48262 Federal Register / Vol. 72, No. 163 / Thursday, August 23, 2007 / Notices 

SCHEDULE OF ANCILLARY MEETINGS—Continued 

Washington State Delegation 7 a.m. 

Enforcement Consultants 8 a.m. 

Groundfish Advisory Subpanel 8 a.m. 

Groundfish Management Team 8 a.m. 

Scientific and Statistical Committee 8 a.m. 

Olympic Coast National Marine Sanctuary 

Marine Habitat Research Report 7 p.m. 

Thursday, September 13, 2007 

Council Secretariat 7 a.m. 

California State Delegation 7 a.m. 

Oregon State Delegation 7 a.m. 

Washington State Delegation 7 a.m. 

Groundfish Advisory Subpanel 8 a.m. 

Groundfish Management Team 8 a.m. 

Enforcement Consultants As needed. 

Friday, September 14, 2007 

Council Secretariat 7 a.m. 

California State Delegation 7 a.m. 

Oregon State Delegation 7 a.m. 

Washington State Delegation 7 a.m. 

Enforcement Consultants As needed. 

Although non-emergency issues not 

contained in this agenda may come 

before this Council for discussion, those 

issues may not be the subject of formal 

Council action during this meeting. 

Council action will be restricted to those 

issues specifically listed in this notice 

and any issues arising after publication 

of this notice that require emergency 

action under Section 305(c) of the 

Magnuson-Stevens Fishery 

Conservation and Management Act, 

provided the public has been notified of 

the Council’s intent to take final action 

to address the emergency. 

Special Accommodations 

These meetings are physically 

accessible to people with disabilities. 

Requests for sign language 

interpretation or other auxiliary aids 

should be directed to Ms. Carolyn Porter 

at (503) 820–2280 at least 5 days prior 

to the meeting date. 

Dated: August 17, 2007. 

Tracey L. Thompson, 

Acting Director, Office of Sustainable 

Fisheries, National Marine Fisheries Service. 

[FR Doc. E7–16625 Filed 8–22–07; 8:45 am] 

BILLING CODE 3510–22–S 

COMMODITY FUTURES TRADING 

COMMISSION 

Petition of the Chicago Mercantile 

Exchange Inc. for Exemptive Relief, 

Pursuant to Section 4(c) of the 

Commodity Exchange Act, From the 

Requirement That the China Foreign 

Exchange Trade System and National 

Interbank Funding Center or Its 

Members Register as Futures 

Commission Merchants 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Notice of proposed order and 

request for comment. 

SUMMARY: The Chicago Mercantile 

Exchange Inc. (CME) has petitioned the 

Commodity Futures Trading 

Commission (Commission) for 

exemptive relief, pursuant to section 

4(c) of the Commodity Exchange Act 

(Act or CEA), from the requirement that 

the China Foreign Exchange Trade 

System and National Interbank Funding 

Center (CFETS) or its members register 

as futures commission merchants 

(FCMs). The Commission seeks 

comment on CME’s petition. Copies of 

the petition are available for inspection 

at the Office of the Secretariat by mail 

at the address listed below, by 

telephoning (202) 418–5100, or on the 

Commission’s Web site (http:// 

www.cftc.gov). 

DATES: Comments must be received on 

or before September 24, 2007. 

ADDRESSES: Comments should be sent to 

David A. Stawick, Secretary, 

Commodity Futures Trading 

Commission, Three Lafayette Centre, 

1155 21st Street, NW., Washington, DC 

20581. Comments may be sent by 

facsimile transmission to (202) 418–

5521, or by e-mail to secretary@cftc.gov. 

Reference should be made to ‘‘CME 

Petition for Exemption from FCM 

Registration on Behalf of CFETS.’’

Comments may also be submitted by 

connecting to the Federal eRulemaking 

Portal at http://www.regulations.gov and 

following the comment submission 

instructions. Comments will be 

published on the Commission’s Web 

site. 

FOR FURTHER INFORMATION CONTACT: 

Robert B. Wasserman, Associate 

Director, (202) 418–5092, 

rwasserman@cftc.gov, Division of 

Clearing and Intermediary Oversight, 

Commodity Futures Trading 

Commission, Three Lafayette Centre, 

1155 21st Street, NW., Washington, DC 

20581. 

SUPPLEMENTARY INFORMATION: 

I. Background 

By petition dated July 27, 2007 

(Petition), CME applied for an 

exemption, pursuant to section 4(c) of 

the Act, 7 U.S.C. 6(c), from the 

requirement (pursuant to section 4d of 

the Act, 7 U.S.C. 6d) that CFETS or its 

members register as FCMs. 

According to the Petition, CFETS is a 

non-profit affiliate of the People’s Bank 

of China (PBC). CFETS operates an 

electronic trading system with respect to 

trading in the interbank foreign 

exchange market, Renminbi (RMB) 

lending, and trading on the bond market 

in China. The foreign currencies traded 

against the RMB through CFETS include 

the U.S. dollar, Japanese yen, Euro, and 

Hong Kong dollar, and CFETS provides 

trading services for foreign exchange 

spot, forwards, and swaps. CFETS also 

operates China’s interbank RMB money 


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Federal Register / Vol. 72, No. 163 / Thursday, August 23, 2007 / Notices 48263 

1 In this context, ‘‘foreign broker’’ means any 

person located outside the U.S., its territories, or 

possessions who is engaged in soliciting or in 

accepting orders only from persons located outside 

the U.S., its territories, or possessions for the 

purchase or sale of any commodity interest 

transaction on or subject to the rules of any 

designated contract market or derivatives execution 

facility and that, in or in connection with such 

solicitation or acceptance of orders, accepts any 

money, securities, or property (or extends credit in 

lieu thereof) to margin, guarantee, or secure any 

trades or contracts that result or may result 

therefrom. See Exemption From Registration for 

Certain Foreign Persons, 72 FR 15,637 (Apr. 2, 

2007) (proposing to revise and redesignate a 

definition for the term ‘‘foreign broker’’). 

2The Commission has recently proposed to 

codify its longstanding view that a foreign broker 

is not required to register if the foreign broker: (1) 

Limits its customers to foreign customers; (2) 

submits the trades of such foreign customers that 

are entered into on U.S. markets for clearing on an 

omnibus basis through a registered FCM; and (3) 

does not solicit or accept orders from U.S. 

customers for trading on U.S. markets. See supra 

note 1; see also CFTC Staff Letter 89–07, [1987–

1990 Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶

24,479 at 36,096–97 (June 22, 1989) (‘‘The 

Commission has not required a person located 

outside the United States which engages in the 

conduct described in section 2(a)(1)(A) of [the Act] 

for or on behalf of foreign customers through a U.S. 

FCM to register as an FCM’’). In the proposal, the 

Commission specifically noted that, by limiting 

exemptive relief in the past to activities conducted 

‘‘though a U.S. FCM’’ ‘‘staff did not extend the 

exemptive relief available to a foreign broker to 

include the submission of trades executed for its 

customer and non-customer accounts directly to a 

clearing organization for a U.S. market.’’ See 72 FR 

at 15,638. 

3Petition, at 3. 

4Section 4(c)(1) of the Act, 7 U.S.C. 6(c)(1), 

provides that: 

In order to promote responsible economic or 

financial innovation and fair competition, the 

Commission by * * * order, after notice and 

opportunity for hearing, may ( * * * on application 

of any person, including any board of trade 

designated or registered as a contract market * * *) 

exempt any agreement, contract, or transaction (or 

class thereof) that is otherwise subject to subsection 

(a) of this section (including any person or class of 

persons offering, entering into, rendering advice or 

rendering other services with respect to, the 

agreement, contract, or transaction), either 

unconditionally or on stated terms or conditions or 

for stated periods * * * from any * * * provision 

of this chapter (except subparagraphs (C)(ii) and (D) 

of section 2(a)(1) of this title, except that the 

Commission and the Securities and Exchange 

Commission may by rule, regulation, or order 

jointly exclude any agreement, contract, or 

transaction from section 2(a)(1)(D) of this title), if 

the Commission determines that the exemption 

would be consistent with the public interest. 

While Section 4(c)(2) of the Act, 7 U.S.C. 6(c)(2), 

imposes additional requirements with respect to 

any exemption from the requirements of Section 

4(a) of the Act, 7 U.S.C. 6(a), CME is not seeking 

such relief. 

5 If the Commission were to grant CFETS’ request 

for relief, CFETS would not be required to meet the 

minimum capital requirements of Regulation 1.17. 

See Regulation 1.17, 17 CFR 1.17 (minimum capital 

requirements applicable to persons ‘‘registered as a 

futures commission merchant’’). ‘‘Surrogate capital’’

refers to alternative minimum capital requirements 

that CME represents that CFETS would be required 

to meet that are intended to parallel, in effect, the 

minimum capital requirements of Regulation 1.17. 

These requirements may be imposed on CFETS as 

conditions of a Commission order pursuant to 

Section 4(c)(1), 6(c)(1). 

6For example, if CFETS had a surrogate capital 

requirement of $10 million, it would be required to 

maintain surrogate capital of $11 million (110% of 

the requirement) in a CME-controlled account in 

Continued 

market and facilitates the trading of 

government securities and repo 

transactions. CFETS has over 270 

members engaged in foreign exchange 

trading, including all of the major 

Chinese banks. CFETS members also 

include insurance and securities 

companies, fund management 

companies, and foreign financial 

institutions. 

CME and CFETS have entered into an 

agreement pursuant to which CFETS 

will become a ‘‘super-clearing’’ member 

of CME authorized to clear foreign 

currency and interest rate futures 

transactions on behalf of CFETS 

members and their customers domiciled 

in China. Although CFETS members 

include non-Chinese financial 

institutions, only those of its members 

(and their customers) that are domiciled 

in China would be permitted to clear 

CME contracts through CFETS under 

the agreement. Pursuant to the 

agreement, CME will, among other 

things, provide consulting services and 

technical assistance to CFETS. In 

addition, CME and CFETS will 

cooperate to complete both a 

comprehensive training program and a 

marketing program. Under the 

arrangement, CFETS’ compliance with 

CME operational procedures will not be 

enforced via regulatory processes 

applicable to other clearing members, 

but instead under the terms of the 

agreement. 

As a clearing member of CME, CFETS 

would fall within the FCM definition of 

section 1a(20) of the Act, 7 U.S.C. 

1a(20), in that it would ‘‘accept[] orders 

for the purchase or sale of [a] 

commodity for future delivery on or 

subject to the rules of [a] contract 

market * * * and * * * in or in 

connection with such * * * acceptance 

of orders, [would] accept[] * * * 

money, securities, or property * * * to 

margin, guarantee, or secure * * * 

trades or contracts that * * * result 

therefrom.’’ While the Commission and 

its predecessor agencies have not 

applied the FCM registration 

requirement to foreign brokers 1 that 

clear through U.S. FCMs, Commission 

staff have stated that the FCM 

registration requirement of Section 

4d(a)(1) of the Act, 7 U.S.C. 6d(a)(1), 

applies to foreign brokers that clear 

directly through a U.S.-based 

clearinghouse,2 as CFETS will under the 

proposed arrangement with CME. 

CME states that, given CFETS’ status 

as an entity that is not separately 

capitalized, ‘‘CFETS itself will not be in 

a position to provide net capital 

information to CME. Therefore, CFETS 

cannot meet the requirements that 

would apply if it were required to 

register as an FCM.’’ 3 CME further 

states that, in light of CFETS’ existing 

business environment, CFETS is 

currently unable to establish a 

capitalized subsidiary in the U.S. that 

could otherwise meet the requirements 

applicable to registered FCMs. 

Consequently, CME is seeking an 

exemption, pursuant to section 4(c) of 

the Act, 7 U.S.C. 6(c), on behalf of 

CFETS, from the FCM registration 

requirement. CME is also seeking relief 

from any FCM registration requirement 

that might apply to CFETS members. 

Section 4(c)(1) of the Act, 7 U.S.C. 

6(c)(1), empowers the Commission to 

‘‘promote responsible economic or 

financial innovation and fair 

competition’’ by exempting any 

transaction or class of transactions, 

including any person offering or 

entering into such transaction, from any 

of the provisions of the CEA (subject to 

exceptions not relevant here) where the 

Commission determines that the 

exemption would be consistent with the 

public interest.4

The Petition includes, among other 

things, the following conditions that 

could be included in any order granting 

an exemption to CFETS pursuant to 

section 4(c), § 6(c): 

• CFETS shall be required to comply 

with financial requirements that 

substitute for those applicable to CME’s 

clearing members. Specifically, CFETS 

shall be required to satisfy CME’s 

security deposit requirement, which is 

currently a minimum of $500,000. 

CFETS shall be required to maintain 

‘‘surrogate capital’’ 5 of 8% of aggregate 

required customer performance bond, 

but in any case, no less than $10 

million. All such surrogate capital shall 

be required to be held in the form of 

U.S. dollars or Treasury securities 

(subject to any haircuts required by 

Regulation 1.17) in a CME-controlled 

account in the U.S. 

• CME shall be required to provide 

the Commission a monthly report 

detailing surrogate capital amounts and 

calculation (which report, or portions 

thereof, would be published on the 

Commission’s Web site). CME shall be 

required to provide next-day notice to 

the Commission if: (i) Surrogate capital 

falls below 110% of the requirement; or 

(ii) if a customer margin call exceeds 

excess surrogate capital on deposit.6


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48264 Federal Register / Vol. 72, No. 163 / Thursday, August 23, 2007 / Notices 

order to avoid providing the Commission with nextday notice of its surrogate capital on deposit. 

7As noted above, the Commission may grant an 

exemption pursuant to Section 4(c)(1) of the Act, 7 

U.S.C. 6(c)(1), ‘‘[i]n order to promote responsible 

economic or financial innovation and fair 

competition.’’ Section 15(b) of the Act, 7 U.S.C. 

19(b), provides that the ‘‘Commission shall take into 

consideration the public interest to be protected by 

the antitrust laws and endeavor to take the least 

anticompetitive means of achieving the objectives 

of this chapter, as well as the policies and purposes 

of this chapter, in issuing any order * * *.’’

8The Commission notes that Section 15(a) of the 

Act, 7 U.S.C. 19(a), requires that the Commission, 

before issuing an order, consider the costs and 

benefits in light of considerations of protection of 

market participants and the public; considerations 

of the efficiency, competitiveness, and financial 

integrity of futures markets; considerations of price 

discovery; considerations of sound risk 

management practices; and other public interest 

considerations. 

1NFA is the only registered futures association. 

2See Section 237 of the Futures Trading Act of 

1982, 7 U.S.C. 16a and 31 U.S.C. 9701. For a 

broader discussion of the history of Commission 

Fees, see 52 FR 46070 (Dec. 4, 1987). 

CME shall be required to provide the 

Commission immediate notice of any 

deficiency in surrogate capital. 

• CME and CFETS shall be required 

to provide all large-trader reporting 

information at the same time and in the 

same format that CFETS would be 

required to provide if CFETS were 

registered as an FCM. CME and CFETS 

shall be required to act as agent for 

service of process regarding trading on 

CME for both CFETS members and 

customers of CFETS members. 

• CME shall not hold CFETS 

positions and associated funds in U.S. 

customer accounts segregated pursuant 

to section 4d of the Act, 7 U.S.C. 6d. 

• CME and CFETS shall be required 

to maintain records, in English, in the 

U.S., sufficient to permit the 

Commission to confirm compliance 

with any provision of any order issued 

by the Commission. CME and CFETS 

shall be required to make such records 

available to the Commission in the U.S. 

within 72 hours of any request. 

• CME and CFETS shall be required 

to comply with U.S. anti-money 

laundering requirements as determined 

by the U.S. Treasury. 

• CME and CFETS shall be required 

to accept joint and several liability in 

any Commission enforcement action 

relating to compliance with any order 

issued by the Commission. 

• CME and CFETS shall be required 

to file a report with the Commission 

providing statistics and analyzing issues 

(to be determined) within 18 months 

after issuance of any relief. 

II. Request for Comments 

The Commission requests public 

comment on any aspect of the Petition 

that commenters believe may raise 

issues under the CEA or Commission 

regulations. In particular, the 

Commission invites comment regarding: 

(1) Whether the proposed exemption is 

consistent with the requirements for 

relief set forth in section 4(c) of the Act, 

7 U.S.C. 6(c), including whether 

granting the exemption would be 

consistent with the public interest and 

the purposes of the CEA; (2) whether 

CME’s representations, as discussed 

above, if imposed as conditions of an 

order pursuant to section 4(c)(1), section 

6(c)(1), would provide adequate 

safeguards with respect to the U.S. 

clearing system in light of CFETS’

exemption from the FCM registration 

requirement; (3) whether an order 

granting the request for relief should 

include requirements different from or 

in addition to those discussed above; (4) 

whether an order granting the request 

for relief should exclude any one or 

more of the requirements discussed 

above; (5) any material adverse effects 

that granting the petition would have 

upon other derivatives clearing 

organizations, exchanges, or other 

Commission registrants from a 

competitive 7 or other perspective 8; and 

(6) any other issues relevant to this 

petition. 

Issued in Washington, DC, on August 8, 

2007 by the Commission. 

David A. Stawick, 

Secretary of the Commission. 

[FR Doc. E7–16641 Filed 8–22–07; 8:45 am] 

BILLING CODE 6351–01–P 

COMMODITY FUTURES TRADING 

COMMISSION 

Fees for Reviews of the Rule 

Enforcement Programs of Contract 

Markets and Registered Futures 

Associations 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Establish the FY 2007 schedule 

of fees. 

SUMMARY: The Commission charges fees 

to designated contract markets and 

registered futures associations to recover 

the costs incurred by the Commission in 

the operation of its program of oversight 

of self-regulatory organization (SRO) 

rule enforcement programs (17 CFR part 

1 Appendix B) (National Futures 

Association (NFA), a registered futures 

association, and the contract markets are 

referred to as SROs). The calculation of 

the fee amounts to be charged for FY 

2007 is based upon an average of actual 

program costs incurred during FY 2004, 

2005, and 2006, as explained below. 

The FY 2007 fee schedule is set forth in 

the SUPPLEMENTARY INFORMATION. 

Electronic payment of fees is required. 

DATES: Effective Dates: The FY 2007 fees 

for Commission oversight of each SRO 

rule enforcement program must be paid 

by each of the named SROs in the 

amount specified by no later than 

October 22, 2007. 

FOR FURTHER INFORMATION CONTACT: 

Stacy Dean Yochum, Counsel to the 

Executive Director, Commodity Futures 

Trading Commission, (202) 418–5160, 

Three Lafayette Centre, 1155 21st Street, 

NW., Washington, DC 20581. For 

information on electronic payment, 

contact Adrienne Young-Burgess, Three 

Lafayette Centre, 1155 21st Street, NW., 

Washington, DC 20581, (202) 418–5196. 

SUPPLEMENTARY INFORMATION: 

I. General 

This notice relates to fees for the 

Commission’s review of the rule 

enforcement programs at the registered 

futures associations 1 and designated 

contract markets (DCM), which are 

referred to as SROs, regulated by the 

Commission. 

II. Schedule of Fees 

Fees for the Commission’s review of 

the rule enforcement programs at the 

registered futures associations and 

DCMs regulated by the Commission: 

Entity Fee 

amount 

Chicago Board of Trade ............. $72,547 

Chicago Mercantile Exchange .... 97,725 

New York Mercantile Exchange 59,604 

Kansas City Board of Trade ....... 10,799 

New York Board of Trade .......... 57,273 

Minneapolis Grain Exchange ..... 10,967 

HedgeStreet ................................ 2,736 

One Chicago ............................... 18,355 

Chicago Climate Futures Exchange .................................... 1,731 

EUREX ....................................... 2,523 

National Futures Association ...... 273,854 

Total ..................................... 608,114 

III. Background Information 

A. General 

The Commission recalculates the fees 

charged each year with the intention of 

recovering the costs of operating this 

Commission program.2 All costs are 

accounted for by the Commission’s 

Management Accounting Structure 

Codes (MASC) system, which records 

each employee’s time for each pay 

period. The fees are set each year based 


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