[Federal Register Volume 64, Number 77 (Thursday, April 22, 1999)]
[Rules and Regulations]
[Pages 19711-19713]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-9939]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Parts 1, 5 and 31


Fees for Applications for Contract Market Designation, Audits of 
Leverage Transaction Merchants, and Reviews of the Rule Enforcement 
Programs of Contract Markets and Registered Futures Associations

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 stay in line with current 
Commission costs. In this regard, the staff recently reviewed the 
Commission's actual costs of processing applications for contract 
market designations (17 CFR Part 5, Appendix B), audits of leverage 
transactions merchants (17 CFR Part 31, Appendix B) and reviews of the 
rule enforcement programs of contract markets and registered futures 
associations (17 CFR Part 1, Appendix B). As a result of this review, 
the Commission is adopting final fees for applications for contract 
market designation for a futures contract, submitted to the Commission 
for review and approval by contract markets, which will be reduced from 
$7,900 to $6,800; contract market designation for an option contract 
which will be reduced from $1,600 to $1,200; and simultaneous 
applications for contract market designation for a futures contract and 
an option on that futures contract, which will be reduced from a 
combined fee of $8,500 to a combined fee of $7,500.
    In addition, the Commission is adopting the final fees for 1999 for 
the Commission's review of the rule enforcement program at the 
registered futures association and the contract markets regulated by 
the Commission as described under SUPPLEMENTARY INFORMATION.
    Finally, the Commission is eliminating the list of fees for audits 
of leverage transaction merchants because there have been no leverage 
transaction merchants registered with the Commission for a number of 
years and none is expected to register in the near future.

DATES: The fee schedule for reviews of the programs of listed contract 
markets and the registered futures association must be paid by the 
named entities no later than June 21, 1999. The reduced fee for filing 
futures and option contracts singly or simultaneously is effective 
April 22, 1999. The list of fees for audits of Leverage Transaction 
Merchants is no longer provided upon publication in the Federal 
Register.

FOR FURTHER INFORMATION CONTACT: Donald L. Tendick, Office of the 
Executive Director, (202) 418-5160, Paul Bjarnason, Division of Trading 
and Markets, (202) 418-5459, or Richard Shilts, Division of Economic 
Analysis, (202) 418-5275, Three Lafayette Centre, 1155 21st Street, 
N.W., Washington, D.C. 20581.

SUPPLEMENTARY INFORMATION

I. Computation of Fees

    The Commission has established fees for certain activities and 
functions it performs, including processing applications for contract 
market designation and performing reviews of the rule enforcement 
programs of contract markets and the registered futures association.\1\ 
The starting point for the determination of all fees, including both 
contract market designations and reviews of rule enforcement programs, 
is the average of the previous three years' actual costs incurred for 
each of the above-mentioned activities. However, as explained below in 
section II, all contract markets pay a uniform fee for filing 
applications with the Commission for the designation of new contracts. 
With respect to the Commission's review of programs of rule 
enforcement, a unique fee is assessed each entity, based upon the 
actual costs of the particular review conducted at each entity. The 
costs of performing a rule enforcement review at a contract market or 
registered futures association vary according to the size and 
complexity of the entity's program. To ensure that high fees do not 
unduly burden small exchanges, the Commission's formula provides for 
some reduction in the fee assessed, as explained in section II below.
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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.
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    Actual costs include the direct salaries of the personnel assigned 
to each activity plus overhead. The overhead added to the direct salary 
costs is based upon various indirect costs including: indirect 
personnel costs (leave and benefits), rent, communications, travel/
transportation, contract services, utilities, equipment

[[Page 19712]]

and supplies. All costs are accounted for by the Commission's 
Management Accounting Structure Codes (MASC) system, which is an 
agency-wide time accounting system. Overhead is calculated according to 
a government-wide standard established by the Office of Management and 
Budget. The overhead rate applied usually differs each year due to 
fluctuations in the component costs included in overhead. The overhead 
rate for fiscal year 1996 was 98%, for fiscal year 1997 was 91% and for 
fiscal year 1998 was 104% (rounded to nearest whole percent). As stated 
above, once the total direct personnel costs for each fee item have 
been determined for each year, the overhead factor for that year is 
applied, and the three-year costs are averaged. The three-year annual 
average of costs is used to compute the fee schedule amounts, as 
explained in detail below.

II. Applications for Contract Market Designation

A. History

    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 and the number of contracts, 
reviewed by the Commission during that period of time. The formula for 
determining the fee was revised in 1985. At that time, most of 
designation applications were for futures contracts as opposed to 
option contracts, and the same fee was applied to both futures and 
option designation applications.
    In 1992, the Commission reviewed its data on the actual costs for 
reviewing designation applications for both futures and option 
contracts and determined that the cost of reviewing a futures contract 
designation application was much higher than the cost of reviewing an 
option contract designation. It also determined that, when designation 
applications for both a futures contract and an option on that futures 
contract were submitted simultaneously, the cost for reviewing both 
together was lower than for reviewing the contracts separately. Based 
upon that finding, three separate fees were established--one for 
futures alone, one for options alone, and one for combined futures and 
option contract applications (57 FR 1372). The combined futures/option 
designation application fee is set at a level that is less than the 
aggregate fee for separate futures and option applications to reflect 
the fact that the cost for review of an option is lower when submitted 
simultaneously with the underlying future and to create an incentive 
for contract markets to submit simultaneously applications for futures 
and options on that future.

B. Fees for Applications for Contract Market Designation

    The Commission staff reviewed the actual costs of processing 
applications for contract market designation for a futures contract for 
fiscal years 1996, 1997 and 1998 and found that the average cost over 
the three-year period was $6,810 per contract. The review of actual 
costs of processing applications for contract market designation for an 
option contract for fiscal years 1996, 1997 and 1998 revealed that the 
average cost over the same period was $1,268 per contract. Accordingly, 
the Commission has determined that the final fee for applications for 
contract market designations as a futures contract will be reduced to 
$6,800, and the final fee for applications for contract market 
designation as an option contract will be reduced to $1,200 in 
accordance with the Commission's regulations (17 CFR Part 5, Appendix 
B). In addition, the final 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 $7,500 per combined filing.
    The fee for futures contract applications also applies to options 
on physicals applications. Because the requirements for designation of 
an option on a physical are substantially identical to those of futures 
contracts, the same fee will apply to both types of filings.\2\
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    \2\ In this regard, under the Commission's Guideline No. 1, 
which details the information an application for contract market 
designation must include, all of the requirements for futures 
contract applications (whether providing for physical delivery or 
cash settlement) also apply to options on physicals applications, 
plus several additional requirements that apply uniquely to options. 
See, for example, 63 FR 38537, July 17, 1998.
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    The Commission is also today publishing separately in the Federal 
Register a proposal to establish reduced fees for a limited class of 
simultaneously submitted multiple contract market designation 
application filings.

III. Rule Enforcement Reviews of Contract Markets and Registered 
Futures Associations

    Under the formula adopted in 1993 (58 FR 42643 (August 11, 1993), 
which appears in 17 CFR Part 1, Appendix B), the Commission calculates 
the fee for its review of rule enforcement programs based on its actual 
costs. The Commission has provided for a downward adjustment to reduce 
an exchange's fee below actual costs if actual costs (as a percentage 
of total rule enforcement review program costs) are greater for the 
particular exchange than that exchange's pro-rata portion of contracts 
traded industry-wide (total contract volume for the exchange as a 
percentage of total U.S. futures industry contract volume). As noted 
above, this feature of the formula generally reduces the fee burden on 
the smaller exchanges.
    Specifically, the fee required of each contract market is equal to 
the lesser of: average annual costs based upon the three-year 
historical average of costs for that contract market or one-half the 
average annual costs incurred by the Commission pertaining to each 
contract market for the most recent three-years, plus a pro-rata share 
(based upon average trading volume for the most recent three years) of 
the aggregate of average annual costs of all the contract markets for 
the most recent three years. The formula for calculating the second 
factor mentioned above 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. The one registered 
futures association regulated by the Commission, National Futures 
Association (NFA), has no contracts traded, and thus, NFA's fee is 
based simply on the average costs for the most recent three fiscal 
years.
    Following is a summary of data used in the calculations and the 
resultant fee for each entity:

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                                                                                  3-year average
                                                                  3-year average   percentage of     1999 fee
                                                                   annual costs       volume          amount
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Chicago Board of Trade..........................................        $259,841         46.0317        $259,841
Chicago Mercantile Exchange.....................................         228,215         35,6595         228,215
New York Mercantile Exchange....................................         204,627         15.1517         174,062
Coffee, Sugar & Cocoa Exchange..................................          66,814          2.2468          44,046

[[Page 19713]]

 
New York Cotton Exchange........................................         155,338          1,2997          83,824
Kansas City Board of Trade......................................          15,055          0.4074           9,457
Minneapolis Grain Exchange......................................          16,558          0.1979           9,216
Philadelphia Board of Trade.....................................             624          0.0054             338
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    Subtotal....................................................         947,072        100.0000         808,999
National Futures Association....................................         327,551             N/A         327,551
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    Total.......................................................       1,274,624        100,0000       1,136,550
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    Below is an example of how the fee was calculated for one exchange, 
the Minneapolis Grain Exchange:

    (i) Average annual costs are $16,558;
    (ii) Alternative computation is:

(.5)($16,558) + (.5)(.1979%) (947,042) = $8,279 + $937 = $9,216

    (iii) The fee is the lesser of (i) and (ii) = $9,216.

    As noted above, NFA, a registered futures association, has no 
contracts and, therefore, is billed for average annual costs. The 
Commission's average annual cost for conducting oversight review of the 
NFA rule enforcement program during fiscal years 1996 through 1998 was 
$327,551 (\1/3\ of $982,654). Therefore, the fee to be paid by NFA 
pertaining to fiscal year 1998 is $327, 551.

    Issued in Washington, D.C. on April 15, 1999, by the Commission.
Jean A. Webb,
Secretary of the Commission.
[FR Doc. 99-9939 Filed 4-21-99; 8:45 am]
BILLING CODE 6351-01-M