[Federal Register Volume 76, Number 96 (Wednesday, May 18, 2011)]
[Notices]
[Pages 28755-28756]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-11554]


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COMMODITY FUTURES TRADING COMMISSION


Performance of Certain Functions by National Futures Association 
With Respect to Commodity Pool Operators

AGENCY: Commodity Futures Trading Commission.

ACTION: Notice and Order.

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SUMMARY: The Commodity Futures Trading Commission (Commission) is 
authorizing the National Futures Association (NFA) to process: (1) 
Claims of exemption from certain Part 4 requirements for commodity pool 
operators (CPOs) with respect to pools whose units are listed and 
traded on a national securities exchange (Commodity ETFs); and (2) 
notices of exemption from registration as a CPO filed by independent 
directors or trustees of Commodity ETFs. Further, the Commission is 
authorizing NFA to maintain and serve as the official custodian of 
certain Commission records.

DATES: Effective Date: June 17, 2011.

FOR FURTHER INFORMATION CONTACT: Christopher W. Cummings, Special 
Counsel, Division of Clearing and Intermediary Oversight, or Barbara S. 
Gold, Associate Director, Division of Clearing and Intermediary 
Oversight, Commodity Futures Trading Commission, 1155 21st Street, NW., 
Washington, DC 20581, telephone number: (202) 418-5450; facsimile 
number: (202) 418-5528; and electronic mail: [email protected], or 
[email protected], respectively.

I. Authority and Background

    In a separate document published elsewhere in today's Federal 
Register, the Commission is announcing adoption of new Regulation 
4.12(c), which makes available to the CPOs of Commodity ETFs relief 
from certain disclosure, reporting and recordkeeping requirements, and 
new Regulation 4.13(a)(5), which makes available relief from the 
requirement to register as a CPO for certain independent directors and 
trustees of Commodity ETFs.\1\ Relief under each of the new regulations 
must be claimed by the filing of specified notices and in the case of 
Regulation 4.13(a)(5), certain additional statements. These filings are 
similar to filings currently made with NFA by CPOs seeking to claim 
relief under other provisions of Regulation 4.13.\2\
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    \1\ In the Federal Register release proposing new Regulations 
4.12(c) and 4.13(a)(5), the Commission explained the origins and use 
of the term ``Commodity ETF''. 75 FR 54794, at 54795 (Sep. 9, 2010).
    \2\ 17 CFR 4.13 (2010). Commission regulations referred to 
herein may be accessed through the Commission's Web site at http://www.cftc.gov.
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    Section 8a(10) of the Commodity Exchange Act \3\ (Act) provides 
that the Commission may authorize any person to perform any portion of 
the registration functions under the Act, notwithstanding any other 
provision of law, in accordance with rules adopted by such person and 
submitted to the Commission for approval or, if applicable, for review 
pursuant to Section 17(j) of the Act \4\ and subject to the provisions 
of the Act applicable to registrations granted by the Commission. 
Section 17(o)(1) of the Act \5\ provides that the Commission may 
require NFA to perform Commission registration functions in accordance 
with the Act and NFA rules. In this regard, the Commission notes that 
NFA has confirmed its willingness to perform certain functions that 
would otherwise be performed by the Commission.\6\
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    \3\ 7 U.S.C. 12a(10) (2006). The Act also may be accessed 
through the Commission's Web site.
    \4\ 7 U.S.C. 21(j) (2006).
    \5\ 7 U.S.C. 21(o)(1) (2006).
    \6\ Letter from Robert K. Wilmouth, President of NFA, to 
Brooksley Born, Chairperson of the Commission, dated June 20, 1997.
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    Upon consideration, the Commission has determined to authorize NFA, 
90 days following publication of this Notice and Order in the Federal 
Register, to perform the following functions: (1) To process \7\ 
notices of claim under Regulation 4.12(c) for exemption from certain 
Part 4 requirements; (2) to process notices of exemption pursuant to 
Rule 4.13(a)(5) from registration as a CPO; and (3) to maintain and to 
serve as the official custodian of records for such notices of claim 
for exemption. As discussed below, these functions involve exemption 
from certain disclosure, reporting and recordkeeping requirements for 
CPOs, and exemption from CPO registration for certain persons. This 
action is consistent with other action the Commission has taken with 
respect to delegating to NFA various responsibilities under Part 4 of 
the Commission's regulations.\8\
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    \7\ As used in this Notice and Order, the term ``process'' 
generally refers to the review of a notice for compliance with 
applicable requirements and, where necessary, advising the CPO of 
any deficiency related thereto.
    \8\ See, e.g., 62 FR 52088 (Oct. 6, 1997), whereby the 
Commission delegated to NFA the authority to process various filings 
made under Part 4.
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A. Exemption From Certain Part 4 Requirements for CPOs of Commodity 
ETFs

    Regulation 4.12(c) makes available an exemption from certain 
disclosure, reporting and reporting requirements for registered CPOs of 
Commodity ETFs. To perfect the exemption, Regulation 4.12(d) requires 
eligible CPOs to file a notice of claim for exemption with NFA. By this 
Order, NFA is authorized to process claims for exemption filed by CPOs 
who meet the requirements set forth in Regulation 4.12(c).

B. Exemption From Registration as a CPO for Independent Directors or 
Trustees

    Regulation 4.13(a)(5) makes available an exemption from CPO 
registration where a person is a director or trustee of a commodity 
pool solely to comply with the requirements under section 10A of the 
Securities Exchange Act of 1934, as amended, and any Securities and 
Exchange Commission rules and exchange listing requirements adopted 
pursuant thereto, that the pool have an audit committee comprised 
exclusively of independent directors or trustees. To perfect the 
exemption, Regulation 4.13(b) requires eligible persons to file a 
notice of exemption with NFA. By this Order, NFA is authorized to 
process claims for exemption filed by persons who meet the requirements 
set forth in Regulation 4.13(a)(5).

C. Recordkeeping Requirements

    By prior orders, the Commission has authorized NFA to maintain 
various other Commission registration records and has certified NFA as 
the official custodian of such records for this agency.\9\ The 
Commission has now determined, in accordance with its authority under 
Section 8a(10) of the Act, to authorize NFA to maintain and to serve as 
the official custodian of records for the claims required for the 
exemptions provided by Regulations 4.12(c) and 4.13(a)(5).
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    \9\ See, e.g., 75 FR 55310 (Sep. 10, 2010); 70 FR 2621 (Jan. 14, 
2005); and 68 FR 12684 (Mar. 17, 2003).
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    In maintaining the Commission's records pursuant to this Order, NFA 
shall be subject to all other requirements

[[Page 28756]]

and obligations imposed upon it by the Commission in existing or future 
Orders or regulations. In this regard, NFA shall also implement such 
additional procedures (or modify existing procedures) as are acceptable 
to the Commission and as are necessary: to ensure the security and 
integrity of the records in NFA's custody; to facilitate prompt access 
to those records by the Commission and its staff, particularly as 
described in other Commission Orders or regulations; to facilitate 
disclosure of public or nonpublic information in those records when 
permitted by Commission Orders or regulations and to keep logs as 
required by the Commission concerning disclosure of nonpublic 
information; and otherwise to safeguard the confidentiality of the 
records consistent with Section 8 of the Act and the Commission's 
regulations issued thereunder.

II. Conclusion and Order

    The Commission has determined, in accordance with the provisions of 
Sections 8a(10) and 17(o)(1) of the Act, to authorize NFA to perform 
the following functions:
    (1) To process notices of claim under Regulation 4.12(c) for 
exemption from compliance with certain Part 4 requirements, filed under 
Regulation 4.12(d) by the registered CPOs of Commodity ETFs;
    (2) To process notices of exemption pursuant to Regulation 
4.13(a)(5) from registration as a CPO, filed under Regulation 4.13(b) 
by independent directors or trustees of Commodity ETFs; and
    (3) To maintain and to serve as the official custodian of records 
for the notices required by the regulations listed above.
    NFA shall perform these functions in accordance with the standards 
established by the Act and Commission Orders and regulations 
promulgated thereunder, particularly Part 4 of the regulations and 
Commission Orders issued thereunder, and shall provide the Commission 
with such summaries and periodic reports as the Commission may 
determine are necessary for effective oversight of the functions 
delegated hereby.
    These determinations are based upon the Congressional intent 
expressed in Sections 8a(10) and 17(o) of the Act that the Commission 
have the authority to delegate to NFA any portion of the Commission's 
registration responsibilities under the Act for purposes of carrying 
out these responsibilities in the most efficient and cost-effective 
manner.\10\
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    \10\ See also, Section 125 of the Commodity Futures 
Modernization Act of 2000, Public Law 106-554, 114 Stat. 2763, 
enacted December 21, 2000, which directed the Commission to report 
to Congress identifying, among other things, ``the regulatory 
functions the Commission currently performs that can be delegated to 
a registered futures association.''
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    This Order does not, however, authorize NFA to render ``no-action'' 
positions, exemptions or interpretations with respect to applicable CPO 
disclosure, reporting, recordkeeping and registration requirements.
    Nothing in this Order or in Section 8a(10) or 17(o) of the Act 
shall affect the Commission's authority to review NFA's performance of 
Commission functions listed in items (1) through (3) of Section II of 
this Order.
    NFA is authorized to perform all functions specified herein until 
such time as the Commission orders otherwise. Nothing in this Order 
shall prevent the Commission from exercising the authority delegated 
herein. NFA may submit to the Commission for decision any specific 
matters that have been delegated to it, and Commission staff will be 
available to discuss with NFA staff issues relating to the 
implementation of this Order. Nothing in this Order affects the 
applicability of any previous Orders issued by the Commission 
concerning Part 4.

III. Cost-Benefit Analysis

    Section 15(a) of the Act \11\ requires the Commission to consider 
the costs and benefits of its actions before promulgating regulations 
under the Act or issuing certain orders. By its terms, section 15(a) 
does not require the Commission to quantify the costs and benefits of a 
regulation or order, or to determine whether the benefits of the 
regulation or order outweigh its costs; rather, it requires that the 
Commission ``consider'' the costs and benefits of its actions. Section 
15(a) further specifies that the costs and benefits 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 and could in its 
discretion determine that, notwithstanding its costs, a particular rule 
is necessary or appropriate to protect the public interest or to 
effectuate any of the provisions or accomplish any of the purposes of 
the Act.
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    \11\ 7 U.S.C. 19(a) (2006).
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    Summary of proposed requirements. The Order would delegate to NFA 
the responsibility to process notices submitted by persons seeking to 
claim exemption under new provisions of Regulations 4.12 and 4.13, and 
to maintain and serve as the official custodian of those notices.
    Costs. With respect to costs, the Commission has determined that 
there will be no costs to members of the public or persons subject to 
Commission regulation. Any costs to NFA will be insignificant, inasmuch 
as NFA is already responsible for performing the same processing 
functions with respect to existing provisions of the same regulations, 
and it has procedures in place to readily accommodate the notices to be 
submitted with respect to Regulations 4.12(c) and 4.13(a)(5).
    Benefits. With respect to benefits, the Commission has determined 
that persons claiming exemption under new Regulations 4.12(c) and 
4.13(a)(5) will be able to use the same procedure that is currently 
used for the other exemptive provisions of Part 4, and the Commission 
will not be required to devote any resources to performing functions 
that NFA is already performing.

    Issued in Washington, DC, on May 5, 2011 by the Commission.
David A. Stawick,
Secretary of the Commission.
[FR Doc. 2011-11554 Filed 5-17-11; 8:45 am]
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