[Federal Register Volume 63, Number 45 (Monday, March 9, 1998)]
[Rules and Regulations]
[Pages 11368-11370]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-5881]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Parts 1, 5, and 31


Fees for Applications for Contract Market Designation, Leverage 
Commodity Registration and Registered Futures Association and Exchange 
Rule Enforcement and Financial Reviews

AGENCY: Commodity Futures Trading Commission.

ACTION: Final schedule of fees.

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SUMMARY: The Commission periodically adjusts fees charged for certain 
program services to assure that they accurately reflect current 
Commission costs. In this regard, the staff recently reviewed the 
Commission's actual costs of processing applications for contract 
market designation (17 CFR part 5, appendix B), audits of leverage 
transaction merchants (17 CFR part 31, appendix B) and registered 
futures association and exchange rule enforcement and financial reviews 
(17 CFR part 1, appendix B). The following fee schedule for fiscal year 
1998 reflects the average annual actual costs to the Commission of 
providing those services during fiscal years 1995, 1996, and 1997. 
Accordingly, the Commission will charge the following fees: 
applications for contract market designation for a futures contract 
will be reduced from $8,300 to $7,900; contract market designation for 
an option contract will be reduced from $1,700 to $1,600; and contract 
markets that simultaneously submit designation applications for a 
futures contract and an option on that futures contract will be reduced 
from a combined fee of $9,000 to a combined fee of $8,500. In addition, 
the Commission is publishing the schedule of fees for registered 
futures association and exchange rule enforcement and financial 
reviews.

EFFECTIVE DATES: The Fee Schedule for Contract Market Designation is 
effective on March 9, 1998. Registered Futures Association and Exchange 
Rule Enforcement and Financial Review fees are due May 8, 1998.

FOR FURTHER INFORMATION CONTACT: Gerald P. Smith, Special Assistant to 
the Executive Director, Office of the Executive Director, Commodity 
Futures Trading Commission, Three Lafayette Centre, 1155 21st Street, 
N.W., Washington, D.C. 20581, 202-418-5160.

SUPPLEMENTARY INFORMATION: The Commission periodically reviews the 
actual costs of providing services for which fees are charged and 
adjusts these fees accordingly. In connection with its most recent 
review, the Commission has determined that fees for contract market 
designations should be adjusted. Also, this release announces the 
fiscal year 1998 schedule of fees for registered futures association 
and exchange rule enforcement and financial reviews and leverage 
commodity registration fees.

Background Information

I. Computation of Fees

    The Commission has established fees for certain activities and 
functions it performs.\1\ In calculating the actual cost of processing 
applications for contract market designation, registering leverage 
commodities, and performing registered futures association and exchange 
rule enforcement and financial reviews, the Commission takes into 
account personnel costs (direct costs) and benefits and administrative 
costs (overhead costs).
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    \1\ See Section 237 of the Futures Trading Act of 1982, 7 U.S.C. 
16a and 31 U.S.C. 9701. For a broader discussion of the history of 
Commission fees, see 52 FR 46070 (Dec. 4, 1987).
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    The Commission first determines personnel costs by extracting data 
from the agency's Management Accounting Structure Codes (MASC) system. 
Employees of the Commission record the time spent on each project under 
the MASC system. The Commission then adds an overhead factor that is 
made up of two components--benefits and general and administrative 
costs. Benefits, which include retirement, insurance and leave, are 
based on a government-wide standard established by the Office of 
Management and Budget. General and administrative costs include the 
Commission's costs for space, equipment, utilities, etc. These general 
and administrative costs are derived by computing the percentage of 
Commission appropriations spent on these non-personnel items. The 
overhead calculations fluctuate slightly due to changes in government-
wide benefits and the percentage of Commission appropriations applied 
to non-personnel costs from year to year. The actual overhead factor 
for prior fiscal years were 92% in 1995, 98% in 1996 and 91% in 1997.
    Once the total personnel costs for each fee item (contract market 
designation, rule enforcement review, etc.) have been determined for 
each year, the overhead factor is applied and the costs for fiscal 
years 1995, 1996 and 1997 are averaged. This results in a calculation 
of the average annual cost over the three-year period.

II. Applications for Contract Market Designation

    On August 23, 1983, the Commission established a fee for Contract 
Market Designation (48 FR 38214). The fee was based upon a three-year 
moving average of the actual costs expended and the number of contracts 
reviewed during that period of time. The formula for determining the 
fee was revised in 1985. At that time the overwhelming majority of 
designation applications was for futures contracts as opposed to option 
contracts. Therefore, the fee covered both futures and option 
designation applications. In fiscal year 1992, the Commission reviewed 
its data on the actual costs for reviewing designation applications for 
both futures and option contracts and determined that the costs for 
reviewing a futures contract designation application was much higher 
than the cost of reviewing an application for an option contract. It 
also determined that, when designation applications for both a futures 
contract and an option on that futures contract are submitted 
simultaneously, the cost for reviewing both together was lower than 
reviewing them individually. Based on that review, separate fees were 
established for futures, option and combined futures and option 
contracts.
    The Commission staff reviewed the actual costs of processing 
applications for contract market designation for a futures contract for 
fiscal years 1995, 1996, and 1997 and found that the

[[Page 11369]]

average cost over the three-year period was $7,939.48. The review of 
actual costs of processing applications for contract market designation 
for an option contract for fiscal years 1995, 1996 and 1997 revealed 
that the average costs over the same three-year period was $1,628.67. 
Accordingly, the Commission has determined that the fee for 
applications for contract market designation for a futures contract 
will be reduced to $7,900 and the fee for applications for contract 
market designation as an option contract will be reduced to $1,600 in 
accordance with the Commission's regulations (17 CFR part 5, Appendix 
B). In addition, the combined fee for contract markets simultaneously 
submitting designation applications for a futures contract and an 
option contract on that futures contract will be reduced to $8,500.

III. Leverage Commodity Registration

    No new applications for leverage commodity registration have been 
received for approximately ten years. Accordingly, the Commission will 
not publish a fee for this service.

IV. Registered Futures Association and Exchange Rule Enforcement and 
Financial Reviews

    Under the formula adopted in 1993 (58 FR 42643, August 11, 1993, 
which appears in 17 CFR Part I, Appendix B), the Commission calculates 
the rule enforcement and financial review fees based on its actual 
costs as well as actual exchange trading volume. The formula for 
calculating the rule enforcement and financial review fee is 0.5a + 
0.5vt=current fee. In the formula, ``a'' equals the average annual 
costs, ``v'' equals the percentage of total volume across exchanges 
over the last three years and ``t'' equals the average annual cost for 
all exchanges.
    To determine the fee, the staff first calculates actual costs for 
the last three fiscal years. The average annual costs for that time 
period for rule enforcement reviews and financial reviews for each 
exchange are as follows:

------------------------------------------------------------------------
                                                           FY 1995-1997 
                                                          average annual
                        Exchange                             costs for  
                                                              review    
                                                             services   
------------------------------------------------------------------------
Chicago Board of Trade..................................     $292,692.79
Chicago Mercantile Exchange.............................      202,687.56
New York Mercantile/COMEX Exchange......................      208,224.10
Coffee Sugar and Cocoa Exchange.........................       75,516.41
New York Cotton/New York Futures Exchange...............      141,279.28
Kansas City Board of Trade..............................       11,266.57
Minneapolis Grain Exchange..............................       24,991.23
Philadelphia Board of Trade.............................          624.35
                                                         ---------------
    Total...............................................      957,282.29
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    Then, the staff calculates the trading volume for the past three 
fiscal years to determine the cumulative volume for each exchange and 
its percentage of total volume across all exchanges during that same 
period. The trading volume figures for that period are as follows:

------------------------------------------------------------------------
                                                             Percentage 
                                            FY 1995-1997      of total  
                Exchange                 cumulative volume     volume   
                                          (# of contracts)   across all 
                                                              exchanges 
------------------------------------------------------------------------
Chicago Board of Trade.................        668,713,095       43.9419
Chicago Mercantile Exchange............        558,542,483       36.7024
New York Mercantile/COMEX Exchange.....        229,833,443       15.1026
Coffee, Sugar and Cocoa Exchange.......         35,725,840        2.3476
New York Cotton/New York Futures                                        
 Exchange..............................         19,593,431        1.2875
Kansas City Board of Trade.............          6,190,142        0.4068
Minneapolis Grain Exchange.............          3,092,736        0.2032
Philadephia Board of Trade.............            121,721        0.0080
                                        --------------------------------
    Total..............................      1,521,812,891      100.00  
------------------------------------------------------------------------

    Finally, the staff calculates the current fees by applying the 
appropriate exchange data to the formula. The following is an example 
of how the rule enforcement and financial review fees for exchanges are 
calculated:

    The Minneapolis Grain Exchange (MGE) average annual cost is 
$24,991.23 and its percentage of total volume over the last three 
years is 0.2032. The annual average total cost for all exchanges 
during that same time period is $957,282.29. As a result, the MGE 
fee for fiscal 1997 is: (.5) ($24,991.23)+(.5) (.002032) 
($957,282.79)=current fee or $12,495.62+$972.73=$13,468.35.

    As stated in 1993 when the formula was adopted, if the calculated 
fee using this formula is higher than actual costs, the exchange pays 
actual costs. If the calculated fee using the formula is less than 
actual costs, the exchange pays the calculated fee. No exchange will 
pay more than actual costs. Also, if an exchange has no volume over the 
three-year period, it pays a flat 50% of actual costs.
    The National Futures Association (NFA) is a registered futures 
association which is responsible for regulating the practices of its 
members. In its oversight role, the Commission performs rule 
enforcement and financial reviews of the NFA. The Commission's average 
annual cost for reviewing the National Futures Association during 
fiscal years 1995 through 1997 was $344,364.39. The National Futures 
Association will continue to be charged 100% of its actual costs.
    Based upon this formula, the fees for all of the exchanges and the 
NFA for fiscal 1998 are as follows:

------------------------------------------------------------------------
                       Exchange                            FY 1998 fee  
------------------------------------------------------------------------
Chicago Board of Trade................................       $292,692.79
Chicago Mercantile Exchange...........................        202,687.56
New York Mercantile/COMEX Exchange....................        176,399.35
Coffee, Sugar and Cocoa Exchange......................         48,994.71
New York Cotton/New York Futures Exchange.............         76,802.17
Kansas City Board of Trade............................          7,580.21
Minneapolis Grain Exchange............................         13,468.35
Philadephia Board of Trade............................            350.46
NFA...................................................        344,364.39
                                                       -----------------
    Total.............................................      1,163,339.99
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V. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA''), 5 U.S.C. 601 et seq., 
requires agencies to consider the impact of rules on small businesses. 
The fees implemented in this release affect contract markets (also 
referred to as

[[Page 11370]]

``exchanges'') and registered futures associations. The Commission has 
previously determined that contract markets are not ``small entities'' 
for purposes of the Regulatory Flexibility Act, 5 U.S.C. 601 et seq., 
47 FR 18618 (April 30, 1982). Registered futures associations also are 
not considered ``small entities'' by the Commission. Therefore, the 
requirements of the Regulatory Flexibility Act do not apply to contract 
markets or registered futures associations. Accordingly, the 
Chairperson, on behalf of the Commission, certifies that the fees 
implemented herein do not have a significant economic impact on a 
substantial number of small entities.

    Issued in Washington, D.C. on March 3, 1998, by the Commission.
Jean A. Webb,
Secretary of the Commission.
[FR Doc. 98-5881 Filed 3-6-98; 8:45 am]
BILLING CODE 6351-01-M