[Federal Register Volume 69, Number 47 (Wednesday, March 10, 2004)]
[Notices]
[Pages 11388-11389]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-5101]


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COMMODITY FUTURES TRADING COMMISSION


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 FY 2003 is 
based on an average of actual program costs incurred during FY 2000, 
2001, and 2002, as explained below. The FY 2003 fee schedule is set 
forth in the SUPPLEMENTARY INFORMATION.

EFFECTIVE DATES: The FY 2003 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 May 10, 2004.

FOR FURTHER INFORMATION CONTACT: Stacy Dean Yochum, Counsel to the 
Executive Director, Office of the Executive Director, Commodity Futures 
Trading Commission, Three Lafayette Centre, 1155 21st Street, NW., 
Washington, DC 20581, (202) 418-5160, or Eileen Chotiner, Attorney, 
Division of Clearing and Intermediary Oversight, Commodity Futures 
Trading Commission, Three Lafayette Centre, 1155 21st Street, NW., 
Washington, DC 20581, (202) 418-5467.

SUPPLEMENTARY INFORMATION:

I. General

    This notice 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.

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..................................        $161,420
Chicago Mercantile Exchange.............................         170,273
Kansas City Board of Trade..............................          12,301
New York Mercantile Exchange............................         132,918
Minneapolis Grain Exchange..............................           6,748
National Futures Association............................         195,708
New York Board of Trade.................................          58,265
                                                         ---------------
    Total...............................................         737,633
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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 overhead 
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

[[Page 11389]]

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 2000, 117 percent for fiscal year 2001, and 129 percent 
for fiscal year 2002. 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 the 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 at 
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 + 0.5 vt = 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 costs 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         2003 fee
----------------------------------------------------------------------------------------------------------------
Chicago Board of Trade..........................................        $161,420         34.7882        $161,420
Chicago Mercantile Exchange.....................................         170,273         47.6397         170,273
New York Mercantile Exchange....................................         173,114         14.4836         132,918
New York Board of Trade.........................................         100,453          2.5111          58,265
Kansas City Board of Trade......................................          22,310          0.3581          12,301
Minneapolis Grain Exchange......................................          12,617          0.1373           6,748
                                                                 -----------------
    Subtotal....................................................         640,187         99.9181         541,925
National Futures Association....................................         195,708             N/A         195,708
                                                                 =================
        Total...................................................         835,895         99.9181         737,633
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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 $12,617.
    b. The alternative computation is:

(.5) ($12,617) + (.5) (.001373) ($640.187) = $6748.

    c. The fee is the lesser of a or b; in this case $6748.
    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 2000 through 2002 was $195,708 (one-third of $587,124). 
The fee to be paid by the NFA for the current fiscal year is $195,708.

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 (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 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 March 2, 2004, by the Commission.
Jean A. Webb,
Secretary of the Commission.
[FR Doc. 04-5101 Filed 3-9-04; 8:45 am]
BILLING CODE 6351-01-M