Proposed Rule

Friday,
December 12, 2008

Part III

Commodity Futures
Trading Commission

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17 CFR Parts 15, 16, 17, et al.
Significant Price Discovery Contracts on
Exempt Commercial Markets; Proposed
Rule

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Federal Register / Vol. 73, No. 240 / Friday, December 12, 2008 / Proposed Rules

COMMODITY FUTURES TRADING
COMMISSION
17 CFR Parts 15, 16, 17, 18, 19, 21, 36,
and 40
Significant Price Discovery Contracts
on Exempt Commercial Markets
AGENCY: Commodity Futures Trading
Commission.
ACTION: Proposed rules.

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SUMMARY: The Commodity Futures
Trading Commission (‘‘Commission’’ or
‘‘CFTC’’) is proposing rules to
implement the CFTC Reauthorization
Act of 2008 (‘‘Reauthorization Act’’).1 In
pertinent part, the Reauthorization Act
amends the Commodity Exchange Act to
significantly expand the CFTC’s
regulatory authority over exempt
commercial markets (‘‘ECMs’’), which
had heretofore operated largely outside
the Commission’s regulatory reach, by
creating a new regulatory category—
ECMs with significant price discovery
contracts (‘‘SPDCs’’)—and directing the
Commission to adopt rules to
implement this expanded authority. In
addition to proposing regulations
mandated by the Reauthorization Act,
the Commission is also proposing to
amend existing regulations applicable to
registered entities in order to clarify that
such regulations are now applicable to
ECMs with SPDCs.
DATES: Comments must be received by
February 10, 2009.
ADDRESSES: You may submit comments
by any of the following methods:
• Federal eRulemaking Portal: http://
www.regulations.gov.
• Mail/Hand Deliver: David Stawick,
Secretary of the Commission,
Commodity Futures Trading
Commission, Three Lafayette Centre,
1155 21st Street, NW., Washington, DC
20581.
• E-mail: secretary@cftc.gov.
FOR FURTHER INFORMATION CONTACT:
Susan Nathan, Senior Special Counsel,
Division of Market Oversight,
Commodity Futures Trading
Commission, Three Lafayette Centre,
1155 21st Street, NW., Washington, DC
20581. Telephone: (202) 418–5133.
E-mail: snathan@cftc.gov.
SUPPLEMENTARY INFORMATION:

Table of Contents
I. Background
A. The Commodity Futures Modernization
Act of 2000 Established a New
Regulatory Framework
1. Multi-Tiered Regulation
1 Incorporated as Title XIII of the Food,
Conservation and Energy Act of 2008, Pub. L. No.
110–246, 122 Stat. 1624 (June 18, 2008).

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2. Exempt Commercial Markets
3. Differences Between ECMs and DCMs
B. The Changing ECM Landscape
C. The CFTC’s Response to the Changing
Energy Markets
1. Empirical Study of Trades on ICE and
NYMEX
2. Commission Surveillance of Energy
Markets
3. The Commission’s ECM Hearing
4. The Commission’s Findings and
Legislative Recommendations
D. The Reauthorization Legislation and the
Statutory Scheme
II. The Proposed Rules
A. Part 36—Exempt Markets
1. Required Information
2. Identifying Significant Price Discovery
Contracts
(i) Criteria for SPDC Determination
(ii) Notification Requirement for ECMs
With a SPDC
3. Procedures
4. Substantive Compliance With the Core
Principles
5. Annual Commission Review
B. Market, Transaction and Large Trader
Reporting Rules
C. Other Regulatory Provisions
1. Part 40—Provisions Common to
Registered Entities
III. Related Matters
A. Cost Benefit Analysis
B. Regulatory Flexibility Act
C. Paperwork Reduction Act
List of Subjects: Proposed Rules

I. Background
A. The Commodity Futures
Modernization Act of 2000 Established
a New Regulatory Framework
1. Multi-Tiered Regulation
On December 21, 2000, Congress
enacted the Commodity Futures
Modernization Act (‘‘CFMA’’), which
amended the Commodity Exchange Act
(‘‘Act’’ or ‘‘CEA’’) 2 to replace the Act’s
‘‘one-size-fits-all’’ supervisory
framework for futures trading with a
multi-tiered approach to regulatory
oversight of derivatives markets. The
CFMA applies different levels of
regulatory oversight to markets based
primarily on the nature of the
underlying commodity being traded and
the participants who are trading. In
general, the more sophisticated the
traders or commercial participants, or
the less susceptible a commodity is to
manipulation or other market or trading
abuses, the less regulatory oversight is
required under the CFMA.
Accordingly, designated contract
markets (‘‘DCMs’’), are subject to the
highest level of regulatory oversight
because they are open to all participants
and may offer all types of commodities.3
Derivatives Transaction Execution
27
37

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U.S.C. 7.

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Facilities (‘‘DTEFs’’) 4 are subject to less
regulatory oversight than DCMs because
participants must be sophisticated
investors or must be hedging risk
associated with their commercial
activities. Additionally, the CFMA
imposes limitations on the types of
commodities that may be traded, and
the manner in which they may be
traded.5 Exempt Boards of Trade
(‘‘EBOTs’’) are subject to virtually no
regulatory oversight and are not
registered with or designated by the
Commission. EBOTs are exempt from
most provisions of the CEA other than
its antifraud and anti-manipulation
prohibitions, but are subject to
significant commodity and participant
restrictions.6 In addition to creating
these three new categories of trading
facility, the CFMA created a broad array
of exclusions and exemptions from
regulation for certain swaps and other
derivatives products traded either
bilaterally or on electronic trading
facilities.7 These exclusions and
exemptions reflected a view, consistent
with Congressional and Commission
actions relating to the passage of the
CFMA, that transactions between
sophisticated counterparties do not
necessarily require the protections that
the CEA provides for transactions on
DCMs and DTEFs.
2. Exempt Commercial Markets
The CFMA established an exemption
for transactions in exempt commodities
traded on electronic trading facilities,
also known as exempt commercial
markets (‘‘ECMs’’).8 To qualify as an
ECM, a facility must limit its
transactions to principal-to-principal
transactions executed between ‘‘eligible
commercial entities’’ (‘‘ECEs’’) 9 on an
‘‘electronic trading facility.’’ 10 Contracts
4 To qualify as a DTEF, an exchange must
implement certain restrictions on retail market
participation and can only trade certain
commodities (including excluded commodities and
other commodities with very high levels of
deliverable supply) and generally must exclude
retail participants. CFTC Glossary (Glossary).
5 7 U.S.C. 7a.
6 EBOTs may trade only ‘‘excluded commodities’’
(7 U.S.C. 1a(13); 17 CFR § 36.2(a)(2)(i)), and are
open only to ‘‘eligible contract participants’’
(‘‘ECPs’’) (7 U.S.C. 1a(12)).
7 For example, section 2(g) created an exclusion
from the CEA for individually negotiated swaps,
based on non-agricultural commodities entered into
between eligible contract participants, 7 U.S.C. 2(g).
Similarly excluded are transactions between ECPs
involving excluded commodities that are not
executed on a trading facility. 7 U.S.C. 2(d)(1).
8 7 U.S.C. 2(h)(3)–(5).
9 7 U.S.C. 1a(11) (a subset of ECPs).
10 7 U.S.C. 1a(10). For purposes of this proposed
rulemaking, the terms electronic trading facility and
ECM are used interchangeably. The term ‘‘trading
facility’’ means a person or group of persons that
constitutes, maintains, or provides a physical or

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Federal Register / Vol. 73, No. 240 / Friday, December 12, 2008 / Proposed Rules
for all commodities except agricultural
and excluded commodities (primarily
financial commodities but also
commodities such as weather)
potentially are eligible to trade on an
ECM. Examples of commodities traded
on ECMs are energy products, metals,
chemicals, air emission allowances,
paper pulp, and barge freight rates.11
ECMs fall somewhere between DTEFs
and EBOTs on the regulatory oversight
spectrum. Like EBOTs, they are neither
licensed nor registered with the CFTC
and are subject to the Act’s antifraud
and anti-manipulation provisions.12 In
addition, and different from EBOTs,
ECMs are subject to certain
recordkeeping and reporting
requirements under the CEA.13
3. Differences Between ECMs and DCMs

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ECMs are not subject to the level of
transparency and Commission oversight
associated with DCMs. DCMs must
satisfy specified criteria to become
designated, and then must demonstrate
continuing compliance with 18 core
principles set out in the Act.14 The Act
provides flexibility with respect to how
DCMs may choose to meet the core
electronic facility or system in which multiple
participants have the ability to execute or trade
agreements, contracts or transactions—(i) by
accepting bids or offers made by other participants
that are open to multiple participants in the facility
or system; or (ii) through the interaction of multiple
bids or multiple offers within a system with a predetermined non-discretionary automated trade
matching and execution algorithm. 7 U.S.C. 1a(34).
11 7 U.S.C. 1a(14).
12 Sections 2(h)(4)(B) and (C) of the Act, 7 U.S.C.
2(h)(4)(B) and (C).
13 For example, an ECM must maintain for five
years and make available for inspection records of
its activities relating to its business as a trading
facility. 7 U.S.C. 2(h)(5)(B)(ii). More specifically,
Commission rule 36.3, 17 CFR 36.3, requires that
an ECM identify to the Commission those
transactions for which it intends to rely on the
exemption in section 2(h)(3) of the CEA and which
averaged five trades per day or more over the most
recent calendar quarter. For all such transactions,
the ECM must provide to the Commission weekly
reports showing certain basic trading information,
or provide the Commission with electronic access
that would allow it to compile the same
information. 17 CFR 36.3(b)(1)(ii). An ECM also
must provide to the Commission, upon special call,
any information relating to its business that the
Commission determines is appropriate to enforce
the antifraud and anti-manipulation provisions of
the CEA, to evaluate a systemic market event, or to
obtain information on behalf of another federal
financial regulator. 7 U.S.C. 2(h)(5)(B)(iii); 17 CFR
36.3(b)(3). An ECM must maintain a record of any
allegations or complaints it receives concerning
suspected fraud or manipulation and must provide
the Commission with a copy of the record of each
such complaint. 17 CFR 36.3(b)(1)(iii). Finally, an
ECM is required to file an annual certification that
it continues to operate in reliance on the exemption
in section 2(h)(3) of the Act and that the
information it previously provided to the
Commission remains correct. 17 CFR 36.3(c)(4).
14 See sections 5(d)(1)–(18) of the Act, 7 U.S.C.
7(d)(1)–(18).

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principles’ mandate that DCMs
undertake significant supervisory
responsibility with respect to trading on
their markets. DCMs must, for example,
establish rules and procedures for
preventing market manipulation and
must adopt necessary and appropriate
position limit or accountability rules to
address the potential for manipulation
or congestion. DCMs also must establish
compliance and surveillance programs,
which the Commission evaluates
through rule enforcement reviews,15
must monitor trading on their markets
and must undertake other selfregulatory responsibilities mandated by
the CEA.
The CFMA did not impose these
obligations on ECMs. While the
Commission was given the authority to
determine whether an ECM performs a
significant price discovery function for
transactions in an underlying cash
market,16 such a determination did not
trigger any self-regulatory
responsibilities for the ECM or confer
any additional oversight authority on
the Commission. Rather, the presence of
a contract performing a significant price
discovery function required the ECM to
publicly disseminate certain basic
information, such as contract terms and
conditions and daily trading volume,
open interest, and opening and closing
prices or price ranges.17
B. The Changing ECM Landscape
Following enactment of the CFMA in
December 2000, the first ECMs that
notified the Commission of their intent
to operate generally were simple trading
platforms, resembling in many ways
business-to-business facilities for large
commercial firms. ECMs facilitate the
execution of trades between commercial
counterparties by offering an
anonymous and efficient electronic
matching system which many believed
to be superior to the existing voice
broker system, and to provide a
competitive advantage over the bilateral
OTC market, especially for energy
products. Initially, most ECMs were
15 The Commission conducts regular rule
enforcement reviews of the self regulatory programs
operated by DCMs for enforcing exchange rules,
preventing market manipulations and customer and
market abuses, and ensuring that trade related
information is recorded and stored in a manner
consistent with the Act.
16 In 2004, the Commission amended its part 36
rules to include the requirement that an ECM notify
the Commission when it has reason to believe that
one or more of the markets on which it is
conducting agreements, contracts or transactions in
reliance on section 2(h)(3) of the CEA has been met
or if the market holds itself out to the public as
performing a price discovery function for the cash
market of a commodity. 17 CFR 36.3(c)(2)(i) and (ii).
69 FR 43285 (July 20, 2004).
17 Id.

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small operations with low trading
volumes that were small relative to
DCMs. The first ECMs did not offer
centralized clearing, but sought to
address counterparty risk through the
use of credit filters whereby traders
could limit their potential
counterparties to a list of traders whose
credit they found satisfactory.
Significantly, early ECM contracts were
not linked to contracts listed on DCMs.
Over time, however, ECMs began to
offer ‘‘look-alike’’ contracts that were
linked to the settlement prices of their
exchange-traded counterparts, and these
look-alike contracts in one case began to
garner significant volumes. In recent
years, several active ECMs began to offer
the option of centralized clearing for
their contracts—an option which
became widely utilized by their
customers to manage counterparty risk.
This evolution, and particularly the
linkage of ECM contract settlement
prices to DCM futures contract
settlement prices, began to raise
questions about whether ECM trading
activity could impact trading on DCMs
and whether the CFTC had adequate
authority to address that impact and
protect markets from manipulation and
abuse. Of special concern to CFTC staff
was the existence of the ECM cashsettled ‘‘look-alike’’ contracts that could
provide an incentive to manipulate the
settlement price of an underlying DCM
futures contract to benefit positions in
the look-alike ECM contract. As
discussed more fully below, the
Commission subsequently considered
and studied these concerns in a variety
of ways, culminating, in September
2007, in a public hearing examining
trading on regulated exchanges and
ECMs.18
C. The CFTC’s Response to the
Changing Energy Markets
1. Empirical Study of Trades on ICE 19
and NYMEX
During the last several years, one ECM
in particular—the Intercontinental
18 See Commodity Futures Trading Commission,
Report on the Oversight of Trading on Regulated
Futures Exchanges and Exempt Commercial
Markets (October 2007), http://www.cftc.gov/
stellent/groups/public/@newsroom/documents/file/
pr5403-07_ecmreport.pdf for a comprehensive
report of the Commission’s findings following its
September 2007 hearing (‘‘ECM Report’’).
19 Intercontinental Exchange, or ICE, consists of
four separate entities: ICE OTC, to which this
document refers, is an ECM trading energy
products. ICE Future Europe trades energy futures
and is regulated by the Financial Services Authority
of Great Britain; ICE Futures US focuses primarily
on futures based on soft commodities (e.g., coffee,
sugar, cocoa, cotton) and financial futures and is
regulated by the CFTC; ICE Futures Canada trades

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Exchange (‘‘ICE’’)—has become a major
trading venue for natural gas contracts
in direct competition with the New
York Mercantile Exchange (‘‘NYMEX’’)
natural gas benchmark futures contract,
in addition, Commission staff has found
that the traders on ICE are virtually the
same as the traders on NYMEX. All of
the top 25 natural gas traders on
NYMEX are also significant traders on
ICE. For the Henry Hub natural gas
market,20 market participants generally
view ICE and NYMEX as essentially a
single market, looking to both ICE and
NYMEX when determining where to
execute a trade at the best price.
To assess these changes in the
marketplace, the Commission’s Office of
the Chief Economist (‘‘OCE’’) conducted
an empirical study of the relationship
between the natural gas contracts that
trade on ICE and NYMEX. OCE
collected transaction prices for ICE and
NYMEX natural gas contracts from
January 3, 2006 through December 31,
2006 and evaluated trading for 12
contract months when trading on each
market was appropriately active. OCE
examined the timing of price changes on
ICE and NYMEX to draw inferences
about where information arrives first. If
price changes on one venue consistently
‘‘led’’ those on the other venue, then
OCE concluded that informed traders
preferred trading at that ‘‘leading’’
venue and inferred that market to be
‘‘discovering’’ prices.21 OCE found that
ICE exhibited price leadership with
respect to NYMEX on 20 percent of the
contract-days, while NYMEX exhibited
price leadership on 63 percent of the
contract-days. OCE concluded that these
results suggested that both ICE and
NYMEX are significant price discovery
venues for natural gas futures contracts.

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2. Commission Surveillance of the
Energy Markets
The Commission’s surveillance of
natural gas energy markets traditionally
has focused on the regulated futures
markets traded on NYMEX. Prior to the
Reauthorization Act, ECMs were not
subject to the requirements of the
Commission’s large trader reporting
system (‘‘LTRS’’).22 In order to obtain
futures and options and is regulated by the
Manitoba Securities Commission.
20 Henry Hub is a natural gas pipeline hub in
Louisiana that serves as the delivery point for
NYMEX natural gas futures contracts and often
serves as a benchmark for wholesale natural gas
prices across the U.S. Glossary.
21 See ECM Report at 11–12. Price discovery is the
process of determining the price level for a
commodity based on supply and demand
conditions. Price discovery may occur in a futures
market or cash market. Glossary.
22 The LTRS is the centerpiece of the
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analogous large trader information from
ECMs, the Commission had to issue
special calls.23 Based on the prominent
role played by the ICE natural gas
contract in the price discovery process
and the possible impact on the NYMEX
natural gas contract, the Commission
determined to issue a series of special
calls for information related to ICE’s
cleared natural gas swap contracts that
are cash-settled based on the settlement
price of the NYMEX physical delivery
natural gas contract.24
3. The Commission’s ECM Hearing
Following the OCE study and the
special calls issued to ICE, the
Commission held a public hearing on
September 18, 2007, to examine the
oversight of DCMs and ECMs. Witnesses
the LTRS, clearing members, futures commission
merchants and foreign brokers file daily reports
with the CFTC showing futures and option
positions in accounts they carry that are above
reporting levels set by the Commission. The
reporting level for the NYMEX natural gas futures
market is 200 contracts.
23 Section 2(h)(5)(B)(iii) of the Act, 7 U.S.C.
2(h)(5)(B)(iii), requires that an electronic trading
facility relying on the exemption provided in
section 2(h)(3) must, upon a special call by the
Commission, provide such information related to its
business as an electronic trading facility as the
Commission may determine appropriate to enforce
the antifraud provisions of the CEA, to evaluate a
systemic market event, or to obtain information
requested by a Federal financial regulatory
authority in connection with its regulatory or
supervisory responsibilities.
24 The special calls were issued primarily to assist
the Commission in its surveillance of the NYMEX
natural gas contract. They were not issued as part
of an investigation of any particular market
participant or trading activity on either ICE or
NYMEX, nor were they issued to conduct regular
market surveillance of ICE. The first special call,
issued on September 28, 2006, requested daily
clearing member position data for ICE’s natural gas
swap contracts, broken out between house and
aggregate customer positions, which is similar to
information that the Commission receives from
NYMEX pursuant to Commission rule 16.00. This
information permits CFTC market surveillance staff
to see all cleared positions at the clearing member
level, but it is not possible to determine individual
customer positions. To obtain daily individual
trader positions, the Commission issued a second
special call on December 1, 2006. While the data
received is similar to large trader reporting for
DCMs, the methodology for reporting is very
different. Because ICE is a principal-to-principal
market and therefore does not receive position
reporting from firms, it was necessary for ICE to
develop an algorithm to infer open positions from
the sum of all trading by each individual trader.
While this approach has provided valuable
information, it is less accurate than traditional large
trader reporting. The third special call, issued on
September 5, 2007, required ICE to provide all
cleared transaction data for its Henry Hub swap
contracts and identify counterparties for the final
two trading sessions prior to the expiration of
prompt month Henry Hub natural gas products.
This data is similar to transaction data that the
Commission receives from NYMEX for all trading
days and enables CFTC staff to monitor trading
activity on ICE and obtain more complete coverage
to counter possible manipulative schemes that
could affect trading on ICE.

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at the hearing included Commission
staff, representatives of DCMs and
ECMs, and representatives of a broad
spectrum of market users and consumer
groups. The hearing focused on a
number of issues, including the tiered
regulatory approach of the CFMA and
whether it was adequate; the similarities
and differences between ECMs and
DCMs; the associated regulatory risks of
each market category; the types of
regulatory or legislative changes that
may be appropriate to address identified
risks; and the impact that regulatory or
legislative changes might have on the
U.S. futures industry and the global
competitiveness of the U.S. financial
industry. In announcing the hearing,
CFTC Acting Chairman Lukken
observed that:
The evolution of these energy markets
[ECMs] in recent years requires our agency to
address whether the level of regulatory
oversight is proper given the importance of
energy prices to all Americans.* * * This
oversight hearing will provide a better
understanding of the inter-relationship of
these trading venues so policymakers can
make informed decisions to protect these
vital markets.25

4. The Commission’s Findings and
Legislative Recommendations
Based on information developed
through various studies, surveillance,
special calls and its public hearing, the
Commission published in October 2007
a ‘‘Report on the Oversight of Trading
on Regulated Futures Exchanges and
Exempt Commercial Markets.’’ (‘‘ECM
Report’’).26 The report was provided to
the Commission’s Congressional
oversight committees, which were then
in the process of considering legislation
to amend the CEA and reauthorize the
Commission.
The ECM Report noted that while
some participants disagreed, most
witnesses at the September 18 hearing
generally supported the tiered
regulatory structure of the CFMA, but
expressed concern regarding the
regulatory provisions governing ECMs
and the regulatory disparity between
DCMs and ECMs.27 Witnesses suggested
that this disparity made markets more
susceptible to manipulation and put
regulated exchanges at a competitive
disadvantage vis-a`-vis ECMs offering
virtually identical products. Generally,
most witnesses felt that some changes to
the ECM provisions might be
appropriate, provided those changes
25 CFTC Release 5368–07, August 2, 2007 (CFTC
Announces September Hearing to Examine Trading
on Regulated Exchanges and Exempt Commercial
Markets).
26 supra n. 20.
27 Id. at 15.

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Federal Register / Vol. 73, No. 240 / Friday, December 12, 2008 / Proposed Rules
were prudently targeted and did not
adversely affect the ability of ECMs to
innovate and grow.28
Based on the hearing testimony and
its own experience in administering the
Act, the Commission at that time
concluded that the tiered approach of
the CFMA generally had operated
effectively. ECMs had proven popular
for new start-up markets and had
provided competition for DCMs,
spurring them toward innovations of
their own. The Commission further
found that, to the extent that trading
volume on an ECM contract remained
low and its prices were not significantly
relied upon by other markets, the
current level of regulation remained
appropriate. However, when a futures
contract traded on an ECM matured and
began to serve a significant price
discovery function for transactions in
commodities in interstate commerce,
the contract warranted increased
oversight to deter and prevent price
manipulation or other disruptions to
market integrity, both on the ECM itself
and in any related futures contracts
trading on DCMs. Such increased
oversight would also help to ensure fair
competition among ECMs and DCMs
trading similar products and competing
for the same business.
In light of these conclusions, the
Commission’s ECM Report
recommended that the CEA be amended
to grant the Commission additional
authority over ECM contracts serving a
significant price discovery function, and
that certain self-regulatory
responsibilities be assigned to ECMs
offering such contracts. Specifically, the
Commission advocated that (1) An ECM
contract that is determined to perform a
significant price discovery function be
subject to large trader reporting
requirements comparable to those
applicable to all DCM contracts; (2) an
ECM should be required to adopt
position limits or accountability levels,
as appropriate, for a listed contract that
serves a significant price discovery
function similar to the limits on DCMs;
(3) an ECM should be required to
monitor trading of a listed contract that
serves a significant price discovery
function to detect and prevent
manipulation, price distortion, and
disruptions of the delivery or cashsettlement process; and (4) the
Commission and the ECM should be
provided with emergency authority to
alter or supplement contract rules,
liquidate open positions, and suspend
or curtail trading in any listed contract
that serves a significant price discovery
function. These authorities would be
28 Id.

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essential tools for the Commission and
the ECM to prevent manipulation and
disruptions of the delivery or cashsettlement process.
The Commission further
recommended that the determination
whether an ECM contract serves a
significant price discovery function
should focus on the following factors:
(1) Material Liquidity—trading volume
in the ECM contract must be significant
enough to affect regulated markets or to
become a pricing benchmark; and (2)
Linkage/Material Price Reference—the
relevant ECM contract must either
influence other markets and
transactions through this linkage or be
materially referenced by others in
interstate commerce on a frequent and
recurring basis.
D. The Reauthorization Legislation and
the Statutory Scheme
The CFTC Reauthorization Act of
2008 29 adds a new section 2(h)(7) to the
CEA to govern the treatment of
‘‘significant price discovery contracts’’
(‘‘SPDCs’’) on ECMs.30 The legislation,
based largely on the Commission’s
recommendations for improving
oversight of ECMs, provides for greater
regulation of contracts traded on ECMs
that fulfill a significant price discovery
function and establishes criteria for the
Commission to consider in determining
whether an ECM contract qualifies as a
SPDC. The Reauthorization Act directs
the CFTC to extend its regulatory
oversight to the trading of SPDCs;
requires ECMs to adopt position and
accountability limits for SPDCs;
authorizes the Commission to require
large traders to report their positions in
SPDCs; and establishes core principles
for ECMs with contracts that are
determined to perform a significant
price discovery function. Finally, the
legislation directs the Commission to
issue rules implementing the provisions
of new section 2(h)(7) of the CEA and
to include in such rules the conditions
under which an ECM will have the
responsibility to notify the Commission
that an agreement, contract or
transaction conducted in reliance on the
exemption provided in section 2(h)(3) of
29 Public Law No. 110–246, supra. n. 1 (‘‘Pub. L.
110–246’’). The Reauthorization Act was
incorporated into the Food, Conservation and
Energy Act of 2008 as Title XIII of that legislation.
Title XIII was not the subject of Congressional
hearings and the legislative history is limited to The
Joint Explanatory Statement of the Committee of
Conference, H.R. Rep. No. 110–627, 110 Cong., 2d
Sess. at 978–86 (2008) (Conference Committee
Report).
30 7 U.S.C. 2(h)(7).

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the CEA may perform a price discovery
function.31
The Reauthorization Act significantly
broadens the CFTC’s regulatory
authority over ECMs by creating, in
section 2(h)(7) of the CEA, a new
regulatory category—ECMs on which
SPDCs are traded—and treating
electronic trading facilities in that
category as registered entities subject to
all provisions of the CEA that are
applicable to registered entities.32 The
legislation confers on the CFTC the
authority to designate an agreement,
contract or transaction as a SPDC if the
Commission determines, in its
discretion, that the agreement, contract
or transaction performs a significant
price discovery function under criteria
established by section 2(h)(7). When the
Commission makes such a
determination, the ECM on which the
SPDC is traded must assume, with
respect to that contract or contracts, all
the responsibilities and obligations of a
registered entity under the Act and
Commission regulations, and must
comply with nine core principles
established by new section 2(h)(7)(C)—
including the obligation to establish
position limits and/or accountability
standards for SPDCs.33 The
Reauthorization Act separately amends
section 4i of the CEA to authorize the
Commission to require large trader
reports for SPDCs listed on ECMs.34
Consistent with Congress’ directive,
the Commission is issuing this proposed
notice of rulemaking as an initial step to
implementing the amended statutory
scheme for ECMs with SPDCs.35 These
regulations are applicable to exempt
markets, but also implicate parts 16
through 21 (market, transaction and
large trader reporting rules), and 40
(provisions common to contract
markets, derivatives transaction
execution facilities and derivatives
clearing organizations).
31 Pub. L. 110–246 at sec. 12304. See also
Conference Committee Report, at 985–86; 2008
Farm Bill Commodity Futures Title: Strengthening
Oversight of Futures Markets, House Committee on
Agriculture (May 9, 2008) http://
agriculture.house.gov/inside/Legislation/110/FB/
Conf/Title_XIII_fs.pdf.
32 Conference Committee Report, at 985–86.
33 Congress has made clear that an ECM with a
SPDC shall be considered as a registered entity for
purposes of the CEA. Id. at 985.
34 Public Law 110–246 at sec. 13202.
35 Id. at sec. 13204. Congress has directed that the
Commission issue proposed rules implementing
section 2(h)(7) of the CEA not later than 180 days
after the date of enactment of the Reauthorization
Act and that the Commission issue a final rule no
later than 270 days after the date of enactment. The
Reauthorization Act initially was enacted as H.R.
2419 on May 22, 2008 but was repealed due to
clerical error—and concurrently enacted—by H.R.
2164, Public Law 110–264 on June 18, 2008.

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II. The Proposed Rules

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A. Part 36—Exempt Markets
Part 36 of the Commission’s
regulations contains the provisions that
apply to exempt boards of trade and to
exempt commercial markets, regardless
of whether the markets are a significant
source for price discovery. Rule 36.3
imposes a number of requirements and
restrictions on ECMs—electronic trading
facilities relying on the exemption in
section 2(h)(3) of the CEA—including
notification of intent to rely on the
exemption; initial and ongoing
information submission requirements;
prohibited representations; price
discovery notification; and price
dissemination requirements. The
Commission proposes to amend rule
36.3 to implement its broadened
regulatory authority over ECMs with
SPDCs under section 2(h)(7) of the CEA.
1. Required Information
The notification provision in rule
36.3(a) is unchanged. The Commission
proposes to amend rule 36.3(b) to
separately specify the information
submission requirements, both initially
and on an ongoing basis, for: (1) All
ECMs; (2) for ECMs with respect to
agreements, contracts or transactions
that have not been determined to
perform a significant price discovery
function; and (3) for ECMs with
SPDCs.36 The proposed amendment to
rule 36.3(b) additionally includes
provisions related to subpoenas, special
calls and the delegation of authority and
provides that an electronic trading
facility relying on the exemption in
section 2(h)(3) of the Act shall not, with
respect to agreements, contracts or
transactions that are not SPDCs,
represent to any person that it is
registered with, designated, recognized,
licensed or approved by the
Commission. This prohibition has its
origin in section 2(h)(5) of the CEA,
which sets forth the requirements and
obligations for ECMs. Although the
Reauthorization Act did not amend the
prohibition on representation in section
2(h)(5)(7) of the Act, the legislation did
amend the statutory definition of
‘‘registered entity’’ to include, ‘‘with
respect to a contract that the
Commission determines is a significant
price discovery contract, any electronic
trading facility on which the contract is
executed or traded.’’ 37 Accordingly, the
Commission believes that when it has
determined that a contract, agreement or
36 Enhanced obligations for ECMs with SPDCs
apply only to the SPDCs and need not be applied
to ECM contracts, agreements or transactions that
are not SPDCs.
37 Public Law 110–246 at sec. 13203(b)(3).

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transaction executed or traded on the
trading facility is a SPDC, the trading
facility may represent that it is a
registered entity, provided that the
representation clearly and prominently
states that the ECM is a registered entity
only with respect to its SPDCs.
In general, the proposed information
submission requirements for ECMs
without SPDCs are drafted to be
substantively similar to the information
that all ECMs currently are required to
provide.38 A significant change to the
submission requirements for ECMs is
the proposed requirement to file,
initially and on a quarterly basis,
information about the terms and
conditions as well as related
information for all contracts traded on
the facility. Although the proposed rules
set forth the terms, standards and
conditions under which an ECM will be
responsible to notify the Commission
that it may have a SPDC, the
Commission is mindful that it must
independently be aware of ECM
contracts that may develop into SPDCs.
The Commission believes that requiring
ECMs to identify all agreements,
contracts and transactions and to
provide basic trading information will
enable it to fulfill that obligation. To
that end, the Commission proposes to
retain for non-SPDCs the requirement
that ECMs submit to the Commission
weekly reports (or alternatively provide
electronic access that would allow the
Commission to capture the same
information) for contracts that average
five trades per day or more.39 In
addition, the Commission is proposing
to add a quarterly reporting requirement
for all non-SPDCs, to include their terms
and conditions, average daily trading
volume, and open interest. This
quarterly reporting requirement also is
being proposed to provide the
Commission with information that will
assist it in making prompt assessments
whether ECM contracts may be SPDCs.
ECMs should note that this provision
will require them to fulfill the quarterly
reporting requirement beginning with
the end of the calendar quarter
following the adoption of these final
rules. Under proposed rule 36.3(b)(3),
ECMs with SPDCs will be required to
38 ECMs that have already filed a Notification of
Operation under section 2(h)(3) of the Act should
note that proposed rule 36.3(b) will not require
them to provide any additional information to the
Commission explaining how the facility meets the
definition of trading facility or with information
demonstrating that the facility requires all
participants to be ECEs as long as the operations of
the facility and the participants trading on the
facility have not materially changed since the filing
of the notification or the most recent ECM Annual
Certification form.
39 See 17 CFR 36.3(b).

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comply with the daily reporting and
publication requirements of regulation
16.01.40
2. Identifying Significant Price
Discovery Contracts
The Reauthorization Act directs the
Commission to consider, as appropriate,
four specific criteria when identifying
whether an agreement, contract or
transaction is a SPDC: Price linkage,
arbitrage, material price reference, and
material liquidity.41 The legislation
further directs that in its rulemaking to
implement the provisions of section
2(h)(7) of the CEA, the Commission
shall include the standards, as well as
conditions under which an ECM will
have the responsibility to notify the
Commission that a contract traded on
the facility may perform a significant
price discovery function. Accordingly,
proposed rule 36.3(c) addresses: (i) The
criteria on which the Commission will
rely in making a determination that an
agreement, contract or transaction is a
SPDC; (ii) the factors that will trigger the
ECM’s obligation to notify the
Commission that it may have a SPDC;
(iii) the procedures the Commission will
follow in reaching its determination
whether a contract is a SPDC (and in
determining that a contract is no longer
a SPDC); and (iv) the procedures and
standards by which an ECM with a
SPDC must demonstrate compliance
with the core principles.
(i) Criteria for SPDC Determination. In
enacting new section 2(h)(7) of the CEA,
Congress specified four criteria that the
Commission must consider in making a
determination that an agreement,
contract or transaction performs a
significant price discovery function.
Proposed rule 36.3(c)(1) enumerates the
factors—price linkage, arbitrage,
material price reference, and material
liquidity. Because the legislation does
not assign priority to any of the factors,
and neither the statutory language nor
the Conference Committee Report
specifies the degree to which any of the
factors must be present, section
2(h)(7)(B) gives the Commission
flexibility in applying the criteria to a
particular contract and market. The
Commission is also mindful that:
[n]ot all the listed factors must be present
to make a determination that a contract
40 Once in compliance with the core principles
and daily reporting and publication requirements
applicable to ECMs with SPDCs, ECMs will not be
required to comply with proposed rule 36.3(b)(2)
except in regard to non-SPDC contracts that are
traded or executed on the facility.
41 Section 2(h)(7)(B)(v) also authorizes the
Commission to specify by rule other material factors
relevant to a determination whether a contract is a
SPDC.

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performs a significant price discovery
function. However, the Managers intend that
the Commission should not make a
determination that an agreement, contract or
transaction performs a significant price
discovery function on the basis of the price
linkage factor unless the agreement, contract
or transaction has sufficient volume to
impact other regulated contracts or to become
an independent price reference or benchmark
that is regularly utilized by the public.42

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Because the criteria mandated by
Congress do not lend themselves to
bright-line rules, the Commission
proposes to explain, in Appendix A to
the part 36 rules, how it expects to
apply the criteria in making its
determinations. This proposed guidance
explains that the Commission will make
SPDC determinations on a case-by-case
basis, applying and weighing each factor
as appropriate to the specific contract
and circumstances under consideration;
offers examples to illustrate which
factor or combinations of factors the
Commission would look to when
evaluating whether a contract is
performing a significant price discovery
function; and describes the
circumstances under which the
presence of a factor or factors would be
sufficient to warrant such a
determination.
By way of example, for contracts that
are linked to other contracts or that may
be arbitraged with other contracts, the
Commission would determine that the
contract is a SPDC if the price of the
contract moves in such harmony with
the other contract that the two markets
essentially become interchangeable.
This co-movement of prices would be
an indication that liquidity in the
contract has reached a level sufficient
for the contract to perform a significant
price discovery function. Accordingly,
the proposed guidance establishes
threshold liquidity and price
relationship standards that will inform
the Commission’s determination. A
different approach is required when
considering the price discovery
potential of a contract that is serving as
a material price reference. In these
circumstances, the Commission would
rely on either of two sources of evidence
in making its determination. The
Commission believes that a direct
indicator that a contract is serving as a
material price reference is observation
that cash market participants are
actively referencing the contract price
42 Conference Committee Report at 984–85. In
addition to the four criteria established by Congress,
section 2(h)(7) permits the Commission to consider
such other material factors as it may specify by rule
as relevant to a determination whether an
agreement, contract or transaction serves a
significant price discovery function. 7 U.S.C.
2(h)(7)(B)(v).

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when they enter into cash market
transactions. Routine publication of an
ECM’s contract price in widely
distributed industry publications and
newsletters also would indicate that
industry participants attach some value
to this information.
(ii) Notification requirement for ECMs
with a SPDC. The Reauthorization Act
requires that as part of its rulemaking to
implement new section 2(h)(7) of the
CEA, the Commission include the
standards, terms and conditions under
which an ECM will have the
responsibility to notify the Commission
that an agreement, contract or
transaction conducted in reliance on the
exemption provided in section 2(h)(3) of
the CEA may perform a significant price
discovery function.43 Accordingly, in
proposed rule 36.3(c)(2) the
Commission has specified conditions,
derived from the statutory criteria,
which signal the ECM’s obligation to
notify the Commission of a possible
SPDC. An ECM will be obligated to
notify the Commission of a potential
SPDC when an agreement, contract or
transaction is traded an average of 5
trades per day or more over the most
recent calendar quarter and also meets
one of the other two reporting factors.
The Commission is aware that this
requirement may result in overreporting by ECMs, and wishes to
emphasize that the presence of one
factor alone will not necessarily result
in a determination that a contract is a
SPDC. This notice requirement,
however, will serve to alert the
Commission to the contracts that are
most likely to be SPDCs. The
Commission believes that the benefit of
having the maximum available
information with which to make its
determinations outweighs the costs
associated with possible over-reporting
by ECMs.
3. Procedures
When the Commission learns of a
potential SPDC—whether through its
own information collection and
surveillance activities,44 notification by
an ECM pursuant to proposed rule
36.3(c)(2), or unsolicited information
from participants in the cash market
underlying a contract—the
Reauthorization Act directs the
Commission to implement a process for
43 Public

Law 110–246 at sec. 13204.
Reauthorization Act amended the CEA to
require that the Commission review all ECM
contracts at least once a year to determine whether
any contract is a SPDC. In addition to these formal
reviews, it is expected that Commission staff might
also become aware of the price discovery attributes
of ECM contracts in the ordinary course of
discussion or interaction with ECM personnel and
various cash and futures market participants.
44 The

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determining whether ECM contracts are
SPDCs. In proposed rule 36.3(c)(3) the
Commission establishes procedures
under which the Commission will make
and announce its determination
whether a particular contract performs a
significant price discovery function and
also sets forth the actions that must be
taken by an ECM following such a
determination. With respect to the
former, proposed rule 36.3(c)(3)
provides that when the Commission
intends to undertake such a
determination in response to notice by
an ECM pursuant to rule 36.3(c)(2), or
upon its own initiative, it will notice its
intention in the Federal Register. The
proposed rule also specifies that the
Commission, as part of its
consideration, will solicit written data,
views and arguments from the ECM that
lists the potential SPDC and from any
other interested parties. Generally, such
written submissions must be received
within 30 calendar days of the date of
publication in the Federal Register.
After consideration of all relevant
matters the Commission will issue an
order explaining its determination. The
issuance of an affirmative Commission
order signals the effectiveness of the
Commission’s authorities with respect
to ECMs with SPDCs 45 and triggers the
obligations, requirements—both
procedural and substantive—and
timetables prescribed in proposed rule
36.3(c)(4) for the ECM.46
Under proposed rule 36.3(c)(4), an
ECM with a SPDC must submit to the
Commission a written demonstration
that it complies with the nine core
principles established in section 2(h)(7)
of the CEA with respect to the SPDC.
Although status as a registered entity
attaches to an ECM as soon as the
Commission issues its order
determining that a particular ECM
contract performs a significant price
discovery function, the Commission has
included in proposed rule 36.3(c)(4) a
grace period for achieving compliance
with the core principles. As proposed,
the rule provides 90 calendar days for
ECMs with a first-time determination of
a SPDC to demonstrate compliance with
45 Those authorities include the emergency
powers conferred by section 8a(9) of the Act, 7
U.S.C. 12a(9), which permits the Commission to
intervene when it has reason to believe an
emergency exists and to take action necessary to
maintain or restore orderly trading or liquidation of
any futures contract.
46 Should the Commission conclude, either
formally or informally, that a contract which
demonstrates some characteristics consistent with a
SPDC nonetheless does not serve a significant price
discovery function, the Commission may continue
to monitor the contract pursuant to its special call
authority under proposed rule 36.3(b)(1)(iv), and
will advise the ECM as to what further reporting it
may require with respect to the contract.

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the core principles.47 For each
subsequent SPDC, the ECM is given 15
calendar days from the date of the
Commission’s order to achieve
compliance. The grace period is
designed to ensure that the ECM has
sufficient time to implement its new
regulatory requirements and operations,
while avoiding the market disruption
that might occur by the sudden
imposition of position limits and other
trading rules. The Commission is aware
that position limits that become
effective at the end of the applicable
grace period may negatively impact
traders who in good faith acquired
positions that are above that limit.
Requiring immediate compliance would
force such traders to liquidate positions
in order to be at or below the limit.
Accordingly, for the purpose of
applying limits on speculative positions
in newly-determined SPDCs, the
Commission proposes to permit a grace
period following the ECM’s
implementation of position limits
applicable to SPDCs for traders with
cleared positions in such contracts to
become compliant with applicable
position limit rules. Traders who hold
cleared positions on a net basis in the
electronic trading facility’s SPDC must
be at or below the specified position
limit no later than 90 calendar days
from the date on which the electronic
trading facility implements a position
limit, unless a hedge exemption is
granted by the electronic trading
facility. This grace period applies to
both initial and subsequent SPDCs on
an ECM, and the ECM should promptly
notify traders when it has set position
limits. This provision is outlined in the
proposed Guidance to Core Principle IV.
Rule 36.3(c)(4) requires that the
ECM’s submission include specific
information designed to permit the
Commission to evaluate whether the
ECM is indeed in compliance with the
core principles. Although there are
obvious differences between them, this
procedure was modeled on the
procedure required of applicants to
become designated contract markets.48
As with other aspects of this
rulemaking, the Commission is striving
to make the procedures and
requirements for ECMs with SPDCs as
close as possible to those for DCMs, and
in this regard will review the adequacy
of submitted materials with the same
47 Conference

Committee Report at 986.
applicants make submissions prior to
designation as a registered entity and prior to the
listing of any contract, whereas the Commission
must review the same information for ECMs after
they are deemed registered entities and after the
subject contract has established trading volume and
open interest.
48 DCM

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rigor it applies to DCM applications.
Submissions that are incomplete or do
not adequately demonstrate compliance
with each of the core principles may
trigger Commission proceedings under
section 5c(d) of the Act and may,
pursuant to section 5e or 6 of the Act,
result in the revocation of the ECM’s
right to operate in reliance on the
exemption set forth in section 2(h)(3) of
the Act with respect to a SPDC.
The Commission also proposes to
establish a process for vacating a SPDC
determination when the contract no
longer meets the criteria specified in
section 2(h)(7)(B). Under proposed
regulation 36.3(c)(6), the Commission
may, on its own initiative or at the
request of an ECM with a SPDC,
determine that a contract no longer
performs a significant price discovery
function and vacate its previous
determination. Any subsequent
determination that the contract once
again is a SPDC will be subject to the
procedures proposed in regulation
36.3(c)(2). Proposed rule 36.3(c)(6)
further provides for the automatic
vacation of a significant price discovery
contract determination when the SPDC
has no open interest and no trading on
the contract has occurred for a period of
12 complete calendar months. The
Commission is proposing this provision
in order to reduce the administrative
burden on staff and the compliance
burden on an ECM where lack of
activity eliminates any possibility that a
contract performs a significant price
discovery function for the underlying
cash market.
4. Substantive Compliance With the
Core Principles: Guidance and
Acceptable Practices
Section 2(h)(7) of the CEA, as
amended, requires that an electronic
trading facility on which significant
price discovery contracts are traded
comply with nine core regulatory
principles. Consistent with Congress’s
intent that status as a registered entity
attach to an ECM following the
Commission’s determination that a
particular ECM contract serves a
significant price discovery function,49
these core principles have their origins
in their DCM counterparts in section 5
of the CEA and have been construed
similarly.50 The Commission proposes
to adopt Appendix B to the part 36 rules
to provide general guidance and
acceptable practices with respect to
compliance with the ECM core
principles; the acceptable practices for
49 Conference
50 7

Committee Report at 986.
U.S.C. 7(d); Conference Committee Report at

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compliance with the ECM core
principles will, where appropriate,
mirror those for DCMs. The Commission
intends in the acceptable practices to
provide non-exclusive safe harbors for
compliance with the core principles by
ECMs with SPDCs. As is the case with
the core principles established for other
registered entities, the guidance offered
for ECMs is neither mandatory nor the
only means of compliance with the core
principles. Consistent with its practice
of evaluating a DCM’s compliance with
the core principles during rule
enforcement reviews, the Commission
will conduct regular rule enforcement
reviews of ECMs with SPDCs to evaluate
compliance with the nine core
regulatory principles.
The Guidance to Core Principle I of
section 2(h)(7)(C) of the Act requires the
ECM to certify the terms and conditions
of the SPDC within 90 calendar days of
an ECM’s initial SPDC, or 15 calendar
days if the ECM has previously traded
a SPDC. The acceptable practice for this
core principle provides that Guideline
No. 1 in Appendix A to the
Commission’s part 40 rules may be used
as guidance to satisfy this provision. To
ensure continued compliance with all
elements of the Commission’s statutory
and regulatory regimes for ECMs with
SPDCs, the ECM is expected to monitor
the SPDC and its trading activity on a
continuous basis.
Core Principle II requires ECMs to
monitor trading in SPDCs to prevent
market manipulation and participation
abuses. Its guidance and acceptable
practices were derived from DCM Core
Principle 4 (Monitoring of Trading) and
DCM Designation Criterion 2
(Prevention of Market Manipulation).51
The proposed guidance and acceptable
practices in Appendix B to part 36 make
clear that ECMs with SPDCs must
demonstrate the capacity to prevent
market manipulation and have rules
deterring trading and participation
abuses. Under the proposed guidance,
ECMs with SPDCs can demonstrate this
capacity through either a dedicated
regulatory department or by delegation
of that function to an appropriate third
party.52 In either case, the regulatory
51 17

CFR 38, Appendices A and B to Part 38.
is the case for DCMs and DTEFs, ECMs with
SPDCs may comply with any core principle through
delegation of any relevant function to any registered
futures association or another registered entity, but
the ECM remains responsible for carrying out the
function. Section 5c(b) of the CEA, 7 U.S.C. 7a–2(b).
A detailed discussion of registered entities’
responsibilities and obligations with respect to
delegated functions, as well as a discussion of the
distinctions between delegation of functions and
outsourcing, or contracting out specified core
principle duties is found in the Commission’s final
rulemaking implementing provisions of the CFMA
52 As

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department or third party should have
an acceptable trade monitoring program,
the authority to collect information and
documents, and the ability to assess
participants’ market activity and power.
Core Principle III addresses the ability
of an ECM with a SPDC to obtain
information necessary to perform any of
the functions enumerated in section
2(h)(7)(C) of the CEA (the core
principles), to provide that information
to the Commission, and to have the
capacity to carry out any required
information sharing agreements. Core
Principle III’s guidance and acceptable
practices have as their source the
guidance and acceptable practices of
DCM Designation Criterion 8—Ability to
Obtain Information.53 Proposed
Appendix B to part 36 makes clear that
ECMs with SPDCs must have the
authority to collect information and
documents on both a routine and nonroutine basis; maintain and properly
store audit trail data; maintain records
in a form and manner acceptable to the
Commission; and have the capacity to
carry out appropriate informationsharing agreements. In providing
guidance on compliance with this
requirement, the Commission also
proposes to incorporate the guidance
and acceptable practices provided for
DCM Core Principles 10 (Trade
Information) and 17 (Recordkeeping).54
The Commission believes that the
acceptable practices outlined in Core
Principle 10 should be made applicable
to ECMs with SPDCs because the ability
to record full data entry and trade
details, as well as the safe storage of
audit trail data, is a necessary
component in assessing potential
manipulation and conducting effective
market surveillance. DCM Core
Principle 17 requires that DCMs
maintain required records in a form and
manner acceptable to the Commission
and establishes as guidance for
acceptable recordkeeping the standards
prescribed in Commission regulation
1.31.55 To ensure that all information
required by the Commission is
maintained in a uniform manner, the
Commission proposes in the acceptable
practices for Core Principle III to adopt
the acceptable practices for
recordkeeping found in DCM Core
Principle 17.
Core Principle IV requires electronic
trading facilities with significant price
discovery contracts to establish position
relating to trading facilities (‘‘A New Regulatory
Framework’’), 66 FR 42256, 42266 (August 10,
2001).
53 17 CFR 38, Appendix B to Part 38.
54 17 CFR 38, Appendix B to Part 38.
55 17 CFR 1.31.

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limit or accountability rules for traders
in such significant price discovery
contracts. Speculative position limits
are necessary to reduce the potential for
market manipulation. The acceptable
practices for Core Principle IV were
derived largely from Core Principle 5 for
designated contract markets.56
DCMs can list for trading futures
contracts on a wide range of
commodities, including enumerated
agricultural products, excluded
commodities (e.g., financial products
such as currencies), and exempt
commodities (e.g., metals, crude oil,
natural gas and electricity). Some of
these commodities have limited
deliverable supplies while others have
deep and liquid cash markets.
Depending on the variety of possible
contracts listed for trading, a DCM may
have a mix of position limit and
accountability rules. Specifically,
futures contracts based on commodities
with limited deliverable supplies
should have spot-month speculative
position limits. In contrast, financial
products having deep and liquid cash
markets may be eligible for position
accountability levels in lieu of position
limits since the potential for market
manipulation is minimal.
Unlike DCMs, ECMs relying on the
exemption in section 2(h)(3) of the CEA
are permitted to offer for trading only
contracts on exempt commodities.
Because the deliverable supplies of
exempt commodities typically are
limited, the Commission believes that it
will be necessary for SPDCs to have
spot-month position limits.
The acceptable practices for Core
Principle IV make recommendations
with respect to how ECMs should
establish spot-month speculative
position limits. For a unique SPDC,57
the spot-month speculative position
limit should be set in the same manner
outlined for contracts listed for trading
on DCMs. In this regard, for a
physically-delivered SPDC, the level of
the spot-month limit should be based
upon an analysis of the deliverable
supply and the history of spot-month
liquidations. The spot-month limit for a
physical-delivery market is
appropriately set at no more than 25
percent of the estimated deliverable
supply.58 Where a SPDC has a cash
56 17

CFR 38, Appendix B to Part 38.
unique SPDC is one that is not economically
equivalent to another SPDC or to a contract traded
on a DCM or DTEF.
58 The Commission notes that deliverable supply
typically is less than total supply. In this regard, it
is common for some portion of the supply to be
unavailable for delivery for a variety of reasons.
Deliverable supply is the amount of the underlying
commodity that reasonably can be expected to be
57 A

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settlement provision, the spot-month
speculative position limit should be set
at a level that minimizes the potential
for price manipulation or distortion in
the SPDC itself; in related futures and
option contracts traded on a DCM or
DTEF; in other SPDCs; in other fungible
agreements, contracts and transactions;
and in the underlying commodity.
The Commission notes that some
SPDCs may not be unique. In other
words, a SPDC may be economically
equivalent to another SPDC or to a
contract traded on a DCM or DTEF.
Economic equivalence can arise due to
substantial similarity among contracts’
terms and conditions (e.g., two
physically-delivered contracts or two
cash-settled contracts having the same
specifications). A SPDC also can be
economically equivalent to another
SPDC or to a contract listed for trading
on a DCM or DTEF if it is cash settled
based on a daily settlement price or the
final settlement price of the referenced
contract. For economically-equivalent
SPDCs, the electronic trading facility
should establish the same spot-month
speculative position limits as specified
for the equivalent contract.59
ECMs should establish non-spot
individual month position
accountability levels and all-monthscombined position accountability levels
for its SPDCs. Once a trader exceeds an
established position accountability
level, the ECM should initiate an
investigation to determine whether the
individual’s trading activity is justified
and is not intended to manipulate the
market. As part of its investigation, the
ECM should inquire about the trader’s
rationale for holding a net position in
excess of the accountability levels. The
ECM also can request that the trader not
further increase contract positions. If a
trader fails to comply with a request for
information, provides information that
does not sufficiently justify the position,
or continues to increase contract
positions after a request not to do so is
issued by the ECM, then the
accountability provisions should enable
the ECM to order the trader to reduce
the positions.
If a SPDC is economically equivalent
to another SPDC or to a contract traded
available to short traders and salable by long traders
at its market value in normal cash market channels.
59 Many DCMs have non-spot individual month
and all-months-combined position accountability
rules for their futures contracts. Moreover, some
DCMs establish non-spot individual month and allmonths-combined position limits in lieu of the
position accountability levels. The Commission
believes that the implementation of such
accountability provisions or position limits is a
good practice. Accordingly, the Commission
proposes to adopt it as an acceptable practice for
ECMs.

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on a DCM or DTEF, then the ECM
should set the non-spot individual
month position accountability level and
all-months-combined position
accountability level at the same level as
those specified for the economicallyequivalent contract. For a unique SPDC,
the ECM should adopt non-spot
individual month and all-monthscombined position accountability levels
that are no greater than 10 percent of the
average combined futures and deltaadjusted option month-end open
interest for the most recent calendar
year.
Position accountability levels are not
necessary for SPDCs that specify nonspot individual month position limits
and all-months-combined position
limits. If a SPDC is economically
equivalent to another contract, then the
non-spot individual month position
limit and all-months-combined position
limit should be set at the same levels
specified for the equivalent or
referenced contract. For unique SPDCs,
the non-spot individual month and allmonths-combined position limits
should be set in the same manner as for
position accountability levels, i.e.,
levels that capture a material amount of
large positions that could threaten the
market.
An ECM with a SPDC may require
that all transactions in that contract be
cleared only through a DCO.
Alternatively, an ECM’s SPDC may not
be subject to any clearing requirement,
in which case the contract would trade
on an uncleared basis. Lastly, an ECM
may permit a given SPDC to trade on
either a cleared or uncleared basis
depending on the status of the
counterparties involved. The
amendments to the CEA give electronic
trading facilities reasonable discretion
to take into account the differences
between cleared and uncleared
transactions when complying with Core
Principle IV.60 For the purpose of
applying speculative limits to positions
in SPDCs, the ECM should apply
speculative position limits to cleared
positions only.
Uncleared transactions in SPDCs
potentially play an important role in
risk management strategies and price
formation. As a result, the Commission
believes that an ECM should monitor
not only trading in cleared transactions
but also trading with respect to
uncleared transactions. However, the
Commission is cognizant of the fact that
uncleared trades conducted on the ECM
may be offset by trades done off the
facility. Such offsetting transactions
consummated outside of an ECM
60 Public

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typically are not reported to the facility.
Thus, the ECM likely would find it
difficult to net uncleared transactions
and maintain records of traders’
uncleared positions in a given SPDC. In
order to account for this situation, the
Commission proposes for ECMs with
SPDCs a new measure of trading activity
called the volume accountability level.
For this measure, the ECM should keep
track of each trader’s uncleared
transactions in a SPDC on a net basis
that are conducted on the facility. (For
the purpose of netting uncleared
transactions, long and short uncleared
transactions are only offset if they are
conducted with the same counterparty.)
A volume accountability level is similar
to a position accountability level in that
a trader may exceed the volume
accountability level. However, if a
trader’s net volume of uncleared trades
exceeds the volume accountability level,
the ECM should initiate an investigation
to determine whether the trading
activity is justified and is not intended
to manipulate the market. As part of its
investigation, the ECM should inquire
about the trader’s rationale for holding
a net volume of uncleared trades in
excess of the volume accountability
level. The ECM also can request that the
trader not further increase the volume of
uncleared trades. If a trader fails to
comply with a request for information
about the portfolio of uncleared trades,
provides information that does not
sufficiently justify the uncleared
transactions conducted, or continues to
increase the volume of uncleared trades
after a request not to do so is issued by
the ECM, then the volume
accountability provisions should enable
the ECM to require the trader to reduce
the volume of uncleared trades.
Consistent with the specific directive
of Core Principle IV, the Commission
expects ECMs to impose position limit
and position accountability
requirements on SPDCs as well as
positions in agreements, contracts and
transactions that are fungible and
cleared together with any SPDC. This
circumstance typically occurs where an
ECM lists a particular contract on its
multilateral trading platform and the
resultant positions are cleared by a
DCO. Separately, the ECM also provides
a non-multilateral trading platform
capability for the trading of the same
contract and the resultant positions are
cleared at the same clearing
organization together with positions
established on the multilateral platform.
Given the fact that such arrangements
allow market participants to put on
positions on the multilateral platform
and take them off away from the

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platform—as well as vice versa—the
Commission believes that it is
appropriate for position limit
requirements to be applied to overall
positions regardless of where they
originated.
With regard to compliance with a
particular position limit or position
accountability rule, ECMs should
aggregate on a net basis cleared
transactions, including those that are
treated by a DCO (registered or
unregistered) as fungible with the SPDC.
Aggregate positions then will be
compared with the applicable position
limit and position accountability rules
to determine compliance. Uncleared
transactions also should be aggregated
by trader on a net basis in order to
determine whether such trader’s volume
of uncleared trades exceeds the spotmonth volume accountability level.
An ECM with SPDCs should use an
automated means of detecting traders’
violations of speculative limit rules and
exemptions. An automated system also
should be used to determine whether a
trader has exceeded applicable non-spot
individual month accountability levels,
all-months-combined accountability
levels, and spot-month volume
accountability levels. An electronic
trading facility should establish a
program for effective enforcement of
position limits for SPDCs. Lastly, ECMs
should use a large trader reporting
system to monitor and enforce daily
compliance with position limit rules.
The Commission recognizes that some
traders with relatively large positions
may be adversely affected by newly
imposed position limits when a SPDC
initially comes into compliance with the
core principles. To address this issue,
the Commission proposes, for the
purpose of applying limits on
speculative positions in newlydetermined SPDCs, to permit a grace
period following issuance of its order
for traders with cleared positions in
such contracts to become compliant
with applicable position limit rules.
Traders who hold cleared positions on
a net basis in the ECMs SPDC must be
at or below the specified position limit
level no later than 90 calendar days
from the date of the ECM’s
implementation of position limit rules,
unless a hedge exemption is granted by
the ECM.
Core Principle V requires the ECM to
adopt rules to provide for the exercise
of emergency authority. The proposed
guidance contained in Appendix B to
part 36 is substantially similar to the
guidance for DCM Core Principle 6.61
However, the Commission added a
61 17

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reference in the proposed guidance for
Core Principle V to acknowledge that
calls for additional margin apply only to
contracts that are cleared through a
clearinghouse, since not all contracts
traded on electronic trading facilities are
cleared.
Core Principle VI requires that an
ECM with a SPDC make public daily
information on price, trading volume,
and other trading data. The Commission
believes this information should include
settlement prices, price range, volume,
open interest, and other related market
information, and has proposed in the
acceptable practices that compliance
with Commission regulation 16.01,62
which the Commission proposes to
make mandatory for ECMs with SPDCs,
would constitute an acceptable practice
under Core Principle VI.
Core Principle VII requires the ECM to
monitor and enforce compliance with
the rules of its market. The proposed
guidance and acceptable practices
provided in Appendix B to part 36 are
roughly parallel to the guidance and
acceptable practices prescribed for DCM
Core Principle 2.63 The Commission
notes that ECMs on which SPDCs are
traded are non-intermediated markets,
and for this reason guidance relating to
a DCM’s authority to examine the books
and records of intermediaries has not
been included in the proposed guidance
for Core Principle VII.
Core Principle VIII requires the
electronic trading facility to establish
and enforce rules to minimize conflicts
of interest in its decision-making
processes. The Commission notes that
an ECM may face conflicts between its
self-regulatory responsibilities and its
commercial interests similar to those
encountered by a DCM. For this reason
the Commission proposes to insert
certain general elements of the
acceptable practices for DCM Core
Principle 15 64—specifically, those
descriptive elements that provide
greater clarity and context to particular
conflicts—into paragraph (a)(2) of the
guidance section for ECM Core Principle
VIII.
The acceptable practices for DCM
Core Principle 15 include four specific
provisions that must be met to receive
the benefit of the safe harbor. These
provisions address: (1) Board
Composition; (2) Definition of Public
Director; (3) Regulatory Oversight
Committee; and (4) Disciplinary Panels.
Although the Commission did not
propose any acceptable practices for
Core Principle VIII, the Commission
62 17
63 17

CFR 16.01.
CFR 38, Appendix B to part 38.

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emphasizes that the four provisions in
the acceptable practices for DCM Core
Principle 15 are a clear articulation of
acceptable methods for managing
conflicts of interest in decision-making.
Accordingly, the Commission
encourages ECMs with SPDCs to consult
the DCM Core Principle 15 acceptable
practices for additional guidance as to
the spirit of Core Principle VIII.
The Commission recognizes that an
electronic trading facility may become
subject to compliance with Core
Principle VIII by virtue of a single
contract representing a small portion of
the facility’s operations. Thus, the
ECM’s conflicts may be contract-specific
and not require the all-encompassing
safe harbor offered for the benefit of
DCMs in Core Principle 15.65 The
Commission also recognizes that it may
not be practicable for an ECM to
implement the full panoply of the Core
Principle 15 acceptable practices. The
ECM must nonetheless ensure that
appropriate measures are in place to
guard against conflicts of interest in
decision-making. An electronic trading
facility should carefully consider its
method of compliance, including
whether additional measures may be
required as the number or importance of
its SPDCs increases. The Commission
reserves the right to issue additional
guidance or specific acceptable
practices for Core Principle VIII as
circumstances warrant.
Core Principle IX requires ECMs with
SPDCs to avoid adopting rules or taking
actions that result in unreasonable
restraints of trade or impose a material
anticompetitive burden on trading. The
Commission is required by section 15(b)
of its statute to take into consideration
the public interest to be protected by the
antitrust laws and to take the least
anticompetitive means of achieving the
objectives, policies and purposes of the
CEA.66 Consistent with the
Commission’s approach to antitrust
considerations with respect to DCMs,67
it is the Commission’s intent to be
guided by section 15(b) of the Act in its
consideration of any issues arising
under this core principle.

5. Annual Commission Review
In accordance with section 2(h)(7) of
the CEA, proposed regulation 36.3(d)
provides that the Commission will
review at least annually agreements,
contracts and transactions traded on
ECMs to determine whether they serve
a significant price discovery function.
The Commission proposes to limit these
annual reviews to those contracts that
have an average daily volume of five or
more trades or that have been brought
to the attention of the Commission,
through the notification procedures of
proposed regulation 36.3(c)(2) or
otherwise, as possible SPDCs. The
Commission believes this approach is
consistent with Congress’ intent as
reflected in the Conference Committee
Report:
The Managers do not intend that the
Commission conduct an exhaustive annual
examination of every contract traded on an
electronic trading facility pursuant to the
section 2(h)(3) exemption, but instead to
concentrate on those contracts that are most
likely to meet the criteria for performing a
significant price discovery function.68

B. Market, Transaction and Large
Trader Reporting Rules
The Commission’s market and large
trader reporting rules (‘‘reporting rules’’)
are contained in parts 15 through 21 of
the Commission’s regulations.69
Collectively, the reporting rules
effectuate the Commission’s market and
financial surveillance programs.70 The
market surveillance programs analyze
market data to detect and prevent
market manipulation and disruptions
and to enforce speculative position
limits. The financial surveillance
programs use market data to measure
the financial risks that large contract
positions may pose to Commission
registrants and clearing organizations.
The Commission’s reporting rules can
be applied to SPDCs traded on ECMs
pursuant to the authority of sections 4a,
4c(b), 4g and 4i of the CEA.71 The
amendments introduced to the CEA by
the Reauthorization Act, both by
defining ECMs with SPDCs as registered
entities with respect to those contracts
and by making certain provisions of the
68 Conference

Committee Report at 985.
CFR parts 15 to 21.
70 See 69 FR 76392 (Dec. 21, 2004).
71 The Reauthorization Act amended section
2(h)(4)(B) of the Act to subject SPDCs requiring
large trader reporting to the provisions of section
4c(b) of the Act. In addition, section 2(h)(4)(D) of
the Act provides that transactions executed on
ECMs shall be subject to ‘‘such rules, regulations,
and orders as the Commission may issue to ensure
timely compliance with any of the provisions of
this Act applicable to a significant price discovery
contract traded on or executed on any electronic
trading facility * * *.’’ 7 U.S.C. 2(h)(4)(D).
69 17

65 The Commission recognizes that, pursuant to
the Reauthorization Act, compliance with the core
regulatory principles is limited to ECMs with
SPDCs. However, the Commission also recognizes
that all ECMs, not just ECMs with SPDCs, may face
potential conflicts of interest in their decisionmaking processes. Therefore, all ECMs may want to
consider implementing appropriate measures to
minimize conflicts of interests.
66 7 U.S.C. 19.
67 17 CFR 38, Appendix B to part 38, Guidance
for Core Principle 18.

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Act directly applicable to SPDCs, give
the Commission the authority to
establish a comprehensive transaction
and position reporting system for
SPDCs. Specifically, section 4a of the
CEA permits the Commission to set,
approve exchange-set, and enforce
speculative position limits.72 Section
4c(b) of the Act,73 which gives the
Commission plenary authority to
establish the rules pursuant to which
the terms and conditions on which
commodity options transactions may be
conducted, provides the basis for the
Commission’s authority to establish a
large trader reporting system for
transactions on ECMs that involve
commodity options. Section 4g of the
Act, as amended, imposes reporting and
recordkeeping obligations on registered
persons and requires them to file such
reports as the Commission may require
on proprietary and customer positions
executed on any board of trade and in
any SPDC traded or executed on an
electronic trading facility.74 Finally,
section 4i of the Act requires the filing
of such reports as the Commission may
require when positions made or
obtained on DCMs, DTEFs or ECMs with
respect to SPDCs equal or exceed
Commission-set levels.75
In addition to proposing technical and
conforming amendments to parts 15
through 21 of its regulations, the
Commission seeks, through the
proposed regulations, to extend to
SPDCs the reporting rules that currently
apply to DCMs and DTEFs by defining
clearing member and clearing
organization and amending the
definition of reporting market in
Commission regulation 15.00 to apply to
positions in, and the trading and
clearing of, SPDCs executed on ECMs.
Under the proposed rules, ECMs would
provide clearing member reports for
SPDCs to the Commission pursuant to
Commission regulation 16.00. As with
DCMs, proposed rule 16.01 would
require ECMs to submit to the
Commission and publicly disseminate
option deltas and aggregated trading
data on a daily basis.76 ECM clearing
members that clear SPDCs, regardless of
their registration status with the
Commission or their status as domestic
or foreign persons, would be required to
72 7

U.S.C. 6a.
U.S.C. 6c(b).
74 7 U.S.C. 6g.
75 7 U.S.C. 6i.
76 Currently, the public dissemination
requirement of Commission regulation 16.01(e)
applies only to DCMs. The proposed rules would
uniformly apply the public dissemination
requirement of Commission regulation 16.01(e) to
actively traded DCM contracts and SPDCs executed
on DTEFs and ECMs. 17 CFR 16.01(e).

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file position reports with the
Commission for large SPDC positions
held in accounts carried by such brokers
when customer positions exceed the
contract reporting levels of Commission
regulation 15.03(b). In addition, the
proposed regulations would require
clearing members to identify the owners
of reportable SPDC positions on Form
102 (Identification of Special
Accounts).77
Under the proposed regulations,
SPDC traders likewise would be subject
to the special call provisions of part 18
of the Commission’s regulations for
reportable positions. Moreover, clearing
members for SPDCs, SPDC traders, and
ECMs listing SPDCs each would be
subject to the special call provisions of
part 21 of the Commission’s regulations,
which establish the Commission’s
ability to request information on
persons that exercise trading control
over commodity futures and options
accounts along with additional accountrelated information for positions that
may or may not be reportable under
Commission regulation 15.03(b).78
In order to effectively communicate
with foreign clearing members and
foreign traders and to properly
administer the proposed special call
provisions of parts 17, 18 and 21 of the
Commission’s regulations, the
Commission is also proposing to amend
the designation of agent provisions of
Commission regulation 15.05. This rule
relates to the appointment of an agent
for service of process for foreign
persons; it is self-effectuating and is
designed to permit the Commission to
communicate expeditiously with foreign
individuals and entities that trade on
domestic commodity exchanges.79
Similar to requirements that currently
apply to DCMs and DTEFs, the
proposed amendments to regulation
15.05 would require ECMs that list
SPDCs to act as the agent of foreign
clearing members and foreign traders for
77 The Commission’s Division of Market
Oversight increasingly has been charged with
administering the procedural requirements of the
reporting rules. Accordingly, the Commission is
proposing to shift any delegation of the
Commission’s authority to determine the format of
reports and the manner of reporting under parts 15
through 21 of the Commission’s regulations from
the Executive Director to the Director of the
Division of Market Oversight.
78 17 CFR 15.03(b). The proposed rules also seek
to amend paragraphs (i)(1) and (i)(2) of Commission
regulation 21.01 to ensure that any special call to
an intermediary for information that classifies a
trader as a commercial or noncommercial trader,
and the positions of the trader as speculative,
spread positions, or positions held to hedge
commercial risks, can be made with respect to both
commodity futures and commodity options
contracts. 17 CFR 21.02(i).
79 For background on the adoption of the rule, see
45 FR 30426 (May 8, 1980).

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the purpose of accepting service or
delivery of any communication,
including special calls, issued by the
Commission to a foreign clearing
member or foreign trader.80
The Commission is also proposing
new regulation 16.02 to require all
reporting markets—a definition that
currently includes DCMs and DTEFs
(unless the Commission determines
otherwise) and, as proposed, will
include ECMs listing SPDCs with
respect to such contracts—to report on
a daily basis trade data and related order
information for each transaction that is
executed on the market. Such reports
would include time and sales data,
reference files and such other
information as the Commission or its
designee may require and, upon request,
would be accompanied by data that
identifies or facilitates the identification
of each trader for each transaction or
order included in a submitted report.
For some time, DCMs have consistently
provided transaction level data to the
Commission pursuant to rule 38.5(a),
under which they must file trade data
upon request by the Commission.81
Recent acquisitions of technology have
enabled the Commission more
effectively to integrate trade data and
related order information into its trade
practice, market and financial
surveillance programs. Accordingly, the
Commission proposes in new regulation
16.02 to make the submission of trade
data and related order information
mandatory.
In this regard, and specifically with
respect to SPDCs, the Commission notes
that the proposed amendments to part
17 of the Commission’s regulations do
not apply to SPDC transactions that are
not cleared for the simple reason that no
clearing members are involved in
clearing such transactions. For purposes
of enforcing SPDC position limits and
monitoring large SPDC positions, the
Commission would use proposed
regulation 16.02 to access transaction
information and trader identifications to
enforce position limits and monitor
large positions for market and financial
surveillance purposes.

80 In order to ensure that the Commission can
expeditiously communicate with all foreign
individuals and entities that may effect transactions
in ECM SPDCs, the Commission is proposing to
define the term foreign clearing member in
proposed regulation 15.00(g), and to use that term
along with the term foreign trader as defined in
regulation 15.00(h), in proposed regulation 15.05(i).
81 17 CFR 38.5(a).

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C. Other Regulatory Provisions
1. Part 40—Provisions Common to
Registered Entities
ECMs with SPDCs are integrated into
the definition of ‘‘registered entity’’ in
section 1a(29) of the CEA, as amended.
Part 40 of the Commission’s regulations
applies to registered entities, and
therefore, ECMs with SPDCs. Proposed
part 40 is being amended to specify
which provisions would be, or would
not be, applicable to all registered
entities. In particular, rules 40.1, 40.2
and 40.5–40.8 and Appendix D apply to
ECMs with SPDCs. Although not all
provisions of part 40 will be applicable
to ECMs with SPDCs,82 interested
parties are strongly encouraged to
review all of part 40 because even those
sections that are not being amended in
this rulemaking may be de facto
amended by virtue of the fact that the
term ‘‘registered entity’’ now includes
ECMs with SPDCs.

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III. Related Matters
A. Cost Benefit Analysis
Section 15(a) of the Act requires the
Commission to consider the costs and
benefits of its actions before issuing new
regulations under the Act. Section 15(a)
does not require the Commission to
quantify the costs and benefits of new
regulations or to determine whether the
benefits of adopted regulations
outweigh their costs. Rather, section
15(a) requires the Commission to
consider the cost and benefits of the
subject regulations. Section 15(a) further
specifies that the costs and benefits of
the regulations shall be evaluated in
light of five broad areas of market and
public concern: (1) Protection of market
participants and the public; (2)
efficiency, competitiveness, and
financial integrity of the market for
listed derivatives; (3) price discovery;
(4) sound risk management practices;
and (5) other public interest
considerations. The Commission may,
in its discretion, give greater weight to
any one of the five enumerated areas of
concern and may, in its discretion,
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 regulations implement
the Reauthorization Act by establishing
an enhanced level of oversight of
82 Regulation 40.3 will not apply to ECMs with
SPDCs because it addresses Commission approval
of products. Regulation 40.4 applies solely to
agricultural products, which cannot be traded on
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ECMs—including ECMs with SPDCs
and ECM market participants—as
mandated by Reauthorization Act. As a
result, in certain cases, it may be more
appropriate to attribute the compliance
costs imposed by the proposed
regulations to requirements that directly
arise from the provisions of the
Reauthorization Act.
Under the proposed rules, all DCMs,
DTEFs (unless the Commission
determines otherwise) and ECMs with
SPDCs would be required to provide
daily transaction and related data
reports to the Commission under
proposed rule 16.02. The costs
associated with the daily transaction
and related data reporting requirements
of proposed regulation 16.02, however,
may be ameliorated by the fact that
DCMs have been voluntarily providing
transactional data to the Commission on
a daily basis since the mid-1980s. The
Commission estimates that DCMs would
account for the substantial majority of
the markets that would likely be
required to file such reports pursuant to
proposed rule 16.02.
The proposed regulations would
extend the market and position
reporting requirements of parts 15 to 21
of the Commission’s regulations to
ECMs with SPDCs with respect to such
contracts. The requirements of the
proposed regulations are substantial,
would involve the submission of daily
reports, and would impose burdens on
market participants that clear and trade
SPDCs. More specifically, the proposed
rules would require ECMs with SPDCs
with respect to such contracts to
provide clearing member reports for
SPDCs to the Commission pursuant to
Commission regulation 16.00. Proposed
rule 16.01 would require ECMs to
submit to the Commission and publicly
disseminate option deltas and
aggregated trading data on a daily basis.
Pursuant to proposed rule 17.00 ECM
clearing members that clear SPDCs
would be required to file position
reports with the Commission for large
SPDC positions held in accounts carried
by such brokers when customer
positions exceed contract reporting
levels and would be required to identify
the owners of reportable SPDC positions
on Form 102 under proposed rule 17.01.
SPDC traders likewise would be subject
to the special call provisions of part 18
of the Commission’s regulations for
reportable positions, and clearing
members for SPDCs, SPDC traders, and
ECMs listing SPDCs each would be
subject to the special call provisions of
part 21 of the Commission’s regulations.
The costs associated with the
requirements of the market and position
reporting rules, should, however, be

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reduced in part by the substantial
overlap between the persons that are
currently subject to the reporting rules,
and the persons that would be subject
to the reporting rules pursuant to the
Commission’s proposed regulations. For
example, there is substantial overlap
between traders of the natural gas
contract on ICE OTC and traders of the
same contract on NYMEX. With respect
to clearing members of ICE OTC, for
example, such persons are often clearing
members or affiliates of clearing
members of NYMEX.
The benefits of extending the market
and reporting rules to SPDCs are
substantial. As an initial matter, it is
important to note that a significant focus
of the Reauthorization Act concerned
amending the CEA with the specific
intent of giving the Commission the
authority to extend the market and
position reporting rules to SPDC
markets and market participants. To the
extent that contracts listed on ECMs
serve a significant price discovery
function, the regulatory value of
enhanced oversight, through the
application of the market and position
reporting rules to such contracts, is
elevated. The Commission analyzes the
information funneled to it by the
requirements of the market and position
reporting rules to conduct market and
financial surveillance. Without such
information, the ability of the
Commission to discharge its regulatory
responsibilities, including the
responsibilities of preventing market
manipulations and contract price
distortions and ensuring the financial
integrity of the listed derivatives
marketplace, would be compromised.
The bulk of the costs that would be
imposed by the requirements of
proposed regulation 36.3 relate to
significant and increased submission of
information requirements. For example,
under proposed regulation 36.3(b)(1), all
ECMs would be required to file certain
basic information including contract
terms and conditions with, and make
certain demonstrations related to
compliance with the terms of the
section 2(h)(3) exemption to, the
Commission. Proposed regulation
36.3(b)(2) would require ECMs to
submit transactional information on a
weekly basis to the Commission for
certain traded contracts that are not
SPDCs and would not be subject to the
terms of proposed rule 16.02. Proposed
regulation 36.3(c)(4) would impose a
substantial cost on ECMs with SPDCs in
terms of providing information to the
Commission.
In enacting the Reauthorization Act,
Congress directed the Commission to
take an active role in determining

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whether contracts listed by ECMs could
qualify as SPDCs. Accordingly, the
enhanced informational requirements
that would be imposed on ECMs with
respect to contracts that have not been
identified as SPDCs have been proposed
by the Commission in order to acquire
the information that it requires to
discharge this newly mandated
responsibility. In addition, the
substantial information submission and
demonstration requirements that would
be imposed on ECMs with SPDCs have
been proposed because ECMs with
SPDCs, by statute, acquire certain of the
self-regulatory responsibilities of DCMs.
The submission requirements associated
with proposed regulation 36.3(c)(4) are
tailored to enable the Commission to
ensure that ECMs with SPDCs, as
entities with the elevated status of a
registered entity under the Act, are in
compliance with the statutory terms of
the core principles of section 2(h)(7)(C)
of the Act. As with the market and
position reporting rules, the primary
benefit to the public of proposed
regulation 36.3 is that its requirements
give the Commission the ability to
discharge its statutorily mandated
responsibility for monitoring for the
presence of SPDCs and extending its
oversight to the trading of SPDCs.
B. The Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA),
5 U.S.C. 601 et seq., requires that
agencies consider the impact of their
regulations on small businesses. The
requirements related to the proposed
amendments fall mainly on registered
entities, exchanges, futures commission
merchants, clearing members, foreign
brokers, and large traders. The
Commission has previously determined
that exchanges, futures commission
merchants and large traders are not
‘‘small entities’’ for the purposes of the
RFA.83 Similarly, clearing members,
foreign brokers and traders would be
subject to the proposed regulations only
if carrying or holding large positions.
Accordingly, the Acting Chairman, on
behalf of the Commission, hereby
certifies, pursuant to 5 U.S.C. 605(b),
that the actions proposed to be taken
herein will not have a significant
economic impact on a substantial
number of small entities.

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C. Paperwork Reduction Act
Certain provisions of proposed
Commission regulation 36.3 would
result in new collection of information
requirements within the meaning of the
Paperwork Reduction Act of 1995

(PRA).84 The Commission therefore is
submitting this proposal to the Office of
Management and Budget (OMB) for
review in accordance with 44 U.S.C.
3507(d) and 5 CFR 1320.11. The title for
this collection of information is
‘‘Regulation 36.3—Exempt Commercial
Market Submission Requirements’’
(OMB control number 3038–NEW). If
adopted, responses to this collection of
information would be mandatory. The
Commission will protect proprietary
information according to the Freedom of
Information Act and 17 CFR part 145,
‘‘Commission Records and
Information.’’ In addition, section
8(a)(1) of the Act strictly prohibits the
Commission, unless specifically
authorized by the Act, from making
public ‘‘data and information that
would separately disclose the business
transactions or market positions of any
person and trade secrets or names of
customers.’’ 85
The requirements of Commission
regulation 36.3 are currently covered by
OMB control number 3038–0054 which
applies to both EBOTs and ECMs. As a
result of the Reauthorization Act,
EBOTs and ECMs have to comply with
additional divergent regulatory
requirements. Accordingly, the
Commission is seeking a new and
separate control number for ECMs
operating in compliance with the
requirements of regulation 36.3. Upon
OMB’s approval and assignment of a
separate control number specifically for
the collection of information
requirements of proposed regulation
36.3, the Commission intends to submit
the necessary documentation to OMB to
enable it to apply OMB control number
3038–0054 exclusively to EBOTs.
In addition, the Commission is
proposing amendments to parts 15 to 21
of the Commission’s regulations, which
amend two existing collections of
information titled ‘‘Large Trader
Reports’’ (OMB control number 3038–
0009) and ‘‘Futures Volume, Open
Interest, Price, Deliveries, and
Exchanges of Futures’’ (OMB control
number 3038–0012). Responses to this
collections of information would be
mandatory. Where appropriate, the
Commission will protect proprietary
information pursuant to the Freedom of
Information Act 86 and 17 CFR part 145,
‘‘Commission Records and
Information.’’ In addition, section
8(a)(1) of the Act prohibits the
Commission, unless specifically
authorized by the Act, from making
public ‘‘data and information that
U.S.C. 3501–3520.
U.S.C. 12(a)(1).
86 5 U.S.C. 552 et seq.

FR 18618 (April 30, 1982).

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1. Proposed Regulation 36.3
A. Regulation 36.3(a)
Regulation 36.3(a) requires that ECMs
notify the Commission of the intent to
operate as an ECM in reliance of section
2(h)(3) of the Act and further provide
the information and certifications
required by section 2(h)(5)(A) of the Act.
Section 2(h)(5)(A) of the Act requires an
ECM to provide the name and address
of the person who is authorized on
behalf of the ECM to receive
communications from the Commission,
the commodity categories that the ECM
intends to offer, and certifications that
certain owners and principals of the
ECM are not bad actors, that the facility
will comply with the requirements of
the ECM exemption, and that the facility
will update its filings under section
2(h)(5)(A) to account for material
changes in the information submitted to
the Commission.

84 44
85 7

83 47

would separately disclose the business
transactions or market positions of any
person and trade secrets or names of
customers.’’ 87
Finally, proposed regulation 16.02
would result in a new collection of
information requirement within the
meaning of the PRA. The Commission is
therefore submitting the proposal for
regulation 16.02 to OMB for review. The
title for the collection of information
requirement is ‘‘Regulation 16.02—Daily
Trade and Supporting Data Reports’’
(OMB control number 3038–NEW). If
adopted, this collection would be
mandatory. The Commission will
protect proprietary information
according to the Freedom of Information
Act and 17 CFR part 145, ‘‘Commission
Records and Information.’’ In addition,
section 8(a)(1) of the Act strictly
prohibits the Commission, unless
specifically authorized by the Act, from
making public ‘‘data and information
that would separately disclose the
business transactions or market
positions of any person and trade
secrets or names of customers.’’ 88
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless it displays a currently valid
control number. OMB has not yet
assigned control numbers to the new
collections for proposed regulations
36.3 and 16.02. The approved collection
of information requirements associated
with parts 15 to 21, which would be
revised by the proposed rules and rule
amendments, display control numbers
3038–0009 and 3038–0012.

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88 Id.

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The substantive requirements of
regulation 36.3(a) repeat the
requirements that are imposed by the
Act as a condition of operating pursuant
to the ECM exemption. The reporting or
recordkeeping burden associated with
Commission regulation 36.3(a) involves
the compilation and submission of the
required information to the
Commission. Commission staff
estimates that each ECM would expend
approximately 4 hours of professional
time annually to maintain, verify, and
update the notification and required
certifications. Commission staff
estimates that 20 ECMs will be subject
to the requirement resulting in an
aggregate burden of 80 hours annually.
B. Regulation 36.3(b)(1)
Under proposed regulation 36.3(b)(1),
each ECM would be required to provide
contract descriptions and terms and
conditions, the market’s trading
conventions, and the market’s trading
protocols to the Commission. Each ECM
would be required to describe how it
meets the statutory definition of a
trading facility and demonstrate that it
requires each participant to comply
with all applicable laws; complies with
the initial statutory requirements for the
ECM exemption under section 2(h)(3) of
the Act; and directs a program to
monitor market participants for
compliance with the transactional
requirements of the ECM exemption.
Proposed regulation 36.3(b)(1) would
further require that each ECM provide,
upon the Commission’s request,
information that the Commission would
deem helpful to its determination as to
whether a particular contract is a SPDC.
Lastly, each ECM would be required to
annually indicate on Form 205 whether
it continues to operate under the ECM
exemption and certify the accuracy of
the information contained in its
Notification of Operation submitted
pursuant to section 2(h)(5)(A) of the Act
and regulation 36.3(a).
Based on the number of contract
submissions made by DCMs, the
Commission estimates that ECMs
collectively would list for trading 250
commodity futures and options
contracts annually. Commission staff
estimates that compliance with the
above requirements and the
transmission of descriptions and terms
and conditions for such products would
take approximately 2 hours of
professional time to prepare per contract
resulting in a collective burden of 500
hours annually for all ECMs.
C. Regulation 36.3(b)(2)
Proposed regulation 36.3(b)(2) would
require that ECMs, with respect to

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contracts that are not SPDCs, identify
contracts which average 5 or more
trades per day over a calendar quarter,
and for such contracts, compile daily
transaction-based reports that include
the date of execution, the time of
execution, the price of execution, the
quantity executed, the total daily
trading volume, the total open interest,
option type, option strike prices for each
qualifying contract, and such other
information as may be requested by the
Commission. Proposed regulation
36.3(b)(2) would require the submission
of the reports on a weekly basis. Such
data is generated by ECMs in the normal
course of operation. The Commission
staff estimates that ECMs would submit
weekly reports for a total of 40 contracts
annually (2,080 reports). Commission
staff estimates that ECMs would expend
approximately 20 minutes of
professional time to compile and
transmit each weekly report to the
Commission resulting in an annual
burden of approximately 693 hours.
Proposed regulation 36.3(b)(2) would
give an ECM the flexibility to choose to
submit weekly transaction-based reports
or, in the alternative, give the
Commission electronic access to its
trading facility to enable the
Commission to create the weekly
reports. Should an ECM select this
option, Commission staff believes that
such access would not result in any
estimable burden on an ECM.
Proposed regulation 36.3(b)(2) also
would require that ECMs, with respect
to contracts that are not SPDCs, to
identify contracts which average 1 or
more trades per day over a calendar
quarter, and for such contracts, to
provide to the Commission on a
quarterly basis, the terms and
conditions of such contracts, the average
daily trading volume, and the most
recent level of open interest. As with
weekly reports, such data is generated
by ECMs in the normal course of
operation. The Commission staff
estimates that ECMs would submit
quarterly reports for a total of 90
contracts annually (360 total reports).
Commission staff estimates that ECMs
would expend approximately 20
minutes of professional time to compile
and transmit each quarterly report
resulting in an annual burden of 120
hours.
Furthermore, proposed regulation
36.3(b)(2) would require ECMs to
maintain an inventory of all fraud or
manipulation based complaints and
submit a copy of such complaints to the
Commission within 3 or 30 days,
depending on the specific facts of the
complaints. ECMs should record and
retain an inventory of complaints in the

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normal course of operation. Commission
staff is unable to estimate the hourly
burden associated with the routine
transmittal of such reports to the
Commission. However, Commission
staff would presume that such
transmittal requirements should not
result in any materially measurable
burden on ECMs.
Lastly, proposed regulation 36.3(b)(2)
addresses the Commission’s authority to
require the submission of data upon
special call under section 2(h)(5)(B)(iii)
of the Act. Pursuant to that section of
the Act, the Commission has the
authority to issue special calls in order
to enforce certain provisions of the Act
including the anti-fraud and antimanipulation provisions. In addition,
the Commission is authorized to issue
special calls to ECMs to facilitate its
determination as to whether certain
contracts are SPDCs, to evaluate a
systemic market event, or to obtain
information requested by another
Federal financial regulator. Commission
staff estimates that a total of 15 special
calls would be issued to ECMs annually
under section 2(h)(5)(B)(iii) of the Act.
Each ECM that has been issued a special
call would expend approximately 5
hours of professional time to respond to
the call resulting in a burden of 75
hours annually.
D. Proposed Regulation 36.3(c)(2)
Proposed regulation 36.3(c)(2)
establishes for ECMs certain
requirements for notifying the
Commission of possible SPDCs that may
be listed by the ECM. Specifically, an
ECM’s obligation to notify the
Commission would apply to contracts
that average 5 trades or more per day
over the most recent calendar quarter,
and may be triggered by either the
ECM’s sale of contract price data or by
a contract’s daily settlement price being
within 2.5 percent of the
contemporaneously determined closing,
settlement or daily price of another
contract 95 percent or more of the days
in the most recent quarter. Such
notifications would be accompanied by
supporting details. Commission staff
estimates that cost of monitoring for the
triggering conditions is nominal.
Commission staff estimates that
collectively 10 contracts would be the
subject of the notification requirement
annually. Each ECM with a qualifying
contract would expend approximately 1
hour of professional time to compile
and transmit such data to the
Commission at an aggregate annual
burden of 10 hours.

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E. Proposed Regulation 36.6(c)(4)
An ECM with a SPDC, with respect to
such a contract, has substantial
regulatory responsibilities including the
obligation to comply with the core
principles of section 2(h)(7)(C) of the
Act and to certify the compliance of
SPDC contract terms and conditions and
exchange rules with the core principles,
other applicable provisions of the Act,
and Commission regulations
thereunder. To enable the Commission
to evaluate an ECM’s compliance with
the statutory and regulatory provisions
applicable to SPDCs and ECMs listing
SPDCs, Commission regulation
36.3(c)(4) would require ECMs with
SPDCs to submit a substantial amount of
information and documentation to the
Commission including the market’s
rules, a description of financial
standards for members or participants, a
description of the market’s trading
algorithm, legal status documents, and a
description of the governance structure
of the market. As proposed, such
information collectively would be filed
only once upon the market’s listing of
a SPDC. However, subsequent exchange
rule changes, as with initial SPDC
contract terms and conditions and
amendments thereto, would be required
to be certified on an ongoing basis.
Commission staff estimates that up to
three new ECMs could list at least one
SPDC during the next five years.
Commission staff estimates that each
new ECM listing its initial SPDC would
expend approximately 200 hours of
professional time providing the
information and documentation
required under regulation 36.3(c)(4) for
an aggregate burden of 600 hours.
Assuming that such trading facilities
will operate for ten years, the aggregated
annualized cost, in terms of burden
hours, would be 60 hours. Additionally,
Commission staff estimates that the
Commission would receive
approximately 50 certified filings per
SPDC. For each SPDC related certified
filing, an ECM would expend, in
accordance with the procedural and
submission requirements of
Commission regulation 40.6,
approximately 30 minutes resulting in
an aggregate annual burden of 75 hours.

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F. Proposed Regulation 36.3(c)(6)
Proposed regulation 36.3(c)(6)
requires an ECM listing a SPDC, upon
the Commission’s request, to file a
written demonstration that the ECM is
in compliance with the core principles
of section 2(h)(7)(C) of the Act.
Commission staff estimates that such
demonstrations of compliance could
require up to 20 hours of response time.

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Commission staff anticipates issuing 2
requests annually resulting in an
aggregate burden of 40 hours.
2. Proposed Regulation 16.02
Under proposed regulation 16.02,
reporting markets, a term which as
proposed would include ECMs with
SPDCs with respect to SPDCs, in
addition to DCMs and DTEFs (unless
determined otherwise by the
Commission), would be required to
provide trade and supporting data
reports to the Commission on a daily
basis. Such reports would include
transaction-level trade data and related
order information for each transaction
executed on the reporting market and
would be accompanied by data that
identifies traders for each transaction
when reporting markets maintain such
data.
Since the mid-1980s, all DCMs have
voluntarily provided the Commission
with transaction level data on a daily
basis. Proposed regulation 16.02 seeks
to formalize and codify the submission
process. Commission staff estimates that
each reporting market would expend 18
hours for onsite visits to the
Commission, discussions with staff to
introduce the order flow process, and
meetings with staff for follow-up
discussions. The proposed rules would
require that reporting markets expend
approximately 2325 hours in additional
start-up costs to establish the required
information technology infrastructure.
Commission staff estimates that it
would receive daily trade and
supporting data reports from up to15
reporting markets annually. Accordingly
the start-up burden in terms of hours
would in the aggregate be 35,145 hours.
Annualized over a useful life of ten
years, the aggregated annual burden
hours would be 3,514.
It is also estimated that start-up and
continuing costs may involve product
and service purchases. Commission staff
estimates that reporting markets could
expend up to $5,000 annually per
market on product and service
purchases to comply with proposed
regulation 16.02. This would result in
an aggregated cost of $75,000 per annum
(15 reporting markets × $5,000). This
estimate, however, is speculative
because reporting markets must possess
the ability to audit and track
transactions in the ordinary course of
operations independently of proposed
regulation 16.02.
In addition to the start-up burden,
proposed regulation 16.02, if adopted,
would impose certain ongoing costs.
Commission staff estimates that each
reporting market would expend 30
minutes for each daily trade and

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supporting data report transmitted to
the Commission resulting in an
aggregate burden of 1,875 hours
annually (assuming that such reports are
provided for each of 250 trading days).
3. Market and Large Trader Reporting
Rules
In order to implement the CEA as
amended by the Reauthorization Act,
the Commission through this
rulemaking proposes to extend the
market and large trader reporting
requirements that currently apply to
DCMs and DTEFs to ECMs with SPDCs
with respect to such contracts.
A. Futures Volume, Open Interest, Price,
Deliveries, and Exchanges of Futures
(OMB control number 3038–0012)
Twelve exchanges currently submit
aggregated market data to the
Commission and are required to
publicly disseminate for each of
approximately 250 trading days per year
under Commission regulation 16.01.
The information includes aggregate
figures on a per contract basis on total
gross open contracts, open futures
contracts against which delivery notices
have been stopped, volume generated
from the exchange of futures, delta
factors as well as certain pricing data.
Should the proposed amendments be
adopted, it is estimated that up to 15
reporting markets, including ECMs with
SPDCs with respect to such contracts,
could be required to submit this data to
the Commission on a continuing basis.
Commission staff estimates that such
markets would expend approximately
30 minutes per day to generate the
required data files, transmit that file to
Commission offices, and publish the
required information. This would
results in an annual burden of
approximately 1,875 hours.
B. Large Trader Reports (OMB Control
Number 3038–0009)
1. Clearing Member Reports
Twelve designated contract markets
provide clearing member reports
pursuant to Commission regulation
16.00 once on each of an estimated 250
trading days per year. Should the
proposed rules be adopted, it is
estimated that up to 15 reporting
markets, including ECMs with SPDCs
with respect to such contracts, would be
providing this data to the Commission
on a continuing basis. The exchanges
and ECMs would be required to submit
confidential information to the
Commission on the aggregate positions
and trading activity of each clearing
member.
Reporting markets, on a daily basis,
are required under regulation 16.00 to

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report each clearing member’s open long
and short positions, purchases and
sales, exchanges of futures, and futures
delivery notices. The data is reported
separately by proprietary and customer
accounts by futures month and, for
options, by puts and calls by expiration
date and strike price. The Commission
obtains clearing member reports from
the reporting markets or the clearing
organizations of each reporting market.
Reporting markets and the clearing
organizations routinely compile,
analyze and provide such data to each
clearing member. Since the data is
routinely provided to clearing members,
the reporting burden for this set of data
is estimated at 20 minutes for each
reporting market per day. Assuming that
a total of 15 entities would provide this
data on a daily basis to the Commission,
the total aggregate burden hours for
reporting would be 1,250 hours
(assuming that there are 250 trading
days annually).

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2. Reporting Firms
Under Commission regulation 17.00,
routine reports are filed only for
accounts with commodity futures and
option positions that exceed levels set
by the Commission in regulation
15.03(b). As proposed, regulation 17.00
would extend the routine reporting
requirements of regulation 17.00 to
clearing members on ECMs with SPDCs
with respect to SPDCs. Should proposed
regulation 17.00 be adopted, it is
estimated that up to an additional 30
respondents would be required to file
reports at any one time under regulation
17.00 increasing the total number of
respondents to 250. The reporting
burden consists of staff of reporting
firms initializing their information
technology systems for new contracts
and new accounts. On average it is
expected that about 15 minutes per day
is expended by these reporting firm
staff. Over 250 trading days annually,
the aggregate burden would be 15,625
hours.
3. Forms 102
Each account reported to the
Commission by an FCM, clearing
member, or foreign broker must also be
identified on a Form 102 pursuant to
regulation 17.01. By amending the
definition of reporting market, clearing
member, and clearing organization, the
notice of proposed rulemaking would
extend the requirements of regulation
17.01 to clearing members of ECMs with
SPDCs with respect to such contracts.
Forms 102 provide information that
allows the Commission to combine
different accounts held or controlled by
the same trader and to identify

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commercial firms using the markets for
hedging. Should the notice of proposed
rulemaking be adopted, the total
number of Forms 102 filed with the
Commission is estimated to increase by
500 to 4,500 per year. Respondents
would expend 12 minutes completing
each form for a total aggregate burden of
900 hours annually.
4. Reports From Traders
Traders provide identifying
information using Forms 40 under
Commission regulation 18.04 and
position data upon special call under
Commission regulations 18.00 and
18.05. The notice of proposed
rulemaking would extend the
requirements of those regulations to
traders of SPDCs. Should the proposed
amendments be adopted, the total
estimated number of traders filing the
Form 40 under regulation 18.04 would
increase by 100 to 2,500 per year with
each response requiring approximately
20 minutes, resulting in an aggregate
annual burden of 833 hours.
The Commission has maintained the
authority to make special calls on
traders under part 18 of the
Commission’s regulations when the
information obtained routinely under
part 17 of the Commission’s regulations
is incomplete for its market and
financial surveillance purposes.
Information obtained on call under
Commission regulations 18.00 and 18.05
is provided in the manner stipulated per
instruction contained in the special call.
Should the proposed regulations be
adopted, the Commission estimates that
12 special calls would be issued to each
of 45 traders under Commission
regulations 18.00 and 18.05 and that
each response to a call would require
approximately 5 hours, for an estimated
aggregate annual burden of 2,700 hours.
5. Part 21 of the Commission
Regulations
Under part 21 of the Commission’s
regulations, the Commission may issue
special calls for additional cash and
futures data concerning traders from
FCMs, introducing broker, clearing
members, foreign brokers, and traders.
In addition, under part 21 of the
Commission’s regulations (17 CFR part
21), the Commission may request
identifying information regarding
persons who exercise trading control
over accounts. Position information
collected pursuant to special call under
part 21 of the Commission’s regulations
may be used to audit large trader reports
and is used to investigate potential
market abuses. Although similar to the
standardized information routinely
collected under part 17 of the

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Commission’s regulations for reportable
accounts, such data is submitted in
response to customized requests for
information and may regard accounts
and positions that are not reportable. In
contrast to special calls for identifying
data made under Commission regulation
18.04, special calls made under any
provision of part 21 of the Commission’s
regulations generally occur only when a
particular market shows a potential for
disruption or when there is an
investigation of possible violations of
the Act or the regulations thereunder.
The notice of proposed rulemaking
would apply the terms of part 21 to
ECMs with SPDCs with respect to such
contracts, clearing members clearing
SPDCs, and SPDC traders. Should the
proposed regulations be adopted, the
Commission estimates that the
Commission will continue to make less
than 10 special calls under all of the
provisions of part 21 of the
Commission’s regulations and that each
response to a call will require
approximately 1 hour, resulting in an
aggregate reporting burden of 10 hours
annually.
4. Information Collection Comments
The Commission invites the public
and other Federal agencies to comment
on any aspect of the reporting and
recordkeeping burdens discussed above.
Pursuant to 44 U.S.C. 3506(c)(2)(B), the
Commission solicits comments in order
to: (i) Evaluate whether the proposed
collections of information are necessary
for the proper performance of the
functions of the Commission, including
whether the information will have
practical utility; (ii) evaluate the
accuracy of the Commission’s estimate
of the burden of the proposed
collections of information; (iii)
determine whether there are ways to
enhance the quality, utility, and clarity
of the information to be collected; and
(iv) minimize the burden of the
collections of information on those who
are to respond, including through the
use of automated collection techniques
or other forms of information
technology.
You may submit your comments
directly to the Office of Information and
Regulatory Affairs, by fax at (202) 395–
6566 or by e-mail at OIRAsubmissions@omb.eop.gov. Please
provide the Commission with a copy of
your comments so that we can
summarize all written comments and
address them in the final rule preamble.
Refer to the Addresses section of this
notice of proposed rulemaking for
comment submission instructions to the
Commission. You may obtain a copy of
the supporting statements for the

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collections of information discussed
above by visiting RegInfo.gov. OMB is
required to make a decision concerning
the collections of information between
30 and 60 days after publication of this
Release. Consequently, a comment to
OMB is most assured of being fully
effective if received by OMB (and the
Commission) within 30 days after
publication of this notice of proposed
rulemaking.
List of Subjects
17 CFR Part 15
Brokers, Commodity futures,
Reporting and recordkeeping
requirements.
17 CFR Part 16
Commodity futures, Reporting and
recordkeeping requirements.
17 CFR Part 17
Brokers, Commodity futures,
Reporting and recordkeeping
requirements.
17 CFR Part 18
Commodity futures, Reporting and
recordkeeping requirements.
17 CFR Part 19
Commodity futures, Cottons, Grains,
Reporting and recordkeeping
requirements.
17 CFR Part 21
Brokers, Commodity futures,
Reporting and recordkeeping
requirements.
17 CFR Part 36
Commodity futures, Commodity
Futures Trading Commission.
17 CFR Part 40
Commodity futures, Contract markets,
Designation application, Reporting and
recordkeeping requirements.
For the reasons stated in the
preamble, the Commodity Futures
Trading Commission proposes to amend
17 CFR parts 15, 16, 17, 18, 19, 21, 36
and 40 as follows:

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PART 15—REPORTS—GENERAL
PROVISIONS
1. The authority citation for part 15 is
revised to read as follows:
Authority: 7 U.S.C. 2, 5, 6a, 6c, 6f, 6g, 6i,
6k, 6m, 6n, 7, 7a, 9, 12a, 19, and 21, as
amended by Title XIII of the Food,
Conservation and Energy Act of 2008, Pub. L.
No. 110–246, 122 Stat. 1624 (June 18, 2008).

2. Revise § 15.00 to read as follows:

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§ 15.00 Definitions of terms used in parts
15 to 21 of this chapter.

As used in parts 15 to 21 of this
chapter:
(a) Cash or Spot, when used in
connection with any commodity, means
the actual commodity as distinguished
from a futures or option contract in such
commodity.
(b) Clearing member means any
person who is a member of, or enjoys
the privilege of clearing trades in his
own name through, the clearing
organization of a designated contract
market, registered derivatives
transaction execution facility, or
registered entity under section 1a(29) of
the Act.
(c) Clearing organization means the
person or organization which acts as a
medium for clearing transactions in
commodities for future delivery or
commodity option transactions, or for
effecting settlements of contracts for
future delivery or commodity option
transactions, for and between members
of any designated contract market,
registered derivatives transaction
execution facility or registered entity
under section 1a(29) of the Act.
(d) Compatible data processing media
means data processing media approved
by the Commission or its designee.
(e) Customer means ‘‘customer’’ (as
defined in § 1.3(k) of this chapter) and
‘‘option customer’’ (as defined in
§ 1.3(jj) of this chapter).
(f) Customer trading program means
any system of trading offered,
sponsored, promoted, managed or in
any other way supported by, or
affiliated with, a futures commission
merchant, an introducing broker, a
commodity trading advisor, a
commodity pool operator, or other
trader, or any of its officers, partners or
employees, and which by agreement,
recommendations, advice or otherwise,
directly or indirectly controls trading
done and positions held by any other
person. The term includes, but is not
limited to, arrangements where a
program participant enters into an
expressed or implied agreement not
obtained from other customers and
makes a minimum deposit in excess of
that required of other customers for the
purpose of receiving specific advice or
recommendations which are not made
available to other customers. The term
includes any program which is of the
character of, or is commonly known to
the trade as, a managed account, guided
account, discretionary account,
commodity pool or partnership account.
(g) Discretionary account means a
commodity futures or commodity
option trading account for which buying
or selling orders can be placed or

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originated, or for which transactions can
be effected, under a general
authorization and without the specific
consent of the customer, whether the
general authorization for such orders or
transactions is pursuant to a written
agreement, power of attorney, or
otherwise.
(h) Exclusively self-cleared contract
means a cleared contract for which no
persons, other than a reporting market
and its clearing organization, are
permitted to accept any money,
securities, or property (or extend credit
in lieu thereof) to margin, guarantee, or
secure any trade.
(i) Foreign clearing member means a
‘‘clearing member’’ (as defined by
paragraph (b) of this section) who
resides or is domiciled outside of the
United States, its territories or
possessions.
(j) Foreign trader means any trader (as
defined in paragraph (o) of this section)
who resides or is domiciled outside of
the United States, its territories or
possessions.
(k) Guided account program means
any customer trading program which
limits trading to the purchase or sale of
a particular contract for future delivery
of a commodity or a particular
commodity option that is advised or
recommended to the participant in the
program.
(l) Managed account program means
a customer trading program which
includes two or more discretionary
accounts traded pursuant to a common
plan, advice or recommendations.
(m) Open contracts means ‘‘open
contracts’’ (as defined in § 1.3(t) of this
chapter) and commodity option
positions held by any person on or
subject to the rules of a board of trade
which have not expired, been exercised,
or offset.
(n) Reportable position means:
(1) For reports specified in parts 17,
18 and § 19.00(a)(2) and (a)(3) of this
chapter any open contract position that
at the close of the market on any
business day equals or exceeds the
quantity specified in § 15.03 of this part
in either:
(i) Any one future of any commodity
on any one reporting market, excluding
future contracts against which notices of
delivery have been stopped by a trader
or issued by the clearing organization of
a reporting market; or
(ii) Long or short put or call options
that exercise into the same future of any
commodity, or long or short put or call
options for options on physicals that
have identical expirations and exercise
into the same physical, on any one
reporting market.

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(2) For the purposes of reports
specified in § 19.00(a)(1) of this chapter,
any combined futures and futuresequivalent option open contract
position as defined in part 150 of this
chapter in any one month or in all
months combined, either net long or net
short in any commodity on any one
reporting market, excluding futures
positions against which notices of
delivery have been stopped by a trader
or issued by the clearing organization of
a reporting market, which at the close of
the market on the last business day of
the week exceeds the net quantity limit
in spot, single or in all-months fixed in
§ 150.2 of this chapter for the particular
commodity and reporting market.
(o) Reporting market means a
designated contract market, registered
entity under section 1a(29)(E) of the Act,
and unless determined otherwise by the
Commission with respect to the facility
or a specific contract listed by the
facility, a registered derivatives
transaction execution facility.
(p) Special account means any
commodity futures or option account in
which there is a reportable position.
(q) Trader means a person who, for
his own account or for an account
which he controls, makes transactions
in commodity futures or options, or has
such transactions made.
3. In § 15.01, revise paragraph (a) to
read as follows:
§ 15.01

Persons required to report.

*

*
*
*
*
(a) Reporting markets—as specified in
parts 16, 17, and 21 of this chapter.
*
*
*
*
*
4. In § 15.05, revise the heading and
paragraph (a); and add paragraph (i) to
read as follows:

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§ 15.05 Designation of agent for foreign
persons.

(a) For purposes of this section, the
term ‘‘futures contract’’ means any
contract for the purchase or sale of any
commodity for future delivery, or a
contract identified under § 36.3(b)(i) of
this chapter as traded in reliance on the
exemption in section 2(h)(3) of the Act,
traded or executed on or subject to the
rules of any designated contract market
or registered derivatives transaction
execution facility, or for the purposes of
paragraph (i) of this section, a reporting
market; the term ‘‘option contract’’
means any contract for the purchase or
sale of a commodity option, or as
applicable, any other instrument subject
to the Act pursuant to section 5a(g) of
the Act, traded or executed on or subject
to the rules of any designated contract
market or registered derivatives
transaction execution facility, or for the

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purposes of paragraph (i) of this section,
a reporting market; the term ‘‘customer’’
means any person for whose benefit a
foreign broker makes or causes to be
made any futures contract or option
contract; and the term
‘‘communication’’ means any summons,
complaint, order, subpoena, special call,
request for information, or notice, as
well as any other written document or
correspondence.
*
*
*
*
*
(i) Any reporting market that is a
registered entity under section 1a(29)(E)
of the Act that permits a foreign clearing
member or foreign trader to clear or
effect contracts, agreements or
transactions on the trading facility or its
clearing organization, shall be deemed
to be the agent of the foreign clearing
member or foreign trader with respect to
any such contracts, agreements or
transactions cleared or executed by the
foreign clearing member or the foreign
trader. Service or delivery of any
communication issued by or on behalf
of the Commission to the reporting
market shall constitute valid and
effective service upon the foreign
clearing member or foreign trader. The
reporting market which has been served
with, or to which there has been
delivered, a communication issued by
or on behalf of the Commission to a
foreign clearing member or foreign
trader shall transmit the communication
promptly and in a manner which is
reasonable under the circumstances, or
in a manner specified by the
Commission in the communication, to
the foreign clearing member or foreign
trader.
(1) It shall be unlawful for any such
reporting market to permit a foreign
clearing member or a foreign trader to
clear or effect contracts, agreements or
transactions on the facility or its
clearing organization unless the
reporting market prior thereto informs
the foreign clearing member or foreign
trader of the requirements of this
section.
(2) The requirements of paragraphs (i)
introductory text and (i)(1) of this
section shall not apply to any contracts,
transactions or agreements if the foreign
clearing member or foreign trader has
duly executed and maintains in effect a
written agency agreement in compliance
with this paragraph with a person
domiciled in the United States and has
provided a copy of the agreement to the
reporting market prior to effecting or
clearing any contract, agreement or
transaction on the trading facility or its
clearing organization. This agreement
must authorize the person domiciled in
the United States to serve as the agent

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75905

of the foreign clearing member or
foreign trader for the purposes of
accepting delivery and service of all
communications issued by or on behalf
of the Commission to the foreign
clearing member or the foreign trader
and must provide an address in the
United States where the agent will
accept delivery and service of
communications from the Commission.
This agreement must be filed with the
Commission by the reporting market
prior to permitting the foreign clearing
member or the foreign trader to clear or
effect any transactions in futures or
option contracts. Unless otherwise
specified by the Commission, the
agreements required to be filed with the
Commission shall be filed with the
Secretary of the Commission at Three
Lafayette Centre, 1155 21st Street, NW.,
Washington, DC 20581.
(3) A foreign clearing member or a
foreign trader shall notify the
Commission immediately if the written
agency agreement is terminated,
revoked, or is otherwise no longer in
effect. If the reporting market knows or
should know that the agreement has
expired, been terminated, or is no longer
in effect, the reporting market shall
notify the Secretary of the Commission
immediately. If the written agency
agreement expires, terminates, or is not
in effect, the reporting market, the
foreign clearing member and the foreign
trader shall be subject to the provisions
of paragraphs (i) introductory text and
(i)(1) of this section.
5. Add § 15.06 to read as follows:
§ 15.06

Delegations.

(a) The Commission hereby delegates,
until the Commission orders otherwise,
the authority to approve data processing
media, as referenced in § 15.00(d), for
data submissions to the Director of the
Division of Market Oversight, to be
exercised by such Director or by such
other employee or employees of such
Director as designated from time to time
by the Director. The Director may
submit to the Commission for its
consideration any matter which has
been delegated in this paragraph.
Nothing in this paragraph prohibits the
Commission, at its election, from
exercising the authority delegated in
this paragraph.
(b) [Reserved]
PART 16—REPORTS BY REPORTING
MARKETS
6. The authority citation for part 16 is
revised to read as follows:
Authority: 7 U.S.C. 2, 6a, 6c, 6g, 6i, 7, 7a
and 12a, as amended by Title XIII of the
Food, Conservation and Energy Act of 2008,

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Federal Register / Vol. 73, No. 240 / Friday, December 12, 2008 / Proposed Rules

Pub. L. No. 110–246, 122 Stat. 1624 (June 18,
2008), unless otherwise noted.

7. In § 16.01, revise paragraphs (e)(1)
and (e)(2) to read as follows:
§ 16.01 Trading volume, open contracts,
prices, and critical dates.

*

*
*
*
*
(e) Publication of recorded
information. (1) Reporting markets shall
make the information in paragraph (a) of
this section readily available to the
news media and the general public
without charge, in a format that readily
enables the consideration of such data,
no later than the business day following
the day to which the information
pertains. The information in paragraphs
(a)(4) through (a)(6) of this section shall
be made readily available in a format
that presents the information together.
(2) Reporting markets shall make the
information in paragraphs (b)(1) and
(b)(2) of this section readily available to
the news media and the general public,
and the information in paragraph (b)(3)
of this section readily available to the
general public, in a format that readily
enables the consideration of such data,
no later than the business day following
the day to which the information
pertains.
*
*
*
*
*
8. Section 16.02 is added to read as
follows:

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§ 16.02 Daily trade and supporting data
reports.

Reporting markets shall provide trade
and supporting data reports to the
Commission on a daily basis. Such
reports shall include transaction-level
trade data and related order information
for each transaction that is executed on
the reporting market. Reports shall also
include time and sales data, reference
files and other information as the
Commission or its designee may require.
All reports must be submitted at the
time, and in the manner and format, and
with the specific content specified by
the Commission or its designee. Upon
request, such information shall be
accompanied by data that identifies or
facilitates the identification of each
trader for each transaction or order
included in a submitted trade and
supporting data report if the reporting
market maintains such data.
9. In § 16.07, revise the heading and
introductory text; and add paragraph (c)
to read as follows:
§ 16.07 Delegation of authority to the
Director of the Division of Market Oversight.

The Commission hereby delegates,
until the Commission orders otherwise,
the authority set forth in paragraphs (a),
(b) and (c) of this section to the Director

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of the Division of Market Oversight, to
be exercised by such Director or by such
other employee or employees of such
Director as may be designated from time
to time by the Director. The Director of
the Division of Market Oversight may
submit to the Commission for its
consideration any matter which has
been delegated in this paragraph.
Nothing in this paragraph prohibits the
Commission, at its election, from
exercising the authority delegated in
this paragraph.
*
*
*
*
*
(c) Pursuant to § 16.02, the authority
to determine the specific content of any
daily trade and supporting data report,
request that such reports be
accompanied by data that identifies or
facilitates the identification of each
trader for each transaction or order
included in a submitted trade and
supporting data report, and the time for
the submission of and the manner and
format of such reports.
PART 17—REPORTS BY REPORTING
MARKETS, FUTURES COMMISSION
MERCHANTS, CLEARING MEMBERS,
AND FOREIGN BROKERS
10. The authority citation for part 17
is revised to read as follows:
Authority: 7 U.S.C. 2, 6a, 6c, 6d, 6f, 6g, 6i,
7, 7a and 12a, as amended by Title XIII of the
Food, Conservation and Energy Act of 2008,
Pub. L. No. 110–246, 122 Stat. 1624 (June 18,
2008), unless otherwise noted.

11. Revise the heading of part 17 as
set forth above.
12. In § 17.00, revise paragraph (a)
introductory text and paragraphs (a)(1),
(b)(1), and (f); and add and reserve
paragraph (c) to read as follows:
§ 17.00 Information to be furnished by
futures commission merchants, clearing
members and foreign brokers.

(a) Special accounts—reportable
futures and options positions, delivery
notices, and exchanges of futures. (1)
Each futures commission merchant,
clearing member and foreign broker
shall submit a report to the Commission
for each business day with respect to all
special accounts carried by the futures
commission merchant, clearing member
or foreign broker, except for accounts
carried on the books of another futures
commission merchant or clearing
member on a fully-disclosed basis.
Except as otherwise authorized by the
Commission or its designee, such report
shall be made in accordance with the
format and coding provisions set forth
in paragraph (g) of this section. The
report shall show each futures position
traded in reliance on the exemption in
section 2(h)(3) of the Act, separately for

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each reporting market and for each
future position traded in reliance on the
exemption in section 2(h)(3) of the Act,
and each put and call options position
separately for each reporting market,
expiration and strike price in each
special account as of the close of market
on the day covered by the report and,
in addition, the quantity of exchanges of
futures for commodities or for
derivatives positions and the number of
delivery notices issued for each such
account by the clearing organization of
a reporting market and the number
stopped by the account. The report shall
also show all positions in all contract
months and option expirations of that
same commodity on the same reporting
market for which the special account is
reportable.
*
*
*
*
*
(b) * * *
(1) Accounts of eligible entities—
Accounts of eligible entities as defined
in § 150.1 of this chapter that are traded
by an independent account controller
shall, together with other accounts
traded by the independent account
controller or in which the independent
controller has a financial interest, be
considered a single account.
*
*
*
*
*
(c) [Reserved]
*
*
*
*
*
(f) Omnibus accounts. If the total open
long positions or the total open short
positions for any future of a commodity
carried in an omnibus account is a
reportable position, the omnibus
account is in Special Account status and
shall be reported by the futures
commission merchant or foreign broker
carrying the account in accordance with
paragraph (a) of this section.
*
*
*
*
*
13. In § 17.03, revise the heading, the
introductory text, and paragraphs (a)
and (b) to read as follows:
§ 17.03 Delegation of authority to the
Director of the Division of Market Oversight.

The Commission hereby delegates,
until the Commission orders otherwise,
the authority set forth in the paragraphs
below to the Director of the Division of
Market Oversight to be exercised by
such Director or by such other employee
or employees of such Director as
designated from time to time by the
Director. The Director of the Division of
Market Oversight may submit to the
Commission for its consideration any
matter which has been delegated in this
paragraph. Nothing in this paragraph
prohibits the Commission, at its
election, from exercising the authority
delegated in this paragraph.

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(a) Pursuant to § 17.00(a) and (h), the
authority to determine whether futures
commission merchants, clearing
members and foreign brokers can report
the information required under
paragraphs (a) and (h) of § 17.00 on
series ’01 forms or using some other
format upon a determination that such
person is unable to report the
information using the format, coding
structure or electronic data transmission
procedures otherwise required.
(b) Pursuant to § 17.02, the authority
to instruct or approve the time at which
the information required under §§ 17.00
and 17.01 must be submitted by futures
commission merchants, clearing
members and foreign brokers provided
that such persons are unable to meet the
requirements set forth in §§ 17.01(g) and
17.02.
*
*
*
*
*
14. In § 17.04, revise the heading,
paragraph (a), and paragraph (b)(1)(ii) to
read as follows:
§ 17.04 Reporting omnibus accounts to
reporting firms.

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(a) Any futures commission merchant,
clearing member or foreign broker who
establishes an omnibus account with
another futures commission merchant,
clearing member or foreign broker shall
report to that futures commission
merchant, clearing member or foreign
broker the total open long positions and
the total open short positions in each
future of a commodity and, for
commodity options transactions, the
total open long put options, the total
open short put options, the total open
long call options, and the total open
short call options for each commodity
options expiration date and each strike
price in such account at the close of
trading each day. The information
required by this section shall be
reported in sufficient time to enable the
futures commission merchant, clearing
member or foreign broker with whom
the omnibus account is established to
comply with the regulations of this part
and the reporting requirements
established by the reporting markets.
(b) * * *
(1) * * *
(ii) The account is an omnibus
account of another futures commission
merchant, clearing member or foreign
broker; or
*
*
*
*
*
PART 18—REPORTS BY TRADERS
15. The authority citation for part 18
continues to read as follows:
Authority: 7 U.S.C. 2, 4, 5, 6a, 6c, 6f, 6g,
6i, 6k, 6m, 6n, 12a and 19, as amended by
Title XIII of the Food, Conservation and

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Energy Act of 2008, Pub. L. No. 110–246, 122
Stat. 1624 (June 18, 2008); 5 U.S.C. 552 and
552(b), unless otherwise noted.

16. Revise § 18.01 to read as follows:
§ 18.01 Interest in or control of several
accounts.

If any trader holds, has a financial
interest in or controls positions in more
than one account, whether carried with
the same or with different futures
commission merchants or foreign
brokers, all such positions and accounts
shall be considered as a single account
for the purpose of determining whether
such trader has a reportable position
and, unless instructed otherwise in the
special call to report under § 18.00 for
the purpose of reporting.
17. In § 18.04, revise paragraphs (a)(7)
and (b)(3)(i) to read as follows:
§ 18.04

Statement of reporting trader.

*

*
*
*
*
(a) * * *
(7) The names and locations of all
futures commission merchants, clearing
members, introducing brokers, and
foreign brokers through whom accounts
owned or controlled by the reporting
trader are carried or introduced at the
time of filing a Form 40, if such
accounts are carried through more than
one futures commission merchant,
clearing member or foreign broker or
carried through more than one office of
the same futures commission merchant,
clearing member or foreign broker, or
introduced by more than one
introducing broker clearing accounts
through the same futures commission
merchant, and the name of the reporting
trader’s account executive at each firm
or office of the firm.
(b) * * *
(3) * * *
(i) Commercial activity associated
with use of the option or futures market
(such as and including production,
merchandising or processing of a cash
commodity, asset or liability risk
management by depository institutions,
or security portfolio risk management).
*
*
*
*
*
18. In § 18.05, revise paragraphs (a)(2),
(a)(3), and (a)(4) to read as follows:
§ 18.05

Maintenance of books and records.

(a) * * *
(2) Over the counter or pursuant to
sections 2(d), 2(g) or 2(h)(1)–(2) of the
Act or part 35 of this chapter;
(3) On exempt commercial markets
operating pursuant to sections 2(h)(3)–
(5) of the Act;
(4) On exempt boards of trade
operating pursuant to section 5d of the
Act; and
*
*
*
*
*

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PART 19—REPORTS BY PERSONS
HOLDING BONA FIDE HEDGE
POSITIONS PURSUANT TO § 1.3(z) OF
THIS CHAPTER AND BY MERCHANTS
AND DEALERS IN COTTON
19. The authority citation for part 19
continues to read as follows:
Authority: 7 U.S.C. 6g(a), 6i, and 12a(5), as
amended by Title XIII of the Food,
Conservation and Energy Act of 2008, Pub. L.
No. 110–246, 122 Stat. 1624 (June 18, 2008),
unless otherwise noted.

20. In § 19.00, revise paragraph (a) to
read as follows:
§ 19.00

General provisions.

(a) Who must file series ’04 reports.
The following persons are required to
file series ’04 reports:
(1) All persons holding or controlling
futures and option positions that are
reportable pursuant to § 15.00(n)(2) of
this chapter and any part of which
constitute bona fide hedging positions
as defined in § 1.3(z) of this chapter;
(2) Merchants and dealers of cotton
holding or controlling positions for
futures delivery in cotton that are
reportable pursuant to § 15.00(n)(1)(i) of
this chapter, or
(3) All persons holding or controlling
positions for future delivery that are
reportable pursuant to § 15.00(n)(1) of
this chapter who have received a special
call for series ’04 reports from the
Commission or its designee. Filings in
response to a special call shall be made
within one business day of receipt of the
special call unless otherwise specified
in the call. For the purposes of this
paragraph, the Commission hereby
delegates to the Director of the Division
of Market Oversight, or to such other
person designated by the Director,
authority to issue calls for series ’04
reports.
*
*
*
*
*
21. In § 19.01, revise paragraph (b)
introductory text and paragraph (b)(1) to
read as follows:
§ 19.01 Reports on stocks and fixed price
purchases and sales pertaining to futures
positions in wheat, corn, oats, soybeans,
soybean oil, soybean meal or cotton.

*

*
*
*
*
(b) Time and place of filing reports—
Except for reports filed in response to
special calls made under § 19.00(a)(3),
each report shall be made monthly, as
of the close of business on the last
Friday of the month, and filed at the
appropriate Commission office specified
in paragraph (b)(1) or (2) of this section
not later than the second business day
following the date of the report in the
case of the 304 report and not later than
the third business day following the

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date of the report in the case of the 204
report. Reports may be transmitted by
facsimile or, alternatively, information
on the form may be reported to the
appropriate Commission office by
telephone and the report mailed to the
same office, not later than midnight of
its due date.
(1) CFTC Form 204 reports with
respect to transactions in wheat, corn,
oats, soybeans, soybean meal and
soybean oil should be sent to the
Commission’s office in Chicago, IL,
unless otherwise specifically authorized
by the Commission or its designee.
*
*
*
*
*
PART 21—SPECIAL CALLS
22. The authority citation for part 21
continues to read as follows:
Authority: 7 U.S.C. 1a, 2, 2a, 4, 6a, 6c, 6f,
6g, 6i, 6k, 6m, 6n, 7, 7a, 12a, 19 and 21, as
amended by Title XIII of the Food,
Conservation and Energy Act of 2008, Pub. L.
No. 110–246, 122 Stat. 1624 (June 18, 2008);
5 U.S.C. 552 and 552(b), unless otherwise
noted.

23. Revise § 21.01 to read as follows:
§ 21.01 Special calls for information on
controlled accounts from futures
commission merchants, clearing members
and introducing brokers.

Upon call by the Commission, each
futures commission merchant, clearing
member and introducing broker shall
file with the Commission the names and
addresses of all persons who, by power
of attorney or otherwise, exercise
trading control over any customer’s
account in commodity futures or
commodity options on any reporting
market.
24. In § 21.02, revise the heading,
introductory text, and paragraphs (f) and
(i) to read as follows:

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§ 21.02 Special calls for information on
open contracts in accounts carried or
introduced by futures commission
merchants, clearing members, members of
reporting markets, introducing brokers, and
foreign brokers.

Upon special call by the Commission
for information relating to futures or
option positions held or introduced on
the dates specified in the call, each
futures commission merchant, clearing
member, member of a reporting market,
introducing broker, or foreign broker,
and, in addition, for option information,
each reporting market, shall furnish to
the Commission the following
information concerning accounts of
traders owning or controlling such
futures or option positions, except for
accounts carried on a fully disclosed
basis by another futures commission

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merchant or clearing member, as may be
specified in the call:
*
*
*
*
*
(f) The number of open futures or
option positions introduced or carried
in each account, as specified in the call;
*
*
*
*
*
(i) As applicable, the following
identifying information:
(1) Whether a trader who holds
commodity futures or option positions
is classified as a commercial or as a
noncommercial trader for each
commodity futures or option contract;
(2) Whether the open commodity
futures or option contracts are classified
as speculative, spreading (straddling), or
hedging; and
(3) Whether any of the accounts in
question are omnibus accounts and, if
so, whether the originator of the
omnibus account is another futures
commission merchant, clearing member
or foreign broker.
*
*
*
*
*
25. Amend § 21.03 as follows:
A. Revise the heading and paragraphs
(a), (b), (c) and (d);
B. Revise paragraph (e) introductory
text and paragraphs (e)(1) introductory
text , (e)(1)(iv) and (e)(1)(v); and
C. Revise paragraphs (f), (g) and (h) to
read as follows:
§ 21.03 Selected special calls-duties of
foreign brokers, domestic and foreign
traders, futures commission merchants,
clearing members, introducing brokers, and
reporting markets.

(a) For purposes of this section, the
term ‘‘accounts of a futures commission
merchant, clearing member or foreign
broker’’ means all open contracts and
transactions in futures and options on
the records of the futures commission
merchant, clearing member or foreign
broker; the term ‘‘beneficial interest’’
means having or sharing in any rights,
obligations or financial interest in any
futures or options account; the term
‘‘customer’’ means any futures
commission merchant, clearing member,
introducing broker, foreign broker, or
trader for whom a futures commission
merchant, clearing member or reporting
market that is a registered entity under
section 1a(29)(E) of the Act makes or
causes to be made a futures or options
contract. Paragraphs (e), (g) and (h) of
this section shall not apply to any
futures commission merchant, clearing
member or customer whose books and
records are open at all times to
inspection in the United States by any
representative of the Commission.
(b) It shall be unlawful for a futures
commission merchant to open a futures
or options account or to effect
transactions in futures or options

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contracts for an existing account, or for
an introducing broker to introduce such
an account, for any customer for whom
the futures commission merchant or
introducing broker is required to
provide the explanation provided for in
§ 15.05(c) of this chapter, or for a
reporting market that is a registered
entity under section 1a(29)(E) of the Act,
to cause to open an account in a
contract traded in reliance on the
exemption in section 2(h)(3) of the Act
or to cause to be effected transactions in
a contract traded in reliance on the
exemption in section 2(h)(3) of the Act
for an existing account for any person
that is a foreign clearing member or
foreign trader, until the futures
commission merchant, introducing
broker, clearing member, or reporting
market has explained fully to the
customer, in any manner that such
persons deem appropriate, the
provisions of this section.
(c) Upon a determination by the
Commission that information
concerning accounts may be relevant
information in enabling the Commission
to determine whether the threat of a
market manipulation, corner, squeeze,
or other market disorder exists on any
reporting market, the Commission may
issue a call for information from a
futures commission merchant, clearing
member, introducing broker or customer
pursuant to the provisions of this
section.
(d) In the event the call is issued to
a foreign broker, foreign clearing
member or foreign trader, its agent,
designated pursuant to § 15.05 of this
chapter, shall, if directed, promptly
transmit calls made by the Commission
pursuant to this section by electronic
mail or a similarly expeditious means of
communication.
(e) The futures commission merchant,
clearing member, introducing broker, or
customer to whom the special call is
issued must provide to the Commission
the information specified below for the
commodity, reporting market and
delivery months or option expiration
dates named in the call. Such
information shall be filed at the place
and within the time specified by the
Commission.
(1) For each account of a futures
commission merchant, clearing member,
introducing broker, or foreign broker,
including those accounts in the name of
the futures commission merchant,
clearing member or foreign broker, on
the dates specified in the call issued
pursuant to this section, such persons
shall provide the Commission with the
following information:
*
*
*
*
*

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(iv) Whether the account is carried for
and in the name of another futures
commission merchant, clearing member,
introducing broker, or foreign broker;
and
(v) For the accounts which are not
carried for and in the name of another
futures commission merchant, clearing
member, introducing broker, or foreign
broker, the name and address of any
other person who controls the trading of
the account, and the name and address
of any person who has a ten percent or
more beneficial interest in the account.
*
*
*
*
*
(f) If the Commission has reason to
believe that any person has not
responded as required to a call made
pursuant to this section, the
Commission in writing may inform the
reporting market specified in the call
and that reporting market shall prohibit
the execution of, and no futures
commission merchant, clearing member,
introducing broker, or foreign broker
shall effect a transaction in connection
with trades on the reporting market and
in the months or expiration dates
specified in the call for or on behalf of
the futures commission merchant or
customer named in the call, unless such
trades offset existing open contracts of
such futures commission merchant or
customer.
(g) Any person named in a special call
that believes he or she is or may be
adversely affected or aggrieved by action
taken by the Commission under
paragraph (f) of this section shall have
the opportunity for a prompt hearing
after the Commission acts. That person
may immediately present in writing to
the Commission for its consideration
any comments or arguments concerning
the Commission’s action and may
present for Commission consideration
any documentary or other evidence that
person deems appropriate. Upon
request, the Commission may, in its
discretion, determine that an oral
hearing be conducted to permit the
further presentation of information and
views concerning any matters by any or
all such persons. The oral hearing may
be held before the Commission or any
person designated by the Commission,
which person shall cause all evidence to
be reduced to writing and forthwith
transmit the same and a recommended
decision to the Commission. The
Commission’s directive under paragraph
(f) of this section shall remain in effect
unless and until modified or withdrawn
by the Commission.
(h) If, during the course of or after the
Commission acts pursuant to paragraph
(f) of this section, the Commission
determines that it is appropriate to

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undertake a proceeding pursuant to
section 6(c) of the Act, the Commission
shall issue a complaint in accordance
with the requirements of section 6(c),
and, upon further determination by the
Commission that the conditions
described in paragraph (c) of this
section still exist, a hearing pursuant to
section 6(c) of the Act shall commence
no later than five business days after
service of the complaint. In the event
the person served with the complaint
under section 6(c) of the Act has, prior
to the commencement of the hearing
under section 6(c) of the Act, sought a
hearing pursuant to paragraph (g) of this
section and the Commission has
determined to accord him such a
hearing, the two hearings shall be
conducted simultaneously. Nothing in
this section shall preclude the
Commission from taking other
appropriate action under the Act or the
Commission’s regulations thereunder,
including action under section 6(c) of
the Act, regardless of whether the
conditions described in paragraph (c) of
this section still exist, and no ruling
issued in the course of a hearing
pursuant to paragraph (g) or this section
shall constitute an estoppel against the
Commission in any other action.
26. Revise § 21.04 to read as follows:
§ 21.04 Delegation of authority to the
Director of the Division of Market Oversight.

The Commission hereby delegates,
until the Commission orders otherwise,
the special call authority set forth in
§§ 21.01 and 21.02 the Director of the
Division of Market Oversight to be
exercised by such Director or by such
other employee or employees of such
Director as designated from time to time
by the Director. The Director of the
Division of Market Oversight may
submit to the Commission for its
consideration any matter which has
been delegated in this paragraph.
Nothing in this section shall be deemed
to prohibit the Commission, at its
election, from exercising the authority
delegated in this section to the Director.
PART 36—EXEMPT MARKETS
27. The authority citation for part 36
is revised to read as follows:
Authority: 7 U.S.C. 2, 2(h)(7), 6, 6c and
12a, as amended by Title XIII of the Food,
Conservation and Energy Act of 2008, Pub. L.
No. 110–246, 122 Stat. 1624 (June 18, 2008).

28–30. Section 36.3 is amended by
revising paragraphs (b) and (c), and
adding paragraph (d), to read as follows:
§ 36.3

*

Exempt commercial markets.

*
*
*
*
(b) Required information.

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75909

(1) All electronic trading facilities. A
facility operating in reliance on the
exemption in section 2(h)(3) of the Act,
initially and on an on-going basis, must:
(i) Provide the Commission with the
terms and conditions, as defined in part
40.1(i) of this chapter and product
descriptions for each agreement,
contract or transaction listed by the
facility in reliance on the exemption set
forth in section 2(h)(3) of the Act, as
well as trading conventions,
mechanisms and practices;
(ii) Provide the Commission with
information explaining how the facility
meets the definition of ‘‘trading facility’’
contained in section 1a(33) of the Act
and provide the Commission with
access to the electronic trading facility’s
trading protocols, in a format specified
by the Commission;
(iii) Demonstrate to the Commission
that the facility requires, and will
require, with respect to all current and
future agreements, contracts and
transactions, that each participant
agrees to comply with all applicable
laws; that the authorized participants
are ‘‘eligible commercial entities’’ as
defined in section 1a(11) of the Act; that
all agreements, contracts and
transactions are and will be entered into
solely on a principal-to-principal basis;
and that the facility has in place a
program to routinely monitor
participants’ compliance with these
requirements;
(iv) At the request of the Commission,
provide any other information that the
Commission, in its discretion, deems
relevant to its determination whether an
agreement, contract, or transaction
performs a significant price discovery
function; and
(v) File with the Commission
annually, no later than the end of each
calendar year, a completed copy of
CFTC Form 205—Exempt Commercial
Market Annual Certification. The
information submitted in Form 205
shall include:
(A) A statement indicating whether
the electronic trading facility continues
to operate under the exemption; and
(B) A certification that affirms the
accuracy of and/or updates the
information contained in the previous
Notification of Operation as an Exempt
Commercial Market.
(2) Electronic trading facilities trading
or executing agreements, contracts or
transactions other than significant price
discovery contracts. In addition to the
requirements of paragraph (b)(1) of this
section, a facility operating in reliance
on the exemption in section 2(h)(3) of
the Act, with respect to agreements,
contracts or transactions that have not
been determined to perform significant

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price discovery function, initially and
on an on-going basis, must:
(i) Identify to the Commission those
agreements, contracts and transactions
conducted on the electronic trading
facility with respect to which it intends,
in good faith, to rely on the exemption
in section 2(h)(3) of the Act, and which
averaged five trades per day or more
over the most recent calendar quarter;
and, with respect to such agreements,
contracts and transactions, either:
(A) Submit to the Commission, in a
form and manner acceptable to the
Commission, a report for each business
day, showing for each such agreement,
contract or transaction executed the
following information:
(1) The underlying commodity, the
delivery or price-basing location
specified in the agreement, contract or
transaction maturity date, whether it is
a financially settled or physically
delivered instrument, and the date of
execution, time of execution, price, and
quantity;
(2) Total daily volume and, if cleared,
open interest;
(3) For an option instrument, in
addition to the foregoing information,
the type of option (i.e., call or put) and
strike prices; and
(4) Such other information as the
Commission may determine.
Each such report shall be
electronically transmitted weekly,
within such time period as is acceptable
to the Commission after the end of the
week to which the data applies; or
(B) (1) Provide to the Commission, in
a form and manner acceptable to the
Commission, electronic access to those
transactions conducted on the electronic
trading facility in reliance on the
exemption in section 2(h)(3) of the Act,
and meeting the average five trades per
day or more threshold test of this
section, which would allow the
Commission to compile the information
described in paragraph (b)(2)(i)(A) of
this section and create a permanent
record thereof;
(2) Maintain a record of allegations or
complaints received by the electronic
trading facility concerning instances of
suspected fraud or manipulation in
trading activity conducted in reliance
on the exemption set forth in section
2(h)(3) of the Act. The record shall
contain the name of the complainant, if
provided, date of the complaint, market
instrument, substance of the allegations,
and name of the person at the electronic
trading facility who received the
complaint;
(3) Provide to the Commission, in the
form and manner prescribed by the
Commission, a copy of the record of
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paragraph (b)(2)(ii) of this section that
alleges, or relates to, facts that would
constitute a violation of the Act or
Commission regulations. Such copy
shall be provided to the Commission no
later than 30 calendar days after the
complaint is received. Provided,
however, that in the case of a complaint
alleging, or relating to, facts that would
constitute an ongoing fraud or market
manipulation under the Act or
Commission regulations, such copy
shall be provided to the Commission
within three business days after the
complaint is received; and
(4) Provide to the Commission on a
quarterly basis, within 15 calendar days
of the close of each quarter, a list of each
agreement, contract or transaction
executed on the electronic trading
facility in reliance on the exemption set
forth in section 2(h)(3) of the Act and
indicate for each such agreement,
contract or transaction the contract
terms and conditions, the contract’s
average daily trading volume, and the
most recent open interest figures.
(3) Electronic trading facilities trading
or executing significant price discovery
contracts. In addition to the
requirements of paragraph (b)(1) of this
section, if the Commission determines
that a facility operating in reliance on
the exemption in section 2(h)(3) of the
Act trades or executes an agreement,
contract or transaction that performs a
significant price discovery function, the
facility must, with respect to any
significant price discovery contract,
publish and provide to the Commission
the information required by § 16.01 of
this chapter.
(4) Delegation of authority. The
Commission hereby delegates, until the
Commission orders otherwise, the
authority to determine the form and
manner of submitting the required
information under paragraphs (b)(1)
through (3) of this section, to the
Director of the Division of Market
Oversight and such members of the
Commission’s staff as the Director may
designate. The Director may submit to
the Commission for its consideration
any matter that has been delegated by
this paragraph. Nothing in this
paragraph prohibits the Commission, at
its election, from exercising the
authority delegated in this paragraph.
(5) Special calls.
(i) All information required upon
special call of the Commission under
section 2(h)(5)(B)(iii) of the Act shall be
transmitted at the time and to the office
of the Commission as may be specified
in the call.
(ii) The Commission hereby delegates,
until the Commission orders otherwise,
the authority to make special calls as set

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forth in section 2(h)(5)(B)(iii) of the Act
to the Directors of the Division of
Market Oversight, the Division of
Clearing and Intermediary Oversight,
and the Division of Enforcement to be
exercised by each such Director or by
such other employee or employees as
the Director may designate. The
Directors may submit to the
Commission for its consideration any
matter that has been delegated in this
paragraph. Nothing in this paragraph
prohibits the Commission, at its
election, from exercising the authority
delegated in this paragraph.
(6) Subpoenas to foreign persons. A
foreign person whose access to an
electronic trading facility is limited or
denied at the direction of the
Commission based on the Commission’s
belief that the foreign person has failed
timely to comply with a subpoena as
provided under section 2(h)(5)(C)(ii) of
the Act shall have an opportunity for a
prompt hearing under the procedures
provided in § 21.03(b) and (h) of this
chapter.
(7) Prohibited representation. An
electronic trading facility relying upon
the exemption in section 2(h)(3) of the
Act, with respect to agreements,
contracts or transactions that are not
significant price discovery contracts,
shall not represent to any person that it
is registered with, designated,
recognized, licensed or approved by the
Commission.
(c) Significant price discovery
contracts.
(1) Criteria for significant price
discovery determination. The
Commission may determine, in its
discretion, that an electronic trading
facility operating a market in reliance on
the exemption in section 2(h)(3) of the
Act performs a significant price
discovery function for transactions in
the cash market for a commodity
underlying any agreement, contract or
transaction executed or traded on the
facility. In making such a determination,
the Commission shall consider, as
appropriate:
(i) Price linkage. The extent to which
the agreement, contract or transaction
uses or otherwise relies on a daily or
final settlement price, or other major
price parameter, of a contract or
contracts listed for trading on or subject
to the rules of a designated contract
market or a derivatives transaction
execution facility to value a position,
transfer or convert a position, cash or
financially settle a position, or close out
a position;
(ii) Arbitrage. The extent to which the
price for the agreement, contract or
transaction is sufficiently related to the
price of a contract or contracts listed for

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trading on or subject to the rules of a
designated contract market or
derivatives transaction execution
facility, or a significant price discovery
contract or contracts trading on or
subject to the rules of an electronic
trading facility, so as to permit market
participants to effectively arbitrage
between the markets by simultaneously
maintaining positions or executing
trades in the contracts on a frequent and
recurring basis;
(iii) Material price reference. The
extent to which, on a frequent and
recurring basis, bids, offers, or
transactions in a commodity are directly
based on, or are determined by
referencing, the prices generated by
agreements, contracts or transactions
being traded or executed on the
electronic trading facility;
(iv) Material liquidity. The extent to
which the volume of agreements,
contracts or transactions in the
commodity being traded on the
electronic trading facility is sufficient to
have a material effect on other
agreements, contracts or transactions
listed for trading on or subject to the
rules of a designated contract market, a
derivatives transaction execution
facility, or an electronic trading facility
operating in reliance on the exemption
in section 2(h)(3) of the Act;
(v) Other material factors [Reserved].
(2) Notification of possible significant
price discovery contract conditions. An
electronic trading facility operating in
reliance on section 2(h)(3) of the Act
shall promptly notify the Commission,
and such notification shall be
accompanied by supporting information
or data concerning any contract that:
(i) Averaged five trades per day or
more over the most recent calendar
quarter; and
(ii) (A) For which the exchange sells
its price information regarding the
contract to market participants or
industry publications; or
(B) Whose daily closing or settlement
prices on 95 percent or more of the days
in the most recent quarter were within
2.5 percent of the contemporaneously
determined closing, settlement or other
daily price of another agreement,
contract or transaction.
(3) Procedure for significant price
discovery determination. Before making
a final price discovery determination
under this paragraph, the Commission
shall publish notice in the Federal
Register that it intends to undertake a
determination with respect to whether a
particular agreement, contract or
transaction performs a significant price
discovery function and to receive
written data, views and arguments
relevant to its determination from the

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electronic trading facility and other
interested persons. Any such written
data, views and arguments shall be filed
with the Secretary of the Commission,
in the form and manner specified by the
Commission, within 30 calendar days of
publication of notice in the Federal
Register or within such other time
specified by the Commission. After
consideration of all relevant
information, the Commission shall issue
an order explaining its determination
whether the agreement, contract or
transaction executed or traded by the
electronic trading facility performs a
significant price discovery function
under the criteria specified in
paragraphs (c)(1)(i) through (v) of this
section.
(4) Compliance with Core Principles.
Following the issuance of an order by
the Commission that the electronic
trading facility executes or trades an
agreement, contract or transaction that
performs a significant price discovery
function, the electronic trading facility
must demonstrate, with respect to that
agreement, contract or transaction,
compliance with the Core Principles
under section 2(h)(7)(C) of the Act and
the applicable provisions of this part. If
the Commission’s order represents the
first time it has determined that the
electronic trading facility’s agreement,
contract or transaction performs a
significant price discovery function, the
facility must submit a written
demonstration of compliance with the
Core Principles within 90 calendar days
of the date of the Commission’s order.
For subsequent determinations by the
Commission that the electronic trading
facility has an additional agreement,
contract or transaction that performs a
significant price discovery function, the
facility must submit a written
demonstration of compliance with the
Core Principles within 15 calendar days
of the date of the Commission’s order.
Attention is directed to Appendix B of
this part for guidance on and acceptable
practices for complying with the Core
Principles. Submissions demonstrating
how the electronic trading facility
complies with the Core Principles with
respect to its significant price discovery
contract must be filed with the Secretary
of the Commission at its Washington,
DC headquarters. Submissions must
include the following:
(i) A written certification that the
significant price discovery contract(s)
complies with the Act and regulations
thereunder;
(ii) A copy of the electronic trading
facility’s rules (as defined in § 40.1 of
this chapter) and any technical manuals,
other guides or instructions for users of,
or participants in, the market, including

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minimum financial standards for
members or market participants.
Subsequent rule changes must be
certified by the electronic trading
facility pursuant to section 5c(c) of the
Act and § 40.6 of this chapter. The
electronic trading facility also may
request Commission approval of any
rule changes pursuant to section 5c(c) of
the Act and § 40.5 of this chapter;
(iii) A description of the trading
system, algorithm, security and access
limitation procedures with a timeline
for an order from input through
settlement, and a copy of any system
test procedures, tests conducted, test
results and contingency or disaster
recovery plans;
(iv) A copy of any documents
pertaining to or describing the
electronic trading system’s legal status
and governance structure, including
governance fitness information;
(v) An executed or executable copy of
any agreements or contracts entered into
or to be entered into by the electronic
trading facility, including partnership or
limited liability company, third-party
regulatory service, or member or user
agreements, that enable or empower the
electronic trading facility to comply
with a Core Principle;
(vi) A copy of any manual or other
document describing, with specificity,
the manner in which the trading facility
will conduct trade practice, market and
financial surveillance;
(vii) To the extent that any of the
items in paragraphs (c)(4)(ii) through
(vi) of this section raise issues that are
novel, or for which compliance with a
core principle is not self-evident, an
explanation of how that item satisfies
the applicable core principle or
principles. The electronic trading
facility must identify with particularity
information in the submission that will
be subject to a request for confidential
treatment pursuant to § 145.09 of this
chapter. The electronic trading facility
must follow the procedures specified in
§ 40.8 of this chapter with respect to any
information in its submission for which
confidential treatment is requested.
(5) Determination of compliance with
core principles. The Commission shall
take into consideration differences
between cleared and uncleared
significant price discovery contracts
when reviewing the implementation of
the Core Principles by an electronic
trading facility. The electronic facility
also has reasonable discretion in
accounting for differences between
cleared and uncleared significant price
discovery contracts when establishing
the manner in which it complies with
the Core Principles.

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(6) Information relating to compliance
with core principles. Upon request by
the Commission, an electronic trading
facility trading a significant price
discovery contract shall file with the
Commission a written demonstration,
containing such supporting data,
information and documents, in the form
and manner and within such time as the
Commission may specify, that the
electronic trading facility is in
compliance with one or more core
principles as specified in the request, or
that is otherwise requested by the
Commission to enable the Commission
to satisfy its obligations under the Act.
(7) Enforceability. An agreement,
contract or transaction entered into on
or pursuant to the rules of an electronic
trading facility trading or executing a
significant price discovery contract shall
not be void, voidable, subject to
rescission or otherwise invalidated or
rendered unenforceable as a result of:
(i) A violation by the electronic
trading facility of the provisions of
section 2(h) of the Act or this part; or
(ii) Any Commission proceeding to
alter or supplement a rule, term or
condition under section 8a(7) of the Act,
to declare an emergency under section
8a(9) of the Act, or any other proceeding
the effect of which is to alter,
supplement or require an electronic
trading facility to adopt a specific term
or condition, trading rule or procedure,
or to take or refrain from taking a
specific action.
(8) Procedures for vacating a
determination of a significant price
discovery function.
(i) By the electronic trading facility.
An electronic trading facility that
executes or trades an agreement,
contract or transaction that the
Commission has determined performs a
significant price discovery function
under paragraph (c)(3) of this section
may petition the Commission to vacate
that determination. The petition shall
demonstrate that the agreement,
contract or transaction no longer
performs a significant price discovery
function under the criteria specified in
paragraph (c)(1) of this section, and has
not done so for at least the prior 12
months. An electronic trading facility
shall not petition for a vacation of a
significant price discovery
determination more frequently than
once every 12 months.
(ii) By the Commission. The
Commission may, on its own initiative,
begin vacation proceedings if it believes
that an agreement, contract or
transaction has not performed a
significant price discovery function for
at least the prior 12 months.

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(iii) Procedure. Before making a final
determination whether an agreement,
contract or transaction has ceased to
perform a significant price discovery
function, the Commission shall publish
notice in the Federal Register that it
intends to undertake such a
determination and to receive written
data, views and arguments relevant to
its determination from the electronic
trading facility and other interested
persons. Written submissions shall be
filed with the Secretary of the
Commission in the form and manner
specified by the Commission, within 30
calendar days of publication of notice in
the Federal Register or within such
other time specified by the Commission.
After consideration of all relevant
information, the Commission shall issue
an order explaining its determination
whether the agreement, contract or
transaction has ceased to perform a
significant price discovery function and,
if so, vacating its prior order. If such an
order issues, and the Commission
subsequently determines, on its own
initiative or after notification by the
electronic trading facility, that the
agreement, contract or transaction that
was subject to the vacation order again
performs a significant price discovery
function, the electronic trading facility
must comply with the Core Principles
within 15 calendar days of the date of
the Commission’s order.
(iv) Automatic vacation of significant
price discovery determination.
Regardless of whether a proceeding to
vacate has been initiated, any significant
price discovery contract that has no
open interest and in which no trading
has occurred for a period of 12 complete
and consecutive calendar months shall,
without further proceedings, no longer
be considered to be a significant price
discovery contract.
(d) Commission review. The
Commission shall, at least annually,
evaluate as appropriate agreements,
contracts or transactions conducted on
an electronic trading facility in reliance
on the exemption provided in section
2(h)(3) of the Act to determine whether
they serve a significant price discovery
function as described in paragraph (c)(1)
of this section 31. Part 36 is amended by
adding a new Appendix A to read as
follows:
Appendix A to Part 36—Guidance on
Significant Price Discovery Contracts
1. Section 2(h)(7) of the CEA specifies four
factors that the Commission must consider,
as appropriate, in making a determination
that a contract is performing a significant
price discovery function. The four factors
prescribed by the statute are: Price Linkage;

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Arbitrage; Material Price Reference; and
Material Liquidity.
2. Not all listed factors must be present to
support a determination that a contract
performs a significant price discovery
function. Moreover, the statutory language
neither prioritizes the factors nor specifies
the degree to which a significant price
discovery contract must conform to the
various factors. Congress has indicated that it
intends that the Commission should not
make a determination that an agreement,
contract or transaction performs a significant
price discovery function on the basis of the
Price Linkage factor unless the agreement,
contract or transaction also has sufficient
volume to impact other regulated contracts or
to become an independent price reference or
benchmark that is regularly utilized by the
public. The Commission believes that the
Arbitrage and Material Price Reference
factors can be considered separately from
each other. That is, the Commission could
make a determination that a contract serves
a significant price discovery function based
on the presence of one of these factors and
the absence of the other. The presence of any
of these factors, however, would not
necessarily be sufficient to establish the
contract as a significant price discovery
contract. The fourth factor, Liquidity, would
be considered in conjunction with the
arbitrage and linkage factors as a significant
amount of liquidity presumably would be
necessary for a contract to perform a
significant price discovery function in
conjunction with these factors.
3. These factors do not lend themselves to
a mechanical checklist or formulaic analysis.
Accordingly, this guidance is intended to
illustrate which factors, or combinations of
factors, the Commission will look to when
determining that a contract is performing a
significant price discovery function, and
under what circumstances the presence of a
particular factor or factors would be
sufficient to support such a determination.
(A) MATERIAL LIQUIDITY—The extent to
which the volume of agreements, contracts or
transactions in the commodity being traded
on the electronic trading facility is sufficient
to have a material effect on other agreements,
contracts or transactions listed for trading on
or subject to the rules of a designated
contract market, a derivatives transaction
execution facility, or an electronic trading
facility operating in reliance on the
exemption in section 2(h)(3) of the Act.
(1) Liquidity is a broad concept that
captures the ability to transact immediately
with little or no price concession.
Traditionally, objective measures of trading
such as volume or open interest have been
used as measures of liquidity. So, for
example, a market in which trades occur
multiple times per minute at prices that
differ by only fractions of a cent normally
would be considered highly liquid, since
presumably a trader could quickly execute a
trade at a price that was approximately the
same as the price for other recently executed
trades. Other factors also will affect the
characterization of liquidity, such as whether
a large trade—e.g., 100 contracts versus 1
contract—could be executed without a
significant price concession. For example,

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having to wait a day to sell 1000 bushels of
corn may be considered an illiquid market
while waiting a day to sell a home may be
considered quite liquid. Thus, quantifying
the levels of immediacy and price concession
that would define material liquidity may
differ from one market or commodity to
another.
(2) The Commission believes that material
liquidity alternatively can be identified by
the impact liquidity exhibits through
observed prices. In markets where material
liquidity exists, a more or less continuous
stream of prices can be observed and the
prices should be similar. For example, if the
trading of a contract occurs on average five
times a day, there will be on average five
observed prices for the contract per day. If
the market is liquid in terms of traders
having to make little in the way of price
concessions to execute these trades, the
prices of this contract should be similar to
those observed for similar or related contracts
traded in liquid markets elsewhere. Thus, in
making determinations that contracts have
material liquidity, the Commission will look
to transaction prices, both in terms of how
often prices are observed and the extent to
which observed prices tend to correlate with
other contemporaneous prices.
(3) The Commission anticipates that
material liquidity will frequently be a
consideration in evaluating whether a
contract is a significant price discovery
contract; however, there may be
circumstances in which other factors so
dominate the conclusion that a contract is
serving a significant price discovery function
that a finding of material liquidity in the
contract would not be necessary.
Circumstances in which this might arise are
discussed with respect to the assessment of
other factors below.
(4) Finally, material liquidity itself would
not be sufficient to make a determination that
a contract is a significant price discovery
contract, but combined with other factors it
can serve as a guidepost indicating which
contracts are functioning as significant price
discovery contracts. As further discussed
below, material liquidity, as reflected
through the prices of linked or arbitraged
contracts, will be a primary consideration in
determining whether such contracts are
significant price discovery contracts.
(B) PRICE LINKAGE—The extent to which
the agreement, contract or transaction uses
or otherwise relies on a daily or final
settlement price, or other major price
parameter, of a contract or contracts listed
for trading on or subject to the rules of a
designated contract market or a derivatives
transaction execution facility to value a
position, transfer or convert a position, cash
or financially settle a position, or close out
a position.
(1) A price-linked contract is a contract
that relies on a contract traded on another
trading facility to settle, value or otherwise
offset the price-linked contract. The link may
involve a one-to-one linkage, in that the
value of the linked contract is based on a
single contract’s price, or it may involve
multiple contracts. An example of a multiple
contract linkage might be where the
settlement price is calculated as an index of

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prices obtained from a basket of contracts
traded on other exchanges.
(2) For a linked contract, the mere fact that
a contract is linked to another contract will
not be sufficient to support a determination
that a contract performs a significant price
discovery function. To assess whether such
a determination is warranted, the
Commission will examine the relationship
between transaction prices of the linked
contract and the prices of the referenced
contract(s). The Commission believes that
where material liquidity exists, prices for the
linked contract would be observed to be
substantially the same as or move
substantially in conjunction with the prices
of the referenced contract(s). Where such
price characteristics are observed on an
ongoing basis, the Commission would expect
to determine that the linked contract is a
significant price discovery contract.
(3) As an example, where the Commission
has observed price linkage, it will next
consider whether transactions were occurring
on a daily basis for the linked contract in
material volumes. (Conversely, where
volume has increased noticeably in a
particular contract, the Commission would
look for linkage) The ultimate level of
volume that would be considered material for
purposes of deeming a contract a significant
price discovery contract will likely differ
from one contract to another depending on
the characteristics of the underlying
commodity and the overall size of the
physical market in which it is traded. At a
minimum, however, the Commission will
consider a linked contract which has volume
equal to 5% of the volume of trading in the
contract to which it is linked to have
sufficient volume potentially to be deemed a
significant price discovery contract. In
combination with this volume level, the
Commission will also examine the
relationship between prices of the linked
contract and the contract to which it is linked
to determine whether a contract is serving a
significant price discovery function. As a
threshold, the Commission will consider a
2.5 percent price range for 95 percent of
contemporaneously determined closing,
settlement, or other daily prices over the
most recent quarter to be sufficiently close
for a linked contract potentially to be deemed
a significant price discovery contract. For
example, if, over the most recent quarter, it
was found that 95 percent of the closing,
settlement, or other daily prices of the
contract, which have been calculated using
transaction prices, were within 2.5 percent of
the contemporaneously determined closing,
settlement, or other daily prices of a contract
to which it was linked, the Commission
potentially would consider the contract to
perform a significant price discovery
function.
(4) If, in the example above, the
Commission determines that material volume
existed, it will examine the relationship
between the prices of the linked contracts
and the referenced contracts. If it finds that
the transaction prices of the linked contract
were consistently within a small percentage
of the referenced contract or index of
contracts that was being referenced, the
Commission will be likely to find the linked

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75913

contract to be a significant price discovery
contract. As a threshold, the Commission
will consider a 2.5 percent price range for 95
per cent of closing or settlement prices over
the most recent quarter to be sufficiently
close for a linked contract to potentially be
deemed a significant price discovery
contract. For example, if, over the most
recent quarter, it was found that on 95
percent or more of the days the closing or
settlement price of the contract, which has
been calculated using transaction prices, was
within 2.5 percent of the closing or
settlement price of a contract to which it was
linked, the Commission potentially will
consider the contract to perform a significant
price discovery function.
(C) ARBITRAGE CONTRACTS—The extent
to which the price for the agreement, contract
or transaction is sufficiently related to the
price of a contract or contracts listed for
trading on or subject to the rules of a
designated contract market or derivatives
transaction execution facility, or a significant
price discovery contract or contracts trading
on or subject to the rules of an electronic
trading facility, so as to permit market
participants to effectively arbitrage between
the markets by simultaneously maintaining
positions or executing trades in the contracts
on a frequent and recurring basis.
(1) Arbitrage contracts are those contracts
that can be combined with other contracts to
exploit expected economic relationships in
anticipation of a profit. In assessing whether
a contract can be incorporated into an
arbitrage strategy, the Commission will weigh
the terms and conditions of a contract in
comparison to contracts that potentially
could be used in an arbitrage strategy; will
consult with industry or other sources
regarding a contract’s viability in an arbitrage
strategy; and will rely on direct observation
confirming the use of a contract in arbitrage
strategies.
(2) As with linked contracts, the mere fact
that a contract could be employed in an
arbitrage strategy will not be sufficient to
make a determination that a contract is a
significant price discovery contract. In
addition, the level of liquidity will be
considered. To assess whether designation as
a significant price discovery contract is
warranted, the Commission will examine the
relationship between transaction prices of an
arbitrage contract and the prices of the
contract(s) to which it is related. The
Commission believes that where material
liquidity exists, prices for the arbitrage
contract would be observed to move
substantially in conjunction with the prices
of the related contract(s) to which it is
economically linked. Where such price
characteristics are observed on an ongoing
basis, it is likely that the linked contract
performs a significant price discovery
function.
(3) The Commission will apply the same
threshold liquidity and price relationship
standards for arbitrage contracts as it does for
linked contracts. That is, the Commission
will view the average of 5 trades per day or
more threshold as the level of activity that
would potentially meet the material volume
criterion. With respect to prices, the
Commission will consider an arbitrage

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contract potentially to be a significant price
discovery contract if, over the most recent
quarter, greater than 95 percent of the closing
or settlement prices of the contract, which
have been calculated using transaction
prices, fall within 2.5 percent of the closing
or settlement price of the contract or
contracts to which it could be arbitraged.
(D) MATERIAL PRICE REFERENCE—The
extent to which, on a frequent and recurring
basis, bids, offers or transactions in a
commodity are directly based on, or are
determined by referencing, the prices
generated by agreements, contracts or
transactions being traded or executed on the
electronic trading facility.
(1) The Commission will rely on one of two
sources of evidence—direct or indirect—to
determine that the price of a contract was
being used as a material price reference and,
therefore, serving a significant price
discovery function. The primary source of
direct evidence is that cash market bids,
offers or transactions are directly based on,
or quoted at a differential to, the prices
generated on the market on a frequent and
recurring basis. The Commission expects that
normally only contracts with material
liquidity will be referenced by the cash
market; however, the Commission notes that
it may be possible for a contract to have very
low liquidity and yet still be used as a price
reference. In such cases, the simple fact that
participants in the underlying cash market
broadly have elected to use the contract price
as a price reference would be a strong
indicator that the contract is a significant
price discovery contract.
(2) In evaluating a contract’s price
discovery role as a directly referenced price
source, the Commission will perform an
analysis to determine whether cash market
participants are quoting bid or offer prices or
entering into transactions at prices that are
set either explicitly or implicitly at a
differential to prices established for the
contract. Cash market prices are set explicitly
at a differential to the section 2(h)(3) contract
when, for instance, they are quoted in dollars
and cents above or below the reference
contract’s price. Cash market prices are set
implicitly at a differential to a section 2(h)(3)
contract when, for instance, they are arrived
at after adding to, or subtracting from the
section 2(h)(3) contract, but then quoted or
reported at a flat price. The Commission will
also consider whether cash market entities
are quoting cash prices based on a section
2(h)(3) contract on a frequent and recurring
basis.
(3) The second source of evidence is that
the price of the contract is being routinely
disseminated in widely distributed industry
publications—or offered by the ECM itself for
some form of remuneration—and consulted
on a frequent and recurring basis by industry
participants in pricing cash market
transactions. As with contract prices that are
directly incorporated into cash market prices,
the Commission assumes that industry
publications choose to publish prices
because of the value they transfer to industry
participants for the purpose of formulating
prices in the cash market.
(4) In applying this criterion, consideration
will be given to whether prices established

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by a section 2(h)(3) contract are reported in
a widely distributed industry publication. In
making this determination, the Commission
will consider the reputation of the
publication within the industry, how
frequently it is published, and whether the
information contained in the publication is
routinely consulted by industry participants
in pricing cash market transactions.
(5) Under a Material Price Reference
analysis, the Commission expects that
material liquidity in the contract likely will
be the primary motivation for a publisher to
publish particular prices. In other words, the
fact that the price of a contract is being used
as a reference by industry participants
suggests, prima facie, that the contract
performs a significant price discovery
function. But the Commission recognizes that
trading levels could nonetheless be low for
the contract while still serving a significant
price discovery function and that evidence of
routine publication and consultation by
industry participants may be sufficient to
establish the contract as a significant price
discovery contract. On the other hand, while
cash market participants may regularly refer
to published prices of a particular contract
when establishing cash market prices, it may
be the case that the contract itself is a niche
market for a specialized grade of the
commodity or for delivery at a minor
geographic location. In such cases, the
Commission will look to such measures as
trading volume, open interest, and the
significance of the underlying cash market to
make a determination that a contract is
functioning as a significant price discovery
contract. If an examination of trading in the
contract were to reveal that true price
discovery was occurring in other more
broadly defined contracts and that this
contract was itself simply reflective of those
broader contracts, it is less likely the
Commission will deem the contract a
significant price discovery contract.
(6) Because price referencing normally
occurs out of the view of the electronic
trading facility, the Commission may have
difficulty ascertaining the extent to which
cash market participants actually reference or
consult a contract’s price when transacting.
The Commission expects, however, that as a
contract begins to be relied upon to set a
reference price, market participants will be
increasingly willing to purchase price
information. To the extent, then, that an
electronic trading facility begins to sell its
price information regarding a contract to
market participants or industry publications,
the contract will meet a threshold standard
to indicate that the contract potentially is a
significant price discovery contract.

32. Part 36 is amended by adding a
new Appendix B to read as follows:
Appendix B to Part 36—Guidance On,
and Acceptable Practices in,
Compliance With Core Principles
1. This Appendix provides guidance on
complying with the core principles under
section 2(h)(7)(C) of the Act and this part,
both initially and on an ongoing basis. The
guidance is provided in paragraph (a)
following each core principle and can be

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used to demonstrate to the Commission core
principle compliance under § 36.3(c)(4). The
guidance for each core principle is
illustrative only of the types of matters an
electronic trading facility may address, as
applicable, and is not intended to be used as
a mandatory checklist. Addressing the issues
and questions set forth in this guidance will
help the Commission in its consideration of
whether the electronic trading facility is in
compliance with the core principles. A
submission pursuant to § 36.3(c)(4) should
include an explanation or other form of
documentation demonstrating that the
electronic trading facility complies with the
core principles.
2. Acceptable practices meeting selected
requirements of the core principles are set
forth in paragraph (b) following each core
principle. Electronic trading facilities on
which significant price discovery contracts
are traded or executed that follow the
specific practices outlined under paragraph
(b) for any core principle in this appendix
will meet the selected requirements of the
applicable core principle. Paragraph (b) is for
illustrative purposes only, and does not state
the exclusive means for satisfying a core
principle.
CORE PRINCIPLE I OF SECTION
2(h)(7)(C)—CONTRACTS NOT READILY
SUSCEPTIBLE TO MANIPULATION. The
electronic trading facility shall list only
significant price discovery contracts that are
not readily susceptible to manipulation.
(a) Guidance. Upon determination by the
Commission that a contract listed for trading
on an electronic trading facility is a
significant price discovery contract, the
electronic trading facility must self-certify
the terms and conditions of the significant
price discovery contract under § 36.3(c)(4)
within 90 calendar days of the date of the
Commission’s order, if the contract is the
electronic trading facility’s first significant
price discovery contract; or 15 days from the
date of the Commission’s order if the contract
is not the electronic trading facility’s first
significant price discovery contract. Once the
Commission determines that a contract
performs a significant price discovery
function, subsequent rule changes must be
self-certified to the Commission by the
electronic trading facility pursuant to § 40.6
of this chapter.
(b) Acceptable practices. Guideline No. 1,
17 CFR part 40, Appendix A may be used as
guidance in meeting this core principle for
significant price discovery contracts.
CORE PRINCIPLE II OF SECTION
2(h)(7)(C)—MONITORING OF TRADING.
The electronic trading facility shall monitor
trading in significant price discovery
contracts to prevent market manipulation,
price distortion, and disruptions of the
delivery of cash-settlement process through
market surveillance, compliance and
disciplinary practices and procedures,
including methods for conducting real-time
monitoring of trading and comprehensive
and accurate trade reconstructions.
(a) Guidance. An electronic trading facility
on which significant price discovery
contracts are traded or executed should, with
respect to those contracts, demonstrate a
capacity to prevent market manipulation and

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have trading and participation rules to detect
and deter abuses. The facility should seek to
prevent market manipulation and other
trading abuses through a dedicated regulatory
department or by delegation of that function
to an appropriate third party. An electronic
trading facility also should have the authority
to intervene as necessary to maintain an
orderly market.
(b) Acceptable practices.
(1) An acceptable trade monitoring
program. An acceptable trade monitoring
program should facilitate, on both a routine
and non-routine basis, arrangements and
resources to detect and deter abuses through
direct surveillance of each significant price
discovery contract. Direct surveillance of
each significant price discovery contract will
generally involve the collection of various
market data, including information on
participants’ market activity. Those data
should be evaluated on an ongoing basis in
order to make an appropriate regulatory
response to potential market disruptions or
abusive practices. For contracts with a
substantial number of participants, an
effective surveillance program should
employ a much more comprehensive large
trader reporting system.
(2) Authority to collect information and
documents. The electronic trading facility
should have the authority to collect
information and documents in order to
reconstruct trading for appropriate market
analysis. Appropriate market analysis should
enable the electronic trading facility to assess
whether each significant price discovery
contract is responding to the forces of supply
and demand. Appropriate data usually
include various fundamental data about the
underlying commodity, its supply, its
demand, and its movement through market
channels. Especially important are data
related to the size and ownership of
deliverable supplies—the existing supply
and the future or potential supply—and to
the pricing of the deliverable commodity
relative to the futures price and relative to
similar, but non-deliverable, kinds of the
commodity. For cash-settled contracts, it is
more appropriate to pay attention to the
availability and pricing of the commodity
making up the index to which the contract
will be settled, as well as monitoring the
continued suitability of the methodology for
deriving the index.
(3) Ability to assess participants’ market
activity and power. To assess participants’
activity and potential power in a market,
electronic trading facilities, with respect to
significant price discovery contracts, at a
minimum should have routine access to the
positions and trading of its participants and,
if applicable, should provide for such access
through its agreements with its third-party
provider of clearing services.
CORE PRINCIPLE III OF SECTION
2(h)(7)(C)—ABILITY TO OBTAIN
INFORMATION. The electronic trading
facility shall establish and enforce rules that
allow the electronic trading facility to obtain
any necessary information to perform any of
the functions described in this subparagraph,
provide the information to the Commission
upon request, and have the capacity to carry
out such international information-sharing
agreements as the Commission may require.

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(a) Guidance. An electronic trading facility
on which significant price discovery
contracts are traded or executed should, with
respect to those contracts, have the ability
and authority to collect information and
documents on both a routine and non-routine
basis, including the examination of books
and records kept by participants. This
includes having arrangements and resources
for recording full data entry and trade details
and safely storing audit trail data. An
electronic trading facility should have
systems sufficient to enable it to use the
information for purposes of assisting in the
prevention of participant and market abuses
through reconstruction of trading and
providing evidence of any violations of the
electronic trading facility’s rules.
(b) Acceptable practices.
(1) The goal of an audit trail is to detect
and deter market abuse. An effective contract
audit trail should capture and retain
sufficient trade-related information to permit
electronic trading facility staff to detect
trading abuses and to reconstruct all
transactions within a reasonable period of
time. An audit trail should include
specialized electronic surveillance programs
that identify potentially abusive trades and
trade patterns. An acceptable audit trail must
be able to track an order from time of entry
into the trading system through its fill. The
electronic trading facility must create and
maintain an electronic transaction history
database that contains information with
respect to transactions executed on each
significant price discovery contract.
(2) An acceptable audit trail should
include the following: original source
documents, transaction history, electronic
analysis capability, and safe storage
capability. An acceptable audit trail system
would satisfy the following practices.
(i) Original source documents. Original
source documents include unalterable,
sequentially identified records on which
trade execution information is originally
recorded. For each order (whether filled,
unfilled or cancelled, each of which should
be retained or electronically captured), such
records reflect the terms of the order, an
account identifier that relates back to the
account(s) owner(s), and the time of order
entry.
(ii) Transaction history. A transaction
history consists of an electronic history of
each transaction, including:
(A) All the data that are input into the
trade entry or matching system for the
transaction to match and clear;
(B) Timing and sequencing data adequate
to reconstruct trading; and
(C) The identification of each account to
which fills are allocated.
(iii) Electronic analysis capability. An
electronic analysis capability that permits
sorting and presenting data included in the
transaction history so as to reconstruct
trading and to identify possible trading
violations with respect to market abuse.
(iv) Safe storage capability. Safe storage
capability provides for a method of storing
the data included in the transaction history
in a manner that protects the data from
unauthorized alteration, as well as from
accidental erasure or other loss. Data should

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be retained in the form and manner specified
by the Commission or, where no acceptable
manner of retention is specified, in
accordance with the recordkeeping standards
of Commission regulation 1.31.
(3) Arrangements and resources for the
disclosure of the obtained information and
documents to the Commission upon request.
To satisfy section 2(h)(7)(C)(III)(bb), the
electronic trading facility should maintain
records of all information and documents
related to each significant price discovery
contract in a form and manner acceptable to
the Commission. Where no acceptable
manner of maintenance is specified, records
should be maintained in accordance with the
recordkeeping standards of Commission
regulation 1.31.
(4) The capacity to carry out appropriate
information-sharing agreements as the
Commission may require. Appropriate
information-sharing agreements could be
established with other markets or the
Commission can act in conjunction with the
electronic trading facility to carry out such
information sharing.
CORE PRINCIPLE IV OF SECTION
2(h)(7)(C)—POSITION LIMITATIONS OR
ACCOUNTABILITY. The electronic trading
facility shall adopt, where necessary and
appropriate, position limitations or position
accountability for speculators in significant
price discovery contracts, taking into account
positions in other agreements, contracts and
transactions that are treated by a derivatives
clearing organization, whether registered or
not registered, as fungible with such
significant price discovery contracts to
reduce the potential threat of market
manipulation or congestion, especially
during trading in the delivery month.
(a) Guidance. [Reserved]
(b) Acceptable practices.
(1) Introduction. In order to diminish
potential problems arising from excessively
large speculative positions, and to facilitate
orderly liquidation of expiring contracts, an
electronic trading facility relying on the
exemption in section 2(h)(3) should adopt
rules that set position limits or accountability
levels on traders’ cleared positions in
significant price discovery contracts. These
position limit rules specifically may exempt
bona fide hedging; permit other exemptions;
or set limits differently by market, delivery
month or time period. For the purpose of
evaluating a significant price discovery
contract’s speculative-limit program for
cleared positions, the Commission will
consider the specified position limits or
accountability levels, aggregation policies,
types of exemptions allowed, methods for
monitoring compliance with the specified
limits or levels, and procedures for dealing
with violations.
(2) Accounting for cleared and uncleared
trades.
(i) Speculative-limit levels typically should
be set in terms of a trader’s combined
position involving cleared trades in a
significant price discovery contract, plus
positions in agreements, contracts and
transactions that are treated by a derivatives
clearing organization, whether registered or
not registered, as fungible with such
significant price discovery contract. (This

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circumstance typically exists where an
exempt commercial market lists a particular
contract for trading but also allows for
positions in that contract to be cleared
together with positions established through
bilateral or off-exchange transactions, such as
block trades, in the same contract.
Essentially, both the on-facility and offfacility transactions are considered fungible
with each other.) In this connection, the
electronic trading facility should make
arrangements to ensure that it is able to
ascertain accurate position data for the
market.
(ii) For significant price discovery
contracts that may be traded on either a
cleared or an uncleared basis, the electronic
trading facility should apply position limits
to cleared transactions in the contract. For
those transactions in the contract that are not
cleared, the electronic trading facility should
establish accountability procedures for
monitoring traders’ overall positions and take
that information into account when
ascertaining whether an individual trader’s
overall position poses a threat to the market.
(3) Limitations on spot-month positions.
Spot-month limits should be adopted for
significant price discovery contracts to
minimize the susceptibility of the market to
manipulation or price distortions, including
squeezes and corners or other abusive trading
practices.
(i) Contracts economically equivalent to an
existing contract. An electronic trading
facility that lists a significant price discovery
contract that is economically-equivalent to
another significant price discovery contract
or to a contract traded on a designated
contract market or derivatives transaction
execution facility should set the spot-month
limit for its significant price discovery
contract at the same level as that specified for
the economically-equivalent contract.
(ii) Contracts that are not economically
equivalent to an existing contract. There may
not be an economically-equivalent significant
price discovery contract or economically
equivalent contract traded on a designated
contract market or derivatives transaction
execution facility. In this case, the spotmonth speculative position limit should be
established in the following manner. The
spot-month limit for a physical delivery
market should be based upon an analysis of
deliverable supplies and the history of spotmonth liquidations. The spot-month limit for
a physical-delivery market is appropriately
set at no more than 25 percent of the
estimated deliverable supply. In the case
where a significant price discovery contract
has a cash settlement provision, the spotmonth limit should be set at a level that
minimizes the potential for price
manipulation or distortion in the significant
price discovery contract itself; in related
futures and options contracts traded on a
designated contract market or derivatives
transaction execution facility; in other
significant price discovery contracts; in other
fungible agreements, contracts and
transactions; and in the underlying
commodity.
(4) Position accountability for non-spotmonth positions. The electronic trading
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price discovery contracts non-spot individual
month position accountability levels and allmonths-combined position accountability
levels. An electronic trading facility may
establish non-spot individual month position
limits and all-months-combined position
limits for its significant price discovery
contracts in lieu of position accountability
levels.
(i) Definition. Position accountability
provisions provide a means for an exchange
to monitor traders’ positions that may
threaten orderly trading. An acceptable
accountability provision sets target
accountability threshold levels that may be
exceeded, but once a trader breaches such
accountability levels, the electronic trading
facility should initiate an investigation to
determine whether the individual’s trading
activity is justified and is not intended to
manipulate the market. As part of its
investigation, the electronic trading facility
should inquire about the trader’s rationale for
holding a position in excess of the
accountability levels. An acceptable
accountability provision should provide the
electronic trading facility with the authority
to order the trader not to further increase
positions. If a trader fails to comply with a
request for information about positions held,
provides information that does not
sufficiently justify the position, or continues
to increase contract positions after a request
not to do so is issued by the facility, then the
accountability provision should enable the
electronic trading facility to require the
trader to reduce positions.
(ii) Contracts economically equivalent to
an existing contract. When an electronic
trading facility lists a significant price
discovery contract that is economically
equivalent to another significant price
discovery contract or to a contract traded on
a designated contract market or derivatives
transaction execution facility, the electronic
trading facility should set the non-spot
individual month position accountability
level and all-months-combined position
accountability level for its significant price
discovery contract at the same levels, or
lower, as those specified for the
economically-equivalent contract.
(iii) Contracts that are not economically
equivalent to an existing contract. For
significant price discovery contracts that are
not economically equivalent to an existing
contract, the trading facility shall adopt nonspot individual month and all-monthscombined position accountability levels that
are no greater than 10 percent of the average
combined futures and delta-adjusted option
month-end open interest for the most recent
calendar year. For electronic trading facilities
that choose to adopt non-spot individual
month and all-months-combined position
limits in lieu of position accountability levels
for their significant price discovery contracts,
the limits should be set in the same manner
as the accountability levels.
(iv) Contracts economically equivalent to
an existing contract with position limits. If a
significant price discovery contract is
economically equivalent to another
significant price discovery contract or to a
contract traded on a designated contract
market or derivatives transaction execution

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facility that has adopted non-spot or allmonths-combined position limits, the
electronic trading facility should set non-spot
month position limits and all-monthscombined position limits for its significant
price discovery contract at the same (or
lower) levels as those specified for the
economically-equivalent contract.
(5) Provisions for uncleared contracts. If an
electronic trading facility offers a significant
price discovery contract that is exclusively
uncleared, or one that may be either cleared
by a derivatives clearing organization or
uncleared at the discretion of the trader, the
trading facility should establish for the
uncleared trades a spot-month volume
accountability level equal to the spot-month
speculative position limit. In this regard, the
electronic trading facility should keep track
of each trader’s uncleared transactions in a
significant price discovery contract on a net
basis. (For the purpose of netting uncleared
transactions, long and short uncleared
transactions are only offset if they are
conducted with the same counterparty.) If a
particular trader’s net volume of uncleared
transactions exceeds the specified spotmonth volume accountability level, the
electronic trading facility should conduct an
investigation to determine whether the
trader’s trading activity is warranted and is
not intended to manipulate the market.
(6) Account aggregation. An electronic
trading facility should have aggregation rules
for significant price discovery contracts that
apply to accounts under common control,
those with common ownership, i.e., where
there is a ten percent or greater financial
interest, and those traded according to an
express or implied agreement. Such
aggregation rules should apply to cleared
transactions with respect to applicable
speculative position limits, as well as to
uncleared transactions with respect to
applicable spot-month volume accountability
levels. An electronic trading facility will be
permitted to set more stringent aggregation
policies. An electronic trading facility may
grant exemptions to its price discovery
contracts’ position limits for bona fide
hedging (as defined in § 1.3(z) of this chapter)
and may grant exemptions for reduced risk
positions, such as spreads, straddles and
arbitrage positions.
(7) Implementation deadlines. An
electronic trading facility with a significant
price discovery contract is required to
comply with Core Principle IV as set forth in
section 2(h)(7)C) of the Act within 90
calendar days of the date of the
Commission’s order determining that the
contract performs a significant price
discovery function if such contract is the
electronic trading facility’s first significant
price discovery contract, or within 15 days of
the date of the Commission’s order if such
contract is not the electronic trading facility’s
first significant price discovery contract. For
the purpose of applying limits on speculative
positions in newly-determined significant
price discovery contracts, the Commission
will permit a grace period following issuance
of its order for traders with cleared positions
in such contracts to become compliant with
applicable position limit rules. Traders who
hold cleared positions on a net basis in the

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electronic trading facility’s significant price
discovery contract must be at or below the
specified position limit level no later than 90
calendar days from the date of the electronic
trading facility’s implementation of position
limit rules, unless a hedge exemption is
granted by the electronic trading facility.
This grace period applies to both initial and
subsequent price discovery contracts.
Electronic trading facilities should notify
traders of this requirement promptly upon
implementation of such rules.
(8) Enforcement provisions. The electronic
trading facility should have appropriate
procedures in place to monitor its position
limit and accountability provisions and to
address violations.
(i) An electronic trading facility with
significant price discovery contracts should
use an automated means of detecting traders’
violations of speculative limits or
exemptions, particularly if the significant
price discovery contracts have large numbers
of traders. An electronic trading facility
should monitor the continuing
appropriateness of approved exemptions by
periodically reviewing each trader’s basis for
exemption or requiring a reapplication. An
automated system also should be used to
determine whether a trader has exceeded
applicable non-spot individual month
position accountability levels, all-monthscombined position accountability levels, and
spot-month volume accountability levels.
(ii) An electronic trading facility should
establish a program for effective enforcement
of position limits for significant price
discovery contracts. Electronic trading
facilities should use a large trader reporting
system to monitor and enforce daily
compliance with position limit rules. The
Commission notes that an electronic trading
facility may allow traders to periodically
apply to the electronic trading facility for an
exemption and, if appropriate, be granted a
position level higher than the applicable
speculative limit. The electronic trading
facility should establish a program to monitor
approved exemptions from the limits. The
position levels granted under such hedge
exemptions generally should be based upon
the trader’s commercial activity in related
markets including, but not limited to,
positions held in related futures and options
contracts listed for trading on designated
contract markets, fungible agreements,
contracts and transactions, as determined by
either a registered or unregistered derivatives
clearing organization. Electronic trading
facilities may allow a brief grace period
where a qualifying trader may exceed
speculative limits or an existing exemption
level pending the submission and approval of
appropriate justification. An electronic
trading facility should consider whether it
wants to restrict exemptions during the last
several days of trading in a delivery month.
Acceptable procedures for obtaining and
granting exemptions include a requirement
that the electronic trading facility approve a
specific maximum higher level.
(iii) An acceptable speculative limit
program should have specific policies for
taking regulatory action once a violation of a
position limit or exemption is detected. The
electronic trading facility policies should
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(9) Violation of Commission rules. A
violation of position limits for significant
price discovery contracts that have been selfcertified by an electronic trading facility also
a violation of section 4a(e) of the Act.
CORE PRINCIPLE V OF SECTION
2(h)(7)(C)—EMERGENCY AUTHORITY—The
electronic trading facility shall adopt rules to
provide for the exercise of emergency
authority, in consultation or cooperation with
the Commission, where necessary and
appropriate, including the authority to
liquidate open positions in significant price
discovery contracts and to suspend or curtail
trading in a significant price discovery
contract.
(a) Guidance. An electronic trading facility
on which significant price discovery
contracts are traded should have clear
procedures and guidelines for decisionmaking regarding emergency intervention in
the market, including procedures and
guidelines to avoid conflicts of interest while
carrying out such decision-making. An
electronic trading facility on which
significant price discovery contracts are
executed or traded should also have the
authority to intervene as necessary to
maintain markets with fair and orderly
trading as well as procedures for carrying out
the intervention. Procedures and guidelines
should include notifying the Commission of
the exercise of the electronic trading facility’s
regulatory emergency authority, explaining
how conflicts of interest are minimized, and
documenting the electronic trading facility’s
decision-making process and the reasons for
using its emergency action authority.
Information on steps taken under such
procedures should be included in a
submission of a certified rule and any related
submissions for rule approval pursuant to
part 40 of this chapter, when carried out
pursuant to an electronic trading facility’s
emergency authority. To address perceived
market threats, the electronic trading facility
on which significant price discovery
contracts are executed or traded should,
among other things, be able to impose
position limits in the delivery month, impose
or modify price limits, modify circuit
breakers, call for additional margin either
from market participants or clearing members
(for contracts that are cleared through a
clearinghouse), order the liquidation or
transfer of open positions, order the fixing of
a settlement price, order a reduction in
positions, extend or shorten the expiration
date or the trading hours, suspend or curtail
trading on the electronic trading facility,
order the transfer of contracts and the margin
for such contracts from one market
participant to another, or alter the delivery
terms or conditions or, if applicable, should
provide for such actions through its
agreements with its third-party provider of
clearing services.
(b) Acceptable practices. [Reserved]
CORE PRINCIPLE VI OF SECTION
2(h)(7)(C)—DAILY PUBLICATION OF
TRADING INFORMATION. The electronic
trading facility shall make public daily
information on price, trading volume, and
other trading data to the extent appropriate
for significant price discovery contracts.
(a) Guidance. An electronic trading facility,
with respect to significant price discovery

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contracts, should provide to the public
information regarding settlement prices,
price range, volume, open interest, and other
related market information for all applicable
contracts as determined by the Commission
on a fair, equitable and timely basis.
Provision of information for any applicable
contract can be through such means as
provision of the information to a financial
information service or by timely placement of
the information on the electronic trading
facility’s public Web site.
(b) Acceptable practices. Compliance with
§ 16.01 of this chapter, which is mandatory,
is an acceptable practice and satisfies the
requirements of under Core Principle VI.
CORE PRINCIPLE VII OF SECTION
2(h)(7)(C)—COMPLIANCE WITH RULES. The
electronic trading facility shall monitor and
enforce compliance with the rules of the
electronic trading facility, including the
terms and conditions of any contracts to be
traded and any limitations on access to the
electronic trading facility.
(a) Guidance.
(1) An electronic trading facility on which
significant price discovery contracts are
executed or traded should have appropriate
arrangements and resources for effective
trade practice surveillance programs, with
the authority to collect information and
documents on both a routine and non-routine
basis, including the examination of books
and records kept by its market participants.
The arrangements and resources should
facilitate the direct supervision of the market
and the analysis of data collected. Trade
practice surveillance programs may be
carried out by the electronic trading facility
itself or through delegation or contracting-out
to a third party. If the electronic trading
facility on which significant price discovery
contracts are executed or traded delegates or
contracts-out the trade practice surveillance
responsibility to a third party, such third
party should have the capacity and authority
to carry out such programs, and the
electronic trading facility should retain
appropriate supervisory authority over the
third party.
(2) An electronic trading facility on which
significant price discovery contracts are
executed or traded should have
arrangements, resources and authority for
effective rule enforcement. The Commission
believes that this should include the
authority and ability to discipline and limit
or suspend the activities of a market
participant as well as the authority and
ability to terminate the activities of a market
participant pursuant to clear and fair
standards. The electronic trading facility can
satisfy this criterion for market participants
by expelling or denying such person’s future
access upon a determination that such a
person has violated the electronic trading
facility’s rules.
(b) Acceptable practices. An acceptable
trade practice surveillance program generally
would include:
(1) Maintenance of data reflecting the
details of each transaction executed on the
electronic trading facility;
(2) Electronic analysis of this data
routinely to detect potential trading
violations;

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(3) Appropriate and thorough investigative
analysis of these and other potential trading
violations brought to the electronic trading
facility’s attention; and
(4) Prompt and effective disciplinary action
for any violation that is found to have been
committed. The Commission believes that
the latter element should include the
authority and ability to discipline and limit
or suspend the activities of a market
participant pursuant to clear and fair
standards that are available to market
participants. See, e.g., 17 CFR part 8.
CORE PRINCIPLE VIII OF SECTION
2(h)(7)(C)—CONFLICTS OF INTEREST. The
electronic trading facility on which
significant price discovery contracts are
executed or traded shall establish and
enforce rules to minimize conflicts of interest
in the decision-making process of the
electronic trading facility and establish a
process for resolving such conflicts of
interest.
(a) Guidance.
(1) The means to address conflicts of
interest in the decision-making of an
electronic trading facility on which
significant price discovery contracts are
executed or traded should include methods
to ascertain the presence of conflicts of
interest and to make decisions in the event
of such a conflict. In addition, the
Commission believes that the electronic
trading facility on which significant price
discovery contracts are executed or traded
should provide for appropriate limitations on
the use or disclosure of material non-public
information gained through the performance
of official duties by board members,
committee members and electronic trading
facility employees or gained through an
ownership interest in the electronic trading
facility or its parent organization(s).
(2) All electronic trading facilities on
which significant price discovery contracts
are traded bear special responsibility to
regulate effectively, impartially, and with
due consideration of the public interest, as
provided in section 3 of the Act. Under Core
Principle VIII, they are also required to
minimize conflicts of interest in their
decision-making processes. To comply with
this core principle, electronic trading
facilities on which significant price discovery
contracts are traded should be particularly
vigilant for such conflicts between and
among any of their self-regulatory
responsibilities, their commercial interests,
and the several interests of their
management, members, owners, market
participants, other industry participants and
other constituencies.
(b) Acceptable practices. [Reserved]
CORE PRINCIPLE IX OF SECTION
2(h)(7)(C)—ANTITRUST CONSIDERATIONS.
Unless necessary or appropriate to achieve
the purposes of this Act, the electronic
trading facility, with respect to any
significant price discovery contracts, shall
endeavor to avoid adopting any rules or
taking any actions that result in any
unreasonable restraints of trade or imposing
any material anticompetitive burden on
trading on the electronic trading facility.
(a) Guidance. An electronic trading facility,
with respect to a significant price discovery

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contract, may at any time request that the
Commission consider under the provisions of
section 15(b) of the Act any of the electronic
trading facility’s rules, which may be trading
protocols or policies, operational rules, or
terms or conditions of any significant price
discovery contract. The Commission intends
to apply section 15(b) of the Act to its
consideration of issues under this core
principle in a manner consistent with that
previously applied to contract markets.
(b) Acceptable practices. [Reserved]

PART 40—PROVISIONS COMMON TO
REGISTERED ENTITIES
33. The authority citation for part 40
is revised to read as follows:
Authority: 7 U.S.C. 1a, 2, 5, 6, 6c, 7, 7a,
8 and 12a, as amended by Title XIII of the
Food, Conservation and Energy Act of 2008,
Pub. L. No. 110–246, 122 Stat. 1624 (June 18,
2008).

34. Revise the heading of part 40 as
set forth above.
35. Amend § 40.1 as follows:
A. Remove the term ‘‘registered
entity’’ and add in its place the term
‘‘contract market, derivatives
transaction execution facility or
derivatives clearing organization’’ in
paragraphs (b)(2), (b)(3), and (f)(2); and
B. Remove the term ‘‘contract market,
derivatives transaction execution
facility or derivatives clearing
organization’’ and add in its place the
term ‘‘registered entity’’ in paragraph
(h).
36. Amend § 40.2 as follows:
A. Remove the term ‘‘registered
entity’’ and add in its place ‘‘contract
market, derivatives transaction
execution facility on which significant
price discovery contracts are traded or
executed’’ in paragraph (a);
B. Remove the term ‘‘registered
entity’’ and add in its place ‘‘contract
market, derivatives transaction
execution facility or derivatives clearing
organization’’ in paragraphs (a)(1) and
(a)(3)(iv); and
C. Revise paragraph (b) to read as
follows:
§ 40.2 Listing and accepting products for
trading or clearing by certification.

*

*
*
*
*
(b) A registered entity shall provide,
if requested by Commission staff,
additional evidence, information or data
relating to whether any contract meets,
initially or on a continuing basis, any of
the requirements of the Act or
Commission regulations or policies
thereunder which may be beneficial to
the Commission in conducting a due
diligence assessment of the product and
the entity’s compliance with these
requirements.
*
*
*
*
*

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37. In § 40.3, remove the term
‘‘registered entity’’ and add in its place
the term ‘‘designated contract market or
registered derivatives transaction
execution facility’’ in paragraphs (a)(1),
(c)(1), (c)(2), and (e)(2).
38. In § 40.4, remove the term
‘‘registered entity’’ and add in its place
the term ‘‘designated contract market’’
in paragraph (b)(9)(ii).
39. In § 40.6, revise paragraphs (a)(2),
(c)(3)(ii)(G), and (c)(3)(ii)(H) to read as
follows:
§ 40.6

Self-certification of rules.

(a) * * *
(2) The registered entity has filed its
submission electronically in a format
specified by the Secretary of the
Commission with the Secretary of the
Commission at submissions@cftc.gov,
the relevant branch chief at the regional
office having local jurisdiction over the
registered entity, and, for filings
submitted by a designated contract
market, registered derivatives
transaction execution facility, or
electronic trading facility on which
significant price discovery contracts are
traded or executed, the Division of
Market Oversight at
DMOSubmissions@cftc.gov, and the
Commission has received the
submission at its headquarters by the
open of business on the business day
preceding implementation of the rule;
provided, however, rules or rule
amendments implemented under
procedures of the governing board to
respond to an emergency as defined in
§ 40.1, shall, if practicable, be filed with
the Commission prior to the
implementation or, if not practicable, be
filed with the Commission at the earliest
possible time after implementation, but
in no event more than twenty-four hours
after implementation; and
*
*
*
*
*
(c) * * *
(3) * * *
(ii) * * *
(G) Option contract terms. For
registered entities that are in
compliance with the daily reporting
requirements of § 16.01 of this chapter,
changes to option contract rules relating
to the strike price listing procedures,
strike price intervals, and the listing of
strike prices on a discretionary basis.
(H) Trading months. For registered
entities that are in compliance with the
daily reporting requirements of § 16.01
of this chapter, the initial listing of
trading months which are within the
currently established cycle of trading
months.
40. In § 40.7, remove the term
‘‘designated contract market, registered
derivatives transaction execution

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facility or registered derivatives clearing
organization’’ and add in its place the
term ‘‘registered entity’’ in paragraph (b)
introductory text.
41. In § 40.8, revise paragraph (a),
redesignate paragraph (b) as paragraph
(c), and add new paragraph (b) to read
as follows:
§ 40.8

Availability of public information.

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(a) The following sections of all
applications to become a designated
contract market, derivatives execution
transaction facility or designated
clearing organization will be public:
transmittal letter, proposed rules, the
applicant’s regulatory compliance chart,
documents establishing the applicant’s
legal status, documents setting forth the
applicant’s governance structure, and
any other part of the application not
covered by a request for confidential
treatment.
(b) The following submissions
required by § 36.3(c)(4) by an electronic
trading facility on which significant
price discovery contracts are traded or
executed will be public: rulebook, the
facility’s regulatory compliance chart,
documents establishing the facility’s
legal status, documents setting forth the

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facility’s governance structure, and any
other parts of the submissions not
covered by a request for confidential
treatment.
*
*
*
*
*
42. Revise Appendix D to part 40 to
read as follows:
Appendix D to Part 40—Submission
Cover Sheet and Instructions
A properly completed submission cover
sheet must accompany all rule submissions
submitted electronically by a registered
entity to the Secretary of the Commodity
Futures Trading Commission, at
submissions@cftc.gov in a format specified by
the Secretary of the Commission. Each
submission should include the following:
1. Identifier Code (optional)—If applicable,
the exchange or clearing organization
Identifier Code at the top of the cover sheet.
Such codes are commonly generated by the
exchanges or clearing organizations to
provide an identifier that is unique to each
filing (e.g., NYMEX Submission 03–116).
2. Date—The date of the filing.
3. Organization—The name of the
organization filing the submission (e.g.,
CBOT).
4. Filing as a—Check the appropriate box
for a designated contract market (DCM),
derivatives clearing organization (DCO),
derivatives transaction execution facility

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(DTEF), or electronic trading facility with a
significant price discovery contract (ECM–
SPDC).
5. Type of Filing—Indicate whether the
filing is a rule amendment or new product
and the applicable category under that
heading.
6. Rule Numbers—For rule filings only,
identify rule number(s) being adopted or
modified in the case of rule amendment
filings.
7. Description—For rule or rule
amendment filings only, enter a brief
description of the new rule or rule
amendment. This narrative should describe
the substance of the submission with enough
specificity to characterize all essential
aspects of the filing.
8. Other Requirements—Comply with all
filing requirements for the underlying
proposed rule or rule amendment. The filing
of the submission cover sheet does not
obviate the responsibility to comply with any
applicable filing requirement (e.g., rules
submitted for Commission approval under
§ 40.5 must be accompanied by an
explanation of the purpose and effect of the
proposed rule along with a description of any
substantive opposing views).
A sample of the required submission cover
sheet follows.
BILLING CODE 6351–01–P

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Federal Register / Vol. 73, No. 240 / Friday, December 12, 2008 / Proposed Rules
Issued in Washington, DC, on December 2,
2008, by the Commission.
David Stawick,
Secretary of the Commission.
[FR Doc. E8–28867 Filed 12–11–08; 8:45 am]

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