New York 

Mercantile Exchange 

Ms. Eileen Donovan 

Acting Secretary 

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Received CFTC 

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COMMENT 

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August 23,2007 

Commodity Futures Trading Commission 

Three Lafayette Centre 

1155 21st St., N.W. 

Washington, D.C. 20581 

Re: Confidential Information and Commission Records and Information 

Dear Ms. Donovan: 

The New York Mercantile Exchange, Inc. (NYMEX or Exchange) appreciates the 

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

Commission) Federal Register Release (Release) dated July 20,2007. The CFTC 

requested comment on proposed amendments to procedures for confidential treatment 

requests by derivatives transaction facilities (DTEF), derivatives clearing organizations 

(DCO), or designated contract markets (DCM) for products and rules submitted via 

certification or for CFTC review and approval. NYMEX is a for-profit corporation 

organized under the laws of the State of Delaware. It is the chief operating subsidiary of 

NYMEX Holdings, Inc. (NYMX Holdings). As a DCM and DCO, NYMEX is the 

largest exchange in the world for trading futures and options contracts on energy and 

metals commodities. 

The CFTC is proposing to amend Commission Regulation 40.8 to add paragraph 

(c) as the exclusive method of requesting confidential treatment for information required 

to be filed under Parts 40 and 41. In addition, the CFTC proposes to add new provisions 

to Parts 40 and 41 to direct the registered entity requesting confidential treatment to 

follow the new procedures specified in Commission Regulation 40.8( c). Registered 

entities would be required to follow the current standard procedures, and in addition 

would be required to file a detailed written justification simultaneously with the request 

for confidential treatment, and to segregate the material deemed confidential in an 

appendix to the submission. Furthermore, CFTC staff could make an initial 

determination to grant or deny confidential treatment to such material before receiving a 

request under the Freedom of Information Act (FOIA). The CFTC stated that the 

purpose of the proposed rule changes is to expedite the confidential treatment review 

process and thereby provide the public with more immediate access to non-confidential 

information. 

New York Mercantile Exchange, Inc. 

World Financial Center 

One North End Avenue 

New York, NY 10282-1101 

(212) 299-2000 

The New Y11rk Mercantile Exchange, Inc., is composed of two divisions. 

The NYMF.X Division offers trading in crude oil, heating oil, unleaded gasoline, 

natural gas, electricity, coal, propane, platinum, a.nd palladium. The COM EX Division 

offers trading in gold, silver, copper, and aluminum. 

D7- 9 

® 
NYMEX understands the CFTC's stated purpose ofthe proposed rule, which is to 

expedite the release of non-confidential information. However, NYMEX has several 

concerns about the proposal as drafted. Specifically, NYMEX questions the merit of 

including in the submissions a detailed confidentiality analysis, regardless of whether 

such materials are subject to a FOIA request. Additionally, the proposal adopts a rigid 

exclusive means for requesting confidential treatment when the Commodity Futures 

Modernization Act of2000 (CFMA) ushered in a flexible core principles approach to 

regulation. Also, the proposal could potentially preclude DTEFs, DCMs and DCOs from 

seeking confidential treatment of proprietary intellectual property that is developed in 

connection with such facility's transaction execution processes. Further, the proposed 

rule by its own terms only applies to DTEFs, DCOs and DCMs, and does not apply to 

any other person or entity that makes submissions to the Commission with confidentiality 

requests included. Lastly, the Release does not identify specific problems encountered 

under the current procedure that would justify the change. 

Under the proposed rule, all confidential treatment requests for submissions under 

Part 40 must include a detailed written justification for confidentiality, regardless of 

whether a FOIA request is actually received by the CFTC. NYMEX believes that this 

requirement imposes unnecessary burdens on certain registered entities seeking 

confidential treatment. There is an economy of effort issue to be addressed in a 

requirement that mandates extensive analysis and the development of persuasive 

arguments ahead of a FOIA request for release of the subject materials. The result of this 

approach is an expenditure of resources to prepare the detailed justification regardless of 

whether there is a need to justify the request for confidential treatment. We question the 

merits of preparing a detailed justification every time we request confidential treatment 

when possibly 80% of our submissions are never subject to a FOIA request. In fact, we 

do not believe that there is any good public policy purpose to be served by requiring 

registered entities to provide confidentiality justification unless there is an actual FOIA 

request that covers the subject materials. Neither the Commission nor the regulated 

entities have sufficient resources to have the luxury of engaging in hypothetical 

confidentiality justification just for the sake of the analysis. We believe it would be a 

better use of our resources, and those of the Commission, to focus our efforts only on 

confidentiality matters that are "ripe" through an actual FOIA request. 

NYMEX also believes that requiring a justification at the time of the submission 

may slow our ability to roll out innovative new products and services when we are 

seeking confidential treatment for part of the filing. Indeed, one of the main purposes of 

the self-certification process, adopted under the CFMA, was to expedite the time to 

market of new products or other instruments and to facilitate the timely implementation 

of new rules. The self-certification process was considered essential to the ability of 

DCMs to compete with the over-the-counter markets domestically and globally. Any 

retrenchment on that front would contradict the CFMA and potentially dampen the 

successes DCMs have experienced under the CFMA. 

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The proposed rule would establish an exclusive method for requesting · 

confidential treatment for information required to be filed under Parts 40 and 41 of the 

CFTC's regulations. NYMEX believes that a rulemaking of this kind appears on its face 

to be inconsistent with the spirit and intent of the CFMA, which set forth a principlesbased approach to regulation to provide greater flexibility in the regulatory structure. We 

question the need for such a rigid requirement, and view this as potentially further 

erosion of the CFMA as it applies to the exchanges. We believe that the stated objective 

of expediting the release of non-confidential information can be accomplished in other 

less prescriptive ways than as proposed in the Release. 

NYMEX believes that views about confidentiality can change over time. 

Consequently, NYMEX questions the CFTC's blanket dismissal of any request for 

confidential treatment of mechanisms for executing transactions on the facility. 

Specifically, in part II (B) of the supplementary information, the release provides as 

follows: 

" 

The Commission notes that mechanisms for executing transactions on or through 

the facilities of the contract market generally include such information as trading 

algorithms and information from an exchange's rulebook that pertain to trading. 

Moreover, the Commission notes that requests for confidential treatment covering 

the mechanisms for executing transactions on or through the facilities of the 

contract market and a product's terms and conditions will not be processed." 

This explanatory paragraph supplants the actual proposed new regulation at 17 

CFR 40.8(d), which does not specify what is, or is not," ... mechanisms for executing 

transactions on or though the facilities of the contract market". While we would 

generally agree with the Commission's observation that the mechanisms for executing 

transactions in a product may include algorithms, we disagree that this type of material 

should automatically be made public and not be eligible for confidential treatment. 

Indeed, NYMEX could envision a si~tion in which we request confidential treatment of 

an algorithm or other similar proprietary trading tool as part of a submission to the 

Commission, while we are simultaneously seeking to get intellectual property protection 

for the exact same thing. NYMEX believes that the CFTC should reconsider its decision 

to automatically exclude something from being classified as confidential if it can 

potentially qualify as proprietary intellectual property for which a regulated entity may 

seek protection under patent or trademark laws. 

NYMEX further observes that the proposed rule applies only to DCM, DCOs and 

DTEFs, thus the proposal singles out registered exchanges and clearing organizations for 

the new requirements. Other submitters presumably would continue to follow the current 

procedures for requesting confidential treatment of submissions. The CFTC does not 

elaborate on why this new procedure is proper only for DTEFs, DCMs and DCOs. 

NYMEX believes that the Commission should delineate its rationale for distinguishing 

between the regulated entities subject to the proposed rule and others who regularly make 

3 
submissions to the Commission, or consider broadly applying this new procedure through 

a change to 17 CFR 145.9. 

Finally, in our view, the current procedure for requesting confidential treatment 

works well because it does not unduly burden a DTEF, DCM or DCO by requiring 

confidentiality justifications unless and until such time as the materials are actually 

subject to a FOIA request. Under the current regulations and procedures, NYMEX may 

request confidential treatment with respect to certain materials when filed with the 

Commission and, if the Commission receives a FOIA request applicable to such 

materials, NYMEX has 10 days to prepare a detailed written justification. Commission 

staff then makes a determination about whether such materials should remain confidential 

or not. NYMEX notes that the Release does not identify any particular complaints 

relative to the Commission's timeliness of handling FOIA requests or other problems that 

the Commission is having with respect to handling FOIA requests involving submissions 

by DTEFs, DCMs or DCOs. Because NYMEX believes this proposed rule would create 

a significant additional regulatory burden to its submissions to the Commission, we 

believe that it would be appropriate for the Commission to delineate the actual need for 

this regulatory change including identifying any complaints received such as consistent, 

unusual, and lengthy delays in the CFTC's response to FOIA requests. 

NYMEX thanks the Commission for the opportunity to comment on this proposed 

rulemaking. If you have any comments or questions, please do not hesitate to contact me 

at anytime. 

4 

Sincerely, 

General 

~c Counsel 

Chief Administrative Officer 

and Secretary