[Federal Register Volume 59, Number 10 (Friday, January 14, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-962]


[[Page Unknown]]

[Federal Register: January 14, 1994]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Parts 1 and 5

 

Contract Market Rule Review Procedures

AGENCY: Commodity Futures Trading Commission.

ACTION: Final rules.

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SUMMARY: The Commodity Futures Trading Commission (``Commission'') is 
amending Regulation 1.41 to revise the Commission's requirements with 
respect to the number of copies of rule change proposals that an 
exchange must provide to the Commission. The Commission also is 
adopting amendments that would revise certain of the procedures and 
standards set forth in the Commission's expedited approval rules, 
Regulations 1.41(h) through 1.41(t), to reflect recent innovations by 
the exchanges as well as miscellaneous amendments to the procedural 
aspects of the expedited approval rules. Other proposed amendments 
include miscellaneous clarifying amendments to the Commission's 
Guideline No. 1.

EFFECTIVE DATE: February 14, 1994.

FOR FURTHER INFORMATION CONTACT: Richard A. Shilts, Supervisory 
Economist, Division of Economic Analysis, Commodity Futures Trading 
Commission, 2033 K Street, NW., Washington, DC 20581. Telephone: (202) 
254-7303.

SUPPLEMENTARY INFORMATION:

I. Introduction

    Section 5a(a)(12) of the Commodity Exchange Act (``Act''), 7 U.S.C. 
7a(12), provides that all rules\1\ of a contract market which relate to 
terms and conditions\2\ in futures or option contracts traded on or 
subject to the rules of a contract market must be submitted to the 
Commission for its prior approval. Section 5a(a)(12) further requires 
that contract markets submit all other rules to the Commission. Such 
other rules may be made effective ten days after Commission receipt 
unless, within the ten-day period, the Exchange requests Commission 
approval or the Commission notifies the Exchange that it intends to 
review the rules for approval.
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    \1\Commission Regulation 1.41(a)(1) defines ``rule'' of a 
contract market as follows:
    * * * any constitutional provision, article of incorporation, 
bylaw, rule, regulation, resolution, interpretation, stated policy, 
or instrument corresponding thereto, in whatever form adopted, and 
any amendment or addition thereto or repeal thereof, made or issued 
by a contract market, or by the governing board of thereof or any 
committee thereof.
    \2\Commission Regulation 1.41(a)(2) defines ``terms and 
conditions'' as follows:
    Any definition of the trading unit or the specific commodity 
underlying a contract for the future delivery of a commodity or 
commodity option contract, specification of settlement or delivery 
standards and procedures, and establishment of buyers' and sellers' 
rights and obligations under the contract. Terms and conditions 
shall be deemed to include provisions relating to the following:
    (i) Quality or quantity standards for a commodity and any 
applicable exemptions or discounts;
    (ii) Trading hours, trading months and the listing of contracts;
    (iii) Minimum and maximum price limits and the establishment of 
settlement prices;
    (iv) Position limits and position reporting requirements;
    (v) Delivery points and locational price differentials;
    (vi) Delivery standards and procedures, including alternatives 
to delivery and applicable penalties or sanctions for failure to 
perform;
    (vii) Settlement of the contract; and
    (viii) Payment or collection of commodity option premiums or 
margins.
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    Commission Regulation 1.41 sets forth procedures for submitting 
proposed exchange rules for Commission approval, permitting certain 
exchange rules to go into effect without Commission approval, and 
dealing with exchange emergency rules. All proposed exchange rules 
relating to the terms and conditions of a commodity futures or option 
contract must, and any other rule may, be submitted for prior 
Commission approval, under Section 5a(a)(12) of the Act, pursuant to 
procedures set forth in Regulation 1.41(b). Regulation 1.41(c) sets 
forth the submission requirements for rules that do not relate to terms 
and conditions and which may be placed into effect without Commission 
approval ten days after receipt by the Commission. Regulation 1.41(d) 
sets forth the submission requirements for rules that are exempt from 
the requirements of Section 5a(a)(12) of the Act. Regulations 1.41(h) 
through (t) set forth conditions under which, in lieu of submission 
under Regulation 1.41(b), certain types of exchange rule proposals 
relating to terms and conditions requiring Commission approval may be 
deemed approved either upon adoption by the exchange or within a 
specified number of days of Commission receipt, which ranges from one 
to ten days.\3\
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    \3\Regulations 1.41(e) and 1.41(f), respectively, set forth the 
submission requirements for exchange membership and contract market 
rules relating to temporary emergencies. These regulations are not 
affected by the amendments proposed in this notice.
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    In submitting rules to the Commission under any of Regulations 
1.41(b), 1.41(c), or 1.41(h) through (t), an exchange is required to 
furnish three copies of the proposal to the Commission's Washington, DC 
headquarters and one copy to the regional office of the Commission 
having local jurisdiction over that exchange. For rules submitted under 
the provisions of Regulation 1.41(d), an exchange is required to 
furnish one copy of the proposal to the Commission's Washington, DC 
headquarters and one copy to the regional office of the Commission 
having local jurisdiction over that exchange.
    Commission Regulation 1.41a sets forth procedures delegating to the 
Directors of the Divisions of Trading and Markets (T&M) and Economic 
Analysis (DEA) the authority to make certain decisions regarding rule 
submissions. Specifically, this regulation delegates to the Directors 
of T&M and DEA the authority to determine: (1) Whether to remit and not 
accept for review rules submitted under Regulations 1.41(b), (c) or (d) 
that do not comply with the applicable submission requirements of those 
regulations; (2) whether a rule submission submitted under Regulation 
1.41(c) or (d) relates to terms and conditions thus requiring prior 
Commission approval pursuant to the provisions of Regulation 1.41(b); 
(3) whether rules submitted under Regulation 1.41(c) do not require 
prior approval under Section 5a(a)(12) of the Act and Regulation 
1.41(b) and whether such rules may become effective prior to the 
expiration of the ten-day period following receipt for such rules by 
the Commission; and (4) whether proposals submitted under any of the 
expedited procedures of Regulations 1.41(h) through (t) comply with the 
applicable provisions of these regulations and, if not, to notify the 
contract market that the submission is subject to the provisions of 
Regulation 1.41(b).

II. Amendments to Regulation 1.41

    The Commission is adopting amendments to Regulation 1.41 that would 
revise the requirements of Regulations 1.41(b), 1.41(c) and 1.41(h) 
through (t) to reduce to one from three the number of copies of rule 
change proposals that an exchange must furnish to the Commission at its 
Washington, DC headquarters for rule changes submitted under these 
regulations. However, with respect to applications for contract market 
designation, under the amendments the exchanges would continue to be 
required to submit three copies of the application, including the 
proposed rules, to the Commission at its Washington, DC headquarters. 
Amendments to appendix A to part 5 of the Commission's regulations 
reflect this continuing requirement.
    Also, the Commission is eliminating the requirement that exchanges 
must submit one copy of rules submitted under Regulations 1.41(d) and 
1.41(h) through (t) to the regional office of the Commission having 
local jurisdiction over that exchange. The exchanges would continue to 
be required to submit one copy of rule proposals submitted under 
Commission Regulations 1.41(b) and 1.41(c) to the regional office of 
the Commission having local jurisdiction over that exchange.
    The Commission has reviewed its procedures for processing rule 
submissions under Regulations 1.41(b), 1.41(c), and 1.41(h) through 
(t), and, as a result of that review, the Commission has determined 
that the submission of more than one copy of a rule change proposal to 
the Washington, DC headquarters is not necessary. Moreover, the 
Commission has determined that, for rule change proposals submitted 
under Regulations 1.41(d) and 1.41(h) through (t), the submission of a 
copy of such rule to the regional office of the Commission having local 
jurisdiction over that exchange also is not necessary.\4\ Further, 
these amendments would diminish the paperwork burden on the exchanges 
and would reduce costs associated with filing submissions under these 
regulations.
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    \4\These changes would not affect the current submission 
requirements under paragraph (f) of Regulation 1.41 regarding 
temporary emergency rules, where the exchange is required to notify 
the Commission at its Washington, DC headquarters by the fastest 
available means of communication. A written copy of the emergency 
rule shall be furnished to the Commission at its Washington, DC 
headquarters and two copies of the rule shall be furnished to the 
regional office of the Commission having local jurisdiction over 
that exchange.
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    The Commission also is adopting amendments that would clarify and 
update the standards set forth in the expedited approval procedures in 
paragraphs (h), (l), (o), (p), and (q) of Regulation 1.41. Paragraph 
(h) establishes an expedited review procedure for changes to the 
composition, computation, or method of stock selection of a stock index 
in which a contract market is designated to trade futures contracts, or 
options on such futures contracts. Currently, such changes are deemed 
approved upon adoption by the contract market if: (i) The index is 
compiled for commercial purposes by an independent third party; (ii) 
the change is consistent with a rule of the contract market which has 
been approved by the Commission for this purpose which specifically 
defines, or establishes standards governing, the composition of the 
stock index upon which the designated futures contracts are authorized 
to trade; (iii) the contract market provides the Commission with 
written notice of the change within five days after the change is 
adopted by the contract market; and (iv) the contract market labels the 
written notice as being submitted under Regulation 1.41(h). This 
expedited procedure was established because routine changes to an index 
to maintain its continuity were not expected to require detailed review 
by the Commission under paragraph (b) of Regulation 1.41.
    Based on approximately 10 years of experience in administering the 
provisions of Regulation 1.41(h), the Commission has determined that 
the submission to the Commission on a routine basis of changes which 
relate to maintaining the continuity of a stock index is not necessary. 
Further, deleting this requirement would reduce the paperwork burden on 
the exchanges.
    Accordingly, the amendment to Regulation 1.41(h) would delete items 
(iii) and (iv) above, so that a contract market no longer would be 
required to submit routinely to the Commission a written notice of a 
change in the composition, computation, or method of stock selection 
that is made to maintain the continuity of a stock index in which that 
contract market is designated to trade futures or futures option 
contracts. In order for such a change to be deemed approved by the 
Commission pursuant to Regulation 1.41(h) as amended, the index must 
continue to be compiled for commercial purposes by an independent third 
party, and the change must be consistent with a rule of the contract 
market which has been approved by the Commission for this purpose which 
defines, or establishes standards governing, the composition of the 
stock index. Under the amended regulation, however, such changes would 
not routinely be required to be submitted to the Commission following 
adoption by the exchange. As currently provided, contract markets would 
continue to be required to submit to the Commission for review and 
approval under Regulation 1.41(b) all changes to the composition, 
computation, or method of stock selection that are for purposes other 
than the continuity of the index.
    Further, under amended Regulation 1.41(h), contract markets would 
be required to provide to the Commission, upon special call to the 
contract market, information regarding the composition, computation, or 
method of stock selection of the index, including any change or changes 
related to the continuity of the index, or any other issues relating to 
the index, as instructed, and within the time, and for the period, 
specified in the call. Such a special call would provide the Commission 
with information, as requested, to assure that the contract market 
continued to meet its regulatory obligations.
    Paragraph (l) of Regulation 1.41 establishes an expedited procedure 
for changes in trading months. Such changes are deemed approved 10 days 
after the Commission receives written notification of the proposal, 
provided certain conditions are satisfied. The amendment to paragraph 
(l) would clarify that this paragraph applies to exchange proposals to 
delist contract months without open interest as well as to exchange 
proposals to list new months. In that regard, the division directors or 
their delegees routinely process requests to delist contact months 
under Regulation 1.41(l), as long as the months to be delisted have no 
open interest. The amendment simply clarifies the division directors' 
delegated authority in this regard.
    Paragraph (o) establishes an expedited procedure for changes in 
strike price listing procedures. Such changes are deemed approved 10 
days after the Commission receives written notification of the 
proposal, provided certain conditions are satisfied. The amendment to 
paragraph (o) would clarify that this paragraph applies to exchange 
proposals to amend strike price listing procedures for listed options 
without open interest, as well as for options not listed, at the time 
the rule goes into effect.
    Paragraph (p) establishes an expedited procedure for changes in the 
last trading day of an option contract. Such changes are deemed 
approved 10 days after the Commission receives written notification of 
the proposal, provided certain conditions are satisfied. One amendment 
to paragraph (p) would clarify that this paragraph applies to listed 
options without open interest, as well as to options not listed, at the 
time the rule goes into effect. Another amendment is non-substantive 
and would correct a typographical error in section (3) of that 
paragraph. Specifically, the amendment would clarify that the 
Commission will, within 10 days after receipt of a submission regarding 
a change in option last trading day specifications, notify the contract 
market if the change appears to not be consistent with the provisions 
of this paragraph.
    Paragraph (q) of Regulation 1.41 provides that changes related to 
``cabinet trade'' provisions for options may be approved under 
expedited procedures. A cabinet trade currently is defined as an option 
trade that represents a closing transaction for both parties to the 
trade and which is specifically identified as such in the contract 
market's rules. The amendments to paragraph (q) revise the expedited 
approval standard to remove the requirement that option cabinet trade 
rules eligible for treatment under this paragraph must involve closing 
transactions exclusively. This revision in the expedited approval 
standard reflects recent innovations by the exchanges with respect to 
cabinet trade provisions. An amendment to section (3) of that paragraph 
is non-substantive and corrects a typographical error. Specifically, 
the amendment clarifies that the Commission will, within 10 days after 
receipt of a submission regarding a change in the cabinet trade 
provisions of an option contract, notify the contract market if the 
change appears to not be consistent with the provisions of this 
paragraph.

III. Amendments to Regulation 1.41a

    In connection with the foregoing amendments to Regulation 1.41, the 
Commission is adopting amendments to paragraph (a)(5) of Regulation 
1.41a. Currently, as noted above, this regulation delegates to the 
Director of the Division of Trading and Markets and to the Director of 
the Division of Economic Analysis, or their respective delegees, 
authority to determine whether changes submitted under paragraphs (h)-
(t) of Regulation 1.41 are inconsistent with the relevant provisions of 
those paragraphs and to notify contract markets if such submissions are 
to be subject to the usual review procedures under Section 5a(a)(12) of 
the Act and Regulation 1.41(b).
    One amendment to Regulation 1.41a provides that the Director of the 
Division of Trading and Markets and the Director of the Division of 
Economic Analysis, or their respective delegees, have the delegated 
authority to give notice that rules submitted pursuant to 
Secs. 1.41(k)-(t) comply with the provisions of Secs. 1.41(k)-(t), as 
applicable, and therefore shall be deemed approved prior to the end of 
the period specified in the applicable rule. Such period commences on 
the day the rule is received by the Commission at its Washington, DC 
headquarters. The Commission has received requests from exchanges for 
notice that rules submitted under the expedited procedures of 
Secs. 1.41(k)-(t) are deemed approved prior to the end of the specified 
period in order to provide for timely implementation of rules to 
respond to rapidly changing market conditions or to avoid a market 
problem.
    Another amendment to Regulation 1.41a would expand the delegated 
authority of the Director of the Division of Trading and Markets and 
the Director of the Division of Economic Analysis, or their respective 
delegees, to notify a contract market that a rule submitted under 
Section 5a(a)(12) of the Act and Sec. 1.41(b) will be treated as if 
submitted pursuant to Secs. 1.41(h)-(t), as applicable, if the rule 
submitted pursuant to the provisions of Sec. 1.41(b) complies with any 
of the provisions of Secs. 1.41(h)-(t). Current procedures can delay 
processing of the proposal and impede timely implementation of the 
rule.

IV. Amendments to Commission Guideline No. 1

    Guideline No. 1 sets forth the Commission's economic and public 
interest requirements for initial and continuing designation of a 
contract market in a particular commodity. The Commission is proposing 
to revise this guideline to correct an improper rule reference. 
Specifically, item 5 in column 2 of the ``Option Designation Checklist 
For Options On Futures Contracts'' (option on futures checklist) and 
the ``Option Designation Checklist For Options on Physicals'' (option 
on physicals checklist) regarding the option expiration criteria cites 
Commission Regulation 33.4(d)(1) as the applicable Commission 
regulation for these criteria. However, as a result of substantive 
revisions to the Commission's option regulations adopted in September 
1991 (56 FR 43694), many of the Commission's option regulations were 
renumbered, including Regulation 33.4(d)(1) which was renumbered as 
33.4(b)(2). Therefore, the Commission hereby is amending the option 
checklists to replace 33.4(d)(1) with 33.4(b)(2) as the cited 
Commission regulation for the option expiration criteria in each of 
those checklists.

Related Matters

A. Regulatory Flexibility Act
    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq., 
requires that agencies, in adopting rules, consider their impact on 
small businesses. The Commission has previously determined that 
contract markets are not small entities for purposes of the Regulatory 
Flexibility Act. 47 FR 18618 (April 30, 1982). Moreover, no additional 
regulatory burdens are imposed by these amendments. Therefore, the 
Acting Chairman on behalf of the Commission hereby certifies, pursuant 
to 5 U.S.C. 605(b), that the action taken herein will not have a 
significant economic impact on a substantial number of small entities.
B. Paperwork Reduction Act
    The Paperwork Reduction Act of 1980 (PRA), 44 U.S.C. 3501 et seq., 
imposes certain requirements on federal agencies (including the 
Commission) in connection with their conducting or sponsoring any 
collection of information as defined by the Paperwork Reduction Act. In 
compliance with the Act, the Commission has submitted these amended 
rules and their associated information collection requirements to the 
Office of Management and Budget.
    While these amended rules result in no increased burden, the group 
of rules (OMB control # 3038-0007) of which they are a part has the 
following burden:
    Average Burden Hours per Response: 50.34.
    Number of Respondents: 10,727,182.
    Frequency of Response: Monthly.
    Persons wishing to comment on the estimated paperwork burden 
associated with these amended rules should contact Gary Waxman, Office 
of Management and Budget, room 3228, NEOB, Washington, DC 20503. Copies 
of the information collection submission to OMB are available from Joe 
F. Mink, CFTC Clearance Officer, 2033 K Street, NW., Washington, DC 
20581, (202) 254-9735.
C. Notice and Comment
    Section 553(b) of the Administrative Procedure Act, 5 U.S.C. 
553(b), requires in most instances that a notice of proposed rulemaking 
be published in the Federal Register and that opportunity for comment 
be provided when an agency promulgates new regulations. Section 553(b) 
sets forth an exception, however, for rules of agency organization, 
procedure, or practice. The instant amendments provide expedited 
procedures for the approval of certain contract market rules. The 
Commission has determined that these amendments, which will reduce the 
burden on the exchanges, relate to Commission procedure and practice 
and therefore that notice and comment is not required.
    Section 553(b) also sets forth an exception to the requirement of 
notice and opportunity for public comment when the Commission for good 
cause finds such notice and public comment are unnecessary or contrary 
to the public interest. The Commission finds that notice and public 
comment on the rule changes announced herein are unnecessary because 
the changes are procedural in nature and do not establish any new 
obligations under the Act.

List of Subjects in 17 CFR Parts 1 and 5

    Commodity futures, Contract market rules, Consumer protection, Rule 
review procedures, Reporting and recordkeeping requirements.

    In consideration of the foregoing and pursuant to the authority 
contained in the Commodity Exchange Act and, in particular, sections 
4c, 5a, and 8a thereof, 7 U.S.C. 6c, 7a and 12a, the Commission hereby 
amends parts 1 and 5 of chapter I of title 17 of the Code of Federal 
Regulations as follows:

PART 1--GENERAL REGULATIONS UNDER THE COMMODITY EXCHANGE ACT

    1. The authority citation for part 1 continues to read as follows:

    Authority: 7 U.S.C. 2, 2a, 4, 4a, 6, 6a, 6b, 6c, 6d, 6e, 6f, 6g, 
6h, 6i, 6j, 6k, 6l, 6m, 6n, 6o, 6p, 7, 7a, 7b, 8, 9, 12, 12a, 12c, 
13a, 13a-1, 16, 16a, 19, 21, 23, and 24, unless otherwise stated.

    2. Section 1.41 is amended by revising paragraphs (b) introductory 
text, (c)(1), (d)(2) and (h), by redesignating (l)(1)(iii) as 
(l)(1)(iv) and adding a new (l)(1)(iii), and by revising (o)(1)(ii), 
(p)(2)(ii), (p)(3), and (q) to read as follows:


Sec. 1.41  Contract market rules; submission of rules to the 
Commission; exemption of certain rules.

* * * * *
    (b) Submission of rules for prior Commission approval. Except as 
provided herein and in paragraph (f) of this section, all proposed 
contract market rules that relate to terms and conditions and any other 
rules that the Commission has determined pursuant to paragraph (c) of 
this section require prior approval must, and any other rule may, be 
submitted to the Commission for approval pursuant to section 5a(a)(12) 
of the Act prior to their proposed effective dates. One copy of each 
such rule submitted under this section shall be furnished to the 
Commission at its Washington, DC headquarters, and, excluding 
submissions under paragraphs (h) through (t) of this section, one copy 
shall be furnished to the regional office of the Commission having 
local jurisdiction over the contract market. Provided, however, that 
for submissions under appendix A to part 5 of the Commission's 
Regulations with respect to contract market designation applications, 
three copies of such submissions shall be furnished to the Commission 
at its Washington, DC headquarters. Each submission under this 
paragraph (b) shall, in the following order:
* * * * *
    (c) Rules that do not relate to terms and conditions. (1) Except as 
provided in paragraphs (d) and (f) of this section (exempt or temporary 
emergency rules), one copy of any rule which does not relate to terms 
and conditions or which a contract market proposes to place into effect 
without submission to the Commission for approval under section 
5a(a)(12) of the Act and paragraph (b) of this section shall be 
furnished to the Commission at its Washington, DC headquarters at least 
ten days prior to its proposed effective date. One copy also shall be 
transmitted by the contract market to the regional office of the 
Commission having local jurisdiction over the contract market. Each 
such submission shall be labeled as being submitted pursuant to 
paragraph (c) of this section and include the information required by 
paragraphs (b)(2) through (b)(5) of this section.
* * * * *
    (d) * * *
    (2) Rules that are exempt from the requirements of section 
5a(a)(12) of the Act in accordance with the provisions of this 
paragraph (d) shall nonetheless be submitted to the Commission pursuant 
to the provisions of section 5a(a)(1) of the Act. Each such submission 
shall be labeled as being submitted pursuant to section 5a(a)(1) of the 
Act and paragraph (d) of this section. One copy of each such submission 
shall be furnished to the Commission at its Washington, DC 
headquarters.
* * * * *
    (h) Stock index contracts. (1) Notwithstanding the provisions of 
paragraph (b) of this section, all changes in the composition, 
computation, or method of stock selection of a stock index in which a 
contract market is designated to trade futures contracts, or options on 
such futures contracts, shall be deemed approved by the Commission at 
the time such changes are adopted by a contract market if:
    (i) The index is compiled for commercial purposes by an independent 
third party; and
    (ii) The change is consistent with a rule of the contract market 
which has been approved by the Commission for this purpose which 
specifically defines, or establishes standards governing, the 
composition of the stock index upon which the designated futures 
contracts are authorized to trade.
    (2) The contract market must provide to the Commission, upon 
special call, information regarding the composition, computation, or 
method of stock selection of the index, including any change or 
changes, or any other issues relating to the index, as instructed, and 
within such time, and for such a period, specified in the call.
* * * * *
    (l) * * *
    (1) * * *
    (iii) For proposals to delist previously listed futures or option 
contract months, the months to be delisted have no open interest at the 
time of delisting.
* * * * *
    (o) * * *
    (1) * * *
    (ii) The amended rule does not affect any option with open interest 
at the time the rule goes into effect.
* * * * *
    (p) * * *
    (2) * * *
    (ii) The amended last trading day rule does not apply to any option 
with open interest at the time the rule goes into effect.
* * * * *
    (3) The Commission will, within 10 days after receipt by the 
Commission of notice of a change in the last trading day specification 
of an option contract, notify the contract market making the submission 
if it appears that the change is not consistent with the provisions of 
this paragraph. Upon such notification by the Commission to the 
contract market, the change will be subject to the usual procedures 
under section 5a(a)(12) of the Act and paragraph (b) of this section.
    (q) Option cabinet trade provisions. (1) For purposes of this 
paragraph, a cabinet trade is defined as an option trade that 
represents a transaction whereby the per-contract value of the cabinet 
trade is less than the per-contract value associated with a trade at 
the existing minimum premium fluctuation specified in the contract 
market's rules for that option contract.
    (2) Notwithstanding the provisions of paragraph (b) of this 
section, all initial specifications of, and changes to, option cabinet 
trade provisions shall be deemed approved by the Commission 10 days 
after written notice of such change is received by the Commission if:
    (i) The initial specification of a cabinet trade rule or a change 
thereto provides that the per-contract value (or values) of the cabinet 
trade is (are) less than the per-contract value associated with a trade 
at the existing minimum premium fluctuation specified in the contract 
market's rules for that option contract.
    (ii) The contract market labels the written notice as being 
submitted pursuant to paragraph (q) of this section.
    (3) The Commission will, within 10 days after receipt by the 
Commission of notice of a change in the cabinet trade provisions of an 
option contract, notify the contract market making the submission if it 
appears that the change is not consistent with the provisions of this 
paragraph. Upon such notification by the Commission to the contract 
market, the change will be subject to the usual procedures under 
section 5a(a)(12) of the Act and paragraph (b) of this section.
* * * * *
    3. Section 1.41a is amended by revising paragraph (a)(5) to read as 
follows:


Sec. 1.41a  Delegation of authority to the Directors of the Division of 
Trading and Markets and the Division of Economic Analysis to process 
certain contract market rules.

    (a) * * *
    (5) Pursuant to Secs. 1.41(h) through (t) to determine:
    (i) Whether contract market rules submitted pursuant to Section 
5a(a)(12) of the Act and the provisions of Secs. 1.41(h) through (t) 
comply with the provisions of Secs. 1.41(h) through (t), as applicable;
    (ii) To give notice that rules submitted pursuant to Secs. 1.41(k) 
through (t) comply with the provisions of Secs. 1.41(k) through (t), as 
applicable, and therefore shall be deemed approved prior to the end of 
the period specified in the applicable rule, commencing on the day the 
rule is received by the Commission at its Washington, DC headquarters;
    (iii) If contract market rules submitted pursuant to the provisions 
of Secs. 1.41(h) through (t) do not comply with the applicable 
provisions of these regulations, to notify the submitting contract 
market that such rules are therefore subject to the procedures 
specified in Section 5a(a)(12) of the Act and Sec. 1.41(b); and
    (iv) If contract market rules submitted pursuant to the provisions 
of Sec. 1.41(b) comply with any of the provisions of Secs. 1.41(h) 
through (t), to notify the contract market that such rules will be 
treated as if submitted pursuant to Secs. 1.41(h) through (t) as 
applicable.
* * * * *

PART 5--DESIGNATION OF AND CONTINUING COMPLIANCE BY CONTRACT 
MARKETS

    4. The authority citation for part 5 continues to read as follows:

    Authority: 7 U.S.C. 6c, 7, 7a, 8 and 12a, unless otherwise 
noted.

    5. Appendix A to part 5, Commission Guideline No. 1, is amended by 
revising the introductory text of the appendix and by revising the 
option designation checklists in paragraph (b)(2) and paragraph (c)(5) 
to read as follows:

Appendix A to Part 5--Guideline No. 1; Interpretive Statement Regarding 
Economic and Public Interest Requirements for Contract Market 
Designation

    For purposes of a board of trade seeking designation as a contract 
market and thereafter for the purpose of demonstrating continued 
compliance with the requirements of sections 4c, 5 and 5a of the 
Commodity Exchange Act, and regulations thereunder, the following shall 
be provided to the Commission. The board of trade shall furnish to the 
Commission at its Washington, DC headquarters three copies of the 
application including the proposed rules.
* * * * *
    (b) * * *
    (2) * * *

      Option Designation Checklist for Options on Futures Contracts     
------------------------------------------------------------------------
                     Applicable                               Met by    
    Criteria      Commission Rule,        Standard         exchange rule
                       17 CFR                                 number    
------------------------------------------------------------------------
1. Speculative    1.61............  Combined net                        
 limits.                             position in futures                
                                     and options on a                   
                                     futures-equivalent                 
                                     basis at the                       
                                     futures position                   
                                     levels, with inter-                
                                     month spread                       
                                     exemptions that are                
                                     consistent with                    
                                     those of the                       
                                     futures contracts.                 
2. Aggregation    1.61(g).........  Same as section                     
 rule.                               1.61(g) of this                    
                                     chapter or                         
                                     previously approved                
                                     language.                          
3. Reporting      15.00(b)(2).....  50 contracts or                     
 level.                              fewer.                             
4. Strike prices  33.4(b)(1)......  Procedures for                      
                                     listing strikes are                
                                     specified and                      
                                     automatic.                         
5. Option         33.4(b)(2)......  Options, except for                 
 expiration.                         options on cash-                   
                                     settled futures                    
                                     contracts, expire                  
                                     not less than one                  
                                     business day before                
                                     the earlier of the                 
                                     last trading day or                
                                     the first notice                   
                                     day of the                         
                                     underlying futures                 
                                     contract.                          
6. Minimum tick.  33.4(d).........  Tick is equal to, or                
                                     less than, the                     
                                     underlying futures                 
                                     tick.                              
7. Daily price    33.4(d).........  Price limit, if any,                
 limit, if                           is equal to, or                    
 specified.                          greater than,                      
                                     underlying futures                 
                                     price limit .                      
------------------------------------------------------------------------

* * * * *
    (c) * * *
    (5) * * *

          Option Designation Checklist for Options on Physicals         
------------------------------------------------------------------------
                     Applicable                               Met by    
    Criteria      Commission Rule,        Standard         exchange rule
                       17 CFR                                 number    
------------------------------------------------------------------------
1. Speculative    1.61............  If there is a                       
 limits.                             futures contract in                
                                     the same commodity                 
                                     on the same                        
                                     exchange, combined                 
                                     futures and options                
                                     on a futures-                      
                                     equivalent basis at                
                                     the futures                        
                                     position levels,                   
                                     with inter-month                   
                                     spread exemptions                  
                                     that are consistent                
                                     with those of the                  
                                     futures contracts.                 
2. Aggregation    1.61(g).........  Same as Section                     
 rule.                               1.61(g) of this                    
                                     chapter or                         
                                     previously approved                
                                     language.                          
3. Reporting      15.00(b)(2).....  50 contracts or                     
 level.                              fewer.                             
4. Strike prices  33.4(b)(1)......  Procedures for                      
                                     listing strikes are                
                                     specified and                      
                                     automatic.                         
5. Option         33.4(b)(2)......  Options expire not                  
 expiration.                         less than one                      
                                     business day before                
                                     the earlier of the                 
                                     last trading day or                
                                     the first notice                   
                                     day of any futures                 
                                     contract in the                    
                                     same or a related                  
                                     commodity, except                  
                                     for cash-settled                   
                                     futures contracts .                
------------------------------------------------------------------------

* * * * *
    Issued in Washington, DC on January 10, 1994, by the Commission.
Jean A. Webb,
Secretary of the Commission.
[FR Doc. 94-962 Filed 1-13-94; 8:45 am]
BILLING CODE 6351-01-M