[Federal Register Volume 61, Number 34 (Tuesday, February 20, 1996)]
[Rules and Regulations]
[Pages 6310-6315]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-3568]



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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 17


Reports by Futures Commission Merchants, Members of Contract 
Markets, and Foreign Brokers

AGENCY: Commodity Futures Trading Commission.

ACTION: Final rulemaking.

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SUMMARY: The Commodity Futures Trading Commission (Commission or CFTC) 
is amending rule 17.01 and modifying the form 102 required to be filed 
by clearing members, futures commission merchants (FCMs), and foreign 
brokers. This form identifies persons having financial interest in, or 
control of, special accounts in futures and options. The amendments 
being adopted clarify the information required on the form 102 for 
various kinds of special accounts reported to the Commission. The 
Commission is also amending rule 17.02 concerning the time in which a 
completed form 102 must be filed. The rule requires that firms provide 
certain specified identification information upon request by the 
Commission or its designee on the day when a special account is first 
reported, and that a completed form 102 be filed with the Commission 
within three business days.

EFFECTIVE DATE: August 20, 1996.

FOR FURTHER INFORMATION CONTACT: Lamont L. Reese, Supervisory 
Statistician, Division of Economic Analysis, Commodity Futures Trading 
Commission, Three Lafayette Centre, 1155 21st Street NW., Washington, 
DC 20581, (202) 418-5310.

SUPPLEMENTARY INFORMATION:

I. Background

A. Large Trader Reporting System

    Part 17 of the Commission's regulations requires that FCMs, 
clearing members, and foreign brokers (firms) submit a daily report to 
the Commission with respect to futures positions in all special 
accounts on their books.1 Information required to be provided to 
the Commission includes quantities of reportable futures positions, 
exchanges of futures for cash, and delivery notices issued or stopped 
by each special account.2 For reporting purposes, futures 
positions in all accounts controlled by the same person and those in 
which a person has a ten percent or more financial interest must be 
combined and treated as if they are held in a single account. The firm 
assigns a reporting number to the special account and reports all 
information to the Commission using this number.3

    \1\ Special account means any commodity futures or option 
account in which there is a reportable position, 17 CFR 15.00 
(1994). Firms report futures information to the Commission and 
option information to the exchanges.
    \2\ A reportable position is any open position held or 
controlled by a trader at the close of business in any one futures 
contract of a commodity traded on any one contract market that is 
equal to or in excess of the quantities fixed by the Commission in 
Sec. 15.03 of the regulations, 17 CFR 15.03 (1994).
    \3\ The firm's reporting number may be the account number 
carried on its books. However, as noted above, the number may refer 
to a collection of accounts that are owned and/or controlled by the 
same person.
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    In addition to the reporting number and the position and 
transaction information mentioned above, the firm must file a CFTC form 
102 showing the information specified under Sec. 17.01 of the 
regulations for each special account.4 This information identifies 
persons who have a financial interest in or trading control of a 
special account, informs the Commission of the type of account that is 
being reported, and gives preliminary information whether positions and 
transactions are commercial or noncommercial in nature. The form must 
be filed when the account first becomes reportable, and updated when 
information concerning financial interest in, or control of, the 
special account changes.5 In addition to its use by the 
Commission, the form 102 is used by the exchanges to identify accounts 
reported through their large trader reporting systems for both futures 
and options.6

    \4\ 17 CFR 17.01 (1994).
    \5\ 17 CFR 17.02 (1994).
    \6\ Part 17 of the regulations requires that firms identify 
large traders in options on the form 102 and transmit the form to 
the appropriate exchange in accordance with their rules. Those 
exchanges that maintain a futures large trader reporting system also 
use the CFTC form 102 for identifying futures large traders.
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B. Proposed Rulemaking

    In June 1995 the Commission published in the Federal Register a 
proposal to change its form 102 and Secs. 17.01 and 17.02 of its 
regulations to resolve some of the ambiguities in the present form, 
making it more useful to both the exchanges and the Commission (60 FR 
31653 June 16, 1995). The Commission also requested comment on a 
proposal set forth by the Chicago Mercantile Exchange (CME) to obtain 
information on the form 102 in machine-readable form.
    The Futures Industry Association (FIA), two exchanges, and two FCMs 
commented on the Commission's proposal. All commentors supported 
Commission efforts to clarify information requested on its form 102 and 
supported the initiative of the CME to obtain data in machine-readable 
form. Some commentors took issue with certain of the new requirements, 
asking that they be eliminated or modified. These comments are 
discussed in detail below.7 Commission staff will continue to 
explore the feasibility of obtaining information on the form 102 
electronically, both with the FIA and the exchanges.

    \7\ The Commission also proposed to amend rule 17.01 to require 
that option and futures accounts be reported using the same 
designator, which may be any string of alphanumeric characters up to 
the maximum number permitted. Commentors supported this proposal, 
since using the same designator for both types of accounts for the 
same persons reduces the number of form 102s that firms must file 
and that the Commission must process. In view of this, the 
Commission is adopting this rule as proposed.
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II. Comments on Proposed Rule Changes

A. Special Account Identifying Information

    The proposed form requires that firms provide registration 
information if the person reported is registered as a commodity trading 
advisor (CTA) or securities investment advisor (SIA). The FIA opined 
that the responsibility for monitoring compliance with persons' 
registration status rested with the National Futures Association (NFA) 
and the Securities and Exchange Commission (SEC). In view of this, they 
recommended that this requirement be eliminated.
    The Commission currently collects information concerning persons' 
registration status through means other than the form 102.8 The 
request for firms to provide registration information on the form 102 
comes principally from the exchanges. As explained in the notice of 
proposed rulemaking, the rules of some exchanges require that they 
obtain this information for enforcement purposes. The exchanges, 
however, collect information only from their 

[[Page 6311]]
members, not from their members' customers. The exchanges, therefore, 
rely solely on the form 102 for routine information concerning futures 
trading participants. Although the exchanges could design their own 
account identification forms to collect this information, a 
proliferation of such forms would be burdensome for the industry. 
Adding the requirement that this information be included on the form 
102 will result in an overall reduction in paperwork and a savings for 
all parties involved. Moreover, if the firms provide this information 
to the Commission, it will be more timely and complete. In view of the 
above, the Commission is adopting this requirement as proposed.

    \8\ This is generally through the form 40 filed by reportable 
traders and through the NFA (17 CFR Sec. 18.04, 1994).
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    The FIA also sought clarification concerning identifying 
information that must be provided in four different circumstances. The 
Commission announced in its notice of proposed rulemaking that 
Commission staff, after consulting with the exchanges, would provide 
written advisories on reporting issues raised by firms. The Commission 
believes that the questions raised by FIA are in this category and has 
asked that the Division of Economic Analysis respond to these issues.

B. Reporting Controlled Accounts

    When identifying special accounts controlled by independent account 
controllers, the Commission proposed that firms provide the following 
information:
    1. For publicly-offered managed or guided account programs in which 
ten or more accounts participate, the name and account number used for 
the program and, in addition, for commodity pools that participate in 
the program, the name and address of the commodity pool operator; and
    2. For each controlled account not included in 1 above, the account 
number and the names and addresses of persons having a ten percent or 
more financial interest in the account.
    As explained in the Federal Register release, amendments to rule 
17.01 were made in June of 1993 to limit the information provided about 
controlled accounts (58 FR 33329 June 17, 1993).9

    \9\ Previous to these amendments, firms were required to 
identify the beneficial owners of all controlled accounts even 
though, in general, accounts that were a part of customer trading 
programs were held by small traders whose identity for surveillance 
purposes was not needed on a routine basis.
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    The FIA and the exchanges questioned the need for firms to provide 
a name for each customer trading program. The FIA noted that, since no 
definition or purpose is provided on the form itself for program name, 
firms are likely to provide the wrong information. The Commission 
agrees and has changed its form 102 accordingly. Rather than asking for 
program names, firms will only indicate whether a person controls ten 
or more accounts. Further instructions for reporting will be based on 
the answer to this question.
    The FIA was also concerned that providing the proposed additional 
information for controlled accounts would often pose an administrative 
burden on the reporting firms. Except for requiring account numbers, 
the proposed requirements are the same as current requirements in 
regulation 17.01(b)(6). The Commission believes this information is 
important for properly combining accounts for the same traders and will 
adopt these amendments as proposed. The proposed amendments also 
provide that the required information be updated whenever it changes. 
The Commission is amending its proposal so that updates to the 
information required by these rules must be provided only on call by 
the Commission or its designee. The Commission believes this will 
alleviate much of the administrative burden imposed by these 
requirements.

C. Two-Part Filing Requirements

    The Commission proposed that certain identification information be 
provided to the Commission on the first day that an account is reported 
to the Commission, and that a completed form be provided within three 
business days of that date. The FIA was concerned that the two-part 
filing requirement would not be beneficial to the industry and may 
impose additional administrative burdens upon operations' personnel. 
The FIA proposed that firms provide the identifying information by 
facsimile or telephone on the first day that a special account is 
reported only in response to a request by the Commission or its 
designee. In a majority of cases, Commission staff currently request 
form 102s when accounts are first reported. In view of this, the 
Commission is amending its proposal as recommended by the FIA. The 
Commission emphasizes however, that these amendments in no way 
alleviate the responsibility of firms to appropriately combine and 
report accounts. Accounts that are not combined to determine reporting 
status and for reporting may lead to a loss of important surveillance 
information.10

    \10\ The Commission also proposed amendments to rule 17.02 
concerning the submission of position and transaction information in 
hard-copy form. The Commission proposed that this information be 
supplied by facsimile or in accordance with instructions by the 
Commission or its designee. Since no comments were received 
concerning this requirement, the Commission is adopting this 
amendment as proposed.
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    Two exchanges commenting on the Commission's proposal also 
expressed some concern about the two-part filing requirement. Under 
Commission regulations, firms report large trader option positions only 
to the exchanges which in turn report them to the Commission (17 CFR 
16.02). Firms identify reportable option accounts on the form 102 and 
provide these to the exchanges. These also are provided to the 
Commission by the exchanges. The exchanges expressed concern that the 
two-part requirement would affect the current turnover period allowed 
the exchanges. Both exchanges suggested that, if it were necessary to 
obtain option account identification quickly, the Commission do so 
independently through the reporting firms. One exchange suggested that 
the Commission receive both the position information and form 102s for 
option traders directly from reporting firms to reduce duplication of 
effort and avoid delays.
    In light of the final rule, which permits filing of the form 102 in 
three days unless called for by the Commission, the turnover time for 
the exchanges will be unaffected. Moreover, calls for information will 
go directly to the reporting firms as the exchanges suggested.

D. Clarification of Required Information

    The FIA requested clarification concerning the distinction the 
Commission made, if any, between an individual and sole proprietorship, 
since both terms were used on the form. The Commission recognizes that 
there may be little, if any, distinction between the terms. At times, 
however, accounts have been reported in the name of a business 
organized as a sole proprietorship. This term has been included on the 
form only to prevent confusion when firms specify the organization of 
the trader being reported.11

    \11\ If the owner of a sole proprietorship trades an account in 
the name of the business and separately an individual account, the 
accounts should be aggregated and can be reported either in the name 
of the individual or the business.
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    The FIA also asked whether the omnibus clearing status of a United 
States or offshore bank trading for customers was discernible from the 
information requested on the form. The regulations require that firms 
determine if an account they carry is a house or customer omnibus 
account. The Commission relies on reporting firms to 

[[Page 6312]]
obtain accurate information concerning the omnibus clearing status for 
accounts in whatever manner is necessary. This may require that firms 
obtain information not included on the form.

E. Effective Date

    One exchange has asked for a substantial period of time between 
publication of the final rules in the Federal Register and the 
effective date of the amendments in order to change computer software 
that captures information on the form. A delayed effective date may 
also assist firms in implementing use of the new forms. Accordingly, 
the Commission has determined that the effective date of these 
amendments be six months after they are published in the Federal 
Register. However, the Commission can process the new forms 
immediately. Therefore, if at any time prior to the effective date 
exchanges request that the new form be used by firms reporting to them, 
the firms may also use the new form to identify accounts to the 
Commission.

III. Other Related Matters

A. The Regulatory Flexibility Act (RFA)

    The RFA requires that agencies consider the impact of substantive 
rules on small businesses. These amendments affect large traders, FCMs, 
commodity pools, CTAs and other similar entities, such as foreign 
brokers and foreign traders. The Commission has defined ``small 
entities'' in evaluating the impact of its rule in accordance with the 
RFA, 47 FR 18618-18621 (April 30, 1982).
    In that statement, the Commission concluded that large traders and 
FCMs are not considered to be small entities for purposes of the RFA. 
In this regard, the amendments to reporting requirements relating to 
the form 102 fall mainly upon FCMs. Similarly, foreign brokers and 
foreign traders report only if carrying or holding reportable 
positions, i.e., large positions. Thus, pursuant to section 3(a) of the 
RFA (5 U.S.C. 605(b)), the Chairman, on behalf of the Commission, 
certified in its proposal for rulemaking that these proposed rules 
would not have a significant economic impact on a substantial number of 
small entities. The Commission however, invited comments from any firm 
which believed that these rules would have a significant economic 
impact upon its operation. No comments were received.

B. Paperwork Reduction Act (PRA)

    The PRA of 1980, 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 PRA. In compliance with the PRA, the 
Commission has submitted these rules and their associated information-
collection requirements to the Office of Management and Budget (OMB). 
OMB approved the requirements associated with this rule on September 
14, 1995.
    The burden associated with the entire collection, including this 
rule, is as follows:
    Average Burden Hours Per Response--.1587 hour.
    Number of Respondents--3709.
    Frequency of Response--Daily.
    The burden associated with this specific proposed rule, is as 
follows:
    Average Burden Hours Per Response--0.2 hour.
    Number of Respondents--6,592.
    Frequency of Response--On occasion.
    Copies of the OMB-approved information-collection requirements may 
be obtained from Jeff Hill, Office of Management and Budget, Room 3228, 
NEOB, Washington, DC 20503, (202) 395-7340.

List of Subjects in 17 CFR Part 17

    Brokers, Commodity Futures, Reporting and Recordkeeping 
Requirements.

    In consideration of the foregoing, and pursuant to the authority 
contained in the Act and, in particular, sections 4g, 4i, 5, and 8a of 
the Act, 7 U.S.C. 6g, 6i, 7, and 12a (1994), the Commission hereby 
amends Chapter I of Title 17 of the Code of Federal Regulations as 
follows:

PART 17--REPORTS BY FUTURES COMMISSION MERCHANTS, MEMBERS OF 
CONTRACT MARKETS AND FOREIGN BROKERS

    1. The authority citation for part 17 continues to read as follows:

    Authority: 7 U.S.C. 6a, 6d, 6f, 6g, 6i, 7, and 12a.

    2. Section 17.01 is revised to read as follows:


Sec. 17.01   Special account designation and identification.

    When a special account is reported for the first time, the FCM, 
clearing member, or foreign broker shall identify the account to the 
Commission or to the contract market on form 102 showing the 
information in paragraphs (a) through (f) of this section.
    (a) Special account designator. A unique identifier for the 
account. Provided, that the same designator is assigned for option and 
futures reporting, and the identifier is not changed or assigned to 
another account without prior approval of the Commission or its 
designee.
    (b) Special account identification. The name, address, business 
phone, and for individuals, the person's job title and employer for the 
following:
    (1) The person originating the account, if the special account is a 
house omnibus or customer omnibus account; or
    (2) The person (i.e., individual, corporation, partnership, etc.) 
who owns the special account, if such person (or an employee or 
officer) also controls the trading of the special account. And, in 
addition:
    (i) The registration status of the person as a commodity trading 
advisor or a securities investment advisor;
    (ii) the legal organization of the person and the person's 
principal business or occupation;
    (iii) account numbers and account names included in the special 
account, if different than supplied in paragraph (b)(2) of this 
section;
    (iv) the name and location of all persons not identified in 
paragraph (b)(2) of this section having a ten percent or more financial 
interest in the special account, indicating those having discretionary 
trading over the account; and
    (v) for special accounts with five or fewer persons having trading 
authority, the names and locations of all persons with trading 
authority that have not been identified in paragraphs (b)(2) or 
(b)(2)(iv) of this section; or
    (3) the account controller, if trading of the special account is 
controlled by a person or legal entity who is an independent account 
controller for the account owners as defined in Sec. 150.1(e). And, in 
addition:
    (i) the registration status of the person as a commodity trading 
advisor or a securities investment advisor;
    (ii) if ten or more accounts are controlled by the independent 
advisor, the account number and the name of each commodity pool that is 
controlled by the advisor and the name and location of the commodity 
pool operator;
    (iii) if fewer than ten accounts are under control of the 
independent advisor, for each account the account number and the name 
and location of each person having a ten percent or more financial 
interest in the account. For commodity pools, provide the account 
number, name of the pool, and name and location of the commodity pool 
operator; and
    (iv) on call by the Commission or its designee, for each account 
controlled by 

[[Page 6313]]
the independent advisor, the account number and account name and the 
name and location of each person having a ten percent or more financial 
interest in the account.
    (c) Other accounts. If the person identified in paragraphs (b)(1), 
(b)(2) or (b)(3) of this section either controls or has a financial 
interest of ten percent or more in an account not included in this 
special account, report the account number and the name of the account.
    (d) Commercial use. For futures or options, commodities in which 
positions or transactions in the account are associated with a 
commercial activity of the account owner in a related cash commodity or 
activity (i.e., those considered as hedging, risk-reducing, or 
otherwise off-setting with respect to the cash commodity or activity).
    (e) Account executive. The name and business telephone number of 
the associated person of the FCM who has solicited and is responsible 
for the account or, in the case of an introduced account, the name and 
business telephone number of the introducing broker who introduced the 
account.
    (f) Reporting firm. The name and address of the FCM clearing 
member, or foreign broker carrying the account, the signature, title, 
and business phone of the authorized representative of the firm filing 
the report, and the date of signing the form 102.
    (g) Form 102 updates. If, at the time an account is in special 
account status and a form 102 filed by an FCM, clearing member, or 
foreign broker is then no longer accurate because there has been a 
change in the information required under paragraph (b) of this section 
since the previous filing, the FCM, clearing member, or foreign broker 
shall file an updated form 102 with the Commission or the contract 
market, as appropriate, within three business days after such change 
occurs.
    3. Section 17.02 is amended by revising the introductory text and 
paragraph (b), and adding a new paragraph (c) to read as follows:


Sec. 17.02  Place and time of filing reports.

    Unless otherwise instructed by the Commission or its designee, the 
reports required to be filed by FCMs, clearing members, and foreign 
brokers under Secs. 17.00 and 17.01 shall be filed at the nearest 
appropriate Commission office as specified in paragraphs (a), (b), and 
(c) of this section, wherein the times stated are eastern times for 
information concerning markets located in that time zone, and central 
time for information concerning all other markets.
    (a) * * *
    (b) For data submitted in hard-copy form pursuant to Secs. 17.00 
(a), or (h) at a Commission office by facsimile or as otherwise 
specified in accordance with instructions by the Commission or its 
designee. Data in hard-copy form required under Sec. 17.00(a) shall be 
submitted no later than 9 a.m. on the business day following that to 
which the information pertains.
    (c) For data submitted pursuant to Sec. 17.01 on the form 102;
    (1) on call by the Commission or its designee, the type of special 
account specified in 1(a), 1(b), or 1(c) of form 102, and the name and 
location of the person to be identified in 1(d) on the form 102 by 
facsimile or telephone on the same day that the special account in 
question is first reported to the Commission; and
    (2) a completed form 102 within three business days of the first 
day that the special account in question is reported to the Commission.

    Note: The following form will not appear in the Code of Federal 
Regulations.

    Issued in Washington, DC, February 12th, 1996, by the 
Commission.
Jean A. Webb,
Secretary of the Commission.
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[FR Doc. 96-3568 Filed 2-16-96; 8:45 am]
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