Paul Hastings 

Allan! a 

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Milan 

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Received CFTC 

Records Section 

9~ 1/or 

COMMENT 

(202) 551-1850 

marklewis@paulhastings.com 

August 17, 2009 

VIA EMAIL: SECRETARY@CFTC.GOV 

David Stawick 

Secretary 

Commodity Futures Trading Commission 

Three Lafayette Centre 

1155 21st Street, N.W. 

Washington, D.C. 20581 

Paul, Hastings, Janofsky & Walker LLP 

875 15th S1reet, N. W. 

Washington, DC 20005 

telephone 202-551-1700 • facsimile 202-551-1705 • www.paulhastings.com 

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Re: Advanced Notice of Proposed Rulemak.ing: Account Ownership aq"dico~ol 

Report, 74 Fed Rtg. 31642 Guly 2, 2009). -i 

Dear Mr. Stawick: 

Paul, Hastings, Janofsky & Walker LLP ("Paul Hastings") appreciates the 

opportunity to comment on the Commodity Futures Trading Commission's (the "CFTC" 

or the "Commission") Advanced Notice of Proposed Rulemaking regarding the proposed 

Account Ownership and Control Reports 1 (the "Advanced Notice"). Paul Hastings is an 

international law firm with eighteen offices in major business centers across the U.S., Asia 

and Europe. We provide regulatory and commercial representation to several market 

participants who are engaged in the business of trading energy commodities and 

derivatives on designated contract markets and other electronic exchanges, and who 

would be directly impacted by the implementation of proposed rules regarding Account 

Ownership and Control Reports ("OCRs") as detailed in the Advanced Notice. We 

would like to offer these comments on the content of the proposed OCRs. 

In particular, there is serious concern that the term "controller" is undefined and 

that it might be interpreted so broadly as to entail the collection and transmission to the 

Commission of the names, addresses and social security numbers of individual traders 

who are merely carrying out their jobs on behalf of their employers. While some 

individuals at trading desks or large energy companies may exercise discretion over certain 

aspects of trading on a day-to-day basis, such individuals are acting entirely within the 

scope of their employment, and their personal information should not be captured as if 

they were individuals trading on their own accounts. Rather, the terms "owner" and 

"controller" should be defined appropriately to capture only those entities or individuals 

who own the accounts, and to whom trading decisions and responsibilities can be 

properly attributed. In the case of a trader working for an energy company or other 

enterprise, it is the employing entity that owns and controls the account and that is 

1 74 Fed. Reg. 31642 Ouly 2, 2009) 
David Stawick 

August 17, 2009 

Page 2 

responsible for trading decisions. Trading employees may have discretion but they are not 

acting for their own accounts or pursuant to their own policies or strategies. In the event 

that a given account is owned and controlled by individual persons, their personal 

information would properly be captured by the proposed OCRs. However, where an 

accourit is owned by a company such as an oil and natural gas exploration and production 

company or commodity merchant/marketer, the terms "owner" and "controller" should 

be limited to the entity. An employee whose trading activities are solely in the scope of 

his or her employment duties should not be subject to reporting of personal information 

on an OCR. The Commission's regulatory objectives can be met through the submission 

of OCRs that contain only company information and do not require the submission of 

intrusive personal information of individual employees merely undertaking their 

employment duties. 

Proposed Content of the OCRr 

The Commission currently receives daily trade data via Trade Capture Reports 

from trade registers detailing significant information concerning trades made on reporting 

contract markets, including trade dates, products, price, quantity and account numbers. 

The Advanced Notice characterizes this trade data: as reflecting "unknown individuals 

directing trades on behalf ofunnamed accounts."2 Separately, the Commission receives 

large trader reports from reporting firms showing open end-of-day positions above 

. specified levels set by the Commission. The Commission seeks to better integrate the 

information it currently receives from the market in the form of Trade Capture Reports 

and large trader reports, and to close the gaps that currently exist between these sets of 

data that make it difficult to determine what market participants are actually directing 

specific trading activity across the spectrum of electronic markets monitored by the 

Commission. Indeed, as noted in the Advanced Notice, one main goal of the OCRs is to 

"bridge the gap between individual transactions reported on exchange trade registers and 

aggregate positions reported in large trader data."3 

In order to bridge this gap and enable the OCRs to illustrate the trading activity by 

specific market participants that leads, for example, to their inclusion in large trader 

reports, the Advanced Notice suggests that inclusion of ownership information of a given 

account would provide useful information. However, it would not serve the stated 

purpose of the OCRs if the data collected redundantly included both the name of the 

entity that owns a given account, as well as individuals who work for that entity and may 

direct trading activity solely within the scope of their employment. This constitutes an 

unnecessary intrusion and collection of personal information of individuals who are 

merely acting as the instruments of their employers. Indeed, there is serious concern that 

the collection of such personal information could lead to legitimate employee complaints 

about invasion of privacy and potential public sharing of the information, given the 

2 Id. at 31643. 

3 Id. 
David Stawick 

August 17, 2009 

P~ge 3 

pervasive fear of identity theft and other misuses of this kind of information. The goal of 

identifying the holders of accounts in order to integrate information about daily trading 

activity with large trader reports would be met by simply collecting the information about 

the account holders via the OCRs. The terms "owner" and "controller" should therefore 

be defined with appropriate narrowness so as not to unnecessarily entail the collection of 

files on individual traders who do not own any accounts and are simply employed by the 

actual owners and controllers .. If "owner". and "controller'' information were to be 

collected only at the company or organizational level, the Commission might find it useful 

to require those companies providing data to certify that none of their traders executes 

trades on any other account other than that for which the data is being collected. In this 

way, the Commission could be certain that the information being collected regarding 

account owners and controllers is not leaving any gaps in which traders at those entities 

might be engaging in trading on other accounts without being captured by the OCRs. 

As currently explained in the Advanced Notice, it appears that the OCRs would 

require inclusion of the names, addresses and last four digits of the social security 

numbers of individuals who work on the trading desks of large companies and who may 

have responsibility for certain day~to-day trading decisions. However, these individuals 

are not trading for their own accounts, and would not have unfettered discretion to 

determine the overall plans and strategies that govern trading by that desk. Moreover, 

since the entities by which such individuals are employed would also be captured and 

listed for the same account numbers in the OCRs, the inclusion of individual employees' 

personal information would add nothing to the OCRs and would not advance the goal of 

greater transparency and integration of trade data explicated by the Advanced Notice. For 

these reasons, unless the definitions of "owner" and "controller" are tailored to exclude 

unnecessary personal information of traders, the OCRs could become unwarranted and 

unhelpful intrusions into the personal information of individuals who are simply 

employed by the entities that the OCRs are intended to capture. 

We are not commenting on the rationale set forth in the Advanced Notice for 

seeking ownership and control information with respect to trading accounts via the 

proposed collection of OCRs. Rather, these comments focus on the definition of the 

term "controller", and we wish to convey our understanding that companies that are 

regular participants in CFTC-regulated markets are concerned about the adverse impact 

on their employees (and thus on the companies) that might result if traders' personal 

· information were required to be submitted to the Commission. The goal of integrating 

the data currently available to the Commission and supplementing it by pairing names and 

other information with trading account numbers would not be served by a definition of 

the term "controller" that unnecessarily sweeps up the personal information of employees 

who work for entities that are otherwise captured and accounted for by the OCRs. 

By capturing the relevant information with respect to the company for which a 

trader works, in cases where a given trader does not trade for his/her own account, all of 

the regulatory goals set forth in the Advanced Notice would be met without resorting to 
David Stawick 

August 17, 2009 

Page 4 

unnecessarily rmrung the personal data of the trader. This would still allow the 

Commission to follow the trading practices and patterns of trading accounts with 

reference to the actual names of the account holders, and enable this data to be matched 

up with the appearance of the same accounts on the daily large trader reports. 4 Similarly, 

the OCRs would still enable the aggregation of accounts under common control, and 

further enable the linkage of traders' intraday transactions with end-of-day positions, 

thereby aiding the Division of Enforcement's investigations of Commodity Exchange Act 

violations.5 As long as the Commission can be satisfied that the traders who work for a 

given reporting entity are not trading on their own accounts or otherwise trading for 

different accounts than those captured by their employers, the OCRs would give a 

complete picture of the ownership and control of all relevant accounts. As stated 

previously, the Commission could seek assurance or certification by the entities holding 

accounts that their traders are not executing trades for their own accounts or other 

accounts not captured by the employer's reports. Where an individual trader does indeed 

own and control a given account, then it would be appropriate for that individual's 

information to be captured by the OCRs as designed. 

Conclusion 

There is deep concern that the lack of a clear definition of the term "controller" 

could lead to the wholly unnecessary collection of the personal information of individual 

traders who may exercise some degree of trading discretion within the scope of their 

employment, but who are not truly "controllers" of any account in any reasonable sense. 

Except for cases in which an individual person is trading for his/her own account, the 

regulatory objectives set forth by the Commission in the Advanced Notice can be met by 

limiting the reach of the OCRs to the entities that actually own and are ultimately 

responsible for trading decisions for a given account. 

Sincerely, 

Is/ Mark K. Lewis 

Mark K. Lewis 

of Paul, Hastings,Janofsky & Walker LLP 

cc: Chairman Gary Gensler 

Commissioner Michael Dunn 

Commissioner Jill E. Sommers 

Commissioner Bart Chilton 

Daniel Berkovitz, General Counsel 

LEGAL_US_E # 84704942.6 

4 See id. at 31644. 

s See id. at 31645.