[Federal Register Volume 62, Number 117 (Wednesday, June 18, 1997)]
[Rules and Regulations]
[Page 33007]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-15883]



[[Page 33007]]

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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 1


Financial Reports of Futures Commission Merchants and Introducing 
Brokers; Correction

AGENCY: Commodity Futures Trading Commission.

ACTION: Technical amendment.

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SUMMARY: This document contains a technical amendment to the final rule 
amendments which were published on Friday, March 7, 1997 (62 FR 10441). 
The rule amendments related to financial reports of futures commission 
merchants (FCMs) and introducing brokers (IBs) filed electronically. 
The technical amendment makes clear that the Commodity Futures Trading 
Commission (Commission) will only accept an electronic filing of a 
financial report in lieu of a filing in paper form if the FCM, IB or a 
designated self-regulatory organization (DSRO) has provided the 
Commission with the means necessary to read and to process the 
information contained in the financial report filed electronically.

EFFECTIVE DATE: June 18, 1997.

FOR FURTHER INFORMATION CONTACT: Lawrence B. Patent, Associate Chief 
Counsel, or Lawrence T. Eckert, Attorney Advisor, Division of Trading 
and Markets, Commodity Futures Trading Commission, 1155 21st Street, 
NW., Washington, D.C. 20581. Telephone (202) 418-5450.

SUPPLEMENTARY INFORMATION: On March 7, 1997, the Commission published 
final amendments to Commission Rule 1.10(c), among others, that are 
intended to facilitate the filing of financial reports by FCMs and IBs 
with the Commission electronically. 62 FR 10441. These rule amendments 
provided that financial reports which need not be certified by an 
independent public accountant in accordance with Commission Rule 1.16 
may be submitted to the Commission in electronic form using a 
Commission-assigned Personal Identification Number, and otherwise in 
accordance with instructions issued by the Commission, if the 
Commission has obtained the means necessary to read and to process the 
information contained in such reports. (Emphasis added.)
    Member firms of the Chicago Mercantile Exchange (CME) and the 
Chicago Board of Trade (CBT) are filing financial reports with those 
exchanges electronically. The software which enables firms to make such 
electronic filings, and which enables the CME and CBT to read and to 
process the data contained in the reports, was co-developed by CME and 
CBT.
    In order for the Commission to permit firms to file financial 
reports with the Commission electronically, the Commission must be able 
to read and to process the data contained therein. When the Commission 
adopted the amendment to Rule 1.10(c), it intended that firms would be 
permitted to file electronically only if they or a DSRO furnished the 
electronic filing software to the Commission. However, somewhat broader 
language was used in the amendment to Rule 1.10(c) to allow for the 
possibility that the Commission could obtain such software by other 
means.
    The Commission, in an effort to eliminate any possible confusion on 
this point, has determined to make a technical amendment to the first 
proviso of Rule 1.10(c) such that the Commission will accept a non-
certified financial report filed by an FCM or IB electronically if, 
among other things, the FCM, IB or a DSRO \1\ has provided the 
Commission with the means necessary to read and to process the 
information contained in the financial report filed electronically. The 
Commission believes that this technical amendment is consistent with 
its original intent in adopting amendments to Rule 1.10(c) as well as 
with the Commission rule governing maintenance of records in electronic 
format.\2\ The Commission also believes this methodology for reviewing 
firm and exchange controls may become increasingly necessary as firms 
and DSROs move toward ``paperless'' or electronic surveillance systems.
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    \1\ There are still some FCMs and IBs that do not belong to a 
DSRO so the Commission wants to allow for the possibility that such 
firms may themselves develop electronic filing software and supply 
it to the Commission. Further, the Commission allows any DSRO to 
furnish the software, rather than only the FCM's or IB's own DSRO, 
because these products may be used by more than one DSRO and it may 
be the case that the software necessary to read and/or to process 
financial reports filed electronically is supplied by a particular 
DSRO to the entire industry and the Commission. For example, CME may 
supply the software that permits the Commission to process a report 
filed electronically by a CBT member firm.
    The Commission reiterates that it encourages the industry to 
develop a system of electronic filing of financial reports that will 
provide for the development of a uniform database of financial 
information with the least burden upon filers, self-regulatory 
organizations and the Commission. 62 FR 10442 n.8.
    \2\ The Commission's general recordkeeping rule, Rule 1.31, 
provides, among other things, that if microfilm, microfiche or 
optical disk substitution for hard copy is made, persons required to 
keep such records shall at all times have on their premises and make 
available upon request to representatives of the Commission or the 
U.S. Department of Justice facilities for easily readable projection 
of the microfilm or microfiche, or display of information stored on 
optical disk, as well as facilities for making complete, accurate 
and easily readable copies of the records preserved in those 
formats. Commission Rule 1.31(c)(1); see also 17 CFR Sec. 240.17a-4, 
as amended by 62 FR 6469, 6473 (Feb. 12, 1997) (Securities and 
Exchange Commission rule governing records to be preserved by 
certain securities exchange members, securities brokers and 
securities dealers).
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Need for Correction

    As published, the final rules contain statements which may prove to 
be misleading and are in need of clarification.

List of Subjects in 17 CFR Part 1

    Commodity futures; Minimum financial and related reporting 
requirements.

PART 1--GENERAL REGULATIONS UNDER THE COMMODITY EXCHANGE ACT

    Accordingly, 17 CFR Part 1 is corrected by making the following 
technical amendments:
    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, 7b, 8, 9, 12, 12a, 
12c, 13a, 13a-1, 16, 16a, 19, 21, 23 and 24.


Sec. 1.10  [Corrected]

    2. In Sec. 1.10, paragraph (c), the first proviso is revised to 
read, ``Provided, however, That any report filed pursuant to paragraphs 
(b)(1), (b)(2) or (b)(4) of this section or Sec. 1.12 (a) or (b) which 
need not be certified in accordance with Sec. 1.16 may be submitted to 
the Commission in electronic form using a Commission-assigned Personal 
Identification Number, and otherwise in accordance with instructions 
issued by the Commission, if the futures commission merchant, 
introducing broker or a designated self-regulatory organization has 
provided the Commission with the means necessary to read and to process 
the information contained in such report:''.

    Issued in Washington, D.C. on June 12, 1997 by the Commission.
Jean A. Webb,
Secretary of the Commission.
[FR Doc. 97-15883 Filed 6-17-97; 8:45 am]
BILLING CODE 6351-01-P