[Federal Register Volume 66, Number 117 (Monday, June 18, 2001)]
[Rules and Regulations]
[Pages 32737-32739]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-15272]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 1


Fees for Reviews of the Rule Enforcement Programs of Contract 
Markets and Registered Futures Association

AGENCY: Commodity Futures Trading Commission.

ACTION: Establish a new schedule of fees.

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SUMMARY: The Commission charges fees to designated contract markets and 
the National Futures Association (NFA) to recover the costs incurred by 
the Commission in the operation of a program which provides a service 
to these entities. The fees are charged for the Commission's conduct of 
its program of oversight of self-regulatory rule enforcement programs 
(17 CFR part 1 appendix B) (NFA and the contract markets are referred 
to as SROs).
    The calculation of the fee amounts to be charged for the upcoming 
year is based on an average of actual program costs incurred in the 
most recent three full fiscal years, as explained below. The new fee 
schedule is set forth in the Supplementary Information and information 
is provided on the effective date of the fees and the due date for 
payment.

EFFECTIVE DATES: The fees for Commission oversight of each SRO rule 
enforcement program must be paid by each of the named SROs in the 
amount specified by no later than August 17, 2001.

[[Page 32738]]


FOR FURTHER INFORMATION CONTACT: Donald L. Tendick, Acting Executive 
Director, Office of the Executive Director, Commodity Futures Trading 
Commission, Three Lafayette Centre, 1155 21st Street, NW, Washington, 
DC 20581, (202) 418-5160.

SUPPLEMENTARY INFORMATION:

I. General

    This notice only relates to fees for the Commission's review of the 
rule enforcement programs at the registered futures associations and 
contract markets regulated by the Commission. Fees for designation will 
be set forth in rules implementing the Commodity Futures Modernization 
Act of 2000, Appendix E of Pub. L. No. 106-554, 114 Stat. 2763, and the 
Commission's new regulatory framework. The Commission has proposed 
rules to implement the Commodity Futures Modernization Act of 2000, 
Appendix E of Pub. L. No. 106-554, 114 Stat. 2763, and the Commission's 
new regulatory framework. The proposed rules (66 FR 14262, Mar. 9, 
2001) establish three new market categories, including exempt markets 
and two categories of markets subject to Commission regulatory 
oversight--designated contract markets and registered derivatives 
transaction execution facilities. The Commission proposed also to 
charge a fee for product review where approval has been requested by a 
designated contract market or registered derivatives transaction 
execution facility. See 66 FR 14262, 14286 (Mar. 9, 2001). No fee was 
proposed for the initial designation of a contract market or 
registration of a derivatives transaction execution facility. The new 
rules will amend the Schedule of Fees found in appendix B to part 5 of 
the Commission's rules.

II. Schedule of Fees

    Fees for the Commission's review of the rule enforcement programs 
at the registered futures associations and contract markets regulated 
by the Commission:

------------------------------------------------------------------------
                          Entity                             Fee amount
------------------------------------------------------------------------
Chicago Board of Trade....................................      $187,396
Chicago Mercantile Exchange...............................       224,912
New York Mercantile Exchange/COMEX........................       173,156
New York Board of Trade...................................        73,730
Minneapolis Grain Exchange................................         3,269
National Futures Association..............................       213,421
                                                           -------------
    Total.................................................       889,738
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III. Background Information

A. General

    The Commission recalculates the fees charged each year with the 
intention of recovering the costs of operating this Commission 
program.\1\ All costs are accounted for by the Commission's Management 
Accounting Structure Codes (MASC) system, which records each employee's 
time for each pay period. The fees are set each year based on direct 
program costs, plus an overhead factor.
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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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B. Overhead Rate

    The fees charged by the Commission to the SROs are designed to 
recover program costs, including direct labor costs and overhead. The 
overhead rate is calculated by dividing total Commission-wide direct 
program labor costs into the total amount of the Commission-wide 
overhead pool. For this purpose, direct program labor costs are the 
salary costs of personnel working in all Commission programs. Overhead 
costs consist generally of the following Commission-wide costs: 
Indirect personnel costs (leave and benefits), rent, communications, 
contract services, utilities, equipment, and supplies. This formula has 
resulted in the following overhead rates for the most recent three 
years (rounded to the nearest whole percent): 104 percent for fiscal 
year 1998, 105 percent for fiscal year 1999, and 105 percent for fiscal 
year 2000. These overhead rates are applied to the direct labor costs 
to calculate the costs of oversight of SRO rule enforcement programs.

C. Conduct of SRO Rule Enforcement Reviews

    Under the formula adopted in 1993 (58 FR 42643, Aug. 11, 1993) 
which appears at 17 CFR part 1 appendix B, the Commission calculates 
the fee to recover the costs of its review of rule enforcement 
programs, based on a three-year average of the actual cost of 
performing reviews at each SRO. The cost of operation of the 
Commission's program of SRO oversight varies from SRO to SRO, according 
to the size and complexity of each SRO's program. The three-year 
averaging is intended to smooth out year-to-year variations in cost. 
Timing of reviews may affect costs--a review may span two fiscal years 
and reviews are not conducted at each SRO each year. Adjustments to 
actual costs may be made to relieve the burden on an SRO with a 
disproportionately large share of program costs.
    The Commission's formula provides for a reduction in the assessed 
fee if an SRO has a smaller percentage of United States industry 
contract volume than its percentage of overall Commission oversight 
program costs. This adjustment reduces the costs so that as a 
percentage of total Commission SRO oversight program costs, they are in 
line with the pro rata percentage for that SRO of United States 
industry-wide contract volume.
    The calculation made is as follows: The fee required to be paid to 
the Commission by each contract market is equal to the lesser of actual 
costs based on the three-year historical average of costs for that 
contract market or one-half of average costs incurred by the Commission 
for each contract market for the most recent three years, plus a pro 
rata share (based on average trading volume for the most recent three 
years) of the aggregate of average annual costs of all contract markets 
for the most recent three years. The formula for calculating the second 
factor is: 0.5a + 0.5vt=current fee. In this 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. NFA, the only registered futures 
association regulated by the Commission, has no contracts traded; hence 
its fee is based simply on costs for the most recent three fiscal 
years.
    This table summarizes the data used in the calculations and the 
resulting fee for each entity:

----------------------------------------------------------------------------------------------------------------
                                                                    Three-year      Three-year
                                                                  average actual   percentage of   Average  year
                                                                       costs          volume         2001 fee
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Chicago Board of Trade..........................................        $187,396         43.3411        $187,396
Chicago Mercantile Exchange.....................................         224,912         35.7562         224,912
NYMEX/COMEX.....................................................         215,703         16.7928         173,156

[[Page 32739]]

 
New York Board of Trade.........................................         120,068          3.5220          73,730
Kansas City Board of Trade......................................          24,582           .4019          13,854
Minneapolis Grain Exchange......................................           5,102           .1845           3,269
Philadelphia Board of Trade.....................................               0           .0004               0
                                                                 ===============================================
    Subtotal....................................................         777,760        100.0000         676,317
National Futures Association....................................         213,421             N/A         213,421
                                                                 -----------------------------------------------
    Total.......................................................         991,184        100.0000         889,738
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    An example of how the fee is calculated for one exchange, the 
Minneapolis Grain Exchange, is set forth here:
    a. Actual three-year average costs equal $5,102.
    b. The alternative computation is:

(.5)($5,102) + (.5)(.001845)($777,760) = $3,269.

c. The fee is the lesser of a or b; in this case $3,269.
    As noted above, the alternative calculation based on contracts 
traded, is not applicable to the NFA because it is not a contract 
market and has no contracts traded. The Commission's average annual 
cost for conducting oversight review of the NFA rule enforcement 
program during fiscal years 1998 through 2000 was $213,421 (one-third 
of $640,263). The fee to be paid by the NFA for the current fiscal year 
is $213,421.

IV. Regulatory Flexibility Act

    The Regulatory Flexibility Act, 5 U.S.C. 601, et seq., requires 
agencies to consider the impact of rules on small business. The fees 
implemented in this release affect contract markets (also referred to 
as exchanges) and registered futures associations. The Commission has 
previously determined that contract markets and registered futures 
associations are not ``small entities'' for purposes of the Regulatory 
Flexibility Act. Accordingly, the Acting Chairman on behalf of the 
Commission, certifies pursuant to 5 U.S.C. 605(b), that the fees 
implemented here will not have a significant economic impact on a 
substantial number of small entities.

    Issued in Washington, DC on June 6, 2001 by the Commission.
Catherine D. Dixon,
Assistant Secretary of the Commission.
[FR Doc. 01-15272 Filed 6-15-01; 8:45 am]
BILLING CODE 6351-01-P