 

U.S.C. 4421) positions of any person in 

accounts carried on the books of the 

futures commission merchant and 

cleared by any organization permitted to 

clear such instruments under the laws 

of the relevant jurisdiction. 

(10) Cleared over the counter 

customer means any person that is not 

a proprietary person as defined in 

§ 1.3(y) and for whom the futures 

commission merchant carries on its 

books one or more accounts for the over 

the counter-cleared derivative positions 

of such person. 

(c) * * * 

(5) * * * 

(x) In the case of open futures 

contracts or cleared OTC derivative 

positions and granted (sold) commodity 

options held in proprietary accounts 

carried by the applicant or registrant 

which are not covered by a position 

held by the applicant or registrant or 

which are not the result of a ‘‘changer 

trade’’ made in accordance with the 

rules of a contract market: 

* * * * * 

Issued in Washington, DC, on December 

24, 2009, by the Commission. 

David A. Stawick, 

Secretary of the Commission. 

[FR Doc. E9–31058 Filed 12–30–09; 8:45 am] 

BILLING CODE P 

DEPARTMENT OF VETERANS 

AFFAIRS 

38 CFR Part 17 

RIN 2900–AN50 

Copayments for Medications 

AGENCY: Department of Veterans Affairs. 

ACTION: Interim final rule. 

SUMMARY: The Department of Veterans 

Affairs (VA) is taking action to amend 

its medical regulations concerning the 

copayment required for certain 

medications. Under current regulations, 

the copayment amount must be 

increased based on the prescription 

drug component of the Medical 

Consumer Price Index, and the 

maximum annual copayment amount 

must be increased when the copayment 

is increased. Under the amendments in 

this document, we will freeze 

copayments at the current rate for the 

next 6 months, and thereafter resume 

increasing copayments in accordance 

with any change in the prescription 

drug component of the Medical 

Consumer Price Index. 

DATES: This rule is effective on 

December 31, 2009. Comments must be 

received on or before February 1, 2010. 

ADDRESSES: Written comments may be 

submitted by e-mail through http:// 

www.regulations.gov; by mail or handdelivery to Director, Regulations 

Management (02REG), Department of 

Veterans Affairs, 810 Vermont Ave., 

NW., Room 1068, Washington, DC 

20420; or by fax to (202) 273–9026. 

Comments should indicate that they are 

submitted in response to ‘‘RIN 2900– 

AN50 Copayments for Medications.’’ 

Copies of comments received will be 

available for public inspection in the 

Office of Regulation Policy and 

Management, Room 1063B, between the 

hours of 8 a.m. and 4:30 p.m. Monday 

through Friday (except holidays). Please 

call (202) 461–4902 for an appointment. 

In addition, during the comment period, 

comments may be viewed online 

through the Federal Docket Management 

System (FDMS) at http:// 

www.regulations.gov. 

FOR FURTHER INFORMATION CONTACT: 

Roscoe Butler, Acting Director, Business 

Policy, Chief Business Office, 810 

Vermont Ave., Washington, DC 20420, 

202–461–1586. (This is not a toll-free 

number.) 

SUPPLEMENTARY INFORMATION: Under 38 

U.S.C. 1722A(a), VA must require 

veterans to pay a $2 copayment for each 

30-day supply of medication furnished 

on an outpatient basis for the treatment 

of a nonservice-connected disability or 

condition. Under 38 U.S.C. 1722A(b), 

VA ‘‘may’’ by regulation increase that 

copayment and establish a maximum 

annual copayment (a ‘‘cap’’). We 

interpret section 1722A(b) to mean that 

VA has discretion to determine the 

appropriate copayment amount and 

annual cap amount for medication 

furnished on an outpatient basis for 

covered treatment, provided that any 

decision by VA to increase the 

copayment amount or annual cap 

amount is the subject of a rulemaking 

proceeding. We have implemented this 

statute in 38 CFR 17.110. 

Under current 38 CFR 17.110(b)(1), 

veterans are ‘‘obligated to pay VA a 

copayment for each 30-day or less 

supply of medication provided by VA 

on an outpatient basis (other than 

medication administered during 

treatment).’’ The regulation ties any 

increase in that copayment amount to 

the prescription drug component of the 

Medical Consumer Price Index (CPI–P). 

The current regulation includes an 

escalator provision for the copayment 

amount. The regulation states that the 

copayment amount for each calendar 

year after 2002 is established using the 

CPI–P as follows: For each calendar year 

beginning after December 31, 2002, the 

Index as of the previous September 30 

will be divided by the Index as of 

September 30, 2001. The ratio so 

obtained will be multiplied by the 

original copayment amount of $7. The 

copayment amount for the new year will 

be this result, rounded down to the 

whole dollar amount. 

Current § 17.110(b)(2), also includes a 

cap on the total amount of copayments 

in a calendar year for a veteran enrolled 

in one of the priority categories 2 

through 6. The amount of the cap was 

$840 for the year 2002. The current 

regulation also requires that ‘‘[i]f the 

copayment amount increases * * * the 

cap of $840 shall be increased by $120 

for each $1 increase in the copayment 

amount.’’ 38 CFR 17.110(b)(2). 

In January 2006, based on this 

regulation, the copayment amount 

increased to $8 and the cap on priority 

categories 2 through 6 increased to 

$960. This change was announced in 70 

FR 72329 (December 2, 2005). These are 

the current copayment requirements. 

Based on our analysis of the average rate 

of growth of the CPI–P, the current 

regulatory methodology, calculated 

according to the CPI–P as of September 

30, 2009, would automatically escalate 

the copayment amount from $8 to $9 in 

January 2010. Current § 17.110(b) does 

not afford the Secretary any discretion 

on increasing the copayment amount as 

calculated by the CPI–P. 

Although we continue to believe that 

the CPI–P is a relevant indicator of the 

costs of prescriptions nationwide, we 

need time to determine whether an 

increase might pose a significant 

financial hardship for certain veterans 

and if so, what alternative approach 

would provide appropriate relief for 

these veterans. In light of this 

anticipated review, we are delaying 

implementation of the $1 increase in the 

copayment amount (and the 

corresponding $120 increase in the cap) 

until the completion of our review. 

Maintaining the current copayment and 

cap amounts will give us time to 

determine whether the current 

methodology for establishing copayment 

amounts, consistent with our 

responsibility under 38 U.S.C. 1722A to 

require a copayment in order to control 

health-care costs, is appropriate for all 

veterans. 

Therefore, we are, for the next 6 

months (i.e., through June 30, 2010), 

freezing the copayment amount at the 


erowe on DSK5CLS3C1PROD with RULES