21290 Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Proposed Rules 

8Air Carriers’ Outsourcing of Aircraft 

Maintenance, OIG Report Number: AV–2008–090, 

September 30, 2008—http://www.oig.dot.gov/ 

item.jsp?id=2364. 

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

Commission regulations cited herein may be found 

at 17 CFR Ch. I (2008). 

repair station operating environment. 

Also, we are withdrawing it because of 

the many significant issues commenters 

to the NPRM raised, which the FAA 

needs to consider in developing a better 

proposal. 

The current NPRM is based on 

recommendations developed in 2001 by 

ARAC. At that time, air carriers 

performed the majority of their 

maintenance work in-house. Since then, 

air carriers have increasingly contracted 

their maintenance. According to an 

analysis by the Office of Inspector 

General in 2003, the nine major air 

carriers were contracting 34 percent of 

their heavy airframe maintenance 

checks to repair stations. By 2007, this 

figure had increased to 71 percent.8 The 

NPRM as written does not address this 

changing operational dynamic. 

In their comments to the NPRM, many 

small repair station operators said the 

proposal takes a ‘‘one-size-fits-all’’ 

approach. This approach, they argue, 

does not adequately address the 

operational differences between large 

and small repair stations. As a result, 

the commenters said, the NPRM would 

place a substantial economic and 

administrative burden on their 

operations. 

Many commenters, as noted in the 

Discussion of Comments section of this 

document, argued against adopting key 

portions of the NPRM for a variety of 

reasons. Several commenters asked us to 

withdraw the NPRM in its entirety. For 

the reasons we have discussed, we 

believe the best course of action is to 

withdraw the NPRM. Withdrawal will 

give us time to thoroughly review and 

properly address the substantial changes 

in the repair station operating 

environment and the many issues raised 

by commenters. 

Conclusion 

Withdrawal of the December 1, 2006, 

Repair Stations; Proposed Rule does not 

preclude the FAA from issuing another 

proposal on the subject. In fact, we have 

initiated rulemaking to update and 

revise the regulations for repair stations 

to more fully address the significant 

changes in the repair station business 

model. The new proposed rule will 

address concerns from the 2006 NPRM, 

as well as other issues related to 

bringing the repair station regulations 

up-to-date with industry practice. The 

public will be provided the opportunity 

for public comment on this rulemaking 

through the NPRM process. 

Issued in Washington, DC, on April 30, 

2009. 

Chester D. Dalbey, 

Deputy Director, Flight Standards Service. 

[FR Doc. E9–10638 Filed 5–6–09; 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: Notice of proposed rulemaking; 

request for comments. 

SUMMARY: The Commodity Futures 

Trading Commission (‘‘Commission’’) 

proposes to amend its regulations that 

prescribe minimum adjusted net capital 

(‘‘ANC’’) requirements for futures 

commission merchants (‘‘FCMs’’) and 

introducing brokers (‘‘IBs’’). The 

proposed amendments would increase 

the required minimum dollar amount of 

ANC, as defined in the regulations, that 

an FCM must maintain from $250,000 to 

$1,000,000. The proposed amendments 

also would increase the required 

minimum dollar amount of ANC that 

IBs must maintain from $30,000 to 

$45,000. The Commission also is 

proposing to amend the computation of 

an FCM’s margin-based minimum ANC 

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’’). In addition, the 

Commission is proposing to amend the 

regulations to require that FCM 

proprietary cleared OTC derivative 

positions be subject to capital 

deductions in a manner that is 

consistent with the capital deductions 

required by the Commission’s 

regulations for FCM proprietary 

positions in exchange-traded futures 

contracts and options contracts. Further, 

the Commission proposes to 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 customer accounts from 

eight percent to ten percent and in 

noncustomer accounts from four percent 

to ten percent. Lastly, the Commission 

solicits public comments on the 

advisability of increasing the ANC 

requirement for FCMs that are also 

securities brokers and dealers by the 

amount of net capital required by the 

Securities and Exchange Commission 

(‘‘SEC’’) Rule 15c3–1(a). 

DATES: Submit comments on or before 

July 6, 2009. 

ADDRESSES: You may submit comments, 

identified by RIN number, by any of the 

following methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Agency Web Site: http:// 

www.cftc.gov. Follow the instructions 

for submitting comments on the Web 

site. 

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

the RIN number in the subject line of 

the message. 

• Fax: 202–418–5521. 

• Mail: David A. Stawick, Secretary of 

the Commission, Commodity Futures 

Trading Commission, Three Lafayette 

Centre, 1155 21st Street, NW., 

Washington, DC 20581. 

Hand Delivery/Courier: Same as mail 

above. 

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, 

Special Counsel, 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. Minimum Financial Requirements for 

FCMs and IBs 

Section 4f(b) of the Commodity 

Exchange Act (‘‘Act’’) provides that 

FCMs and IBs must meet the minimum 

financial requirements that the 

Commission ‘‘may by regulation 

prescribe as necessary to insure’’ that 

FCMs and IBs meet their obligations as 

registrants.1 FCMs are subject to higher 

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 positions with a DCO. In addition, 

Section 4d of the Act and the 

Commission’s regulations provide 

Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Proposed Rules 21291 

2The Commission increased the minimum ANC 

requirements of IBs and FCMs to $30,000 and 

$250,000 in May of 1996. See 61 FR 19177 (May 

1, 1996). 

3The Commission also notes that Congress 

recently recognized the importance of appropriate 

minimum capital requirements for registrants with 

obligations to customers by establishing a $20 

million capital requirement for retail over-thecounter forex firms. 

4The term ‘‘risk margin’’ is defined at 

Commission Regulation 1.17(b)(8). 

further protection for customer funds by 

requiring that they be held as 

‘‘segregated’’ funds that are separate and 

apart from the FCM’s own proprietary 

funds. Part 30 of the Commission’s 

regulations also requires FCMs to hold 

‘‘secured amount’’ funds for U.S. 

customers trading in non-U.S. futures 

markets. 

As specified in Commission 

Regulation 1.17(a), the minimum dollar 

amount of ANC that FCMs and IBs must 

maintain is $250,000 and $30,000, 

respectively. The minimum ANC 

requirements in Commission Regulation 

1.17(a) also set forth other computations 

which, if greater, will increase the 

minimum capital requirement for the 

FCM or IB. Specifically, the relevant 

provisions of Regulation 1.17(a)(1)(i) 

require an FCM to maintain ANC equal 

to or in excess of the greatest of: 

$250,000; the FCM’s margin-based or 

‘‘risk-based’’ capital requirement, which 

is computed 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 ANC required by a registered 

futures association of which the FCM 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). For an IB, 

Commission Regulation 1.17(a)(1)(iii) 

requires ANC that equals or exceeds the 

greatest of: $30,000; the amount of ANC 

required by a registered futures 

association of which the IB is a member; 

or for an IB also registered with the SEC 

as securities broker and dealer, the 

amount of net capital required by SEC 

Rule 15c3–1(a). 

The minimum ANC requirements of 

$30,000 for IBs and $250,000 for FCMs 

were adopted by the Commission over 

a decade ago,2 and are no longer 

consistent with the regulatory objective 

of requiring these registrants to maintain 

a minimum base of liquid capital from 

which to meet their current financial 

obligations, including obligations to 

customers. Adopting increased 

minimum ANC requirements for 

registrants whose customers engage in 

exchange-traded futures activity would 

recognize the striking increase over the 

past decade in the amount of funds that 

such customers have deposited with 

their FCMs. As of August 31, 1995, 

approximately $30 billion of segregated 

and secured amount funds were 

required to be held by FCMs for their 

customers, at a time when there were 

255 FCMs. As of December 31, 2008, the 

total amount of such funds had 

escalated to approximately $200 billion, 

which 134 FCMs were required to hold 

for their customers. Thus, not only has 

there been a dramatic increase in the 

amount that FCMs must hold as 

segregated and secured amount funds 

for their customers, but those funds 

have become concentrated among far 

fewer FCMs, further supporting 

additional measures to ensure the sound 

financial strength of such firms.3

Other considerations also support the 

proposed increase in FCM and IB 

minimum dollar amount ANC 

requirements. As noted above, one of 

the factors in determining the minimum 

ANC requirements for FCMs and IBs is 

the minimum requirement imposed by a 

registered futures association of which 

the FCM or IB is a member. The 

National Futures Association (‘‘NFA’’) is 

the only registered futures association, 

and Commission Regulation 170.15(a) 

requires each registered FCM to be a 

member of a registered futures 

association. All registered IBs are also 

members of the NFA. On July 31, 2006, 

NFA’s amendments to Section 1 of its 

Financial Requirements became 

effective, increasing its FCM members’ 

minimum ANC requirement from 

$250,000 to $500,000, and increasing 

the required minimum dollar amount of 

ANC for member IBs from $30,000 to 

$45,000. Consequently, when the NFA 

amended the minimum dollar amount 

of ANC required of its member FCMs 

and IBs on July 31, 2006, the required 

dollar level of minimum ANC for all 

FCMs and IBs increased to $500,000 and 

$45,000 respectively. Therefore, the 

Commission’s proposal to increase the 

minimum dollar ANC requirement of 

IBs to $45,000 merely harmonizes its 

regulations with NFA rules, which will 

simplify the capital calculations of IBs. 

Lastly, Commission staff notes that the 

number of FCMs that may have to add 

capital as a result of the proposed ANC 

requirement of $1,000,000 is minimal 

and that the proposed increased ANC 

requirement is appropriate for the 

reasons discussed above. Accordingly, 

the Commission is proposing to amend 

Regulation 1.17(a)(1)(iii)(A) to raise the 

minimum dollar amount of required 

ANC to $45,000 for IBs, and to amend 

Regulation 1.17(a)(1)(i)(A) to raise the 

minimum dollar amount of required 

ANC for FCMs to $1,000,000. The 

Commission is also proposing 

additional increases to ANC 

requirements for FCMs, as discussed 

below. 

II. Proposed Amendment To Include 

Cleared OTC Positions in the 

Calculation of an FCM’s Minimum Net 

Capital Requirement 

The Commission’s minimum financial 

requirements provide protection to 

customers and other market participants 

by requiring FCMs and IBs to maintain 

minimum levels of liquid assets in 

excess of their liabilities to finance their 

business activities. In 2004, the 

Commission amended Regulation 

1.17(a)(1)(i)(B) to include a ‘‘risk-based’’ 

computation based on the margin, or 

performance bond, requirements for the 

FCM’s customers and noncustomers. 

Specifically, Commission Regulation 

1.17(a)(1)(i)(B) requires an FCM to 

compute its risk-based capital 

requirement as the sum of: (1) Eight 

percent of the total risk margin 4

requirement for positions carried by the 

FCM in ‘‘customer accounts’’, as defined 

in Regulation 1.17(b)(7), and (2) four 

percent of the total risk margin 

requirement for positions carried by the 

FCM in ‘‘noncustomer accounts’’, as 

defined in Regulation 1.17(b)(4). 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). 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. 

In adopting risk-based capital 

requirements in Regulation 1.17 with 

respect to the futures and options 

positions of FCM customers and 

noncustomers, the Commission noted 

that the amendments included any 

customer positions, including nonfutures positions, that were held in 

customer segregated accounts 

established in accordance with the 

provisions of Section 4d of the Act and 

Commission regulations. Various DCOs, 

21292 Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Proposed Rules 

5OTC 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.’’ 

6Examples 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. 

7Some examples of OTC-clearing by foreign 

clearing organizations include ICE, which clears 

through IceClear Europe, and Bclear, an exchange 

service launched by Euronext/Liffe, which brings 

derivatives transactions to LCH.Clearnet for 

clearing. The proposed rule would also include 

OTC-clearing by multilateral clearing organizations 

authorized under Section 409 of the Federal Deposit 

Insurance Corporation Improvement Act and any 

securities clearing organization. 

8The term ‘‘person’’ is defined in CFTC 

Regulation. 1.3(u). 

as part of their increasing efforts to clear 

OTC derivative instruments,5 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.6

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 deemed it 

necessary to include OTC customer 

positions in the definition of ‘‘customer 

accounts’’ for purposes of computing an 

FCM’s risk-based capital requirement. 

The Commission now proposes 

further amendments to Regulation 1.17, 

in order to require FCMs to account for 

all cleared OTC derivative positions the 

FCM carries for customers, whether or 

not included in a Section 4d segregated 

customer account, in the FCM’s riskbased capital calculations. The 

proposed amendments would apply to 

OTC derivative instruments cleared in 

either the U.S. or abroad by any 

organization that is permitted to clear 

such products under the laws of the 

relevant jurisdiction.7 As drafted, the 

proposed capital requirements would 

also apply to credit default swaps, if 

these OTC derivative instruments are 

submitted for clearing on any U.S. DCO 

or foreign clearing organization and 

carried in accounts on the books of the 

FCM. 

The Commission is proposing these 

amendments because FCMs and DCOs 

have become significant clearers of OTC 

derivative instruments. This has 

increased the risk exposure of FCMs in 

a manner that is not currently reflected 

in Regulation 1.17. Therefore, the 

Commission proposes to amend 

Regulation 1.17 in order to expand the 

definitions of ‘‘customer account’’ in 

Regulation 1.17(b)(7), ‘‘noncustomer 

account’’ in Regulation 1.17(b)(4), and 

‘‘proprietary account’’ in Regulation 

1.17(b)(3) to include cleared OTC 

derivative positions. Cleared OTC 

derivative positions would be defined in 

proposed Regulation 1.17(b)(9) as over 

the counter derivative instrument 

positions of any person 8 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, Commission Regulation 

1.17(b)(2) is proposed to be amended to 

include references to ‘‘cleared OTC 

customers’’, which would be defined in 

a proposed new paragraph (b)(10) to 

mean any person that is not a 

proprietary person as defined in 

Commission Regulation § 1.3(y) and for 

whom the FCM carries on its books one 

or more accounts for such person’s 

OTC-cleared derivative positions. 

Finally, the Commission is also 

proposing to amend 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. The Commission notes that 

pursuant to the proposed rulemaking, 

capital deductions to be applied to 

cleared OTC derivative positions in 

proprietary accounts do not apply to 

‘‘covered’’ positions, as that term is 

defined in Commission Regulation 

1.17(j). Therefore, the Commission is 

soliciting comments on the advisability 

of revising Commission Regulation 

1.17(j) to reflect that cleared OTC 

positions in proprietary accounts may 

be covered by positions which would 

qualify as cover for proprietary futures 

and options positions. 

The proposed amendments continue 

the Commission’s efforts to enhance and 

update the Commission’s ANC 

regulation to reflect the increasing 

diversity of positions that are submitted 

for clearing by clearing FCMs for their 

customers and noncustomers. In 

contemplation of this proposed rule 

making, the Commission notes that the 

clearinghouses that clear these OTC 

derivative instruments typically already 

require margin for both exchange-traded 

and OTC positions, regardless of 

whether the positions are held in 

customer segregated accounts. 

Furthermore, the margin requirements 

for cleared OTC derivative positions are 

often calculated in the same manner as 

that for exchange-traded products. As 

such, it is quite appropriate to include 

cleared OTC derivative positions in the 

calculation of an FCM’s minimum ANC. 

However, to ensure adequate capital 

requirements where the clearinghouse 

imposes margin or performance bond 

requirements only for clearing level 

accounts but does not prescribe 

minimum margin requirements for 

customer or noncustomer accounts at 

the FCM level, the Commission also 

proposes to amend the definition of 

‘‘risk margin’’ in Commission 

Regulation 1.17(b)(8) to mean ‘‘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 

customer and noncustomer positions in 

accounts carried by the FCM.’’ 

III. Proposed Amendment To Increase 

Applicable Percentage for Customer 

and Noncustomer Positions 

As noted above, currently, an FCM’s 

risk-based capital calculations includes 

a lower required percentage of risk 

maintenance margin for noncustomer 

Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Proposed Rules 21293 

9See 47 FR 18618, 18619 (Apr. 30, 1982). 

10See 48 FR 35248, 35275–78 (Aug. 3, 1983). 

11 7 U.S.C. 19(a). 

positions (four percent) than the 

required percentage for the same 

positions in customer accounts (eight 

percent). The Commission believes that 

rigorous standards for FCM financial 

strength support the increase of the 

required percentages. As such, the 

Commission is proposing to amend 

Regulation 1.17 so that an FCM’s riskbased capital requirement is ten percent 

of the total risk margin requirement for 

positions carried by the FCM in both 

‘‘customer accounts’’, as defined in 

Regulation 1.17(b)(7), and 

‘‘noncustomer accounts’’, as defined in 

Regulation 1.17(b)(4). 

With respect to noncustomer 

accounts, the Commission notes that in 

general non-customers are persons 

affiliated with the FCM including 

certain employees and officers of the 

FCM. In adopting this lower percentage 

for noncustomer positions, the 

Commission noted that these 

percentages were the same as those 

contained in the self-regulatory 

organization rules upon which the 

Commission’s regulation was modeled, 

and that it was the belief of these selfregulatory organizations that 

noncustomers’ accounts reflected less 

credit risk to FCMs and the clearing 

system. In more recent times, the 

Commission has observed that the risk 

associated with noncustomer accounts 

may not necessarily be less than the risk 

associated with customer accounts 

under conditions of financial stress for 

the FCM. Therefore, to increase the 

financial integrity of the futures 

markets, the Commission is proposing 

to amend Regulation 1.17 to apply the 

same percentage requirement for both 

customer and noncustomer accounts. As 

part of its assessment of the proposed 

amendments, the Commission has been 

advised by staff that, based on the 

information included in financial 

reports filed by FCMs with the 

Commission, it appears that some FCMs 

whose minimum capital requirements 

are determined under the risk-based 

computations do not currently hold 

sufficient levels of capital to satisfy the 

proposed amended requirements, but 

that the overwhelming majority do hold 

levels of capital that are sufficient to 

satisfy the proposed new requirements. 

IV. Proposed Effective Date 

Because some FCMs may need time to 

raise additional capital, the Commission 

is contemplating making the effective 

date for any final rule amendments to 

Regulation 1.17 that it adopts effective 

60 days from the date of publication of 

the final regulations in the Federal 

Register. 

V. Solicitation of Comments 

The Commission requests comments 

on each of the proposed amendments to 

Regulation 1.17 that are described in 

this release, and also as to the proposed 

effective date. The Commission is 

further soliciting comments on the 

advisability of expanding ANC 

requirements for FCMs that are also 

securities brokers and dealers (‘‘FCM/ 

BDs’’), by increasing their ANC by the 

amount of net capital required by SEC 

Rule 15c3–1(a). Currently, Commission 

Regulation 1.17 and SEC Regulation 

15c3–1 require FCM/BDs to compare the 

amounts of capital required under the 

SEC’s and Commission’s regulations, 

and to maintain capital in excess of 

whichever amount is greater. 

The Commission notes that in event 

of liquidation, the adjusted net capital 

of an FCM that is also a securities broker 

and dealer is available to satisfy any 

unsecured claims of creditors, including 

any unsecured claims of both its futures 

and securities customers. The equity 

available to satisfy such unsecured 

claims of customers, would be increased 

if the FCM/BD’s capital requirement 

was not based only on the higher of the 

CFTC’s or SEC’s requirements, but 

rather the combined requirements of the 

two regulations. This would help ensure 

that the FCM/BD’s capital requirements 

reflected more fully the scope of 

customer activity by both its securities 

and futures customers. Therefore, the 

Commission is soliciting comments on 

the advisability of increasing ANC 

requirements of FCMs that are also 

securities brokers and dealers by the 

amount of net capital required by SEC 

Rule 15c3–1(a). 

VI. Related Matters 

A. Regulatory Flexibility Act 

The Regulatory Flexibility Act 

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

that agencies, in proposing rules, 

consider the impact of those rules on 

small businesses. The rule amendments 

proposed herein would affect FCMs and 

non-guaranteed IBs. 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.9

With respect to IBs, the Commission 

stated that it is appropriate to evaluate 

within the context of a particular rule 

proposal whether some or all IBs should 

be considered to be small entities and, 

if so, to analyze the economic impact on 

such entities at that time.10 The 

proposed amendment to the minimum 

ANC requirement for an IB would 

conform the Commission’s requirement 

to that of the NFA and, therefore, should 

have no impact on an IB’s financial 

operations. Thus, if adopted, the 

proposal would not have a significant 

economic impact on a substantial 

number of IBs. Therefore, pursuant to 

Section 3(a) of the RFA, 5 U.S.C. 605(b), 

the Chairman certifies that these 

proposed rule amendments will not 

have a significant economic impact on 

a substantial number of small entities. 

B. Paperwork Reduction Act 

The Paperwork Reduction Act of 

1990, (‘‘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. 

The proposed inclusion of OTC-cleared 

products in the risk-based net capital 

calculation requires no change in line 

item 22A of the Statement of the 

Computation of Minimum Capital 

Requirements on Form 1–FR–FCM. 

There is a change to Line 22.B as a 

result of increasing the minimum dollar 

requirement to $1,000,000, however, 

this is a minor change and would not 

alter the reporting burden. The 

proposed increase in the percentage 

requirements applicable to risk margin 

requirements for customer and 

noncustomer positions included in riskbased 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 OTCcleared products, but neither change 

would alter the related reporting 

burden. Therefore, the amendments 

proposed herein have minimal burden. 

Persons wishing to comment on the 

estimated paperwork burden associated 

with these proposed rule amendments 

should contact Mark Bretscher, Division 

of Clearing and Intermediary Oversight, 

525 W. Monroe St., Chicago, IL 60661, 

(312) 596–0529. 

C. Cost-Benefit Analysis 

Section 15(a) of the Act, as amended 

by Section 119 of the Commodity 

Futures Modernization Act,11 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 

21294 Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Proposed Rules 

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 proposed 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 no effect on the 

following areas: efficiency, 

competitiveness or price discovery. 

Specifically, if adopted, the proposed 

amendments will increase the minimum 

required dollar amount of ANC for 

FCMs from $250,000 to $1,000,000; 

increase the minimum required dollar 

amount of ANC for IBs from $30,000 to 

$45,000; require an FCM’s risk based 

capital computation to include risk 

margin for OTC-cleared positions; and 

increase from 4 percent and 8 percent to 

10 percent the applicable percentage of 

risk margin for all noncustomer and 

customer positions held by the FCM 

respectively. 

After considering these factors, the 

Commission has determined to propose 

the amendments to Regulation 1.17 

discussed above. The Commission 

invites public comment on its 

application of the cost-benefit provision. 

Commenters also are invited to submit 

any data that they may have quantifying 

the costs and benefits of the proposed 

amendments with their comment letters. 

List of Subjects in 17 CFR Part 1 

Brokers, Commodity futures, 

Minimum financial requirements, 

Reporting and recordkeeping 

requirements. 

In consideration of the foregoing and 

pursuant to the authority contained in 

the Commodity Exchange Act and, in 

particular, Sections 4f, 4g and 8a(5) 

thereof, 7 U.S.C. 6f, 6g and 12a(5), the 

Commission hereby proposes to amend 

17 CFR part 1 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 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 ten 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) * * * 

(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 

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 April 30, 

2009 by the Commission. 

David A. Stawick, 

Secretary of the Commission. 

[FR Doc. E9–10459 Filed 5–6–09; 8:45 am] 

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