[Federal Register Volume 67, Number 107 (Tuesday, June 4, 2002)]
[Rules and Regulations]
[Pages 38379-38381]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-13861]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 40


Fees for Product Review and Approval

AGENCY: Commodity Futures Trading Commission.

ACTION: Annual update of schedule of fees for product review and 
approval.

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SUMMARY: The Commission charges fees to designated contract markets and 
registered derivatives transaction execution facilities to recover the 
costs of its review of requests for product review and approval. 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 below.

EFFECTIVE DATE: June 4, 2002.

FOR FURTHER INFORMATION CONTACT: Richard A. Shilts, Acting Director, 
Division of Economic Analysis, Commodity Futures Trading Commission, 
Three Lafayette Centre, 1155 21st Street, NW, Washington, DC 20581, 
(202) 418-5260.

SUPPLEMENTARY INFORMATION:

I. Summary of Fees

Fees Charged for Processing Requests for Product Review and Approval

Single Applications
     A single futures contract or an option on a physical--
$5,000;
     A single option on a previously-approved futures contract-
-$1,000;

[[Page 38380]]

     A combined submission of a futures contract and an option 
on the same futures contract--$5,500.
Multiple Applications
    For multiple contract filings containing related contracts, the 
product review and approval fees are:
     A submission of multiple related futures contracts--$5,000 
for the first contract, plus $500 for each additional contract;
     A submission of multiple related options on futures 
contracts--$1,000 for the first contract, plus $100 for each additional 
contract;
     A combined submission of multiple futures contracts and 
options on those futures contracts--$5,500 for the first combined 
futures and option contract, plus $550 for each additional futures and 
option contract.

II. Background Information

1. General

    The Commission recalculates each year the fees it charges with the 
intention of recovering the costs of operating certain programs.\1\ All 
costs are accounted for by the Commission's Management Accounting 
Structure Codes (MASC) system operated according to a government-wide 
standard established by the Office of Management and Budget. 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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2. Overhead Rate

    The fees charged by the Commission 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): 105 percent for fiscal year 1999, 117 percent for 
fiscal year 2000, and 105 percent for fiscal year 2001. These overhead 
rates are applied to the direct labor costs to calculate the costs of 
reviewing contract approval requests.

3. Processing requests for contract approval

    Calculations of the fees for processing requests for product review 
and approval have become more refined over the years as the types of 
contracts being reviewed have changed.
    On August 23, 1983, the Commission established a fee for Contract 
Market Designation (48 FR 38214). Prior to its recent amendment, the 
Commodity Exchange Act (Act) provided for ``designation'' of each new 
contract as a ``contract market.'' The Commodity Futures Modernization 
Act (CFMA) amended the Act to limit the concept of ``contract market 
designation'' to the approval of certain markets or trading facilities 
on which futures and options are traded, as opposed to approval of a 
specific contract or product. Commission rules that implemented the 
CFMA, therefore, charged a fee for the contract review where approval 
has been requested by a designated contract market or registered 
derivatives transaction execution facility (DTF). No fee is charged a 
board of trade for its initial designation as a contract market or 
registration as a DTF.
    The fee, as originally adopted in 1983, was based on a three-year 
moving average of the actual costs expended and the number of contracts 
reviewed by the Commission during that period. The formula for 
determining the fee was revised in 1985. At that time, most designation 
applications were for futures contracts and no separate fee was set for 
option contracts.
    In 1992, the Commission reviewed its data on the actual costs for 
reviewing applications for both futures and option contracts and 
determined that the percentage-of applications pertaining to options 
had increased and that the cost of reviewing a futures contract 
designation application was much higher than the cost of reviewing an 
application for an option contract. The Commission also determined that 
when applications for a futures contract and an option on that futures 
contract are submitted simultaneously, the cost is much lower than when 
the contracts are separately reviewed. 'To recognize this cost 
difference, three separate fees were established: one for futures; one 
for options; and one for combined futures and option contract 
applications (57 FR 1372, Jan. 14, 1992).
    The Commission refined its fee structure further in 1999 to 
recognize the unique processing cost characteristics of a class of 
contracts--cash-settled based on an index of non-tangible commodities 
(64 FR 30384, June 8, 1999). The Commission determined to charge a 
reduced fee for related simultaneously submitted contracts for which 
the terms and conditions of all contracts in the filing are identical, 
except in regard to a specified temporal or spatial pricing 
characteristic or the multiplier used to determine the size of each 
contract. Contracts on major currencies, defined as the Australian 
dollar, British pound, Euro (and its component currencies), Japanese 
yen, Canadian dollars Swiss franc, New Zealand dollar, Swedish krona, 
and the Norwegian krone (including contracts based on currency cross 
rates), were determined to be eligible for the reduced multiple 
contract fees.\2\ The Commission determined that a 10 percent marginal 
fee for additional contracts in a filing would be appropriate for 
simultaneously submitted contracts eligible for the multiple contract 
filing fee.
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    \2\ Submissions containing a number of similar cash-settled 
contracts based on the government debt of different foreign 
countries would not be eligible for the reduced fee, since the 
manipulation potential of each contract would be related to the 
liquidity of the underlying instruments, and the individual trading 
practices and governmental oversight in each specific country 
require separate analysis.
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    Commission staff compiled the actual costs of processing a request 
for product review and contract approval for a futures contract for 
fiscal years 1999, 2000, and 2001, and found that the average cost over 
the three-year period was $5,000, including overhead. Review of actual 
costs of processing contract-approval reviews for an option contract 
for fiscal years 1999, 2000, and 2001 reveal that the average cost over 
the period was $1,000 per contract, including overhead.
    In accordance with its regulations as codified at 17 CFR part 40 
appendix B, the Commission has determined that the fee for approval of 
a futures contract will be set at $5,000 and the fee for approval of an 
option contract will be set at $1,000. The fee for simultaneously 
submitted futures contracts and option contracts on those futures 
contracts and the fees for filings containing multiple cash-settled 
indices on non-tangible commodities have been set similarly and as 
indicated in the schedule set forth in the Summary of Fee above.

III. Cost-Benefit Analysis

    Section 15 of the Act, as amended by section 119 of the CFMR, 
requires the Commission to consider the costs and benefits of its 
action before issuing a new regulation under the Act. Section

[[Page 38381]]

15 does not require the Commission to quantify the costs and benefits 
of a new regulation or to determine whether the benefits of the 
proposed regulation outweigh its costs. Rather, section 15 simply 
requires the Commission to ``consider the costs and benefits'' of its 
action, in light of five broad areas of market and public concern: 
protection of market participants and the public; efficiency, 
competitiveness, and financial integrity of futures markets; price 
discovery; sound risk management practices; and other public interest 
considerations. Accordingly, the Commission could in its discretion 
give greater weight to any one of the five enumerated areas of concern 
and could in its discretion determine that, notwithstanding its costs, 
a particular rule was necessary or appropriate to protect the public 
interest or to effective any of the provisions or to accomplish any of 
the purposes of the Act.
    The submission of new products for Commission review and approved 
by designated contract markets or DTFs is voluntary. The Commission has 
therefore concluded that those entities choosing to make such 
submissions find that the benefits of doing so equal or exceed the 
fees, which, as explained above, are derived from the Commission's 
actual processing costs.

IV. Regulatory Flexibility Act

    The Regulatory Flexibility Act, 5 USC 601, et seq., requires 
agencies to consider the impact of rules on small business. The fees 
implemented in this release affect contract markets and registered 
DTFs. The Commission has previously determined that contract markets 
and registered DTFs are not ``small entities'' for purposes of the 
Regulatory Flexibility Act. Accordingly, the Chairman, on behalf of the 
Commission, certifies pursuant to 5 USC 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 May 29, 2002 by the Commission.
Jean A. Webb,
Secretary of the Commission.
[FR Doc. 02-13861 Filed 6-3-02; 8:45 am]
BILLING CODE 6351-01-M