Federal Register / Vol. 73, No. 219 / Wednesday, November 12, 2008 / Notices 66847 

1 7 U.S.C. 1 et seq. 

2 7 U.S.C. 6(c). 

3 7 U.S.C. 7a–1. 

4 15 U.S.C. 78q–1. 

5 7 U.S.C. 7a–2(c), 17 CFR 39.4(a), 40.5. 

6See Section 5 of the CEA, 7 U.S.C. 7. 

7 15 U.S.C. 78o–3(k). 

8See SR–OCC–2008–13 and SR–OCC–2008–14. 

OCC has also filed these proposed rule changes 

with the Securities and Exchange Commission 

(‘‘SEC’’). 

9Section 4(c)(1) of the CEA, 7 U.S.C. 6(c)(1), 

provides in full that: In order to promote 

responsible economic or financial innovation and 

fair competition, the Commission by rule, 

regulation, or order, after notice and opportunity for 

hearing, may (on its own initiative or on application 

of any person, including any board of trade 

designated or registered as a contract market or 

derivatives transaction execution facility for 

transactions for future delivery in any commodity 

under section 7 of this title) 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 and either 

retroactively or prospectively, or both, from any of 

the requirements of subsection (a) of this section, 

or from any other 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. 

10HOUSE CONF. REPORT NO. 102–978, 1992 

U.S.C.C.A.N. 3179, 3213 (‘‘4(c) Conf. Report’’). 

There are no capital costs or operating 

and maintenance costs associated with 

this collection. 

Dated: November 5, 2008. 

David A. Stawick, 

Secretary of the Commission. 

[FR Doc. E8–26834 Filed 11–10–08; 8:45 am] 

BILLING CODE 6351–01–P 

COMMODITY FUTURES TRADING 

COMMISSION 

Proposal To Exempt, Pursuant to the 

Authority in Section 4(c) of the 

Commodity Exchange Act, the Trading 

and Clearing of Certain Products 

Related to iShares COMEX Gold 

Trust Shares and iShares Silver Trust 

Shares 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Notice of proposed order and 

request for comment. 

SUMMARY: The Commodity Futures 

Trading Commission (‘‘CFTC’’ or the 

‘‘Commission’’) is proposing to exempt 

the trading and clearing of certain 

contracts called ‘‘options’’ and other 

contracts called ‘‘security futures’’ on 

each of iShares COMEX Gold Trust 

Shares (‘‘Gold Products’’) and iShares 

Silver Trust Shares (‘‘Silver Products’’) 

(collectively, ‘‘Gold and Silver 

Products’’), proposed to be traded on 

national securities exchanges (as to 

options) and designated contract 

markets registered with the Securities 

and Exchange Commission (‘‘SEC’’) as 

limited purpose national securities 

associations (as to security futures), and 

in either case cleared through the 

Options Clearing Corporation (‘‘OCC’’) 

in its capacity as a registered securities 

clearing agency, from the provisions of 

the Commodity Exchange Act (‘‘CEA’’) 1

and the regulations thereunder, to the 

extent necessary to permit them to be so 

traded and cleared. Authority for this 

exemption is found in Section 4(c) of 

the CEA.2

DATES: Comments must be received on 

or before November 19, 2008. 

ADDRESSES: Comments may be 

submitted by any of the following 

methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• E-mail: secretary@cftc.gov. Include 

‘‘Options and Security Futures on Gold 

and Silver Products’’ in the subject line 

of the message. 

• Fax: 202–418–5521. 

• Mail: Send to David A. Stawick, 

Secretary, Commodity Futures Trading 

Commission, Three Lafayette Centre, 

1155 21st Street, NW., Washington, DC 

20581. 

• Courier: Same as mail above. 

All comments received will be posted 

without change to http:// 

www.CFTC.gov/. 

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, 

1151 21st Street, NW., Washington, DC 

20581. 

SUPPLEMENTARY INFORMATION: 

I. Introduction 

The OCC is both a Derivatives 

Clearing Organization (‘‘DCO’’) 

registered pursuant to Section 5b of the 

CEA,3 and a securities clearing agency 

registered pursuant to Section 17A of 

the Securities Exchange Act of 1934 

(‘‘the ’34 Act’’).4

OCC has filed with the CFTC, 

pursuant to Section 5c(c) of the CEA 

and Commission Regulations 39.4(a) 

and 40.5 thereunder,5 requests for 

approval of rules and rule amendments 

that would enable OCC (1) to clear and 

settle contracts called ‘‘options’’ 

(‘‘Options’’) on Gold and Silver 

Products traded on national securities 

exchanges, in its capacity as a registered 

securities clearing agency (and not in its 

capacity as a DCO) and (2) to clear and 

settle contracts called ‘‘security futures’’ 

(‘‘Security Futures’’) on Gold and Silver 

Products traded on designated contract 

markets 6 registered with the SEC as 

limited purpose national securities 

associations pursuant to Section 15A(k) 

of the ’34 Act 7 (‘‘DCMs’’) as security 

futures subject to the CEA and CFTC 

regulations thereunder governing 

security futures, in either case in OCC’s 

capacity as a registered securities 

clearing agency (and not in its capacity 

as a DCO).8 Section 5c(c)(3) provides 

that the CFTC must approve such rules 

and rule amendments submitted for 

approval unless it finds that the rules or 

rule amendments would violate the 

CEA. 

The request for approval concerning 

the Options and Security Futures on 

Gold and Silver Products was filed 

effective July 23, 2008. By letter dated 

August 20, 2008, the Director of the 

Division of Clearing and Intermediary 

Oversight, pursuant to delegated 

authority, extended the review period of 

the request until October 21, 2008 due 

to the novel and complex issues raised 

by the products that are the subject of 

the request. By letter dated October 16, 

2008, OCC consented to an extension of 

the review period until November 20, 

2008. 

II. Section 4(c) of the Commodity 

Exchange Act 

Section 4(c)(1) of the CEA empowers 

the CFTC to ‘‘promote responsible 

economic or financial innovation and 

fair competition’’ by exempting any 

transaction or class of transactions 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.9 The Commission 

may grant such an exemption by rule, 

regulation or order, after notice and 

opportunity for hearing, and may do so 

on application of any person or on its 

own initiative. 

In enacting Section 4(c), Congress 

noted that the goal of the provision ‘‘is 

to give the Commission a means of 

providing certainty and stability to 

existing and emerging markets so that 

financial innovation and market 

development can proceed in an effective 

and competitive manner.’’ 10 Permitting 

Options and Security Futures on Gold 

and Silver Products to trade on national 

securities exchanges (as to Options) and 

DCMs (as to Security Futures) and in 

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66848 Federal Register / Vol. 73, No. 219 / Wednesday, November 12, 2008 / Notices 

11 7 U.S.C. 1a(31). 

12 4(c) Conf. Report at 3214–3215. 

13Section 4(c)(2) of the CEA, 7 U.S.C. 6(c)(2), 

provides in full that: The Commission shall not 

grant any exemption under paragraph (1) from any 

of the requirements of subsection (a) of this section 

unless the Commission determines that— 

(A) the requirement should not be applied to the 

agreement, contract, or transaction for which the 

exemption is sought and that the exemption would 

be consistent with the public interest and the 

purposes of this Act; and 

(B) the agreement, contract, or transaction— 

(i) will be entered into solely between appropriate 

persons; and 

(ii) will not have a material adverse effect on the 

ability of the Commission or any contract market or 

derivatives transaction execution facility to 

discharge its regulatory or self-regulatory duties 

under this Act. 

14CEA 3(b), 7 U.S.C. 5(b). See also CEA 4(c)(1), 

7 U.S.C. 6(c)(1) (purpose of exemptions is ‘‘to 

promote responsible economic or financial 

innovation and fair competition.’’). 

15 44 U.S.C. 3507(d). 

16 7 U.S.C. 19(a). 

either case to be cleared by OCC in its 

capacity as a securities clearing agency, 

as discussed above, may foster both 

financial innovation and competition. In 

accordance with the Memorandum of 

Understanding entered into between the 

CFTC and the SEC on March 11, 2008, 

and in particular the addendum thereto 

concerning Principles Governing the 

Review of Novel Derivative Products, the 

Commission believes that novel 

derivative products that implicate areas 

of overlapping regulatory concern 

should be permitted to trade in either or 

both a CFTC- or SEC-regulated 

environment, in a manner consistent 

with laws and regulations (including the 

appropriate use of all available 

exemptive and interpretive authority). 

The CFTC is requesting comment on 

whether it should exempt Options and 

Security Futures on Gold and Silver 

Products, as described above, that are 

traded on a national securities exchange 

or a DCM, respectively, and cleared 

through OCC in its capacity as a 

registered securities clearing agency, 

from the CEA and the Commission’s 

regulations thereunder, to the extent 

necessary to permit them to be so traded 

and cleared. 

In proposing this exemption, the 

CFTC need not—and does not—find 

that Options on the Gold and Silver 

Products are (or are not) options subject 

to the CEA, or find that Security Futures 

on the Gold and Silver Products are (or 

are not) security futures as defined in 

Section 1a(31) of the CEA.11 During the 

legislative process leading to the 

enactment of Section 4(c) of the CEA, 

the House-Senate Conference 

Committee noted that: 

The Conferees do not intend that the 

exercise of exemptive authority by the 

Commission would require any 

determination beforehand that the agreement, 

instrument, or transaction for which an 

exemption is sought is subject to the Act. 

Rather, this provision provides flexibility for 

the Commission to provide legal certainty to 

novel instruments where the determination 

as to jurisdiction is not straightforward. 

Rather than making a finding as to whether 

a product is or is not a futures contract, the 

Commission in appropriate cases may 

proceed directly to issuing an exemption.12

The Options and Security Futures on 

Gold and Silver Products described 

above are ‘‘novel instruments.’’ Given 

their potential usefulness to the market, 

however, the Commission believes that 

this may be an appropriate case for 

issuing an exemption without making a 

finding as to the nature of these 

particular instruments. 

Section 4(c)(2) provides that the 

Commission may grant exemptions only 

when it determines: that the 

requirements for which an exemption is 

being provided should not be applied to 

the agreements, contracts or transactions 

at issue, and the exemption is consistent 

with the public interest and the 

purposes of the CEA; that the 

agreements, contracts or transactions 

will be entered into solely between 

appropriate persons; and that the 

exemption will not have a material 

adverse effect on the ability of the 

Commission or any contract market or 

derivatives transaction execution 

facility to discharge its regulatory or 

self-regulatory responsibilities under the 

CEA.13

The purposes of the CEA include 

‘‘promot[ing] responsible innovation 

and fair competition among boards of 

trade, other markets and market 

participants.’’ 14 It may be consistent 

with these and the other purposes of the 

CEA, with the public interest, with the 

CFTC–SEC Memorandum of 

Understanding of March 11, 2008, and 

with the addendum thereto, for the 

mode of trading and clearing the 

Options and Security Futures on Gold 

and Silver Products—whether the mode 

applicable to options on securities or 

commodities, or to security futures or 

futures—to be determined by 

competitive market forces. Accordingly, 

the CFTC is requesting comment as to 

whether this exemption from the 

requirements of the CEA and regulations 

thereunder should be granted in the 

context of these transactions. 

Section 4(c)(3) includes within the 

term ‘‘appropriate persons’’ a number of 

specified categories of persons, and also 

in subparagraph (K) thereof ‘‘such other 

persons that the Commission 

determines to be appropriate in light of 

* * * the applicability of appropriate 

regulatory protections.’’ National 

securities exchanges and OCC, as well 

as their members who will intermediate 

Options on Gold and Silver Products, 

are subject to extensive and detailed 

regulation by the SEC under the ’34 Act. 

Similarly, DCMs and OCC, as well as 

their members who will intermediate 

Security Futures on Gold and Silver 

Products, are subject to regulation by 

the SEC and CFTC. The CFTC is 

requesting comment as to whether all 

persons trading Options and Security 

Futures on Gold and Silver Products on 

national securities exchanges and 

DCMs, respectively, and clearing such 

products on OCC, are appropriate 

persons. 

In light of the above, the Commission 

also is requesting comment as to 

whether this exemption will interfere 

with its ability to discharge its 

regulatory responsibilities under the 

CEA or with the self-regulatory duties of 

any contract market or derivatives 

transaction execution facility. 

III. Request for Comment 

The Commission requests comment 

on all aspects of the issues presented by 

this proposed order. 

IV. Related Matters 

A. Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

(‘‘PRA’’) 15 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. The 

proposed exemptive order would not, if 

approved, require a new collection of 

information from any entities that 

would be subject to the proposed order. 

B. Cost-Benefit Analysis 

Section 15(a) of the CEA,16 as 

amended by Section 119 of the 

Commodity Futures Modernization Act 

of 2000, requires the Commission to 

consider the costs and benefits of its 

action before issuing an order under the 

CEA. By its terms, Section 15(a) as 

amended does not require the 

Commission to quantify the costs and 

benefits of an order or to determine 

whether the benefits of the order 

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 CEA 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; 

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Federal Register / Vol. 73, No. 219 / Wednesday, November 12, 2008 / Notices 66849 

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 

order 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 

CEA. 

The Commission is considering the 

costs and benefits of this proposed order 

in light of the specific provisions of 

Section 15(a) of the CEA, as follows: 

1. Protection of market participants 

and the public. National securities 

exchanges, DCMs, OCC and their 

members who would intermediate the 

above-described Options and Security 

Futures on Gold and Silver Products are 

subject to extensive regulatory 

oversight. 

2. Efficiency, competition, and 

financial integrity. The proposed 

exemption may enhance market 

efficiency and competition since it 

could encourage potential trading of 

Options and Security Futures on Gold 

and Silver Products through modes 

other than those normally applicable to 

designated contract markets or 

derivatives transaction execution 

facilities. Financial integrity will not be 

affected since the Options and Security 

Futures on Gold and Silver Products 

will be cleared by OCC, a DCO and SECregistered clearing agency, and 

intermediated by SEC-registered brokerdealers. 

3. Price discovery. Price discovery 

may be enhanced through market 

competition. 

4. Sound risk management practices. 

The Options and Security Futures on 

Gold and Silver Products will be subject 

to OCC’s current risk-management 

practices including its margining 

system. 

5. Other public interest 

considerations. The proposed 

exemption may encourage development 

of derivative products through market 

competition without unnecessary 

regulatory burden. 

After considering these factors, the 

Commission has determined to seek 

comment on the proposed order as 

discussed above. The Commission 

invites public comment on its 

application of the cost-benefit provision. 

Issued in Washington, DC, on November 5, 

2008 by the Commission. 

David A. Stawick, 

Secretary of the Commission. 

[FR Doc. E8–26815 Filed 11–10–08; 8:45 am] 

BILLING CODE 6351–01–P 

DEPARTMENT OF DEFENSE 

Office of the Secretary 

Meeting of the Defense Policy Board 

Advisory Committee 

AGENCY: Department of Defense, Defense 

Policy Board Advisory Committee. 

ACTION: Notice. 

SUMMARY: The Defense Policy Board 

Advisory Committee will meet in closed 

session on December 1, 2008 from 0800 

hrs until 1730 hrs and on December 2, 

2008 from 0800 hrs until 1130 hrs at the 

Pentagon. 

The purpose of the meeting is to 

provide the Secretary of Defense, 

Deputy Secretary of Defense and Under 

Secretary of Defense for Policy with 

independent, informed advice on major 

matters of defense policy. The Board 

will hold classified discussions on 

national security matters. 

In accordance with Section 10(d) of 

the Federal Advisory Committee Act, 

Public Law No. 92–463, as amended [5 

U.S.C. App II (1982)], it has been 

determined that this meeting concerns 

matters listed in 5 U.S.C. 

552B(c)(1)(1982), and that accordingly 

this meeting will be closed to the 

public. 

Dated: November 4, 2008. 

Patricia L. Toppings, 

OSD Federal Register Liaison Officer, 

Department of Defense. 

[FR Doc. E8–26760 Filed 11–10–08; 8:45 am] 

BILLING CODE 5001–06–P 

DEPARTMENT OF DEFENSE 

Office of the Secretary 

[Docket ID: DoD–2008–OS–0139] 

Privacy Act of 1974; System of 

Records 

AGENCY: Office of the Secretary, DoD. 

ACTION: Notice to amend a system of 

records notice. 

SUMMARY: The Office of the Secretary of 

Defense is amending a system of records 

notice in its existing inventory of record 

systems subject to the Privacy Act of 

1974, (5 U.S.C. 552a), as amended. 

DATES: This proposed action will be 

effective without further notice on 

December 12, 2008 unless comments are 

received which result in a contrary 

determination. 

ADDRESSES: Send comments to the 

Privacy Act Officer, Office of Freedom 

of Information, Washington 

Headquarters Services, 1155 Defense 

Pentagon, Washington, DC 20301–1155. 

FOR FURTHER INFORMATION CONTACT: Mrs. 

Cindy Allard at (703) 588–2386. 

SUPPLEMENTARY INFORMATION: The Office 

of the Secretary of Defense systems of 

records notices subject to the Privacy 

Act of 1974, (5 U.S.C. 552a), as 

amended, have been published in the 

Federal Register and are available from 

the address above. 

The specific changes to the record 

systems being amended are set forth 

below followed by the notice, as 

amended, published in its entirety. The 

proposed amendments are not within 

the purview of subsection (r) of the 

Privacy Act of 1974, (5 U.S.C. 552a), as 

amended, which requires the 

submission of a new or altered system 

report. 

Dated: November 4, 2008. 

Morgan E. Frazier, 

Alternate OSD Federal Register Liaison 

Officer, Department of Defense. 

DPR 36 

SYSTEM NAME: 

Defense Integrated Military Human 

Resources System (DIMHRS) Records 

(September 30, 2008, 73 FR 56807). 

CHANGES: 

* * * * * 

CATEGORIES OF RECORDS IN THE SYSTEM: 

Delete ‘‘mother’s maiden name’’ from 

first paragraph. 

* * * * * 

DPR 36 

SYSTEM NAME: 

Defense Integrated Military Human 

Resources System (DIMHRS) Records. 

SYSTEM LOCATION: 

Primary Location Corporate Data 

Center, Defense Enterprise Computing 

Center Ogden, 7879 Wardleigh Road, 

Hill AFB, UT 84056–5996. 

Decentralized segments are located at 

Department of Defense (DoD) activities 

worldwide. Official mailing addresses 

can be obtained from the appropriate 

Service point of contact found in the 

‘‘Notification procedure’’ or ‘‘Record 

Access’’ sections of this proposed 

system of records notice. 

mstockstill on PROD1PC66 with NOTICES