[Federal Register Volume 70, Number 131 (Monday, July 11, 2005)]
[Proposed Rules]
[Pages 39672-39689]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-13467]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Parts 36, 37, 38, 39 and 40


Technical and Clarifying Amendments to Rules for Exempt Markets, 
Derivatives Transaction Execution Facilities and Designated Contract 
Markets, and Procedural Changes for Derivatives Clearing Organization 
Registration Applications

AGENCY: Commodity Futures Trading Commission.

ACTION: Proposed rules.

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SUMMARY: On August 10, 2001, the Commodity Futures Trading Commission 
(``Commission'') published final rules implementing the provisions of 
the Commodity Futures Modernization Act of 2000 (``CFMA'') relating to 
trading facilities.\1\ The amendments proposed herein are intended to 
clarify and codify acceptable practices under the rules for trading 
facilities, based on the Commission's experience over the intervening 
four years in applying those rules, including the adoption of several 
amendments to the original rules over the same period. The proposed 
amendments also would make various technical corrections and conforming 
amendments to the rules.
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    \1\ 66 FR 42256, August 10, 2001.
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    In addition, the proposed amendments would revise the application 
and review process for registration as a derivatives clearing 
organization (``DCO'') by eliminating the presumption of automatic 
fast-track review of applications and replacing it with the presumption 
that all applications will be reviewed pursuant to the 180-day 
timeframe and procedures specified in section 6(a) of the Commodity 
Exchange Act (``CEA'' or ``Act''). In lieu of the current 60-day 
automatic fast-track review, the Commission is proposing to permit 
applicants to request expedited review

[[Page 39673]]

and to be registered as a DCO by affirmative Commission action not 
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later than 90 days after the Commission receives the application.

DATES: Comments must be received by September 9, 2005.

ADDRESSES: Comments should be sent to the Commodity Futures Trading 
Commission, Three Lafayette Centre, 1155 21st Street, NW., Washington, 
DC 20581, attention: Office of the Secretariat. Comments may be sent by 
facsimile transmission to 202-418-5521 or, by e-mail to 
[email protected]. Reference should be made to ``Proposed Clarifying 
Amendments for Exempt Markets, Derivatives Transaction Execution 
Facilities and Designated Contract Markets, and Procedural Changes for 
Derivatives Clearing Organization Registration Applications.''

FOR FURTHER INFORMATION CONTACT: Donald Heitman, Senior Special Counsel 
(telephone 202-418-5041, e-mail [email protected]), Division of Market 
Oversight, or Lois Gregory, Special Counsel (telephone 202-418-5521, e-
mail [email protected]), Division of Clearing and Intermediary 
Oversight, Commodity Futures Trading Commission, Three Lafayette 
Center, 1155 21st Street, NW., Washington, DC 20581.

SUPPLEMENTARY INFORMATION:

I. Background

    The CFMA amended the Commodity Exchange Act (the ``Act'') to 
profoundly alter federal regulation of commodity futures and option 
markets. The new statutory framework created by the CFMA established 
two categories of markets subject to Commission regulatory oversight, 
designated contract markets (``DCMs'') and registered derivatives 
transaction execution facilities (``DTEFs''), and two categories of 
exempt markets, exempt boards of trade (``EBOTs'') and exempt 
commercial markets (``ECMs''). The original rules applicable to these 
trading facilities \2\ established administrative procedures necessary 
to implement the CFMA, interpreted certain of the CFMA's provisions, 
and provided guidance on compliance with various of the CFMA's 
requirements. In addition, the Commission, under the general exemptive 
authority of section 4(c) of the Act, in a limited number of instances 
provided relief from, or greater flexibility than, the CFMA's 
provisions.
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    \2\ Id.
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    In addition, over the four years during which these new rules for 
trading facilities have been in effect, they have been amended several 
times.\3\ The amendments proposed herein are intended to clarify and 
codify acceptable practices under the Commission's rules for trading 
facilities, as amended, based on the Commission's experience in 
applying those rules over the last four years. The proposed amendments 
also would make a number of technical and clarifying corrections and 
conforming amendments to enhance the consistency and clarity of the 
rules.
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    \3\ See, for example: Regulation To Restrict Dual Trading in 
Security Futures Products, 67 FR 11223 (March 15, 2002); Changes in 
Divisional Structure and Delegations of Authority, 67 FR 62350 
(October 7, 2002); Amendments to New Regulatory Framework for 
Trading Facilities and Clearing Organizations, 67 FR 62873 (October 
9, 2002); Exempt Commercial Markets, 69 FR 43285 (July 20, 2004); 
Confidential Information and Commission Records and Information, 69 
FR 67503 (November 18, 2004); and Application Procedures for 
Registration as a Derivatives Transaction Execution Facility or 
Designation as a Contract Market, 69 FR 67811 (November 22, 2004).
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    It should also be noted that the Commission has provided 
information that may be helpful to those subject to the rules for 
trading facilities on its Web site at http://www.cftc.gov. In 
particular, the website includes charts setting out information that 
may be helpful in: (1) Complying with the registration criteria as a 
DTEF (see Appendix A to part 37); (2) complying with the designation 
criteria as a DCM (see Appendix A to part 38); and (3) complying with 
the requirements for designation of physical delivery futures contracts 
(see Appendix A to part 40--Guideline No. 1). While these charts are 
not intended to be used as mandatory checklists, they may provide 
helpful guidance to those subject to the regulations governing trading 
facilities.
    In addition, the Commission is proposing to revise the application 
and review procedures for registration as a DCO. Specifically, the 
Commission is proposing to eliminate the presumption of automatic fast-
track review of applications and replace it with the presumption that 
all applications will be reviewed pursuant to the 180-day timeframe and 
procedures specified in section 6(a) of the Act. In lieu of the 
automatic fast-track review (under which applicants were deemed to be 
registered as DCOs 60 days after receipt of an application), the 
Commission is proposing to permit applicants to request expedited 
review and to be registered as a DCO by the Commission not later than 
90 days after the date of receipt of the application. The Commission is 
also proposing, among other things, to provide that review under the 
expedited review procedures may be terminated if it appears that the 
application is materially incomplete, raises novel or complex issues 
that require additional time for review, or has undergone substantive 
amendment or supplementation during the review period. The Commission 
is proposing these amendments based upon its experience in processing 
applications and in light of administrative practices that have been 
implemented since the rules were first adopted. These amendments would 
establish procedures substantially similar, where appropriate, to those 
recently amended in parts 37 and 38 for processing applications for 
registration of derivatives transaction execution facilities and 
contract market designation, respectively.\4\
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    \4\ 69 FR 67811, November 22, 2004.
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II. The Proposed Amendments

A. Part 36--Exempt Markets

    Sections 36.2(b) and 36.3(a) would be amended by deleting the 
reference to ``hard copy'' in the provisions requiring trading 
facilities operating as EBOTs and ECMs, respectively, to notify the 
Commission. In order to simplify and modernize the notification 
process, the amended rules would require that such notifications may 
only be filed electronically. Similar amendments are proposed in other 
sections requiring notifications or filings with the Commission, so 
that under the amended rules, all formal filings from ECMs, EBOTs, 
DTEFs, DCMs and DCOs must be filed electronically.
    Section 36.2(c)(2), relating to market data dissemination for 
EBOTs, would be revised. Sections 2(h)(4)(D) and 5d(d) of the Act 
include similar language requiring ECMs and EBOTs, respectively, to 
daily disseminate certain basic trading information in the event either 
market becomes a significant source of price discovery for the 
underlying cash market for any commodity traded on the ECM or EBOT. The 
previously noted amendments to the rules applicable to ECMs \5\ 
established clear procedures for ECMs to follow in complying with the 
price discovery/price dissemination requirement, by: (1) Providing 
criteria for making a price discovery determination; (2) requiring ECMs 
that meet those criteria and thus are performing a price discovery 
function to inform the Commission; (3) establishing procedures for the 
Commission to make a formal price discovery determination; (4) setting 
out the types of information

[[Page 39674]]

an ECM that serves a price discovery function must disseminate; and (5) 
establishing procedures for modifying a price discovery determination.
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    \5\ 69 FR 43285 (July 20, 2004).
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    The proposed rules would amend Sec.  36.2(c)(2) to implement price 
discovery/price dissemination rules for EBOTs that closely parallel the 
price discovery/price dissemination rules currently applicable to ECMs. 
The wording of the Act's price discovery/price dissemination provision 
for EBOTs is substantially similar, although not identical, to the 
provision applicable to ECMs. However, both provisions are identical in 
their ultimate purpose. Furthermore, the regulatory provision 
applicable to ECMs has recently gone through the public comment 
process. Finally, parallel provisions would be easier for the industry 
to apply, since the price discovery/price dissemination rules would be 
essentially identical for both types of exempt markets.
    The proposed rules would also add new Sec. Sec.  36.2(c)(3) and 
36.3(c)(4) requiring EBOTs and ECMs, respectively, to annually file a 
notice with the Commission, no later than the end of each calendar 
year. The notice must include a statement that the entity continues to 
operate under the exemption and a certification that the information in 
its original notification of operation is still correct. Annual 
notification of operation by the facility would allow the Commission to 
track whether facilities that notified the Commission of their intent 
to operate actually commenced operations and would allow the Commission 
to eliminate inactive facilities from any listing of active EBOTs or 
ECMs maintained on its Web site.

B. Part 37--Derivatives Transaction Execution Facilities

    Section 37.1(a) would be amended to make clear that the provisions 
of Part 37 apply not only to boards of trade operating as registered 
DTEFs, but also to applicants for registration as DTEFs.
    Section 37.2 would be revised to identify certain reserved 
provisions of the Commission's regulations that specifically and 
comprehensively reference DTEFs separately from other reserved 
provisions that do not. The proposed revisions also would make clear 
that all the references in Sec.  37.2 to reserved provisions of the 
regulations applicable to DTEFs also include related definitions and 
cross-referenced sections cited in those reserved provisions. Finally, 
Sec.  1.60 would be added to the list of reserved provisions of the 
regulations applicable to DTEFs under Sec.  37.2 to make clear that 
DTEFs need to notify the Commission of any material legal proceeding to 
which the DTEF is a party or to which its property or assets are 
subject.
    In Sec.  37.3, subparagraph (a)(5) would be renumbered as 
subparagraph (b) and the remaining subparagraphs would be renumbered 
accordingly.
    Section 37.6, Compliance with Core Principles, would be revised to 
harmonize DTEF core principle compliance with the previously noted new 
application procedures for DCMs and DTEFs.\6\
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    \6\ 69 FR 67811 (November 22, 2004).
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    New Sec.  37.6(c)(2) would be added delegating to the Division of 
Market Oversight (the ``Division'') the authority under Sec.  
37.6(c)(1) to request additional information in reviewing a DTEF's 
continued compliance with one or more core principles, or to enable the 
Commission to satisfy its obligations under the Act. The delegation 
provision notes that the Commission, at its election, may exercise the 
delegated authority directly. A similar delegation would be made in new 
Sec.  38.5(c) to allow the Division to request additional information 
in reviewing a DCM's continued compliance with designation criteria and 
core principles, or to enable the Commission to satisfy its obligations 
under the Act. The foregoing delegated authority would also extend to 
other requests by Commission staff to DTEFs or DCMs for additional 
information: (1) Under new Sec.  40.2(b), regarding compliance with 
respect to new products listed by certification; (2) under Sec.  
40.3(a)(9), regarding voluntary submission of new products for 
Commission review and approval; and (3) under new Sec.  40.6(a)(4), 
regarding compliance with respect to self-certified rules. This 
delegated authority would aid the staff in reviewing DTEF and DCM 
compliance with the requirements of the Act or Commission regulations 
or policies thereunder without involving the Commission in the 
mechanics of day-to-day due diligence oversight.
    In addition, the guidance in current Sec.  37.6(d) would be deleted 
as duplicative of ``Appendix B to Part 37--Guidance on Compliance with 
Core Principles'' and would be replaced with a reference to Appendix B.
    Section 37.8(b), regarding special calls for information, would be 
amended to make clear that the section applies not only to futures 
commission merchants, but to foreign brokers (as defined in Sec.  
15.00) as well.
    The title of Appendix A to part 37 would be reworded to read, 
``Appendix A to part 37--Guidance on Compliance with Registration 
Criteria,'' to be consistent with the wording of the titles of the 
other appendices to parts 37 and 38. The introductory paragraph of the 
appendix also would be revised to make clear that registration criteria 
guidance applies both to new registrants that register by application 
and to DTEFs operated by DCMs, which would not need to file an 
application, but could become registered by notification/certification. 
The revised language also is consistent with the requirement that the 
registration criteria must be met initially and on an ongoing basis, 
rather than just upon application.
    In Appendix B to part 37, subsection 1 of the appendix would be 
revised to make clear that the guidance therein applies to all 
registered DTEFs, whether they come in by notification under Sec.  
37.5(a) or by application. Subsection 3 of the appendix would be 
revised to make clear that, consistent with Sec.  37.6(b)(2), the 
guidance therein applies to applicants for registration, rather than 
registered DTEFs.
    Core Principle 5 of Appendix B to part 37, ``Daily Publication of 
Trading Information,'' would be revised in a manner consistent with the 
price discovery/price dissemination provisions applicable to EBOTs and 
ECMs, which are not as comprehensive as those applicable to DCMs. This 
reflects the fact that DTEFs are subject to a different informational 
standard than DCMs. DCMs are subject to a blanket requirement, under 
Core Principle 8 of Appendix B to part 38, to publish daily trading 
information for all actively traded contracts. DTEFs, however, are 
subject to Core Principle 5 (section 5a(d)(5) of the Act), which 
includes language similar to that applicable to EBOTs and ECMs (under 
sections 5d(d) and 2(h)(4)(D) of the Act, respectively) requiring DTEFs 
to make public certain daily trading information only if the Commission 
determines that contracts traded on the facility perform a significant 
price discovery function for transactions in the cash market for the 
commodity underlying the contracts. The revised core principle 
explanatory language would apply to DTEFs the same standards that would 
apply to EBOTs and ECMs (see Sec. Sec.  36.2(b)(2) and 36.3(c)(2), 
respectively) whereby a DTEF would perform a significant price 
discovery function if: (1) Cash market bids, offers or transactions are 
directly based on, or quoted at a differential to, the prices generated 
on the market on a more than occasional basis; or (2) the market's 
prices are routinely disseminated in a widely distributed industry 
publication and are routinely consulted by industry participants in 
pricing cash market transactions. If the

[[Page 39675]]

Commission has reason to believe that a DTEF may meet either of these 
standards, or if the facility holds itself out to the public as 
performing a price discovery function, the Commission will notify the 
DTEF and provide it with an opportunity for a hearing through the 
submission of written data, views and arguments. If, after considering 
all relevant matters, the Commission finds that the DTEF meets the 
price discovery standards, it will direct the DTEF to publish daily 
trading information in accordance with the core principle. The 
information could be published by providing it to a financial 
information service or by placing it on the facility's website. The 
information should be made available to the public without charge no 
later than the business day following the day to which the information 
pertains.

C. Part 38--Designated Contract Markets

    In Sec.  38.1, language would be added to make clear that the 
provisions of part 38 apply to applicants for designation as well as to 
already designated contract markets, and redundant and inapplicable 
references would be deleted.
    In Sec.  38.2, language would be added to make clear that the 
references therein to reserved provisions of the regulations applicable 
to DCMs also include related definitions and cross-referenced sections 
cited in those reserved provisions. Similar clarifying amendments, 
reserving the applicability of related definitions and cross-referenced 
sections, appear in other sections of the proposal. Also, Sec.  1.60 
would be added to the list of reserved provisions of the regulations 
applicable to DCMs under Sec.  38.2 to make clear that DCMs need to 
notify the Commission of any material legal proceeding to which the DCM 
is a party or to which its property or assets are subject.
    In Sec.  38.5, subparagraph (b) would be amended to make clear that 
DCMs are required to comply with both the designation criteria and the 
core principles, initially and on an ongoing basis, and to conform its 
language to Sec.  37.6(c)(1). As noted in the discussion of new Sec.  
37.6(c)(2) above, new Sec.  38.5(c) would be added, delegating to the 
Division of Market Oversight the authority under Sec.  38.5(b) to 
request additional information in reviewing a DCM's continued 
compliance with designation criteria or core principles, or to enable 
the Commission to satisfy its obligations under the Act.
    The title of Appendix A to part 38 would be revised to refer to 
``Guidance on Compliance with Designation Criteria,'' and the 
introductory paragraph of the appendix would be revised in conformity 
with the revisions to the introductory paragraph of Appendix A to part 
37, to make clear that the obligation to comply with the designation 
criteria applies not just to applicants, but is ongoing.
    Designation Criterion 7 under Appendix A to part 38 would be 
updated to provide, consistent with the wording of other provisions 
regarding designation criteria and core principles, that a DCM 
``should'' (rather than ``may'') provide information to the public by 
placing the information on its Web site.
    In Appendix B to part 38, language would be added in subparagraph 
(1) to harmonize part 38, Appendices A and B, with part 37, Appendices 
A and B, consistent with the idea that the obligation to comply with 
the core principles applies both initially and on an ongoing basis. In 
subparagraph (2), a reference to ``selected'' requirements of the core 
principles would be added to make clear that the enumerated acceptable 
practices under each core principle are neither the complete nor the 
exclusive requirements for meeting that core principle. With respect to 
the completeness issue, the selected requirements in the acceptable 
practices section of a particular core principle may not address all 
the requirements necessary for compliance with the core principle. With 
respect to the exclusivity issue, the acceptable practices that are 
listed for a particular core principle requirement are for illustrative 
purposes only and do not state the only means of satisfying the 
particular requirement they address. There may be other ways of 
complying with that requirement of the core principle that would also 
be acceptable.
    Under Core Principle 2 of Appendix B to part 38, a reference would 
be added in subparagraph (a)(1) to clarify that a DCM could carry out 
trade practice surveillance programs through delegation or 
``contracting out.'' A delegation confers upon another the authority to 
act in the delegating authority's name. A third party contractor would 
not act in the DCM's name, but the DCM would be required to maintain 
sufficient control over the contractor because it would remain the 
DCM's responsibility to assure that the DCM's obligations under the Act 
were met.\7\
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    \7\ See the discussion in 66 FR 42256, at 42266 (August 10, 
2001).
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    Under Core Principle 6 of Appendix B, ``Emergency Authority,'' the 
language now appearing under subparagraph (b), ``Acceptable 
Practices,'' would be moved to subparagraph (a), ``Application 
Guidance.'' This amendment would reflect that the language moved to 
subparagraph (a) more accurately describes guidance on establishing 
rules to exercise emergency authority in the first instance, rather 
than acceptable practices in implementing such rules.
    Under Core Principle 7 of Appendix B, guidance would be added in 
subparagraph (b) as to what constitutes ``timely placement'' of 
information on a DCM's Web site. In noting that the DCM's rulebook 
should be ``available to the public,'' the intent of the subparagraph 
is that the rulebook should be freely accessible to anyone who visits 
the Web site without the need to register, log in, provide a user name 
or obtain a password.
    Core Principle 8 of Appendix B requires that a DCM shall make 
public daily information on settlement prices, volume, open interest, 
and opening and closing ranges for actively traded contracts. New 
language would be added to subparagraph (b), Acceptable Practices, 
whereby compliance with Sec.  16.01 of the Commission's regulations, 
which is mandatory since Sec.  16.01 is one of the sections reserved 
under Sec.  38.2, would constitute an acceptable practice under Core 
Principle 8. All currently designated DCMs are in compliance with Sec.  
16.01.
    Under Core Principle 16 of Appendix B, paragraph (a) would be 
revised to refer to a contract market's board (rather than the contract 
market as a whole) in conformity with the language of the core 
principle.

D. Part 39--Derivatives Clearing Organizations

    The Commission adopted the application procedures specified in 
Commission Regulation 39.3 \8\ for organizations applying to be 
registered as DCOs in 2001 when it first implemented the CFMA.\9\ These 
procedures presume that an application will be submitted and reviewed 
pursuant to a fast-track procedure under which an organization is 
deemed to be designated as a DCO 60 days after submitting its 
application,\10\ unless notified otherwise during the review period. 
DCO registration procedures are not subject to any statutory deadline 
under section 6(a) of the Act, which only applies to DCMs and DTEFs.

[[Page 39676]]

However, the fast-track review period is substantially shorter than the 
180-day review period specified in section 6(a) of the Act for DCMs and 
DTEFs. The rules provide procedures for terminating the fast-track 
review, including termination by the Commission if it appears that the 
application's form or substance fails to meet the requirements of the 
Commission's regulations.\11\
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    \8\ 17 CFR 39.3.
    \9\ See 66 FR 45604 (August 29, 2001). The CFMA, Appendix E of 
Pub. L. 106-554, 114 Stat. 2763, substantially revised the Commodity 
Exchange Act (Act or CEA), 7 U.S.C. 1 et seq.
    \10\ 17 CFR 39.3(a).
    \11\ 17 CFR 39.3(b).
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    The application procedures also generally identify information 
required to be included in applications for registration as a DCO \12\, 
and identify where additional guidance for applicants can be found.\13\ 
The rules also provide procedures for the withdrawal of an application 
for registration \14\ and specify the extent of the delegation of 
authority from the Commission to the Director of the Division of 
Clearing and Intermediary Oversight, with the concurrence of the 
General Counsel, with respect to, among other things, the termination 
of expedited review procedures.\15\
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    \12\ 17 CFR 39.3(a).
    \13\ 17 CFR 39.3(d).
    \14\ 17 CFR 39.3(c).
    \15\ 17 CFR 39.3(e).
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    The Commission is proposing to modify the application procedures in 
a number of respects. Most of these modifications mirror changes 
recently made to parts 37 and 38 regarding, among other things, the 
review and processing of applications for registration of DTEFs and 
DCMs. With respect to the review period for applications generally, it 
is proposing to establish, as it recently has under parts 37 and 38, 
the presumption that all applications are submitted for review under 
the 180-day timeframe specified in section 6(a) of the Act for DCMs and 
DTEFs.\16\ An expedited 90-day review could be requested by the 
applicant, in which case the Commission would register the applicant as 
a DCO during or by the end of the 90-day period unless the Commission 
terminated the expedited review for certain specifically identified 
reasons. In comparison to the current rules, the Commission is 
proposing to lengthen the expedited review periods for DCO applications 
by 30 days. The Commission believes, based upon its experience in 
processing DCO applications and in light of certain administrative 
practices that have developed since these rules were first adopted, 
that these potentially longer review periods are necessary to ensure a 
comprehensive review of applications and to meet other public policy 
objectives.
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    \16\ Under the current rules, DCO applications are routinely 
reviewed under the fast-track procedures unless the applicant 
instructs the Commission in writing at the time of the submission of 
the application or during the review period to review the 
application pursuant to the time provisions of and procedures under 
section 6 of the Act. See 17 CFR 39.3(a)(8).
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    The Commission has reviewed nine DCO applications since passage of 
the CFMA. The applications themselves are large and contain technical 
documents describing operations and operational outsourcing agreements. 
The applications frequently need to be substantially amended or 
supplemented in various ways and generate a series of questions by 
Commission staff responsible for reviewing the applications. In 
addition, a new Commission policy to promote transparency in Commission 
operations, implemented in August of 2003, provides for the posting of 
all such applications on the Commission's Web site for a period of at 
least 15 days for public review and comment.\17\ This will lengthen the 
review process. The proposed 90-day review period should provide the 
Commission with sufficient time to review these substantial 
applications and to respond to any public comments. The Commission 
notes that the proposed 90-day review period, while longer than the 
current fast-track review periods, would continue to be substantially 
shorter than the 180-day review period set forth in section 6(a) for 
DCMs and DTEFs.
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    \17\ The Commission has recently proposed revisions to 
Commission Regulation 40.8 to specify which portions of an 
application for registration as a DTEF or designation as a DCO will 
be made public. See 69 FR 44981 (July 28, 2004).
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    The Commission also is proposing to modify its internal processing 
procedures under which an applicant would be registered as a DCO. Under 
the proposal, an applicant would no longer be deemed to be registered 
based upon the passage of time (currently 60 days for DCOs). If the 
applicant requested expedited review, the Commission would take 
affirmative action to register or designate the applicant as a DCO, 
subject to conditions if appropriate, not later than 90 days after 
receipt of the application, unless the Commission terminated the 
expedited review. Thus, registration as a DCO would involve affirmative 
action by the Commission, which would normally be in the form of 
issuance of a Commission order. It should be noted that it would be 
possible, under the proposed procedures, for applicants who submit 
applications that are complete and not amended or supplemented during 
the review period to be designated as a DCO in less than 90 days.
    With respect to the termination of expedited review, the rules 
provide that fast-track review may be terminated because the 
application's form or substance fails to meet the requirements of part 
39 or upon written instruction of the applicant during the review 
period. Based upon its experience in reviewing applications submitted 
to date and in light of its new practice of posting all such 
applications on the Commission's website for public review and comment, 
the Commission is proposing to clarify and expand the rationale for 
terminating expedited review. In addition to the reasons for 
termination cited above, the Commission is proposing that the expedited 
review period be terminated if the application is materially incomplete 
or, as more fully described below, undergoes major amendment or 
supplementation. The Commission is also proposing to provide for 
termination of expedited review if an application raises novel or 
complex issues that require additional time for review. This proposal 
is responsive to the public interest that the Commission has witnessed 
to date with respect to DCO applications and is substantially the same 
as a proposal recently adopted for DCMs and DTEFs.
    The Commission is further proposing to delete the provision of the 
rules that would require the Commission, upon terminating fast-track 
review, to commence a proceeding to deny a DCO application upon the 
request of the applicant. This procedure has proved to be unnecessary 
to date, and an analogous procedure is available under the statutory 
review procedure.\18\ Finally, the Commission is proposing to amend the 
expedited review procedures to expressly provide that expedited review 
would be terminated if an applicant so requests in writing. The 
Commission stresses that if expedited review were terminated for any of 
the reasons cited above, the application would continue to be reviewed 
pursuant to the 180-day procedure.
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    \18\ 7 U.S.C. 8(a).
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    To further enhance the application process, the Commission is 
proposing to more completely identify the information required to be 
provided by an applicant under both the 180-day and the expedited 90-
day review procedures. The proposal would make it clear that all 
applicants would be required to submit for review an executed or 
executable copy of any agreements or contracts entered into or to be 
entered into by the applicant that enable the applicant to comply with 
the core principles. Final, signed copies of such documents would be 
required to be submitted prior to registration. The initial application 
would be required to

[[Page 39677]]

include something more than a letter of intent or draft contract or 
agreement, such as a final contract or agreement signed by at least one 
of the parties. While the Commission understands that applicants may 
prefer to defer the finalization of contracts in order to defer 
associated costs until registration or designation, it must balance 
that preference against the assurance that a contract or agreement will 
actually be executed prior to registration.
    With respect to the additional information that would be required 
to be submitted as part of the application, the rule requires that 
applicants demonstrate how they are able to satisfy each of the core 
principles specified in section 5b of the Act. The proposal would amend 
the rule to eliminate the proviso, ``to the extent it is not self-
evident from the applicant's rules.'' Based upon experience in 
reviewing DCO applications, the Commission recognizes that this 
additional information is necessary for Commission review of the 
application when determining whether the applicant satisfies the core 
principles. The proposal would eliminate the requirement that the 
applicant support requests for confidential treatment of information 
included in the application with reasonable justification. The 
Commission believes that the procedures provided in Commission 
Regulation 145.9, ``Petition for confidential treatment of information 
submitted to the Commission,'' should be followed by all applicants.
    Under the proposal, the items required to be included in an 
application to be reviewed under the 180-day review procedures would be 
identical to those required to be included in an application to be 
reviewed under the expedited review procedures with the following 
additional requirements for the expedited review procedure: (1) An 
applicant must request expedited review; and (2) an application 
submitted for expedited review must not be amended or supplemented by 
the applicant, except as requested by the Commission or for correction 
of typographical errors, renumbering or other nonsubstantive revisions. 
The proposal provides that amending or supplementing an application in 
a manner that is inconsistent with the above provision would result in 
termination of the expedited review.
    The Commission is also proposing to modify the delegation of 
authority provisions applicable to applications for registration as a 
DCO. Currently, the rules provide for the delegation of authority to 
the Director of the Division of Clearing and Intermediary Oversight, 
with the concurrence of the General Counsel: (1) To terminate the 
review of both fast-track applications and those reviewed under the 
180-day procedure; and (2) to register an applicant as a DCO subject to 
conditions. The Commission is proposing to modify and standardize the 
delegation of authority as it applies to DCO applicants. Thus, under 
the proposal, the Commission would also delegate to the Director of the 
Division of Clearing and Intermediary Oversight, with the concurrence 
of the General Counsel, the authority to stay the running of the 180-
day review period for applications if they are materially incomplete, 
as is provided under section 6(a) of the Act. Because one result of the 
proposed amendments would be that registration as a DCO would involve 
affirmative action on the part of the Commission, the proposal would 
rescind the delegation of the authority to designate the applicant as a 
DCO subject to conditions.
    The Commission also is adding a provision for vacation of DCO 
registration. Under this provision, a registered DCO may vacate its 
registration under section 7 of the Act by filing a request with the 
Commission at its Washington, DC headquarters. Vacation of registration 
will not affect any action taken or to be taken by the Commission based 
upon actions, activities or events occurring during the time that the 
DCO was registered with the Commission. A similar provision with 
respect to contract markets is already part of part 38.\19\
---------------------------------------------------------------------------

    \19\ 17 CFR 38.3(d).
---------------------------------------------------------------------------

    Finally, the Commission is proposing to make minor word changes and 
deletions in order to clarify requirements and procedures.
    The Commission continues to encourage applicants to consult with 
Commission staff prior to formally submitting an application for DCO 
registration to help ensure that an application, once submitted, will 
be able to be reviewed in a timely manner. The Commission encourages 
interested parties, particularly prior applicants, to comment upon 
these proposals.

E. Part 40--Provisions Common to Contract Markets, Derivatives 
Transaction Execution Facilities and Derivatives Clearing Organizations

    In Sec.  40.1, the definitions therein would be redesignated as 
numbered subparagraphs, beginning with subparagraph (a). In 
redesignated subparagraphs 40.1(b)-(e), the definitions of dormant 
contract/product, dormant contract market, dormant derivatives clearing 
organization and dormant derivatives transaction execution facility, 
respectively, the length of time during which no trading (or clearing) 
has occurred before dormancy could be declared would be extended from 
six to twelve calendar months. Also, in Sec.  40.1(b), in the proviso 
granting a 36-month grace period after initial certification or 
Commission approval before a contract/product can be considered 
dormant, language would be added to make clear that, if the DCM or DTEF 
itself becomes dormant prior to the running of the 36-month period, the 
contract/product would likewise be considered dormant. Finally, 
language would be added to Sec.  40.1(b) to allow a board of trade to 
self-declare a contract/product to be dormant at any time after initial 
certification or Commission approval.
    Under new Sec.  40.1(f), a definition of ``dormant rule'' would be 
added whereby a new rule or rule amendment that is not made effective 
and implemented within twelve months of initial certification or 
Commission approval would be considered dormant and would have to be 
resubmitted, either by certification or for approval, before it could 
be implemented.
    Sections 40.2, 40.3, 40.5 and 40.6 would be revised for internal 
consistency between sections. In addition, in Sec.  40.2, relating to 
listing new products for trading by certification, new subparagraph 
40.2(b) would make clear that a registered entity shall provide, if 
requested by Commission staff, additional evidence, information or data 
relating to whether the contract meets, initially or on a continuing 
basis, any of the requirements of the Act or Commission regulations or 
policies thereunder. Such evidence may be beneficial to the Commission 
in conducting a due diligence assessment of the product and the 
registered entity's compliance with these requirements, including the 
obligation that the registered entity must have reason to believe the 
certification is proper. This language is consistent with the 
Commission's obligation to assure that the Act and Commission 
regulations and policies thereunder are not being violated. Similar 
language would be added in Sec.  40.3(a)(9) with respect to voluntary 
submission of new products for approval, and in Sec. 40.6(a)(4) with 
respect to self-certification of rules by DCMs and DTEFs. DCMs and 
DTEFs should be aware that, in conducting routine due diligence reviews 
of self-certified new product listings and new rules or rule amendments 
under Sec.  40.2(b) and Sec.  40.6(a)(4), respectively, the staff gives 
special consideration to

[[Page 39678]]

particular requirements. For DTEFs, the key requirements are: Sec.  
5a(b)(2) of the Act (requirements for underlying commodities); Core 
Principle 3 (monitoring trading to assure an orderly market); and Core 
Principle 4 (disclosure of general information). For DCMs, the key 
requirements are: Core Principle 3 (listing contracts that are not 
readily susceptible to manipulation); Core Principle 4 (monitoring 
trading to prevent manipulation, price distortion or disruptions of the 
delivery or cash-settlement process); and Core Principle 5 (adopting 
position limits or position accountability rules to reduce the threat 
of market manipulation or distortion, especially in the delivery 
month). To the extent that a DCM or DTEF includes with its initial 
submission, data, research reports, trade interview reports, exchange 
or third party analyses, or other background information demonstrating 
compliance with these requirements, a DTEF or DCM can minimize the 
prospect of requests for additional information under Sec.  40.2(b) or 
Sec.  40.6(a)(4), respectively.
    The proposed revisions to Sec.  40.3 would set forth with greater 
particularity the information Commission staff needs to make a 
determination on whether to approve a new product voluntarily submitted 
for Commission review and approval.
    Section 5c(c)(2)(B) of the Act and Sec.  40.4 of the regulations 
require prior Commission approval of DCM rule amendments that, for a 
delivery month having open interest, would materially change a term or 
condition of a contract for future delivery of an enumerated 
agricultural commodity, or an option on such a contract or 
commodity.\20\ The proposal would add new subsection 40.4(b)(8) to 
include fees or fee changes that are $1.00 or more per contract and are 
established by an independent third party or are unrelated to delivery, 
trading, clearing or dispute resolution to the types of rule changes 
for which a materiality determination is not required. The proposal 
would also make clear that the non-material changes described in Sec.  
40.4(b), subparagraphs (1)-(8), would fall within the provisions of 
revised Sec.  40.6(c) and would be subject to the weekly notification 
procedures set out therein. Also, in Sec.  40.4(b)(9) under 
subparagraph (i), the deadline for Commission review of ``non-material 
agricultural rule changes'' would be changed from 10 calendar days to 
10 business days to provide for a consistent review period for all 
submissions and to allow for more time for review. Under subparagraph 
(ii), the DCM would be required to provide an explanation of why the 
DCM believes the proposed rule change is non-material. Similarly, in 
Sec.  40.5(c)(1), the review period for rules that are voluntarily 
submitted by DCMs or DTEFs for approval would be extended from 30 days 
to 45 days, to be consistent with Sec.  40.3.
---------------------------------------------------------------------------

    \20\ The ``enumerated commodities'' are those agricultural 
commodities listed in Sec.  1a(4) of the Act.
---------------------------------------------------------------------------

    Under Sec.  40.6, current Sec.  40.6(a) sets out the conditions 
under which a DCM or DCO may implement new rules by certifying them to 
the Commission. Subparagraph 40.6(a)(1) provides that the certification 
procedure does not apply to rules of a DCM that materially change a 
term or condition of a futures or option contract on an enumerated 
agricultural commodity in a delivery month with open interest. 
Subparagraphs 40.6(a)(2) and (3) set out the filing requirements for 
rule certifications and the information to be provided in such 
certifications. Section 40.6(c) establishes an exception to the rule 
certification requirements of Sec. Sec.  40.6 (a)(2) and (3) whereby 
DCMs and DCOs may place certain rules and rule amendments into effect 
without certification, provided that certain conditions are met. The 
conditions are that: (1) The DCM or DCO provide to the Commission a 
weekly summary of rule changes made effective pursuant to this 
paragraph; and (2) the rule change governs such routine matters as 
nonmaterial revisions, changes to delivery standards made by third 
parties that do not affect deliverable supplies or the pricing basis 
for the product, changes in the composition of an index (other than a 
stock index) that do not affect the pricing basis of the index, routine 
changes to option contract terms, and certain fee changes established 
by independent third parties. The proposed rules would add a reference 
to Sec.  40.6(a)(1) to the exception established in Sec.  40.6(c). The 
effect would be to make clear that, while material rule changes 
involving contract months with open interest in enumerated agricultural 
commodities may not be certified to the Commission, the type of routine 
changes described in Sec.  40.6(c)(2), as well as the partially 
overlapping list of non-material changes in Sec. Sec.  40.4(b)(1)-(8), 
would not constitute material changes within the meaning of the Act or 
Commission regulations. Therefore, DCMs could inform the Commission of 
such rule changes on a weekly basis under the provisions of Sec.  
40.6(c). Also, new Sec.  40.6(c)(2)(vi) would add to the list of items 
that could be reported weekly under Sec.  40.6(c)(1), changes in survey 
lists of banks, brokers or dealers that provide market information to 
an independent third party and that are incorporated by reference as 
product terms. Finally, new Sec.  40.6(c)(3)(ii)(F) would add de 
minimis changes to security indexes to the list of information the 
Commission does not require to be certified or reported weekly by a DCM 
or DCO.
    Under Sec.  40.7, Delegations, new Sec.  40.7(a)(3) would delegate 
to the Division the authority to notify a DCM that a rule change 
submitted for a materiality determination under Sec.  40.4(b)(9) is 
material and must be submitted for Commission approval. Finally, new 
Sec.  40.7(b)(3) would increase the Division's delegated authority to 
allow it, with the concurrence of the Office of the General Counsel, to 
approve rules regarding speculative limits or position accountability.

III. 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 or order under the Act. By its 
terms, Sec.  15(a) does not require the Commission to quantify the 
costs and benefits of its action or to determine whether the benefits 
of the action outweigh its costs. Rather, Sec.  15(a) simply requires 
the Commission to ``consider the costs and benefits'' of the subject 
rule or order.
    Section 15(a) further specifies that the costs and benefits of the 
proposed rule or order shall be evaluated in light of five broad areas 
of market and public concern: (1) Protection of market participants and 
the public; (2) efficiency, competitiveness, and financial integrity of 
futures markets; (3) price discovery; (4) sound risk management 
practices; and (5) other public interest considerations. The Commission 
may, in its discretion, give greater weight to any one of the five 
enumerated areas of concern and may, in its discretion, determine that, 
notwithstanding its costs, a particular rule or order is 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 amendments proposed herein are intended to clarify and codify 
acceptable practices under the rules for trading facilities, based on 
the Commission's experience over the past four years in applying those 
rules, including the adoption of several amendments to the original 
rules over the same period. The proposed amendments also would make 
various

[[Page 39679]]

technical corrections and conforming amendments to the rules.
    In addition, the proposed amendments would revise the application 
and review process for registration as a DCO by eliminating the 
presumption of automatic fast-track review of applications and 
replacing it with the presumption that all applications will be 
reviewed pursuant to the 180-day timeframe and procedures specified in 
section 6(a) of the Act. In lieu of the current 60-day automatic fast-
track review, the Commission is proposing to permit applicants to 
request expedited review and to be registered as a DCO not later than 
90 days after the Commission receives the application.
    The Commission has endeavored, in proposing these amendments, to 
impose the minimum requirements necessary to enable the Commission to 
perform its oversight functions, to carry out its mandate of assuring 
the continued existence of competitive and efficient markets and to 
protect the public interest in markets free of fraud and abuse.
    After considering these factors, the Commission has determined to 
propose the rules and rule amendments set forth below.
    The Commission specifically invites public comment on its 
application of the criteria contained in the Act for consideration. 
Commenters are also invited to submit any quantifiable data that they 
may have concerning the costs and benefits of the proposed rules with 
their comment letter.

IV. Related Matters

A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq., 
requires federal agencies, in promulgating rules, to consider the 
impact of those rules on small entities. The rules proposed herein 
would affect exempt commercial markets, exempt boards of trade, 
derivatives transaction execution facilities, designated contract 
markets and designated clearing organizations. The Commission has 
previously determined that the foregoing entities are not small 
entities for purposes of the RFA.\21\ Accordingly, the Chairman, on 
behalf of the Commission, hereby certifies pursuant to 5 U.S.C. 605(b) 
that the proposed rules will not have a significant economic impact on 
a substantial number of small entities.
---------------------------------------------------------------------------

    \21\ 47 FR 18618, 18619 (April 30, 1982) discussing contract 
markets; 66 FR 42256, 42268 (August 10, 2001) discussing exempt 
boards of trade, exempt commercial markets and derivatives 
transaction execution facilities; 66 FR 45605, 45609 (August 29, 
2001) discussing designated clearing organizations.
---------------------------------------------------------------------------

B. Paperwork Reduction Act of 1995

    This proposed rulemaking contains information collection 
requirements. As required by the Paperwork Reduction Act of 1995 (44 
U.S.C. 3504(h)), the Commission has submitted a copy of this section to 
the Office of Management and Budget (OMB) for its review.
    Collection of Information: Rules Relating to Part 36, Establishing 
Procedures for Exempt Markets, OMB Control Number 3038-0054.
    The estimated burden was calculated as follows:
    Estimated number of respondents: 10.
    Annual responses by each respondent: 1.
    Total annual responses: 10.
    Estimated average hours per response: 1.
    Annual reporting burden: 10.
    Collection of Information: Rules Relating to Part 38, Establishing 
Procedures for Entities to become Designated as Contract Markets, OMB 
Control Number 3038-0052. The proposed rules will not change the burden 
previously approved by OMB.

    The estimated burden was calculated as follows:
    Estimated number of respondents: 13.
    Annual responses by each respondent: 1.
    Total annual responses: 13.
    Estimated average hours per response: 300.
    Annual reporting burden: 3,900.
    Collection of Information: Rules Relating to Part 39, Establishing 
Procedures for Entities to Become Registered as Derivatives Clearing 
Organizations, OMB Control Number 3038-0051. The proposed rules will 
not change the burden previously approved by OMB.

    The estimated burden was calculated as follows:
    Estimated number of respondents: 10.
    Reports annually by each respondent: 1.
    Total annual responses: 10.
    Estimated average hours per response: 200.
    Annual burden in fiscal year: 2,000.
    Organizations and individuals desiring to submit comments on the 
information collection requirements should direct them to the Office of 
Information and Regulatory Affairs, Office of Management and Budget, 
Room 10202, New Executive Office Building, 725 17th Street, NW., 
Washington, DC 20503; Attention: Desk Officer for the Commodity Futures 
Trading Commission.
    The Commission considers comments by the public on this proposed 
collection of information in:
    Evaluating whether the proposed collection of information is 
necessary for the proper performance of the functions of the 
Commission, including whether the information will have a practical 
use;
    Evaluating the accuracy of the Commission's estimate of the burden 
of the proposed collection of information, including the validity of 
the methodology and assumptions used;
    Enhancing the quality, usefulness, and clarity of the information 
to be collected; and
    Minimizing the burden of collecting information on those who are to 
respond, including through the use of appropriate automated electronic, 
mechanical, or other technological collection techniques or other forms 
of information technology; e.g., permitting electronic submission of 
responses.
    OMB is required to make a decision concerning the collection of 
information contained in these proposed regulations between 30 and 60 
days after publication of this document in the Federal Register. 
Therefore, a comment to OMB is best assured of having its full effect 
if OMB receives it within 30 days of publication. This does not affect 
the deadline for the public to comment to the Commission on the 
proposed regulations.
    Copies of the information collection submission to OMB are 
available from the CFTC Clearance Officer, 1155 21st Street, NW., 
Washington, DC 20581, (202) 418-5160.

List of Subjects

17 CFR Part 36

    Commodity futures, Commodity Futures Trading Commission.

17 CFR Part 37

    Commodity futures, Commodity Futures Trading Commission.

17 CFR Part 38

    Commodity futures, Commodity Futures Trading Commission.

17 CFR Part 39

    Commodity futures, Consumer Protection.

17 CFR Part 40

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

    In consideration of the foregoing, and pursuant to the authority in 
the Commodity Exchange Act and, in particular, sections 1a, 2, 3, 4, 
4c, 4i, 5,

[[Page 39680]]

5a, 5b, 5c, 5d, 6 and 8a of the Act, the Commission hereby proposes to 
amend Chapter I of Title 17 of the Code of Federal Regulations as 
follows:

PART 36--EXEMPT MARKETS

    1. The authority citation for part 36 continues to read as follows:

    Authority: 7 U.S.C. 2, 5, 6, 6c, and 12a, as amended by the 
Commodity Futures Modernization Act of 2000, Appendix E of Pub. L. 
106-554, 114 Stat. 2763 (2000).

    1a. Section 36.2 is proposed to be amended by revising paragraphs 
(b) and (c) to read as follows:


Sec.  36.2  Exempt boards of trade.

* * * * *
    (b) Notification. Boards of trade operating under Section 5d of the 
Act as exempt boards of trade shall so notify the Commission. This 
notification shall be filed with the Secretary of the Commission at its 
Washington, DC headquarters, in electronic form, shall be labeled as 
``Notification of Operation as an Exempt Board of Trade,'' and shall 
include:
    (1) The name and address of the exempt board of trade; and
    (2) The name and telephone number of a contact person.
    (c) Additional requirements. (1) Prohibited representation. A board 
of trade notifying the Commission that it meets the criteria of Section 
5d of the Act and elects to operate as an exempt board of trade shall 
not represent to any person that it is registered with, designated, 
recognized, licensed or approved by the Commission.
    (2) Market data dissemination. (i) Criteria for price discovery 
determination. An exempt board of trade operating a market in reliance 
on the exemption in Section 5d of the Act performs a significant price 
discovery function for transactions in the cash market for a commodity 
underlying any agreement, contract, or transaction executed or traded 
on the facility when:
    (A) Cash market bids, offers or transactions are directly based on, 
or quoted at a differential to, the prices generated on the market on a 
more than occasional basis; or
    (B) The market's prices are routinely disseminated in a widely 
distributed industry publication and are routinely consulted by 
industry participants in pricing cash market transactions.
    (ii) Notification. An exempt board of trade operating a market in 
reliance on the exemption in Section 5d of the Act shall notify the 
Commission when:
    (A) It has reason to believe that cash market bids, offers or 
transactions are directly based on, or quoted at a differential to, the 
prices generated on the market on a more than occasional basis;
    (B) It has reason to believe that the market's prices are routinely 
disseminated in a widely distributed industry publication and are 
routinely consulted by industry participants in pricing cash market 
transactions; or
    (C) The exempt board of trade holds out the market to the public as 
performing a price discovery function for the cash market for the 
commodity.
    (iii) Price discovery determination. Following receipt of a notice 
under paragraph (c)(2)(ii) of this section, or on its own initiative, 
the Commission may notify an exempt board of trade operating a market 
in reliance on the exemption in Section 5d of the Act that the facility 
appears to meet the criteria for performing a significant price 
discovery function under paragraph (c)(2)(i)(A) or (B) of this section. 
Before making a final price discovery determination under this 
paragraph, the Commission shall provide the exempt board of trade with 
an opportunity for a hearing through the submission of written data, 
views and arguments. Any such written data, views and arguments shall 
be filed with the Secretary of the Commission in the form and manner 
and within the time specified by the Commission. After consideration of 
all relevant matters, the Commission shall issue an order containing 
its determination whether the facility performs a significant price 
discovery function under the criteria of paragraph (c)(2)(i)(A) or (B) 
of this section.
    (iv) Price dissemination. (A) An exempt board of trade that the 
Commission has determined performs a significant price discovery 
function under paragraph (c)(2)(iii) of this section shall disseminate 
publicly, and on a daily basis, all of the following information with 
respect to transactions executed in reliance on the exemption in 
Section 5d of the Act:
    (1) Contract terms and conditions, or a product description, and 
trading conventions, mechanisms and practices;
    (2) Trading volume by commodity and, if available, open interest; 
and
    (3) The opening and closing prices or price ranges, the daily high 
and low prices, a volume-weighted average price that is representative 
of trading on the board of trade, or such other daily price information 
as proposed by the board of trade and approved by the Commission.
    (B) The exempt board of trade shall make such information readily 
available to the news media and the general public without charge no 
later than the business day following the day to which the information 
pertains.
    (v) Modification of price discovery determination. An exempt board 
of trade that the Commission has determined performs a significant 
price discovery function under paragraph (c)(2)(iii) of this section 
may petition the Commission at any time to modify or vacate that 
determination. The petition shall contain an appropriate justification 
for the request. The Commission, after notice and opportunity for a 
hearing through the submission of written data, views and arguments, 
shall by order grant, grant subject to conditions, or deny such 
request.
    (3) Annual Certification. A board of trade operating under Section 
5d of the Act as an exempt board of trade shall file with the 
Commission annually, no later than the end of each calendar year, a 
notice that includes:
    (i) A statement that it continues to operate under the exemption; 
and
    (ii) A certification that the information contained in the previous 
Notification of Operation as an Exempt Board of Trade is still correct.
    2. Section 36.3 is proposed to be amended by revising paragraph (a) 
introductory text, revising paragraph (c)(2)(ii), and adding a new 
paragraph (c)(4) to read as follows:


Sec.  36.3  Exempt commercial markets.

    (a) Notification. An electronic trading facility relying upon the 
exemption in Section 2(h)(3) of the Act shall notify the Commission of 
its intention to do so. This notification, and subsequent notification 
of any material changes in the information initially provided, shall be 
filed with the Secretary of the Commission at its Washington, DC 
headquarters, in electronic form, shall be labeled as ``Notification of 
Operation as an Exempt Commercial Market,'' and shall include the 
information and certifications specified in Section 2(h)(5)(A) of the 
Act.
* * * * *
    (c) * * *
    (2) * * *
    (ii) Notification. An electronic trading facility operating in 
reliance on Section 2(h)(3) of the Act shall notify the Commission 
when:
    (A) It has reason to believe that cash market bids, offers or 
transactions are directly based on, or quoted at a differential to, the 
prices generated on the market on a more than occasional basis;
    (B) It has reason to believe that the market's prices are routinely 
disseminated in a widely distributed industry publication and are 
routinely consulted by industry participants in pricing cash market 
transactions; or

[[Page 39681]]

    (C) The market holds itself out to the public as performing a price 
discovery function for the cash market for the commodity.
* * * * *
    (4) Annual Certification. An electronic trading facility operating 
in reliance upon the exemption in Section 2(h)(3) of the Act shall file 
with the Commission annually, no later than the end of each calendar 
year, a notice that includes:
    (i) A statement that it continues to operate under the exemption; 
and
    (ii) A certification that the information contained in the previous 
Notification of Operation as an Exempt Commercial Market is still 
correct.

PART 37--DERIVATIVES TRANSACTION EXECUTION FACILITIES

    3. The authority citation for part 37 continues to read as follows:

    Authority: 7 U.S.C. 2, 5, 6, 6c, 6(c), 7a and 12a, as amended by 
Appendix E of Pub. L. 106-554, 114 Stat. 2763A-365.
    3a. Section 37.1 is proposed to be amended by revising paragraph 
(a) to read as follows:


Sec.  37.1  Scope and definition.

    (a) Scope. The provisions of this part apply to any board of trade 
operating as or applying to become registered as a derivatives 
transaction execution facility under Sections 5a and 6 of the Act.
* * * * *
    4. Section 37.2 is proposed to be revised to read as follows:


Sec.  37.2  Exemption.

    Contracts, agreements or transactions traded on a derivatives 
transaction execution facility registered as such with the Commission 
under Section 5a of the Act, the facility and the facility's operator 
are exempt from all Commission regulations for such activity, except 
for the requirements of this Part 37 and:
    (a) Section 15.05, part 40 and part 41 of this chapter, including 
any related definitions and cross-referenced sections; and
    (b) Sections 1.3, 1.31, 1.59(d), 1.60, 1.63(c), 33.10, and part 190 
of this chapter and, as applicable to the market, Sec. Sec.  15.00 to 
15.04 and parts 16 through 21 of this chapter, including any related 
definitions and cross-referenced sections, which are applicable as 
though they were set forth in this part 37 and included specific 
reference to derivatives transaction execution facilities.
    5. Section 37.3 is proposed to be amended as follows:
    a. By redesignating paragraphs (b) and (c) as paragraphs (d) and 
(e);
    b. By redesignating paragraph (a)(5) as paragraph (b);
    c. By redesignating paragraph (a)(6) introductory text as paragraph 
(c);
    d. By redesignating paragraph (a)(6)(i) and (ii) as paragraphs 
(c)(1) and (2); and
    e. By redesignating paragraphs (a)(6)(ii)(A) through (H) as 
paragraphs (c)(2)(i) through (viii).
    6. Section 37.6 is proposed to be revised to read as follows:


Sec.  37.6  Compliance with core principles.

    (a) In general. To maintain registration as a derivatives 
transaction execution facility upon commencing operations by listing 
products for trading or otherwise, or for a dormant derivatives 
transaction execution facility as defined in Sec.  40.1 of this chapter 
that has been reinstated under Sec.  37.5(d) upon recommencing 
operations by relisting products for trading or otherwise, and on a 
continuing basis thereafter, the derivatives transaction execution 
facility must have the capacity to be, and be, in compliance with the 
core principles of Section 5a(d) of the Act.
    (b) New and reinstated derivatives transaction execution 
facilities--(1) Certification of compliance. Unless an applicant for 
registration or for reinstatement of registration has chosen to make a 
voluntary demonstration under paragraph (b)(2) of this section, a newly 
registered derivatives transaction execution facility at the time it 
commences operations, or a dormant derivatives transaction execution 
facility as defined in Sec.  40.1 of this chapter at the time that it 
recommences operations, must certify to the Commission that it has the 
capacity to, and will, operate in compliance with the core principles 
under Section 5a(d) of the Act.
    (2) Voluntary demonstration of compliance. An applicant for 
registration or for reinstatement of registration may choose to make a 
voluntary demonstration of its capacity to operate in compliance with 
the core principles. Such demonstration may be included in an 
application submitted pursuant to Sec.  37.5 of this part.
    (i) The demonstration would include the following:
    (A) The label, ``Demonstration of Compliance with Core Principles 
for Operation'';
    (B) A document that describes the manner in which the applicant 
will comply with each core principle (such as a regulatory chart), 
which could cite to documents previously submitted including documents 
submitted pursuant to Sec.  37.5(b)(1)(ii)(A)-(E); and
    (C) To the extent that any of the items in Sec.  37.5(b)(1)(ii)(A)-
(E) raise issues that are novel, or for which compliance with a core 
principle is not self-evident, an explanation as to how that item and 
the application satisfy the core principle.
    (ii) If it appears that the applicant has failed to make the 
requisite showing, the Commission will so notify the applicant at the 
end of that period. Upon commencement or recommencement of operations 
by the derivatives transaction execution facility, such a notice may be 
considered by the Commission in a determination to issue a notice of 
violation of core principles under Section 5c(d) of the Act.
    (c) Existing derivatives transaction execution facilities--(1) In 
general. Upon request by the Commission, a registered derivatives 
transaction execution facility shall file with the Commission such 
data, documents and other information as the Commission may specify in 
its request that demonstrates that the registered derivatives 
transaction execution facility is in compliance with one or more core 
principles as specified in the request or that is requested by the 
Commission to enable the Commission to satisfy its obligations under 
the Act.
    (2) Delegation of authority. The Commission hereby delegates, until 
it orders otherwise, the authority set forth in paragraph (c)(1) to the 
Director of the Division of Market Oversight or such other employee or 
employees as the Director may designate from time to time. The Director 
may submit to the Commission for its consideration any matter that has 
been delegated in this paragraph. Nothing in this paragraph prohibits 
the Commission, at its election, from exercising the authority 
delegated in this paragraph.
    (3) Change of owners. Upon a change of ownership of an existing 
registered derivatives transaction execution facility, the new owner 
shall file electronically with the Secretary of the Commission at its 
Washington, DC, headquarters, a certification that the derivatives 
transaction execution facility meets the requirements for trading and 
the criteria for registration of Sections 5a(b) and 5a(c) of the Act, 
respectively.
    (d) Guidance regarding compliance with core principles. Appendix B 
to this part provides guidance to registered derivatives transaction 
execution facilities on compliance with the core principles under 
Section 5a(d) of the Act.

[[Page 39682]]

    7. Section 37.7 is proposed to be amended by revising paragraph (b) 
to read as follows:


Sec.  37.7  Additional requirements.

* * * * *
    (b) Material modifications. Notwithstanding the provisions of 
Section 5c(c) of the Act, registered derivatives transaction execution 
facilities need not certify rules or rule amendments under Sec.  40.6 
of this chapter, and must only notify the Commission prior to placing 
into effect or amending such a rule, (as defined in Sec.  40.1 of this 
chapter):
    (1) By electronic notification to the Commission of the rule to be 
placed into effect or to be changed, in a format approved by the 
Secretary of the Commission, at the time traders or participants in the 
market are notified, but (unless taken as an emergency action) in no 
event later than the close of business on the business day preceding 
implementation. The submission notification shall be labeled ``DTEF 
Rule Notices'' and shall include the text of the rule or rule amendment 
(with deletions and additions indicated). Provided, however, the 
derivatives transaction execution facility need not notify the 
Commission of rules or rule amendments for which no certification is 
required under Sec.  40.6(c) of this chapter.
    (2) The derivatives transaction execution facility must maintain 
documentation regarding all changes to rules, terms and conditions or 
trading protocols.
* * * * *
    8. Section 37.8 is proposed to be amended by revising paragraph (b) 
to read as follows:


Sec.  37.8  Information relating to transactions on derivatives 
transaction execution facilities.

* * * * *
    (b) Special calls for information from futures commission merchants 
or foreign brokers. Upon special call by the Commission, each person 
registered as a futures commission merchant or a foreign broker (as 
defined in Sec.  15.00 of this chapter) that carries or has carried an 
account for a customer on a derivatives transaction execution facility 
shall provide information to the Commission concerning such accounts or 
related positions carried for the customer on that or other facilities 
or markets, in the form and manner and within the time specified by the 
Commission in the special call.
* * * * *
    9. Appendix A to Part 37--Application Guidance is proposed to be 
amended by revising the heading of the appendix and the first paragraph 
of the appendix to read as follows:

Appendix A to Part 37--Guidance on Compliance With Registration 
Criteria

    This appendix provides guidance on meeting the criteria for 
registration under Sections 5a(c) and 6 of the Act and this Part, 
both initially and on an ongoing basis. The guidance following each 
registration criterion is illustrative only of the types of matters 
an applicant may address, as applicable, and is not intended to be 
used as a mandatory checklist. Addressing the issues and questions 
set forth in this appendix would help the Commission in its 
consideration of whether the application has met the criteria for 
registration. To the extent that compliance with, or satisfaction 
of, a criterion for registration is not self-explanatory from the 
face of the derivatives transaction execution facility's rules, (as 
defined in Sec.  40.1 of this chapter), the application should 
include an explanation or other form of documentation demonstrating 
that the applicant meets the registration criteria of Section 5a(c) 
of the Act and Sec.  37.5.
* * * * *
    10. Appendix B to Part 37--Guidance on Compliance With Core 
Principles is proposed to be amended by revising paragraphs 1. and 3. 
of the appendix to read as follows:

Appendix B to Part 37--Guidance on Compliance With Core Principles

    1. This appendix provides guidance on complying with the core 
principles in order to maintain registration under Section 5a(d) of 
the Act and this Part. This guidance is illustrative only and is not 
intended to be used as a mandatory checklist.
* * * * *
    3. Alternatively, if an applicant for registration or for 
reinstatement of registration under Sec.  37.6(b)(2) chooses to 
provide the Commission with a demonstration of its compliance with 
core principles, addressing the issues set forth in this appendix 
would help the Commission in its consideration of such compliance. 
To the extent that compliance with, or satisfaction of, the core 
principles is not self-explanatory from the face of the derivatives 
transaction execution facility's rules, (as defined in Sec.  40.1 of 
this chapter) a submission under Sec.  37.6(b)(2) should include an 
explanation or other form of documentation demonstrating that the 
derivatives transaction execution facility complies with the core 
principles.
* * * * *
    11. Appendix B to part 37 is proposed to be further amended by 
revising the second paragraph of Core Principle 5 to read as follows:

Appendix B to Part 37--Guidance on Compliance With Core Principles

* * * * *

Core Principle 5 of Section 5a(d)(5) of the Act: DAILY PUBLICATION OF 
TRADING INFORMATION * * *

    A board of trade operating as a registered derivatives 
transaction execution facility should provide to the public 
information regarding settlement prices, price range, trading 
volume, open interest and other related market information for all 
applicable contracts, as determined by the Commission. In making 
such determination, the Commission will consider whether a contract 
performs a significant price discovery function for transactions in 
the cash market for the commodity underlying the contract. The 
Commission will apply the same standards applicable to exempt boards 
of trade and exempt commercial markets (see Sec. Sec.  36.2(b)(2) 
and 36.3(c)(2), respectively) whereby a market performs a 
significant price discovery function for transactions in the cash 
market for an underlying commodity if: Cash market bids, offers or 
transactions are directly based on, or quoted at a differential to, 
the prices generated on the market on a more than occasional basis; 
or the market's prices are routinely disseminated in a widely 
distributed industry publication and are routinely consulted by 
industry participants in pricing cash market transactions. In the 
event the Commission has reason to believe that a derivatives 
transaction execution facility may meet either of the foregoing 
standards, or if the facility holds itself out to the public as 
performing a price discovery function for the cash market for the 
underlying commodity, the Commission shall notify the facility that 
it appears to meet the criteria for performing a significant price 
discovery function under Core Principle 5. Before making a final 
price discovery determination under this core principle, the 
Commission shall provide the facility with an opportunity for a 
hearing through the submission of written data, views and arguments. 
After consideration of all relevant matters, the Commission shall 
issue an order containing its determination whether the requirement 
of the core principle on publication of trading information under 
Section 5a(d)(5) of the Act applies to a particular contract traded 
on a facility. Provision of information for any applicable contract 
could be through such means as providing the information to a 
financial information service or by placing the information on a 
facility's website. Such information shall be made available to the 
public without charge no later than the business day following the 
day to which the information pertains.
* * * * *

PART 38--DESIGNATED CONTRACT MARKETS

    12. The authority citation for part 38 continues to read as 
follows:

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

    12a. Section 38.1 is proposed to be revised to read as follows:

[[Page 39683]]

Sec.  38.1  Scope.

    The provisions of this part 38 shall apply to every board of trade 
that has been designated or is applying to become designated as a 
contract market under Sections 5 and 6 of the Act. Provided, however, 
nothing in this provision affects the eligibility of designated 
contract markets to operate under the provisions of parts 36 or 37 of 
this chapter.
    13. Section 38.2 is proposed to be revised to read as follows:


Sec.  38.2  Exemption.

    Agreements, contracts, or transactions traded on a designated 
contract market under Section 5 of the Act, the contract market and the 
contract market's operator are exempt from all Commission regulations 
for such activity, except for the requirements of this Part 38 and 
Sec. Sec.  1.3, 1.12(e), 1.31, 1.37(c)-(d), 1.38, 1.52, 1.59(d), 1.60, 
1.63(c), 1.67, 33.10, Part 9, Parts 15 through 21, Part 40, Part 41 and 
Part 190 of this chapter, including any related definitions and cross-
referenced sections.
    14. Section 38.5 is proposed to be amended by revising paragraph 
(b), redesignating paragraph (c) as paragraph (d), and adding new 
paragraph (c) as follows:


Sec.  38.5  Information relating to contract market compliance.

* * * * *
    (b) Upon request by the Commission, a designated contract market 
shall file with the Commission a written demonstration, containing such 
supporting data, information and documents, in the form and manner and 
within such time as the Commission may specify, that the designated 
contract market is in compliance with one or more designation criteria 
or core principles as specified in the request, or that is requested by 
the Commission to enable the Commission to satisfy its obligations 
under the Act.
    (c) Delegation of authority. The Commission hereby delegates, until 
it orders otherwise, the authority set forth in paragraph (b) of this 
section to the Director of the Division of Market Oversight or such 
other employee or employees as the Director may designate from time to 
time. The Director may submit to the Commission for its consideration 
any matter that has been delegated in this paragraph. Nothing in this 
paragraph prohibits the Commission, at its election, from exercising 
the authority delegated in this paragraph.
    (d) Upon a change of ownership of an existing designated contract 
market, the new owner shall file electronically with the Secretary of 
the Commission at its Washington, DC, headquarters, a certification 
that the designated contract market meets all of the requirements of 
Sections 5(b) and 5(d) of the Act and the provisions of this Part 38.
* * * * *
    15. Appendix A to Part 38--Application Guidance is proposed to be 
amended by revising the title of the appendix and the first paragraph 
of the appendix to read as follows:

Appendix A to Part 38--Guidance on Compliance With Designation Criteria

    This appendix provides guidance on meeting the criteria for 
designation under Sections 5(b) and 6 of the Act and this Part, both 
initially and on an ongoing basis. The guidance following each 
designation criterion is illustrative only of the types of matters 
an applicant may address, as applicable, and is not intended to be 
used as a mandatory checklist. Addressing the issues and questions 
set forth in this appendix would help the Commission in its 
consideration of whether the application has met the criteria for 
designation. To the extent that compliance with, or satisfaction of, 
a criterion for designation is not self-explanatory from the face of 
the contract market's rules (as defined in Sec.  40.1 of this 
chapter), the application should include an explanation or other 
form of documentation demonstrating that the applicant meets the 
designation criteria of Section 5(b) of the Act.
* * * * *
    16. Appendix A to Part 38 is proposed to be further amended by 
revising the second paragraph of Designation Criterion 7 to read as 
follows:

Appendix A to Part 38--Guidance on Compliance With Designation Criteria

* * * * *

Designation Criterion 7 of Section 5(b) of the Act: PUBLIC ACCESS * * *

    A designated contract market should provide information to the 
public by placing the information on its website.
* * * * *
    17. Appendix B to Part 38--Guidance on, and Acceptable Practices 
in, Compliance With Core Principles is proposed to be amended by 
revising paragraphs 1. and 2. to read as follows:

Appendix B to Part 38--Guidance on, and Acceptable Practices in, 
Compliance With Core Principles

    1. This appendix provides guidance on complying with the core 
principles, both initially and on an ongoing basis, to maintain 
designation under Section 5(d) of the Act and this Part. The 
guidance is provided in paragraph (a) following each core principle 
and it can be used to demonstrate to the Commission core principle 
compliance, under Sec. Sec.  38.3(a) and 38.5. The guidance for each 
core principle is illustrative only of the types of matters a board 
of trade may address, as applicable, and is not intended to be used 
as a mandatory checklist. Addressing the issues and questions set 
forth in this appendix would help the Commission in its 
consideration of whether the board of trade is in compliance with 
the core principles. To the extent that compliance with, or 
satisfaction of, a core principle is not self-explanatory from the 
face of the board of trade's rules (as defined in Sec.  40.1 of this 
chapter), an application pursuant to Sec.  38.3, or a submission 
pursuant to Sec.  38.5 should include an explanation or other form 
of documentation demonstrating that the board of trade complies with 
the core principles.
    2. Acceptable practices meeting selected requirements of the 
core principles are set forth in paragraph (b) following each core 
principle. Boards of trade that follow the specific practices 
outlined under paragraph (b) for any core principle in this appendix 
will meet the selected requirements of the applicable core 
principle. Paragraph (b) is for illustrative purposes only, and does 
not state the exclusive means for satisfying a core principle.
* * * * *

    18. Appendix B to Part 38 is proposed to be further amended by 
revising paragraph (a)(1) of Core Principle 2 to read as follows:

Appendix B to Part 38--Guidance on, and Acceptable Practices in, 
Compliance With Core Principles

* * * * *

Core Principle 2 of Section 5(d) of the Act: COMPLIANCE WITH RULES * * 
*

    (a) Application guidance. (1) A designated contract market 
should have arrangements and resources for effective trade practice 
surveillance programs, with the authority to collect information and 
documents on both a routine and non-routine basis, including the 
examination of books and records kept by the contract market's 
members and by non-intermediated market participants. The 
arrangements and resources should facilitate the direct supervision 
of the market and the analysis of data collected. Trade practice 
surveillance programs may be carried out by the contract market 
itself or through delegation or contracting-out to a third party. If 
the contract market delegates or contracts-out the trade practice 
surveillance responsibility to a third party, such third party 
should have the capacity and authority to carry out such program, 
and the contract market should retain appropriate supervisory 
authority over the third party.
* * * * *

    19. Appendix B to Part 38 is proposed to be further amended by 
revising paragraphs (a) and (b) of Core Principle 6 to read as follows:

Appendix B to Part 38--Guidance on, and Acceptable Practices in, 
Compliance With Core Principles

* * * * *


[[Page 39684]]



Core Principle 6 of Section 5(d) of the Act: EMERGENCY AUTHORITY * * *

    (a) Application guidance. A designated contract market should 
have clear procedures and guidelines for contract market decision-
making regarding emergency intervention in the market, including 
procedures and guidelines to avoid conflicts of interest while 
carrying out such decision-making. A contract market should also 
have the authority to intervene as necessary to maintain markets 
with fair and orderly trading as well as procedures for carrying out 
the intervention. Procedures and guidelines should include notifying 
the Commission of the exercise of a contract market's regulatory 
emergency authority, explaining how conflicts of interest are 
minimized, and documenting the contract market's decision-making 
process and the reasons for using its emergency action authority. 
Information on steps taken under such procedures should be included 
in a submission of a certified rule and any related submissions for 
rule approval pursuant to Part 40, when carried out pursuant to a 
contract market's emergency authority. To address perceived market 
threats, the contract market, among other things, should be able to 
impose position limits in the delivery month, impose or modify price 
limits, modify circuit breakers, call for additional margin either 
from customers or clearing members, order the liquidation or 
transfer of open positions, order the fixing of a settlement price, 
order a reduction in positions, extend or shorten the expiration 
date or the trading hours, suspend or curtail trading on the market, 
order the transfer of customer contracts and the margin for such 
contracts from one member including non-intermediated market 
participants of the contract market to another, or alter the 
delivery terms or conditions, or, if applicable, should provide for 
such actions through its agreements with its third-party provider of 
clearing services.
    (b) Acceptable practices. [Reserved]
* * * * *

    20. Appendix B to Part 38 is proposed to be further amended by 
adding paragraph (b) to Core Principle 7 to read as follows:

Appendix B to Part 38--Guidance on, and Acceptable Practices in, 
Compliance With Core Principles

* * * * *

Core Principle 7 of Section 5(d) of the Act: AVAILABILITY OF GENERAL 
INFORMATION * * *

* * * * *
    (b) Acceptable practices. In making information available to 
market participants and the public, on its website, a designated 
contract market should place information on the website no later 
than the day a new product is listed, the day a new or amended rule 
is implemented or the day previously disclosed information is 
changed. For example, the timely provision of this information on a 
contract market's website could be done through press releases, 
newsletters or notices to members. Additionally, a contract market 
should ensure that the rulebook posted on its website is available 
to the public (i.e., can be accessed by visitors to the website 
without the need to register, log in, provide a user name or obtain 
a password) and is current to within one day of implementation of a 
new or amended rule.
* * * * *

    20. Appendix B to Part 38 is proposed to be further amended by 
adding paragraph (b) of Core Principle 8 to read as follows:

Appendix B to Part 38--Guidance on, Acceptable Practices in, Compliance 
With Core Principles

* * * * *

Core Principle 8 of Section 5(d) of the Act: DAILY PUBLICATION OF 
TRADING INFORMATION * * *

* * * * *
    (b) Acceptable Practices. The mandatory compliance with Section 
16.01, ``Trading volume, open contracts, prices and critical 
dates,'' required under the regulations, would constitute an 
acceptable practice under Core Principle 8.
* * * * *

    21. Appendix B to Part 38 is proposed to be further amended by 
revising paragraph (a) of Core Principle 16 to read as follows:

Appendix B to Part 38--Guidance on, and Acceptable Practices in, 
Compliance With Core Principles

* * * * *
    Core Principle 16 of Section 5(d) of the Act: COMPOSITION OF 
BOARDS OF MUTUALLY OWNED CONTRACT MARKETS * * *
    (a) Application guidance. The composition of a mutually-owned 
contract market's governing board should fairly represent the 
diversity of interests of the contract market's market participants.
* * * * *

PART 39--DERIVATIVES CLEARING ORGANIZATIONS

    22. The authority citation for part 39 continues to read as 
follows:

    Authority: 7 U.S.C. 7b as amended by Appendix E of Pub. L. 106-
554, 114 Stat. 2763A-365.

    22a. Section 39.3 is proposed to be revised to read as follows:


Sec.  39.3  Procedures for registration.

    (a) Application Procedures. (1) 180-day review procedures. An 
organization desiring to be registered as a derivatives clearing 
organization shall file electronically an application for registration 
with the Secretary of the Commission at its Washington, DC, 
headquarters. Except as provided under the 90-day review procedures 
described in paragraph (a)(3) of this section, the Commission will 
review the application for registration as a derivatives clearing 
organization pursuant to the 180-day timeframe and procedures specified 
in Section 6(a) of the Act. The Commission may approve or deny the 
application or, if deemed appropriate, register the applicant as a 
derivatives clearing organization subject to conditions.
    (2) The following must be included:
    (i) The application is labeled as being submitted pursuant to this 
Part 39;
    (ii) The applicant represents that it will operate in accordance 
with the definition of derivatives clearing organization contained in 
Section 1a(9) of the Act;
    (iii) The application includes a copy of the applicant's rules;
    (iv) The application demonstrates how the applicant is able to 
satisfy each of the core principles specified in Section 5b(c)(2) of 
the Act;
    (v) The applicant submits agreements entered into or to be entered 
into between or among the applicant, its operator or its participants, 
and descriptions of system test procedures, tests conducted or test 
results, that will enable the applicant to comply, or demonstrate the 
applicant's ability to comply, with the core principles specified in 
Section 5b(c)(2) of the Act; and
    (vi) The applicant identifies with particularity information in the 
application that will be subject to a request for confidential 
treatment and supports that request for confidential treatment.
    (3) Ninety-day review procedures. An organization desiring to be 
registered as a derivatives clearing organization may request that its 
application be reviewed on a 90-day basis and that the applicant be 
registered as a derivatives clearing organization 90 days after the 
date of receipt of the application for registration by the Secretary of 
the Commission. The 90-day period shall begin on the first business day 
(during the business hours defined in Sec.  40.1 of this chapter) that 
the Commission is in receipt of the application. Unless the Commission 
notifies the applicant during the 90-day period that the expedited 
review has been terminated pursuant to Sec.  39.3(b), the Commission 
will register the applicant as a derivatives clearing organization 
during the 90-day period. If deemed appropriate by the Commission, the 
registration may be subject to such conditions as the Commission may 
stipulate.
    (i) The application must include the items described in Sec. Sec.  
39.3(a)(2)(i)-(vi); and

[[Page 39685]]

    (ii) The applicant must not amend or supplement the application 
except as requested by the Commission or for correction of 
typographical errors, renumbering or other nonsubstantive revisions, 
during that period.
    (b) Termination of 90-day review. (1) During the 90-day period for 
review pursuant to paragraph (a)(3) of this section, the Commission 
shall notify the applicant seeking registration that the Commission is 
terminating review under this section and will review the proposal 
under the 180-day time period and procedures of Section 6(a) of the 
Act, if it appears to the Commission that the application:
    (i) Is materially incomplete;
    (ii) Fails in form or substance to meet the requirements of this 
part;
    (iii) Raises novel or complex issues that require additional time 
for review; or
    (iv) Is amended or supplemented in a manner that is inconsistent 
with Sec.  39.3(a)(3)(ii).
    (2) This termination notification shall identify the deficiencies 
in the application that render it incomplete, the manner in which the 
application fails to meet the requirements of this part, or the novel 
or complex issues that require additional time for review. The 
Commission shall also terminate review under this section if requested 
in writing to do so by the applicant.
    (c) Withdrawal of application for registration. An applicant for 
registration may withdraw its application submitted pursuant to 
paragraphs (a)(1)-(2) or (a)(3) of this section by filing with the 
Commission such a request. Withdrawal of an application for 
registration shall not affect any action taken or to be taken by the 
Commission based upon actions, activities, or events occurring during 
the time that the application for registration was pending with the 
Commission.
    (d) Guidance for applicants and registrants. Appendix A to this 
part provides guidance to applicants and registrants on how the core 
principles specified in Section 5b(c)(2) of the Act may be satisfied.
    (e) Reinstatement of dormant registration. Before listing or 
relisting contracts for clearing, a dormant registered derivatives 
clearing organization as defined in Sec.  40.1 of this chapter must 
reinstate its registration under the procedures of paragraph (a)(1)-(2) 
or (a)(3) of this section; provided, however, that an application for 
reinstatement may rely upon previously submitted materials that still 
pertain to, and accurately describe, current conditions.
    (f) Request for vacation of registration. A registered derivatives 
clearing organization may vacate its registration under Section 7 of 
the Act by filing electronically such a request with the Commission at 
its Washington, DC headquarters. Vacation of registration shall not 
affect any action taken or to be taken by the Commission based upon 
actions, activities or events occurring during the time that the 
facility was designated by the Commission.
    (g) Delegation of authority. (1) The Commission hereby delegates, 
until it orders otherwise, to the Director of the Division of Clearing 
and Intermediary Oversight or the Director's delegates, with the 
concurrence of the General Counsel or the General Counsel's delegates, 
the authority to notify an applicant seeking designation under Section 
6(a) of the Act that the application is materially incomplete and the 
running of the 180-day period is stayed or that the 90-day review under 
paragraph (a)(3) of this section is terminated.
    (2) The Director of the Division of Clearing and Intermediary 
Oversight may submit to the Commission for its consideration any matter 
which has been delegated in this paragraph.
    (3) Nothing in this paragraph prohibits the Commission, at its 
election, from exercising the authority delegated in paragraph (g)(1) 
of this section.

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

    23. The authority citation 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.

    23a. Section 40.1 is proposed to be revised to read as follows:


Sec.  40.1  Definitions.

    As used in this part:
    (a) Business hours means the hours between 8:15 a.m. and 4:45 p.m., 
eastern standard time or eastern daylight savings time, whichever is 
currently in effect in Washington, DC, all days except Saturdays, 
Sundays and legal public holidays.
    (b) Dormant contract or dormant product means any commodity futures 
or option contract or other agreement, contract, transaction or 
instrument in which no trading has occurred in any future or option 
expiration for a period of twelve complete calendar months and in which 
there is no open interest; provided, however, no contract or instrument 
shall be considered to be dormant until the end of 36 complete calendar 
months following initial exchange certification or Commission approval, 
or until the designated contract market or derivatives transaction 
execution facility on which it is traded becomes dormant. 
Notwithstanding the above, a board of trade may, by certifying to the 
Commission, self-declare a contract to be dormant at any time following 
initial exchange certification or Commission approval.
    (c) Dormant contract market means any designated contract market on 
which no trading has occurred for a period of twelve complete calendar 
months; provided, however, no contract market shall be considered to be 
dormant until the end of 36 complete calendar months following the day 
that the initial order of designation was issued.
    (d) Dormant derivatives clearing organization means any derivatives 
clearing organization that has not accepted for clearing any agreement, 
contract or transaction that is required or permitted to be cleared by 
a derivatives clearing organization under Sections 5b(a) and 5b(b) of 
the Act, respectively, for a period of twelve complete calendar months; 
provided, however, no derivatives clearing organization shall be 
considered to be dormant until the end of 36 complete calendar months 
following the day that the initial order of registration was issued.
    (e) Dormant derivatives transaction execution facility means any 
derivatives transaction execution facility on which no trading has 
occurred for a period of twelve complete calendar months; provided, 
however, no derivatives transaction execution facility shall be 
considered to be dormant until the end of 36 complete calendar months 
following the day that the initial order of registration was issued.
    (f) Dormant rule means any new rule or rule amendment which the 
designated contract market, derivatives transaction execution facility 
or derivatives clearing organization has not made effective and 
implemented; provided, however, no new rule or rule amendment shall be 
considered to be dormant until the end of twelve complete calendar 
months following initial certification or Commission approval. Prior to 
implementing a dormant rule, it should be resubmitted to the 
Commission, either by certification or for approval.
    (g) Emergency means any occurrence or circumstance which, in the 
opinion

[[Page 39686]]

of the governing board of the contract market, derivatives transaction 
execution facility or derivatives clearing organization, requires 
immediate action and threatens or may threaten such things as the fair 
and orderly trading in, or the liquidation of or delivery pursuant to, 
any agreements, contracts or transactions on such a trading facility, 
including: Any manipulative or attempted manipulative activity; any 
actual, attempted, or threatened corner, squeeze, congestion, or undue 
concentration of positions; any circumstances which may materially 
affect the performance of agreements, contracts or transactions traded 
on the trading facility, including failure of the payment system or the 
bankruptcy or insolvency of any participant; any action taken by any 
governmental body, or any other board of trade, market or facility 
which may have a direct impact on trading on the trading facility; and 
any other circumstance which may have a severe, adverse effect upon the 
functioning of a designated contract market or derivatives transaction 
execution facility.
    (h) Rule means any constitutional provision, article of 
incorporation, bylaw, rule, regulation, resolution, interpretation, 
stated policy, term and condition, trading protocol, agreement or 
instrument corresponding thereto, in whatever form adopted, and any 
amendment or addition thereto or repeal thereof, made or issued by a 
contract market, derivatives transaction execution facility or 
derivatives clearing organization or by the governing board thereof or 
any committee thereof, except those provisions relating to the setting 
of levels of margin for commodities other than those subject to the 
provisions of Section 2(a)(1)(C)(v) of the Act and security futures as 
defined in Section 1a(31) of the Act.
    (i) Terms and conditions mean any definition of the trading unit or 
the specific commodity underlying a contract for the future delivery of 
a commodity or commodity option contract, specification of cash 
settlement or delivery standards and procedures, and establishment of 
buyers' and sellers' rights and obligations under the contract. Terms 
and conditions include provisions relating to the following:
    (1) Quality and other standards that define the commodity or 
instrument underlying the contract;
    (2) Quantity standards or other provisions related to contract 
size;
    (3) Any applicable premiums or discounts for delivery of nonpar 
products;
    (4) Trading hours, trading months and the listing of contracts;
    (5) The pricing basis and minimum price fluctuations;
    (6) Any price limits, trading halts, or circuit breaker provisions, 
and procedures for the establishment of daily settlement prices;
    (7) Position limits, position accountability standards, and 
position reporting requirements;
    (8) Delivery points and locational price differentials;
    (9) Delivery standards and procedures, including fees related to 
delivery or the delivery process, alternatives to delivery and 
applicable penalties or sanctions for failure to perform;
    (10) If cash settled; all provisions related to the definition, 
composition, calculation and revision of the cash settlement price or 
index; and
    (11) Payment or collection of commodity option premiums or margins.
    24. Section 40.2 is proposed to be revised to read as follows:


Sec.  40.2  Listing products for trading by certification.

    (a) A registered entity may list a new product for trading, list a 
product for trading that has become dormant, or accept for clearing a 
product that is not traded on a designated contract market or a 
registered derivatives transaction execution facility, if the following 
conditions have been met:
    (1) The registered entity has filed its submission electronically 
with the Secretary of the Commission and at the regional office having 
local jurisdiction over the registered entity, in a format specified by 
the Secretary of the Commission;
    (2) The Commission has received the submission at its headquarters 
by close of business on the business day preceding the product's 
listing or acceptance for clearing, and:
    (3) The submission includes:
    (i) A copy of the submission cover sheet in accordance with the 
instructions in Appendix D to this part;
    (ii) A copy of the product's rules, including all rules related to 
its terms and conditions, or the rules establishing the terms and 
conditions of the listed product that make it acceptable for clearing;
    (iii) The intended listing date; and
    (iv) A certification by the registered entity that the product to 
be listed complies with the Act and regulations thereunder.
    (b) A registered entity shall provide, if requested by Commission 
staff, additional evidence, information or data relating to whether the 
contract meets, initially or on a continuing basis, any of the 
requirements of the Act or Commission regulations or policies 
thereunder which may be beneficial to the Commission in conducting a 
due diligence assessment of the product and the entity's compliance 
with these requirements.
    (c) Stay. The Commission may stay the listing of a contract 
pursuant to paragraph (a) of this section during the pendency of 
Commission proceedings for filing a false certification or to alter or 
amend the contract terms and conditions pursuant to Section 8a(7) of 
the Act. The decision to stay the listing of a contract in such 
circumstances shall not be delegable to any employee of the Commission.
    25. Section 40.3 is proposed to be amended by revising paragraphs 
(a), (c), and (e)(2) to read as follows:


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

    (a) Request for approval. A designated contract market or 
registered derivatives transaction execution facility may request under 
Section 5c(c)(2) of the Act that the Commission approve new products. A 
submission requesting approval shall:
    (1) Be filed electronically with the Secretary of the Commission 
and at the regional office of the Commission having local jurisdiction 
over the submitting registered entity in a format specified by the 
Secretary of the Commission;
    (2) Include a copy of the submission cover sheet in accordance with 
the instructions in Appendix D to this part;
    (3) Include a copy of the rules that set forth the contract's terms 
and conditions;
    (4) Comply with the requirements of Appendix A to this Part--
Guideline No. 1. To demonstrate compliance, the submission shall 
include:
    (i) An explanation, if not self-evident from the rules, as to how 
the specific terms and conditions satisfy the acceptable practices set 
forth in Guideline No. 1, Appendix A to Part 40. This information may 
be provided in narrative form or by completion of the applicable chart.
    (ii) For physical delivery contracts, an explanation as to how the 
terms and conditions as a whole will result in a deliverable supply 
such that the contract will not be conducive to price manipulation or 
distortion and that the deliverable supply reasonably can be expected 
to be available to short traders and salable by long traders at its 
market

[[Page 39687]]

value in normal cash marketing channels.
    (iii) For cash settled contracts, an explanation as to how the cash 
settlement of the contract is at a price reflecting the underlying cash 
market, will not be subject to manipulation or distortion, and is based 
on a cash price series that is reliable, acceptable, publicly available 
and timely.
    (iv)(A) A brief description of the cash market for the commodity, 
instrument, index or interest that underlies the contract. The 
description may include materials prepared by the designated contract 
market or registered derivatives transaction execution facility, 
existing studies by industry trade groups, academics, governmental 
bodies or other entities, reports of consultants, or other materials, 
which provide a description of the underlying cash market.
    (B) The cash market description may, however, be confined only to 
those aspects relevant to particular term(s) or condition(s) that 
differ from an existing contract, where a contract based on the same, 
or a closely related, commodity is already listed for trading and is 
not dormant.
    (5) Describe any agreements or contracts entered into with other 
parties that enable the designated contract market or derivatives 
transaction execution facility to carry out its responsibilities.
    (6) Include the certifications required in Sec.  41.22 of this 
chapter for product approval of a commodity that is a security future 
or a security futures product as defined in Sections 1a(31) or 1a(32) 
of the Act, respectively;
    (7) Identify 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 support that request for confidential 
treatment with reasonable justification;
    (8) Include the filing fee required under Appendix B to this part; 
and
    (9) Include, if requested by Commission staff, additional evidence, 
information or data relating to whether the contract meets, initially 
or on a continuing basis, any of the specific requirements of the Act, 
or any other requirement for designation under the Act or Commission 
regulations or policies thereunder.
* * * * *
    (c) Extension of time. The Commission may extend the forty-five day 
review period in paragraph (b) of this section for:
    (1) An additional forty-five days, if the product raises novel or 
complex issues that require additional time for review or is of major 
economic significance, in which case, the Commission would notify the 
submitting registered entity within the initial forty-five day review 
period and would briefly describe the nature of the specific issues for 
which additional time for review would be required; or
    (2) Such extended period as the submitting registered entity so 
instructs the Commission in writing.
* * * * *
    (e) Effect of non-approval.
    (1) * * *
    (2) Notification to a submitting registered entity under paragraph 
(d) of this section of the Commission's refusal to approve a product 
shall be presumptive evidence that the entity may not truthfully 
certify under Sec.  40.2 that the same, or substantially the same, 
product does not violate the Act or regulations thereunder.
    26. Section 40.4 is proposed to be revised to read as follows:


Sec.  40.4  Amendments to terms or conditions of enumerated 
agricultural contracts.

    (a) Designated contract markets must submit for Commission approval 
under the procedures of Sec.  40.5, prior to its implementation, any 
rule or rule amendment that, for a delivery month having open interest, 
would materially change a term or condition as defined in Sec.  
40.1(i), of a contract for future delivery in an agricultural commodity 
enumerated in Section 1a(4) of the Act, or of an option on such a 
contract or commodity.
    (b) The following rules or rule amendments are not material changes 
and, except as provided in paragraph (b)(9) of this section, may be 
reported to the Commission pursuant to the provisions of Sec.  40.6(c):
    (1) Changes in trading hours;
    (2) Changes in lists of approved delivery facilities pursuant to 
previously set standards or criteria;
    (3) Changes to terms and conditions of options on futures other 
than those relating to last trading day, expiration date, option strike 
price delistings, and speculative position limits;
    (4) Reductions in the minimum price fluctuation (or ``tick'');
    (5) Changes required to comply with a binding order of a court of 
competent jurisdiction, or of a rule, regulation or order of the 
Commission or of another federal regulatory authority;
    (6) Corrections of typographical errors, renumbering, periodic 
routine updates to identifying information about approved entities and 
other such nonsubstantive revisions of a product's terms and conditions 
that have no effect on the economic characteristics of the product;
    (7) Fees or fee changes of less than $1.00 per contract;
    (8) Fees or fee changes that are $1.00 or more per contract and are 
established by an independent third party or are unrelated to delivery, 
trading, clearing or dispute resolution; and
    (9) Any other rule:
    (i) The text of which has been submitted for review to the 
Secretary of the Commission electronically in a format specified by the 
Secretary of the Commission, at least ten business days prior to its 
implementation and that has been labeled ``Non-Material Agricultural 
Rule Change;''
    (ii) For which the registered entity has provided an explanation as 
to why it considers the rule ``non-material,'' and any other 
information that may be beneficial to the Commission in analyzing the 
merits of the entity's claim of non-materiality; and
    (iii) With respect to which the Commission has not notified the 
contract market during the review period that the rule appears to 
require or does require prior approval under this section.
    27. Section 40.5 is proposed to be amended by revising paragraph 
(a), revising paragraph (c)(1) and revising paragraph (e)(2) to read as 
follows:


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

    (a) Request for approval of rules. A registered entity may request 
pursuant to Section 5c(c) of the Act that the Commission approve any 
proposed rule or rule amendment. A submission requesting approval 
shall:
    (1) Be filed electronically with the Secretary of the Commission 
and at the regional office of the Commission having local jurisdiction 
over the registered entity in a format specified by the Secretary of 
the Commission.
    (2) Include a copy of the submission cover sheet in accordance with 
the instructions in Appendix D to this part;
    (3) Set forth the text of the proposed rule or rule amendment (in 
the case of a rule amendment, deletions and additions must be 
indicated);
    (4) Describe the proposed effective date of a proposed rule and any 
action taken or anticipated to be taken to adopt the proposed rule by 
the registered entity or by its governing board or by any committee 
thereof, and cite the rules of the entity that authorize the adoption 
of the proposed rule;
    (5) Explain the operation, purpose, and effect of the proposed 
rule, including, as applicable, a description of the anticipated 
benefits to market

[[Page 39688]]

participants or others, any potential anticompetitive effects on market 
participants or others, how the rule fits into the registered entity's 
framework of self-regulation, a demonstration that the submission 
complies with the requirements of Appendix A to this part--Guideline 
No. 1, and any other information which may be beneficial to the 
Commission in analyzing the proposed rule. If a proposed rule affects, 
directly or indirectly, the application of any other rule of the 
submitting registered entity, set forth the pertinent text of any such 
rule and describe the anticipated effect;
    (6) Briefly describe any substantive opposing views expressed to 
the registered entity by governing board or committee members, members 
of the entity or market participants with respect to the proposed rule 
that were not incorporated into the proposed rule;
    (7) 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;
    (8) 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
    (9) Include a copy of the submission cover sheet in accordance with 
the instructions in Appendix D to this part.
* * * * *
    (c) Extensions of time. The Commission may extend the review period 
in paragraph (b) of this section for:
    (1) An additional forty-five days, if the proposed rule raises 
novel or complex issues that require additional time for review or is 
of major economic significance, in which case, the Commission would 
notify the submitting registered entity within the initial forty-five 
day review period and would briefly describe the nature of the specific 
issues for which additional time for review would be required; or
* * * * *
    (e) Effect of non-approval. (1) * * *
    (2) Notification to a registered entity under paragraph (d) of this 
section of the Commission's refusal to approve a proposed rule or rule 
amendment of a registered entity shall be presumptive evidence that the 
entity may not truthfully certify that the same, or substantially the 
same, proposed rule or rule amendment does not violate the Act or 
regulations thereunder.
* * * * *
    28. Section 40.6 is proposed to be amended by revising paragraph 
(a) introductory text, paragraphs (a)(2), (3), and (4), paragraph (c) 
introductory text, and paragraphs (c)(1), (c)(2)(iii) and (c)(2)(v), 
and by adding new paragraphs (c)(2)(vi) and (c)(3)(ii)(F) to read as 
follows:


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

    (a) Required certification. A designated contract market or a 
registered derivatives clearing organization may implement any new rule 
or rule amendment (other than a rule or rule amendment approved or 
deemed approved by the Commission under Sec.  40.5) if the following 
conditions have been met:
    (1) * * *
    (2) The designated contract market or registered derivatives 
clearing organization has filed a submission electronically for the 
rule or rule amendment with the Secretary of the Commission and at the 
regional office having local jurisdiction over the submitting 
registered entity in a format specified by the Secretary of the 
Commission, and the Commission has received the submission at its 
headquarters by close of business on the business day preceding 
implementation of the rule; provided, however, rules or rule amendments 
implemented under procedures of the governing board to respond to an 
emergency as defined in Sec.  40.1, shall, if practicable, be filed 
with the Commission prior to the implementation or, if not practicable, 
be filed with the Commission at the earliest possible time after 
implementation, but in no event more than 24 hours after 
implementation; and
    (3) The rule submission includes:
    (i) A copy of the submission cover sheet in accordance with the 
instructions in Appendix D to this part (in the case of a rule or rule 
amendment that responds to an emergency, ``Emergency Rule 
Certification'' should be noted in the Description section of the 
submission cover sheet);
    (ii) The text of the rule (in the case of a rule amendment, 
deletions and additions must be indicated);
    (iii) The date of implementation;
    (iv) A brief explanation of any substantive opposing views 
expressed to the registered entity by governing board or committee 
members, members of the entity or market participants, that were not 
incorporated into the rule; and
    (v) A certification by the registered entity that the rule complies 
with the Act and regulations thereunder.
    (4) The registered entity shall provide, if requested by Commission 
staff, additional evidence, information or data that may be beneficial 
to the Commission in conducting a due diligence assessment of the 
certification filing and the entity's compliance with any of the 
requirements of the Act or Commission regulations or policies 
thereunder.
* * * * *
    (c) Notification of rule amendments. Notwithstanding the rule 
certification requirement of Section 5c(c)(1) of the Act, and 
paragraphs (a)(1), (a)(2) and (a)(3) of this section, a designated 
contract market or a registered derivatives clearing organization may 
place the following rules or rule amendments into effect without 
certification to the Commission if the following conditions are met:
    (1) The designated contract market or registered derivatives 
clearing organization provides to the Commission at least weekly a 
summary notice of all rule changes made effective pursuant to this 
paragraph during the preceding week. Such notice must be labeled 
``Weekly Notification of Rule Changes'' and need not be filed for weeks 
during which no such actions have been taken. One copy of each such 
submission shall be furnished electronically in a format specified by 
the Secretary of the Commission; and
    (2) * * *
    (iii) Index products. Routine changes in the composition, 
computation, or method of selection of component entities of an index 
(other than a stock index) referenced and defined in the product's 
terms, that do not affect the pricing basis of the index, which are 
made by an independent third party whose business relates to the 
collection or dissemination of price information and which was not 
formed solely for the purpose of compiling an index for use in 
connection with a futures or option product;
* * * * *
    (v) Fees. Fees or fee changes that are $1.00 or more per contract 
and are established by an independent third party or are unrelated to 
delivery, trading, clearing or dispute resolution.
    (vi) Survey lists. Changes to lists of banks, brokers, dealers, or 
other entities

[[Page 39689]]

that provide price or cash market information to an independent third 
party and that are incorporated by reference as product terms.
    (3) * * *
    (ii) * * *
    (F) Securities Indexes. Routine changes to the composition, 
computation or method of security selection of an index that is 
referenced and defined in the product's rules, and which are made by an 
independent third party.
    29. Section 40.7 is proposed to be amended by adding paragraphs 
(a)(3) and (b)(3) to read as follows:


Sec.  40.7  Delegations.

    (a) Procedural matters * * *
    (3) The Commission hereby delegates to the Director of the Division 
of Market Oversight or to the Director's delegatee, with the 
concurrence of the General Counsel or the General Counsel's delegatee, 
the authority to notify a designated contract market that a rule change 
submitted for materiality determination under Sec.  40.4(b)(9) is 
material and must be submitted for the Commission's prior approval.
    (b) Approval authority. * * *
    (3) Establish or amend speculative limits or position 
accountability provisions that are in compliance with the requirements 
of the Act and Commission regulations;
* * * * *
    30. Section 40.8 is proposed to be amended by revising paragraph 
(b) to read as follows:


Sec.  40.8  Availability of public information.

* * * * *
    (b) Any information required to be made publicly available by a 
registered entity under Sections 5(d)(7), 5a(d)(4) and 5b(c)(2)(L) of 
the Act, respectively, will be treated as public information by the 
Commission at the time an order of designation or registration is 
issued by the Commission, a registered entity is deemed to be 
designated or registered, or a rule or rule amendment of the registered 
entity is approved or deemed to be approved by the Commission or can 
first be made effective the day following its certification by the 
registered entity.
    31. Appendix D to Part 40--Submission Cover Sheet and Instructions 
is proposed to be amended by revising the first paragraph 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 electronically by a designated contract 
market, registered derivatives transaction execution facility, or 
registered derivatives clearing organization to the Secretary of the 
Commodity Futures Trading Commission, at [email protected] in a 
format specified by the Secretary of the Commission. Each submission 
should include the following:
* * * * *

    Issued in Washington, DC, this first day of July, 2005, by the 
Commission.
Jean A. Webb,
Secretary of the Commission.
[FR Doc. 05-13467 Filed 7-8-05; 8:45 am]
BILLING CODE 6351-01-P