[Federal Register Volume 76, Number 144 (Wednesday, July 27, 2011)]
[Rules and Regulations]
[Pages 44776-44800]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-18661]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 40

RIN 3038-AD07


Provisions Common to Registered Entities

AGENCY: Commodity Futures Trading Commission.

ACTION: Final Rule.

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SUMMARY: The Commodity Futures Trading Commission (``Commission'') is 
adopting regulations to implement certain statutory provisions of the 
Dodd-Frank Wall Street Reform and Consumer Protection Act (``Dodd-Frank 
Act''). The Commission also is amending its existing regulations 
governing the submission of new products, rules, and rule amendments. 
The final regulations establish the Commission's procedural framework 
for the submission of new products, rules, and rule amendments by 
designated contract markets (``DCMs''), derivatives clearing 
organizations (``DCOs''), swap execution facilities (``SEFs''), and 
swap data repositories (``SDRs''). In addition, the final regulations 
prohibit event contracts involving certain excluded commodities, 
establish special submission procedures for certain rules proposed by 
systemically important derivatives clearing organizations (``SIDCOs''), 
and stay the certifications and the approval review periods of novel 
derivative products pending jurisdictional determinations.

DATES: Effective date: September 26, 2011.

FOR FURTHER INFORMATION CONTACT: Bella Rozenberg, Assistant Deputy 
Director, Division of Market Oversight (``DMO''), at 202-418-5119 or 
cftc.gov">brozenberg@cftc.gov, Riva Spear Adriance, Associate Director, DMO at 
202-418-5494 or cftc.gov">radriance@cftc.gov, Phyllis Dietz, Associate Director, 
Division of Clearing and Intermediary Oversight at 202-418-5449 or 
cftc.gov">pdietz@cftc.gov, and Joseph R. Cisewski, Attorney Advisor, DMO at 202-
418-5718 or cftc.gov">jcisewski@cftc.gov, in each case, at the Commodity Futures 
Trading Commission, Three Lafayette Centre, 1155 21st Street, NW., 
Washington, DC 20581.

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Background
II. Amendments to Part 40 of the Commission's Regulations
    a. Definitions (Sec.  40.1)
    b. Listing Products for Trading by Certification (Sec.  40.2)
    c. Voluntary Submission of New Products for Commission Review 
and Approval (Sec.  40.3)
    d. Amendments to Terms or Conditions of Enumerated Agricultural 
Contracts (Sec.  40.4)
    e. Voluntary Submission of Rules for Commission Review and 
Approval (Sec.  40.5)
    f. Self-Certification of Rules (Sec.  40.6)
    g. Delegations (Sec.  40.7)
    h. Availability of Public Information (Sec.  40.8)
    i. Special Certification Procedures for Submission of Rules by 
Systemically Important Derivatives Clearing Organizations (Sec.  
40.10)
    j. Review of Event Contracts Based Upon Certain Excluded 
Commodities (Sec.  40.11)
    k. Staying of Certification and Tolling of Review Period Pending 
Jurisdictional Determination (Sec.  40.12)
III. Cost Benefit Considerations
IV. Related Matters
    a. Regulatory Flexibility Act
    b. Paperwork Reduction Act

I. Background

    On November 2, 2010, the Commission published proposed regulations 
to implement certain statutory provisions of the Dodd-Frank Act and to 
amend existing regulations governing the submission of new products, 
rules, and rule amendments.\1\ The Commission is hereby adopting final 
regulations 40.1 through 40.8, as amended below, and new regulations 
40.10 through 40.12 to implement certain provisions of the Dodd-Frank 
Act, to clarify submission-related regulatory obligations of registered 
entities, and to enhance the Commission's administration of the 
Commodity Exchange Act (``Act'').
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    \1\ 17 CFR part 40 Provisions Common to Registered Entities, 75 
FR 67282 (Nov. 2, 2010).
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    The Commission's final regulations implement, among other 
provisions, Section 745 of the Dodd-Frank Act, which, effective July 
16, 2011, amended Section 5c of the Act to provide new procedures for 
the submission of rules and rule amendments by DCMs, SEFs, DCOs, and 
SDRs.\2\ The final regulations also amend existing requirements for the 
submission of new products and prohibit the listing and clearing of 
products based upon certain excluded commodities, if such products 
involve statutorily-specified activities or similar activities 
determined, by rule or regulation, to be contrary to the public 
interest. In addition, the Commission is adopting special submission 
procedures for certain risk-related rules proposed

[[Page 44777]]

by SIDCOs.\3\ The SIDCO regulations implement Section 806(e)(1) of the 
Dodd-Frank Act by requiring, among other things, 60-days advance notice 
of proposed rules that may materially affect the nature or level of 
risk presented by the SIDCO. Finally, the Commission is adopting 
previously proposed regulations to stay certifications and toll 
approval review periods for novel derivative products subject to 
jurisdictional determinations by the Commission or the Securities and 
Exchange Commission (``SEC'').
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    \2\ Sections 728 and 733 of the Dodd-Frank Act created two new 
categories of registered entities, SEFs and SDRs. Provisions related 
to the regulation of these entities will be promulgated in other 
Commission rulemakings.
    \3\ A SIDCO is a DCO that has been designated as a 
systematically important financial market utility by the Financial 
Stability Oversight Council pursuant to Section 804 of the Dodd-
Frank Act and for which the Commission is the Supervisory Agency. 
See below section II.i. (discussing Sec.  40.10).
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    Part 40 of the Commission's regulations, as amended herein, will 
become effective sixty days after publication in the Federal Register.

II. Amendments to Part 40 of the Commission's Regulations

    The Commission received nine comment letters during the 60-day 
public comment period following the publication of its notice of 
proposed rulemaking. Seven of these comment letters were submitted by 
registered entities subject to the proposed regulations. Five comments 
were submitted on behalf of DCMs--the CME Group, Inc. (``CME''), ICE 
Futures U.S., Inc. (``ICE''), the Kansas City Board of Trade 
(``KCBOT''), the Minneapolis Grain Exchange, Inc. (``MGEX''), and 
OneChicago LLC Futures Exchange (``OCX'')--and two comments were 
submitted on behalf of registered DCOs--the Options Clearing 
Corporation (``OCC'') and LCH.Clearnet Ltd (``LCH'').\4\ The Commission 
also received comments from the Futures Industry Association (``FIA''), 
an organization representing futures commission merchants, and the 
American Benefits Council (``ABC''), an organization representing 
pension funds and other buy-side swaps users.
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    \4\ CME also submitted a comment on the Commission's cost-
benefit analysis subsequent to the close of the public comment 
public for the proposed rulemaking. The Commission has addressed 
CME's comments in its cost-benefit analysis, below. CME, KCBOT, and 
MGEX are also registered DCOs and they commented on clearing-related 
issues.
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    Many of the comments received by the Commission offered specific 
recommendations for clarification or modification of proposed 
regulations; other comments generally objected to certain aspects of 
the proposal. The Commission, in consideration of these comments and as 
detailed below, is modifying its proposed rules to clarify regulatory 
obligations under certain provisions of part 40. The Commission has 
otherwise determined to implement its regulations as originally 
published on November 2, 2010.

a. Definitions (Sec.  40.1)

    Three registered entities submitted comments concerning the 
proposed definitions of ``rule'' and ``terms and conditions'' in Sec.  
40.1 of the Commission's regulations. The Commission has determined to 
revise both definitions to address these comments. In addition, the 
Commission is adopting revised language in the definition of ``terms 
and conditions'' to provide specific examples of terms and conditions 
frequently included in swaps.
    The FIA asked the Commission to consider whether an amendment to 
the Sec.  40.1 definition of ``rule'' might be appropriate to ensure 
that the Commission's regulations captured advisories, interpretations, 
and less formal means of communicating policies to market participants. 
The FIA noted that registered entities, including DCMs, may be able to 
circumvent regulatory obligations by issuing communications under a 
category not enumerated in the proposed definition of ``rule.'' The 
Commission notes that ``interpretations'' and ``stated policies'' are 
explicitly included in the present definition of ``rule'' and that the 
non-exclusive categories enumerated in that definition are merely 
examples of the types of actions that are subject to Commission review. 
The Commission's position has always been that the definition of 
``rule'' turns more on substance than form; that is, a registered 
entity cannot avoid regulatory obligations by adopting what is in 
substance a policy or interpretation by formally issuing the 
communication under a category that is not enumerated in the definition 
of ``rule.''
    The Commission nevertheless has determined to add the term 
``advisory'' to the list of categories constituting ``rules'' under 
Sec.  40.1, which should ensure that registered entities issue 
advisories in compliance with all regulations applicable to ``rules.'' 
In consideration of the FIA's comments, the Commission also has 
determined to move the phrase ``in whatever form adopted'' to ensure 
that an addition or deletion to a communication constitutes a ``rule'' 
under Sec.  40.1, without regard to the particular form in which a 
registered entity adopts such an amendment. In this regard, the 
Commission is clarifying that the language ``in whatever form adopted'' 
applies to all non-exclusive categories of ``rules'' enumerated in 
Sec.  40.1 and that the enumeration of particular examples of ``rules'' 
does not imply the exclusion of others.
    MGEX commented on the proposed definition of ``rule'' as well. In 
its comments, MGEX suggested that the Commission may be exceeding its 
authority by requiring DCMs to submit market maker and trading 
incentive programs as ``rules'' subject to the provisions of part 40. 
MGEX also commented that the terms and conditions of such programs 
should not be submitted to the Commission for approval, because, as a 
policy matter, the Commission should not substitute its judgment for 
``the business judgment of the registered entities.'' Moreover, in 
MGEX's view, the publication of program terms and conditions could 
inhibit negotiations with market participants. The Commission disagrees 
with MGEX and, for the reasons discussed below, has determined to 
continue requiring registered entities to submit the complete terms and 
conditions of market maker and trading incentive programs to the 
Commission, with an appropriate request for confidential treatment.\5\
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    \5\ Pursuant to Sec.  145.9 of the Commission's regulation, 
registered entities requesting confidential treatment for program 
terms and conditions must, among other things, file a written 
justification for the confidential treatment request.
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    A DCM's rules implementing market maker and trading incentive 
programs fall within the Commission's oversight authority. Indeed, a 
number of core principles touch upon trading issues that may be 
implicated by the design of such programs. Core Principle 9, for 
example, establishes the Commission's framework for regulating the 
execution of transactions, requiring DCMs, like MGEX, to provide a 
competitive, open, and efficient market and mechanism for execution. 
The newly-amended Core Principle 12 also requires DCMs to establish and 
enforce rules to protect markets and market participants from abusive 
practices and to promote fair and equitable trading on designated 
contract markets. In addition, market maker and trading incentive 
programs frequently touch upon Core Principle 19, which requires that 
DCMs avoid adopting any rules or taking any actions that result in 
unreasonable restraints of trade.
    It is not always clear in the first instance whether the rules 
implementing market maker and trading incentive programs have 
implications for a DCM's compliance with these core principles. 
Consequently, for many years, the Commission has required registered 
entities to submit the terms and conditions of all market maker and

[[Page 44778]]

trading incentive programs to ensure that, among other things, they do 
not incentivize manipulative activities, unreasonably restrain 
competition on or between exchanges, or otherwise interfere with the 
fair and efficient functioning of the marketplace. Reviewing program 
rules for compliance with applicable law is not tantamount to 
substituting the Commission's judgment for the business judgment of the 
registered entity.
    The Commission continues to view such programs as ``agreements * * 
* corresponding'' to a ``trading protocol'' within the Sec.  40.1 
definition of ``rule'' and, as such, all market maker and trading 
incentive programs must be submitted to the Commission in accordance 
with procedures established in part 40. In addition, to further clarify 
submission obligations, the Commission intends to continue reminding 
each newly-designated contract market, in its designation letter, that 
such programs are considered ``rules'' under Sec.  40.1. The Commission 
would like to emphasize, however, that such programs need not be 
submitted to the Commission for approval, as suggested in MGEX's 
comment. Market maker and trading incentive programs may be submitted 
for approval under Sec.  40.5, but they also may be certified and 
submitted in accordance with the provisions of Sec.  40.6, which has 
been the favored process for submission of market maker and trading 
incentive programs to date.
    In a similar comment concerning the Commission's authority to amend 
rules relating to margin, MGEX stated that ``DCMs and DCOs are best 
qualified to set margins'' in light of their ``extensive historical 
record for doing this well.'' MGEX recommended that the Commission 
provide DCOs ``the broadest latitude possible'' to establish 
appropriate margin rules. The Commission believes that the final 
definition of ``rule,'' as adopted herein--and which does not restrict 
the Commission's review of rules relating to margin levels--is not 
inconsistent with the comment submitted by MGEX. As discussed in the 
proposed rulemaking, Section 736 of the Dodd-Frank Act amends Section 
8a(7) of the Act to permit the Commission to alter or supplement the 
rules of a registered DCO by issuing rules, regulations or orders 
regarding margin requirements. To ascertain whether or not and under 
what conditions to issue such rules, regulations, or orders, the 
Commission must be able to review rules ``relating to the setting of 
levels of margin'' in the first instance, although the Commission is 
not authorized to ``set specific margin amounts'' under Section 
8a(7)(D)(iii) of the Act. The Commission's review of such rules is an 
appropriate exercise of its DCO oversight responsibilities and may not 
result in the Commission taking action under Section 8(a)(7).
    Finally, OCC recommended that the Commission reconsider certain 
language within the proposed definition of ``terms and conditions'' in 
Sec.  40.1(j). Specifically, OCC suggested that the Commission delete 
language that would have required ``proposed swap or contract terms and 
conditions * * * [to] conform to industry standards or those terms and 
conditions adopted by comparable contracts.'' In OCC's view, novel 
products, by their nature, contain provisions that deviate somewhat 
from those in comparable contracts. The Commission, as suggested by 
OCC, intended to prevent registered entities from designing products 
that are economically identical to existing products but that have 
``one or more unique features that serve no apparent purpose but to 
prevent fungibility.'' Given the potential adverse effect on innovation 
and other proposed regulatory provisions, the Commission has determined 
to revise the definition of ``terms and conditions'' to delete the 
above-cited language.
    To further clarify the definition of ``terms and conditions,'' the 
Commission is revising Sec.  40.1(j) to differentiate between the 
``terms and conditions'' generally applicable to a contract for the 
purchase or sale of a commodity for future delivery, or an option on 
such a contract or an option on a commodity--not including an option on 
a commodity that falls within the definition of a swap--(``commodity 
futures and options contracts'') in paragraph (j)(1) and the ``terms 
and conditions'' generally applicable to a swap in paragraph (j)(2). 
Some of the ``terms and conditions'' associated with commodity futures 
and options contracts are different from those associated with swaps 
and, accordingly, the revised format for identifying particular 
examples of ``terms and conditions'' applicable to each product type 
may clarify certain submission requirements that are dependent on this 
definition. For example, the Commission has determined to revise the 
introductory paragraph to the definition of ``terms and conditions'' to 
include language that describes a swap's underlying ``trading unit'' or 
``commodity'' as a ``description of the payments to be exchanged under 
a swap.''
    The examples of ``terms and conditions'' generally applicable to 
commodity futures and options contracts and contained in paragraph 
(j)(1) are being adopted as proposed, except that the Commission has 
determined to amend the definition to include ``no cancellation 
ranges'' within subparagraph (vi). However, as discussed above, the 
Commission also has determined to amend and clarify the definition of 
``terms and conditions'' by separating those terms and conditions 
generally applicable to commodity futures and options contracts from 
those generally applicable to swaps.\6\ Accordingly, the new and final 
Sec.  40.1(j)(2) provides examples of ``terms and conditions'' 
frequently associated with swaps,\7\ which the Commission has 
determined to clarify and/or renumber as follows:
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    \6\ The examples of terms and conditions proposed as paragraphs 
(j)(1)-(14) are being renumbered as paragraphs (j)(1)(i) through 
(xiv) to reflect the inclusion of paragraph (j)(2) for swaps.
    \7\ The Commission notes that the definition of ``swap'' in 
Section 1a(47)(A)(i) of the Act includes an option (``any agreement, 
contract or transaction (i) that is a put, call, cap, floor, collar, 
or similar option of any kind that is for the purchase or sale, or 
based on the value of 1, or more interest or other rates, 
currencies. * * *''
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     Paragraph (j)(2)(i) defines as a ``term'' or ``condition'' 
the ``identification of the major group, category, type or class in 
which the swap falls'' and ``any further sub-group, category, type or 
class that further describes the swap.'' \8\ To clarify the meaning of 
this phrase, a parenthetical lists ``interest rate, commodity, credit, 
or equity'' swaps as non-exclusive examples of major swap groups. This 
is equivalent to a description of the ``quality and other standards 
that define the commodity or instrument underlying the contract'' 
applied to commodity futures and options contracts in Sec.  
40.1(j)(1)(i);
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    \8\ The terminolory used in this provision, i.e., ``group, 
category, type, or class,'' is used to describe swaps in section 723 
of the Dodd-Frank Act, codified in section 2(h)(2) of the Act, 
regarding the review of swaps for a mandatory clearing 
determination. See also proposed Sec.  39.5 (process for review of 
swaps for mandatory clearing; 75 FR 67277 (Nov. 2, 2010)).
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     Paragraph (j)(2)(ii) refers to ``[n]otional amounts, 
quantity standards, or other unit size characteristics.'' This 
provision, as proposed in paragraph (j)(15)(i), previously referred 
only to ``notional values.'' The revision clarifies that there may be 
more than one way to state the size of a swap;
     Paragraphs (j)(2)(iii) (any applicable premiums or 
discounts for delivery of nonpar products) and (iv) (trading hours and 
the listing of swaps) are parallel to paragraphs (j)(1)(iii) and (iv), 
which are applicable to commodity futures and options contracts;
     Paragraph (j)(2)(v) for swaps, like paragraph (j)(1)(v) 
for commodity

[[Page 44779]]

futures and options contracts, addresses the pricing basis of the 
instrument. It refers to ``pricing basis for establishing the payment 
obligations under, and mark-to-market value of, the swap including, as 
applicable, the accrual start dates, termination or maturity dates, 
and, for each leg of the swap, the initial cash flow components, 
spreads, and points, and the relevant indexes, prices, rates, coupons, 
or other price reference measures.'' This incorporates the provisions 
of proposed paragraphs (j)(15)(iii) (indexes), (iv) (relevant prices, 
rates or coupons), (vi) (initial cash flow components), and (x) 
(spreads and points). The Commission notes that other ``price reference 
measures'' could include any factor that might have a bearing on the 
price of a swap, including pricing curves, reference prices, reference 
entities or obligations, reference currencies, disruption fallbacks, 
or, given the variety of existing and potential swap products, any 
other term or condition that affects the pricing basis of the swap;
     Paragraphs (j)(2)(vi) (any price limits, trading halts, or 
circuit breaker provisions, and procedures for the establishment of 
daily settlement prices) and (vii) (position limits, position 
accountability standards, and position reporting requirements) for 
swaps are the same as paragraphs (j)(1)(vi) and (vii), respectively, as 
applied to commodity futures and options contracts;
     Paragraph (j)(2)(viii) refers to ``payment and reset 
frequency, day count conventions, business calendars, and accrual 
features.'' It incorporates proposed paragraphs (j)(15)(ii) (relevant 
dates, tenor and day count conventions), (vii) (payment and reset 
frequency), (viii) (business calendars), and (ix) (accrual type). 
Included within this category are such specifications as payment, 
delivery, pricing and reset dates, day count fractions, holiday 
calendars, and accrual features such as compounding;
     Paragraph (j)(2)(ix) addresses specifications related to 
physical delivery, if physical delivery applies. The enumerated 
features are the same as those listed for commodity futures and options 
contracts in paragraph (j)(1)(ix);
     Paragraph (j)(2)(x) relates to cash settlement and 
provides ``[i]f cash settled, the definition, composition, calculation 
and revision of the cash settlement price, and the settlement 
currency.'' This is the same as paragraph (j)(1)(x) for commodity 
futures and options contracts, except that the new paragraph contains 
an additional reference to settlement currency that incorporates 
proposed paragraph (j)(15)(v) (currency);
     Paragraphs (j)(2)(xi), (xii), (xiii) and (xiv), relating 
to swaps that are options, parallel paragraphs (j)(1)(xi), (xii), 
(xiii) and (xiv) relating to commodity options contracts;
     Paragraph (j)(2)(xv) lists ``[l]ife cycle events'' as a 
term or condition. Originally included in proposed paragraph 
(j)(15)(vi), this encompasses provisions relating to such attributes as 
special assignment, novation, exchange or other transfer rights or 
limitations, special termination events, amendment provisions, rights 
to extinguish obligations under the swap, and special notice 
requirements.
    The Commission would like to clarify that these ``terms and 
conditions'' apply to the submission of products for listing or trading 
by DCMs and SEFs. The Commission's proposed swap-related examples 
referenced ``swaps cleared by a derivatives clearing organization,'' 
which may have suggested that the examples were relevant only in 
connection with rules submitted by DCOs. The ``terms and conditions'' 
of a swap are relevant to rules that may be submitted by DCMs and SEFs, 
as well as DCOs, and the reference to swaps cleared by DCOs therefore 
has been removed.

b. Listing Products for Trading by Certification (Sec.  40.2)

    The Commission previously proposed to amend Sec.  40.2(a) to 
require registered entities to accompany their submissions with the 
documentation relied upon to establish the basis for compliance with 
the Act and the Commission's regulations. The Commission received a 
number of comments regarding the proposed documentation requirement in 
Sec.  40.2(a)(3)(v). Two registered entities, ICE Futures and CME, 
commented that the Commission may not have the authority to require the 
submission of documentation with newly-certified products. A number of 
registered entities also found the proposed provision unclear or overly 
prescriptive. The Commission, in consideration of these comments, has 
determined to amend its regulations to clarify the filing obligations 
of registered entities and to ameliorate the perceived burdens 
associated with the proposal.
    ICE Futures and CME suggested that the Commission may not have the 
authority to amend the product submission requirements, because the 
Dodd-Frank Act, while substantially amending statutory provisions 
relevant to the submission of rules and rule amendments, did not amend 
the Act's provisions governing the certification and approval of 
products. The Commission would like to clarify that its proposed 
rulemaking concerned not only Dodd-Frank related amendments but also 
certain amendments that facilitate the Commission's administration of 
the Act. Thus, although the Dodd-Frank Act did not substantively change 
the product certification provisions in Section 5c(c) of the Act, the 
Commission proposed the documentation requirement in Sec.  40.2, as 
well as other provisions,\9\ to expedite the submission review process 
and to ensure adequate consideration is given to legal and financial 
issues arising from new product and rule submissions.
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    \9\ See proposed Sec. Sec.  40.3, 40.5, 40.6, and 40.10, 17 CFR 
part 40 Provisions Common to Registered Entities, 75 FR 57282 (Nov. 
2, 2010).
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    In this regard, the Commission continues to view its product 
submission requirements as a logical adjunct to the certification 
provisions of Section 5c(c)(1) of the Act. To argue that the 
Commission's proposal exceeds statutory authority, the product 
submission provisions of the Act would need to be read strictly to 
require that registered entities merely make--and not support--
certifications of compliance with the Act and regulations thereunder. 
This interpretation ignores the Commission's product oversight function 
and its duty to examine support for certifications of compliance with 
core principles, including certifications that new products are not 
susceptible to manipulation. The Commission has long recognized ``the 
need to balance the flexibility'' that the Act, as amended by the 
Commodity Futures Modernization Act (``CFMA''), gives ``a DCM in being 
able to [quickly] self-certify new products * * * against the 
obligations of both the DCM and the Commission to assure themselves 
that the certification is accurate--i.e., that the product or rule does 
indeed comply with applicable * * * core principles.'' \10\
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    \10\ See Technical Clarifying Amendmens to Rules for Exempt 
Markets, Derivatives Transaction Executiion Facilities and 
Designated Contract Markets, and Procedural Changes for Derivatives 
Clearing Organization Registration Applications, 71 FR 1953, 1956 
(Jan. 12, 2006).
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    The Commission nevertheless agrees with ICE Futures that it might 
be ``more useful'' for staff to have ``a written explanation'' of the 
newly-certified product than to receive ``pages of reports, data and 
other records.'' The Commission therefore has determined to 
substantially revise Sec.  40.2(a)(3)(v) to require product 
certifications be supported by a ``concise explanation and analysis'' 
of the certified product

[[Page 44780]]

and its compliance with applicable law. This ``explanation and 
analysis'' must either (1) be accompanied by supporting documentation, 
or (2) incorporate the information contained in such documentation, 
with appropriate citations to data sources.\11\ Thus, under final Sec.  
40.2(a)(3)(v), registered entities certifying new products with an 
appropriately detailed and cited ``explanation and analysis'' do not 
have to submit supporting documentation.
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    \11\ For example, registered entities could incorporate a 
summarized record in the product explanation and analysis with 
reference to a Web site link containing the information relied upon 
to establish compliance with applicable law.
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    The submission of an explanation and analysis is necessary for the 
Commission's review of a new product certification. The Commission has 
encountered numerous instances in which registered entities provided 
only cursory supporting analyses for their product submissions or, in 
certain cases, failed to document the evidentiary basis for their 
certifications altogether. The Commission also has experienced undue 
delays in receiving certain requested information, suggesting that 
supporting analyses had not been prepared by the registered entities as 
of the time of request.\12\ Without prompt receipt of supporting 
information, the staff must expend significant resources and time to 
replicate existing analyses or to otherwise independently establish a 
product's compliance with applicable law. In addition, the staff 
frequently has found it necessary to contact registered entities for 
additional guidance on product submissions. To address these problems, 
final Sec.  40.2(a)(3)(v) facilitates the staff's review of new 
products subsequent to certification while discouraging unsupported 
certification of products in the first instance.\13\ The more flexible 
and substantially revised provision permits registered entities to 
support product certifications in a manner that may be most effective 
and least costly under the circumstances.
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    \12\ Staff recently received a number of self-certified 
submissions containing insufficient information for several 
products, implicating a number of core principles. Each submission's 
deficiencies were corrected only after numerous discussions with the 
Commission's staff, a process that exhausted significant resources 
and time.
    \13\ Moreover, the Dodd-Frank Act's elimination of certain 
exemptions and exclusions relied upon by currently operating exempt 
entities may encourage these entities to register with the 
Commission, thereby increasing the number of product certifications 
subject to staff review.
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    The Commission notes that the explanation and analysis supporting a 
product certification requires the incorporation of information that, 
in many cases, is already collected or reviewed by registered entities. 
For example, registered entities complying with the guidance and 
acceptable practices in the Guideline No. 1 Appendix to part 40 
presently must review and, if necessary, develop the evidentiary basis 
for certain certifications prior to submitting new products for 
Commission review. Moreover, under existing Sec.  40.2(b), registered 
entities must, upon receipt of a staff request, submit this or other 
supporting information to substantiate product submissions. The routine 
provision of a concise explanation and analysis should be no more 
burdensome than compliance with existing regulations requiring 
registered entities to collect supporting information and to further 
explain and submit such information upon request.
    To further address comments concerning the perceived burdens of the 
product submission requirements, the Commission also has determined to 
streamline the product certification process for a significant 
percentage of swap contracts \14\ by permitting DCMs and SEFs to 
certify, within a single submission, one or more swaps without 
submitting each swap and its supporting information to the Commission. 
To list a particular swap or a particular number of swaps through the 
class certification provisions of new Sec.  40.2(d), the DCM or SEF 
must certify that each of the individual contracts within the certified 
class complies with certain conditions.
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    \14\ According to a recently published report by the 
International Organization of Securities Commissions (``IOSCO''), 
interest rate swaps comprised approximately 77.5% of the total 
outstanding notional value of over-the-counter swaps. Foreign 
exchange swaps accounted for another 9.1%. See Technical Committee 
of IOSCO, Report on Trading of OTC Derivatives, 1, 6 (Feb. 3, 2011).
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    A DCM or SEF may submit a class certification only if each swap 
within the certified class of swaps complies with the conditions 
specified in Sec.  40.2(d)(1)(i)-(iv). First, each swap within the 
certified class of swaps must be based upon an ``excluded commodity,'' 
as defined in Sec.  40.2(d)(1); these swaps include, for example, 
interest rate swaps, swaps on widely-held and liquid currencies, and 
swaps based upon the occurrence or non-occurrence of certain events or 
contingencies. Second, if more than one swap is included in a single 
filing under Sec.  40.2(d), each particular swap within the certified 
class of swaps must be based upon an excluded commodity with an 
identical pricing source and methodology for calculating reference 
prices and payment obligations. This ensures that DCMs and SEFs 
simultaneously certify, for example, only those interest rate swaps 
with a common pricing source--such as Thomson Reuters on behalf of the 
British Bankers' Association (``BBA'')--and a common methodology for 
calculating the reference rates for swaps with varying maturities--such 
as the contributor averaging methodology used to calculate each of the 
BBA's fifteen London Interbank Offer Rates (``LIBOR'') for a particular 
currency. Thus, a DCM or SEF may class certify (i.e., include in a 
single submission under Sec.  40.2) a number of LIBOR-based interest 
rate swaps for a particular currency notwithstanding the varying 
underlying maturities or varying tenors of swaps within the certified 
class.
    Third, the regulation limits class certifications to swaps based 
upon sources and methodologies that the Commission previously reviewed 
in connection with a certified or approved futures or swap contract. 
This ensures that the Commission had an opportunity to review the 
particular pricing source and methodology used in each of the swaps 
within the certified class of swaps.\15\ Fourth and finally, each 
particular swap within the certified class of swaps must be based upon 
an excluded commodity involving an identical currency or identical 
currencies. For example, a swap based upon 3-month LIBOR for U.S. 
Dollars may not be submitted in the same submission as a swap based 
upon the 3-month LIBOR rate for any of the other 9 currencies presently 
included in the BBA survey.
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    \15\ Based upon its experience with Sec.  40.2(d), the 
Commission may consider expanding the classes of commodities 
eligible for class certification in a future rulemaking.
---------------------------------------------------------------------------

    To further streamline the new product submission process, the 
Commission also has determined to permit DCOs to submit products 
accepted for clearing under the forthcoming provisions of Sec.  39.5. 
As proposed, the second provision of Sec.  40.2(a) would have retained 
the existing requirement that, prior to accepting any over-the-counter 
product for clearing, a DCO must submit the new product pursuant to the 
provisions of part 40. Comments submitted in connection with the 
proposed process for review of swaps for mandatory clearing indicated 
some confusion about the interplay between the Sec.  40.2 product 
submission process and the Sec.  39.5 submission process for a 
mandatory clearing determination. In light of the introduction of 
procedures for a DCO to submit swap products for a mandatory clearing 
determination under Sec.  39.5 and the potential for confusion as to 
the interaction between

[[Page 44781]]

the two regulatory provisions, the Commission has reconsidered what 
would have been a dual submission requirement. The Commission therefore 
is deleting from Sec.  40.2 the provision requiring submission of new 
products by a DCO.\16\ A DCO may submit a single filing in accordance 
with Sec.  39.5 instead of submitting two filings--one under Sec.  40.2 
and one under Sec.  39.5--and the information required for the Sec.  
39.5 submission encompasses the information that would otherwise be 
required under Sec.  40.2. The Commission believes that this revision 
will facilitate the product submission process without adversely 
affecting the supervisory purpose of regulations requiring the 
submission of products for Commission review.
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    \16\ DCOs voluntarily seeking prior approval to clear a new 
product under Sec.  40.3 may still submit two filings--one under 
Sec.  40.3 and one under Sec.  39.5.
---------------------------------------------------------------------------

    In other comments related to product certification requirements, 
registered entities stated that the price certification provision in 
proposed Sec.  40.2(a)(3)(vi) required unclear or vague certifications 
concerning matters unrelated to the Commission's core regulatory 
functions. CME commented that registered entities already have 
sufficient incentives--for example, avoiding possible litigation--to 
ensure that products meet applicable legal standards. In addition, ICE 
Futures commented that the Commission's proposal ``exceed[ed] the 
requirements contained in [the] Dodd-Frank [Act]'' and 
``inappropriately inject[ed] the Commission into the commercial and 
business practices of registered entities.'' In its view, the 
Commission should not be the ``business and legal sounding board for 
each registered entity in the area of intellectual property and other 
legal conditions.'' Moreover, ICE Futures questioned ``whether the 
Commission would be properly positioned to make * * * complex 
[intellectual property] determinations'' as part of the product review 
process. The OCC did not object to the price certification requirement 
but questioned whether it served a ``useful purpose.'' The OCC 
correctly stated that registered entities are required to abide by the 
Act and the Commission's regulations, which contemplate appropriate due 
diligence concerning intellectual property and pricing issues, 
``whether or not [they] give[] * * * a [special] certification'' to 
that effect.
    The Commission, in consideration of these comments, has determined 
not to adopt proposed Sec.  40.2(a)(3)(vi). The Commission recognizes 
that registered entities should, and generally are, sensitive to 
intellectual property issues that might arise in the course of 
developing a new product and that the general certification provision 
in Sec.  40.2(a)(3)(iv) captures the more specific settlement price 
certification proposed in Sec.  40.2(a)(3)(vi).\17\ However, in light 
of recent experience, the Commission disagrees with the assertion that 
registered entities, without exception, sufficiently account for 
intellectual property issues when listing new products for trading. In 
fact, a DCM was recently involved in a legal dispute concerning the use 
of certain published third-party prices. Although the DCM had been 
facilitating trading in contracts referencing these prices, another 
entity obtained an exclusive license to use the third party's prices 
and, accordingly, threatened to seek legal action to enjoin the DCM 
from further referencing those prices to cash settle its products. The 
DCM ultimately found an alternative means for settlement of its 
existing contracts but not without some disruption to the market. The 
episode highlights the relevance and necessity of appropriate due 
diligence in referencing third-party prices for purposes of cash 
settlement. Market participants should be able to enter into positions 
in a newly-certified contract without concerns that the registered 
entity's use of a particular price may be subject to legal challenge. 
Legal challenges or disputes can be not only disruptive to the 
marketplace but also may undermine confidence in the futures and 
derivatives markets. Moreover, such challenges or disputes can affect 
the value of positions taken in contracts subject to the controversy.
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    \17\ Accordingly, implicit in any certification that a product 
complies with the Act and the Commission's regulations is an 
assertion that the submitting entity has the rights to use or 
reference a particular price. Filing a false certification could 
result in a Commission action under Sec.  40.2(c).
---------------------------------------------------------------------------

    Thus, although the Commission has determined not to adopt the 
proposed pricing certification provisions, it notes that the staff, in 
its discretion and as part of its due diligence reviews of new product 
submissions, may request information under Sec.  40.2(b) concerning 
whether a registered entity has obtained the legal rights to use or 
reference proprietary prices, including third-party index prices, in 
connection with the listing or trading of a product. Registered 
entities submitting a product that uses prices published by another 
market or that references third-party prices should include all 
information relevant to the cash settlement of the product with its 
accompanying explanation and analysis. In this regard, a simple 
statement that the registered entity has the legal rights to use or 
reference a particular price could expedite Commission staff review 
without imposing a material burden on either the Commission or 
registered entities.
    Finally, the Commission notes that registered entities frequently 
submit product ``terms and conditions'' with accompanying rules--for 
example, rules establishing block trade thresholds--that, upon the 
effective date of these regulations, will be subject to a new rule 
certification review process. Such ``rules'' or ``rule amendments'' 
submitted in connection with the listing or trading of a product, if 
not included in the definition of ``terms and conditions,'' will not be 
effective and cannot be implemented until properly submitted for 
Commission review under Sec. Sec.  40.5 or 40.6. The Commission also 
notes that the ``terms and conditions'' of a product, as defined in 
Sec.  40.1(j), must be submitted in connection with the listing or 
trading of a product and therefore would become effective one full 
business day after the business day of submission. However, if ``terms 
and conditions'' submitted in connection with the listing or trading of 
a particular contract would amend the existing terms or conditions of a 
previously certified or approved product, such ``terms and conditions'' 
must be certified under Sec.  40.6 or submitted for approval under 
Sec.  40.5 as well.

c. Voluntary Submission of New Products for Commission Review and 
Approval (Sec.  40.3)

    For the reasons noted in its explanation of amendments to Sec.  
40.2, the Commission has determined to revise its documentation 
provisions in proposed Sec.  40.3(a)(4) and to eliminate the price 
certification provisions in proposed Sec.  40.3(a)(9). The amendments 
parallel those adopted with respect to product certifications under 
Sec.  40.2. Final Sec.  40.3(a)(4) requires that products submitted for 
Commission approval be accompanied by an explanation and analysis of 
the product and its compliance with applicable law and either (1) the 
documentation relied upon to establish the basis for compliance with 
applicable law, or (2) the information contained within such 
documentation, with appropriate citations to data sources.
    The Commission received a comment concerning its existing 
regulation governing staff requests for additional information under 
final Sec.  40.3(a)(10). The OCC commented that the two-day deadline 
for responses to requests for additional information may be 
insufficient and impractical in certain circumstances. It reasoned that

[[Page 44782]]

registered entities generally seek to provide ``additional materials as 
soon as possible in order to expedite the staff's review of the new 
product'' and that the regulation's inflexible deadline therefore was 
unnecessary. The OCC also suggested that the Commission adopt 
alternative language to permit registered entities to ``notify the 
Commission'' that additional time is ``reasonably required to provide 
the requested evidence'' and, in such cases, to require the submission 
of this information no later than ten business days subsequent to the 
request, or at the completion of a longer period specified by staff.
    The Commission has determined that a longer response period is not 
appropriate for the submission of additional information. The 
Commission has a limited timeframe for making final determinations 
under the product approval provisions of Sec.  40.3 and the prompt 
receipt of requested information frequently is requisite to its 
determination regarding the submission. In light of the OCC's comment, 
however, the Commission has determined to amend the final Sec.  
40.3(a)(10) to permit, at the discretion of its staff and upon receipt 
of a written request from the registered entity, an extension of time 
for the submission of additional information.

d. Amendments to Terms or Conditions of Enumerated Agricultural 
Contracts (Sec.  40.4)

    The Commission has determined to adopt technical amendments to 
Sec.  40.4(b)(3) to permit registered entities to implement ``[c]hanges 
in no cancellation ranges'' for enumerated agricultural contracts 
without prior approval, provided these rules are properly submitted to 
the Commission pursuant to Sec.  40.6. Newly-certified products 
frequently include terms and conditions related to ``no cancellation 
ranges'' and the Commission does not believe it appropriate to delay 
implementation of a no cancellation range for products involving 
enumerated agricultural commodities, especially when those products may 
be actively trading through a registered entity.

e. Voluntary Submission of Rules for Commission Review and Approval 
(Sec.  40.5)

    For the reasons noted below, the Commission has determined to 
eliminate the documentation provision previously proposed in Sec.  
40.5(a)(7), to revise existing Sec.  40.5(a)(5) to be similar to final 
Sec.  40.6(a)(7)(v), and to eliminate proposed Sec.  40.5(a)(10). The 
Commission notes that the ``explanation and analysis'' requirement in 
final Sec.  40.5(a)(5) does not include the qualifier that the 
submission be ``concise.'' The Commission requires registered entities 
to provide a more detailed explanation and analysis of rules 
voluntarily submitted for Commission approval under the provisions of 
Sec.  40.5.

f. Self-Certification of Rules (Sec.  40.6)

    The Commission received a number of comments concerning the 
proposed documentation requirement in Sec.  40.6(a)(7)(v) and its 
application to routine rules and rule amendments. The OCC, for example, 
commented that it is frequently ``obvious'' that a routine rule 
submission complies with applicable statutory and regulatory provisions 
and that the documentation requirement failed to account for the fact 
that many rules warrant the submission of minimal, if any, supporting 
documentation. Similarly, KCBOT commented that many rule submissions 
need be supported only by a ``cursory review of the rule or rule change 
in relation to Commission regulations,'' with little or no 
``significant benefit'' to be gained from the collection or provision 
of supporting documentation. Like comments concerning the submission of 
documentation in Sec. Sec.  40.2 and 40.3, a number of comments also 
stated that the submission of documentation in connection with all new 
rules and rule amendments would be burdensome and unlikely to yield 
benefits that outweighed costs.
    The Commission has determined, in consideration of these comments, 
to eliminate its proposed documentation requirement in Sec.  
40.6(a)(7)(v) and to insert in its place a requirement that registered 
entities provide a ``concise explanation and analysis'' of the 
``operation, purpose, and effect'' of certified rules, consistent with 
the existing requirement in Sec.  40.5(a)(5). Unlike the certification 
provisions applicable to new products, the rule certification 
provisions of the Act provide the staff ten-business days to review new 
rules and rule amendments and, if necessary, to prevent them from 
becoming effective until staff receives adequate information from the 
submitting entity.\18\ Registered entities therefore should have 
sufficient incentives to provide adequate explanations of new 
submissions under Sec.  40.6 without the provision of actual 
documentation.\19\
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    \18\ Pursuant to Section 745 of the Dodd-Frank Act, the 
Commission has ten-business days to review rule certifications and 
to determine whether to stay certain submissions--including those 
submitted with inadequate information--for as many as 90 additional 
days. Moreover, the Commission's staff may request additional 
information at any time during the applicable rule review period 
pursuant to existing Sec.  40.6(a)(8).
    \19\ CME commented that the extended review period should not be 
``mandatorily invoked in the event a rule submission [is] stayed due 
to the provision of inadequate information.'' In its view, the 
public comment period associated with stayed rules is designed to 
solicit external perspectives regarding only ``controversial'' 
submissions. The Commission does not, however, have the authority to 
prevent a stayed submission from being subject to the extended 
review and public comment requirements. Section 745 of the Dodd-
Frank Act provides that the Commission's issuance of a notification 
``shall stay the certification of the new rule or rule amendment'' 
and that ``[t]he Commission shall provide a not less than 30-day 
public comment period.'' However, the Commission acknowledges that 
its authority to issue a notification of stay in the first instance 
is discretionary rather than mandatory. Under Sec.  40.6(c), the 
Commission ``may stay the certification of a new rule or rule 
amendment'' for the enumerated reasons, but it may also request a 
revised submission that would render a notice of stay unnecessary. 
Accordingly, the Commission's regulations permit--but do not 
require--a stay of any submission that omits information that could 
``reasonably be deemed important by the Commission,'' as noted by 
FIA.
---------------------------------------------------------------------------

    The ``concise explanation and analysis'' will facilitate the 
Commission's review of newly-certified rules and rule amendments. 
Registered entities recently have submitted rule submissions with only 
a cursory explanation of the rule change and a conclusory statement 
concerning the submission's compliance with core principles. As a 
consequence, the staff frequently has found it necessary to contact 
registered entities for additional guidance on submissions and the 
potential implications for compliance with core principles. The 
Commission's review of the explanation and analysis will be less 
burdensome--both for the Commission and registered entities--than the 
current practice of contacting registered entities to request 
explanations and analyses subsequent to each rule submission.\20\ Like 
the explanation and analysis required for new product submissions, the 
explanation and analysis of certified rules or rule amendments should 
be a

[[Page 44783]]

clear and informative--but not necessarily lengthy--discussion of the 
submission, the factors leading to the adoption of the rule or rule 
amendment, and the expected impact of the rule or rule amendment on the 
public and market participants.
---------------------------------------------------------------------------

    \20\ The Commission believes that its final regulations will 
conserve both Commission and registered entity resources. Subsequent 
to the effective date of the Dodd-Frank, the Commission anticipates 
an increase in the number of new and amendatory rule submissions 
implementing the Dodd-Frank Act and forthcoming regulations, as well 
as an increase in the number of registered entities submitting such 
rules. Concise explanations and analyses will assist the 
Commission's staff in conducting its due diligence within the 
initial 10-business-day review period, thereby minimizing potential 
delays for registered entities. Moreover, registered entities 
presently submit a large number of rules and rule amendments 
throughout the year; CME, for example, noted that it submitted more 
than 342 rules in the last calendar year alone.
---------------------------------------------------------------------------

    In another comment concerning proposed Sec.  40.6, the FIA 
encouraged the Commission to adopt regulations that would maximize the 
transparency of the rule submission process, as well as account for the 
expertise of market participants. The Commission, in consideration of 
the FIA's comment, intends to continue its practice of publishing all 
incoming submissions on its Web site and will continue developing a Web 
portal at cftc.gov that, once completed, should expedite both 
Commission and public review of submissions.\21\ The Commission also 
intends to facilitate public comment by enabling interested parties to 
submit comments directly from the submissions page on the Commission's 
Web site. As noted in the notice of proposed rulemaking, the Commission 
presently is working on enhancements to its Web site and information 
technology systems that will, among other things, enable the Commission 
to promptly inform the public of rule submissions and stays of rule 
submissions. The Commission also intends to continue using its current 
ability to provide notice through e-mail notifications and RSS feeds to 
those who choose to sign-up for them.
---------------------------------------------------------------------------

    \21\ Given the short time period for the Commission's review, 
the Commission agrees with FIA that immediate Web site notice is ``a 
far superior alternative to waiting several days for Federal 
Register publication of the rule or product filing.''
---------------------------------------------------------------------------

    The Commission would like to note that the ``industry filings'' tab 
on the Commission's Web site currently consolidates all filings onto a 
single Web page and posts them for public review with a brief 
explanation of the rule or rule amendment. Market participants and the 
public can click on a link within this Web page and access all rule 
filings by registered entities. Thus, although the Commission does not 
intend to publish a ``daily rule digest,'' as suggested by the FIA, all 
market participants currently have and will continue to have access to 
submissions in an organized format, which will be complemented by the 
``concise explanation and analysis'' accompanying each submission.
    The FIA also commented that, with respect to rules submitted in 
response to an emergency pursuant to Sec.  40.6(a)(6), the Commission 
should not limit the ability of registered entities ``to respond as may 
be necessary to the unforeseen circumstances of an emergency 
situation.'' The FIA expressed concerns, however, that a registered 
entity could potentially ``cite an emergency event as the grounds for a 
fundamental recasting'' of regulatory responsibilities. The Commission 
agrees that registered entities must be able to respond flexibly and 
decisively to emergencies. In addition, the Commission acknowledges the 
possibility that a registered entity could attempt to immediately 
implement a rule and bypass the rule certification process by asserting 
that the rule is in response to an emergency. The final regulations 
accordingly clarify that registered entities are required to certify 
any rule implemented in response to an emergency under the procedures 
set forth in Sec.  40.6. The staff will review such certifications for 
compliance with applicable law in situations where the rule, by 
necessity, has been implemented and in situations where the rule is 
intended for implementation prior to the completion of the 10-business-
day review period. In either situation, the staff may permit the 
registered entity's rule to remain effective or it may determine that 
the implemented rule should be stayed for an extended review.\22\
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    \22\ The Commission's staff may stay a rule or rule amendment 
implemented in response to an emergency for the same reasons that it 
may stay other rules or rule amendments submitted pursuant to the 
procedures in part 40. Specifically, the staff may stay the rule for 
an extended review if the submission insufficiently explains the 
emergency or the registered entity's response, presents novel or 
complex issues warranting further consideration, or is potentially 
inconsistent with the Act or regulations thereunder.
---------------------------------------------------------------------------

    The Commission is adopting three revisions to its proposed 
regulations in Sec.  40.6. First, the price certification in proposed 
Sec.  40.6(a)(7)(viii) has been eliminated for the reasons discussed in 
connection with revisions to proposed Sec. Sec.  40.2(a)(3)(vi), 
40.3(a)(9), and 40.5(a)(10). Second, the Commission, in consideration 
of comments from both CME and OCX, has determined to amend Sec.  
40.6(a) to make rules delisting or withdrawing the certification of 
products effective upon submission to the Commission. The Commission 
agrees that such submissions should be exempt from the 10-business-day 
review period in order to avoid complicating the delisting of the 
product by providing market participants an opportunity to enter into 
contracts between the time period of submission and the effective date 
of the rule.\23\ Finally, the Commission, in response to a comment from 
the OCC, is retaining the existing language in Sec.  40.6(d) that 
permits certain non-substantive rules to take effect without 
certification to the Commission.
---------------------------------------------------------------------------

    \23\ The Commission has the discretion to permit certain rules 
to become effective prior to the expiration of the 10-business-day 
rule review period, provided it establishes the effective date of 
such rules by rule or regulation. See Section 5c(c)(2) of the Act, 
as amended by Section 745(b) of the Dodd-Frank Act.
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g. Delegations (Sec.  40.7)

    The Commission is correcting a typographical error that appeared in 
proposed Sec.  40.7(a)(1) by replacing the reference to ``Sec.  
40.5(c)(1)(B)'' with a reference to ``Sec.  40.5(c)(1)(ii).''

h. Availability of Public Information (Sec.  40.8)

    The Commission has determined to adopt technical amendments to 
Sec.  40.8 to reflect possible changes in the designation or 
registration application procedures for DCMs, SEFs, DCOs and SDRs.\24\ 
Specifically, Sec.  40.8(a) will make public the following: (1) The 
transmittal letter and first page of the ``cover sheet'' of 
applications; (2) the applicant's regulatory ``compliance chart;'' and 
(3) the ``narrative summary'' of the applicant's proposed activities.'' 
\25\
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    \24\  See, e.g., 76 FR 3698 (Jan. 20, 2011) (proposing revisions 
to DCO application procedures).
    \25\ See id. at 3718 (proposing a parallel public information 
provision in Sec.  39.3(a)(5)).
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i. Special Certification Procedures for Submission of Rules by 
Systemically Important Derivatives Clearing Organizations (Sec.  40.10)

    CME, FIA, LCH, and OCC submitted comments regarding the 
Commission's proposed regulations to implement Section 806 of the Dodd-
Frank Act. Section 806 requires a financial market utility that has 
been designated by the Financial Stability Oversight Council (``FSOC'') 
to be systemically important to provide its Supervisory Agency with 60 
days advance notice of any proposed changes to rules, procedures, or 
operations that could materially affect the nature or level of risks 
presented by the financial market utility. Section 40.10 sets forth 
implementing requirements for SIDCOs.
    Proposed Sec.  40.10(a) required that all SIDCOs provide 60 days 
advance notice to the Commission in accordance with Section 806 of the 
Dodd-Frank Act. In a separate proposed rulemaking, the Commission 
proposed to define a ``systemically important derivatives clearing 
organization'' to mean a ``financial market utility that is a 
derivatives clearing organization registered under section 5b of the 
Act (7 U.S.C. 7a-1), which has been designated by the FSOC to be 
systemically

[[Page 44784]]

important.'' \26\ Under this definition, a DCO could be a SIDCO even if 
the Commission was not its Supervisory Agency and, as an unintended 
result, proposed Sec.  40.10 would require such a DCO to provide 
advance notice to the Commission.
---------------------------------------------------------------------------

    \26\ See 75 FR 77576, 77586 (Dec. 13, 2010).
---------------------------------------------------------------------------

    OCC pointed out this issue, noting that the authority for Sec.  
40.10(a) is Section 806(e)(1)(A) of the Dodd-Frank Act, which requires 
a systemically important financial market utility to provide 60 days 
advance notice to ``its Supervisory Agency.'' Under Section 803(8)(B) 
of the Dodd-Frank Act, there can be only one Supervisory Agency for a 
financial market utility designated as systemically important.\27\
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    \27\ Section 803(8)(B) provides as follows: ``Multiple Agency 
Jurisdiction: If a designated financial market is subject to the 
jurisdictional supervision of more than 1 agency listed in 
subparagraph (A), then such agencies should agree on 1 agency to act 
as the Supervisory Agency, and if such agencies cannot agree on 
which agency has primary jurisdiction, the Council shall decide 
which agency is the Supervisory Agency for purposes of this title.''
---------------------------------------------------------------------------

    The Commission recognizes that some DCOs, like OCC, may be 
regulated by more than one Federal agency. In the case of OCC, if it 
were designated as a systemically important financial market utility, 
it is possible that it would be so designated because of its activities 
as a securities clearing agency, not because of its activities as a 
DCO. Accordingly, the SEC, not the Commission, would likely be its 
Supervisory Agency.
    OCC recommended revising the language in Sec.  40.10(a) to clarify 
that advance notice to the Commission would be required only for DCOs 
for which the Commission is the Supervisory Agency.\28\ Although the 
Commission is adopting Sec.  40.10(a) as proposed, it intends to act on 
OCC's suggestion by revising the definition of ``systemically important 
derivatives clearing organization'' in a future final rulemaking to 
clarify that a SIDCO is a financial market utility that has been 
designated by the FSOC to be systemically important and for which the 
Commission acts as its Supervisory Agency pursuant to section 803(8) of 
the Dodd-Frank Act. This clarification will address the issue raised by 
OCC in connection with Sec.  40.10 and will serve to clarify the scope 
of any other regulations relating to SIDCOs.
---------------------------------------------------------------------------

    \28\ OCC suggested revising Sec.  40.10(a) to read, in relevant 
part: ``A registered derivatives clearing organization that has been 
designated by the Financial Stability Oversight Council as a 
systemically important derivatives clearing organization and for 
which the Commission acts as the Supervisory Agency pursuant to 
Section 803(8) of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act shall provide notice to the Commission * * *'' See 
OCC letter at 7.
---------------------------------------------------------------------------

    Proposed Sec.  40.10(a) required a SIDCO to notify the Commission 
of a change in rules, procedures, or operations that could materially 
affect the nature or level of risks presented by the SIDCO. OCC and CME 
commented that a SIDCO would be required to notify the Commission of 
proposed changes that could decrease the nature or level of risk in 
addition to changes that could increase the nature or level of risk. 
OCC does not believe that a SIDCO should be required to report a change 
that could materially reduce risk under Sec.  40.10 because the 
proposed change would be subject to a 60-day ``waiting period,'' and 
the goal of reducing risk is not served by requiring that such a change 
be subject to delay.
    Similarly, CME expressed the view that the Dodd-Frank Act does not 
provide the Commission with authority to impose a 60-day advance notice 
requirement for changes in rules, procedures, or operations that could 
improve the operations of a SIDCO, and it believes the Commission 
should exercise its authority over risk-reducing changes under the 
certification procedures of Sec.  40.6.
    OCC and CME proposed that the Commission change Sec.  40.10(a) to 
cover only a proposed change in rules, procedures, or operations that 
could have a materially adverse impact on risk. The Commission has 
determined not to adopt this suggested revision for the reasons 
discussed below.
    As a preliminary matter, the Dodd-Frank Act does not distinguish 
between a change that could materially increase or decrease the nature 
or level of risks presented by a SIDCO. Although Congress could 
reasonably have expected that risk-related changes are almost always 
intended to reduce risk, it required advance notice of ``any'' change 
that could ``affect'' risk and did not limit Section 806 to only those 
instances where a change could increase risk. Moreover, the purpose of 
advance notice is to assist the Commission in monitoring systemic risk 
and in seeing that SIDCOs effectively manage risk in furtherance of 
compliance with the core principles. The Commission acknowledges that 
requiring a SIDCO to notify the Commission under Sec.  40.10 of a 
change that could materially reduce risk could delay the time when that 
change becomes effective. However, a proposed change that could 
materially reduce risk in certain respects also could materially 
increase risk in other respects, and a SIDCO and the Commission might 
come to different conclusions when evaluating whether a particular 
change could increase or decrease risk, overall. For example, a SIDCO 
could reduce risk by requiring heightened membership requirements, but 
this might also reduce the number of clearing members and therefore 
increase concentration of risk. As a practical matter, even for 
ostensibly risk-reducing changes, there may be adverse consequences 
that the Commission should have the opportunity to consider in the time 
frame set forth in Section 806 of the Dodd-Frank Act.
    The Commission notes that, as proposed, Sec.  40.10(g) provides 
that a SIDCO may implement a change in less than 60 days from the date 
the Commission receives the notice of proposed change or the date the 
Commission receives any further information it has requested, if the 
Commission notifies the SIDCO in writing that it does not object to the 
proposed change and authorizes implementation of the change on an 
earlier date, subject to any conditions imposed by the Commission. To 
further address the concerns expressed by the commenters, the 
Commission is adding a new paragraph (a)(3) that provides that a SIDCO 
may request that the Commission expedite the review on the grounds that 
the change would materially decrease risk. The Commission, in its 
discretion, may expedite the review and, pursuant to paragraph (g) of 
this section, notify the SIDCO in less than 60 days.
    The concern that Sec.  40.10 prevents a SIDCO from instituting a 
risk-reducing change in less than 60 days may be overstated. Section 
40.10(g) allows a SIDCO to implement a change in less than 60 days if 
the Commission notifies the SIDCO in writing that it does not object to 
the change. Moreover, unless an emergency exists, it is unlikely the 
market would be significantly harmed if implementation of the change 
were delayed for more than 10 days, which is the basic time period for 
the Commission's review of certified rules under Sec.  40.6.
    Proposed Sec.  40.10(h) required a SIDCO to provide notice to the 
Commission of an emergency change no later than 24 hours after 
implementation of the change.\29\ Among other things, the proposed rule 
required the notification to include the information set forth in 
proposed Sec.  40.10(a). OCC commented that it is not practical to 
require a SIDCO's emergency filing to conform to the requirements of 
Sec.  40.10(a) within 24

[[Page 44785]]

hours of implementing the change. OCC proposed a two-stage approach 
whereby the SIDCO would file an initial notice within 24 hours of the 
change and would submit a more extensive filing conforming to Sec.  
40.10(a) as soon as reasonably practicable thereafter, but in any event 
not more than 30 days after implementation of the change.
---------------------------------------------------------------------------

    \29\ This standard is consistent with the 24-hour requirement 
for emergency rule certifications under Sec.  40.6(a)(6).
---------------------------------------------------------------------------

    The Commission notes that Sec.  40.10(h)(1) codifies Section 
806(e)(2)(B) of the Dodd-Frank Act, which requires that the emergency 
notice be provided as soon as practicable and no later than 24 hours 
after implementation of the change. Section 40.10(h)(2) codifies 
Section 806(e)(2)(C), which requires that the notice contain the 
information that must be submitted for changes subject to advance 
notice, plus a description of the nature of the emergency and the 
reason the change was necessary for the SIDCO to continue to provide 
its services in a safe and sound manner. These provisions do not 
provide for partial or late submissions, as suggested by OCC. However, 
the Commission believes that it can adequately address the concern 
expressed by OCC.
    As proposed, Sec.  40.10(a) required a SIDCO to provide the 
information required by proposed Sec.  40.6(a)(7) within 24 hours. OCC 
singled out the documentation requirement in proposed Sec.  
40.6(a)(7)(v) as one that would be difficult to satisfy within 24 
hours. As discussed above, that provision, as adopted herein, has been 
revised to significantly reduce the perceived burden of the proposed 
rule, and the Commission believes that a SIDCO should be able to 
provide the required ``concise explanation and analysis,'' as well as 
other required information within 24 hours.
    LCH observed that the Commission may require modification or 
rescission of an emergency change if it finds that the change is not 
consistent with the Act or the Commission's regulations. According to 
LCH, this could lead to legal uncertainty regarding activities 
undertaken while the emergency change is in effect. As a result, LCH 
proposed that the Commission revise Sec.  40.10(h)(3) by adding a 
provision to immunize from legal challenge any action taken by a SIDCO 
pursuant to an emergency change that is later modified or rescinded by 
the Commission.\30\ The Commission is not taking further action on 
LCH's suggestion because it believes that the existing enforceability 
provisions in Sec.  39.6 of the Commission's regulations adequately 
address the concern expressed by LCH.\31\
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    \30\ LCH proposed that the Commission add the following language 
adapted from Section 739 of the Dodd-Frank Act (regarding swaps): 
``* * * However, no modification or rescission shall retroactively 
affect the enforceability of any power exercised by the SIDCO, nor 
shall any agreement, contract or transaction entered into by the 
SIDCO or its counterparty pursuant to the exercise by such SIDCO of 
any emergency change, be void, voidable, or unenforceable, and no 
party to such agreement, contract, or transaction shall be entitled 
to rescind, or recover, any payment made with respect to, the 
agreement, contract, or transaction under this section or any other 
provision of Federal or State law.''
    \31\ Section 39.6 provides as follows:
    An agreement, contract or transaction submitted to a derivatives 
clearing organization for clearance shall not be void, voidable, 
subject to rescission, or otherwise invalidated or rendered 
unenforceable as a result of:
    (a) A violation by the derivatives clearing organization of the 
provisions of the Act or of Commission regulations; or
    (b) Any Commission proceeding to alter or supplement a rule 
under section 8a(7) of the Act, to declare an emergency under 
section 8a(9) of the Act, or any other proceeding the effect of 
which is to alter, supplement, or require a derivatives clearing 
organization to adopt a specific rule or procedure, or to take or 
refrain from taking a specific action. See also Sec.  38.6 
(comparable enforceability provisions for DCMs); and proposed Sec.  
37.6, 76 FR 1214, 1240 (Jan. 7, 2011) (comparable enforceability 
provisions for SEFs).
---------------------------------------------------------------------------

    In the notice of proposed rulemaking, the Commission solicited 
comment as to whether there are any changes a SIDCO should be 
prohibited from adopting on an emergency basis. FIA and CME did not 
favor imposing any restrictions on a SIDCO's response to an emergency. 
CME also noted that a DCO does not have unfettered discretion to act in 
an emergency situation. Rather, a DCO's ability to act is limited by 
the emergency rules and procedures that have been vetted previously by 
the Commission.\32\ The Commission agrees that there should not be any 
express limitation on the type of actions that a SIDCO can take in 
responding to an emergency, primarily because it is difficult to pre-
judge the permissibility of an emergency action taken in the context of 
particular circumstances.
---------------------------------------------------------------------------

    \32\ Under proposed Sec.  40.6(a)(6), new rules or rule 
amendments that establish standards for responding to an emergency 
must be submitted pursuant to Sec.  40.6.
---------------------------------------------------------------------------

    Finally, the Commission is making a technical revision to the 
proposed Sec.  40.10(a)(2) requirement that concurrent with providing 
the Commission with the advance notice or any request or other 
information related to the advance notice, the SIDCO provide the Board 
of Governors of the Federal Reserve System (``Board'') with a copy of 
the submission. The Commission is adding the instruction that such 
notice, request or other information must be filed in the same format 
and manner as the Board requires for those designated financial market 
utilities for which it is the Supervisory Agency pursuant to section 
803(8) of the Dodd-Frank Act.

j. Review of Event Contracts Based Upon Certain Excluded Commodities 
(Sec.  40.11)

    Pursuant to Section 745(b) of the Dodd-Frank Act, the Commission 
proposed Sec.  40.11(a)(1) to prohibit the listing of certain contracts 
involving terrorism, assassination, war, gaming, or activities that are 
unlawful under any State or Federal law. The CME commented that the 
term ``gaming'' should be further defined to ensure that registered 
entities do not confront difficult legal questions with respect to the 
applicability of the ``gaming'' prohibition in Sec.  40.11(a)(1). In 
this regard, the CME noted that the courts have struggled to arrive at 
an appropriate legal definition for ``gaming'' for many years and that 
the Commission's prohibition on contracts involving ``gaming'' could 
introduce uncertainty into the markets.
    The Commission agrees that the term ``gaming'' requires further 
clarification and that the term is not susceptible to easy definition. 
Indeed, in its ``Concept Release on the Appropriate Regulatory 
Treatment of Event Contracts,'' the Commission solicited public 
comments on the best approach for addressing the ``the potential gaming 
aspects of some event contracts and the potential pre-emption of state 
laws.'' \33\ The Commission received a number of responses to its 
concept release, including several comments articulating bases for 
distinguishing trading in contracts linked to the occurrence (or non-
occurrence) of events and participation in traditional ``gaming'' 
activities. The Commission continues to consider these comments and may 
issue a future rulemaking concerning the appropriate regulatory 
treatment of ``event contracts,'' including those involving ``gaming.'' 
In the meantime, the Commission has determined to prohibit contracts 
based upon the activities enumerated in Section 745 of the Dodd-Frank 
Act and to consider individual product submissions on a case-by-case 
basis under Sec.  40.2 or Sec.  40.3.
---------------------------------------------------------------------------

    \33\ Concept Release on the Appropriate Regulatory Treatment of 
Event Contracts, 73 FR 25669, 25670 (May 7, 2008).
---------------------------------------------------------------------------

    The Commission would like to note that registered entities may 
receive a definitive resolution of any questions concerning the 
applicability of Sec.  40.11(a)(1) by submitting a particular product 
for Commission approval under to Sec.  40.3. If the submitted product 
is approved, the registered entity may list it for trading or clearing 
with an

[[Page 44786]]

assurance that the Commission reviewed and did not object to the 
submission based on the prohibitions in Sec.  40.11(a). In addition, 
registered entities may always certify products pursuant to the 
procedures in Sec.  40.2. If the Commission determines during its 
review of a product that the submission may violate the prohibitions in 
Sec.  40.11(a)(1)-(2), the Commission may request that the registered 
entity suspend the trading or clearing of the contract pending the 
completion of a 90-day extended review. Upon the completion of that 
review, the Commission must issue an order, pursuant to Section 745(b) 
of the Dodd-Frank Act, finding either that the product violates or does 
not violate the prohibitions in Sec.  40.11(a)(1)-(2).
    The Commission's staff also may, at its discretion and upon a 
request from a registered entity, review a draft product submission or 
proposal and provide guidance concerning the product's compliance with 
core principles and Sec.  40.11(a). The Commission would like to note, 
however, that the staff's guidance concerning drafts and proposals is 
preliminary and non-binding. The staff formally reviews products only 
at such time as a compliant submission is provided to the Commission 
pursuant to Sec.  40.2 or Sec.  40.3.
    Finally, the Commission would like to note that its prohibition of 
certain ``gaming'' contracts is consistent with Congress's intent to 
``prevent gambling through the futures markets'' \34\ and to ``protect 
the public interest from gaming and other events contracts.'' \35\ The 
Commission may, at some future time, adopt regulations that prohibit 
products that are based upon activities ``similar to'' those enumerated 
in Section 745 of the Dodd-Frank Act. It has determined not to propose 
such regulations at this time.
---------------------------------------------------------------------------

    \34\ Congressional Record--Senate, S5906 (July 15, 2010).
    \35\ Id. Senator Lincoln, in a colloquy with Senator Feinstein, 
emphasized that the Commission ``needs the power to, and should, 
prevent derivatives contracts that are contrary to the public 
interest because they exist predominantly to enable gambling through 
supposed event contracts.''
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k. Staying of Certification and Tolling of Review Period Pending 
Jurisdictional Determination (Sec.  40.12)

    The OCC objected to the Commission's use of the term ``derivative'' 
in proposed Sec.  40.12(a)(1), which, the Commission agrees, is an 
undefined term encompassing products within the jurisdiction of both 
the SEC and the Commission. The Commission therefore has determined to 
delete the word ``a derivative'' from Sec.  40.12(a)(1) and to insert 
in its place ``a contract for the sale of a commodity for future 
delivery (or an option on such contract or an option on a commodity).'' 
The final regulation thereby codifies the Dodd-Frank Act's provisions 
concerning ``novel derivative products having elements of both 
securities and contracts for the sale of a commodity for future 
delivery (or options on such contracts or options on commodities).'' In 
addition, the Commission has determined to limit the application of 
Sec.  40.12 to only those novel agreements, transactions, or contracts 
that are not subject to a separate process for requesting 
interpretations of the characterization of swaps, security-based swaps, 
and mixed swaps pursuant to Sec.  1.8 of this chapter.\36\
---------------------------------------------------------------------------

    \36\ See Further Definition of ``Swap,'' ``Security-Based 
Swap,'' and ``Security-Based Swap Agreement;'' Mixed Swaps; 
Security-Based Swap Agreement Recordkeeping, 76 FR 29818 (May 23, 
2011).
---------------------------------------------------------------------------

    The Commission also is amending proposed Sec.  40.12(b) to clarify 
that the receipt of a request for a jurisdictional determination 
``tolls'' both the applicable product certification and the applicable 
approval review period until the issuance of a final determination. In 
this regard, the Commission has determined to insert ``shall be 
stayed'' after ``the product certification,'' which more appropriately 
characterizes the Commission's action with respect to certified 
products and distinguishes that action from the suspension of the 
approval review period under Sec.  40.3.\37\ Similarly, in Sec.  
40.12(b)(2), the Commission has determined to clarify that the stay 
shall be withdrawn and that the submission review period shall resume 
upon the issuance of a final determination order finding that the 
Commission has jurisdiction over the submission.
---------------------------------------------------------------------------

    \37\ Section 717(d) of the Dodd-Frank Act amended Section 
5c(c)(1) of the Act to ``stay the certification of a product pending 
a determination by the Commission upon a request of the Securities 
and Exchange Commission * * * that the Commission issue a 
determination as to whether'' a novel derivative product is within 
the jurisdiction of the Commission. However, Section 745 of the 
Dodd-Frank Act amended the Act by striking Section 5c in its 
entirety and inserting language that did not include the stay 
provision in Section 717(d) of the Dodd-Frank Act. The Commission 
would like to clarify that the stay provisions adopted in final 
Sec.  40.12 of its regulations do not give effect to the stay 
provisions in Section 717(d) of the Dodd-Frank Act, given 
inconsistent amendments to Section 5c(c). The Commission is adopting 
its stay provisions pursuant to its Section 8a(5) authority to 
``make and promulgate such rules and regulations as, in the judgment 
of the Commission, are reasonably necessary to effectuate any of the 
provisions or to accomplish any purposes of the Act.''
---------------------------------------------------------------------------

    The Commission would like to note that the suspension of a 
product's certification would permit continued trading for liquidation 
purposes. That is, the stay of certification under Sec.  40.12 would 
not prevent market participants from entering into positions that 
offset others taken while the product certification remained in effect. 
The Commission will provide to the registered entity a written notice 
of stay pending issuance of a final determination order by the 
Commission.\38\
---------------------------------------------------------------------------

    \38\ A final determination, for purposes of Sec.  40.12(b) of 
this part, shall be a determination order issued pursuant to Section 
718(a)(3) of the Dodd-Frank Act.
---------------------------------------------------------------------------

    Finally, the Commission notes that Section 718(a)(2) of the Dodd-
Frank Act provides the Commission explicit authority to request a 
jurisdictional determination concerning a novel derivative product 
having elements of both a security and a contract for the sale of a 
commodity for future delivery (or an option on such contract or an 
option on a commodity) at any time subsequent to the effective date of 
a product containing such elements, provided no notice of a novel 
derivative product filing has been received from the SEC pursuant to 
Section 718(a)(1) of the Dodd-Frank Act.

III. Cost-Benefit Considerations

    Section 15(a) of the Act requires the Commission to ``consider the 
costs and benefits'' of its actions before promulgating a 
regulation.\39\ In particular, these costs and benefits must 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. In conducting its analysis, the Commission 
may, in its discretion, give greater weight to any one of the five 
enumerated areas and it may determine that, notwithstanding costs, a 
particular rule is necessary to protect the public interest or to 
effectuate any of the provisions or to accomplish any of the purposes 
of the Act.\40\
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    \39\ 7 U.S.C. 19(a).
    \40\ See, e.g., Fisherman's Doc Co-op., Inc v. Brown, 75 F.3d 
164 (4th Cir. 1996); Center for Auto Safety v. Peck, 751 F.2d 1336 
(DC Cir. 1985) (noting that an agency has discretion to weigh 
factors in undertaking cost-benefit analysis).
---------------------------------------------------------------------------

    Certain of the regulations promulgated in this final rule are 
mandated by the Act, as amended by the Dodd-Frank Act, and, for those

[[Page 44787]]

provisions, the Commission does not have the authority to consider 
alternatives to the statute's prescribed procedures. For example, the 
final regulations implement, among other provisions, Section 745 of the 
Dodd-Frank Act, which specifies new procedures for the submission of 
certain rules and rule amendments and new default timelines for the 
Commission's review of rule submissions. Many of these new procedures--
for example, the 30-day public comment period following the stay of a 
submitted rule--are statutorily mandated and the Commission's final 
regulations have been drafted to remain within the confines of the 
enabling language. Similarly, the Commission's SIDCO provisions, in 
large part, codify the procedures established by Section 806 of the 
Dodd-Frank Act. For those final regulations not mandated by the Dodd-
Frank Act, the Commission has adopted the least-cost alternative 
consistent with achieving the purposes of the Act.
    The Commission invited but did not receive public comments specific 
to its cost-benefit discussion within the initial comment period 
following the Commission's proposal. The Commission also invited the 
public ``to submit any data or other information that [it] may have 
quantifying or qualifying the costs and benefits of the proposal with 
their comment letters.'' The Commission received no such data or other 
information. The Commission did, however, receive general comments on 
the ``burden'' associated with the documentation and pricing source 
certification requirements proposed in Sec. Sec.  40.2, 40.3, 40.5, and 
40.6. Those comments suggested that the new provisions could 
substantially increase the time and resources required to prepare 
submissions and could potentially delay the introduction of new 
products and implementation of rules. However, none of these comments 
suggested feasible alternatives to the statutory mandate. Nor did such 
comments show how and to what extent those burdens would be increased 
by the implementing proposal.
    In a comment concerning the Commission's cost-benefit analysis, the 
CME stated that the CFMA streamlined the product and rule submission 
process to eliminate the ``substantial unnecessary paperwork'' 
previously required to be submitted to the Commission. In the CME's 
view, the documentation and pricing source certification requirements 
effectively reinstated the pre-CFMA submission process by mandating 
that registered entities submit ``massive amounts of documentation'' 
for Commission review. In addition, CME stated that the part 40 
proposal's cost-benefit discussion did not ``acknowledge that a fully-
functional and less costly system of self-certification is already in 
place'' and that the Commission failed to justify what CME 
characterized as ``onerous requirements'' with few public benefits. CME 
also stated that the Commission's proposal did not ``address any actual 
costs'' to industry, including ``the cost of compiling all 
documentation relied upon to determine whether a new product, new rule 
or rule amendment complies with the Core Principles'' and the costs of 
``enabl[ing] foreign competitors'' to introduce products that compete 
with domestic DCM product innovations.
    The Commission, after consideration of the public interest factors 
specified in section 15(a) of the Act, has determined, as set forth 
below, that the costs associated with its final regulations will not 
have a material effect on the efficiency, competitiveness, and 
financial integrity of the futures and swaps markets and should 
substantially benefit registered entities by facilitating and 
expediting the Commission's review of product and rule submissions. The 
Commission has considered the costs and benefits of its regulations 
throughout the preamble and generally views the related matters section 
of this final rulemaking to be an extension of that discussion. 
Estimates pursuant to the Paperwork Reduction Act are a subset of and 
incorporated into the overall compliance costs associated with final 
part 40.
    The Commission's final regulations address the relevant areas of 
market and public concern specified in section 15(a) of the Act. 
Specifically, the Commission's certification and approval procedures 
ensure that registered entities do not enact rules that, among other 
things, harm market participants or the public, result in unreasonable 
restraints of trade or material anticompetitive burdens on trading, or 
have other effects that are detrimental to the public interest. In 
addition, the special certification procedures for SIDCOs and certain 
event contracts implement Sections 806 and 745 of the Dodd-Frank Act, 
respectively, and ensure that the Commission has adequate time and 
information to analyze certain risk-related rules and novel products 
based upon certain excluded commodities. The SIDCO notice requirement 
is important to the Commission's oversight of sound risk management 
practices and to its efforts to monitor and mitigate systemic risks. 
The proposed event contract provisions, consistent with the intent of 
Congress, prevent individuals from speculating on activities that are 
potentially harmful to national security or detrimental to the 
stability of the futures markets. Finally, the ``concise explanation 
and analysis'' required for the submission of new products is a less-
costly alternative to the Commission's proposed documentation 
requirement and will assist the Commission in protecting the price 
discovery function of the markets.
    The final certification and approval procedures are necessary to 
fulfill the requirements of the Dodd-Frank Act, to protect market 
participants, to enhance the Commission's administration of the Act, 
and to ensure the continued competitiveness and financial integrity of 
the futures and swaps markets. Moreover, in response to public comments 
and after consultations with market participants and prudential 
regulators, the proposed rules have been amended to implement, where 
possible, a less costly alternative that achieves the statutory 
objectives of the Act, as amended by the Dodd-Frank Act.
    With respect to costs, the Commission recognizes that its final 
regulations may increase compliance costs by requiring the submission 
of a ``concise explanation and analysis'' and by requiring registered 
entities to certify that they posted the complete submission on the 
registered entity's Web site at the time of filing. The Commission 
believes that these costs will be de minimis. A ``concise explanation 
and analysis'' should be a clear and informative--but not necessarily 
lengthy--description of the product or rule and its implications for 
compliance with applicable law. Moreover, the explanation and analysis 
incorporates information that is, in many cases, already required to be 
reviewed or collected by registered entities. A concise description and 
examination of the submission should impose minimal costs on registered 
entities, because it requires the registered entity merely to 
memorialize its due diligence in certifying compliance with applicable 
law. Posting this information on the registered entity's Web site 
should be as simple as providing an electronic copy of the submission 
to appropriate personnel. All current registered entities maintain a 
Web site and therefore this new requirement may increase the overall 
cost, if at all, by only a negligible margin.
    In addition, the proposed price certification provisions are not 
being adopted and the proposed documentation provisions have been 
revised--and, in some cases, removed from the final regulations--to 
permit

[[Page 44788]]

registered entities more flexibility in complying with the Act and 
Commission's regulations, to reduce potential administrative and 
compliance costs, and to adopt, where possible, less burdensome 
alternatives to the Commission's proposal. For example, under the 
Commission's final product submission regulations, registered entities, 
including CME, are not required to submit ``massive amounts of 
documentation'' with their new product submissions. Instead, as 
suggested by ICE Futures, the Commission will allow registered entities 
to submit an explanation and analysis of the product with the 
information contained in such documentation and citations to relevant 
data sources. Moreover, the Commission finds that the submission of an 
explanation and analysis is necessary for its review of product and 
rule certifications. Although CME correctly notes that self-
certification regime has been retained under the Act, as amended by the 
Dodd-Frank Act, the Commission has encountered numerous instances in 
which registered entities provided only cursory supporting analyses for 
their product submissions or, in certain cases, failed to document the 
evidentiary basis for their certifications altogether. As discussed in 
the preamble, the staff must expend significant resources and time to 
replicate existing analyses or to otherwise independently establish a 
product's compliance with applicable law when submissions are not 
adequately explained or supported by registered entities.
    With respect to the new SIDCO provisions in Sec.  40.10, the cost 
of creating the advance notice will not be substantial. A SIDCO should 
have this information prior to determining whether to implement a 
change and, consequently, the marginal cost of drafting and submitting 
the notice will be small. On the other hand, the Commission believes 
that the benefit of this information is significant because it is 
necessary to assess the effect that the proposed change would have on 
the nature or level of risks. The final provisions of Sec.  40.10 
parallel the requirements of the Dodd-Frank Act. The Commission's 
proposal effectively mirrors the enabling provisions of the statute 
and, accordingly, the Commission's ability to revise the proposed 
requirements is limited.
    As discussed above, advance notice of all changes that materially 
impact risk--increasing or decreasing risk--is necessary for the 
Commission to monitor systemic risk and to see that SIDCOs effectively 
manage risk in furtherance of compliance with the core principles. The 
Commission acknowledges that requiring a SIDCO to notify the Commission 
under Sec.  40.10 of a change that could materially reduce risk could 
delay the time when that change becomes effective. However, even for 
ostensibly risk-reducing changes, there may be adverse consequences 
that the Commission should have the opportunity to consider in the time 
frame set forth in Section 806 of the Dodd-Frank Act.
    Moreover, the Commission and the Board have statutory obligations 
to review proposed changes to SIDCO rules, procedures and operations 
that materially impact risks and Section 806 of the Dodd-Frank Act 
mandates the time period for review. The Commission also notes that, in 
appropriate cases, the staff may permit a risk-related rule to become 
effective prior to the expiration of the 60-day notice period.
    The costs associated with the emergency notice required in Sec.  
40.10(h) are similarly minimal and include the cost of drafting and 
submitting the notice and any cost associated with the possibility that 
the Commission could rescind or modify the emergency change. There also 
may be a cost of requiring notice within 24 hours; however, section 
806(e)(2)(B) of the Dodd-Frank Act mandates notices be provided within 
this timeframe. The substantive requirements of the notice provisions 
also are outlined by section 806(e)(2)(C) of the Dodd-Frank Act and, as 
explained above, the Commission believes that the cost of providing the 
information required for an advance notice will be small. The marginal 
cost of providing additional information concerning an emergency notice 
should be similarly small because a SIDCO will already know the nature 
of the emergency and will have determined that the change was necessary 
for the SIDCO to continue to provide its services in a safe and sound 
manner prior to implementing the emergency change. The Commission 
believes that the information is necessary for it to review an 
emergency change.
    Having considered the costs of its proposal, the Commission is 
adopting these final regulations, including changes to the proposed 
regulations as summarized below, to further reduce the information 
collection burdens on and associated costs for registered entities as 
follows:
     The Commission is revising the proposed documentation 
requirements in Sec.  40.2 and Sec.  40.3 to permit the submission of 
an appropriately detailed and cited explanation and analysis in lieu of 
documentation;
     The Commission is amending Sec.  40.2 to apply only to 
DCMs and SEFs and intends to implement new product clearing submission 
requirements in a new Sec.  39.5 (in a separate rulemaking);
     The Commission is eliminating the documentation 
requirements in Sec.  40.5 and Sec.  40.6;
     The Commission is providing new provisions for class 
certifications of certain swaps;
     The Commission is amending Sec.  40.6(a) to make effective 
upon submission rules delisting or withdrawing the certification of 
products;
     The Commission is eliminating the proposed certification 
requirement concerning the use of third-party prices;
     The Commission is eliminating a previously proposed 
provision requiring ``[w]henever possible, all proposed swap or 
contract terms and conditions [to] conform to industry standards or 
those terms and conditions adopted by comparable contracts;''
     The Commission is limiting the application of Sec.  40.12 
to novel derivative products that are not subject to the forthcoming 
provisions of Sec.  1.8.
    The resulting final rules should impose significantly lower costs 
on registered entities than the proposed rules. The average annual 
burden for the 70 anticipated registered entities may be reduced by 
more than one-third in comparison to the initial proposed 
requirements--from an estimated 324 hours per year per registered 
entity to approximately 202 hours per year per registered entity. To 
the extent that the Commission's final regulations impose any 
additional costs or burdens on registered entities, these costs or 
burdens would require a single part-time staff person to handle new 
requirements related to product and rule submissions to the Commission; 
the total time cost may be as little as four hours per week per 
registered entity. Thus, the Commission has determined that these final 
regulations are necessary to enable the Commission to perform its 
oversight functions and to carry out its statutory responsibilities 
under the Act.

IV. Related Matters

a. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA'') \41\ requires agencies to 
consider whether final regulations have a significant economic impact 
on a substantial number of small entities and, where the regulations do 
so, to provide a regulatory flexibility analysis concerning the impact 
of such

[[Page 44789]]

regulations.\42\ The final rules require DCOs, DCMs, SEFs, and SDRs to 
submit to the Commission new products, rules, and rule amendments, 
before they become effective, with either a request for Commission 
approval or a certification that the products or rules comply with the 
Act and Commission regulations. In addition, the Commission's new 
regulations require product submissions be accompanied by a concise 
explanation and analysis that incorporates information contained in 
supporting documents, whereas the new requirements for rule 
certifications simply require the submission of a concise explanation 
and analysis of the purpose, operation, and effect of the filing. 
Accordingly, these product and rule approval and self-certification 
regulations are not complex and do not impose a significant economic 
impact on any registered entity.
---------------------------------------------------------------------------

    \41\ 5 U.S.C. 601 et seq.
    \42\ 5 U.S.C. 601 et seq.
---------------------------------------------------------------------------

    Moreover, the Commission previously determined that DCMs, DCOs, 
SEFs, and SDRs are not ``small entities'' for purposes of the RFA.\43\ 
In determining that these registered entities are not ``small 
entities,'' the Commission reasoned that it designates a contract 
market or registers a DCO, SEF, or SDR only if the entity meets a 
number of specific criteria, including the expenditure of sufficient 
resources to establish and maintain an adequate self-regulatory 
program.\44\ Because DCMs, DCOs, SEFs and SDRs are required to 
demonstrate compliance with Core Principles, including principles 
concerning the maintenance or expenditure of financial resources, the 
Commission previously determined that SEFs and SDRs, like DCMs and 
DCOs, are not ``small entities'' for the purposes of the RFA.
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    \43\ See 17 CFR part 40 Provisions Common to Registered 
Entities, 75 FR 67282 (November 2, 2010); see also 47 FR 18618, 
18619 (April 30, 1982) and 66 FR 45604, 45609 (August 29, 2001).
    \44\ See, e.g., Core Principle 2 applicable to SEFs under 
Section 733 of the Dodd-Frank Act and Core Principles 1-3 applicable 
to SDRs under Section 728 of the Dodd-Frank Act.
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    The Chairman, on behalf of the Commission, hereby certifies 
pursuant to 5 U.S.C. 605(b) that these regulations do not have a 
significant impact on a substantial number of small entities.

b. Paperwork Reduction Act

    The Commission may not conduct or sponsor, and a registered entity 
is not required to respond to, a collection of information unless it 
displays a currently valid Office of Management and Budget (``OMB'') 
control number. Amendments to Sec. Sec.  40.2, 40.3, 40.5, 40.6, and 
40.10 impose new information collection requirements on registered 
entities within the meaning of the Paperwork Reduction Act.\45\ 
Accordingly, the Commission requested and OMB assigned a control number 
for the required collections of information. The Commission has 
submitted this notice of final rulemaking along with supporting 
documentation for OMB's review in accordance with 44 U.S.C. 3507(d) and 
5 CFR 1320.11. The title for this collection of information is ``Part 
40, Provisions Common to Registered Entities, OMB control number 3038-
D07.'' Many of the responses to this new collection of information are 
mandatory.
---------------------------------------------------------------------------

    \45\ 44 U.S.C. 3501 et seq.
---------------------------------------------------------------------------

    The Commission protects proprietary information according to the 
Freedom of Information Act and 17 CFR part 145, ``Commission Records 
and Information.'' In addition, section 8(a)(1) of the Act strictly 
prohibits the Commission, unless specifically authorized by the Act, 
from making public ``data and information that would separately 
disclose the business transactions or market positions of any person 
and trade secrets or names of customers.'' The Commission also is 
required to protect certain information contained in a government 
system of records according to the Privacy Act of 1974, 5 U.S.C. 552a.
1. Information Provided by Reporting Entities/Persons
    These rules require DCMs, DCOs, and new registered entities, SEFs 
and SDRs, to collect and submit to the Commission information 
concerning new products, rules, and rule amendments pursuant to the 
procedures outlined in Sec. Sec.  40.2, 40.3, 40.5, 40.6, and 40.10. 
The Commission is adopting these information collection requirements in 
order to give effect to various notice, rule certification, and rule 
approval provisions of the Dodd-Frank Act, to expedite the staff's 
review of newly-certified and submitted products, and to improve the 
Commission's administration of the Act.
    The Commission estimated the final information collection burdens 
on registered entities below. These estimates account for the 
following: (1) The number of respondents; (2) the number of responses 
required of each respondent; (3) the average hours required to produce 
each response; and (4) the aggregate annual reporting burden. The 
Commission estimates that the effect of final Sec. Sec.  40.2, 40.3, 
40.5, 40.6, 40.10, and 40.12 will be to increase the information 
collection burden by approximately 202 hours per year per registered 
entity, resulting mostly from the preparation of the concise 
explanation and analysis to be filed with the Commission in connection 
with the listing of products or the certification or approval of rules. 
The Commission estimates that 70 registered entities will be required 
to file their new product and rule submissions.
    The Commission previously estimated the aggregate number of hours 
that it expected registered entities to spend complying with part 40. 
Upon further consideration, the Commission has determined to revise the 
hours attributable to the new provisions of part 40. The newly-revised 
and final regulations require each registered entity to spend an 
estimated and additional 202 hours per year complying with part 40. Due 
to a calculation error in the proposed rulemaking, the estimated 
information collection burden in the proposed part 40 rulemaking was 
quoted as 8,300 hours; the estimated information collection burden 
should have been 22,664. Based on the 22,664 estimate, the estimated 
average hours per registered entity would have been 323.771 hours. 
Thus, under the Commission's current analysis and in light of the 
regulatory changes below, each registered entity may expect to spend 
approximately 121 fewer hours per year complying with part 40 than 
would have been required under the Commission's proposal. The 
substantial reduction in the estimated annual time that each registered 
entity may spend complying with part 40 results from revisions to the 
documentation requirements in Sec. Sec.  40.2 and 40.3, the elimination 
of the documentation requirements in Sec. Sec.  40.5 and 40.6, the 
elimination of the price certification requirements in Sec. Sec.  40.2, 
40.3, 40.5, and 40.6, and the addition of the class certification 
provisions for certain swaps in Sec.  40.2(d).
    Final Sec. Sec.  40.2, 40.3, 40.5 and 40.6 require each registered 
entity to comply with new certification and approval requirements when 
seeking to implement new products, rules, and rule amendments, 
including changes to product terms or conditions. However, in 
consideration of comments concerning proposed Sec. Sec.  40.2, 40.3, 
40.5 and 40.6, the Commission has determined to amend its proposal to 
reduce the information collection burden on the registered entities. 
Specifically, the Commission's final Sec.  40.2(d) streamlines the 
product certification process for a significant percentage of swap 
contracts by permitting a DCM or SEF to class certify, within a single 
submission, one

[[Page 44790]]

or more swaps with similar, specified characteristics.
    In addition, the Commission has determined to amend its proposal to 
do the following: (1) Substantially revise Sec.  40.2 and Sec.  40.3 to 
reduce the document collection burden for newly-submitted products, and 
(2) eliminate the previously proposed documentation provisions in Sec.  
40.5 and Sec.  40.6. The Commission has determined to maintain 
Sec. Sec.  40.2(a)(3)(vii), 40.3(a)(10), 40.5(a)(6), and 40.6(a)(2) 
requiring registered entities to state that they posted a copy of the 
certification or request for approval on the registered entity's Web 
site at the time of the filing with the Commission.
    In light of the amendments to the Commission's final regulations, 
noted above, the Commission revises its previous estimates as follows:
    Estimated number of respondents: 70.
    Annual responses by each respondent: 100.
    Estimated average hours per response: 2.00.
    Aggregate annual reporting burden hours (for all respondents): 
14,000.
    The Commission originally estimated that 45 registered entities 
would be subject to the information collection requirements in 
Sec. Sec.  40.2, 40.3, 40.5 and 40.6. The Commission based this 
estimate upon the number of registered and exempt entities at the time 
of proposal. The Commission has determined to increase its previous 
estimate to account for an increased number of anticipated registered 
entities, a few of which do not currently operate a registered or 
exempt entity. The 70 registered entity figure, above, only minimally 
alters the per registered entity estimate of time that will be required 
to comply with part 40.
    In addition, the Commission initially estimated 120 responses per 
year from registered entities. In light of the revisions to the 
documentation requirements and the ability of registered entities to 
certify certain swap contracts as a class under Sec.  40.2(d), the 
number of estimated submissions has been reduced. The Commission also 
reduced the estimated hourly burden in light of revisions to the 
documentation requirements in Sec. Sec.  40.2 and 40.3 and the 
elimination of the documentation requirements in Sec. Sec.  40.5 and 
40.6.
    Sec.  40.10 requires SIDCOs to provide to the Commission 60 days 
advance notice of proposed changes to rules, procedures or operations 
that could materially affect the nature or level of risks presented by 
the SIDCO.
    Estimated number of respondents: 4.
    Annual responses by each respondent: 2.
    Estimated average hours per response: 5.
    Aggregate annual reporting burden hours (for all respondents): 40.
    Finally, Sec.  40.12 permits registered entities to provide notice 
to the Commission and the Securities and Exchange Commission when 
certifying, submitting for approval, or otherwise filing a proposal to 
list a product (other than a product subject to the forthcoming 
provisions of Sec.  1.8 of this chapter) having elements of both a 
security and a contract for the sale of a commodity for future delivery 
(or an option on such contract or an option on a commodity). The 
Commission has determined to promulgate rules governing jurisdictional 
disputes over novel swap products in a separate and forthcoming 
rulemaking. Accordingly, it is adjusting its estimates to reflect that 
fact that jurisdictional determinations concerning certain novel 
product submissions will not be subject to the provisions of Sec.  
40.12.
    Estimated number of respondents: 8.
    Annual responses by each respondent: 4.
    Estimated average hours per response: 2.52.
    Aggregate annual reporting burden hours (for all respondents): 
80.64.

List of Subjects in 17 CFR Part 40

    Commodity futures, Contract markets, Designation application, 
Reporting and recordkeeping requirements, Swap execution facility, Swap 
data repository, Systemically important derivatives clearing 
organization, Rule approval, Rule certification, Review of certain 
event contracts.

    In light of the foregoing, and pursuant to authority in the Act, 
and, in particular, Sections 3, 5, 5c(c) and 8a(5) of the Act, the 
Commission hereby revises part 40 of Title 17 of the Code of Federal 
Regulations to read as follows:

PART 40--PROVISIONS COMMON TO REGISTERED ENTITIES

Sec.
40.1 Definitions.
40.2 Listing products for trading by certification.
40.3 Voluntary submission of new products for Commission review and 
approval.
40.4 Amendments to terms or conditions of enumerated agricultural 
products.
40.5 Voluntary submission of rules for Commission review and 
approval.
40.6 Self-certification of rules.
40.7 Delegations.
40.8 Availability of public information.
40.9 [Reserved]
40.10 Special certification procedures for submission of rules by 
systemically important derivatives clearing organizations.
40.11 Review of event contracts based upon certain excluded 
commodities.
40.12 Staying of certification and tolling of review period pending 
jurisdictional determination.

Appendix A to Part 40--Schedule of Fees

Appendix B to Part 40--[Reserved]

Appendix C to Part 40--[Reserved]

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

    Authority: 7 U.S.C. 1a, 2, 5, 6, 7, 7a, 8 and 12, as amended by 
Titles VII and VIII of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act, Public Pub. L. 111-203, 124 Stat. 1376 
(2010).


Sec.  40.1  Definitions.

    As used in this part:
    (a) Business day means the intraday period of time starting at the 
business hour of 8:15 a.m. and ending at the business hour of 4:45 
p.m.; business hour means any hour between 8:15 a.m. and 4:45 p.m. 
Business day and business hour are Eastern Standard Time or Eastern 
Daylight Savings Time, whichever is currently in effect in Washington, 
DC, on all days except Saturdays, Sundays, and Federal holidays in 
Washington, DC.
    (b) Dormant contract or dormant product means:
    (1) Any agreement, contract, transaction, instrument, swap or any 
such commodity futures or option contract with respect to all future or 
option expiries, listed on a designated contract market, a swap 
execution facility or cleared by a registered derivatives clearing 
organization, that has no open interest and in which no trading has 
occurred for a period of twelve complete calendar months following a 
certification to, or approval by, the Commission; provided, however, 
that no contract or instrument under this paragraph (b)(1) initially 
and originally certified to, or approved by, the Commission within the 
preceding 36 complete calendar months shall be considered to be 
dormant; or
    (2) Any commodity futures or option contract, swap or other 
agreement, contract, transaction or instrument of a dormant designated 
contract market, dormant swap execution facility or a dormant 
derivatives clearing organization; or
    (3) Any commodity futures or option contract or other agreement, 
contract, swap, transaction or instrument not otherwise dormant that a 
designated contract market, a swap execution facility or a derivatives 
clearing

[[Page 44791]]

organization self-declares through certification to be dormant.
    (c) Dormant designated contract market means any designated 
contract market on which no trading has occurred during the period of 
twelve consecutive calendar months, preceding the first day of the most 
recent calendar month; provided, however, no designated contract market 
shall be considered to be dormant if its initial and original 
Commission order of designation was issued within the preceding 36 
consecutive calendar months.
    (d) Dormant derivatives clearing organization means any derivatives 
clearing organization registered pursuant to Section 5b of the Act 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 if 
its initial and original Commission order of registration was issued 
within the preceding 36 complete calendar months.
    (e) Dormant swap data repository means any registered swap data 
repository on which no data has resided for a period of twelve 
consecutive calendar months, preceding the most recent calendar month.
    (f) Dormant swap execution facility means any swap execution 
facility on which no trading has occurred for a period of twelve 
consecutive calendar months, preceding the first day of the most recent 
calendar month; provided, however, no swap execution facility shall be 
considered to be dormant if its initial and original Commission order 
of registration was issued within the preceding 36 consecutive calendar 
months.
    (g) Dormant rule means:
    (1) Any registered entity rule which remains unimplemented for 
twelve consecutive calendar months following a certification with, or 
an approval by, the Commission; or
    (2) Any rule or rule amendment of a dormant designated contract 
market, dormant swap execution facility, dormant swap data repository 
or dormant derivatives clearing organization.
    (h) Emergency means any occurrence or circumstance that, in the 
opinion of the governing board of a registered entity, or a person or 
persons duly authorized to issue such an opinion on behalf of the 
governing board of a registered entity under circumstances and pursuant 
to procedures that are specified by rule, 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, swaps or transactions or the timely collection and payment 
of funds in connection with clearing and settlement by a derivatives 
clearing organization, including:
    (1) Any manipulative or attempted manipulative activity;
    (2) Any actual, attempted, or threatened corner, squeeze, 
congestion, or undue concentration of positions;
    (3) Any circumstances which may materially affect the performance 
of agreements, contracts, swaps or transactions, including failure of 
the payment system or the bankruptcy or insolvency of any participant;
    (4) Any action taken by any governmental body, or any other 
registered entity, board of trade, market or facility which may have a 
direct impact on trading or clearing and settlement; and
    (5) Any other circumstance which may have a severe, adverse effect 
upon the functioning of a registered entity.
    (i) Rule means any constitutional provision, article of 
incorporation, bylaw, rule, regulation, resolution, interpretation, 
stated policy, advisory, terms and conditions, trading protocol, 
agreement or instrument corresponding thereto, including those that 
authorize a response or establish standards for responding to a 
specific emergency, and any amendment or addition thereto or repeal 
thereof, made or issued by a registered entity or by the governing 
board thereof or any committee thereof, in whatever form adopted.
    (j) Terms and conditions means any definition of the trading unit 
or the specific commodity underlying a contract for the future delivery 
of a commodity or commodity option contract, description of the 
payments to be exchanged under a swap, specification of cash settlement 
or delivery standards and procedures, and establishment of buyers' and 
sellers' rights and obligations under the swap or contract. Terms and 
conditions include provisions relating to the following:
    (1) For a contract for the purchase or sale of a commodity for 
future delivery or an option on such a contract or an option on a 
commodity (other than a swap):
    (i) Quality and other standards that define the commodity or 
instrument underlying the contract;
    (ii) Quantity standards or other provisions related to contract 
size;
    (iii) Any applicable premiums or discounts for delivery of nonpar 
products;
    (iv) Trading hours, trading months and the listing of contracts;
    (v) The pricing basis, minimum price fluctuations, and maximum 
price fluctuations;
    (vi) Any price limits, no cancellation ranges, trading halts, or 
circuit breaker provisions, and procedures for the establishment of 
daily settlement prices;
    (vii) Position limits, position accountability standards, and 
position reporting requirements;
    (viii) Delivery points and locational price differentials;
    (ix) 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;
    (x) If cash settled; the definition, composition, calculation and 
revision of the cash settlement price or index;
    (xi) Payment or collection of commodity option premiums or margins;
    (xii) Option exercise price, if it is constant, and method for 
calculating the exercise price, if it is variable;
    (xiii) Threshold prices for an option contract, the existence of 
which is contingent upon those prices; and
    (xiv) Any restrictions or requirements for exercising an option; 
and
    (2) For a swap:
    (i) Identification of the major group, category, type or class in 
which the swap falls (such as an interest rate, commodity, credit or 
equity swap) and of any further sub-group, category, type or class that 
further describes the swap;
    (ii) Notional amounts, quantity standards, or other unit size 
characteristics;
    (iii) Any applicable premiums or discounts for delivery of nonpar 
products;
    (iv) Trading hours and the listing of swaps;
    (v) Pricing basis for establishing the payment obligations under, 
and mark-to-market value of, the swap including, as applicable, the 
accrual start dates, termination or maturity dates, and, for each leg 
of the swap, the initial cash flow components, spreads, and points, and 
the relevant indexes, prices, rates, coupons, or other price reference 
measures;
    (vi) Any price limits, trading halts, or circuit breaker 
provisions, and procedures for the establishment of daily settlement 
prices;
    (vii) Position limits, position accountability standards, and 
position reporting requirements;

[[Page 44792]]

    (viii) Payment and reset frequency, day count conventions, business 
calendars, and accrual features;
    (ix) If physical delivery applies, 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;
    (x) If cash settled, the definition, composition, calculation and 
revision of the cash settlement price, and the settlement currency;
    (xi) Payment or collection of option premiums or margins;
    (xii) Option exercise price, if it is constant, and method for 
calculating the exercise price, if it is variable;
    (xiii) Threshold prices for an option, the existence of which is 
contingent upon those prices;
    (xiv) Any restrictions or requirements for exercising an option; 
and
    (xv) Life cycle events.


Sec.  40.2  Listing products for trading by certification.

    (a) A designated contract market or a swap execution facility must 
comply with the submission requirements of this section prior to 
listing a product for trading that has not been approved under Sec.  
40.3 of this part or that remains dormant subsequent to being submitted 
under this section or approved under Sec.  40.3 of this part. A 
submission shall comply with the following conditions:
    (1) The designated contract market or the swap execution facility 
has filed its submission electronically in a format and manner 
specified by the Secretary of the Commission with the Secretary of the 
Commission;
    (2) The Commission has received the submission by the open of 
business on the business day preceding the product's listing; 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;
    (iii) The intended listing date;
    (iv) A certification by the designated contract market or the swap 
execution facility that the product to be listed complies with the Act 
and Commission regulations thereunder;
    (v) A concise explanation and analysis of the product and its 
compliance with applicable provisions of the Act, including core 
principles, and the Commission's regulations thereunder. This 
explanation and analysis shall either be accompanied by the 
documentation relied upon to establish the basis for compliance with 
applicable law, or incorporate information contained in such 
documentation, with appropriate citations to data sources;
    (vi) A certification that the registered entity posted a notice of 
pending product certification with the Commission and a copy of the 
submission, concurrent with the filing of a submission with the 
Commission, on the registered entity's Web site. Information that the 
registered entity seeks to keep confidential may be redacted from the 
documents published on the registered entity's Web site but must be 
republished consistent with any determination made pursuant to Sec.  
40.8(c)(4);
    (vii) A request for confidential treatment, if appropriate, as 
permitted under Sec.  40.8.
    (b) Additional information. If requested by Commission staff, a 
registered entity shall provide any additional evidence, information or 
data that demonstrates that the contract meets, initially or on a 
continuing basis, the requirements of the Act or the Commission's 
regulations or policies thereunder.
    (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 during the 
pendency of a petition 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.
    (d) Class certification of swaps. (1) A designated contract market 
or swap execution facility may list or facilitate trading in any swap 
or number of swaps based upon an ``excluded commodity,'' as defined in 
Section 1a(19)(i) of the Act, not including any security, security 
index, and currency other than the United States Dollar and a ``major 
foreign currency,'' as defined in Sec.  15.03(a), or an ``excluded 
commodity,'' as defined in Section 1a(19)(ii)-(iv) of the Act, provided 
the designated contract market or swap execution facility certifies, 
under Sec.  40.2(a)(1)-(2), Sec.  40.2(a)(3)(i), Sec.  40.2(a)(3)(iv), 
and Sec.  40.2(a)(3)(vi), each of the following:
    (i) That each particular swap within the certified class of swaps 
is based upon an excluded commodity specified in Sec.  40.2(d)(1); and
    (ii) That each particular swap within the certified class of swaps 
is based upon an excluded commodity with an identical pricing source, 
formula, procedure, and methodology for calculating reference prices 
and payment obligations; and
    (iii) That the pricing source, formula, procedure, and methodology 
for calculating reference prices and payment obligations in each 
particular swap within the certified class of swaps is identical to a 
pricing source, formula, procedure, and methodology for calculating 
reference prices and payment obligations in a product previously 
submitted to the Commission and certified or approved pursuant to Sec.  
40.2 or Sec.  40.3;
    (iv) That each particular swap within the certified class of swaps 
is based upon an excluded commodity involving an identical currency or 
identical currencies.
    (2) The Commission may in its discretion require a registered 
entity to withdraw its certification under Sec.  40.2(d)(1) and to 
submit each individual swap or certain individual swaps within the 
submission for Commission review pursuant to Sec.  40.2 or Sec.  40.3


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

    (a) Request for approval. Pursuant to Section 5c(c) of the Act, a 
designated contract market, a swap execution facility, or a derivatives 
clearing organization may request that the Commission approve a new or 
dormant product prior to listing the product for trading or accepting 
the product for clearing, or if a product was initially submitted under 
Sec.  40.2 of this part or Sec.  39.5 of this chapter, subsequent to 
listing the product for trading or accepting the product for clearing. 
A submission requesting approval shall:
    (1) Be filed electronically in a format and manner specified by the 
Secretary of the Commission with 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) Include an explanation and analysis of the product and its 
compliance with applicable provisions of the Act, including core 
principles, and the Commission's regulations thereunder. This 
explanation and analysis shall either be accompanied by the 
documentation relied upon to establish the basis for compliance with 
the applicable law, or incorporate information contained in such 
documentation, with appropriate citations to data sources;

[[Page 44793]]

    (5) Describe any agreements or contracts entered into with other 
parties that enable the registered entity to carry out its 
responsibilities;
    (6) Include the certifications required in Sec.  41.22 for product 
approval of a commodity that is a security future or a security futures 
product as defined in Sections 1a(44) or 1a(45) of the Act, 
respectively;
    (7) Include, if appropriate, a request for confidential treatment 
as permitted under Sec.  40.8;
    (8) Include the filing fee required under Appendix A to this part;
    (9) Certify that the registered entity posted a notice of its 
request for Commission approval of the new product and a copy of the 
submission, concurrent with the filing of a submission with the 
Commission, on the registered entity's Web site. Information that the 
registered entity seeks to keep confidential may be redacted from the 
documents published on the registered entity's Web site but must be 
republished consistent with any determination made pursuant to Sec.  
40.8(c)(4);
    (10) Include, if requested by Commission staff, additional 
evidence, information or data demonstrating that the contract meets, 
initially or on a continuing basis, the requirements of the Act, or 
other requirement for designation or registration under the Act, or the 
Commission's regulations or policies thereunder. The registered entity 
shall submit the requested information by the open of business on the 
date that is two business days from the date of request by Commission 
staff, or at the conclusion of such extended period agreed to by 
Commission staff after timely receipt of a written request from the 
registered entity.
    (b) Standard for review and approval. The Commission shall approve 
a new product unless the terms and conditions of the product violate 
the Act or the Commission's regulations.
    (c) Forty-five day review. All products submitted for Commission 
approval under this paragraph shall be deemed approved by the 
Commission 45 days after receipt by the Commission, or at the 
conclusion of an extended period as provided under paragraph (d) of 
this section, unless notified otherwise within the applicable period, 
if:
    (1) The submission complies with the requirements of paragraph (a) 
of this section; and
    (2) The submitting entity does not amend the terms or conditions of 
the product or supplement the request for approval, except as requested 
by the Commission or for correction of typographical errors, 
renumbering or other non-substantive revisions, during that period. Any 
voluntary, substantive amendment by the submitting entity will be 
treated as a new submission under this section.
    (d) Extension of time. The Commission may extend the 45 day review 
period in paragraph (c) of this section for:
    (1) An additional 45 days, if the product raises novel or complex 
issues that require additional time to analyze, in which case the 
Commission shall notify the registered entity within the initial 45 day 
review period and shall briefly describe the nature of the specific 
issues for which additional time for review is required; or
    (2) Any extended review period to which the registered entity 
agrees in writing.
    (e) Notice of non-approval. The Commission at any time during its 
review under this section may notify the registered entity that it will 
not, or is unable to, approve the product. This notification will 
briefly specify the nature of the issues raised and the specific 
provision of the Act or the Commission's regulations, including the 
form or content requirements of paragraph (a) of this section, that the 
product violates, appears to violate or potentially violates but which 
cannot be ascertained from the submission.
    (f) Effect of non-approval. (1) Notification to a registered entity 
under paragraph (e) of this section of the Commission's determination 
not to approve a product does not prejudice the entity from 
subsequently submitting a revised version of the product for Commission 
approval or from submitting the product as initially proposed pursuant 
to a supplemented submission.
    (2) Notification to a registered entity under paragraph (e) 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 the Commission's regulations thereunder.


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

    (a) Notwithstanding the provisions of this part, a designated 
contract market must submit for Commission approval under the 
procedures of Sec.  40.5, prior to its implementation, any rule or 
dormant rule that, for a delivery month having open interest, would 
materially change a term or condition, as defined in Sec.  40.1(j), of 
a contract for future delivery in an agricultural commodity enumerated 
in Section 1a(9) of the Act, or of an option on such a contract or 
commodity.
    (b) The following rules or rule amendments are not material and 
should not be submitted under this section:
    (1) Changes that are enumerated in Sec.  40.6(d)(2) may be 
implemented without prior approval or certification if implemented 
pursuant to the notification procedures of Sec.  40.6(d);
    (2) Changes that are enumerated in Sec.  40.6(d)(3)(ii) may be 
implemented without prior approval or certification or notification as 
permitted pursuant to Sec.  40.6(d)(3);
    (3) Changes in no cancellation ranges and trading hours may be 
implemented without prior approval if implemented pursuant to the 
procedures of Sec.  40.6(a);
    (4) Changes required to comply with a binding order of a court of 
competent jurisdiction, or a rule, regulation or order of the 
Commission or of another Federal regulatory authority, may be 
implemented without prior approval if implemented pursuant to the 
procedures of Sec.  40.6(a);or
    (5) Any other rule:
    (i) The text of which has been submitted for review at least ten 
business days prior to its implementation and that has been labeled 
``Non-Material Agricultural Rule Change;''
    (ii) For which the designated contract market 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, may be 
implemented without prior approval if implemented under the procedures 
of Sec.  40.6(a).


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

    (a) Request for approval of rules. Pursuant to Section 5c(c) of the 
Act, a registered entity may request that the Commission approve a new 
rule, rule amendment or dormant rule prior to implementation of the 
rule, or if the request was initially submitted under Sec. Sec.  40.2 
or 40.6 of this part, subsequent to implementation of the rule. A 
request for approval shall:
    (1) Be filed electronically in a format and manner specified by the 
Secretary of the Commission with the Secretary of the Commission;

[[Page 44794]]

    (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 rule or rule amendment (in the case 
of a rule amendment, deletions and additions must be indicated);
    (4) Describe the proposed effective date of the rule or rule 
amendment 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) Provide an explanation and analysis of the operation, purpose, 
and effect of the proposed rule or rule amendment and its compliance 
with applicable provisions of the Act, including core principles, and 
the Commission's regulations thereunder, including, as applicable, a 
description of the anticipated benefits to market participants or 
others, any potential anticompetitive effects on market participants or 
others, and how the rule fits into the registered entity's framework of 
self-regulation;
    (6) Certify that the registered entity posted a notice of pending 
rule with the Commission and a copy of the submission, concurrent with 
the filing of a submission with the Commission, on the registered 
entity's Web site. Information which the registered entity seeks to 
keep confidential may be redacted from the documents published on the 
registered entity's Web site but must be republished consistent with 
any determination made pursuant to Sec.  40.8(c)(4);
    (7) Provide additional information which may be beneficial to the 
Commission in analyzing the new rule or rule amendment. If a proposed 
rule affects, directly or indirectly, the application of any other rule 
of the registered entity, the pertinent text of any such rule must be 
set forth and the anticipated effect described;
    (8) Provide 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, or a statement that no such opposing views 
were expressed;
    (9) Identify any Commission regulation that the Commission may need 
to amend, or sections of the Act or the Commission's regulations that 
the Commission may need to interpret, in order to approve the new rule 
or rule amendment. To the extent that such an amendment or 
interpretation is necessary to accommodate a new rule or rule 
amendment, the submission should include a reasoned analysis supporting 
the amendment to the Commission's regulation or the interpretation;
    (10) As appropriate, include a request for confidential treatment 
as permitted under the procedures of Sec.  40.8.
    (b) Standard for review and approval. The Commission shall approve 
a new rule or rule amendment unless the rule or rule amendment is 
inconsistent with the Act or the Commission's regulations.
    (c) Forty-five day review. (1) All rules submitted for Commission 
approval under paragraph (a) of this section shall be deemed approved 
by the Commission under section 5c(c) of the Act 45 days after receipt 
by the Commission, or at the conclusion of such extended period as 
provided under paragraph (d) of this section, unless the registered 
entity is notified otherwise within the applicable period, if:
    (i) The submission complies with the requirements of paragraph (a) 
of this section;
    (ii) The registered entity does not amend the proposed rule or 
supplement the submission, except as requested by the Commission, 
during the pendency of the review period other than for correction of 
typographical errors, renumbering or other non-substantive revisions. 
Any amendment or supplementation not requested by the Commission will 
be treated as the submission of a new filing under this section.
    (2) The Commission shall commence the review period in paragraph 
(c) of this section for a compliant submission under Sec.  40.4(b)(5) 
ten business days after its receipt.
    (d) Commencement and extension of time for review. The Commission 
may further extend the review period in paragraph (c) of this section 
for any approval request for:
    (1) An additional 45 days, if the proposed rule raises novel or 
complex issues that require additional time for review or is of major 
economic significance, the submission is incomplete or the requestor 
does not respond completely to Commission questions in a timely manner, 
in which case the Commission shall notify the submitting registered 
entity within the initial forty-five day review period and shall 
briefly describe the nature of the specific issues for which additional 
time for review shall be required; or
    (2) Any period, beyond the additional 45 days provided in Sec.  
40.5(d)(1), to which the registered entity agrees in writing.
    (e) Notice of non-approval. Any time during its review under this 
section, the Commission may notify the registered entity that it will 
not, or is unable to, approve the new rule or rule amendment. This 
notification will briefly specify the nature of the issues raised and 
the specific provision of the Act or the Commission's regulations, 
including the form or content requirements of this section, with which 
the new rule or rule amendment is inconsistent or appears to be 
inconsistent with the Act or the Commission's regulations.
    (f) Effect of non-approval. (1) Notification to a registered entity 
under paragraph (e) of this section does not prevent the registered 
entity from subsequently submitting a revised version of the proposed 
rule or rule amendment for Commission review and approval or from 
submitting the new rule or rule amendment as initially proposed in a 
supplemented submission; the revised submission will be reviewed 
without prejudice.
    (2) Notification to a registered entity under paragraph (e) of this 
section of the Commission's determination not 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 under Sec.  
40.6(a) of this section.
    (g) Expedited approval. Notwithstanding the provisions of paragraph 
(c) of this section, changes to a proposed rule or a rule amendment, 
including changes to terms and conditions of a product that are 
consistent with the Act and Commission regulations and with standards 
approved or established by the Commission may be approved by the 
Commission at such time and under such conditions as the Commission 
shall specify in the written notification, provided, however, that the 
Commission may, at any time, alter or revoke the applicability of such 
a notice to any particular product or rule amendment.


Sec.  40.6  Self-certification of rules.

    (a) Required certification. A registered entity shall comply with 
the following conditions prior to implementing any rule, other than a 
rule delisting or withdrawing the certification of a product, that has 
not obtained Commission approval under Sec.  40.5 of this part, that 
remains dormant subsequent to being submitted under this section or 
approved under Sec.  40.5 of this part, or that is submitted under 
Sec.  40.10 of this part, except as otherwise provided by Sec.  
40.10(a):
    (1) The registered entity has filed its submission electronically 
in a format and manner specified by the Secretary

[[Page 44795]]

of the Commission with the Secretary of the Commission.
    (2) The registered entity has provided a certification that the 
registered entity posted a notice of pending certification with the 
Commission and a copy of the submission, concurrent with the filing of 
a submission with the Commission, on the registered entity's Web site. 
Information that the registered entity seeks to keep confidential may 
be redacted from the documents published on the registered entity's Web 
site but it must be republished consistent with any determination made 
pursuant to Sec.  40.8(c)(4).
    (3) The Commission has received the submission not later than the 
open of business on the business day that is 10 business days prior to 
the registered entity's implementation of the rule or rule amendment.
    (4) The Commission has not stayed the submission pursuant to Sec.  
40.6(c).
    (5) The rule or rule amendment is not a rule or rule amendment of a 
designated contract market that materially changes a term or condition 
of a contract for future delivery of an agricultural commodity 
enumerated in section 1a(4) of the Act or an option on such a contract 
or commodity in a delivery month having open interest.
    (6) Emergency rule certifications. (i) New rules or rule amendments 
that establish standards for responding to an emergency must be 
submitted pursuant to Sec.  40.6(a);
    (ii) 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 twenty-four hours after implementation. Such rules shall be 
subject to the certification and stay provisions of paragraphs (b) and 
(c) of this section.
    (7). The rule submission shall include:
    (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 coversheet);
    (ii) The text of the rule (in the case of a rule amendment, 
deletions and additions must be indicated);
    (iii) The date of intended implementation;
    (iv) A certification by the registered entity that the rule 
complies with the Act and the Commission's regulations thereunder;
    (v) A concise explanation and analysis of the operation, purpose, 
and effect of the proposed rule or rule amendment and its compliance 
with applicable provisions of the Act, including core principles, and 
the Commission's regulations thereunder;
    (vi) 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, or a statement that no such opposing views 
were expressed;
    (vii) As appropriate, a request for confidential treatment pursuant 
to the procedures provided in Sec.  40.8; and
    (8) 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 
filing and the registered entity's compliance with any of the 
requirements of the Act or the Commission's regulations or policies 
thereunder.
    (b) Review by the Commission. The Commission shall have 10 business 
days to review the new rule or rule amendment before the new rule or 
rule amendment is deemed certified and can be made effective, unless 
the Commission notifies the registered entity during the 10-business 
day review period that it intends to issue a stay of the certification 
under paragraph (c) of this section.
    (c) Stay (1) Stay of certification of new rule or rule amendment. 
The Commission may stay the certification of a new rule or rule 
amendment submitted pursuant to paragraph (a) of this section by 
issuing a notification informing the registered entity that the 
Commission is staying the certification of the rule or rule amendment 
on the grounds that the rule or rule amendment presents novel or 
complex issues that require additional time to analyze, the rule or 
rule amendment is accompanied by an inadequate explanation or the rule 
or rule amendment is potentially inconsistent with the Act or the 
Commission's regulations thereunder. The Commission will have an 
additional 90 days from the date of the notification to conduct the 
review. The decision to stay the certification of a rule in such 
circumstances shall be delegable pursuant to Sec.  40.7 of this part.
    (2) Public comment. The Commission shall provide a 30-day comment 
period within the 90-day period in which the stay is in effect as 
described in paragraph (c)(1) of this section. The Commission shall 
publish a notice of the 30-day comment period on the Commission Web 
site. Comments from the public shall be submitted as specified in that 
notice.
    (3) Expiration of a stay of certification of new rule or rule 
amendment. A new rule or rule amendment subject to a stay pursuant to 
this paragraph shall become effective, pursuant to the certification, 
at the expiration of the 90-day review period described in paragraph 
(c)(1) of this section unless the Commission withdraws the stay prior 
to that time, or the Commission notifies the registered entity during 
the 90-day time period that it objects to the proposed certification on 
the grounds that the proposed rule or rule amendment is inconsistent 
with the Act or the Commission's regulations.
    (4) Stay of effectiveness of rules or rule amendments already 
implemented. The Commission may stay the effectiveness of an 
implemented rule during the pendency of Commission proceedings for 
filing a false certification or during the pendency of a petition to 
alter or amend the rule pursuant to section 8a(7) of the Act. The 
decision to stay the effectiveness of a rule in such circumstances 
shall not be delegable to any employee of the Commission.
    (d) Notification of rule amendments. Notwithstanding the rule 
certification requirement of Section 5c(c)(1) of the Act and paragraph 
(a) of this section, a registered entity may place the following rules 
or rule amendments into effect without certification to the Commission 
if the following conditions are met:
    (1) The registered entity provides to the Commission at least 
weekly a summary notice of all rule amendments made effective pursuant 
to this paragraph during the preceding week. Such notice must be 
labeled ``Weekly Notification of Rule Amendments'' 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 
and manner specified by the Secretary of the Commission; and
    (2) The rule governs:
    (i) Non-substantive revisions. Corrections of typographical errors, 
renumbering, periodic routine updates to identifying information about 
registered entities and other such non-substantive revisions of a 
product's terms and conditions that have no effect on the economic 
characteristics of the product;
    (ii) Delivery standards set by third parties. Changes to grades or 
standards of commodities deliverable on a product

[[Page 44796]]

that are established by an independent third party and that are 
incorporated by reference as product terms, provided that the grade or 
standard is not established, selected or calculated solely for use in 
connection with futures or option trading and such changes do not 
affect deliverable supplies or the pricing basis for the product;
    (iii) Index products. Routine changes in the composition, 
computation, or method of selection of component entities of an index 
(other than routine changes to securities indexes to the extent that 
such changes are not described in paragraph (d)(3)(ii)(F) of this 
section) 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;
    (iv) Option contract terms. Changes to option contract rules, which 
may qualify for implementation without notice pursuant to paragraph 
(d)(3)(ii)(G) of this section, relating to the strike price listing 
procedures, strike price intervals, and the listing of strike prices on 
a discretionary basis;
    (v) Fees. Fees or fee changes, other than fees or fee changes 
associated with market making or trading incentive programs, that:
    (A) Total $1.00 or more per contract, and
    (B) 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 that provide price or cash market information to an 
independent third party and that are incorporated by reference as 
product terms;
    (vii) Approved brands. Changes in lists of approved brands or 
markings pursuant to previously certified or Commission approved 
standards or criteria;
    (viii) Delivery facilities and delivery service providers. Changes 
in lists of approved delivery facilities and delivery service providers 
(including weigh masters, assayers, and inspectors) at a delivery 
location, pursuant to previously certified or Commission approved 
standards or criteria;
    (ix) Trading months. The initial listing of trading months, which 
may qualify for implementation without notice pursuant to (d)(3)(ii)(H) 
of this section, within the currently established cycle of trading 
months; or
    (x) Minimum tick. Reductions in the minimum price fluctuation (or 
``tick'').
    (3) Notification of rule amendments not required. Notwithstanding 
the rule certification requirements of section 5c(c)(1) of the Act and 
paragraph (a) of this section, a registered entity may place the 
following rules or rule amendments into effect without certification or 
notice to the Commission if the following conditions are met:
    (i) The registered entity maintains documentation regarding all 
changes to rules; and
    (ii) The rule governs:
    (A) Transfer of membership or ownership. Procedures and forms for 
the purchase, sale or transfer of membership or ownership, but not 
including qualifications for membership or ownership, any right or 
obligation of membership or ownership or dues or assessments;
    (B) Administrative procedures. The organization and administrative 
procedures of a registered entity governing bodies such as a Board of 
Directors, Officers and Committees, but not voting requirements, Board 
of Directors or Committee composition requirements or procedures, 
decision making procedures, use or disclosure of material non-public 
information gained through the performance of official duties, or 
requirements relating to conflicts of interest;
    (C) Administration. The routine, daily administration, direction 
and control of employees, requirements relating to gratuity and similar 
funds, but not guaranty, reserves, or similar funds; declaration of 
holidays, and changes to facilities housing the market, trading floor 
or trading area;
    (D) Standards of decorum. Standards of decorum or attire or similar 
provisions relating to admission to the floor, badges, or visitors, but 
not the establishment of penalties for violations of such rules; and
    (E) Fees. Fees or fee changes, other than fees or fee changes 
associated with market making or trading incentive programs, that:
    (1) Are less than $1.00; or
    (2) Relate to matters such as dues, badges, telecommunication 
services, booth space, real time quotations, historical information, 
publications, software licenses or other matters that are 
administrative in nature.
    (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 is made by an 
independent third party.
    (G) Option contract terms. For registered entities that are in 
compliance with the daily reporting requirements of Sec.  16.01 of this 
chapter, changes to option contract rules relating to the strike price 
listing procedures, strike price intervals, and the listing of strike 
prices on a discretionary basis.
    (H) Trading months. For registered entities that are in compliance 
with the daily reporting requirements of Sec.  16.01 of this chapter, 
the initial listing of trading months which are within the currently 
established cycle of trading months.


Sec.  40.7  Delegations.

    (a) Procedural matters. (1) The Commission hereby delegates, until 
it orders otherwise, to the Director of the Division of Clearing and 
Intermediary Oversight and, separately, to the Director of the Division 
of Market Oversight, to be exercised by either Director, as 
appropriate, or by such employees of the Commission that either 
Director may designate from time to time, the following authorities, 
with the concurrence of the General Counsel or the General Counsel's 
delegate:
    (i) To request, pursuant to Sec.  40.3(c)(2) or Sec.  
40.5(c)(1)(ii) of this part, that the registered entity requesting 
approval amend the proposed product, rule or rule amendment, or 
supplement the submission to the Commission;
    (ii) To notify the registered entity, pursuant to Sec.  40.3(e) or 
Sec.  40.5(e) of this part, that the Commission is not approving, or is 
unable to approve, the proposed product, rule or rule amendment;
    (iii) To make all determinations reserved to the Commission in 
Sec.  40.10.
    (2) The Commission hereby delegates, until it orders otherwise, to 
the Director of the Division of Clearing and Intermediary Oversight 
and, separately, to the Director of the Division of Market Oversight, 
to be exercised by either Director, as appropriate, or by such 
employees of the Commission that either Director may designate from 
time to time, the following authorities, after consultation with the 
Office of General Counsel or the General Counsel's delegate to notify a 
registered entity:
    (i) Pursuant to Sec.  40.3(d) of this part, that the time for 
review of the submission has been extended because the product raises 
novel or complex issues that require additional time for review;
    (ii) Pursuant to Sec.  40.5(d) of this part, that the time for 
review of the submission has been extended because the proposed rule or 
rule amendment raises novel or complex issues that

[[Page 44797]]

require additional time for review or is of major economic 
significance;
    (iii) Pursuant to Sec.  40.6(c) of this part, that the proposed 
rule or rule amendment has been stayed because there exist novel or 
complex issues that require additional time to analyze, or there is 
potential inconsistency with the Act or the Commission's regulations.
    (3) The Commission hereby delegates, until it orders otherwise, to 
the Director of the Division of Clearing and Intermediary Oversight 
and, separately, to the Director of the Division of Market Oversight, 
to be exercised by either Director, as appropriate, or by such 
employees of the Commission that either Director may designate from 
time to time, the authority to notify a registered entity, pursuant to 
Sec.  40.3(d) or Sec.  40.5(d) of this part, that the time for review 
of the submission has been extended, or that a rule certified pursuant 
to Sec.  40.6(c) has been stayed, because the submission is incomplete 
or provides an inadequate explanation.
    (4) Emergency rules. The Commission hereby delegates to the 
Director of the Division of Market Oversight and, separately, to the 
Director of the Division of Clearing and Intermediary Oversight, to be 
exercised by either Director, as appropriate, or by such other employee 
or employees of the Commission that either Director may designate from 
time to time, authority to receive notification of emergency rules 
under Sec.  40.6(a)(6)(ii) of this part.
    (5) The Commission hereby delegates to the Director of the Division 
of Market Oversight, to be exercised by the Director or by such 
employees of the Commission that the Director may designate from time 
to time, with the concurrence of the General Counsel or the General 
Counsel's delegate, the authority to determine whether a rule change 
submitted by a designated contract market for a materiality 
determination under Sec.  40.4(b)(5) of this part is not material (in 
which case it may be reported pursuant to the provisions of Sec.  
40.6(d) of this part), or is material, in which case he or she shall 
notify the registered entity that the rule change must be submitted for 
the Commission's prior approval.
    (b) Approval authority. The Commission hereby delegates, until it 
orders otherwise, to the Director of the Division of Clearing and 
Intermediary Oversight and, separately, to the Director of the Division 
of Market Oversight, to be exercised by either Director, as 
appropriate, or by such employees of the Commission that either 
Director may designate from time to time, with the concurrence of the 
General Counsel or the General Counsel's delegate, the authority to 
approve, pursuant to section 5c(c)(3) of the Act and Sec.  40.5 of this 
part, rules or rule amendments of a registered entity that:
    (1) Relate to, but do not substantially change, the quantity, 
quality, or other delivery specifications, procedures, or obligations 
for delivery, cash settlement, or exercise under an agreement, contract 
or transaction approved for trading by the Commission; daily settlement 
prices; clearing position limits; requirements or procedures for 
governance of a registered entity; procedures for transfer trades; 
trading hours; minimum price fluctuations; and maximum price limit and 
trading suspension provisions;
    (2) Reflect routine modifications that are required or anticipated 
by the terms of the rule of a registered entity;
    (3) Establish or amend speculative limits or position 
accountability provisions that are in compliance with the requirements 
of the Act and the Commission's regulations;
    (4) Are in substance the same as a rule of the same or another 
registered entity which has been approved previously by the Commission 
pursuant to section 5c(c)(3) of the Act;
    (5) Are consistent with a specific, stated policy or interpretation 
of the Commission; or
    (6) Relate to the listing of additional trading months of approved 
contracts.
    (c) Notwithstanding the provisions of this section, the Director of 
the Division of Clearing and Intermediary Oversight and, separately, 
the Director of the Division of Market Oversight may submit to the 
Commission for its consideration any matter that has been delegated 
pursuant to this section.
    (d) Nothing in this section shall be deemed to prohibit the 
Commission, at its election, from exercising any of the authority 
delegated pursuant to this section.


Sec.  40.8  Availability of public information.

    (a) The following sections of all applications to become a 
designated contract market, swap execution facility, derivatives 
clearing organization, or swap data repository shall be made publicly 
available: Transmittal letter and first page of the application cover 
sheet, proposed rules, narrative summary of the applicant's proposed 
activities and regulatory compliance chart, documents establishing the 
applicant's legal status, documents setting forth the applicant's 
corporate and governance structure and any other part of the 
application not covered by a request for confidential treatment.
    (b) The following submissions provided by an electronic trading 
facility on which significant price discovery contracts are traded or 
executed will be public: rulebook, the facility's regulatory compliance 
chart, documents establishing the facility's legal status, documents 
setting forth the facility's governance structure, and any other parts 
of the submissions not covered by a request for confidential treatment 
(Sec.  40.8(b) will be removed on July 20, 2012).
    (c) A registered entity's filing of new products pursuant to the 
self-certification procedures of Sec.  40.2 of this part, new products 
for Commission review and approval pursuant to Sec.  40.3 of this part, 
new rules and rule amendments for Commission review and approval 
pursuant to Sec.  40.4 or Sec.  40.5 of this part, and new rules and 
rule amendments pursuant to the self-certification procedures of Sec.  
40.6 and Sec.  40.10 of this part shall be treated as public 
information unless accompanied by a request for confidential treatment. 
If a registered entity files a request for confidential treatment, the 
following procedures shall apply:
    (1) A detailed written justification of the confidential treatment 
request must be filed simultaneously with the request for confidential 
treatment. The form and content of the detailed written justification 
shall be governed by Sec.  145.9 of this chapter;
    (2) All material for which confidential treatment is requested must 
be segregated in an Appendix to the submission;
    (3) The submission itself must indicate that material has been 
segregated and, as appropriate, an additional redacted version 
provided;
    (4) Commission staff may make an initial determination with respect 
to the request for confidential treatment without regard to whether a 
request for the information has been sought under the Freedom of 
Information Act;
    (5) All requests for confidential treatment shall be subject to the 
process provided by Sec.  145.9 of this chapter.
    (6) A submitter of information under this part may appeal an 
adverse decision by staff to the Commission's Office of General 
Counsel. The form and content of such appeal shall be governed by Sec.  
145.9(g) of this chapter.
    (7) The grant of any part of a request for confidential treatment 
under this section may be reconsidered if a subsequent request under 
the Freedom of Information Act is made for the information.
    (d) Commission staff will not consider confidential treatment 
requests for information that is required to be made

[[Page 44798]]

public under the Act. The terms and conditions of a product submitted 
to the Commission pursuant to Sec.  40.2, Sec.  40.3, Sec.  40.5 and 
Sec.  40.6 of this part shall be made publicly available at the time of 
submission.


Sec.  40.9  [Reserved]


Sec.  40.10  Special certification procedures for submission of rules 
by systemically important derivatives clearing organizations.

    (a) Advance notice. A registered derivatives clearing organization 
that has been designated by the Financial Stability Oversight Council 
as a systemically important derivatives clearing organization shall 
provide notice to the Commission not less than 60 days in advance of 
any proposed change to its rules, procedures, or operations that could 
materially affect the nature or level of risks presented by the 
systemically important derivatives clearing organization. A notice 
submitted under this section shall be subject to the filing 
requirements of Sec.  40.6(a)(1) and the Web site publication 
requirements of Sec.  40.6(a)(2).
    (1) The notice of a proposed change shall provide the information 
required to be submitted under Sec.  40.6(a)(7) and shall specifically 
describe:
    (i) The nature of the change and expected effects on risks to the 
systemically important derivatives clearing organization, its clearing 
members, or the market; and
    (ii) How the systemically important derivatives clearing 
organization plans to manage any identified risks.
    (2) Concurrent with providing the Commission with the advance 
notice or any request or other information related to the advance 
notice, the systemically important derivatives clearing organization 
shall provide the Board of Governors of the Federal Reserve System with 
a copy of such notice, request or other information in the same format 
and manner as required by the Board of Governors for those designated 
financial market utilities for which it is the Supervisory Agency 
pursuant to section 803(8) of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act.
    (3) The systemically important derivatives clearing organization 
may request that the Commission expedite the review on the grounds that 
the change would materially decrease risk. The Commission, in its 
discretion, may expedite the review and, pursuant to paragraph (g) of 
this section, notify the systemically important derivatives clearing 
organization in less than 60 days from the date the Commission receives 
the notice of proposed change in writing that it does not object to the 
proposed change and authorizes implementation of the change on an 
earlier date.
    (b) Materiality. The term ``materially affect the nature or level 
of risks presented,'' when used to qualify determinations on a change 
to rules, procedures, or operations of a systemically important 
derivatives clearing organization, means matters as to which there is a 
reasonable possibility that the change could affect the performance of 
essential clearing and settlement functions or the overall nature or 
level of risk presented by the systemically important derivatives 
clearing organization. Such changes may include, but are not limited 
to, changes that materially affect financial resources, participant and 
product eligibility, risk management (including matters relating to 
margin and stress testing), daily or intraday settlement procedures, 
default procedures, system safeguards (business continuity and disaster 
recovery), and governance. If a systemically important derivatives 
clearing organization determines that a proposed change is not material 
and therefore does not file an advance notice under this Sec.  40.10, 
but the Commission determines that the change is material, the 
Commission may require the systemically important derivatives clearing 
organization to withdraw the proposed change and provide notice 
pursuant to this section.
    (c) Further information. The Commission may require the 
systemically important derivatives clearing organization to provide any 
further information necessary to assess the effect the proposed change 
would have on the nature or level of risks associated with the 
systemically important derivatives clearing organization's payment, 
clearing, or settlement activities and the sufficiency of any proposed 
risk management techniques.
    (d) Notice of objection. A systemically important derivatives 
clearing organization shall not implement a change to which the 
Commission has an objection on the grounds that the proposed change is 
not consistent with the Act or the Commission's regulations, or the 
purposes of the Dodd-Frank Act or any applicable rules, orders, or 
standards prescribed under Section 805(a) of the Dodd-Frank Act. The 
Commission will notify the systemically important derivatives clearing 
organization in writing of any objection regarding the proposed change 
within 60 days from the later of:
    (1) The date that the notice of the proposed change was received; 
or
    (2) The date the Commission received any further information it had 
requested for consideration of the notice.
    (e) Implementation of change absent Commission objection. A 
systemically important derivatives clearing organization may implement 
a change if it has not received an objection to the proposed change 
within 60 days from the later of:
    (1) The date that the Commission received the notice of proposed 
change; or
    (2) The date the Commission received any further information it had 
requested for consideration of the notice.
    (f) Extended review. The Commission may, during the 60-day review 
period, extend the review period if the proposed change raises novel or 
complex issues. A notification by the Commission pursuant to this 
paragraph will extend the review for an additional 60 days. Any 
extension under this paragraph will extend the time periods under 
paragraphs (d) and (e) of this section for an additional 60 days.
    (g) Change allowed earlier if notified of no objection. A 
systemically important derivatives clearing organization may implement 
a change in less than 60 days from the date the Commission receives the 
notice of proposed change or the date the Commission receives any 
further information it has requested, if the Commission notifies the 
systemically important derivatives clearing organization in writing 
that it does not object to the proposed change and authorizes 
implementation of the change on an earlier date, subject to any 
conditions imposed by the Commission.
    (h) Emergency changes. A systemically important derivatives 
clearing organization may implement a change that would otherwise 
require advance notice under this section if it determines that an 
emergency exists and immediate implementation of the change is 
necessary for the systemically important derivatives clearing 
organization to continue to provide its services in a safe and sound 
manner.
    (1) The systemically important derivatives clearing organization 
shall provide notice of any such emergency change to the Commission as 
soon as practicable, which shall be no later than 24 hours after 
implementation of the change.
    (2) The notice of an emergency change shall:
    (i) Provide the information required for advance notice as set 
forth in paragraph (a) of this section;
    (ii) Describe the nature of the emergency; and

[[Page 44799]]

    (iii) Describe the reason the change was necessary for the 
systemically important derivatives clearing organization to continue to 
provide its services in a safe and sound manner.
    (3) The Commission may require modification or rescission of the 
emergency change if it finds that the change is not consistent with the 
Act or the Commission's regulations, or the purposes of the Dodd-Frank 
Act or any applicable rules, orders, or standards prescribed under 
Section 805(a) of the Dodd-Frank Act.


Sec.  40.11  Review of event contracts based upon certain excluded 
commodities.

    (a) Prohibition. A registered entity shall not list for trading or 
accept for clearing on or through the registered entity any of the 
following:
    (1) An agreement, contract, transaction, or swap based upon an 
excluded commodity, as defined in Section 1a(19)(iv) of the Act, that 
involves, relates to, or references terrorism, assassination, war, 
gaming, or an activity that is unlawful under any State or Federal law; 
or
    (2) An agreement, contract, transaction, or swap based upon an 
excluded commodity, as defined in Section 1a(19)(iv) of the Act, which 
involves, relates to, or references an activity that is similar to an 
activity enumerated in Sec.  40.11(a)(1) of this part, and that the 
Commission determines, by rule or regulation, to be contrary to the 
public interest.
    (b) [Reserved.]
    (c) 90-day review and approval of certain event contracts. The 
Commission may determine, based upon a review of the terms or 
conditions of a submission under Sec.  40.2 or Sec.  40.3, that an 
agreement, contract, transaction, or swap based on an excluded 
commodity, as defined in Section 1a(19)(iv) of the Act, which may 
involve, relate to, or reference an activity enumerated in Sec.  
40.11(a)(1) or Sec.  40.11(a)(2), be subject to a 90-day review. The 
90-day review shall commence from the date the Commission notifies the 
registered entity of a potential violation of Sec.  40.11(a).
    (1) The Commission shall request that a registered entity suspend 
the listing or trading of any agreement, contract, transaction, or swap 
based on an excluded commodity, as defined in Section 1a(19)(iv) of the 
Act, which may involve, relate to, or reference an activity enumerated 
in Sec.  40.11(a)(1) or Sec.  40.11(a)(2), during the Commission's 90-
day review period. The Commission shall post on the Web site a 
notification of the intent to carry out a 90-day review.
    (2) Final determination. The Commission shall issue an order 
approving or disapproving an agreement, contract, transaction, or swap 
that is subject to a 90-day review under Sec.  40.11(c) not later than 
90 days subsequent to the date that the Commission commences review, or 
if applicable, at the conclusion of such extended period agreed to or 
requested by the registered entity.


Sec.  40.12  Staying of certification and tolling of review period 
pending jurisdictional determination.

    (a) Notice of novel derivative products. (1) A registered entity 
certifying, submitting for approval, or otherwise filing a proposal to 
list, trade, or clear a novel derivative product (other than a product 
subject to the provisions of Sec.  1.8 of this chapter) having elements 
of both a security and a contract for the sale of a commodity for 
future delivery (or an option on such contract or an option on a 
commodity) may provide notice of its proposal to the Commission and the 
Securities and Exchange Commission with a statement that written notice 
has been provided to both agencies through an appropriate means 
provided in each Commission's regulations.
    (2) If concurrent notice is not provided pursuant to Sec.  
40.12(a)(1), the Commission shall notify the Securities and Exchange 
Commission of the registered entity's submission of a novel derivative 
product described in Sec.  40.12(a)(1) and accompany such notice with a 
copy of the submission. The Commission shall determine whether a 
particular submission is a novel derivative product requiring notice to 
the Securities and Exchange Commission not later than five business 
days subsequent to the date that the registered entity submits the 
product for Commission review.
    (b) Tolling of review period. Upon receipt of a request for a 
jurisdictional determination, pursuant to Section 718(a)(2) of the 
Dodd-Frank Act, by the Commission or the Securities and Exchange 
Commission, the product certification shall be stayed or the approval 
review period shall be tolled until a final determination order is 
issued.
    (1) The Commission will provide the registered entity with a 
written notice of stay pending issuance of a final determination order 
by the Commission or the Securities and Exchange Commission.
    (2) The stay shall be withdrawn or the approval review period shall 
resume upon the Commission's or the Securities and Exchange 
Commission's issuance of a final determination order finding that the 
Commission has jurisdiction over the submission.
    (3) Determination order. A final determination, for purposes of 
Sec.  40.12(b) of this part, shall be a determination order issued by 
the Commission or the Securities and Exchange Commission pursuant to 
Section 718(a)(3) of the Dodd-Frank Act.
    (c) Judicial review of determination order. The filing of a 
petition by a complaining Commission, pursuant to Section 718(b) of the 
Dodd-Frank Act, shall operate as a stay of the agency order.
    (1) The stay shall remain in effect until the date on which the 
United States Court of Appeals for the District of Columbia Circuit 
issues a final determination pursuant to Section 718(b)(4) of the Dodd-
Frank Act, or until such date that there is a final disposition of an 
appeal of that determination.
    (2) The submission review period shall resume upon issuance of a 
final determination, as described in Sec.  40.12(c)(1), that the 
Commission has jurisdiction over the submission.

Appendix A to Part 40--Schedule of Fees

    (a) Applications for product approval. Each application for 
product approval under Sec.  40.3 must be accompanied by a check or 
money order made payable to the Commodity Futures Trading Commission 
in an amount to be determined annually by the Commission and 
published in the Federal Register.
    (b) Checks and applications should be sent to the attention of 
the Office of the Secretariat, Commodity Futures Trading Commission, 
Three Lafayette Centre, 1155 21st Street, N.W., Washington, DC 
20581. No checks or money orders may be accepted by personnel other 
than those in the Office of the Secretariat.
    (c) Failure to submit the fee with an application for product 
approval will result in return of the application. Fees will not be 
returned after receipt.

Appendix B to Part 40--[Reserved]

Appendix C to Part 40--[Reserved]

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

    (a) A properly completed submission cover sheet shall accompany 
all rule and product submissions submitted electronically by a 
registered entity in a format and manner specified by the Secretary 
of the Commission to the Secretary of the Commission. A properly 
completed submission cover sheet shall include all of the following:
    1. Identifier Code (optional)--A registered entity Identifier 
Code at the top of the cover sheet, if applicable. Such codes are 
commonly generated by registered entities to

[[Page 44800]]

provide an identifier that is unique to each filing (e.g., NYMEX 
Submission 03-116).
    2. Date--The date of the filing.
    3. Organization--The name of the organization filing the 
submission (e.g., CBOT).
    4. Filing as a--Check in the appropriate box indicating that the 
rule or product is being submitted by a designated contract market 
(DCM), derivatives clearing organization (DCO), swap execution 
facility (SEF), or swap data repository (SDR), electronic trading 
facility with a significant price discovery contract (the term will 
be removed on July 20, 2012).\1\
---------------------------------------------------------------------------

    \1\ Even though ECM-SPDC was eliminated by the Dodd-Frank Act, 
the Commission will retain references to this entity in the cover 
sheet since ECMs may be allowed to operate until July 20, 2012, 
pursuant to grandfather relief issued by the Commission. See 75 FR 
56513 (Sept. 16, 2010).
---------------------------------------------------------------------------

    5. Type of Filing--An indication as to whether the filing is a 
new rule, rule amendment or new product. The registered entity 
should check the appropriate box to indicate the applicable category 
under that heading.
    6. Rule Numbers--For rule filings, the rule number(s) being 
adopted or modified in the case of rule amendment filings.
    7. Description--For rule or rule amendment filings, a 
description of the new rule or rule amendment, including a 
discussion of its expected impact on the registered entity, market 
participants, and the overall market. The narrative should describe 
the substance of the submission with enough specificity to 
characterize all material aspects of the filing.
    (b) Other Requirements--A submission shall comply with all 
applicable filing requirements for proposed rules, rule amendments, 
or products. The filing of the submission cover sheet does not 
obviate the registered entity's responsibility to comply with 
applicable filing requirements (e.g., rules submitted for Commission 
approval under Sec.  40.5 must be accompanied by an explanation of 
the purpose and effect of the proposed rule along with a description 
of any substantive opposing views).
    (c) Checking the box marked ``confidential treatment requested'' 
on the Submission Cover Sheet does not obviate the submitter's 
responsibility to comply with all applicable requirements for 
requesting confidential treatment in Sec.  40.8 and, where 
appropriate, Sec.  145.9 of this chapter, and will not substitute 
for notice or full compliance with such requirements.

    Issued in Washington, DC, on July 19, 2011, by the Commission.
David A. Stawick,
Secretary of the Commission.

Appendices to Provisions Common to Registered Entities--Commission 
Voting Summary and Statements of Commissioners

    Note: The following appendices will not appear in the Code of 
Federal Regulations.

Appendix 1--Commission Voting Summary

    On this matter, Chairman Gensler and Commissioners Dunn, 
Sommers, Chilton and O'Malia voted in the affirmative; no 
Commissioner voted in the negative.

Appendix 2--Statement of Chairman Gary Gensler

    I support the final rulemaking to establish a process for the 
certification and approval of new rules and rule amendments for 
designated contract markets, derivatives clearing organizations, as 
well as new registrants, swap execution facilities and swap data 
repositories. The Dodd-Frank Wall Street Reform and Consumer 
Protection Act establishes enhanced CFTC review and certification of 
new rules and amendments. Today's final regulations provide 
important procedural guidance to registered entities on how to 
comply with Congress's mandate for the Commission's review of new 
rules and rule amendments.

[FR Doc. 2011-18661 Filed 7-26-11; 8:45 am]
BILLING CODE 6351-01-P