[Federal Register Volume 61, Number 243 (Tuesday, December 17, 1996)]
[Proposed Rules]
[Pages 66241-66246]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-31836]



[[Page 66241]]

=======================================================================
-----------------------------------------------------------------------

COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 1


Proposed Rulemaking Concerning Contract Market Rule Review 
Procedures

AGENCY: Commodity Futures Trading Commission.

ACTION: Proposed rulemaking.

-----------------------------------------------------------------------

SUMMARY: The Commodity Futures Trading Commission (``Commission'') is 
proposing a rulemaking which would amend the Commission's procedures 
relating to its review of those contract market rules that do not 
relate to contract terms and conditions. A separate proposal is 
currently pending for rules relating to terms and conditions. The 
instant proposal would shorten the Commission's time frame for 
reviewing complex rules and streamline the review process so that such 
rule changes generally could be deemed approved or be permitted to be 
put into effect without Commission approval.
    Specifically, all such rule changes meeting the form and content 
requirements would be deemed approved or be permitted to be put into 
effect without approval ten days after Commission receipt, unless the 
Commission took action to commence review of the proposal for a 45-day 
period (or a 75-day period in the case of rules published for comment 
in the Federal Register) or the contract market agreed to another, 
specified review period. At the end of such a period, a proposed rule 
meeting the form and content requirements would be deemed approved or 
become effective without approval unless the Commission informed the 
submitting contract market of its intention to initiate disapproval 
proceedings, the contract market withdrew the proposal, or the contract 
market requested that the review period be extended to the current 180-
day period.

DATE: Comments on the proposed rulemaking must be received by January 
16, 1997.

ADDRESSES: Comments should be mailed to Jean A. Webb, Secretary, 
Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st 
Street, NW., Washington, DC 20581; transmitted by facsimile to (202) 
418-5521; or transmitted electronically to [[email protected]].

FOR FURTHER INFORMATION CONTACT: David P. Van Wagner, Special Counsel, 
Division of Trading and Markets, Commodity Futures Trading Commission, 
Three Lafayette Centre, 1155 21st Street, NW., Washington, DC 20581. 
Telephone: (202) 418-5490.

SUPPLEMENTARY INFORMATION

I. Current Statutory and Regulatory Requirements

    Section 5a(a)(12)(A) of the Commodity Exchange Act (``Act''), 7 
U.S.C. 7a(a)(12)(A), provides that all rules \1\ of a contract market 
that 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. If the Commission 
does not approve or begin disapproval proceedings for such a proposed 
rule within 180 days of the Commission's receipt of the submission, the 
contract market may make the rule effective.\3\
---------------------------------------------------------------------------

    \1\ Commission Regulation 1.41(a)(1) defines ``rule'' of a 
contract market to mean:
    * * * 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 thereof or any 
committee thereof.
    \2\ Commission Regulation 1.41(a)(2) defines ``terms and 
conditions'' to mean:
    * * * 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.
    \3\ In addition, if the Commission institutes a disapproval 
proceeding for a proposed rule within 180 days of receipt, but does 
not conclude the disapproval proceeding within one year of receipt, 
the contract market may make the rule effective until such time as 
the Commission disapproves the rule.
---------------------------------------------------------------------------

    Section 5a(a)(12)(A) 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 contract market requests Commission approval or the 
Commission notifies the contract market that it intends to review the 
rules for approval. Section 5a(a)(12)(A) also provides that at least 
thirty days before approving any rules of major economic significance, 
as determined by the Commission, the Commission shall publish a notice 
of such rules in the Federal Register.
    Commission Regulation 1.41 sets forth procedures for submitting 
proposed contract market rules for Commission approval, permitting 
proposed contract market rules to go into effect without Commission 
approval, and dealing with contract market emergency rules. All 
proposed contract market 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)(A) of 
the Act, pursuant to procedures set forth in Commission Regulation 
1.41(b). (Significantly, certain other sections of the Act require 
rules addressing specified matters to be explicitly approved by the 
Commission.) Commission Regulation 1.41(c) sets forth the submission 
requirements for rules that do not require Commission approval and that 
may be placed into effect ten days after receipt by the Commission.
    On November 22, 1996, the Commission published a proposed 
rulemaking which would revise the procedures for contract market 
designations and the review of rules relating to contract terms and 
conditions under Regulation 1.41(b).4 Specifically, that proposed 
rulemaking would establish ``fast-track'' review procedures which would 
permit certain contract market rules to be deemed approved 45 days 
after receipt by the Commission (or 75 days after receipt in cases 
where the Commission decided to extend the review period). These fast-
track review procedures would be an alternative to the current 180-day 
review procedures under section 5a(a)(12)(A) of the Act and Commission 
Regulation 1.41(b).
---------------------------------------------------------------------------

    \4\ 61 FR 59386.
---------------------------------------------------------------------------

    The instant rulemaking would revise the review procedures for rules 
that do not relate to contract terms and conditions. It addresses those 
rules that, although they do not relate to terms and conditions, 
nevertheless require approval under a specific provision of the Act and 
those rules that do not require approval and for which the review 
period has been extended by the contract market or the 
Commission.5 The different review periods set forth in the two 
proposed rulemakings reflect differences established in the statute 
between terms and conditions and other types of rules and the volume of 
contract market rulemakings that are not terms and conditions.6
---------------------------------------------------------------------------

    \5\ In the past three fiscal years, the Commission has processed 
866 non-term and condition submissions. The Commission handled 587 
of these in ten days or fewer. This represents approximately 68% of 
all such submissions received. The Commission processed 613 
submissions in 30 days or fewer. This represents approximately 71% 
of all

[[Page 66242]]

such submissions. In many of the instances where the review period 
exceeded thirty days, in lieu of commencing disapproval proceedings 
or remitting the rules, the Commission kept such rules under review 
while the contract market addressed relevant issues or the 
Commission undertook changes to regulations that otherwise precluded 
the immediate implementation of the proposed rule.
    \6\ See section 5a(a)(12)(A) of the Act. Submissions related to 
terms and conditions constitute approximately 40% of all 
submissions. Other types of rules constitute approximately 60% of 
all submissions.
---------------------------------------------------------------------------

II. Description of Proposed Rulemaking

A. Overview

    The Commission believes that the rule review process is essential 
to ensure the integrity of the markets and to ensure that the public 
interest is protected. At the same time, the Commission wants to 
encourage innovation by the contract markets. The proposed rulemaking 
is designed to expedite the Commission's existing two-track procedures 
for the review of contract market rule proposals that do not relate to 
contract terms and conditions. As described in more detail below, the 
proposal would:

--Permit certain rules to be deemed approved within ten days of receipt 
that currently are subject to a 180-day deadline;
--Require the Commission to identify the issues raised by novel or 
complex proposals within 10 days of receipt;
--Reduce by up to 75% the time within which the Commission was required 
to act on the small portion of rules not handled during the ten-day 
review period;
--Make clear that a contract market could choose to extend the review 
period rather than be subject to a disapproval proceeding; and
--Require disapproval proceedings to be initiated no later than 15 days 
after the submitting contract market advised the Commission that it did 
not wish to withdraw the proposed rule.

    The Commission believes that under the proposed procedures, the 
Commission would identify issues early in the process and make 
decisions on proposed rules in an expeditious manner.7 Similarly, 
the compressed time frames would increase the incentive for contract 
markets to ensure that their initial submissions fully articulated the 
operation, purpose, and effect of their proposals and to attempt to 
resolve open issues more quickly.8
---------------------------------------------------------------------------

    \7\ The rulemaking would not alter the existing statutory 
requirement that any determination to extend the ten-day review 
period for certain rules is not delegable to staff. See section 
5a(a)(12)(A) of the Act. The Commission would continue to make this 
determination. Upon implementation of the proposed rulemaking, the 
Commission anticipates it would adjust its internal processes, as 
appropriate, to accommodate the new procedures.
    \8\ For example, under current procedures, contract markets may 
have an incentive to submit proposals before all the details have 
been finalized in order to start the running of the 180-day review 
period. In such cases, the submission would be supplemented during 
the course of the review. Under the proposal, there would be an 
incentive to make the initial submission as complete as possible in 
order to obtain approval within the initial ten-day period.
---------------------------------------------------------------------------

    The Commission expects that the proposed procedures would increase 
the percentage of submissions handled within ten days. Moreover, by 
simplifying the procedures for routine submissions and by imposing 
stricter deadlines at various stages, the proposal would enable the 
Commission and the contract markets to focus resources on the smaller 
subset of novel and complex submissions that require additional time 
for review. This would result in quicker identification and resolution 
of issues in such cases.
    The following description consists of a section-by-section analysis 
of the Commission's proposed rulemaking. In addition to explaining the 
rationale and operation of the proposal, this description is intended 
to provide interested persons with a framework for addressing issues 
which may be raised by particular provisions of the rulemaking.

B. Proposed Regulation 1.41(b)--Rules That Relate to Terms and 
Conditions

    Current Commission Regulation 1.41(b) establishes approval 
procedures for proposed contract market rules relating to contract 
terms and conditions, other rules that require approval under a 
specific provision of the Act, rules for which the submitting contract 
market requests approval, and rules the Commission determines to review 
for approval. The Commission is proposing to amend Regulation 1.41(b) 
so that it would apply only to proposed rules relating to terms and 
conditions. The procedures for the review of such rules are addressed 
in the related proposed rulemaking mentioned above.9
---------------------------------------------------------------------------

    \9\ 61 FR 59386 (November 22, 1996).
---------------------------------------------------------------------------

C. Proposed Regulation 1.41(c)--Rules That Do Not Relate to Terms and 
Conditions

    Current Commission Regulation 1.41(c) establishes review procedures 
for proposed contract market rules which do not require Commission 
approval and may be placed into effect ten days after receipt by the 
Commission. The Commission's proposed rulemaking would revise 
Regulation 1.41(c) in two significant respects.
    First, the rulemaking would expand the scope of rules eligible to 
be reviewed pursuant to Regulation 1.41(c) to include all proposed 
rules, other than terms and conditions, that the Commission reviews for 
approval. These types of rules would include rules that required 
approval under a provision of the Act other than Section 
5a(a)(12)(A),10 rules that the Commission decided to review for 
approval, and rules that the submitting contract market requested be 
reviewed for approval.
---------------------------------------------------------------------------

    \10\ Several provisions of the Act other than section 
5a(a)(12)(A) require Commission approval of contract market rules: 
Section 4b(b) (crossing of orders); Section 4c(a) (exchange of 
futures for physicals, transfer trades and office trades); and 
Section 4f(b) (financial requirements for futures commission 
merchants). Several provisions of the Commission's regulations also 
require Commission approval of contract market rules: Regulation 
8.02 (disciplinary proceedings); Regulation 155.2 (trading standards 
for floor brokers); and Regulation 190.05(b) (deliveries on behalf 
of a customer of a bankrupt firm).
---------------------------------------------------------------------------

    Second, the rulemaking would compress the time for review. Under 
the proposal, the Commission would be required to act on all non-term 
and condition rule changes within ten days of receipt. Unless the 
Commission found that a rule proposal involved complex or novel issues 
or was of major economic significance and affirmatively decided to 
retain it for further review, all non-term and condition rule changes 
would be deemed approved or be permitted to be placed into effect 
without approval, as appropriate, ten days after the Commission's 
receipt.
    For those rule proposals that the Commission decided merited 
further review, the proposed rulemaking would reduce the Commission's 
maximum review time from the current 180 days to 45 or 75 days, unless 
the submitting contract market requested otherwise. Finally, 
disapproval proceedings for a proposed rule would have to be instituted 
within 75 or 105 days rather than the current 180 days.
1. Proposed Regulation 1.41(c)(1)(i)--Form and Content of Submissions
    Under proposed Regulation 1.41(c)(1)(i), contract markets would be 
required to submit to the Commission for review all proposed rules that 
did not relate to terms and conditions and were not otherwise 
exempt.11 Because

[[Page 66243]]

this rulemaking would substantially reduce the period of time the 
Commission would have to review and dispose of rule proposals, it would 
be very important for contract markets to ensure that their submissions 
fully complied with the form and content requirements.
---------------------------------------------------------------------------

    \11\ Commission Regulations 1.41(d) and 1.41(f), respectively, 
set forth the submission requirements for contract market rules that 
are exempt from the requirements of section 5a(a)(12)(A) of the Act 
and that relate to temporary emergencies. These regulations are not 
affected by the subject rulemaking.
---------------------------------------------------------------------------

    Each submission would have to comply with all the form and content 
requirements that currently apply to rules submitted to the Commission 
pursuant to Regulation 1.41(b) and Regulation 1.41(c). In addition, 
because proposed Regulation 1.41(c) would establish review procedures 
for both rules that receive Commission approval and rules that may be 
put into effect without Commission approval, the proposed rulemaking 
would require that Regulation 1.41(c) submissions included certain 
other information to facilitate the Commission's review of both these 
categories of rules.
    Proposed Regulation 1.41(c)(1)(i)(F) would require that contract 
markets specified in their submissions any sections of the Act or the 
Commission's regulations that were related to a proposed rule, 
particularly citing any such provisions that required Commission 
approval of the rule. To the extent a submission was potentially 
inconsistent with a provision of the Act or the Commission's 
regulations, the proposal would require that the submission contained a 
reasoned analysis addressing that issue and supporting adoption of the 
rule.
    Proposed Regulation 1.41(c)(1)(i)(G) would require that contract 
markets indicated in their submissions whether they were requesting 
Commission approval for a proposed rule. This requirement would help 
the Commission to distinguish rules which did not require Commission 
approval but for which a submitting contract market was requesting 
approval from rules that a contract market wished to put into effect 
without Commission approval.12
---------------------------------------------------------------------------

    \12\ With the exception of certain emergency actions, contract 
markets may request Commission approval of proposed rules that 
otherwise could be put into effect without Commission approval. In 
some cases, contract markets request approval in order to receive 
some degree of immunity from the antitrust or other relevant laws. 
See Johnson and Hazen, Commodities Regulation, Sec. 2.56.
---------------------------------------------------------------------------

    The proposed rulemaking also would amend the current requirement of 
Commission Regulation 1.41 that contract markets include in their rule 
submissions any substantive views expressed by their members or others 
in opposition to a proposed rule.13 As a clarification of this 
requirement, the proposed rulemaking would specify that the views of 
opposing governing board members also must be included in proposed rule 
submissions.14 In addition, the proposed rulemaking would provide 
that the currently-required description of opposing views must indicate 
the membership interest categories of persons who were opposed to the 
proposed contract market rule.
---------------------------------------------------------------------------

    \13\ Current Commission Regulation 1.41(b)(5) requires that rule 
submissions ``[n]ote and briefly describe any substantive views 
expressed by the members of the contract market or others with 
respect to the proposed rule.''
    \14\ The Commission believes that the disclosure of the views 
and categories of board members who opposed a proposed rule during 
board deliberations would aid the Commission in its oversight of the 
self-governance processes of the contract markets and in determining 
whether rules should be subject to public comment.
---------------------------------------------------------------------------

    Identification of the actual individual would not be required. The 
Commission believes that information about the views and categories of 
persons who opposed a rule would help the Commission to ascertain 
quickly any issues which were raised by the proposal and, thus, 
generally would benefit the rule review process.15
---------------------------------------------------------------------------

    \15\ The proposed revisions to Regulation 1.41's form and 
content requirements merely would reflect information that 
Commission staff customarily requests from contract markets 
submitting rule proposals that potentially raise regulatory 
concerns. By clarifying that such information must be included in a 
contract market's original submission of a rule, the proposed 
rulemaking would ensure that the Commission would have such 
information at the outset of the rule review process and, thus, 
should facilitate the Commission's review of proposed rules within 
the compressed time frames of this rulemaking.
---------------------------------------------------------------------------

2. Proposed Regulation 1.41(c)(1)(ii)--Failure to Meet Form and Content 
Requirements
    Under proposed Regulation 1.41(c)(1)(ii), the Commission would 
retain the authority to remit rule proposals which did not comply with 
the form and content requirements of Regulation 1.41(c)(1)(i). This 
provision would simply replicate the remittal provisions of current 
Regulation 1.41(b) and Regulation 1.41(c).
3. Proposed Regulation 1.41(c)(1)(iii)--Extension of Review Period
    Proposed Regulation 1.41(c)(1)(iii) specifies that the Commission 
might extend the ten-day review period to 45 or 75 days for a proposed 
rule if it determined within ten days of receipt that the rule ``raises 
novel or complex issues which require additional time for review or is 
of major economic significance'' and so notified the submitting 
contract market.16 Such rules frequently generate inquiries or 
comments from the public, the industry, or government agencies. In some 
cases, the views of such commenters may not have been taken into 
account in the contract market decision-making process. A review period 
longer than ten days is often necessary to address such concerns 
adequately.
---------------------------------------------------------------------------

    \16\ Examples of the types of rules that might require more than 
ten days for review would include:
    --Rules relating to the financial integrity of markets or their 
participants;
    --Rules establishing novel trading procedures or providing for 
non-competitive trading;
    --Rules providing for the differential treatment of different 
classes of market participants;
    --Rules establishing linkages among exchanges; and,
    --Rules relating to the application of new technology to the 
marketplace.
---------------------------------------------------------------------------

    The provision would require the Commission's notification to 
specify the nature of the issues that necessitated additional review of 
a rule proposal. The standard is essentially the same as that set forth 
in the Commission's proposed rulemaking relating to term and condition 
rule changes for extending the 45-day review period to 75 days.17
---------------------------------------------------------------------------

    \17\ See 61 FR 59386 (November 22, 1996).
---------------------------------------------------------------------------

4. Proposed Regulation 1.41(c)(2)--Action Within Ten Days
    Proposed Regulation 1.41(c)(2) would provide that proposed rules 
(other than terms and conditions) that required approval or that could 
be placed into effect without approval would be deemed approved or 
allowed to go into effect without approval, as appropriate, ten days 
after their receipt by the Commission unless the Commission notified 
the submitting contract market otherwise. As previously noted, the ten-
day period within which rules would be deemed approved is much shorter 
than the 180-day period provided for in the Act.
    Under this provision, the only bases for such notification would be 
if the submission did not comply with Regulation 1.41(c)(1)(i)'s form 
and content requirements, the Commission decided to extend the review 
period pursuant to Regulation 1.41(c)(1)(iii), or the contract market 
agreed to another, specified review period. The last provision reflects 
an informal procedure that has been followed in the past with respect 
to ten day rules where a contract market grants an extension or tolls 
the time period while it amends the proposed rule, rather than having 
the Commission remit the rule or convert it to a 180-day track.

[[Page 66244]]

5. Proposed Regulation 1.41(c)(3)--Action Within 45 or 75 days
    Generally, under proposed Regulation 1.41(c)(3), any proposed rule 
which the Commission retained for further review under Regulation 
1.41(c)(1)(iii) would be deemed approved or allowed to go into effect, 
as determined by the Commission, 45 days after Commission receipt (or 
75 days in the case of rules which were published for comment in the 
Federal Register).18 By providing the Commission with the 
discretion to approve a proposed rule or to allow it into effect at the 
end of the 45- or 75-day review period, the rulemaking would replicate 
the options currently available to the Commission under section 
5a(a)(12)(A) of the Act at the end of 180 days. The proposed rulemaking 
would simply compress the time frame to 45 or 75 days.
---------------------------------------------------------------------------

    \18\ Under section 5a(a)(12)(A) of the Act, the Commission is 
required to publish in the Federal Register for public comment any 
proposed rule of major economic significance. In addition, the 
Commission generally publishes significant rule changes when it 
believes that it is in the public interest to do so and that it 
would be beneficial to ascertain the views of persons or entities 
that might be affected by the proposal. While section 5a(a)(12)(A) 
of the Act specifies that rules of major economic significance must 
be published at least 30 days prior to approval of any such rules, 
neither the Act nor the Commission's regulations specify any minimum 
length for public comment periods.
---------------------------------------------------------------------------

    Proposed Regulation 1.41(c)(3) provides for two exceptions to this 
deadline: rule submissions that have not satisfied the form and content 
requirements of Regulation 1.41(c)(1)(i) 19 or proposed rules as 
to which the Commission notified the contract market of its intention 
to initiate a disapproval proceeding. Again, both the 45-day and 75-day 
time periods are considerably shorter than the 180-day period currently 
provided for rules reviewed pursuant to Commission Regulation 1.41(b).
---------------------------------------------------------------------------

    \19\ Historically, the Commission and its staff have always 
attempted to have contract markets cure defects in the form and 
content of their submissions as early as possible in the rule review 
process. However, the Commission's experience also has been that 
questions about the operation, purpose and effect of significant 
rule proposals can arise at any point in the review process, 
especially when issues are raised during the course of a public 
comment period. For example, other government agencies such as the 
Securities and Exchange Commission (``SEC''), the Department of the 
Treasury, the Federal Reserve Board, and the Department of Justice 
have expressed their regulatory interests in or identified issues 
relating to contract market rule proposals during the course of 
Commission review. Moreover, in some circumstances, such as the 
development of capital or reporting requirements, the gathering of 
information from the SEC and commodities and securities self-
regulatory organizations may be necessary to avoid duplicative 
requirements and to assure adequate coverage. Accordingly, under 
proposed Regulation 1.41(c)(3)(i), the Commission would retain the 
discretion to remit a proposal for failure to satisfy form and 
content requirements throughout the specified review period.
---------------------------------------------------------------------------

6. Proposed Regulation 1.41(c)(4)--Disapproval Proceedings
    Under proposed Regulation 1.41(c)(4), any Commission notice to a 
contract market that the Commission intended to commence disapproval 
proceedings with respect to a proposed rule change would be required to 
specify the nature of the issues raised by the proposal and the 
sections of the Act or the Commission's regulations that the rule 
appeared to violate. Under the provision, the submitting contract 
market would have 15 days from the issuance of the notification either 
to withdraw the proposal or to request that the Commission consider the 
proposal pursuant to the regular 180-day review procedures of section 
5a(a)(12)(A) of the Act. If the submitting contract market chose 
neither of these options, the Commission would commence disapproval 
proceedings no later than 30 days after its issuance of the 
notification. Section 5a(a)(A)(12) sets forth procedures for Commission 
disapproval of proposed rules and provides, among other things, an 
opportunity for the submitting contract market to appear on its own 
behalf at a Commission hearing.
    Under the proposed rulemaking, disapproval proceedings would 
commence within 75 days of a rule's submission (or 105 days in the case 
of rules which were published for comment in the Federal Register). 
Currently, the Commission may institute disapproval proceedings up to 
180 days after a rule's submission. The Commission's proposed shortened 
time frame for rule disapproval is intended to advance the general 
purpose of this proposed rulemaking: to accelerate the Commission's 
review of proposed rule changes and to allow contract markets to 
implement rule changes in a more timely manner than is the case under 
the current rule review scheme of Regulation 1.41.

III. Conclusion

    The Commission believes that the proposed amendments to Regulation 
1.41 would shorten the review time for non-term and condition rule 
changes and streamline the rule review process. Accordingly, the 
proposed rulemaking should enable contract markets to implement rule 
proposals in a more timely manner than can be done at the present time, 
without sacrificing the ability of the Commission to assure an adequate 
public comment process and consistency of a proposed rule with the Act 
and the regulations. The proposal also would provide the Commission 
with the necessary experience to determine whether further streamlining 
could be achieved. The Commission invites public comment on any aspect 
of its proposed rulemaking and, in particular, on the appropriateness 
of the proposed time frames.

IV. Related Matters

A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA''), 5 U.S.C. 601 et seq., 
requires that agencies, in proposing rules, consider the impact of 
those rules on small businesses. The Commission has previously 
determined that contract markets are not ``small entities'' for 
purposes of the RFA, and that the Commission, therefore, need not 
consider the effect of proposed rules on contract markets.20 
Accordingly, the Chairperson, on behalf of the Commission, hereby 
certifies, pursuant to section 3(a) of the RFA, 5 U.S.C. 605(b), that 
the proposed rulemaking, if adopted, would not have a significant 
economic impact on a substantial number of small entities.
---------------------------------------------------------------------------

    \20\ See 47 FR 18618, 18619 (April 30, 1982).
---------------------------------------------------------------------------

B. Agency Information Activities: Proposed Collection; Comment Request

    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 PRA. While the proposed 
rulemaking has no burden, the group of rules (3038-0022) of which this 
is a part has the following burden:

Average burden hours per response..............................3,546.26
Number of respondents.........................................10,971.00
Frequency of response.......................................On Occasion

    Persons wishing to comment on the information that would be 
required by the proposed rulemaking should contact David Rostker, 
Office of Management and Budget (``OMB''), Room 3228, NEOB, Washington, 
DC 20503, (202) 395-7340. Copies of the information collection 
submission to OMB are available from Gerald P. Smith, Clearance 
Officer, Commodity Futures Trading Commission, Three Lafayette Centre, 
1155 21st Street, N.W., Washington, DC 20581. Telephone: (202) 418-
5160.

List of Subjects in 17 CFR Part 1

    Commodity exchanges, Contract markets, Rule review procedures.

    In consideration of the foregoing, and based on the authority 
contained in the

[[Page 66245]]

Commodity Exchange Act and, in particular, sections 4c, 5, 5a, 6 and 8a 
thereof, 7 U.S.C. 6c, 7, 7a, 8 and 12a, the Commission is hereby 
proposing to amend title 17, chapter I, part 1 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. 1a, 2, 2a, 4, 4a, 6, 6a, 6b, 6c, 6d, 6e, 6f, 
6g, 6h, 6i, 6j, 6k, 6l, 6m, 6n, 6o, 6p, 7, 7a, 8, 9, 12, 12a, 12c, 
13a, 13a-1, 16, 16a, 19, 21, 23, and 24.

    2. Section 1.41 would be proposed to be amended be revising the 
first sentence of paragraph (b) and paragraph (c) to read as follows:


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

* * * * *
    (b) Rules that relate to terms and conditions. Except as provided 
herein and in paragraph (f) of this section, all proposed contract 
market rules that relate to terms and conditions must be submitted to 
the Commission for approval pursuant to section 5a(a)(12)(A) of the Act 
prior to their proposed effective dates. * * *
    (c) Rules that do not relate to terms and conditions. (1)(i) Except 
as provided in paragraphs (d) and (f) of this section (exempt or 
temporary emergency rules), each contract market shall submit to the 
Commission pursuant to section 5a(a)(12)(A) of the Act prior to the 
proposed effective dates all proposed rules that do not relate to terms 
and conditions. One copy of the rule shall be furnished to the 
Commission at its Washington, DC headquarters, and one copy shall be 
transmitted by the contract market to the regional office of the 
Commission having local jurisdiction over the contract market. Each 
such submission under this paragraph (c) shall, in the following order:
    (A) State that it is being submitted pursuant to Commission 
regulation 1.41(c);
    (B) Set forth the text of the proposed rule (in the case of any 
change in, addition to, or deletion from any current rule of the 
contact market, the current rule shall be fully set forth, with 
brackets used to indicate words to be deleted and underscoring used to 
indicate words to be added);
    (C) Describe the proposed effective date of the proposed rule and 
any action taken or anticipated to be taken to adopt the proposed rule 
by the contract market, or by the governing board thereof or any 
committee thereof, and cite the rules of the contract market which 
authorize the adoption of the proposed rule;
    (D) Explain the operation, purpose, and effect of the proposed 
rule, including, as applicable, a description of the anticipated 
benefits to market participants or others, any potential 
anticompetitive effects on market participants, or others, how the rule 
fits into the contract market's scheme of self-regulation, information 
which demonstrates that the proposed rule is not inconsistent with the 
policies and purposes of the Act, and any other information which may 
be beneficial to the Commission in analyzing the proposed rule. If a 
proposed rule affects, directly or indirectly, the application of any 
other rule of the contract market, set forth the pertinent text of any 
such rule and describe the anticipated effect;
    (E) Note and briefly describe any substantive opposing views 
expressed by governing board members, members of the contract market, 
or others with respect to the proposed rule which were not incorporated 
into the proposed rule prior to its submission to the Commission. Any 
such description also should identify the membership interest 
categories, as that term is defined by Commission regulation 
1.64(a)(4), of persons who were opposed to the proposed rule;
    (F) Identify any sections of the Act or the Commission's 
regulations that are related to the rule, including any provisions that 
require Commission approval of the rule, and, to the extent of any 
potential inconsistency between the proposed rule and the Act or the 
Commission's regulations, provide a reasoned analysis addressing the 
issue and supporting the submission; and
    (G) State whether the contract market is requesting approval of the 
proposed rule by the Commission.
    (ii) The Commission may remit to the contract market, with an 
appropriate explanation where practicable, and not accept for review 
any rule submission that does not comply with the form and content 
requirements of paragraphs (c)(1)(i) (A)-(F) of this section.
    (iii) The Commission may notify the contract market within ten days 
after receipt of a submission filed pursuant to paragraph (c)(1) of 
this section, that the proposed rule raises novel or complex issues 
which require additional time for review or is of major economic 
significance and therefore that the review period has been extended as 
specified in paragraph (c)(3) of this section. This notification will 
briefly specify the nature of the issues for which additional time for 
review is required.
    (2) All proposed contract market rules submitted for review under 
paragraph (c) of this section may be deemed approved or be placed into 
effect, as appropriate, ten days after Commission receipt (or at such 
earlier time as may be determined by the Commission) unless:
    (i) The Commission notifies the contract market that the submission 
does not comply with the form and content requirements of paragraphs 
(c)(1)(i) (A)-(F) of this section;
    (ii) The Commission notifies the contract market that the review 
period for the submission has been extended pursuant to paragraph 
(c)(1)(iii) of this section; or
    (iii) The contract market agrees to another, specified review 
period.
    (3) Any rule for which the Commission extends the review period 
pursuant to paragraph (c)(1)(iii) of this section may be deemed 
approved or be placed into effect, as determined by the Commission, 
forty-five days after Commission receipt of such rule or seventy-five 
days after Commission receipt in the case of rules that have been 
published for comment in the Federal Register (or at such earlier time 
as may be determined by the Commission) unless the Commission notifies 
the contract market that:
    (i) The submission, including any supplementary materials and in 
consideration of any comments from the public or other government 
agencies, does not comply with the form and content requirements of 
paragraphs (c)(1)(i) (A)-(F) of this section; or
    (ii) The Commission intends to institute a proceeding to disapprove 
the rule pursuant to the procedures specified in section 5a(a)(12)(A) 
of the Act.
    (4) A notice of intention to commence a disapproval proceeding 
issued pursuant to paragraph (c)(3) of this section will:
    (i) Identify the nature of the issues raised by the proposed rule 
and the specific sections of the Act or the Commission's regulations 
that the rule appears to violate; and,
    (ii) State that the Commission will commence disapproval 
proceedings for the proposed rule within thirty days after the 
Commission's issuance of the notification, unless within fifteen days 
of such issuance the contract market:
    (A) Withdraws the rule, or
    (B) Requests the Commission to review the rule pursuant to the one 
hundred and eighty day review procedures set forth in section 
5a(a)(12)(A) of the Act.


[[Page 66246]]


    Issued in Washington, DC, on December 10, 1996, by the 
Commission.
Jean A. Webb,
Secretary of the Commission.
[FR Doc. 96-31836 Filed 12-16-96; 8:45 am]
BILLING CODE 6351-01-P