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Federal Register / Vol. 75, No. 137 / Monday, July 19, 2010 / Proposed Rules
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2009–1136 and Airspace Docket No. 09–
ANM–26) and be submitted in triplicate
to the Docket Management System (see
ADDRESSES section for address and
phone number). You may also submit
comments through the Internet at http://
www.regulations.gov.
Commenters wishing the FAA to
acknowledge receipt of their comments
on this action must submit with those
comments a self-addressed stamped
postcard on which the following
statement is made: ‘‘Comments to FAA
Docket No. FAA–2009–1136 and
Airspace Docket No. 09–ANM–26’’. The
postcard will be date/time stamped and
returned to the commenter.
All communications received on or
before the specified closing date for
comments will be considered before
taking action on the proposed rule. The
proposal contained in this action may
be changed in light of comments
received. All comments submitted will
be available for examination in the
public docket both before and after the
closing date for comments. A report
summarizing each substantive public
contact with FAA personnel concerned
with this rulemaking will be filed in the
docket.
Availability of NPRMs
An electronic copy of this document
may be downloaded through the
Internet at http://www.regulations.gov.
Recently published rulemaking
documents can also be accessed through
the FAA’s web page at http://
www.faa.gov/airports_airtraffic/
air_traffic/publications/
airspace_amendments/.
You may review the public docket
containing the proposal, any comments
received, and any final disposition in
person in the Dockets Office (see the
ADDRESSES section for the address and
phone number) between 9 a.m. and 5
p.m., Monday through Friday, except
Federal holidays. An informal docket
may also be examined during normal
business hours at the Northwest
Mountain Regional Office of the Federal
Aviation Administration, Air Traffic
Organization, Western Service Center,
Operations Support Group, 1601 Lind
Avenue, SW., Renton, WA 98057.
Persons interested in being placed on
a mailing list for future NPRM’s should
contact the FAA’s Office of Rulemaking,
(202) 267–9677, for a copy of Advisory
Circular No. 11–2A, Notice of Proposed
Rulemaking Distribution System, which
describes the application procedure.
The Proposal
The FAA is proposing an amendment
to Title 14 Code of Federal Regulations
(14 CFR) Part 71 by establishing Class E
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surface airspace within a 4.1-mile radius
of Deer Park Airport to accommodate
existing RNAV (GPS) SIAPs at the
airport. This action also would remove
the Non-Directional Radio Beacon
(NDB) from the legal description of the
existing Class E airspace area extending
upward from 700′ above the surface, as
the NDB soon will be decommissioned.
This action would enhance the safety
and management of aircraft operations
at the airport.
Class E airspace designations are
published in paragraph 6002 and 6005,
respectively, of FAA Order 7400.9T,
signed August 27, 2009, and effective
September 15, 2009, which is
incorporated by reference in 14 CFR
71.1. The Class E airspace designation
listed in this document will be
published subsequently in this Order.
The FAA has determined that this
proposed regulation only involves an
established body of technical
regulations for which frequent and
routine amendments are necessary to
keep them operationally current.
Therefore, this proposed regulation; (1)
Is not a ‘‘significant regulatory action’’
under Executive Order 12866; (2) is not
a ‘‘significant rule’’ under DOT
Regulatory Policies and Procedures (44
FR 11034; February 26, 1979); and (3)
does not warrant preparation of a
regulatory evaluation as the anticipated
impact is so minimal. Since this is a
routine matter that will only affect air
traffic procedures and air navigation, it
is certified that this proposed rule,
when promulgated, would not have a
significant economic impact on a
substantial number of small entities
under the criteria of the Regulatory
Flexibility Act.
The FAA’s authority to issue rules
regarding aviation safety is found in
Title 49 of the U.S. Code. Subtitle 1,
Section 106, describes the authority for
the FAA Administrator. Subtitle VII,
Aviation Programs, describes in more
detail the scope of the agency’s
authority. This rulemaking is
promulgated under the authority
described in Subtitle VII, Part A,
Subpart I, Section 40103. Under that
section, the FAA is charged with
prescribing regulations to assign the use
of the airspace necessary to ensure the
safety of aircraft and the efficient use of
airspace. This regulation is within the
scope of that authority as it establishes
additional controlled airspace at Deer
Park Airport, Deer Park, WA.
List of Subjects in 14 CFR Part 71
Airspace, Incorporation by reference,
Navigation (air).
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The Proposed Amendment
Accordingly, pursuant to the
authority delegated to me, the Federal
Aviation Administration proposes to
amend 14 CFR Part 71 as follows:
PART 71—DESIGNATION OF CLASS A,
B, C, D AND E AIRSPACE AREAS; AIR
TRAFFIC SERVICE ROUTES; AND
REPORTING POINTS
1. The authority citation for 14 CFR
Part 71 continues to read as follows:
Authority: 49 U.S.C. 106(g), 40103, 40113,
40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959–
1963 Comp., p. 389.
§ 71.1
[Amended]
2. The incorporation by reference in
14 CFR 71.1 of the FAA Order 7400.9T,
Airspace Designations and Reporting
Points, signed August 27, 2009, and
effective September 15, 2009 is
amended as follows:
Paragraph 6002 Class E airspace
Designated as Surface Areas.
*
*
*
*
*
ANM WA E2 Deer Park, WA [New]
Deer Park Airport, WA
(Lat. 47°58′01″ N., long. 117°25′43″ W.)
Within a 4.1-mile radius of Deer Park
Airport. This Class E airspace area is effective
during the specific dates and times
established in advance by a Notice to
Airmen. The effective date and time will
thereafter be continuously published in the
Airport/Facility Directory.
Paragraph 6005 Class E airspace areas
extending upward from 700 feet or more
above the surface of the earth.
*
*
*
*
*
ANM WA E5 Deer Park, WA [Modified]
Deer Park Airport, WA
(Lat. 47°58′01″ N., long. 117°25′43″ W.)
That airspace extending upward from 700
feet above the surface within a 7-mile radius
of the Deer Park Airport, excluding the
Spokane, WA, Class E airspace area.
Issued in Seattle, Washington, on July 1,
2010.
John Warner,
Manager, Operations Support Group, Western
Service Center.
[FR Doc. 2010–17516 Filed 7–16–10; 8:45 am]
BILLING CODE 4910–13–P
COMMODITY FUTURES TRADING
COMMISSION
17 CFR Part 16
RIN 3038–AC63
Account Ownership and Control
Report
Commodity Futures Trading
Commission.
AGENCY:
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Federal Register / Vol. 75, No. 137 / Monday, July 19, 2010 / Proposed Rules
Notice of proposed rulemaking
(‘‘Notice’’).
ACTION:
The Commodity Futures
Trading Commission (‘‘CFTC’’ or
‘‘Commission’’) hereby proposes to
collect certain ownership, control, and
related information for all trading
accounts active on U.S. futures
exchanges and other reporting entities.
The information collected will enhance
market transparency, increase the
Commission’s trade practice and market
surveillance capabilities, leverage
existing surveillance systems and data,
and facilitate the Commission’s
enforcement and research programs.
Upon adoption of a final rule, the
Commission will codify its
requirements in Commission Regulation
16.03. The Commission welcomes
public comments on its proposal.
DATES: Comments must be received on
or before September 17, 2010. The
Commission or Commission staff will
hold a public meeting during the
comment period in order to discuss the
proposed rulemaking.
ADDRESSES: Comments should be sent to
David Stawick, Secretary, Commodity
Futures Trading Commission, Three
Lafayette Centre, 1155 21st Street, NW.,
Washington, DC 20581. Comments may
be submitted via e-mail at
OCR@cftc.gov. ‘‘Account Ownership and
Control Report’’ must be in the subject
field of responses submitted via e-mail,
and clearly indicated on written
submissions. Comments may also be
submitted by connecting to the Federal
eRulemaking Portal at http://
www.regulations.gov and following
comment submission instructions. All
comments must be in English.
FOR FURTHER INFORMATION CONTACT:
Sebastian Pujol Schott, Associate
Deputy Director, Market Compliance,
202–418–5641, or Cody J. Alvarez,
Attorney Advisor, 202–418–5404,
Division of Market Oversight,
Commodity Futures Trading
Commission, Three Lafayette Centre,
1155 21st Street, NW., Washington, DC
20581.
SUPPLEMENTARY INFORMATION:
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SUMMARY:
I. Background
The Commission proposes to collect
ownership and control information via
an account ‘‘Ownership and Control
Report’’ (‘‘OCR’’) submitted weekly by all
U.S. futures exchanges and other
reporting entities (collectively,
‘‘reporting entities’’).1 This Notice
1 ‘‘Reporting entities’’ are defined broadly to
include any registered entity required to provide
the Commission with trade data on a regular basis,
where such data is used for the Commission’s trade
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specifies the proposed content of the
OCR, as well as its form and manner. In
addition, it summarizes public
comments received in response to a
previously published Advanced Notice
of Proposed Rulemaking (‘‘ANPR’’) in
which the Commission explained its
need and intended uses for ownership
and control information.
A. Advanced Notice of Proposed
Rulemaking
On July 2, 2009, the Commission
published for public comment an ANPR
where it proposed to collect certain
ownership, control, and related
information for all trading accounts
active on U.S. futures exchanges. The
Commission stated its intention to
collect this information via an OCR
submitted periodically by DCMs and
other reporting entities.2 The ANPR was
not a formal rule proposal; however, it
did provide a detailed explanation of
the Commission’s need and intended
uses for ownership and control
information. The ANPR explained that
the OCR would be designed to enhance
market transparency, leverage the
Commission’s existing surveillance
systems, and foster synergies between
its market surveillance, trade practice,
enforcement, and economic research
programs. In addition, it addressed key
technical points, including: (1) The data
that the Commission planned to collect
through OCRs; (2) the frequency with
which OCRs were to be submitted; and
(3) the form and manner in which OCRs
should be provided. Finally, the ANPR
gave examples of the Commission’s
intended uses for ownership and control
information, and described existing
Commission surveillance systems that
would benefit from OCRs.
practice or market surveillance programs. At
present, reporting entities would include
designated contract markets (‘‘DCMs’’), derivatives
transaction execution facilities (‘‘DTEFs’’), and
exempt commercial markets with significant price
discovery contracts (‘‘ECM SPDCs’’). In addition,
should the Commission adopt the proposed rule, it
would also collect ownership and control
information from foreign boards of trade (‘‘FBOTs’’)
operating in the U.S. pursuant to staff direct access
no-action letters if such letters are conditioned on
the regular reporting of trade data to the
Commission. The Commission notes that much of
the data required in the proposed OCR is already
maintained by one or more registered entities to
comply with existing regulatory requirements. The
OCR will necessitate each reporting entity to collate
and correlate these and other data points into a
single record for trading accounts active on its
trading facility, and to transmit such record to the
Commission for regulatory purposes.
2 74 FR 31642 (July 2, 2009). The ANPR noted
that ‘‘most reporting entities will be designated
contract markets, but they could be any registered
entity that provides trade data to the Commission
on a regular basis.’’ Footnote 1, above, emphasizes
that reporting entities are not limited to DCMs.
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The Commission invited all interested
parties to submit general comments on
the OCR within a 45-day comment
window.3 In addition, it posed eight
specific questions addressing what
additional information, if any, should be
included in the OCR; the root sources of
ownership and control information; the
flow of data from those sources through
reporting entities and on to the
Commission; the form and manner of
OCR transmission; the costs and
burdens that the OCR might impose on
reporting entities and their root data
sources; and related matters. The
Commission stated that comments
received in response to the ANPR would
help it ‘‘formulate an effective and
practical rule,’’ and that comments
would be ‘‘used in developing a
proposed rule at a later date.’’ 4 The
Commission received a total of 12
comment letters from 16 interested
parties.
All comment letters were reviewed
carefully by Commission staff. They
expressed a range of opinions, both in
support and opposition to the OCR.
Many comment letters understood the
utility of gathering ownership and
control information for at least some
trading accounts, but questioned
specific elements of the Commission’s
approach as outlined in the ANPR. The
comments received and the
Commission’s responses are
summarized in Section III below. Briefly
stated, however, the Commission
continues to believe that ownership and
control information is fundamental to
the effective regulation of 21st-century
futures markets. While it has made some
modifications in response to comments
received, and also added several new
data points, the Commission is now
formally proposing the OCR largely as
described in the ANPR.5 The
Commission welcomes all public
comments.
II. Ownership and Control Information
as a Regulatory Tool
A. Commission’s Need for the OCR
The Commission’s need for
ownership and control information
reflects fundamental changes in the
technology, products, and platforms of
3 Comments were due on or before August 17,
2009.
4 74 FR 31642, at 31646 and 31643.
5 For example, the proposed OCR does not require
the last four digits of account owners’ and
controllers’ social security numbers or taxpayer
identification numbers, as was contemplated in the
ANPR. In their place, however, it would collect
account owners’ and controllers’ dates of birth, as
well as their National Futures Association (‘‘NFA’’)
identification numbers, if any. The proposed OCR’s
complete data requirements are described in
Section IV(A).
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Federal Register / Vol. 75, No. 137 / Monday, July 19, 2010 / Proposed Rules
U.S. futures trading. DCMs, in
particular, have undergone a decadelong transition from geographicallydefined trading pits to electronic
platforms with global reach. Between
2000 and 2009, electronic trading grew
from approximately 9 percent to
approximately 81 percent of volume on
all U.S. DCMs. Over the same time
period, the number of actively-traded
futures and options contracts listed on
U.S. exchanges increased more than
seven fold, from approximately 266
contracts in 2000 to approximately
1,866 contracts in 2009.6 Most
importantly, total DCM futures and
options trading volume rose from
approximately 594.5 million contracts
in 2000 to approximately 2.78 billion in
2009, an increase of over 368%.7
Volume growth and changes in
trading technology have coincided with
equally important developments in the
business of futures trading. One
development of significant regulatory
consequence is the growing economic
integration between DCM contracts and
their equivalents traded on ECMs,
FBOTs, or other DCMs. Such linkages
present both new trading opportunities
and new regulatory challenges for the
Commission and exchanges. In
particular, both must be vigilant that
trading in one market is not used to
distort another, or to facilitate abusive
trading practices across markets. The
Commission’s role with respect to such
linked contracts is especially vital, as it
is best equipped to collect regulatory
information from competing exchanges
and conduct surveillance of linked
contracts across markets.
A second development of regulatory
consequence is the increased dispersion
and opacity of market participants as
U.S. exchange floors are replaced by a
broader, global customer base. Whereas
the Commission once monitored trading
via on-site surveillance of open-outcry
pits, today surveillance is primarily
electronic and data-driven.
Paradoxically, while electronic trading
has conferred important informational
advantages, including improved audit
trails, the concomitant increases in
trading volumes, products offered, and
trader dispersion and anonymity have
created equally important regulatory
challenges. Foremost among these is
scale. Effective surveillance of millions
of daily records—for example, an
average of approximately 2.9 million
6 Based on fiscal years 2000 and 2009, as reported
in the Commission’s FY 2009 Performance and
Accountability Report, p.14.
7 In addition, futures and options trading volume
reached a peak of approximately 3.37 billion
contracts traded in 2008, an increase of over 466%
compared to the year 2000.
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trades per day in December 2009—
requires automated systems capable of
intelligently searching for patterns and
anomalies buried deep within the data.
Crucially, it also requires
comprehensive data streams with
sufficient reference points to uncover
relationships where none appear to exist
and to analyze information based on
desired criteria. The proposed OCR
helps both the Commission and selfregulatory organizations accomplish
these tasks by adding account control,
account ownership, and common
control or ownership as new reference
points for trade practice and market
surveillance programs.
Taken together, these and other
changes have transformed regulation
and self-regulation in the futures
industry. The Commission has worked
diligently to keep pace in every respect.
Its efforts have included the assertion of
jurisdiction where appropriate, and the
acquisition of regulatory data—such as
the proposed OCR—from all necessary
sources. In March 2009, for example, the
Commission adopted final rules with
respect to significant price discovery
contracts (‘‘SPDCs’’) traded on ECMs,
which, in some cases, have grown from
nascent trading facilities to large
electronic trading platforms listing
contacts that rival DCM contracts and
contracts that serve a significant price
discovery function.8 The final rules
address concerns that trading in SPDCs,
if insufficiently regulated, could
adversely impact the contracts to which
they are linked or the parties that refer
to SPDCs for the pricing of transactions.
The final rules also describe, in
guidance, how the Commission expects
to apply the statutory criteria for
determining whether an ECM contract
serves a significant price discovery
function.9 Once such a determination is
made, SPDCs become subject to nine
core principle requirements, including
the provision of regulatory data to the
Commission. As of June 28, 2010, eight
ECM contracts have been recognized as
SPDCs.10 In another example,
Commission staff has twice amended its
direct access no-action letter for an
FBOT offering DCM-linked contract(s),
ultimately requiring additional
regulatory data, including large trader
reports and trade execution and audit
8 Final rules were adopted on March 23, 2009 and
became effective April 22, 2009. See 74 FR 12178.
9 The criteria established by Section 2(h)(7) of the
Act include price linkage and arbitrage
relationships with other contracts, material price
reference, and material liquidity.
10 See for example 74 FR 37988 (July 30, 2009)
(wherein the ICE Henry Financial LD1 Fixed Price
contract became the first contract found by the
Commission to perform a significant price
discovery function).
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trail data with respect to the linked
contract(s).11
The Commission has also worked
diligently to modernize its automated
surveillance systems and to upgrade the
data sources available for those systems.
In many cases, the Commission already
receives the information it requires for
effective regulation, including large
trader reports for market surveillance
and exchange trade registers for trade
practice surveillance.12 The proposed
OCR is intended to integrate these
existing resources, and leverage them in
dynamic new ways. As explained
below, it would improve the Division of
Market Oversight’s (‘‘DMO’’) detection
and deterrence capabilities with respect
to specific trade practice violations and
market abuses. It would also help bridge
the gap between individual transactions
reported to the Commission on
exchange trade registers and aggregate
positions reported to it in large trader
data.
The OCR would allow the
Commission’s Division of Enforcement
(‘‘DOE’’) and its Office of Chief
Economist (‘‘OCE’’) to better and more
efficiently utilize regulatory data in
support of their own missions. In
addition, it would increase market
11 See Letter from Richard A. Shilts, Director,
Division of Market Oversight, to Dee Blake, Director
of Regulation, ICE Futures Europe (June 17, 2008)
(requiring, among other things, that ICE Futures
Europe provide a daily report of large trader
positions in each linked contract). On January 21,
2009, the Commission published a Notice in the
Federal Register to provide notice that the
conditions set forth in the staff no-action letter
dated June 17, 2008, would equally apply to noaction relief of any FBOT that lists for trading by
direct access from the U.S. any linked contract. 74
FR 3570, 3572 (January 21, 2009). See also Letter
from Richard A. Shilts, Director, Division of Market
Oversight, to Dee Blake, Director of Regulation, ICE
Futures Europe (August 20, 2009) (requiring, among
other things, that ICE Futures Europe provide trade
execution and audit trail data for the CFTC’s Trade
Surveillance System on a trade-date plus one basis).
12 ‘‘Trade register’’ is a generic term for a
comprehensive, daily record of every trade
facilitated by an exchange, whether executed on the
centralized market (via open-outcry or
electronically) or off of it (e.g., block trades and
exchange of futures for swaps). Trade registers
contain detailed information with respect to the
terms of a trade (e.g., contract, price, quantity, etc.),
the parties involved, and other data points. They
also contain trading account numbers, but no
information with respect to the owners or
controllers of those accounts. In addition, the
trading account numbers in trade registers often do
not correspond to account numbers reported to
other Commission data systems, including its large
trader reporting system. The Commission has
recently standardized the content and format of all
trade registers submitted to it, which are now
required to be FIXML Trade Capture Reports. The
Commission notes that OCR reporting requirements
will be triggered by the regular reporting of trade
data for use in the Commission’s trade practice or
market surveillance programs, regardless of whether
such data is deemed a ‘‘trade register’’ by the entity
providing it.
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transparency and respond to new
regulatory data needs in an era of
predominantly electronic trading. In
short, the proposed OCR reflects the
Commission’s belief that its traditional
data resources—exchange trade registers
and large trader reports—must be
expanded. Accordingly, the
Commission proposes to supplement
those resources with ownership and
control information for all trading
accounts.
B. Specific Benefits Expected From the
OCR
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1. Benefits to DMO’s Trade Practice and
Market Surveillance Programs
The Commission’s primary
responsibility is to ensure that U.S.
futures markets accurately reflect the
underlying forces of supply and demand
for all products traded, and that futures
markets are free from fraud and abuse.
DMO monitors all futures and option
markets to detect and prevent price
manipulation, abusive trading practices,
and customer harm. It is concerned with
both market-wide abuses, such as
manipulation (i.e., market surveillance)
and individual trading violations (i.e.,
trade practice surveillance); often, the
two are connected. DMO’s surveillance
programs include routine monitoring of
markets and trades, and detailed, datadriven investigations when appropriate.
To conduct its surveillance programs,
DMO collects daily trade data from all
U.S. DCMs or their regulatory service
providers, as well as from ECMs with
SPDCs and FBOTs with linked
contracts. The data collected is central
to DMO’s trade practice surveillance
program, and of growing importance to
market surveillance and other regulatory
efforts, as explained below. Presently,
the Commission’s trade practice and
market surveillance programs utilize
distinct platforms—the Integrated
Surveillance System (‘‘ISS’’) for market
surveillance and the Trade Surveillance
System (‘‘TSS’’) for trade practice
surveillance.13
13 ISS tools and data are used to detect and
prevent price manipulation and market congestion
on regulated exchanges, and to enforce speculative
position limits pursuant to section 4a of Commodity
Exchange Act (‘‘Act’’). ISS receives data from
reporting firms via large trader reports filed daily
with the Commission. Large trader reports show
open end-of-day positions in futures and options
that are at or above specific reporting levels set by
the Commission (‘‘large traders’’). Related accounts
are aggregated by reporting firms and given a
‘‘special account number’’ which DMO uses to track
their consolidated end of day positions. Like ISS,
TSS is also a combination of analytical tools and
databases. It also includes powerful algorithms to
analyze large quantities of trade data for suspicious
trading patterns. TSS forms the backbone of the
Commission’s automated trade practice surveillance
program and also provides data and analysis for
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Broadly speaking, ISS facilitates the
storage, analysis, and mining of large
trader data while TSS does the same for
trade data. Both systems include a range
of tools for automated surveillance,
pattern detection, ad hoc examination of
raw data, and investigation. One
valuable benefit of the OCR is that it
would help integrate these two primary
systems by linking individual
transactions reported on exchange trade
registers (TSS) with aggregate positions
reported in large trader data (ISS). DMO
would have the data necessary to
reconstruct trading based on trade
registers, and determine how large
traders established their positions as
recorded in the large trader reporting
system.
One important benefit of the OCR is
that it would help TSS to make more
sophisticated analytical use of the trade
register data already available. As
indicated previously, ‘‘trade register’’ is
a generic term for a comprehensive,
daily record of every trade facilitated by
an exchange. Trade registers contain
detailed information with respect to the
terms of a trade, but no OCR-type data.
Together, TSS and exchange trade
registers aid in the detection, analysis,
and investigation of numerous abusive
trading practices, including trading
ahead of customer orders, wash trading,
pre-arranged trading, money-passing,
and other trade practice violations.
To identify these violations and
others that may arise in the future,
DMO’s trade practice analysts, equipped
with TSS, must distinguish violative
trading patterns hidden within
extremely large data sets. However,
TSS’s analytical capabilities are
proportional to the content of its source
data, which presently does not include
ownership and control information
sufficient to aggregate related trading
accounts within and across exchanges.
This absence of ownership and control
information impairs DMO’s ability to
efficiently detect trade practice
violations such as those listed above, or
to uncover other violations that would
be evident with ownership and control
information. For example, instances of
potential money-passing (including
money laundering) become much more
evident when two apparently unrelated
accounts with frequent trading activity
are known to be under common
ownership. In addition, the absence of
ownership and control information
impairs DMO’s ability to identify small
and medium sized traders whose open
interest does not reach reportable levels,
but who can still have deleterious
Commission enforcement and research programs, as
described below.
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effects on the markets during
concentrated periods of intra-day
trading. Such scenarios include intraday position limit violations and
‘‘banging the close’’ manipulations. The
OCR would allow DMO to addresses
each of these current limitations.
2. Benefits to the Division of
Enforcement
DOE investigates and prosecutes
alleged violations of the Act and
Commission regulations.14 It can act
against any number of persons and
entities suspected of such violations,
including individuals and firms
registered with the Commission, those
who are engaged in commodity futures
and option trading on designated
domestic exchanges, and those who
improperly market futures and options
contracts. DOE proceedings typically
begin with careful investigations based
on leads developed internally or
information referred by other
Commission divisions, industry selfregulatory associations; state, federal,
and international authorities; and
members of the public.
The OCR will be of immediate help to
this investigatory work, especially if it
relies on aggregating related trading
accounts. DOE investigations in the
areas of intra-day manipulation and
trade practice abuses rely on exchange
trade registers. At present, however, the
absence of ownership and control
information in trade register data
presents an obstacle when DOE is
investigating potential price
manipulations or trade practice abuses,
such as front-running. Without this
information, DOE staff must first
identify the universe of accounts traded
in a relevant period, then request and
await information from outside the
Commission to identify the entity
associated with the account number,
and finally aggregate all identified
entities that relate to a common owner.
Only then can staff assess a particular
owner’s trading activity. This timeconsuming process must be re-created
every time DOE initiates an intra-day
trading manipulation investigation. The
Commission believes the information
contained in the OCR would
significantly reduce the time and
resources expended in determining the
identities and relationships between
account holders, and thus facilitate DOE
investigations and prosecutions across
markets and exchanges.
14 The
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3. Benefits to the Office of the Chief
Economist
OCE conducts research on major
policy issues facing the Commission
and assesses the economic impact of
regulatory changes on the futures
markets. It also participates in the
development of Commission
rulemakings, provides expert advice to
other Commission offices and divisions,
and conducts special studies and
evaluations as required. An important
objective of OCE is to help the
Commission achieve deeper and more
sophisticated knowledge of the futures
markets from the data available to it.
The OCR will advance this objective in
significant ways.
OCE is particularly interested in the
OCR as a tool for enhancing the
transparency of regulated markets
through the disclosure of information on
related accounts. It has a number of
initiatives under way designed to
enhance the Commission’s surveillance
capabilities, assist in enforcement, and
improve data integrity. Related account
information derived from the OCR will
help OCE to better link traders’ intraday transactions with their end-of-day
positions. It will also help OCE to
calculate how different categories of
traders contribute to market wide openinterest. Building on these results, OCE
will achieve more sophisticated benefits
for the Commission, including new
avenues of surveillance and
enforcement tools. For example, armed
with OCR/trade register-derived data,
OCE will eventually be able to
accurately identify and categorize
market participants based on their
actual trading behavior on a contract-bycontract basis, rather than on how they
self-report to the Commission (e.g.,
registration type or marketing/
merchandising activity on Commission
Form 40).
In addition to these specific projects,
ownership and control information
available via the OCR will allow OCE to
perform more complete and accurate
studies and provide more targeted
guidance to other Commission staff in
pursuing trade practice violations and
attempted manipulations.
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III. Comments Received in Response to
the Advanced Notice
The Commission received 12
comment letters from 16 commenters in
response to the ANPR. Comment letters
were submitted by: the Air Transport
Association of America, Inc. (‘‘ATA’’);
CME Group Inc. (‘‘CME Group’’); the
Futures Industry Association (‘‘FIA’’);
Foley & Lardner LLP (‘‘F&L’’); ICE
Futures U.S., Inc. (‘‘ICE Futures’’); the
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Kansas City Board of Trade (‘‘KCBT’’);
MF Global Inc. (‘‘MF Global’’); the
Minneapolis Grain Exchange (‘‘MGEX’’);
Newedge USA, LLC (‘‘Newedge’’); Paul,
Hastings, Janofsky & Walker LLP (‘‘PH’’);
the Petroleum Marketers Association of
America and the New England Fuel
Institute, writing jointly (‘‘PMMA/
NEFI’’); and one private commenter (Mr.
Zhang).15 Commission staff reviewed all
comments carefully.
Many commenters recognized
potential regulatory benefits stemming
from enhanced ownership and control
information, including benefits for the
public, the Commission, or industry
self-regulatory organizations.16 Two
commenters representing commodity
trade associations strongly endorsed the
OCR, noting their approval of ‘‘efforts to
acquire all information from DCMs,
ECMs, and DTEFs to improve market
transparency and integrity.’’ 17 The OCR
also received qualified support from
some DCMs. One DCM, for example,
indicated that the OCR will promote
‘‘further integration of our existing
market surveillance and trade practice
surveillance data and bridge gaps that
may exist between individual
transaction data contained in the
Exchange trade register and position
data contained in large trader reports
filed with the Exchange.’’ 18 Another
stated the OCR will ‘‘exponentially
increase market transparency’’ and
‘‘Commission and exchange compliance
staffs will benefit greatly from the
wealth of information at their
disposal.’’ 19
While commenters often
acknowledged the regulatory value of
gathering ownership and control
information, many also expressed
specific concerns with one or more
elements of the OCR as described in the
ANPR. One significant area of concern
focused on the OCR’s potential costs.
Comments in this regard ranged from
proposals to curtail the OCR to outright
opposition to any OCR implementation.
Commenters were also broadly
concerned with the potential difficulty
of acquiring certain OCR data points,
41779
and with whether every OCR data point
contemplated in the ANPR is necessary
to achieve the Commission’s regulatory
objectives. Finally, commenters raised
concerns with respect to the privacy of
ownership and control information and
equal implementation of OCR
requirements across exchanges. These
concerns, and the Commission’s
responses to them, are summarized
below.
A. The OCR’s Costs, Benefits, and
Alternatives
Several commenters raised concerns
with respect to the OCR’s potential
costs. At one extreme, an FCM
commenter expressed outright
opposition to the OCR, claiming that it
would ‘‘result in an inordinate amount
of work and expense for many, if not
most FCMs’’ and may ‘‘cause some FCMs
to go out of business.’’ 20 The FCM also
asserted that the CFTC apparently had
not ‘‘considered the burden that would
be imposed on FCMs other than to a
relatively nominal extent.’’ 21 Similarly,
an industry association representing
numerous large FCMs stated that the
OCR ‘‘would impose a significant
burden on FCMs’’ and ‘‘the potential
costs will far outweigh the expected
benefits to the Commission.’’ 22
Many commenters concerned with the
OCR’s potential costs recommended that
the Commission pursue a more limited
OCR that focuses only on a limited
number of trading accounts.
Specifically, they suggested that the
OCR should be a record of ownership
and control for trading accounts tied to
‘‘special accounts’’ in the Commission’s
large trader reporting system. One DCM
group, for example, asked the
Commission to consider whether
ownership and control information was
necessary for every account, ‘‘as
experience suggests there is little
incremental regulatory value below
certain thresholds.’’ 23 It recommended
that the Commission instead ‘‘automate
the data collection process for Form
102s.’’ 24 In support of its
20 Newedge
Comment Letter at 1 and 5.
Comment Letter at 8. In a related
footnote, Newedge described how the SEC
‘‘conducts a cost-benefit analysis,’’ analyzes new
rules under the Paperwork Reduction Act,’’ and
‘‘prepares a final regulatory flexibility analysis in its
rulemakings.’’ The Commission notes that these
elements were not included in the ANPR, which
was not a proposed or final rule, but they are
included in this Notice.
22 FIA Comment Letter at 2.
23 CME Group Comment Letter at 5.
24 CME Group Comment Letter at 4. The Form
102, titled ‘‘Identification of Special Accounts,’’ is
part of the Commission’s large-trader reporting
system. The Form 102 must be filed by FCMs,
clearing members and foreign brokers who carry
21 Newedge
15 CME Group submitted a single comment letter
on behalf of four DCMs: the Chicago Mercantile
Exchange, Inc.; the Board of Trade of the City of
Chicago, Inc.; the New York Mercantile Exchange,
Inc.; and the Commodity Exchange, Inc. Its
comments are noted here as those of a ‘‘DCM
group.’’
16 ATA, CME Group, ICE Futures, KCBT, MGEX,
PMMA/NEFI, and Zhang.
17 PMAA/NEFI Joint Comment Letter at 1. In the
ANPR, the Commission stated that it anticipates
most OCR reporting entities will be DCMs, but they
could be any registered entity that provides trade
data to the Commission on a regular basis.
18 ICE Futures Comment Letter at 1.
19 KCBT Comment Letter at 1.
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recommendation, the DCM group
argued that the OCR is a ‘‘largely
duplicative report’’ when compared to
the Form 102 and that ‘‘modernizing’’
and ‘‘enhancing the accuracy’’ of the
Form 102 would be more cost effective
than developing a new report.25
Similarly, an FCM commenter
‘‘question[ed] the benefits to be gained
by obtaining Form 102-type information
for small trades and/or inactive
accounts,’’ 26 and an industry
association contested ‘‘the necessity of
collecting OCR data with respect to
accounts that have not been designated
‘special accounts.’ ’’ 27
The Commission appreciates
commenters’ concerns with respect to
the OCR’s potential costs. However, it
also believes that commenters have not
fully understood the Commission’s
intended uses for ownership and control
information. For example, commenters’
emphasis on an enhanced Form 102 as
an alternative to the OCR suggest that
they view the OCR primarily as an
addendum to the Commission’s market
surveillance program, which aims to
detect and deter price manipulation
through reporting and surveillance of
open positions. In this regard, the
Commission notes that while its
objectives do include improved position
surveillance, they also include
improved trade surveillance—regardless
of position size—and other regulatory
goals outlined previously. Indeed, the
proposed OCR forms a new category of
surveillance data that will benefit any
regulatory effort focused on trades and
trading behavior by account owners and
controllers within and across reporting
entities. The Commission believes that
such information is vital for effective
oversight of the U.S. futures markets.
At the same time, the Commission is
sensitive to the cost concerns raised in
response to the ANPR. It invites
interested parties to include detailed
cost estimates in any future comment
letters submitted with respect to the
proposed OCR. Such estimates should
be as specific as possible, should
itemize different categories of costs (e.g.,
hardware and software, personnel, onetime ‘‘start-up’’ costs, and on-going
operational costs), and should reflect
the costs to the commenter itself rather
than an industry average. The
Commission is also open to comments
special accounts. Special accounts are accounts that
reach large-trader reportable position levels in a
particular product, these levels are established by
the Commission.
25 CME Group Comment Letter at 4.
26 Newedge Comment Letter at 7. The Form 102,
titled ‘‘Identification of Special Accounts,’’ is part of
the Commission’s large-trader reporting system.
27 FIA Comment Letter at 4.
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suggesting that the OCR should be
limited to accounts meeting certain
thresholds as a way of containing its
costs. However, such comments should
address an account’s trading volume or
frequency within a given time period,
and not just its relationship to a
reportable position under the large
trader reporting system. Any comments
suggesting that the Commission gather
ownership and control information for
only a subset of accounts based on their
trading volume or frequency should also
document the cost savings to the
commenter from reporting only that
subset. In addition, any such comments
should also address how the
commenter’s proposed threshold would
meet the Commission’s regulatory needs
as explained in this Notice.
A second significant theme in the
comment letters pertained to the flow of
ownership and control information from
its root sources, through reporting
entities, and on to the Commission.
Citing cost and efficiency, two DCMs
recommended that FCMs and clearing
members submit their ownership and
control information directly to the
Commission.28 They suggested that
FCM reporting entities would benefit if
their reporting systems could be built to
a single Commission standard rather
than to multiple exchange standards.29
Another DCM recommended that
ownership and control information be
sent directly to the Commission to
resolve any jurisdictional issues that
might arise when exchanges require
data from non-members.30 In contrast to
these DCM perspectives, an industry
association representing FCMs agreed
that ‘‘DCMs would be the appropriate
funnel through which [OCR]
information is transmitted to the
Commission.’’ 31 However, to avoid
undue burden arising from divergent
OCR standards at different exchanges, it
also proposed that the ‘‘protocols
prescribing the content, format and
transmission of ownership and control
information from FCMs to the several
DCMs be uniform.’’ 32
The Commission agrees that uniform
protocols are an absolute necessity for
the OCR. Accordingly, the proposed
rule specifies that reporting entities
must adopt a single standard, acceptable
to the Commission, for submitting their
OCRs to the Commission. Such
standards will apply to the OCR’s
content, format, and the time and
28 KCBT Comment Letter at 1. MGEX Comment
Letter at 1.
29 KCBT Comment Letter at 2.
30 ICE Futures Comment Letter at 4.
31 FIA Comment Letter at 2.
32 FIA Comment Letter at 2.
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manner of its transmission. The
Commission anticipates that this
requirement will lead reporting entities
and their root data sources to coordinate
their efforts and develop an industrywide standard for the flow of ownership
and control information from root data
sources to reporting entities.33 In
addition, the Commission proposes to
grant the industry adequate time to
design and implement the OCR once a
final rule is adopted, as explained
below. With respect to jurisdictional
issues, the Commission is aware that
some market participants may not be
members of their corresponding
reporting entity. However, in these
cases, or where ‘‘membership’’ is not a
relevant concept based on an reporting
entity’s business structure, market
participants must still access the
exchange directly via its facilities or via
those of an intermediary providing a
technology interface, a clearing
guarantee, or some other service.
Successful implementation of the OCR
will require reporting entities to offer
their services only on the condition that
ownership and control information be
provided upon request by the relevant
party in possession of such information.
Finally, the Commission believes that
reporting entities are the appropriate
vehicle for reporting ownership and
control information to the Commission.
The trading account numbers which
they provide in their OCRs must
correlate perfectly to those reported on
their related trade registers. Thus,
reporting entities are in the best position
to ensure that their trade registers and
their OCRs match as required.
B. Ownership and Control Information
May Be Difficult To Obtain or
Unnecessary
Many commenters raised concerns
with respect to the organizational and
technological challenges that reporting
entities and root data sources may face
in gathering and standardizing
ownership and control information. The
FCM community, in particular, focused
on the difficulty of aggregating data
from different internal systems into a
single OCR file. An industry association,
for example, stated that ‘‘[t]he creation,
use, form, storage and retention of data
are not uniform across FCMs’’ and some
information might even be ‘‘on paper
stored at offsite retention centers’’ or
otherwise unavailable.34 An FCM
explained how ‘‘many FCMs maintain
33 ‘‘Root data sources’’ are those entities from
which reporting entities may need to gather certain
ownership and control information in order to
provide the Commission with a complete OCR for
every trading account active in its markets.
34 FIA Comment Letter at 2.
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mstockstill on DSKH9S0YB1PROD with PROPOSALS
trade reporting information and trader/
system IDs in different locations’’ and
how it would be a ‘‘difficult and timeconsuming task’’ to reconcile this data.35
A number of letters identified specific
account and trade types that may
present special challenges in an OCR.36
One DCM group noted that ‘‘[g]ive-up
transactions, bunched orders and
omnibus accounts are widespread in the
industry, and each creates challenges in
the context of the OCR as currently
proposed.’’ 37 An industry association
provided additional information,
explaining that for give-up trades ‘‘[t]he
account number used by the executing
firm does not necessarily tie back to the
account number used by the clearing
firm for a customer’s account.’’ 38
Another DCM noted that ‘‘[e]xtra efforts
will be needed to obtain and keep
current detail[ed] information that
involves omnibus accounts, index
accounts with multiple investors, or any
accounts with multiple owners,
participants or controllers.’’ 39 A third
DCM explained its belief that omnibus
and give-up accounts will be difficult to
obtain information from ‘‘because the
underlying accounts are not carried on
the clearing member’s books.’’ 40 This
concern was echoed by another FCM as
an important component of its comment
letter.
Some commenters questioned
whether every OCR data point
contemplated in the ANPR is necessary
to achieve the Commission’s regulatory
objectives. One DCM, for example,
stated that ‘‘it does not believe that all
the information itemized in the
Advanced Notice is necessary’’ and that
‘‘some of the information would be
redundant.’’ 41 Similarly, a DCM group
focused specifically on the date of
ownership assignment and the
commodity trading advisor number,
stating that these data points ‘‘may add
complexity to the reporting process
without commensurate value.’’ 42
As a consequence of these perceived
challenges, the Commission received a
significant number of comment letters
suggesting that it form an industry-wide
working group to discuss the OCR and
its implementation. DCM and FCM
commenters both concurred in the
recommendation. One commenter, for
example, called for an ‘‘inclusive,
industry-wide committee calling on the
35 Newedge
Comment Letter at 4.
Group, FIA, ICE Futures, KCBT, MF
Global, and MGEX.
37 CME Group Comment Letter at 4.
38 FIA Comment Letter at 3.
39 MGEX Comment Letter at 2.
40 KCBT Comment Letter at 3.
41 ICE Futures Comment Letter at 2.
42 CME Group Comment Letter at 4.
36 CME
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expertise of all affected stakeholders
* * * to address significant operational
and other issues regarding the
appropriate design of the OCR.’’ 43
The Commission is aware of the
numerous challenges posed by the OCR.
However, it believes that those
challenges can be overcome via a
coordinated industry effort and a
reasonable implementation schedule.
Upon the adoption of any final rule in
this area, the Commission will grant
reporting entities and root data sources
considerable time to coordinate,
develop, and implement the OCR.
Specifically, the Commission would
propose to require OCR test files from
all reporting entities within 12 months
of a final rule, and final OCR
implementation within 18 months of a
final rule. Interested parties are invited
to comment on this proposed schedule.
Any comments requesting additional
time to implement test or final OCRs
should include an alternate
implementation schedule with specific
dates and benchmarks.
The Commission also emphasizes that
its proposal has a number of features
intended to eliminate unnecessary data
points from the OCR and to define
ownership and control in less than the
broadest possible terms. First, to
facilitate implementation, the
Commission has determined to
eliminate from the OCR several data
points that were included in the ANPR.
For example, the proposed OCR does
not include the date on which the
trading account was assigned to its
current owner(s). In addition, as
discussed below, the proposed OCR
would not collect information with
respect to social security numbers or
taxpayer identification numbers.
Second, the Commission notes that at
least one technical obstacle, pertaining
to give-ups, can potentially be
addressed via improvements to the daily
exchange trade registers on which OCR
account numbers will be based. Via a
separate initiative, the Commission has
already requested that exchanges create
a ‘‘give-up group ID’’ that links two
related events—the execution of a trade
and its subsequent give-up, both of
which are reported on trade registers. In
cases where an execution-only firm does
not possess ownership and control
information for the given-up trade, the
reporting entity may collect it from the
clearing firm, and the Commission will
be able to form a complete record of the
trade and its subsequent allocation
through the give-up group ID.44 With
43 FIA
Comment Letter at 1.
this scenario, the executing firm should
provide ownership and control information for the
44 In
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41781
respect to omnibus accounts, however,
the Commission believes that
identifying their ultimate beneficial
owners and controllers remains
necessary despite the acquisition of
information which will be required with
respect to accounts trading on an
undisclosed basis.
Third, the proposed OCR reduces the
overall reporting burden by narrowing
the definition of ‘‘ownership’’ with
respect to collective investment vehicles
(‘‘CIV’’).45 Under the proposed OCR, CIV
ownership information will be required
only with respect to persons whose
ownership share is 10 percent or more
of the CIV’s net asset value, as defined
in Commission Regulation 4.10. Fourth,
the proposed OCR defines ‘‘controller’’
as an individual or individuals with the
legal authority to exercise discretion
over trading decisions by a trading
account or with the authority to
determine the trading strategy of an
automated trading system. The authority
to exercise discretion is sufficient to
qualify as a controller, regardless of
whether such authority is actually used.
Individuals acting without discretion
will not be considered account
controllers.
Interested parties are invited to
comment on the Commission’s
proposed definitions, including its
proposed definitions of ownership and
control, and to suggest specific
alternatives if they will achieve the
Commission’s objectives in a more
efficient manner. The Commission also
invites comments from interested
parties who believe that a data point in
the proposed OCR is impossible to
collect for technical reasons. Such
comments should fully explain the
technical obstacle, including the
account, trade, or ownership type to
which the obstacle applies. Comments
should also identify the entity holding
the data in question, or an explanation
that the data is not maintained by any
entity subject to the Commission’s
authority or that of a Commission
registrant (including any requirement
that a user of an exchange’s facilities
consent to providing ownership and
control information prior to utilizing
such facilities). Any request to deviate
from the definitions or data points in
the proposed OCR should include
execution account, and the clearing firm should
provide the account to which the trade is given-up.
The Commission will link both through the give-up
group ID.
45 While ‘‘collective investment vehicle’’ is not
defined in regulations under the CEA, it is
‘‘commonly used to describe any entity through
which persons combine funds (i.e., cash) or other
assets, which are invested and managed by the
entity.’’ 67 FR 48328, 48331 (July 23, 2002).
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technical diagrams; data flow-charts;
FCM, introducing broker (‘‘IB’’) and
foreign broker account opening and
record retention procedures with
respect to that data point; and other
detailed information as appropriate to
establish the difficulty or impossibility
of implementing the OCR as proposed.
In short, while the Commission is
prepared to amend the proposed OCR
where necessary, it will do so only on
the basis of detailed and welldocumented comments.
Finally, the Commission notes that it
does not intend to convene an industry
working-group to develop the OCR.
While industry coordination will be
crucial, the Commission’s role is to
clearly articulate its requirements and
expectations. Industry participants are
best situated to determine how those
requirements can be met. Should any
element of the proposed OCR remain
unclear, the Commission strongly
encourages industry participants to
present their questions via the public
comment process for this proposed rule.
C. The OCR Should Be Implemented
Equally Across Exchanges and Should
Respect Privacy Considerations
Some commenters argued that DCMs
should not be the only registered
entities required to provide the OCR.
One DCM group noted its concern that
the OCR is limited to trading accounts
active on U.S. futures exchanges, and
does not ‘‘encompass trading on exempt
commercial markets (‘‘ECMs’’) and
foreign boards of trade (‘‘FBOTs’’).’’ The
DCM group stated that such an
exclusion ‘‘would give ECMs and FBOTs
an unfair competitive advantage over
U.S. futures exchanges.’’ 46 Similarly, a
commodity trade association urged the
Commission to obtain OCR information
from all trading platforms including the
OTC market.47
The Commission agrees that OCR
requirements should apply equally to all
entities reporting trade data to the
Commission on a regular basis for trade
practice or market surveillance
purposes. For purposes of this Notice,
however, the proposed OCR specifically
includes DCMs, DTEFs, and ECM
SPDCs within the definition of reporting
entities.48 In addition, the Commission
emphasizes that its proposed rule
requires ownership and control
46 CME
Group Comment Letter at 3.
Comment Letter at 1.
48 The Commission notes that OCRs will only be
required with respect to trading account numbers
reported on trade registers. Thus, an ECM SPDC
reporting trades in only certain contracts (i.e., SPDC
contracts) will be required to provide ownership
and control information only for trading accounts
active in those contracts.
47 ATA
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information equally regarding both U.S.
and non-U.S. entities and natural
persons.
Should the Commission receive
appropriate statutory authority with
respect to OTC and swap transactions,
it would consider collecting ownership
and control information with respect to
such transactions.49 The Commission
invites public comment in this area,
including comment with respect to the
entities (e.g., trade repositories,
designated contract markets, or swap
execution facilities) from which the
Commission should collect OCR data
and the product and transaction types
for which the Commission should
collect data. The Commission invites
public comment on any additional types
of information or data elements related
to OTC and swap transactions that
should be collected and reported to the
Commission.
Five commenters expressed concerns
regarding OCR information security and
confidentiality.50 One law firm
commenter, for example, focused its
comment letter, on ‘‘ensuring that all
identifying information, including
highly sensitive Social Security number
information, will be treated as
confidential and not subject to public
disclosure.’’ 51 It specifically asked that
the Commission ‘‘address confidentiality
concerns as it moves forward with its
rulemaking’’ and ‘‘incorporate a
requirement that the exchanges, in
gathering this information, have a duty
to treat it as non-public and
confidential.’’ 52 An FCM commenter
raised a similar concern when it asked
‘‘can the CFTC ensure that exchanges
will not use sensitive account
ownership or controller information for
their own purposes?’’ 53 One DCM stated
that the exchange ‘‘rarely found it
necessary to obtain the Social Security
Number (‘‘SSN’’) or Tax Identification
Number (‘‘TIN’’) of a trader’’ and that the
risks involved in the ‘‘collection,
transmission and use of client SSN/TIN
information by multiple entities
outweigh the benefit that collection of
such information would bestow.’’ 54
49 Congress has begun to take steps to promote
transparency in swap contracts. The financial
services reform bills passed by the House of
Representatives and the Senate each requires swaps
to be cleared, subject to certain exemptions, and
further requires, with respect to swaps that are
subject to the clearing requirement, that such swaps
be executed on a board of trade designated as a
contract market under Section 5 of the Act or on
a swap execution facility registered or exempt
under Section 5h of the Act (where such a trading
environment is available).
50 FIA, F&L, ICE Futures, Newedge, and PH.
51 F&L Comment Letter at 1.
52 F&L Comment Letter at 1 and 2.
53 Newedge Comment Letter at 6.
54 ICE Futures Comment Letter at 2.
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The Commission agrees with several
of the privacy concerns raised above. Its
internal use and handling of ownership
and control information will be
protected using controls mandated by
the Federal Information Security
Management Act of 2002 (‘‘FISMA’’).55
Specifically, OCR data will be treated as
non-public personal information and
will be subject to internal access
controls. Submission of the OCR to the
Commission will be through secure
communications protocols. Any CFTC
system or equipment used to store or
transmit the OCR will be certified and
accredited as a major system with
medium risk and will have appropriate
controls for access; awareness and
training; audit and accountability;
configuration management; contingency
planning; identification and
authentication; incident response;
maintenance; media protection;
physical environment; personnel;
acquisition; communications; and
integrity. Subject to a number of narrow
exceptions, the Commission notes that
Section 8(a) of the Act severely restricts
disclosure of ‘‘information that would
separately disclose the business
transactions or market positions of any
person and trade secrets or names of
customers.’’ 56 Furthermore, the
Commission pursuant to Section 8a(6)
of the Act, may in connection with
investigations of improper trading or
transactions, disclose to any registered
entity, registered futures association or
self-regulatory organization (‘‘SRO’’),
factual data such as market positions,
business transactions, and the names of
the parties. However, the registered
entity, registered futures association or
SRO, may not disclose this information
55 See 44 U.S.C. 3541 et seq. FISMA was enacted
in 2002 as Title III of the E-Government Act of 2002
(Pub. L. 107–347, 116 Stat. 2899) and recognizes the
importance of information security to the economic
and national security interests of the United States.
It requires the Commission and other federal
agencies to develop, document and implement
agency-wide programs to provide information
security for the information and information
systems that support the operations and assets of
the agency, including those provided or managed
by another agency, contractor, or other source.
56 Section 8(e) of the Act provides that the
Commission may ‘‘upon request’’ furnish
information in its possession to any committee of
Congress, another U.S. government department or
agency, individual state or foreign futures authority
‘‘acting within the scope of its jurisdiction.’’
Similarly, disclosure of information is also
permitted under Section 8(b) of the Act in
connection with congressional, administrative or
judicial proceedings, in any receivership
proceeding involving a receiver appointed in a
judicial proceeding brought under the Act, or in any
bankruptcy proceeding in which the Commission
has intervened, or in which the Commission has the
right to appear and be heard under Title 11 of the
U.S. Code.
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received from the Commission except in
any SRO action or proceeding.57
The Commission has also determined
not to collect the last four digit of
account owners’ and controllers’ SSNs
or TINs, as originally contemplated in
the ANPR. While its objectives for the
OCR require that the Commission
identify all trading account owners and
controllers uniquely within and across
reporting entities, the Commission is
also sensitive to the privacy and
security concerns summarized above.
Accordingly, the Commission proposes
to achieve the unique identification that
SSNs and TINs would have provided
via a combination of other data points.
The proposed OCR would require
reporting entities to provide the name
and address of a trading account’s
owner(s) and controller(s). It would also
require the date of birth for each
account owner and controller, as well as
their NFA ID number, if any. These data
points are additions to the OCR as
contemplated in the ANPR, and seek to
mitigate the loss of SSNs and TINs as
unique identifiers for account owners
and controllers.
In the alternative, or in addition to the
aforementioned data points, the
Commission invites public comment
with respect to how the futures industry
could develop and maintain a system to
assign unique account identification
numbers (‘‘UAIN’’) to all account owners
and account controllers. The
Commission would consider requiring
that the UAIN be utilized in the OCR
and potentially other data reports
submitted to the Commission for
regulatory purposes. The Commission
also invites comment on how this UAIN
could be linked to all orders submitted
to an exchange’s electronic trading
system or executed via open outcry, and
included in the trade registers submitted
daily to the Commission by exchanges.
The Commission seeks comment on
how the UAIN could be automatically
linked to a trade when a user signs into
a trading system. Should the
Commission receive appropriate
statutory authority with respect to OTC
and swap transactions, the Commission
57 In connection with Section 8a(6), the
Commission has designated and authorized certain
Commission employees to disclose confidential
information to certain, designated Exchange staff.
See 17 CFR 140.72. The disclosure of confidential
information in this Regulation specifically requires
a prior determination by the Commission or its
designees that the disclosure is necessary because
‘‘the transaction or market operation disrupts or
tends to disrupt any market or is otherwise harmful
or against the best interests of producers,
consumers, or investors or that disclosure is
necessary or appropriate to effectuate the purposes
of the [CEA].’’ 17 CFR 140.72(a).
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seeks comment on how the UAIN could
be linked to a swap transaction.
Finally, the proposed rule
implementing the OCR requires each
reporting entity to segregate information
provided to it by root data sources if
such data is provided in furtherance of
the Commission’s OCR requirements
and not otherwise required to be
provided by the reporting entity
(‘‘protected data’’). More specifically,
reporting entities must ensure that their
protected data is used only for
regulatory or enforcement purposes
such as trade practice surveillance,
market surveillance, audit, investigative,
or rule enforcement. The use of
protected data for any commercial
reasons, including business
development, is strictly prohibited. In
addition, protected data must be under
the exclusive control of the reporting
entity’s regulatory compliance
department. Reporting entities should
establish appropriate ‘‘firewall’’
procedures and access controls to
ensure the confidentiality, privacy, and
safekeeping of protected data within
their regulatory compliance
departments. Commission staff will
review the adequacy and
implementation of such controls during
its periodic reviews of trading facilities’
self-regulatory programs.
IV. Ownership and Control Report
Outline
The OCR will serve as an ownership,
control, and relationship directory for
every trading account number reported
to the Commission through reporting
entities’ trade registers. The data points
proposed for the OCR have been
specifically selected to achieve four
Commission objectives. These include:
(1) Identifying all accounts that are
under common ownership or control at
a single reporting entity; (2) identifying
all accounts that are under common
ownership or control at multiple
reporting entities; (3) identifying all
trading accounts whose owners or
controllers are also included in the
Commission’s large trader reporting
program (including Forms 40 and 102);
and (4) identifying the entities to which
the Commission should have recourse if
additional information is required,
including the trading account’s
executing firm and clearing firm, and
the name(s) of the firm(s) providing
OCR information for the trading
account.
A. Specific Data Points Required by the
Ownership and Control Report
To ensure that the objectives outlined
above are achieved, each reporting
entity’s OCR should include the
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41783
following information with respect to
each account reported in its trade
registers:
• The trading account number, as
reported in the reporting entity’s trade
register (tags 448 and 452, Party Role 24,
in the Trade Capture Report);
• The trading account’s ultimate
beneficial owner(s), including:
Æ For each ultimate beneficial owner
who is a natural person—
■ Their first, middle, and last name,
■ Their date of birth,
■ The address of their primary
residence,
■ Their NFA identification number,
if any;
Æ For each ultimate beneficial owner
who is not a natural person—
■ Their name and primary business
address,
■ Their NFA identification number,
if any;
• For trading account controller(s)
(who must be natural persons):
Æ The first, middle, and last name of
each controller,
Æ The date of birth of each controller,
Æ The name and primary business
address of the entity that employs each
controller with respect to the reported
account, if any;
Æ The NFA identification number of
each controller, if any;
• The date on which the trading
account was assigned to its current
controller(s);
• A designation of the trading
account as one whose orders are
generated exclusively by a natural
person, exclusively by an automated
trading system, or generated sometimes
by a natural person and sometimes by
an automated trading system;
• The special account number
associated with the trading account, if
one has been assigned;
• An indication of whether the
trading account is part of a reportable
account under the Commission’s large
trader reporting system,
Æ In addition, for a trading account
that becomes part of a reportable
account under the Commission’s large
trader reporting system after December
31st, 2011, the date on which the
trading account first becomes part of a
reportable account;
• Indication of whether the trading
account is a firm omnibus account, and
if so, the name of the firm,
Æ In addition, for a trading account
that becomes part of firm omnibus
account after December 31st, 2011, the
date on which the trading account is
first included in the firm’s omnibus
account;
• The name of the executing firm for
the trading account, and its unique
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identifier as reported in the TCR (TCR
tags 448 and 452, Party Role 1);
• The name of the clearing firm for
the trading account, and its unique
identifier as reported in the TCR (TCR
tags 448 and 452, Party Role 4);
• The name of each root data source
providing the reporting entity with
information with respect to the trading
account;
• The name of the exchange or other
entity submitting the OCR to the
Commission; and
• The OCR transmission date.
B. Definition of Account Controller
For purposes of the OCR, ‘‘account
controller’’ is defined as a natural
person, or group of natural persons,
with the legal authority to exercise
discretion over trading decisions by a
trading account, with the authority to
determine the trading strategy of an
automated trading system, or
responsible for the supervision of any
automated system or strategy. The
authority to exercise discretion is
sufficient, regardless of whether such
authority is actually exercised. An
individual who executes trades for an
account, without input or discretion in
any decision involving the account or
its trades, will not be considered an
account controller with respect to that
account. With respect to CIVs, ‘‘ultimate
beneficial owner’’ excludes those whose
ownership share of the CIV is less than
10 percent of its net asset value, as
defined in Commission Regulation 4.10.
V. Form, Manner, and Frequency of the
Ownership and Control Report
Reporting entities should submit the
OCR weekly, in FIXML via SFTP. Each
reporting entity’s first OCR submission
should constitute a ‘‘master file’’
containing the required data for all
trading account numbers present in its
trade register during the previous 30
days. The master file will establish a
baseline directory. Each subsequent
OCR should be a weekly ‘‘change file’’
reporting only additions, deletions, or
amendments to the master file. If the
reported change includes changes to an
account’s owner(s) or controller(s), the
effective date of such change should
also be reported.
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VI. 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 a
new regulation or order under the Act.58
By its terms, section 15(a) does not
require the Commission to quantify the
58 7
U.S.C. 19(a).
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costs and benefits of a new rule or to
determine whether the benefits of the
adopted rule outweigh its costs. Rather,
section 15(a) requires the Commission
to ‘‘consider the costs and benefits’’ of a
subject rule. Section 15(a) further
specifies that the costs and benefits of
proposed rules 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 futures markets; (3)
price discovery; (4) sound risk
management practices; and (5) other
public interest considerations. In
conducting its analysis, the Commission
may, in its discretion, give greater
weight to any one of the five
enumerated areas of concern and may
determine that, notwithstanding its
costs, a particular rule 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.59
The proposed rule requires reporting
entities to provide the Commission with
certain ownership, control, and related
information on a weekly basis for all
active trading accounts. The
Commission understands that reporting
entities may not have all of the required
OCR information and that the proposed
rule could also have an impact on other
entities that are sources of root data.
While the Commission cannot fully
quantify all of the costs to be borne by
reporting entities and root data sources
until the data collection process is fully
implemented, it recognizes that the
initial cost of developing and
implementing the OCR could be
significant. However, the Commission
also believes that the OCR program,
once implemented, will be less
burdensome for reporting entities and
root data sources to maintain on an
ongoing basis.
Notwithstanding the costs to be
incurred by reporting entities and root
data sources, the Commission believes
the OCR’s benefits are substantial and
important. As described above, the OCR
will increase regulated markets’
transparency to the Commission. It will
also help the Commission to better meet
regulatory data needs that have arisen as
electronic platforms have become the
dominant venue for regulated futures
trading in the United States. In addition,
the OCR will better equip the
Commission to monitor trading
practices across markets. It will also
59 E.g., Fishermen’s Dock Co-op., Inc. v. Brown, 75
F3d 164 (4th Cir. 1996); Center for Auto Safety v.
Peck, 751 F.2d 1336 (D.C. Cir. 1985) (agency has
discretion to weigh factors in undertaking costbenefit analyses).
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provide additional data and reference
points which will further empower the
Commission’s automated trade
surveillance system, TSS, and allow
Commission staff to make more
sophisticated analytical use of the trade
register data already available. For
example, OCE will be able to perform
more complete and accurate studies and
provide more targeted guidance to other
Commission staff in pursuing trade
practice violations and attempted
manipulations. Also, DOE will use the
information to reduce the time and
resources expended in determining the
identities and relationships between
account holders, thereby facilitating
DOE investigations and prosecutions
across markets and exchanges.
After considering the costs and
benefits, the Commission has
determined to issue the proposed rule.
B. Paperwork Reduction Act
Provisions of proposed Commission
Regulation 16.03 would result in new
collection of information requirements
within the meaning of the Paperwork
Reduction Act of 1995 (‘‘PRA’’).60 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
16.03—Ownership and control report’’
(OMB control number 3038–NEW). If
adopted, responses to this new
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.’’ 61
1. Information Provided by Reporting
Entities
Under proposed Regulation 16.03,
reporting entities, which presently
would include DCMs, DTEFs, and ECM
SPDCs, would be required to provide
ownership and control reports to the
Commission on a weekly basis. Such
reports would include ownership,
control and related information for each
account active on the reporting entity.
Commission staff estimates that each
reporting entity would expend 480
60 44
61 7
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U.S.C. 3501–3520.
U.S.C. 12(a)(1).
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hours for discussions with staff and
representatives of other reporting
entities and root data sources to develop
and implement the OCR process. The
proposed rule would also require each
reporting entity to expend
approximately 5,676 hours to establish
the required information technology
infrastructure. At present, the
Commission staff would receive weekly
OCRs from up to 17 reporting entities.62
Accordingly, the aggregate hours
required for start-up by all reporting
entities would total 104,652.
Annualized over an estimated useful life
of ten years, start-up requirements for
all reporting entities combined would
be approximately 10,465 hours per year.
In addition to the hours required for
start-up, proposed Regulation 16.03, if
adopted, would impose certain ongoing
costs. Commission staff estimates that
each reporting entity would expend
about 33 hours for each weekly OCR
transmitted to the Commission resulting
in an aggregate requirement of 29,172
hours annually (assuming that such
reports are provided by each reporting
entity for each of 52 weeks).
It is also estimated that start-up and
continuing costs may involve product
and service purchases. Commission staff
estimates that reporting entities could
expend up to $8,000 annually per
reporting entity on product and service
purchases to comply with proposed
Regulation 16.03. This would result in
an aggregated cost of $ 136,000 per
annum (17 reporting entities × $ 8,000).
The analysis above is a best estimate.
Reporting entities may need to expend
additional resources in order to acquire
OCR data from root data sources; the
number of reporting entities and their
reporting requirements may change; and
the trade volume (and the
corresponding amount of OCR
information) may vary at each reporting
entity.63
While reporting entities are
responsible for providing the OCR, the
Commission is nonetheless aware that
root data sources may be required to
supply reporting entities with certain
OCR data.64 However, the Commission
is not collecting information directly
from the root data sources nor is it
estimating their reporting burden under
the PRA.
62 Reporting entities presently include 1 ECM
SPDC and 16 DCMs. As of June 28, 2010, all eight
recognized SPDCs were trading on the same ECM.
63 For example, an ECM is only required to
provide OCR data with respect to their SPDCs and
the number of SPDCs on an ECM may vary over
time.
64 Root data sources may include FCMs, CPOs,
CTAs, and IBs.
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2. 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
collection of information is 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 collection
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 collection of information
on those who are to respond, including
through the use of automated collection
techniques or other forms of information
technology.
Comments may be submitted 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
submitted comments so that all
comments can be summarized and
addressed in the final rule preamble.
Refer to the Addresses section of this
notice of proposed rulemaking for
comment submission instructions to the
Commission. A copy of the supporting
statements for the collections of
information discussed above may be
obtained by visiting RegInfo.gov. OMB
is required to make a decision
concerning the collection 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.
C. Regulatory Flexibility Act
1. Reporting Entities
The Regulatory Flexibility Act
(‘‘RFA’’) requires that agencies consider
the impact of their regulations on small
entities.65 In a policy statement the
Commission has already established
certain definitions of ‘‘small entities’’ to
be used in evaluating the impact of its
rules on such small entities in
accordance with the RFA.66 In that
statement, the Commission concluded
that DCMs are not small entities.67 The
Commission has also previously
PO 00000
determined that DTEFs and ECMs (with
or without SPDCs) are not small entities
for purposes of the RFA.68
2. FCMs, IBs, Commodity Pool
Operators (‘‘CPOs’’), and Commodit
Trading Advisors (‘‘CTAs’’)
The requirements of the proposed rule
fall mainly on reporting entities, as
described above. However, the
Commission believes that root data
sources may be prompted to provide
reporting entities with some OCR data.
In this regard, the Commission has
previously determined that one
potential root data source—FCMs—are
not small entities for the purposes of the
RFA.69
Other potential sources of root data
include CPOs, CTAs, and IBs who may
be required to provide OCR information
to FCMs or reporting entities. With
respect to CPOs, the Commission has
previously determined that registered
CPOs are not small entities based upon
the Commission’s existing regulatory
standard for exempting certain small
CPOs from the requirement to register
under the Act.70 In the case of CPOs
exempt from registration, the
Commission has previously determined
that a CPO is a small entity if it meets
the criteria for exemption from
registration under Regulation
4.13(a)(2).71 In the case of CTAs, the
Commission has stated that it would
evaluate within the context of a
particular rule proposal whether all or
some affected CTAs would be
considered to be small entities and, if
so, the economic impact on them of the
proposal.72 Under the proposed rule,
those CTAs and exempt CPOs that are
in exclusive control of OCR information
may be required to provide that
information to reporting entities. The
Commission believes much of the data
to be provided by CTAs and exempt
CPOs should already be possessed by
CTAs and exempt CPOs. Also, any
expenditure that must be made in order
to comply with the proposed rule will
likely be proportionate to the size of the
CTA or exempt CPO. Therefore, to the
extent a CTA or exempt CPO is a small
entity and must provide OCR
information, its related costs should also
be smaller. In the event a CTA or
exempt CPO might be considered a
small entity required to provide OCR
information, the Commission does not
believe the proposed reporting
68 66
FR 42255 at 42268 (August 10, 2001).
FR 18618 (April 30, 1982).
70 Id. at 18619–20.
71 Id. at 18620.
72 Id.
69 47
65 5
U.S.C. 601 et seq.
FR 18618 at 18619 (April 30, 1982).
67 Id.
66 47
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requirements to have a significant
economic impact on that small entity.
With respect to IBs, the Commission
previously stated that it is appropriate
to evaluate within the context of a
particular rule proposal whether some
or all IBs should be considered to be
small entities and, if so, to analyze the
economic impact on such entities at that
time.73 Under the proposed rule,
reporting entities may require OCR
information from IBs. However, much of
the information required by the OCR,
such as customer name and date of
birth, is already maintained by
registered IBs and/or FCMs in order to
comply with anti-money laundering
rules.74 Also, Commission Regulation
1.37 already requires IBs to maintain the
name of the person exercising control of
the account.75 Additional information
required by the proposed rule, if not
already available to reporting entities
through an FCM, is likely maintained by
IBs as part of their normal business
practice. Furthermore, to the extent
expenditures must be made to comply
with the proposed rule, they should be
commensurate with the size of the IB.
For example, if an IB is small, with a
limited number of customers, the
burden to comply with the proposed
rule should also be smaller. To the
extent that IBs can be deemed to be
small entities, the Commission does not
consider the provision of OCR data to
have a significant economic impact.
The Commission specifically requests
comment on whether the proposed rules
will have a significant economic impact
on a substantial number of small
entities.
Accordingly, the 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.
List of Subjects
17 CFR Part 16
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Commodity futures, Reports by
contract markets.
In consideration of the foregoing and
pursuant to the authority contained in
the Commodity Exchange Act, the
Commission hereby proposes to amend
17 CFR Part 16 as follows:
73 48
FR 35248, 35275–78 (Aug. 3, 1983).
may rely on FCMs to carry out customer
identification procedures and thus customer
information may be retained by the FCM.
75 17 CFR 1.37(a)(1).
74 IBs
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PART 16—REPORTS BY CONTRACT
MARKETS
1. The Authority Citation for Part 16
will be amended to read as follows:
Authority: 7 U.S.C. 2, 2(h)(7), 6a, 6c, 6g, 6i,
7, 7a, and 12a, as amended by Title XIII of
the Food, Conservation and Energy Act of
2008, Public Law 110–246, 122 Stat. 1624
(June 18, 2008), unless otherwise noted.
2. Add § 16.03 to read as follows:
§ 16.03 Ownership and control report
(‘‘OCR’’).
(a) Entities required to submit reports.
Ownership and control reports shall be
filed by any registered entity required to
provide the Commission with trade data
on a regular basis, where such data is
used for the Commission’s trade
practice or market surveillance
programs (‘‘reporting entities’’).
Reporting entities include, but are not
limited to, designated contract markets,
derivatives transaction execution
facilities, and exempt commercial
markets with significant price discovery
contracts.
(b) Information to be provided. Each
reporting entity shall provide the
following information with respect to
every trading account also reported in
its trade register:
(1) The trading account number;
(2) The trading account’s ultimate
beneficial owner(s), including:
(i) For each ultimate beneficial owner
who is a natural person—
(A) Their first, middle, and last name,
(B) Their date of birth, and
(C) The address of their primary
residence,
(D) Their National Futures
Association (‘‘NFA’’) identification
number, if any;
(ii) For each ultimate beneficial owner
that is not a natural person—
(A) Their name and primary business
address, and
(B) Their NFA identification number,
if any;
(3) For trading account controller(s)
(who must be natural persons):
(i) The first, middle, and last name of
each controller,
(ii) The date of birth of each
controller, and
(iii) The name and primary business
address of the entity that employs each
controller with respect to the reported
account, if any, and
(iv) The NFA identification number of
each controller, if any;
(4) The date on which the trading
account was assigned to its current
controller(s);
(5) A designation of the trading
account as one whose orders are
generated exclusively by a natural
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person, exclusively by an automated
trading system, or generated sometimes
by a natural person and sometimes by
an automated trading system;
(6) The special account number
associated with the trading account, if
one has been assigned;
(7) An indication of whether the
trading account is part of a reportable
account under the Commission’s large
trader reporting system,
(i) In addition, for a trading account
that becomes part of reportable account
under the Commission’s large trader
reporting system after December 31st,
2011, the date on which the trading
account first becomes part of a
reportable account;
(ii) [Reserved]
(8) An indication of whether the
trading account is a firm omnibus
account, and if so, the name of the firm,
(i) In addition, for a trading account
that becomes part of firm omnibus
account after December 31st, 2011, the
date on which the trading account is
first included in the firm’s omnibus
account;
(ii) [Reserved]
(9) The name of the executing firm for
the trading account, and its unique
identifier reported in the reporting
entity’s trade register;
(10) The name of the clearing firm for
the trading account, and its unique
identifier reported in the reporting
entity’s trade register;
(11) The name of each root data
source providing the reporting entity
with information with respect to the
trading account;
(12) The name of the reporting entity
submitting the OCR to the Commission;
and
(13) The OCR transmission date.
(c) Definition of account controller.
For purposes of this section, ‘‘account
controller’’ means a natural person, or a
group of natural persons, with the legal
authority to exercise discretion over
trading decisions by a trading account,
with the authority to determine the
trading strategy of an automated trading
system, or responsible for the
supervision of any automated system or
strategy. The authority to exercise
discretion is sufficient, regardless of
whether such authority is actually
exercised. An individual who executes
trades for an account, without input or
discretion in any decision involving the
account or its trades, will not be
considered an account controller with
respect to that account.
(d) Account types subject to reporting.
Each reporting entity shall provide the
information required in paragraph (b) of
this section for all trading accounts also
reported in its trade register, including
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19JYP1
Federal Register / Vol. 75, No. 137 / Monday, July 19, 2010 / Proposed Rules
commodity pools and other collective
investment vehicles (‘‘CIV’’), and
omnibus accounts and any accounts
trading on an undisclosed basis.
Disclosure shall be made equally for
accounts representing U.S. and non-U.S.
entities and natural persons. Provided
however, that if an ultimate beneficial
owner’s ownership share of a CIV is less
than 10 percent of the CIV’s net asset
value, as defined in Commission
Regulation 4.10, then the ultimate
beneficial owner need not be reported.
(e) Form, time, and manner of filing
reports; uniform protocol required. Each
reporting entity shall submit its OCR in
the time, manner, and format required
by the Commission or its designee.
Reporting entities shall adopt a single,
uniform protocol, acceptable to the
Commission, for the technical structure
of the OCR.
(f) Protection of OCR data. Each
Reporting entity shall segregate any
information provided by its root data
sources, if such data is provided in
furtherance of the Commission’s OCR
requirements and not otherwise
required to be provided by the reporting
entity (‘‘protected data’’). Reporting
entities must ensure that protected data
is used only for regulatory or
enforcement purposes such as trade
practice surveillance, market
surveillance, audit, investigation, or rule
enforcement. Protected data shall be
under the exclusive control of the
reporting entity’s regulatory compliance
department. Reporting entities shall
establish appropriate firewall
procedures and access controls to
ensure the confidentiality, privacy and
safekeeping of protected data within
their regulatory compliance
departments.
Issued in Washington, DC, on July 8, 2010
by the Commission.
David A. Stawick,
Secretary of the Commission.
mstockstill on DSKH9S0YB1PROD with PROPOSALS
Note: The following appendix will not
appear in the Code of Federal Regulations.
Concurring Statement of Commissioner
O’Malia Regarding the Proposal for the
Account Ownership and Control Report
I concur on the release of the Notice of
proposed rulemaking related to Account
Ownership and Control Report (‘‘OCR’’). The
Commission must gain greater transparency
over the data it receives. The OCR represents
a place where technology must catch-up to
how trades are executed in the futures
markets so critical data ultimately flows to
the Commission.
The events of May 6th clearly highlight
that technology drives the structure and
function of the markets. In order to better
understand trading behavior in the
derivatives markets, including the trading
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17:28 Jul 16, 2010
Jkt 220001
behaviors of high frequency traders, it is
essential to discover who controls which
accounts and how those trading styles impact
markets, including the order book, which is
vital to fulfilling our surveillance and
enforcement obligations. CFTC staff recently
noted in the preliminary report on the events
of May 6th that ‘‘obtaining account
ownership and control information in the
exchange trade registers * * * would
increase the timeliness and efficiency of
account identification, an essential step in
data analysis.’’ 76 The Commission must get
as close as possible to real-time surveillance
and post-trade transparency; the OCR would
move the Commission a step closer to that
goal.
Currently, the data the Commission
receives from exchanges and other reporting
entities lacks information because the
Commission has not demanded it. However,
I believe the Commission must now demand
ownership and control information on all
trading accounts in order to enhance the
transparency of information reported to the
Commission. The proposed rule will allow
the Commission to aggregate related trading
accounts within and across exchanges in
order to better detect abusive trading
practices. For example, the OCR will allow
the Commission’s Division of Market
Oversight to identify small and medium
sized traders whose open interest does not
reach reportable levels, but who can still
have deleterious effects on the markets
during concentrated periods of intra-day
trading. Such intra-day trading scenarios
include intra-day position limit violations
and ‘‘banging the close’’ manipulations.
The OCR will also bridge the gap between
individual transactions reported to the
Commission on exchange trade registers and
aggregate positions reported to it in large
trader data so the Commission can determine
how traders established their positions. The
OCR will allow the Commission’s Office of
the Chief Economist to accurately identify
and categorize market participants based on
their actual trading behavior on a contractby-contract basis, rather than on how they
self-report to the Commission (e.g.,
registration type or marketing/merchandising
activity on CFTC Form 40). In short, the OCR
will allow the Commission to better oversee
the markets.
Based on the comments received from the
Advanced Notice of Proposed Rulemaking
published in the Federal Register on July 2,
2009, I appreciate that there are concerns
regarding the implementation of the OCR for
numerous reasons, including the costs and
the difficulty of acquiring specific data
points. Therefore, it is critical that the
Commission engage market participants
including exchanges, clearing organizations,
futures commission merchants, introducing
brokers, and others to understand what data
is available and the most effective means by
which to acquire this data. I strongly support
the modification to this proposed rule to
accommodate a staff technical conference to
76 Preliminary Findings Regarding the Market
Events of May 6, 2010, Report of the Staffs of the
CFTC and SEC to the Joint Advisory Committee on
Emerging Regulatory Issues (May 18, 2010).
PO 00000
Frm 00016
Fmt 4702
Sfmt 4702
41787
provide market participants an opportunity
to provide constructive recommendations as
to the most effective means by which the
Commission can collect this data.
The proposed financial reform legislation
that is currently being negotiated by the
Conference Committee will issue a new
mandate to the Commission for the oversight
of the swaps market. Under the proposed
legislation the Commission will be hit with
a tsunami of data that will need to be
standardized to reflect ownership, control,
and other information of the massive overthe-counter (OTC) market. If this legislation
is signed into law, the OCR rulemaking,
whether in the post-comment or possible
implementation phase, will coincide with the
Commission’s rulemaking efforts under its
new mandate. Therefore, I hope to receive
comment with respect to the entities (e.g.,
trade repositories, designated contract
markets, or swap execution facilities) from
which the Commission should collect OCR
data and the product and transaction types
for which the Commission should collect
data. I hope to receive comment on any
additional types of information or data
elements related to OTC and swap
transactions that should be collected and
reported to the Commission. Finally, I am
interested in receiving comment on how the
derivatives industry could develop and
maintain a system to assign unique account
identification numbers (‘‘UAIN’’) to all
account owners and account controllers.
On a related issue, I understand that
Commission staff is seeking to automate the
information collected via CFTC Forms 40 and
102. This process is long overdue and must
be accomplished in an expedited fashion.
Automation of these forms will minimize the
manual entry and cross checking of data and
will minimize opportunities for human error.
It is my hope that the Commission will
release for public comment a proposed rule
related to these forms later this summer.
[FR Doc. 2010–17530 Filed 7–16–10; 8:45 am]
BILLING CODE 6351–01–P
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 54
[REG–120391–10]
RIN 1545–BJ58
Requirement for Group Health Plans
and Health Insurance Issuers To
Provide Coverage of Preventive
Services Under the Patient Protection
and Affordable Care Act
Internal Revenue Service (IRS),
Treasury.
ACTION: Notice of proposed rulemaking
by cross-reference to temporary
regulations.
AGENCY:
Elsewhere in this issue of the
Federal Register, the IRS is issuing
SUMMARY:
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19JYP1
| File Type | application/pdf |
| File Title | Document |
| Subject | Extracted Pages |
| Author | U.S. Government Printing Office |
| File Modified | 2010-07-16 |
| File Created | 2010-07-16 |