[Federal Register Volume 69, Number 222 (Thursday, November 18, 2004)]
[Rules and Regulations]
[Pages 67503-67508]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-25613]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Parts 40, 41, and 145


Confidential Information and Commission Records and Information

AGENCY: Commodity Futures Trading Commission.

ACTION: Final rules.

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SUMMARY: The Commodity Futures Trading Commission is amending its 
regulations to specify which portions of an application for 
registration as a derivatives transaction execution facility (DTEF) or 
derivatives clearing organization (DCO), or for designation as a 
contract market (DCM), will be public. The amendments also implement a 
procedure requiring registered entities to submit a cover sheet for all 
rule submissions. Additionally, the Commission is updating its 
regulations under the Freedom of Information Act (FOIA) to implement 
expedited processing and increased time limits; revise the schedule of 
fees for FOIA requests; and correct certain provisions concerning 
publicly available records.

DATES: Effective December 20, 2004.

ADDRESSES: You may submit comments by any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov.
     Mail/Hand Deliver: Jean A. Webb, Secretary of the 
Commission, Commodity Futures Trading Commission, Three Lafayette 
Centre, 1155 21st Street, NW., Washington, DC 20581.
    E-mail: [email protected].

FOR FURTHER INFORMATION CONTACT: Eileen A. Donovan, Assistant Secretary 
to the Commission for FOIA Matters, (202) 418-5096, electronic mail: 
[email protected], or David Steinberg, Attorney Advisor, (202) 418-
5102, electronic mail: [email protected], Office of the Secretariat, 
Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st 
Street, NW., Washington, DC 20581.

SUPPLEMENTARY INFORMATION:

I. Background

A. Public Availability of Applications Submitted by DTEFs, DCOs, and 
DCMs

    On July 28, 2004, the Commission requested comment from the public 
regarding its proposal to specify that the following portions of DTEF, 
DCO, and DCM applications are publicly available:\1\ transmittal 
letter, proposed rules, the applicant's regulatory compliance chart, 
documents establishing the applicant's legal status (e.g., corporate 
charters), and documents setting forth the applicant's governance 
structure.\2\ The proposed change to Sec.  40.8 addresses the absence 
in the Commission's regulations of any guidance to applicants or the 
public about the availability of the applications.
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    \1\ 69 FR 44981.
    \2\ The rule proposal indicated that the identical sections of 
applications seeking designation or registration as a DCM or DTEF 
under section 6(a) of the CEA would be publicly available.
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    In response to this proposal, the Commission received comment 
letters from the Chicago Mercantile Exchange (``CME'') and the Chicago 
Board of Trade (``CBOT'') (collectively, ``exchanges''). Both exchanges 
noted strong support for the rule proposal, but requested that the 
Commission expand the proposal to make additional information public as 
a matter of course. The Commission has carefully considered the 
comments from the exchanges and does not believe the proposal should be 
expanded at this time. First, the exchanges contend that the Commission 
should ensure the public has the opportunity to comment meaningfully on 
the salient operational features of the proposed exchange, as well as 
any proposed plans that could adversely impact market integrity, such 
as payment for order flow or internalization plans. The CBOT also 
believes that applicant plans to allow or encourage trading off the 
centralized market should be public. The Commission understands the 
importance of interested parties being able to comment meaningfully on 
this information. The Commission notes that applicant plans regarding 
payment for order flow or internalization plans are either submitted in 
the rules section of the proposed application or may be part of the 
applicant's future plans filed separately from the application. 
Applicant plans for trading off the centralized market are also 
submitted in the rules section of the proposal. Rules are defined in 
Sec.  40.1 and are already generally considered public information. 
Consequently, the Commission does not believe it is necessary to 
separately list this information in Sec.  40.8(a).
    Second, both exchanges assert that information concerning 
outsourcing arrangements upon which the applicant tends to rely should 
be made public. The CME notes that to the extent that an applicant 
proposes to outsource any of its operational, self-regulatory, or 
clearing functions, the public cannot provide the Commission with 
useful comments regarding the applicant's proposed compliance with the 
Commodity Exchange Act's core principles or designation criteria unless 
the key provisions are made public. Again, the Commission recognizes 
the importance of interested parties being able to comment on a 
proposed application, but must balance this with the intent of the 
applicant to protect commercially sensitive information. Outsourcing 
arrangements often include compliance and surveillance techniques and 
the public release of this information could cause competitive harm to 
the applicant. The Commission notes that Sec.  40.8(a) is not intended 
to limit which applicant information will be released, but to specify 
the portions of an application that are automatically public and 
therefore would not be granted confidential treatment under any 
circumstances. Therefore, even though the Commission does not specify 
outsourcing information in Sec.  40.8(a), portions of this material in 
a redacted form could still be made public if requested under the 
Freedom of Information Act. The Commission also notes that the rule 
states that any portion of the application not covered by a request for 
confidential treatment will also be made public. The Commission is 
committed to providing transparency in the application process and will 
continue to evaluate whether additional information should be included 
in Sec.  40.8(a).

B. Appendix D--Submission Cover Sheet and Instructions and Public 
Availability of Rule Submissions

    The Commission proposed to amend the part 40 and 41 regulations 
requiring DTEFs, DCOs, and DTEFs to attach a Commission-generated 
submission cover sheet with all self-certified rules,\3\ self-certified 
products,\4\ rules submitted for Commission approval,\5\ products 
submitted for Commission approval,\6\ notifications of rule 
amendments,\7\ and

[[Page 67504]]

non-material agricultural rule changes.\8\ This cover sheet will assist 
Commission staff in preparing and maintaining the accuracy of the 
submissions being published on the Commission's website. The Commission 
also proposed adding appendix D to part 40 to include a copy of the 
submission cover sheet along with step-by-step instructions for 
completing and returning the form to the Commission. Although the 
Commission did not receive any public comments regarding this proposal, 
the Commission is amending the instructions in appendix D by adding an 
instruction to ensure that registered entities are fully aware that 
completing and returning the cover sheet to the Commission does not 
obviate the responsibility to comply with the other filing requirements 
for the underlying rule or rule amendment. The Commission has observed, 
during the past year of requesting the cover sheet, that some rule 
submissions have not been accompanied by all of the required components 
of the rule filing.
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    \3\ Commission Regulations 40.6(a) and 41.24.
    \4\ Commission Regulations 40.2 and 41.23.
    \5\ Commission Regulations 40.4(a) and 40.5.
    \6\ Commission Regulation 40.3.
    \7\ Commission Regulation 40.6(c).
    \8\ Commission Regulation 40.4(b).
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C. Freedom of Information Act Amendments

    The Commission did not receive any comments regarding the proposed 
amendments to 17 CFR part 145. Therefore, all of the proposed 
amendments are being adopted in the final rules.

II. Related Matters

A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq. (2000), 
requires that agencies, in proposing regulations, consider the impact 
of those regulations on small entities. The regulations discussed 
herein would affect contract markets and other registered entities. The 
Commission has previously established certain definitions of ``small 
entities'' to be used by the Commission in evaluating the impact of its 
regulations in accordance with the RFA.\9\ In its previous 
determinations, the Commission has concluded that DCMs, DTEFs, and DCOs 
are not small entities for purposes of the RFA.\10\
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    \9\ 47 FR 18618-18621 (Apr. 30, 1982).
    \10\ 47 FR 18618, 18619 (April 30, 1982) (discussing contract 
markets); 66 FR 42256, 42268 (August 10, 2001) (discussing DTEFs); 
66 FR 45605, 45609 (August 29, 2001) (discussing DCOs).
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    The Commission has previously determined, pursuant to 5 U.S.C. 
605(b), that part 145 regulations do not have a significant economic 
impact on a substantial number of small entities. Because they do not 
impose regulatory obligations on commodity professionals and small 
commodity firms and because the changes will improve public access to 
Commission records and information, the Commission does not expect the 
regulations to have a significant economic impact on a substantial 
number of small entities.
    In the proposed rules, the Commission solicited comment on whether 
the rules as proposed would have a significant impact on a substantial 
number of small entities. The Commission received no comments in 
response to this request. The Commission hereby determines that the 
rules, as adopted herein, will not have a significant impact on a 
substantial number of small entities. Therefore, the Chairman, on 
behalf of the Commission, hereby certifies, pursuant to 5 U.S.C. 
605(b), that the amendments will not have a significant impact on a 
substantial number of small entities.

B. Paperwork Reduction Act

    As required by the Paperwork Reduction Act of 1995,\11\ the 
Commission submitted a copy of the proposed rule amendments to the 
Office of Management and Budget for its review. The Commission did not 
receive any public comments relative to its analysis of paperwork 
burdens associated with this rulemaking.
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    \11\ Pub. L. 104-13 (May 13, 1995).
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C. Cost-Benefit Analysis

    Section 15(a) of the Act, as amended by section 119 of the CFMA, 
requires the Commission to consider the costs and benefits of its 
action before issuing a new regulation under the Act. By its terms, 
section 15(a) as amended does not require the Commission to quantify 
the costs and benefits of a new regulation or to determine whether the 
benefits of the regulation outweigh its costs. Rather, section 15(a) 
simply requires the Commission to ``consider the costs and benefits'' 
of its action.
    Section 15(a) of the Act further specifies that costs and benefits 
shall be evaluated 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 and could 
in its discretion determine that, notwithstanding its costs, a 
particular rule was necessary or appropriate to protect the public 
interest or to effectuate any of the provisions or to accomplish any of 
the purposes of the Act.
    The Commission published an analysis of costs and benefits when it 
proposed the rule amendments that have now been adopted.\12\ It did not 
receive any public comments pertaining to the analysis.
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    \12\ 69 FR 44981 at 44984 (July 28, 2004).
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List of Subjects

17 CFR Part 40

    Commodity futures, Contract markets, Designation application, 
Reporting and recordkeeping requirements.

17 CFR Part 41

    Security futures.

17 CFR Part 145

    Freedom of information.


0
For the reasons stated in the preamble, the Commodity Futures Trading 
Commission amends 17 CFR parts 40, 41, and 145 as follows:

PART 40--PROVISIONS COMMON TO CONTRACT MARKETS, DERIVATIVES 
TRANSACTION EXECUTION FACILITIES AND DERIVATIVES CLEARING 
ORGANIZATIONS

0
1. The authority for part 40 continues to read as follows:

    Authority: 7 U.S.C. 1a, 2, 5, 6, 6c, 7, 7a, 8 and 12a, as 
amended by appendix E of Pub. L. 106-554, 114 Stat. 2763A-365.


0
2. Section 40.2 is revised to read as follows:


Sec.  40.2  Listing products for trading by certification.

    To list a new product for trading, to list a product for trading 
that has become dormant, or to accept for clearing a product (not 
traded on a designated contract market or a registered derivatives 
transaction execution facility), a registered entity must file with the 
Secretary of the Commission at its Washington, DC, headquarters no 
later than the close of business of the business day preceding the 
product's listing or acceptance for clearing, either in electronic or 
hard copy form, a copy of the submission cover sheet in accordance with 
the instructions in appendix D to this part, a copy of the product's 
rules, including its terms and conditions, or the rules establishing 
the terms and conditions of products that make them acceptable for 
clearing, and a certification by the registered entity that the trading 
product or other instrument, or the clearing of the trading product or 
other instrument, including any rules establishing the

[[Page 67505]]

terms and conditions of products that make them acceptable for 
clearing, complies with the Act and regulations thereunder.

0
3. Section 40.3 is amended by revising paragraphs (a)(4) and (a)(5) and 
by adding paragraph (a)(6) to read as follows:


Sec.  40.3  Voluntary submission of new products for Commission review 
and approval.

    (a) * * *
    (4) The submission identifies with particularity information in the 
submission (except for the product's terms and conditions which are 
made publicly available at the time of submission) that will be subject 
to a request for confidential treatment and supports that request for 
confidential treatment with reasonable justification;
    (5) The submission includes the fee required under appendix B to 
this part; and
    (6) The submission includes a copy of the submission cover sheet in 
accordance with the instructions in appendix D to this part.
* * * * *

0
4. Section 40.5 is amended by revising paragraphs (a)(1)(vi) and 
(a)(1)(vii) and by adding paragraph (a)(1)(viii) to read as follows:


Sec.  40.5  Voluntary submission of rules for Commission review and 
approval.

    (a) * * *
    (1) * * *
    (vi) Identify any Commission regulation that the Commission may 
need to amend, or sections of the Act or Commission regulations that 
the Commission may need to interpret in order to approve the proposed 
rule. To the extent that such an amendment or interpretation is 
necessary to accommodate a proposed rule, the submission should include 
a reasoned analysis supporting the amendment to the Commission 
regulation or the interpretation;
    (vii) Identify with particularity information in the submission 
(except for a product's terms and conditions, which are made publicly 
available at the time of submission) that will be subject to a request 
for confidential treatment and support that request for confidential 
treatment with reasonable justification; and
    (viii) Include a copy of the submission cover sheet in accordance 
with the instructions in appendix D to this part.
* * * * *

0
5. Section 40.6 is amended by revising paragraphs (a)(3)(iv) and 
(a)(3)(v) and adding paragraph (a)(3)(vi) to read as follows:


Sec.  40.6  Self-certification of rules by designated contract markets 
and registered derivatives clearing organizations.

    (a) * * *
    (3) * * *
    (iv) A brief explanation of any substantive opposing views not 
incorporated into the rule;
    (v) A certification by the entity that the rule complies with the 
Act and regulations thereunder; and
    (vi) A copy of the submission cover sheet in accordance with the 
instructions in appendix D to this part.
* * * * *

0
6. Section 40.8 is amended by redesignating the current paragraph as 
paragraph (b) and by adding new paragraph (a) to read as follows:


Sec.  40.8  Availability of public information.

    (a) The following sections of all applications to become a 
registered entity will be public: transmittal letter, proposed rules, 
the applicant's regulatory compliance chart, documents establishing the 
applicant's legal status, documents setting forth the applicant's 
governance structure, and any other part of the application not covered 
by a request for confidential treatment.
* * * * *

Appendix C to Part 40 [Added and Reserved]

0
6a. Appendix C to part 40 is added and reserved.

0
7. Appendix D is added to read as follows:

Appendix D to Part 40--Submission Cover Sheet and Instructions

    A properly completed submission cover sheet must accompany all 
rule submissions submitted by a designated contract market, 
registered derivatives clearing organization, or registered 
derivatives transaction execution facility and forwarded either in 
hard copy form or electronically to the Secretary of the Commodity 
Futures Trading Commission, Three Lafayette Centre, 1155 21st Street 
NW, Washington, DC 20581 or electronically to [email protected] 
in a format specified by the Secretary of the Commission. Each 
submission should include the following:
    1. Identifier Code (optional)--If applicable, the exchange or 
clearing organization Identifier Code at the top of the cover sheet. 
Such codes are commonly generated by the exchanges or clearing 
organizations to provide an identifier that is unique to each filing 
(e.g., NYMEX Submission 03-116).
    2. Date--The date of the filing.
    3. Organization--The name of the organization filing the 
submission (e.g., CBOT).
    4. Filing as a--Check the appropriate box for a designated 
contract market (DCM), derivatives clearing organization (DCO), or 
derivatives transaction execution facility (DTEF).
    5. Type of Filing--Indicate whether the filing is a rule 
amendment or new product and the applicable category under that 
heading.
    6. Rule Numbers--For rule filings only, identify rule number(s) 
being adopted or modified in the case of rule amendment filings.
    7. Description--For rule or rule amendment filings only, enter a 
brief description of the new rule or rule amendment. This narrative 
should describe the substance of the submission with enough 
specificity to characterize all essential aspects of the filing.
    8. Other Requirements--Comply with all filing requirements for 
the underlying proposed rule or rule amendment. The filing of the 
submission cover sheet does not obviate the responsibility to comply 
with any applicable filing requirement (e.g., rules submitted for 
Commission approval under Sec.  40.5 must be accompanied by an 
explanation of the purpose and effect of the proposed rule along 
with a description of any substantive opposing views).
    A sample of the required submission cover sheet follows.

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[[Page 67506]]

[GRAPHIC] [TIFF OMITTED] TR18NO04.000

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[[Page 67507]]

PART 41--SECURITY FUTURES PRODUCTS

0
8. The authority citation for part 41 continues to read as follows:

    Authority: Sections 206, 251 and 252, Pub. L. 106-554, 114 Stat. 
2763, 7 U.S.C. 1a, 2, 6f, 6j, 7a-2, 12a; 15 U.S.C. 78g(c)(2).


0
9. Section 41.23 is amended by revising paragraphs (a)(4) and (a)(5) 
and by adding paragraph (a)(6) to read as follows:


Sec.  41.23  Listing of security futures products for trading.

    (a) * * *
    (4) Includes a certification that the terms and conditions of the 
contract comply with the additional conditions for trading of Sec.  
41.25;
    (5) If the board of trade is a designated contract market pursuant 
to section 5 of the Act or a registered derivatives transaction 
execution facility pursuant to section 5a of the Act, it includes a 
certification that the security futures product complies with the Act 
and rules thereunder; and
    (6) Includes a copy of the submission cover sheet in accordance 
with the instructions in appendix D of part 40.
* * * * *

0
10. Section 41.24 is amended by revising paragraphs (a)(3) and (a)(4) 
and by adding paragraph (a)(5) to read as follows:


Sec.  41.24  Rule amendments to security futures products.

    (a) * * *
    (3) Includes a certification that the designated contract market or 
registered derivatives clearing organization has filed the rule or rule 
amendment with the Securities and Exchange Commission, if such a filing 
is required;
    (4) If the board of trade is a designated contract market pursuant 
to section 5 of the Act or is a registered derivatives clearing 
organization pursuant to section 5b of the Act, it includes the 
documents and certifications required to be filed with the Commission 
pursuant to Sec.  40.6 of this chapter, including a certification that 
the security futures product complies with the Act and rules 
thereunder; and
    (5) Includes a copy of the submission cover sheet in accordance 
with the instructions in appendix D of part 40.
* * * * *

PART 145--COMMISSION RECORDS AND INFORMATION

0
11. The authority citation for part 145 continues to read as follows:

    Authority: Pub. L. 99-570, 100 Stat. 3207, Pub. L. 89-554, 80 
Stat. 383, Pub. L. 90-23, 81 Stat. 54, Pub. L. 93-502, 88 Stat. 
1561-1564 (5 U.S.C. 552); Sec. 101(a), Pub. L. 93-463, 88 Stat. 1389 
(5 U.S.C. 4a(j)); unless otherwise noted.


0
12. Section 145.7 is amended by revising the first sentence of 
paragraph (h)(3), by redesignating paragraph (j) as paragraph (i)(7), 
and by adding a new paragraph (j) to read as follows:


Sec.  145.7  Requests for Commission records and copies thereof.

* * * * *
    (h) * * *
    (3) The Assistant Secretary, or his or her designee, will issue an 
initial determination with respect to a FOIA request within twenty 
business days after receipt by the Assistant Secretary. * * *
* * * * *
    (j) Expedited processing. A request may be given expedited 
processing if the requester demonstrates a compelling need for the 
requested records. For purposes of this provision, the term 
``compelling need'' means: That a failure to obtain requested records 
on an expedited basis could reasonably be expected to pose an imminent 
threat to the life or physical safety of an individual; or with respect 
to a request made by a person primarily engaged in disseminating 
information, urgency to inform the public concerning actual or alleged 
federal government activity. A requester who seeks expedited processing 
must demonstrate a compelling need by submitting a statement that is 
certified by the requester to be true and correct to the best of that 
person's knowledge and belief. The Assistant Secretary, or his or her 
designee, will determine whether to provide expedited processing, and 
notice of the determination will be provided to the requester, within 
ten days after the date of the request. If the request for expedited 
processing is denied, the requester may file an appeal with the Office 
of General Counsel within ten days of the date of the denial by the 
Assistant Secretary. The Office of General Counsel will respond to the 
appeal within ten days after the date of the appeal.

0
13. Section 145.9 is amended by revising paragraph (e)(2) to read as 
follows:


Sec.  145.9  Petition for confidential treatment of information 
submitted to the Commission.

* * * * *
    (e) * * *
    (2) The period for filing a detailed written justification may be 
extended upon request and for good cause shown.
* * * * *

0
14. Appendix A is amended by revising paragraph (a)(2), the heading of 
paragraph (b), paragraphs (b)(2) and (b)(3), and adding paragraph 
(b)(13) to read as follows:

Appendix A to Part 145--Compilation of Commission Records Available to 
the Public

* * * * *
    (a) * * *
    (2) Weekly Advisory (solely available on the Commission's Web 
site at http://www.cftc.gov/cftc/cftcpressoffice.htm).
* * * * *
    (b) Office of the Secretariat (Public reading area with copying 
facilities available). * * *
    (2) Terms and conditions of proposed contracts.
    (3) Registered entity filings relating to rules as defined in 
Sec.  40.1 of this chapter, unless covered by a request for 
confidential treatment.
* * * * *
    (13) Publicly available portions of applications to become a 
registered entity including the transmittal letter, proposed rules, 
proposed bylaws, corporate documents, any overview or similar 
summary provided by the applicant, any documents pertaining to the 
applicant's legal status and governance structure, including 
governance fitness information, and any other part of the 
application not covered by a request for confidential treatment.
* * * * *

0
15. Appendix B is amended by revising paragraphs (a)(1), (a)(2), 
(a)(3), (a)(5), (a)(6) and (b) to read as follows:

Appendix B to Part 145--Schedule of Fees

    (a) * * *
    (1) $4.75 for each quarter hour spent by clerical personnel in 
searching for or reviewing records.
    (2) When a search or review cannot be performed by clerical 
personnel, $10.25 for each quarter hour spent by professional 
personnel in searching or reviewing records.
    (3) When searches require the expertise of a computer 
specialist, staff time for programming and performing searches will 
be charged at $10.25 per quarter hour. For searches of records 
stored on personal computers used as workstations by Commission 
staff and shared access network servers, the computer processing 
time is included in the search time for the staff member using the 
workstation as set forth in paragraph (a) of this appendix.
* * * * *
    (5) For copies of materials other than paper records, the 
requester will be charged the actual cost of materials and 
reproduction, including the time of clerical personnel at a rate of 
$4.75 per quarter hour.
    (6) When a request has been made and granted to examine 
Commission records at an office of the Commission other than the 
office in which the records are routinely maintained, the requester:
    (i) Will reimburse the Commission for the actual cost of 
transporting the records; and

[[Page 67508]]

    (ii) Will be charged at a rate of $4.75 for each quarter hour 
spent by clerical personnel in preparing the records for transit.
* * * * *
    (b) Waiver or reduction of fees. Fees will be waived or reduced 
by the Commission if:
    (1) The fee is less than or equal to $10.00, the approximate 
cost to the Commission of collecting the fee; or,
    (2) If the Commission determines that the disclosure of the 
information is likely to contribute significantly to public 
understanding of the operations or activities of the government and 
is not primarily in the commercial interest of the requester.
* * * * *

Appendix D [Removed]

0
16. Appendix D is removed.

    Issued in Washington, DC, on November 12, 2004, by the 
Commission.
Jean A. Webb,
Secretary of the Commission.
[FR Doc. 04-25613 Filed 11-17-04; 8:45 am]
BILLING CODE 6351-01-P