Source: https://www.federalregister.gov/documents/2002/08/05/02-19608/reporting-levels-for-large-trader-reports-trakrs
Timestamp: 2018-12-10 13:04:27
Document Index: 223014001

Matched Legal Cases: ['art 17', 'art 17', '§\u20092', 'art 16', 'art 16', 'art 17']

A Proposed Rule by the Commodity Futures Trading Commission on 08/05/2002
Comments must be received by September 4, 2002.
50608-50610 (3 pages)
https://www.federalregister.gov/d/02-19608 https://www.federalregister.gov/d/02-19608
The Commodity Futures Trading Commission (Commission or CFTC) is proposing to amend its regulations to establish a reporting level for TRAKRS futures contracts to be traded on the Chicago Mercantile Exchange (CME). The reporting level being proposed is 25,000 contracts.
Comments should be sent to the Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street, NW., Washington, DC 20581, attention: Office of the Secretariat. Comments may be sent by Start Printed Page 50609facsimile transmission to (202) 418-5521 or by e-mail to secretary@cftc.gov. Reference should be made to “Reporting Levels for TRAKRS.”
Gary J. Martinaitis, Deputy Associate Director, Market Surveillance Section, Division of Market Oversight, Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street, NW., Washington, DC 20581. Telephone: (202) 418-5260. E-mail: [GMartinaitis@cftc.gov].
On December 21, 2000, the President signed into law the Commodity Futures Modernization Act of 2000 (CFMA), Pub. L. No. 106-544, which extensively revises the Commodity Exchange Act (Act). Among other things, the CFMA facilitated the introduction of new futures products by the exchanges. The CME intends to introduce a new product, called TRAKRS, which are low notional value futures contracts based on broad based indices of stocks, bonds, currencies, or other financial instruments. The value of the first TRAKRS futures contract, with is scheduled to begin regular trading sessions on August 1, 2002, will be less than $25 at the start of trading.[1]
TRAKRS, like all other commodities traded on Commission-designated markets, will be subject to the Commission's large trader reporting rules. Those rules require futures commission merchants, members of contract markets and foreign brokers to report to the Commission position information of the largest futures and options traders and, upon special call by the Commission, require the traders themselves to file reports with the Commission. Reporting levels are set in the designated futures and option markets under the authority of sections 4i and 4c of the Act to ensure that the Commission receives adequate information to carry out its market surveillance programs. These market surveillance programs are designed to detect and to prevent market congestion and price manipulation and to enforce speculative position limits. They also provide information regarding the overall hedging and speculative use of, and foreign participation in, the futures markets and other matters of public interest.
Based upon its experience in administering a large trader reporting system that is designed to provide adequate market coverage in light of positions traded or expected to be traded, the Commission is proposing to establish a reporting level for TRAKRS of 25,000 contracts. The Commission intends to review this level over time to determine whether it provides adequate coverage. Furthermore, since the proposed reporting level is significantly influenced by the relatively low value of the initial TRAKRS contract (which will be less than $25), the Commission intends to reconsider this reporting level if new TRAKRS contracts are introduced at a substantially higher price or any TRAKRS contract begin to trade at a substantially higher price.
The Commission notes that the low value of TRAKRS contracts could result in very large positions being reported. Due to current limitations in the Commission's large trader record format,[2] and similar limitations in the CME's own large trader reporting system, the Commission is proposing that TRAKRS positions be reported under Part 17 of its rules, 17 CFR Part 17, only after they have been rounded down to the nearest 1000 and then divided by 1000. For example, a position of 27, 955 contracts would be rounded down to 27,000, divided by 1000 and reported as 27.[3]
Because, in the absence of this rule amendment, the Commission's default reporting level of 25 contracts would apply, the Commission hereby is granting no-action relief to futures commission merchants, members of contracts markets and foreign brokers that comply with the requirements on this proposed rule prior to its final adoption. Accordingly, the Commission will not bring any enforcement action against any futures commission merchant, member of a contract market or foreign broker who complies with the rule as proposed herein. Such futures commission merchants, members of contract markets and foreign brokers will, however, be required to bring their conduct into compliance with the final rule to the extent that the final rule differs from the proposed rule.
Section 15 of the Act 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 does not require the Commission to quantify the costs and benefits of a new regulation or to determine whether the benefits of the proposed regulation outweigh its costs. Rather, section 15 simply requires the Commission to “consider the cost and benefits” of the subject rule.
The proposed rule imposes limited costs in terms of reporting requirements, particularly since most entities that trade on U.S. futures markets already file large trader reports with the Commission. Moreover, to reduce the cost of reporting, the Commission will periodically review the reporting level for TRAKRS, as it generally does for reporting levels for all commodities.[4] The countervailing benefits of these costs are that the Commission will have the necessary information to perform its market surveillance function and thus carry out its mandate of assuring the continued existence of competitive and efficient markets, protecting their price discovery function and protecting market participants and the public interest therein.
The Commission specifically invites public comment on its application of the criteria contained in the Act for consideration. Commenters are also invited to submit any quantifiable date that they may have concerning the costs and benefits of the proposed rule with their comment letters.
The Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq., requires that federal agencies, in proposing rules, consider the impact of those rules on small entities. The Commission has previously determined that large traders and FCMs are not “small entities” for Start Printed Page 50610purposes of the RFA.[5] The proposed amendment to reporting requirements primarily impacts FCMs. Similarly, members of contract markets and foreign brokers report only if carrying or holding reportable, i.e., large positions. Therefore, the Chairman, on behalf of the Commission, hereby certifies, pursuant to 5 U.S.C. 605(b), that the action taken herein will not have a significant economic impact on a substantial number of small entities. The Commission invites comments from any firm believing that these rules would have a significant economic impact on its operation.
The Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) (PRA), which imposes certain requirements on federal agencies (including the Commission) in connection with their conducting or sponsoring any collection of information as fined by the PRA, does not apply to this rule. The Commission believes that the proposed rule amendment does not contain information requirements which require the approval of the Office of Management and Budget. The purpose of this rule is to establish a specific reporting level for TRAKRS.
Authority: U.S.C. §§ 2, 5, 6a 6c, 6f, 6g, 6i, 6k, 6m, 6n, 7, 7a, 9, 12a, 19, and 21, as amended by the Commodity Futures Modernization Act of 2000, Appendix E of Pub. L. No. 106-554, 114 Stat. 2763 (2000); 5 U.S.C. 552 and 552(b).
2. Section 15.03 is proposed to be amended by revising paragraph (b) to read as follows:
3-month (13-seek) U.S. Treasury Bills 150
Issued in Washington, DC this 30th day of July, 2002, by the Commission.
1. Securities broker-dealers and their registered representatives may offer and sell TRAKRS futures contract pursuant to a no-action letter issued by Commission staff on July 11, 2001. See CFTC Letter 02-22, Division of Trading and Markets, CFTC (July 11, 2001), available on the Commission website at http://www.cftc.gov.
2. See 17 CFR 17.00(g)(1).
3. Contract markets should continue to report under Part 16, 17 CFR Part 16, the actual TRAKRS position without regard to the reporting convention proposed to be applied for reports under part 17.
4. See, e.g., 65 FR 14452 (Mar. 17, 2000).
5. 47 FR 18618-20 (Apr. 30, 1982).
[FR Doc. 02-19608 Filed 8-2-02; 8:45 am]