[Federal Register Volume 62, Number 28 (Tuesday, February 11, 1997)]
[Rules and Regulations]
[Pages 6112-6114]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-3395]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Parts 15, 18 and 19


Reports by Large Traders; Cash Position Reports in Grains 
(including Soybeans) and Cotton

AGENCY: Commodity Futures Trading Commission.

ACTION: Final rulemaking.

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SUMMARY: The Commodity Futures Trading Commission (Commission) is 
amending Parts 15, 18 and 19 of the regulations under the Commodity 
Exchange Act (``Act''), 17 CFR Parts 15, 18 and 19 (1996). The 
amendments to Part 18 require that traders who hold reportable futures 
or option positions file the CFTC Form 40, ``Statement of Reporting 
Trader,'' only upon request by the Commission or its designee. The 
amendments to Parts 15 and 19 provide that monthly cash position 
reports are required only if a trader's net long or net short combined 
futures and futures equivalent options position exceeds the levels 
specified in rule 150.2. The proposal to amend Parts 15, 18 and 19 was 
included with a number of other proposed amendments that primarily 
concerned option large trader reports. The Commission has determined to 
proceed with the changes to Parts 15, 18 and 19 immediately and will 
consider the remaining changes separately at a later time. 
Consideration of final rules on those changes relating to options 
reporting are dependent, in part, on the completion of upgrades to the 
Commission's computer system.

EFFECTIVE DATE: April 14, 1997.

FOR FURTHER INFORMATION CONTACT: Lamont Reese, Commodity Futures 
Trading Commission, Division of Economic Analysis, Three Lafayette 
Centre, 1155 21st Street, N.W., Washington, D.C. 20581.

SUPPLEMENTARY INFORMATION:

I. Background

    On July 18, 1996, the Commission published a notice of proposed 
rulemaking in the Federal Register that affects reports from large 
traders filed pursuant to rules 18.04 and 19.01(a)(1). See 61 FR 37409 
(July 18, 1996). The amendments to Parts 18 and 19 were included with a 
number of other proposed amendments to the Commission's reporting rules 
that primarily concerned options large trader reports. Consideration of 
final rules with respect to option reporting is dependent, in part, on 
implementation of certain upgrades to the Commission's computer system.
    Under Commission rule 18.04, traders who become reportable in 
futures must file a CFTC Form 40, ``Statement of Reporting Trader,'' 
within ten business days following the day that the trader's position 
equals or exceeds specified levels.\1\ Additional filings are required 
to be made annually as specified in rule 18.04(d). 17 CFR 18.04 (1996). 
Traders who become reportable in options are required to file the Form 
40 only in response to a special call by the Commission. The Form 40 
requires the disclosure of information about ownership and control of 
futures and option positions held by the reporting trader as well as 
the trader's use of the markets for hedging.
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    \1\ 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 Sec. 15.03 (1996).
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    As explained in the Notice of Proposed Rulemaking, when an account 
first becomes reportable in futures, the futures commission merchant, 
clearing member or foreign broker reporting the account files a CFTC 
Form 102 that identifies all persons having a ten percent or more 
financial interest in the account and those persons who control the 
trading of the account. Although all persons named on the Form 102 may 
be considered a ``trader'' according to the Commission's definition, as 
a matter of administrative practice Commission staff has not initiated 
requests for initial and updated Form 40s from all such traders. 
Generally staff has taken action against traders only if the traders 
had failed to respond to the staff's written request. 61 FR 37414 (July 
18, 1996). In view of this, the Commission proposed to amend rule 18.04 
to codify this practice by requiring that traders file Form 40s only in 
response to a special call and to delegate the authority to make these 
calls to the Director of the Division of Economic Analysis.
    With regard to Part 19, the Commission requires that persons owning 
or controlling futures positions in commodities for which the 
Commission has established speculative limits file reports concerning 
their long and short cash positions, i.e., stocks of the commodities 
owned and the quantity of their fixed-price purchase and sale 
commitments. See 17 CFR Part 19 (1996). These commodities include the 
grains, the soybean complex and cotton. See 17 CFR Part 150 (1996). The 
primary purpose for these reports is to determine if the futures and 
option positions of traders that exceed the Commission's speculative 
limits qualify as hedging as defined in section 1.3(z) of the 
Commission's regulations. Although the speculative limits set forth in 
rule 150.2 apply to the net long or net short combined futures and 
futures equivalent option position of a trader, the Commission's 
definition of a reportable position contained in rule 15.00 considers 
only the futures position to determine if a trader is reportable for 
purposes of reports filed

[[Page 6113]]

pursuant to rule 19.01(a)(1).\2\ The Commission proposed amendments to 
rules 15.00 and 19.00 so that a trader's net futures and futures-
equivalent option position would be considered in determining whether 
the subject reports must be filed.\3\
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    \2\ Commission rules 150.1(f)-(h) define futures equivalent long 
and short positions as follows:
    (f) Futures-equivalent means an option contract which has been 
adjusted by the previous day's risk factor, or delta coefficient, 
for that option which has been calculated at the close of trading 
and published by the applicable exchange under Sec. 16.01 of this 
chapter.
    (g) Long positions means a long call option, a short put option 
or a long underlying futures contract.
    (h) Short positions means a short call option, a long put option 
or a short underlying futures contract.
    \3\ Conforming amendments were proposed to rule 15.01(d). See 17 
CFR 15.01(d) (1996). These amendments are adopted as proposed.
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II. Review of Comments

    The Commission received eight comment letters concerning its 
proposals published in the July 18, 1996 Federal Register. Most 
comments addressed that part of the Commission's proposed rulemaking 
concerning options large trader reporting. Three commentors addressed 
the proposed changes to Parts 15, 18 and 19. One commentor supported 
adoption of the amendments as proposed, and the others had no objection 
to their adoption. In view of this, the Commission is adopting the 
amendments as proposed.

III. Related Matters

A. The Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA), 5 U.S.C. Secs. 601 et seq., 
requires that agencies consider the impact of these rules on small 
businesses. The Commission has previously determined that large traders 
and futures commission merchants are not ``small entities'' for 
purposes of the Regulatory Flexibility Act, 47 FR 18618-18621 (April 
30, 1982). Therefore, the Chairperson, on behalf of the Commission, 
hereby certifies, pursuant to 5 U.S.C. Sec. 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 (PRA)

    When publishing final rules, the Paperwork Reduction Act of 1995, 
Pub. L. 104-13 (May 13, 1995), 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, these final rules and/or 
their associated information collection requirements inform the public 
of:
    1. The reasons the information is planned to be and/or has been 
collected; (2) the way such information is planned to be and/or has 
been used to further the proper performance of the functions of the 
agency; (3) an estimate, to the extent practicable, of the average 
burden of the collection (together with a request that the public 
direct to the agency any comments concerning the accuracy of this 
burden); (4) whether responses to the collection of information are 
voluntary, required to obtain or retain a benefit, or mandatory; (5) 
the nature and extent of confidentiality to be provided, if any; and 
(6) the fact that an agency may not conduct or sponsor, and a person is 
not required to respond to, a collection of information unless it 
displays a currently valid OMB control number.
    The Commission previously submitted these rules in proposed form 
and their associated information collection requirements to the Office 
of Management and Budget. The Office of Management and Budget approved 
the collection of information associated with these rules on November 
26, 1996, and assigned OMB control number 3038-0009 to these rules. The 
burden associated with this entire collection, including these final 
rules is as follows:
    Average burden hours per response: .3607 hour.
    Number of Respondents: 6181.
    Frequency of response: Daily.
    The burden associated with these specific final rules, is as 
follows:
    Average burden hours per response: .5991 hour.
    Number of Respondents: 5399.
    Frequency of response: On occasion.
    Persons wishing to comment on the information required by these 
final rules should contact the Desk Officer, CFTC, Office of Management 
and Budget, Room 10202, NEOP, Washington, DC 20503, (202) 395-7340. 
Copies of the information collection submission to OMB are available 
from the CFTC Clearance Officer, 1155 21st Street NW, Washington, DC 
20581, (202) 418-5160.

List of Subjects

17 CFR Part 15

    Brokers, Reporting and recordkeeping requirements.

17 CFR Part 18

    Brokers, Commodity futures, Reporting and recordkeeping 
requirements.

17 CFR Part 19

    Brokers, Commodity futures, Reporting and recordkeeping 
requirements.

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

PART 15--REPORTS--GENERAL PROVISIONS

    1. The authority citation for part 15 continues to read as follows:

    Authority: 7 U.S.C. 2, 4, 5, 6a, 6c(a)-(d), 6f, 6g, 6i, 6k, 6m, 
6n, 7, 9, 12a, 19 and 21; 5 U.S.C. 552 and 552(b).

    2. Section 15.00 is amended by revising paragraph (b)(1)(ii) to 
read as follows:


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

* * * * *
    (b) * * *
    (l) * * *
    (ii) For the purposes of reports specified in Sec. 19.00(a)(1) of 
this chapter, any combined futures and futures-equivalent option open 
contract position as defined in part 150 of this chapter in any one 
month or in all months combined, either net long or net short in any 
commodity on any one contract market, excluding futures positions 
against which notices of delivery have been stopped by a trader or 
issued by the clearing organization of a contract market, which at the 
close of the market on the last business day of the week exceeds the 
net quantity limit in spot, in single or in all-months fixed in 
Sec. 150.2 of this chapter for the particular commodity and contract 
market.
* * * * *
    3. Section 15.01 is amended by revising paragraph (d) to read as 
follows:


15.01  Persons required to report.

* * * * *
    (d) Persons, as specified in part 19 of this chapter, either:
    (1) Who hold or control futures and option and positions that 
exceed the amounts set forth in Sec. 150.2 of this chapter for the 
commodities enumerated in that section, any part of which constitutes 
bona fide hedging positions (as defined in Sec. 1.3(z) of this 
chapter); or
    (2) Who are merchants or dealers of cotton holding or controlling 
positions for future delivery in cotton that equal

[[Page 6114]]

or exceed the amount set forth in Sec. 15.03.

PART 18--REPORTS BY TRADERS

    4. The authority citation for part 18 continues to read as follows:

    Authority: 7 U.S.C. 2, 4, 6a, 6c, 6f, 6g, 6i, 6k, 6m, 6n, 12a, 
and 19; 5 U.S.C. 552 and 552(b) unless otherwise noted.

    5. Part 18 is amended by adding a new Sec. 18.03 as follows:


Sec. 18.03  Delegation of authority to the Director of the Division of 
Economic Analysis.

    The Commission hereby delegates, until the Commission orders 
otherwise, the authority to make special calls on traders for 
information as set forth in Secs. 18.00, 18.04 and 18.05 to the 
Director of the Division of Economic Analysis to be exercised by the 
Director or by such other employee or employees of the Director as may 
be designated from time to time by the Director. The Director of the 
Division of Economic Analysis may submit to the Commission for its 
consideration any matter which has been delegated in this paragraph. 
Nothing in this paragraph prohibits the Commission, at its election, 
from exercising the authority delegated in this paragraph.
    6. Section 18.04 is amended by removing paragraph (d) and by 
revising the introductory text to read as follows:


Sec. 18.04  Statement of reporting trader.

    Every trader who holds or controls a reportable options or futures 
position shall after a special call upon such trader by the Commission 
or its designee file with the Commission a ``Statement of Reporting 
Trader'' on the Form 40 at such time and place as directed in the call. 
All traders shall complete part A of the Form 40 and, in addition, 
shall complete:

    Part B--If the trader is an individual, a partnership or a joint 
tenant.
    Part C--If the trader is a corporation or type of trader other 
than an individual, partnership, or joint tenant.
* * * * *

PART 19--REPORTS BY PERSONS HOLDING BONA FIDE HEDGE POSITIONS 
PURSUANT TO Sec. 1.3(z) OF THIS CHAPTER AND BY MERCHANTS AND 
DEALERS IN COTTON

    7. The authority section for part 19 continues to read as follows:

    Authority: U.S.C. 6g(a), 6i, and 12a(5), unless otherwise noted.

    8. Section 19.00 is amended by revising paragraph (a)(1) to read as 
follows:


Sec. 19.00  General provisions.

    (a) * * *
    (1) All persons holding or controlling options or futures positions 
that are reportable pursuant to Sec. 15.00(b)(1)(ii) of this chapter 
and any part of which constitute bona fide hedging positions as defined 
in Sec. 1.3(z) of this chapter,
* * * * *
    Issued in Washington, D.C., January 31, 1997 by the Commission.
Catherine D. Dixon,
Assistant to the Secretary of the Commission.
[FR Doc. 97-3395 Filed 2-10-97; 8:45 am]
BILLING CODE 6351-01-P