[Federal Register Volume 74, Number 150 (Thursday, August 6, 2009)]
[Rules and Regulations]
[Pages 39211-39212]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-18855]


=======================================================================
-----------------------------------------------------------------------

COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 7


Contract Market Rules Altered or Supplemented by the Commission

AGENCY: Commodity Futures Trading Commission.

ACTION: Final rulemaking.

-----------------------------------------------------------------------

SUMMARY: Regulation 7.201 of the Commodity Futures Trading Commission 
(``Commission'') alters and supplements Chicago Board of Trade 
(``CBOT'') Rule 620.01(B) by requiring members of the CBOT to submit to 
arbitration of any customer claim or grievance initiated by the 
customer according to the arbitration rules and regulations of the 
CBOT. On November 25, 2007, following the merger of Chicago Mercantile 
Exchange (``CME'') Holdings, Inc. with CBOT Holdings, Inc., CBOT Rule 
620.01(B) was superseded by new CBOT Rule 600.D. Like Regulation 7.201, 
new Rule 600.D specifically requires exchange members to submit to 
customer-initiated arbitrations. Accordingly, on petition of The CME 
Group Inc., CBOT's parent company, Regulation 7.201 is being repealed 
by the Commission as no longer necessary.

DATES: Effective Date: Effective August 6, 2009.

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

SUPPLEMENTARY INFORMATION: 

I. Background

    Section 8a(7) of the Commodity Exchange Act (``Act''), 7 U.S.C. 
12a(7), provides in relevant part that the Commission is authorized to 
``alter or supplement the rules of a registered entity insofar as 
necessary or appropriate * * * for the protection of traders or to 
insure fair dealing in commodities traded for future delivery on such 
registered entity.'' In 1981, pursuant to section 5a(11) of the Act and 
Part 180 of the Commission's regulations, each contract market was 
required to ``provide a fair and equitable procedure through 
arbitration or otherwise * * * for the settlement of customers' claims 
and grievances against any member or employee thereof.'' \1\
---------------------------------------------------------------------------

    \1\ Section 5a(11) of the Act, 7 U.S.C. 7a (1981). See also 17 
CFR 180.2 (1981) (implementing section 5a(11) through the 
establishment of minimum requirements). Subsequently, section 5a(11) 
and Part 180 were superseded by amended provisions. However, boards 
of trade are still required to ``establish and enforce rules 
regarding and provide facilities for alternative dispute resolution 
as appropriate for market participants and any market 
intermediaries.'' Section 5(d)(13) of the Act, 7 U.S.C. 7(d)(13) 
(2009). See also 17 CFR Part 38, Appendix B, Core Principle 13 
(application guidance and acceptable practices related to section 
5(d)(13)).
---------------------------------------------------------------------------

    In November of 1981, the Commission published a final rule that 
disapproved proposed CBOT Rule 620.01(B), dealing with arbitration, and 
altered and supplemented CBOT's rule by implementing in its place 
Commission Regulation 7.201.\2\ CBOT Rule 620.01(B), as interpreted by 
CBOT, would have restricted the ability of customers to arbitrate 
claims against CBOT members and their employees under CBOT's 
arbitration rules and regulations. The CBOT had argued that the Act did 
not compel its members to participate in customer-initiated arbitration 
proceedings and, during the period of 1980-81, CBOT members had denied 
five customers the right to arbitrate their disputes with members 
because those members refused to participate in the CBOT's arbitration 
procedures.
---------------------------------------------------------------------------

    \2\ 46 FR 57457 (November 24, 1981) (adopting Commission 
Regulation 7.201). See also 49 FR 10659 (March 24, 1984) (subsequent 
amendment).
---------------------------------------------------------------------------

    The Commission regulation, adopted pursuant to its section 8a(7) 
authority, altered and supplemented CBOT Rule 620.01(B) to implement a 
Commission-drafted version of Rule 620.01(B). The Commission-imposed 
rule assured that CBOT members would submit to arbitration proceedings 
initiated by customers under CBOT rules and regulations. Regulation 
7.201 has remained in place ever since.
    On July 12, 2007, CBOT Holdings, Inc. merged with CME Holdings, 
Inc. to form The CME Group, Inc. On November 25, 2007, as part of the 
harmonization of the rules of the CBOT with those of the CME, the CBOT 
deleted Rule 620.01(B) from its rulebook and adopted new Rule 600.D 
governing permissive arbitrations. New CBOT Rule 600.D, which is 
identical to CME Rule 600.D, provides in relevant part that a CBOT 
member is, ``* * * required to arbitrate * * * claims of a customer 
against a member that relate to or arise out of any transaction on or 
subject to the rules of the Exchange.''
    On June 8, 2009, The CME Group, Inc., CBOT's parent company, 
submitted a petition pursuant to Commission Regulation 13.2 for the 
repeal of Regulation 7.201.\3\ Given that new CBOT Rule 600.D has, 
since November 25, 2007, compelled members to submit to arbitration 
claims initiated by customers, that Rule 600.D fully

[[Page 39212]]

conforms to the Commission's interpretation of section 5a(11) of the 
Act at the time Regulation 7.201 was adopted, and to the Commission's 
interpretation of CBOT's obligations under successor section 5(d)(13) 
of the Act, and that Regulation 7.201 refers to a CBOT rule that is no 
longer in the CBOT rulebook, the Commission has determined to grant the 
CME Group's petition and hereby repeals Regulation 7.201.
---------------------------------------------------------------------------

    \3\ Copies of the petition are available on written request from 
David Stawick, Secretary, Commodity Futures Trading Commission, 
Three Lafayette Centre, 1155 21st Street, NW., Washington, DC 20581, 
by telephone request at (202) 418-5100, or by e-mail request to 
[email protected]. Reference should be made to ``CME Group petition 
to repeal Regulation 7.201.''
---------------------------------------------------------------------------

II. Related Matters

A. No Notice Required Under 5 U.S.C. 553

    The Administrative Procedure Act (``APA'') requires rulemakings to 
be commenced with a general notice of public rulemaking, published in 
the Federal Register,\4\ except, among other things, ``when the agency 
for good cause finds * * * that notice and public procedure thereon are 
impracticable, unnecessary, or contrary to the public interest.'' \5\
---------------------------------------------------------------------------

    \4\ 5 U.S.C. 553(b).
    \5\ 5 U.S.C. 553. See also Commission Regulations 13.3 through 
13.5, 17 CFR 13.3-13.5 (notice of proposed rulemaking and public 
participation in the rulemaking process required unless the 
Commission finds for good cause that notice and public procedure 
thereon are impracticable, unnecessary, or contrary to the public 
interest).
---------------------------------------------------------------------------

    The repeal of Commission Regulation 7.201 will not cause new 
regulatory requirements to be effected, because new CBOT Rule 600.D 
imposes the same requirements on CBOT members that Commission 
Regulation 7.201 was adopted to impose. Therefore, the Commission finds 
for good cause that the notice and public procedure are unnecessary 
before finalizing the repeal of Commission Regulation 7.201.

B. Regulatory Flexibility Act

    The Commission is required to prepare and make available for public 
comment a regulatory flexibility analysis describing the impact of a 
rule on small entities when the Commission is required by 5 U.S.C. 553 
or any other law to publish a notice of proposed rulemaking.\6\ The 
Commission has found according to the provisions of 5 U.S.C. 553 that a 
notice of proposed rulemaking is unnecessary for the repeal of 
Regulation 7.201. Therefore, the Commission is not required to prepare 
and make available a regulatory flexibility analysis, and the head of 
the agency alternatively is not making a certification as to the 
economic impact of the rule on a substantial number of small 
entities.\7\
---------------------------------------------------------------------------

    \6\ 5 U.S.C. 603 and 604.
    \7\ See 5 U.S.C. 605 (certification by the head of an agency 
permitted as an alternative to the regulatory flexibility analyses 
required at 5 U.S.C. 603 and 604).
---------------------------------------------------------------------------

C. Paperwork Reduction Act

    The Paperwork Reduction Act (``PRA''), 44 U.S.C. 3501 et seq., 
imposes certain requirements on federal agencies (including the 
Commission) in connection with their conducting or sponsoring any 
collection of information as defined by the PRA. The repeal of 
Regulation 7.201 is not associated with a collection of information. 
Accordingly, the Paperwork Reduction Act does not apply.

D. Cost Benefit Analysis

    Section 15(a) of the Act requires the Commission to consider the 
costs and benefits of its action before promulgating a new regulation 
or order under the Act. Since this action repeals rather than 
promulgates a regulation, by its terms, Sec.  15(a) does not apply. In 
any event, the repeal of Commission Regulation 7.201 will not cause new 
regulatory requirements to be effected, as new CBOT Rule 600.D imposes 
the same requirements on CBOT members that Commission Regulation 7.201 
was adopted to impose. Thus, the repeal of Regulation 7.201 is cost/
benefit neutral.

List of Subjects in 17 CFR Part 7

    Arbitration, Commodity exchanges, Commodity futures.


0
In consideration of the foregoing, and pursuant to the authority in the 
Commodity Exchange Act and, in particular, sections 5 and 8a of the 
Act, the Commission hereby amends Title 17, part 7, of the Code of 
Federal Regulations as follows:

PART 7--CONTRACT MARKET RULES ALTERED OR SUPPLEMENTED BY THE 
COMMISSION

0
1. The authority citation for part 7 is revised to read as follows:

    Authority:  7 U.S.C. 7(a) and 12a(7).


Sec.  7.201  [Removed and reserved]

0
2. Section 7.201 is removed and reserved.

    Issued in Washington, DC, on July 31, 2009.

    By the Commission.
David Stawick,
Secretary of the Commission.
[FR Doc. E9-18855 Filed 8-5-09; 8:45 am]
BILLING CODE 6717-01-P