Federal Register / Vol. 61, No. 19 / Monday, January 29, 1996 / Rules and Regulations 2717

1See 58 FR 10953 (February 23, 1993).

2Commission rule 30.3(a), 17 CFR 30.3(a), makes

it unlawful for any person to engage in the offer or

sale of a foreign option product until the

Commission, by order, authorizes such foreign

option to be offered or sold in the United States.

3 In this connection, the Initial Order was issued,

in part, based on the Exchange’s commitment to

phase in physical segregation requirements for

customer property. Specifically, a special

enforcement order issued by MAFF on December

14, 1990 required that one quarter of all customer

property held by an FCM be physically segregated

in accordance with Article 92–2 of the CEL, with

an additional quarter to be segregated on April 1 of

each subsequent year until April 1, 1996, when

100% of all customer property will be required to

be segregated. Therefore, 75% of customer property

is currently subject to physical segregation at the

TGE. Under the CEL, the segregation protection is

supplemented by the Guarantee Money Fund, the

Commodity Transaction Responsible Reserve Fund,

Membership Trust Money and the Compensation

Fund.

4See letter dated June 14, 1995 from Seiji Mori,

TGE, to Andrea M. Corcoran, Commission and

letters dated July 11 and July 28, 1995 from Itsuji

Yanagisawa, TGE, to Jane C. Kang, Commission.

FDC date State City Airport FDC No. SIAP

12/13/95 ....... TN Memphis ....................... Memphis Intl ..................................... FDC 5/6679 ILS RWY 18L, AMDT 7B...

12/13/95 ....... TN Memphis ....................... Memphis Intl ..................................... FDC 5/6680 ILS RWY 36R CAT/III/, AMDT

10...

12/13/95 ....... TN Memphis ....................... Memphis Intl ..................................... FDC 5/6681 ILS RWY 36R AMDT 10...

12/13/95 ....... TN Memphis ....................... Memphis Intl ..................................... FDC 5/6682 ILS RWY 36R/CAT II/, AMDT

10...

12/13/95 ....... TN Memphis ....................... Memphis Intl ..................................... FDC 5/6683 NDB RWY 36R, AMDT 7...

12/13/95 ....... TN Memphis ....................... Memphis Intl ..................................... FDC 5/6684 RADAR–1, AMDT 37...

12/13/95 ....... TN Memphis ....................... Memphis Intl ..................................... FDC 5/6685 DEP PROCS/TKOF MNMS

AMDT 12...

12/14/95 ....... SC Summerville .................. Summerville/Dorchester County ....... FDC 5/6705 NDB or GPS RWY 5, ORIG–A...

12/15/95 ....... IA Des Moines ................... Des Moines Intl ................................. FDC 5/6715 ILS RWY 13L, AMDT 6...

12/15/95 ....... OH Wadsworth .................... Wadsworth Muni ............................... FDC 5/6726 NDB or GPS RWY 2, AMDT 5...

12/18/95 ....... OH Wadsworth .................... Wadsworth Muni ............................... FDC 5/6746 VOR/DME–A AMDT 1...

12/20/95 ....... KY Louisville ....................... Louisville Intl-Standiford Field .......... FDC 5/6805 ILS RWY 35, ORIG...

12/20/95 ....... MO Kansas City ................... Kansas City Intl ................................ FDC 5/6785 ILS RWY 19L, ORIG–A...

12/21/95 ....... MA Worcester ...................... Worcester Muni ................................ FDC 5/6835 VOR/DME RWY 33, ORIG...

[FR Doc. 96–1433 Filed 1–26–96; 8:45 am]

BILLING CODE 4910–13–M

COMMODITY FUTURES TRADING

COMMISSION

17 CFR Part 30

Foreign Option Transactions

AGENCY: Commodity Futures Trading

Commission.

ACTION: Order.

SUMMARY: The Commodity Futures

Trading Commission (Commission) is:

confirming that the Part 30 Order issued

on February 17, 1993 (the ‘‘Initial

Order’’) to the Tokyo Grain Exchange

(TGE) continues in effect subsequent to

the merger on October 1, 1993 of the

TGE with the Tokyo Sugar Exchange

(TSE) with the TGE as the surviving

entity; and allowing the option contract

on the raw sugar futures contract traded

on TGE to be offered or sold to persons

located in the United States.

This Order is issued pursuant to

Commission rules 30.3 and 30.10, 17

CFR 30.3 and 30.10 (1995), which:

granted an exemption to designated

members of the Exchange from the

application of certain of the

Commission’s foreign futures and

option rules based on substituted

compliance with comparable Japanese

regulatory and self-regulatory

requirements; and authorized options

on U.S. soybean futures contracts traded

on the TGE to be offered or sold in the

United States, 58 FR 10953 (Feb. 23,

1993). By this Order, the Commission

also acknowledges the substitution of

the merged TGE as the party to several

ongoing information sharing and

financial intermediary recognition

arrangements entered into with the

former TGE, the Ministry of Agriculture,

Forestry and Fisheries (‘‘MAFF’’) and

the Commission as described in the

Initial Order.

EFFECTIVE DATE: February 28, 1996.

FOR FURTHER INFORMATION CONTACT: Jane

C. Kang, Esq. or Robert Rosenfeld, Esq.,

Division of Trading and Markets,

Commodity Futures Trading

Commission, Three Lafayette Centre,

1155 21st Street, NW., Washington, DC

20581. Telephone: (202) 418–5435.

SUPPLEMENTARY INFORMATION: The

Commission has issued the following

Order:

United States of America Before The

Commodity Futures Trading

Commission

Order Pursuant to Commission Rules

30.3 and 30.10 Confirming that the

Initial Order to the TGE Continues in

Effect Subsequent to the Merger of TGE

and TSE and Permitting Option

Contracts on the Raw Sugar Futures

Contract Traded on the TGE To Be

Offered or Sold to Persons Located in

the United States Thirty Days After

Publication of This Notice in the Federal

Register Absent Further Notice

In the Initial Order,1 the Commission

exempted certain designated members

of the TGE from the application of

certain of the foreign futures and option

rules based on substituted compliance

with comparable Japanese regulatory

and self-regulatory requirements and

allowed option contracts on U.S.

soybean futures contracts traded on the

TGE to be offered or sold in the United

States.2 Among other conditions, the

Initial Order specified that:

Except as otherwise permitted under the

Commodity Exchange Act and regulations

thereunder, * * * no offer or sale of any

Tokyo Grain Exchange option product in the

United States shall be made until thirty days

after publication in the Federal Register of

notice specifying the particular option(s) to

be offered or sold pursuant to this Order.

On October 1, 1993, the membership

of the TSE merged with the TGE with

the TGE as the surviving entity. The

merger was approved by the MAFF, the

government regulator with oversight

responsibility for both exchanges.

The Exchange has represented, among

other things, that the basis upon which

the Commission issued the Initial Order

as well as the terms and conditions set

forth therein continue in effect with

respect to TGE subsequent to the merger

with TSE.3 In particular, the Exchange

has represented that: 4

(1) the recognition and continued oversight

by MAFF of TGE remain unaffected by the

merger;

(2) the TSE futures and options which are

now traded on the TGE Sugar Market are

designated and traded according to the

requirements of the Japanese Commodity

Exchange Law (‘‘CEL’’), which the

Commission considered in issuing the Initial

Order to the TGE; and
2718 Federal Register / Vol. 61, No. 19 / Monday, January 29, 1996 / Rules and Regulations

5The TGE’s application had submitted terms for

two option contracts on raw sugar futures contracts.

The last trading day for one of those contracts was

October 31, 1995. Accordingly, this Order

authorizes the one option contract on the raw sugar

futures contract which started trading on January 1,

1995 as described below in the ‘‘Contract

Specifications’’.

(3) no significant rule changes have been

implemented at TGE as a result of the merger:

the only modifications made to date have

been those necessary to bring futures and

options contracts traded at TSE within the

TGE regulatory structure.

In particular, the TGE has

summarized relevant changes resulting

from the merger as follows:

(1) Membership. Although many TSE

members were also TGE members, TSE had

an additional category of membership—

associate members who are permitted to

trade only for their own accounts and must

execute their trades through a futures

commission merchant (‘‘FCM’’) member of

the TGE. Therefore, TGE rules were amended

to add associate members to the existing

regular member and FCM categories.

(2) Creation of Two Markets. The

integrated, centrally located TGE marketplace

now consists of a TGE Agricultural Market,

trading commodities previously associated

with TGE and a TGE Sugar Market, trading

commodities previously associated with TSE.

(3) Staff. Staff of the two exchanges merged

to form staff of the TGE to ensure there is no

diminution in oversight or staff expertise.

The 38 staff members who are responsible for

market surveillance comprise one-third of the

total Exchange staff.

By letter dated June 14, 1995, TGE

requested that the Commission confirm

that the Initial Order continues in effect

relative to the merged entity which

came into existence on October 1, 1993

and supplement the Initial Order

authorizing the offer and sale in the

United States of options on the U.S.

soybean futures contract by also

authorizing the TGE’s option contract

on the raw sugar futures contract to be

offered or sold to persons located in the

United States. 5

Based upon the foregoing, and subject

to the terms and conditions specified in

the Initial Order, the Commission

hereby publishes this Order in the

Federal Register confirming the

continued applicability of the Initial

Order to the newly merged entity, TGE,

and allowing the option contract based

on the raw sugar futures contract traded

on the TGE to be offered or sold to

persons located in the United States

thirty days after publication of this

Order in the Federal Register, unless

prior to that date the Commission

receives any comments which may

result in a determination to delay the

effective date of the Order pending

review of such comments. Under such

circumstances the Commission will

provide notice.

Contract Specifications Options on Raw

Sugar Futures (March 1996 Contract)

Year Contract Began Trading—May

1992

Trading Hours

Morning: Opening Session, 9:10 a.m.–

9:30 a.m.; Continuous Session 9:30

a.m.–11:30 a.m.

Afternoon: Opening Session, 1:00

p.m.–1:15 p.m.; Continuous

Session, 1:15 p.m.–3:00 p.m.;

Closing Session, 3:00 p.m.–3:15

p.m.

Contract Unit—One TGE Raw sugar

futures contract

Delivery Months—January, March, May,

July, September and November within

a 15 month period

Price Quotation—Yen per 1,000

kilogram

Minimum Price Fluctuation—10 yen per

1,000 kilogram (500 yen per contract)

Maximum Daily Price Fluctuation—

1,000 yen per 1,000 kilogram with

variable limits effective under certain

conditions.

Strike Price Increment—1,000 yen per

1,000 kilogram intervals with one

strike price at-the-money and

minimum of three exercise prices

above and three below.

Speculative Position Limits—None

Last Trading Day—The last business

day 3 months prior to the delivery

month of the underlying futures

contract.

Expiration Date—3:45 p.m. of the last

trading day

Automatic Exercise—None

Exercise Style—American style. The

option holder shall give an exercise

notice to the FCMs by 3:30 p.m. of

any business day up to the last trading

day. FCMs and regular members shall

give an exercise notice to the FCMs

from 3:00 p.m. to 3:45 p.m. of any

business day up to the last trading

day. The Exchange shall

proportionally assign an exercised

position to the option writer.

Customer Margin—The writer shall

deposit 50,000 yen (the half amount

of the initial margin of the underlying

futures contract) plus the option

premium per one contract to FCMs.

Commission Fee

New Order, 3,000 yen or less per one

contract

Resale/Repurchase (for liquidation),

2,000 yen or less per one contract.

Note: The first trading day of March 1996

contract started from January 4, 1995.

List of Subjects in 17 CFR Part 30

Commodity futures, Commodity

options, Foreign transactions.

Accordingly, 17 CFR Part 30 is

amended as set forth below:

PART 30—FOREIGN FUTURES AND

FOREIGN OPTION TRANSACTIONS

1. The authority citation for Part 30

continues to read as follows:

Authority: Secs. 2(a)(1)(A), 4, 4c, and 8a of

the Commodity Exchange Act, 7 U.S.C. 2, 6,

6c and 12a.

2. Appendix B to Part 30 is amended

by adding the following entry after the

existing entries for the ‘‘Tokyo Grain

Exchange’’ to read as follows:

APPENDIX B.—OPTION CONTRACTS PERMITTED TO BE OFFERED OR SOLD IN THE U.S. PURSUANT TO § 30.3(A)

Exchange Type of contract FR date and

citation

* * * * * * *

Tokyo Grain Exchange ............................ Option Contract on the Raw Sugar Futures Contract ............................................... 1996;

llFRll

* * * * * * *
Federal Register / Vol. 61, No. 19 / Monday, January 29, 1996 / Rules and Regulations 2719

1By February 9, 1987, the Commission had made

the programs permanent. Option trading on nonagricultural futures was made permanent effective

August 1, 1986. 51 FR 17464 (May 13, 1986); 51 FR

27529 (August 1, 1986). Option trading on

agricultural futures and options on non-agricultural

physicals were made permanent effective February

9, 1987. 52 FR 777 (January 9, 1987).

2For background on the NFA Clearinghouse, see

generally 58 FR 4949 (January 19, 1993).

3 It should be noted that on September 4, 1992,

the Commission proposed the deletion of two other

provisions in Regulation 33.4: Regulation

33.4(b)(4)(iii) and Regulation 33.4(b)(8). 57 FR

40626. On December 14, 1992, the deletion of these

two regulations became final. See 57 FR 58976.

Under these regulations, boards of trade designated

as contract markets for options were required to

adopt rules requiring member FCMs that engaged in

the offer or sale of commodity options regulated

under Part 33 to send copies of customer

complaints, the record of the final disposition

thereof, and copies of all promotional material to

the member’s DSRO.

4Currently, the exchanges are required to submit

hardcopy notices of disciplinary actions to the

Commission pursuant to Regulation 9.11.

Ultimately, however, it is anticipated that data will

be entered into the NFA Clearinghouse in lieu of

filing hardcopy notices. Until the Commission

permits such data entry directly into the NFA

Clearinghouse, in lieu of such filings, exchanges

must continue to file hardcopy notices with the

Commission within the 30-day requirement of

Regulation 9.11.

Issued in Washington, D.C. on January 22,

1996.

Jean A. Webb,

Secretary to the Commission.

[FR Doc. 96–1511 Filed 1–26–96; 8:45 am]

BILLING CODE 6351–01–P

17 CFR Part 33

Deletion of Option Regulation

Requiring That Futures Commission

Merchants Give Notification of

Disciplinary Actions to Their

Designated Self-Regulatory

Organizations; Regulation 33.4(b)(6)

AGENCY: Commodity Futures Trading

Commission.

ACTION: Final rule.

SUMMARY: The Commodity Futures

Trading Commission (‘‘Commission’’) is

amending 17 CFR Part 33 to delete

Regulation 33.4(b)(6), under which a

board of trade must adopt rules that

require each member futures

commission merchant (‘‘FCM’’) that

engages in the offer or sale of Part 33

option contracts to give notice to the

FCM’s designated self-regulatory

organization (‘‘DSRO’’) of any

disciplinary action taken against the

FCM or any of its associated persons by

the Commission or by another selfregulatory organization (‘‘SRO’’). The

purpose of this deletion is to eliminate

unnecessary recordkeeping

requirements affecting FCMs.

EFFECTIVE DATE: February 28, 1996.

FOR FURTHER INFORMATION CONTACT:

Kimberly A. Browning, Attorney,

Commodity Futures Trading

Commission, Division of Trading and

Markets, Three Lafayette Centre, 1155

21 Street NW., Washington, DC 20581.

Telephone (202) 418–5490.

SUPPLEMENTARY INFORMATION:

I. Background

Regulation 33.4(b)(6) is part of a group

of regulations that date from the

Commission’s three-year pilot program,

instituted by the Commission on

November 3, 1981, for the trading on

domestic exchanges of options on nonagricultural futures contracts. The

establishment of the pilot program was

the culmination of a long history of

Commission efforts to provide for the

trading of commodity options in a

regulated environment. Subsequently,

the Commission adopted a pilot

program that expanded the trading of

options to non-agricultural physical

commodities. 47 FR 65996 (December

22, 1982). On January 23, 1984, the

Commission adopted a separate threeyear pilot program that expanded the

trading of options on futures contracts

to domestic agricultural commodities.

49 FR 2752. Overall, the Commission

found that each pilot program had been

a success.1

Part 33 of the Commission’s

regulations governs domestic exchangetraded commodity option transactions.

Regulation 33.4, in conjunction with the

requirements of Section 5 of the

Commodity Exchange Act (‘‘Act’’), sets

forth the requirements which a board of

trade must meet in order to be

designated as a contract market for the

trading of option contracts. Part 33,

including Regulation 33.4, was adopted

concurrently with the initial

implementation of the first pilot

program in 1981. Under Regulation

33.4(b)(6), a board of trade must adopt

rules that require each member FCM

which engages in the offer or sale of Part

33 option contracts to give notice to the

FCM’s DSRO of any disciplinary action

taken against the FCM or any of its

associated persons by the Commission

or by another SRO.

By letter dated September 11, 1992,

the Chicago Board of Trade (‘‘CBT’’)

petitioned the Commission for deletion

of Regulation 33.4(b)(6). In support of its

petition, the CBT explained that, along

with other futures exchanges, it has

joined the National Futures Association

(‘‘NFA’’) in implementing a centralized

repository for the entry of information

on exchange disciplinary actions the

(‘‘NFA Clearinghouse’’).2 The CBT

stated that it believes that because the

NFA Clearinghouse includes data on

Commission, NFA and exchange

disciplinary actions, the reporting

requirements imposed on FCMs by

Regulation 33.4(b)(6) are now

duplicative and should be abolished.3

The NFA Clearinghouse went into

effect in late January 1991. At that time,

several exchanges began to file their

disciplinary action data electronically

into the NFA Clearinghouse database

through what the NFA refers to as the

exchange disciplinary action portion for

the NFA Clearinghouse. The NFA

Clearinghouse, which the exchanges

have entered into voluntarily, permits

the Commission and the exchanges to

enter and review disciplinary action

data, including disciplinary actions

taken against an FCM or any of its

associated persons by the Commission

or by another SRO, via computer

terminals at their respective locations.4

II. Proposed Rule

On January 19, 1993, the

Commission’s proposal to delete

Regulation 33.4(b)(6) was published in

the Federal Register (58 FR 4948). This

proposal was made in response to the

CBT’s September 11, 1992 petition for

deletion of Regulation 33.4(b)(6). The

Commission stated that the NFA

Clearinghouse appeared to satisfy the

objective of Regulation 33.4(b)(6) by

providing a repository for, among other

things, exchange disciplinary actions. In

making the proposal to delete

Regulation 33.4(b)(6), the Commission

stated that before it approved final

deletion of the regulation, it intended to

examine exchange and NFA refinements

to the operation of the NFA

Clearinghouse to determine whether the

system would serve the purpose of

Regulation 33.4(b)(6).

III. Comments Received

The Commission received one

comment letter, from the NFA, that

supported the proposed deletion of

Regulation 33.4(b)(6). The NFA

commented that it believes that

Regulation 33.4(b)(6) places an

unnecessary regulatory burden upon

FCMs because the Commission,

members of the public, and any DSRO

may already obtain disciplinary

information, without an FCM’s specific

disclosure, by accessing the NFA

Clearinghouse.

IV. Final Rule

Commission staff has been monitoring

each exchange’s use of the NFA

Clearinghouse. Since August 1991, the

majority of the exchanges have been