[Federal Register Volume 85, Number 86 (Monday, May 4, 2020)]
[Proposed Rules]
[Pages 26378-26413]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-08496]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 4

RIN 3038-AE98


Amendments to Compliance Requirements for Commodity Pool 
Operators on Form CPO-PQR

AGENCY: Commodity Futures Trading Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Commodity Futures Trading Commission (CFTC or Commission) 
is proposing amendments to agency regulations on Commodity Pool 
Operators. Specifically, the proposal would eliminate the pool-specific 
reporting requirements in existing Schedules B and C of Form CPO-PQR, 
other than the pool schedule of investments, and amend the information 
in existing Schedule A of the form to request Legal Entity Identifiers 
(LEIs) for commodity pool operators (CPOs) and their operated pools 
that have them, and to eliminate questions regarding pool auditors and 
marketers. All CPOs would be required to file the resulting amended 
Form CPO-PQR quarterly, but would also be allowed to file NFA Form PQR, 
a comparable form required by the National Futures Association (NFA), 
in lieu of filing the revised Form CPO-PQR. Relatedly, the Commission 
would also no longer accept filing Form PF in lieu of the revised Form 
CPO-PQR. The Commission preliminarily believes that these amendments 
would focus Form CPO-PQR on data elements that facilitate the 
Commission's oversight of CPOs and their pools in connection with its 
use of other Commission data streams and regulatory initiatives while 
reducing overall data collection requirements for market participants.

DATES: Comments must be received on or before June 15, 2020.

ADDRESSES: You may submit comments, identified by RIN number 3038-AE98, 
by any of the following methods:
     CFTC Comments Portal: https://comments.cftc.gov. Select 
the ``Submit Comments'' link for this rulemaking and follow the 
instructions on the Public Comment Form.
     Mail: Christopher Kirkpatrick, Secretary of the 
Commission, Commodity Futures Trading Commission, Three Lafayette 
Centre, 1155 21st Street NW, Washington, DC 20581.
     Hand Delivery/Courier: Follow the same instructions as for 
Mail, above.
    Please submit your comments using only one of these methods. 
Submissions through the CFTC Comments Portal are encouraged.
    All comments must be submitted in English, or if not, accompanied 
by an English translation. Comments will be posted as received to 
https://comments.cftc.gov. You should submit only information that you 
wish to make available publicly. If you wish the Commission to consider 
information that you believe is exempt from disclosure under the 
Freedom of Information Act (FOIA), a petition for confidential 
treatment of the exempt information may be submitted according to the 
procedures established in Commission Regulation 145.9.\1\
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    \1\ 17 CFR 145.9. The Commission's regulations are found at 17 
CFR Ch. I (2019).
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    The Commission reserves the right, but shall have no obligation, to 
review, pre-screen, filter, redact, refuse or remove any or all of your 
submission from https://comments.cftc.gov that it

[[Page 26379]]

may deem to be inappropriate for publication, such as obscene language. 
All submissions that have been redacted or removed that contain 
comments on the merits of the rulemaking will be retained in the public 
comment file and will be considered as required under the 
Administrative Procedure Act and other applicable laws, and may be 
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accessible under the FOIA.

FOR FURTHER INFORMATION CONTACT: Joshua B. Sterling, Director, at 202-
418-6700 or [email protected]; Amanda Lesher Olear, Deputy Director, 
at 202-418-5283 or [email protected]; Division of Swap Dealer and 
Intermediary Oversight, Commodity Futures Trading Commission, Three 
Lafayette Centre, 1151 21st Street NW, Washington, DC 20581.

SUPPLEMENTARY INFORMATION:

I. Introduction

    Section 1a(11) of the Commodity Exchange Act (CEA or the Act) \2\ 
defines the term ``commodity pool operator'' (CPO), as any person \3\ 
engaged in a business that is of the nature of a commodity pool, 
investment trust, syndicate, or similar form of enterprise, and who, 
with respect to that commodity pool, solicits, accepts, or receives 
from others, funds, securities, or property, either directly or through 
capital contributions, the sale of stock or other forms of securities, 
or otherwise, for the purpose of trading in commodity interests.\4\ CEA 
section 4m generally requires each person who satisfies the CPO 
definition to register as such with the Commission.\5\ CEA section 4n 
requires registered CPOs to maintain books and records and file such 
reports in such form and manner as may be prescribed by the 
Commission.\6\
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    \2\ 7 U.S.C. 1, et seq. (2019). The Act is accessible through 
the Commission's website, https://www.cftc.gov.
    \3\ See 17 CFR 1.3 (defining ``person'' to include individuals, 
associations, partnerships, corporations, and trusts).
    \4\ 7 U.S.C. 1a(11).
    \5\ 7 U.S.C. 6m(1).
    \6\ 7 U.S.C. 6n(3)(A). Registered CPOs have regulatory reporting 
obligations with respect to their operated pools. See 17 CFR. 4.22.
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    In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection 
Act (Dodd-Frank Act) \7\ amended the Investment Advisers Act of 1940 
(Advisers Act) \8\ to require advisers to large private funds \9\ to 
register with the Securities and Exchange Commission. (SEC).\10\ 
Congress further directed the SEC to adopt rules requiring registered 
private fund advisers \11\ to file reports containing such information 
as is deemed necessary and appropriate in the public interest and for 
investor protection and for the assessment of systemic risk.\12\ 
Pursuant to section 204 of the Advisers Act, as amended, those records 
and reports must include, among other things, a description of the 
amount of assets under management, use of leverage, counterparty credit 
risk exposure, and trading and investment positions for each private 
fund advised by the adviser.\13\ These records and reports must also be 
made available to the Financial Stability Oversight Counsel (FSOC).\14\ 
Through these requirements, Congress sought to make available to the 
SEC and FSOC information regarding the size, strategies, and positions 
of large private funds, which Congress believed could be crucial to 
regulatory attempts to deal with a future crisis.\15\
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    \7\ Public Law 111-203, 124 Stat. 1376 (2010).
    \8\ 15 U.S.C. 80b-1 et seq. (2019).
    \9\ Section 202(a)(29) of the Advisers Act defines the term 
``private fund'' as ``an issuer that would be an investment company, 
as defined in section 3 of the Investment Company Act of 1940 (15 
U.S.C. 80a-3), but for section 3(c)(1) or 3(c)(7) of that Act.'' See 
15 U.S.C. 80ab-2(a)(29).
    \10\ See Dodd-Frank Act section 403 of the (amending Advisers 
Act 203(b), 15 U.S.C. 80b-3(b), to incorporate private fund adviser 
registration); Dodd-Frank Act sections 402, 407, 408 (establishing 
certain exemptions from private fund adviser registration); Advisers 
Act section 202(a)(29), 15 U.S.C. 80a-3 (defining ``private fund'').
    \11\ As used in this release, the term ``private fund adviser'' 
refers to any investment adviser that is: (i) Registered or required 
to be registered with the SEC (including any investment adviser that 
is also registered or required to be registered with the CFTC as a 
CPO or CTA); and (ii) advises one or more private funds (including 
any commodity pools that satisfy the definition of ``private 
fund'').
    \12\ See Dodd-Frank Act section 404; Advisers Act section 204, 
15 U.S.C. 80b-4(b)(5). See also 15 U.S.C. 80b-4(b)(1) (authorizing 
the SEC to require each investment adviser to a private fund to file 
reports containing such information as the SEC deems necessary and 
appropriate in the public interest or for the protection of 
investors or for the assessment of systemic risk by the Financial 
Stability Oversight Council).
    \13\ 15 U.S.C. 80b-4(b)(3).
    \14\ 15 U.S.C. 80b-4(b)(7).
    \15\ Commodity Pool Operators and Commodity Trading Advisors: 
Amendments to Compliance Obligations, 76 FR 7976, 7977 (Form CPO-PQR 
Proposal) (Feb. 11, 2011) (citing S. Conf. Rep. No. 111-176, at 38 
(2010)).
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    Pursuant to Advisers Act section 211, as amended, rules 
establishing the form and content of reports filed by private fund 
advisers that are dually registered with the SEC and the CFTC 
(together, the Commissions) must be promulgated jointly by both 
agencies after consultation with FSOC.\16\ Accordingly, in 2011 the 
Commissions jointly adopted sections 1 and 2 of Form PF.\17\ In 
adopting Form PF, the Commissions stated that the form was designed to 
provide FSOC empirical data from which it may make a determination 
about the extent to which the activities of private funds or their 
advisers pose systemic risk.\18\ The SEC added that the policy 
judgements implicit in the Form PF reporting requirements reflected 
FSOC's role as the primary user of the reported information and that 
the SEC would not necessarily have required the same scope of reporting 
if the information reported on Form PF were intended solely for the 
SEC's use.\19\
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    \16\ 15 U.S.C. 80b-11(e).
    \17\ See Reporting by Investment Advisers to Private Funds and 
Certain Commodity Pool Operators and Commodity Trading Advisors on 
Form PF, 76 FR 71128 (Nov. 16, 2011) (Form PF Final Rule). Sections 
3 and 4 of Form PF were adopted solely by the SEC. Id.
    \18\ Id. at 71129.
    \19\ Id. at 71129-30.
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    Following the adoption of Form PF, and on its own initiative, the 
Commission adopted its own new reporting requirement for CPOs: Form 
CPO-PQR and Sec.  4.27, which requires certain CPOs to report on Form 
CPO-PQR.\20\ The Commission proposed this new reporting requirement 
after reevaluating its regulatory approach to CPOs in light of the 2008 
financial crisis and the purposes and goals of the Dodd-Frank Act so as 
to determine the necessary level of regulation in the then-current 
economic environment. The amendments to Part 4, including this new 
reporting requirement, were intended to: (1) Align the Commission's 
regulatory structure for CPOs with the purposes of the Dodd-Frank Act; 
(2) encourage more congruent and consistent regulation of similarly 
situated entities among Federal financial regulatory agencies, such as 
dually registered CPOs required to file Form PF; (3) improve 
accountability and increase transparency of the activities of CPOs and 
the commodity pools that they operate or advise; and (4) facilitate a 
data collection that would potentially assist FSOC.\21\ To that end, 
the requirements of Form CPO-PQR were modeled closely after those of 
Form PF.\22\
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    \20\ See Commodity Pool Operators and Commodity Trading 
Advisors: Compliance Obligations, 77 FR 11252 (Feb. 24, 2012) (Form 
CPO-PQR Final Rule); 17 CFR pt. 4 app. A; 17 CFR 4.27.
    \21\ Form CPO-PQR Proposal, 76 FR at 7978.
    \22\ Id. at 7978 (``The Commission proposes [Form CPO-PQR] to 
solicit information that is generally identical to that sought 
through Form PF . . .''). Section 4.27 further provides for the 
filing of Form PF in lieu of Commission filing requirements (i.e., 
Form CPO-PQR) for CPOs that are dually registered with the SEC. See 
17 CFR 4.27(d).
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    In adopting Form CPO-PQR, the Commission indicated that the 
collected data would be used for several broad purposes, including: 
Increasing the Commission's understanding of its registrant population; 
assessing the market risk associated with pooled

[[Page 26380]]

investment vehicles under its jurisdiction; and monitoring for systemic 
risk.\23\ Specifically, the Commission was interested in receiving 
information regarding the operations of CPOs and their pools, including 
their participation in commodity interest markets, their relationships 
with intermediaries, and their interconnectedness with the financial 
system at large.\24\ In proposing the majority of the more pool-
specific questions in the form in particular, the Commission believed 
the incoming data would assist the Commission in monitoring commodity 
pools in such a way as to allow the Commission to identify trends over 
time, including a pool's exposure to asset classes, the composition and 
liquidity of a commodity pool's portfolio, and a pool's susceptibility 
to failure in times of stress.\25\ Although the Commission recognized 
that the data had some limitations, it believed that, in light of the 
2008 financial crisis and the sources of risk delineated in the Dodd-
Frank Act with respect to private funds, the detailed, pool-specific 
information to be provided in Form CPO-PQR was necessary and 
appropriately balanced to assess the risks posed by a pool or a CPO's 
operations as a whole.\26\
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    \23\ See Form CPO-PQR Final Rule, 77 FR 11252.
    \24\ Id. at 11266.
    \25\ Form CPO-PQR Proposal, 76 FR at 7981.
    \26\ Id.
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    After seven years of experience with Form CPO-PQR, the Commission 
is reassessing the scope of Form CPO-PQR and how it aligns with the 
Commission's current regulatory priorities. The Commission's ability to 
make full use of the more detailed information collected under Form 
CPO-PQR has not met the Commission's initial expectations. At the same 
time, however, the Commission has devoted substantial resources to 
developing other data streams and regulatory initiatives designed to 
enhance its ability to broadly surveil financial markets for risk posed 
by all manner of market participants, including CPOs and their operated 
pools.
    Under these circumstances, and as further explained in discussion 
that follows, the Commission preliminarily believes that Form CPO-PQR 
could be revised in a way that would support the Commission's ability 
to exercise its oversight of CPOs and their operated pools while 
reducing reporting burdens for market participants, thereby further 
promoting the integrity, resilience, and vibrancy of the U.S. 
derivatives markets.

II. Overview of Current Form CPO-PQR

    The amount of information that a CPO is currently required to 
disclose on Form CPO-PQR varies depending on the size of the operator 
and the size of the operated pools.\27\ The form identifies three 
classes of filers: Large CPOs, Mid-Sized CPOs, and Small CPOs. The 
thresholds for determining Large and Mid-Sized CPOs generally align 
with those in Form PF: \28\ A Large CPO is a CPO that had at least $1.5 
billion in aggregated pool assets under management (AUM) \29\ as of the 
close of business on any day during the reporting period; a Mid-Sized 
CPO is a CPO that had at least $150 million, but less than $1.5 
billion, in aggregated pool AUM as of the close of business on any day 
during the reporting period. Although not defined in Form CPO-PQR, 
``Small CPO,'' as used herein, refers to a CPO that is not a Large CPO 
or a Mid-Sized CPO, i.e., a CPO that had less than $150 million in 
aggregated pool AUM during the entire reporting period. The reporting 
period for Large CPOs is any of the individual calendar quarters 
(ending March 31, June 30, September 30, and December 31); for Small 
and Mid-Sized CPOs, the reporting period is the calendar year-end.
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    \27\ See 17 CFR pt. 4 app. A.
    \28\ See Instructions to Form PF, available at http://www.sec.gov/about/forms/formpf.pdf. Private fund investment advisers 
with ``regulatory AUM,'' as that term is defined in Form PF, of at 
least $150 million are required to file Section 1 of Form PF; 
private fund investment advisers with regulatory AUM equal to or 
exceeding $1.5 billion are required to file Sections 1 and 2 of Form 
PF. Id.
    \29\ AUM refers to the amount of all assets that are under the 
control of the CPO. See 17 CFR pt. 4 app. A.
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    Form CPO-PQR consists of three schedules: Schedules A, B, and C. 
Schedule A requires all CPOs to disclose basic identifying information 
about the CPO (Part 1) and about each of the CPO's pools and the 
service providers they used (Part 2). Large CPOs submit Schedule A on a 
quarterly basis; all other CPOs submit it annually. Schedule B requires 
additional detailed information for each pool operated by Mid-Sized and 
Large CPOs regarding each pool's investment strategy; borrowings and 
types of creditors; counterparty credit exposure; trading and clearing 
mechanisms; value of aggregated derivative positions; and a schedule of 
investments. Large CPOs submit Schedule B on a quarterly basis, whereas 
Mid-Sized CPOs submit it annually.
    Schedule C requires further detailed information about the pools 
operated by Large CPOs on an aggregate and pool-by-pool basis. Part 1 
of Schedule C requires aggregate information for all pools operated by 
a Large CPO, including (1) a geographical breakdown of the pools' 
investment on an aggregated basis and (2) the turnover rate of 
aggregate portfolio of pools. Part 2 of Schedule C requires certain 
detailed information for each Large Pool the Large CPO operates, where 
a ``Large Pool'' is defined as a commodity pool that has a net asset 
value (NAV) \30\ individually, or in combination with any parallel pool 
structure,\31\ of at least $500 million as of the close of business on 
any day during the reporting period.\32\ Specifically, Part 2 requires 
information with respect to each Large Pool the Large CPO operates 
during the given reporting period, including information regarding the 
Large Pool's: (1) Identity; (2) liquidity; (3) counterparty credit 
exposure; (4) risk metrics; (5) borrowing; (6) derivative positions and 
posted collateral; (7) financing liquidity; (8) participant 
information; and (9) the duration of its fixed income assets. Large 
CPOs submit Schedule C on a quarterly basis and a separate Part 2 of 
Schedule C on a quarterly basis for each Large Pool they operate during 
the reporting period.
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    \30\ The term ``net asset value'' has the same meaning as in 
Commission regulation at Sec.  4.10(b). See id.
    \31\ The term ``parallel pool structure'' means any structure in 
which one or more pools pursues substantially the same investment 
objective and strategy and invests side by side in substantially the 
same assets as another pool. See id.
    \32\ Id.
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    If a CPO is dually registered with the SEC as an Investment Adviser 
and is required to file Form PF regarding its advisory services to 
private funds \33\ during the reporting period, the CPO is deemed to 
have satisfied its Schedule B and Schedule C filing requirements by 
completing and filing certain questions in Form PF.\34\
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    \33\ The term ``private fund'' has the same meaning as the 
definition of ``private fund'' in Form PF. 17 CFR pt. 4, app. A.
    \34\ See id.
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    In addition to Form PF and Form CPO-PQR, in 2010 NFA implemented 
its form PQR (NFA Form PQR) to elicit data in support of a risk-based 
examination program for CPOs.\35\ Pursuant to NFA Rule 2-46, all CPO 
NFA members, which include all CPOs registered with the Commission, 
must file NFA Form PQR on a quarterly basis.\36\ By rule, NFA accepts 
the filing of Form CPO-PQR, but not Form PF, in lieu of filing its form 
for any quarter in which a Form CPO-PQR filing is

[[Page 26381]]

required under Sec.  4.27. As such, dually-registered CPOs that file 
Form PF in lieu of a Form CPO-PQR filing are currently required to file 
NFA Form PQR with NFA quarterly.
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    \35\ NFA Rule 2-46 (2010).
    \36\ Id. All registered CPOs are required to be NFA members 
pursuant to 17 CFR 170.17.
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III. Proposed Regulations

    As indicated above, the Commission is proposing amendments to Form 
CPO-PQR that would reduce the amount of reporting required thereunder 
while still supporting the Commission's ability to oversee the 
activities of CPOs and their operated pools. Specifically, the proposal 
would eliminate the pool-specific information currently required to be 
reported in Schedules B or C of the form, with the exception of the 
pool schedule of investments (question 6 of Schedule B). The 
information required in current Schedule A would remain with a few 
amendments, notably the addition of questions regarding LEIs. The 
retained reporting requirements--the reporting requirements in current 
Schedule A, as proposed to be amended, plus the schedule of investments 
from Schedule B--would be combined to form the entirety of Form CPO-
PQR, referred to herein as ``Revised Form CPO-PQR.'' The proposal would 
require all CPOs to file Revised Form CPO-PQR on a quarterly basis, but 
would permit CPOs to file a comparable form required by NFA, NFA Form 
PQR, in lieu of Revised Form CPO-PQR. As a corollary, the Commission 
would also revise Sec.  4.27(d) to eliminate the ability of dually 
regulated CPOs that are required to file Form PF with respect to one or 
more of their operated private funds to file Form PF in lieu of filing 
current Form CPO-PQR, while retaining Form PF as the Commission's form. 
The sections that follow explain these proposed changes in further 
detail.

A. Elimination of Pool-Specific Reporting Requirements in Schedules B 
and C

    As mentioned above, the Commission is proposing to eliminate the 
majority of the information required to be reported in current 
Schedules B and C of Form CPO-PQR. The eliminated data elements include 
detailed, pool-specific information, provided on both the individual 
and aggregate level, such as questions about investment strategy and 
counterparty credit exposure, asset liquidity and concentration of 
positions, clearing relationships, risk metrics, financing, and 
investor composition.
    In adopting Form CPO-PQR, the Commission was interested in 
receiving information regarding the operations of CPOs and their 
operated pools, including their participation in commodity interest 
markets, their relationships with intermediaries, and their 
interconnectedness with the financial system at large.\37\ In proposing 
the majority of the elements in Schedules B and C in particular, the 
Commission believed they would assist the Commission in monitoring 
commodity pools in such a way as to allow the Commission to identify 
trends over time, including a pool's exposure to asset classes, the 
composition and liquidity of a commodity pool's portfolio, and a pool's 
susceptibility to failure in times of stress.\38\
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    \37\ Form CPO-PQR Final Rule, 77 FR at 11266.
    \38\ Form CPO-PQR Proposal, 76 FR at 7981.
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    After seven years of experience with Form CPO-PQR, however, the 
Commission acknowledges that challenges with the data collected in 
Schedules B and C, combined with resource constraints in the face of 
broader Commission priorities, have frustrated the Commission's ability 
to fully realize that vision. To begin, in an effort to take into 
account the different ways CPOs maintain information, the Commission 
allowed CPOs flexibility in how they calculated and presented certain 
of the data elements.\39\ For example, Form CPO-PQR gives Large CPOs 
the option of reporting the duration, weighted average tenor, or 10-
year equivalents of fixed income portfolio holdings, understanding that 
Large CPOs may use a wide range of metrics to measure interest rate 
sensitivity. As a result, the Commission's ability to identify trends 
across CPOs or pools using Form CPO-PQR data has been substantially 
challenged.
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    \39\ Form CPO-PQR Final Rule, 77 FR at 11271.
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    Additionally, taking into account the volume and complexity of the 
data it was requesting, the Commission determined not to require the 
data to be provided in real-time but rather only mandated post hoc 
quarterly or annual filings. The Commission acknowledged the 
limitations of this filing schedule at the time but also recognized the 
time it would take to produce the requested information and concluded 
that Form CPO-PQR struck an appropriate balance in addressing the 
Commission's need for timely information and providing CPOs sufficient 
time to prepare it.\40\ As the Commission has reviewed the data over 
the years, however, it has become apparent that the infrequent and 
delayed nature of such reporting has made it difficult to assess the 
impact of CPOs and their operated pools on markets as conditions and 
that relative CPO risk profiles may have changed, potentially 
significantly, by the time Form CPO PQR is filed with the Commission.
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    \40\ Id. at 11267.
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    Part of the Commission's rationale for promulgating Schedules B and 
C was a need for additional information about CPOs that are non-dual 
registrants to ``identify significant risk to the stability of the 
derivatives market and the financial market as a whole.'' \41\ In 
making the assessment that the information then available about the 
operations of CPOs and their operated firms was insufficient, the 
Commission focused primarily on the limited data that it received under 
other provisions of Part 4, such as the annual pool financial 
statements under Sec.  4.22, which it believed was not well suited for 
the stated purpose of identifying risk to the either stability of the 
derivatives markets or the financial markets in general.\42\ Moreover, 
the Commission did not at the time believe that it had the capability 
to use that information to assess the relationship between a large 
position held by a pool and the rest of the pool's other derivatives 
positions and securities investments.\43\
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    \41\ Id. at 11266.
    \42\ Form CPO-PQR Proposed Rule, 76 FR at 7978 (``The 
information that the Commission currently receives is limited, not 
designed to measure systemic or market risk in any meaningful way, 
and is only submitted by registered CPOs on an annual basis.'').
    \43\ Form CPO-PQR Final Rule, 77 FR at 11268.
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    However, in the ten years since the Dodd-Frank Act was passed, the 
Commission has devoted significant resources to regulatory initiatives 
and data streams designed to enhance the Commission's ability to 
broadly surveil financial markets for risk posed by all manner of 
market participants, including CPOs. These data streams include 
extensive information related to trading, reporting, and clearing of 
swaps. Notably, the Commission has developed a regime requiring the 
reporting of detailed swap transaction information to swap data 
repositories (SDRs), including for those transactions entered into by 
CPOs and the pools they operate.\44\ Specifically, swap transaction 
data related to both over-the-counter and exchange traded swaps is 
required to be reported to SDRs,\45\ and consequently, swaps entered 
into by CPOs and pools, whether on an exchange or over-the-counter, are 
reported to SDRs and included in the data set that Commission staff can 
use to conduct broader market surveillance.
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    \44\ See 17 CFR pts. 45; App. 1 to pt. 45, 49.
    \45\ 17 CFR pt. 45.
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    The Commission has also maintained, and in some instances enhanced, 
its daily reporting regime for derivatives clearing organizations 
(DCOs), clearing

[[Page 26382]]

members, designated contract markets (DCMs), futures commission 
merchants (FCMs), swap dealers, and large traders. Commission 
regulations require DCOs to make extensive daily reports, containing 
information on the positions and activities of clearing members and 
customers, including commodity pools, to the Commission.\46\ Commission 
regulations also require reporting by clearing members and large 
traders themselves.\47\ Through this data, the Commission can analyze 
positions and risks at the DCO, clearing member, or customer level, 
including customer positions at more than one clearing member, and 
clearing member positions at more than one DCO.
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    \46\ 17 CFR 39.19.
    \47\ 17 CFR pt. 18.
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    The Commission's risk surveillance program focuses on identifying, 
quantifying, and monitoring the risks to the financial system posed by 
DCOs, clearing participants, and other market participants--including 
CPOs and their operated pools. To this end, on a daily basis, 
Commission staff work to: (1) Identify positions in cleared products 
that pose significant financial risk; and (2) confirm that these risks 
are being appropriately managed. Staff undertakes these tasks at the 
customer level, the firm level, and the DCO level. That is, staff 
identifies both the customers that pose risks to clearing members and 
clearing members that pose risks to DCOs.
    Importantly, most of the transaction and position information the 
Commission uses for its surveillance activities is available on a more 
timely and frequent basis than the data received on the current 
iteration of Form CPO-PQR. Furthermore, Commission programs to conduct 
surveillance of exchanges, FCMs, and DCOs already include CPOs and do 
not rely on the information contained in Schedules B and C of Form CPO-
PQR.
    Taken together, these efforts have enhanced the Commission's 
ability to broadly and actively surveil financial markets, including 
with respect to the activities of CPOs and the pools they operate. In 
general, the Commission's alternate data streams provide a more timely, 
standardized, and reliable view into relevant market activity than that 
provided under Form CPO-PQR, which make them much easier to combine 
into a holistic surveillance program. Although none of the Commission's 
current data streams offers a substitute for the more detailed, pool-
specific type of information set forth in Schedules B and C of Form 
CPO-PQR, the Commission preliminarily believes that, taking into 
account the Commission's current priorities and resource 
availabilities, a Revised Form CPO-PQR that could be more easily 
integrated with these existing and more developed data streams would 
enable the Commission, with some additional data analysis, to oversee 
and assess the impact of CPOs and their operated pools in the commodity 
interest markets in an effective manner. The inclusion of the LEIs for 
the CPO and its operated pools, as explained more fully below, would be 
key to helping facilitate this integration with respect to CPOs and 
pools that engage in the swaps markets. The Commission also 
preliminarily believes that this improved data integration would 
mitigate the need to engage in a more extensive, and likely more 
burdensome, effort to improve the utility of the data fields requested 
in current Schedules B and C.
    The Commission notes that more than half of the largest CPOs and 
pools are captured within the statutory definitions of private fund 
investment advisers and private funds and as such are required to 
report on Form PF.\48\ Other large asset managers that are registered 
as CPOs and file Form CPO-PQR are sponsors or advisers to investment 
companies registered under the Investment Company Act of 1940,\49\ 
which, by definition, are not private funds.\50\ Many of those 
registered investment companies are also commodity pools that trade 
commodity interests to a meaningful degree as part of their investment 
strategies; as a result, those investment companies' principal 
investment advisers have registered with the Commission as CPOs.\51\ 
Registered investment companies are subject to a comprehensive scheme 
of periodic financial reporting under the federal securities laws, and 
most of that data is publicly available on the SEC's website through 
its EDGAR filing system.\52\ In addition, all CPOs file annual 
certified financial statements for their commodity pools with NFA 
pursuant to the Commission's regulations.\53\ NFA reviews the 
information in commodity pool annual certified financial statements, 
uses it as an input for determining the frequency and scope of its 
examinations of CPOs in combination with the data that it collects on 
its NFA Form PQR, and communicates frequently with Commission staff 
regarding its examination of CPOs, as informed by its review of such 
financial statements and data filings.
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    \48\ Based on the data received for the reporting period of 
September 30, 2017, for example, eight out of the ten largest CPOs 
filed Form PF in lieu of Form CPO-PQR.
    \49\ 15 U.S.C. 80a-1, et seq.
    \50\ 15 U.S.C. 80b-2(29).
    \51\ 17 CFR 4.5(c); 17 CFR 4.12(c).
    \52\ For instance, registered management investment companies--a 
category that includes those investment companies that are also 
commodity pools--file with the SEC annual reports on Form N-CEN, 
quarterly reports of their portfolio holdings on Form N-PORT, and 
information about their liquidity on Form N-LIQUID. Management 
investment companies that are regulated as money market funds are 
subject to different reporting, as are other registered investment 
companies that are organized as unit investment trusts, business 
development companies, and face-amount certificate companies.
    \53\ 17 CFR 4.7(b); 4.22(c) and (d).
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    The Commission acknowledges that a determination to no longer 
routinely collect the pool-specific data in Schedules B and C would 
result in this information not being readily available to FSOC upon 
request, which was part of the Commission's envisioned purpose for Form 
CPO-PQR when it was first promulgated. As well, the Commission notes 
that many dually registered CPOs currently include commodity pools that 
are not private funds in data that they report on Form PF, in lieu of a 
filing on Form CPO-PQR for such pools, pursuant to Sec.  4.27(d), and 
that if the amendments proposed herein are adopted as final, these CPOs 
could decide to stop including these pools in their Form PF filing. The 
Commission understands that this could result in less information 
relevant to commodity pools being available to FSOC from Form PF. 
However, given that FSOC is otherwise provided with comparable data for 
the sizeable number of dually registered CPOs via Form PF, the 
Commission preliminarily believes FSOC's monitoring should not be 
materially affected compared to its current state.

B. Revised Form CPO-PQR

    With the proposed elimination of the majority of the data fields 
set forth in Schedules B and C of current Form CPO-PQR, the resulting 
Revised Form CPO-PQR would consist of the information currently 
reported in Schedule A of Form CPO-PQR, with a couple deletions 
discussed below; the pool schedule of investments, currently reported 
under question 6 of Schedule B; and new questions to solicit LEIs for 
each CPO and its operated pools. All CPOs would be required to report 
all of this information quarterly, regardless of their AUM. As 
intimated above, the Commission preliminarily believes that this 
information, when integrated with other data streams available to the 
Commission, would provide an effective and efficient way for the 
Commission to

[[Page 26383]]

oversee and assess the impact of CPOs and their operated pools in the 
commodity interest markets.
    Current Schedule A provides the Commission basic identifying 
information about the CPO and its operated pools and the service 
providers they used, including the custodians and brokers used by the 
CPO with respect to some or all of the operated pools' assets and the 
pools' monthly rate of return. The Commission preliminarily believes 
that this basic, demographic information is useful in providing context 
with respect to the more granular information it receives regarding the 
positions held by commodity pools from other sources.
    At the moment, the data currently collected in Form CPO-PQR cannot 
be easily aggregated with other market information that the Commission 
collects, and, as such, has not been integrated into the Commission's 
market oversight function, which limits its utility to the Commission. 
Specifically, the lack of LEI information for CPOs and their operated 
pools makes it challenging to align it with the data received from 
DCOs, DCMs, SDRs, and FCMs to compile a view into the operations of 
CPOs and pools and the various roles such entities inhabit within the 
commodity interest markets. The Commission is therefore proposing to 
amend Form CPO-PQR to include a question seeking the CPO's and the 
operated pools' LEIs, to the extent they have them. The inclusion of 
existing LEIs within this smaller data set on Revised Form CPO-PQR 
should enable the Commission to more efficiently and accurately 
synthesize the various Commission data streams on an entity-by-entity 
basis. Furthermore, inclusion of LEIs may permit better use of SDR and 
other data to illuminate the risk inherent in pools and pool families. 
The Commission also anticipates that the inclusion of LEIs would 
greatly facilitate the aggregation of data from commodity pools under 
different levels of common control.
    Although the Commission is proposing to continue to receive the 
majority of the information currently collected in Schedule A of Form 
CPO-PQR, it is also proposing to eliminate the questions regarding the 
pool's auditors and marketers. The Commission and NFA receive 
information regarding the independent certified public accountants that 
all CPOs are required to engage to prepare certified annual reports, 
including audited financial statements, for their operated commodity 
pools through other means, which the Commission preliminarily believes 
obviates the need for obtaining this information through Revised Form 
CPO-PQR.\54\ With respect to a pool's marketers, staff generally 
accesses this information through sources other than Form CPO-PQR, such 
as registration records for APs associated with the offered pool's CPO 
or through the disclosure document for the pool. For example, persons 
soliciting for pool participation units are typically either associated 
persons of the CPO \55\ or registered representatives of a broker 
dealer.\56\ Such persons are subject to regulation by either the 
Commission and NFA, or the SEC and the Financial Industry Regulatory 
Authority (FINRA). As such, the Commission preliminarily believes that 
it readily has the means to learn who such persons are with respect to 
the offering of participation units in a particular commodity pool 
without requiring that information to be reported on Form CPO-PQR.
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    \54\ 17 CFR 1.16.
    \55\ 17 CFR 1.3, associated person; 17 CFR 3.12.
    \56\ 17 CFR 3.12(h)(ii).
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    At present, most CPOs are only required to submit the information 
in Schedule A of Form CPO-PQR on an annual basis; only Large CPOs 
submit this information quarterly. In order to fully integrate the 
information reported on Revised Form CPO-PQR into the Commission's 
ongoing oversight of the derivatives markets and commodity pool 
industry, the Commission preliminarily believes that the reporting of 
this basic information on a more frequent quarterly basis would be 
necessary. The Commission therefore preliminarily believes that 
requiring reporting of this basic information on a more frequent 
quarterly basis would play an important role in facilitating 
Commission's ability to monitor trends in the commodity pool industry.
    The pool schedule of investments, currently in Schedule B, provides 
the Commission a fairly detailed breakdown of how the pool's 
investments are allocated by asset category (cash, equities, 
alternative investments, fixed income, derivatives, options, and 
funds). Although under the current iteration of Form CPO-PQR only Mid-
Sized and Large CPOs are required to submit any information in Schedule 
B, and Mid-Sized CPOs only submit it annually, the Commission 
preliminarily believes that obtaining a pool schedule of investment 
from all CPOs with respect to their operated pools on a regular, 
quarterly basis would assist the Commission in understanding the 
composition of a pool's portfolio with a limited, if any, increase in 
their filing burden, as the Commission notes that NFA Form PQR 
currently requires all CPOs regardless of size to file a pool schedule 
of investments each quarter.

C. NFA Form PQR

    As proposed, Revised Form CPO-PQR would generally align with NFA 
Form PQR. NFA Form PQR was implemented in 2010 to elicit data to 
implement NFA's risk-based examination program for CPOs.\57\ The form 
requests basic identifying information for CPOs and their operated 
pools, and a schedule of investments, and requires all CPOs to report 
this information quarterly. As a whole, current NFA Form PQR is 
essentially identical to current Schedule A of Form CPO-PQR combined 
with the pool of investments question from Schedule B. The Commission 
also understands that NFA has plans to include questions regarding LEIs 
in NFA Form PQR. If Revised Form CPO-PQR is adopted as proposed, and 
NFA's amendments to include LEIs are also finalized, the forms will be 
substantively identical. Under those circumstances, the Commission 
would permit a CPO to file NFA Form PQR in lieu of Revised Form CPO-
PQR, offering CPOs additional filing efficiencies without compromising 
the Commission's ability to obtain affected data.
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    \57\ NFA Form PQR assists NFA in assessing risks, identifying 
trends, and assigning audit priorities in its oversight of CPOs. See 
National Futures Association: CPO Quarterly Reporting Requirements--
Proposed Adoption of Compliance Rule 2-46, https://www.nfa.futures.org/news/PDF/CFTC/CR2_46_CPO_Quarterly_Report_082009.pdf (last visited Dec. 30, 2019).
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    As a corollary, the Commission is also proposing to revise Sec.  
4.27(d), which currently permits dually regulated CPOs required to file 
Form PF with respect to one or more of their operated private funds to 
file Form PF in lieu of filing current Form CPO-PQR with respect to any 
commodity pools that are not private funds.\58\ The Commission believes 
that this provision would be redundant in light of the proposed 
provision to accept NFA Form PQR and would frustrate an intended 
purpose of this proposed rulemaking, which is to allow the Commission 
to enhance the Commission's use of its own internal data streams to 
effectuate an efficient and effective oversight program of CPOs and 
their operated pools, given that Revised Form CPO-PQR would no longer 
be closely aligned in content or filing frequency with Form PF. The 
Commission is not, however, proposing to change Form PF's status as the 
Commission's form, nor is the Commission proposing to change its 
requirement that dually registered CPOs

[[Page 26384]]

and CTAs continue to file Form PF with the SEC.
---------------------------------------------------------------------------

    \58\ 17 CFR 4.27(d).
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    Many dually registered CPOs currently include commodity pools that 
are not private funds in data that they report on Form PF, in lieu of a 
filing on Form CPO-PQR for such pools, in reliance on Sec.  4.27(d). If 
Sec.  4.27(d) is revised to eliminate this option for dually registered 
CPOs, the Commission understands that some or even all dually 
registered CPOs that currently file Form PF in lieu of Schedules B and/
or C of current Form CPO-PQR for their non-private fund pools could 
cease to include such non-private fund pools in their Form PF filings, 
resulting in a reduced data set collected on Form PF as compared to the 
status quo. The Commission preliminarily believes, however, that this 
loss of data to the SEC and FSOC would not meaningfully impact the 
efficacy and intent of Form PF in furthering the oversight of the 
private fund industry, given that it would only result in the loss of 
data on Form PF with respect to non-private fund pools.\59\
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    \59\ Form CPO-PQR Final Rule, 77 FR at 11281 (``[T]o mitigate 
reporting costs to regulated entities that may be registered with 
both the Commission and with the SEC, the regulations have been 
modified to allow dually registered entities to file on [F]orm PF 
(plus the first schedule A of [F]orm CPO-PQR) for all of their 
commodity pools, even those that are not `private funds.' ''). As 
noted previously, such CPOs relying upon on the Commission's 
acceptance of Form PF in lieu of a Form CPO-PQR filing are currently 
required to file NFA Form PQR on a quarterly basis under NFA Rule 2-
46.
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IV. Request for Comments

    The Commission requests comment on all aspects of this proposal. 
Additionally, the Commission would appreciate consideration of the 
following specific questions:

A. Scope of Proposed Revised Form CPO-PQR

    1. CPOs that are jointly regulated by the Commission and the SEC 
are required to file Form PF with respect to private funds; many 
commodity pools are private funds within the meaning of Form PF. One of 
the Commission's initial rationales for adopting Form CPO-PQR was to 
encourage more congruent and consistent regulation of similarly 
situated entities among Federal financial regulatory agencies, 
particularly with respect to dually registered CPOs required to file 
Form PF. If Revised Form CPO-PQR is adopted as proposed, Form PF and 
Form CPO-PQR would become less aligned, meaning that dually registered 
CPOs would have reporting obligations that are noticeably different 
from those CPOs only subject to the Commission's jurisdiction. Would 
such a relative lack of regulatory congruence negatively impact CPOs? 
Should the Commission instead rescind Form CPO-PQR in its entirety and 
require all CPOs to file all or part of Form PF with NFA? Why or why 
not?
    2. Many dually registered CPOs currently include commodity pools 
that are not private funds in data that they report on Form PF, in lieu 
of a filing on Form CPO-PQR for such pools, pursuant to Sec.  4.27(d). 
If the amendments proposed herein are adopted as final, these CPOs 
could decide to stop including these pools in their Form PF filing. For 
CPOs in this category, if Form CPO-PQR is amended as proposed, would 
you cease reporting data for these pools on Form PF? Why or why not?
    3. CPOs that operate commodity pools that are registered investment 
companies must report financial information about those pools to the 
SEC, while also providing annual pool financial statements to NFA. Is 
there any additional reporting of investment company financial 
information that the Commission has failed to consider in this proposal 
that addresses the concerns underlying Form CPO-PQR?
    4. Are there any specific questions that the Commission has 
proposed to rescind that it should consider retaining? Why?
    5. Are there ways the Commission could further clarify and refine 
the reporting instructions for completing Revised CPO-PQR in order to 
provide CPOs with greater certainty that they are completing the form 
correctly? For example, could the form's references to other 
regulations or its defined terms be simplified or made clearer? Please 
suggest specific revisions.

B. NFA Form PQR

    5. The Commission proposes to permit a timely filing with NFA of 
NFA Form PQR in lieu of a filing of the revised Proposed Form CPO-PQR. 
Should the Commission consider any other ways to further align with NFA 
Form PQR? What would those ways be? Please describe in detail.
    6. The schedule of investments as it currently appears in both 
Revised Form CPO-PQR and NFA Form PQR requires significant granular 
information regarding numerous asset classes. Are there any asset 
classes that can or should be eliminated? Why or why not? Should the 
Commission consider amending the schedule of investments to align with 
the simpler schedule that appeared in NFA Form PQR in 2010?

C. Addition of LEIs

    7. In order to further the analysis of Revised Form CPO-PQR across 
other existing Commission data sets, the Commission is proposing to 
require the inclusion of LEIs in Revised Form CPO-PQR, to the extent 
that the CPO or its operated pools otherwise already have LEIs. The 
inclusion of LEIs would also make this portion of Form CPO-PQR data 
more accessible for analysis consistent with these other data sets. 
Should the Commission include LEIs on Revised Form CPO-PQR? Why or why 
not?

V. Related Matters

A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) requires Federal agencies, in 
promulgating regulations, to consider whether the rules they propose 
will have a significant economic impact on a substantial number of 
small entities and, if so, to provide a regulatory flexibility analysis 
regarding the economic impact on those entities. Each Federal agency is 
required to conduct an initial and final regulatory flexibility 
analysis for each rule of general applicability for which the agency 
issues a general notice of proposed rulemaking.\60\
---------------------------------------------------------------------------

    \60\ 5 U.S.C. 601 et seq.
---------------------------------------------------------------------------

    These regulatory amendments proposed by the Commission would affect 
only persons registered or required to be registered as CPOs. The 
Commission has previously established certain definitions of ``small 
entities'' to be used by the Commission in evaluating the impact of its 
rules on such entities in accordance with the requirements of the 
RFA.\61\ With respect to CPOs, the Commission previously has determined 
that a CPO is a small entity for purposes of the RFA, if it meets the 
criteria for an exemption from registration under Sec.  4.13(a)(2).\62\ 
Because the regulations proposed in this document generally apply to 
persons registered or required to be registered as CPOs with the 
Commission, as well as from related compliance burdens, the RFA is not 
applicable to this Proposal.
---------------------------------------------------------------------------

    \61\ See, e.g., Policy Statement and Establishment of 
Definitions of ``Small Entities'' for Purposes of the Regulatory 
Flexibility Act, 47 FR 18618, 18620 (Apr. 30, 1982).
    \62\ Id. at 18619-20. Section 4.13(a)(2) exempts a person from 
registration as a CPO when: 1) none of the pools operated by that 
person has more than 15 participants at any time, and 2) when 
excluding certain sources of funding, the total gross capital 
contributions the person receives for units of participation in all 
of the pools it operates or intends to operate do not, in the 
aggregate, exceed $400,000. See 17 CFR 4.13(a)(2).
---------------------------------------------------------------------------

    Accordingly, the Chairman, on behalf of the Commission, hereby 
certifies

[[Page 26385]]

pursuant to 5 U.S.C. 605(b) that these proposed amendments, if adopted, 
will not have a significant economic impact on a substantial number of 
small entities.

B. Paperwork Reduction Act

1. Overview
    The Paperwork Reduction Act (PRA) imposes certain requirements on 
Federal agencies in connection with their conducting or sponsoring any 
collection of information as defined by the PRA.\63\ Under the PRA, an 
agency may not conduct or sponsor, and a person is not required to 
respond to, a collection of information unless it displays a currently 
valid control number from the Office of Management and Budget (OMB). 
This Proposal, if adopted, would result in a collection of information 
within the meaning of the PRA, as discussed below. The Commission is 
therefore submitting this NPRM to OMB for review.
---------------------------------------------------------------------------

    \63\ See 44 U.S.C. 3501 et seq.
---------------------------------------------------------------------------

    The Proposal amends a single collection of information for which 
the Commission has previously received a control number from OMB. This 
collection of information is, ``Rules Relating to the Operations and 
Activities of Commodity Pool Operators and Commodity Trading Advisors 
and to Monthly Reporting by Futures Commission Merchants, OMB control 
number 3038-0005'' (Collection 3038-0005). Collection 3038-0005 
primarily accounts for the burden associated with part 4 of the 
Commission's regulations that concern compliance obligations generally 
applicable to CPOs and CTAs, as well as certain enumerated exemptions 
from registration as such and exclusions from those definitions, and 
available relief from compliance with certain regulatory requirements.
    As discussed above, the Commission's Proposal includes substantive 
changes to current Form CPO-PQR, such as (1) amending Schedule A, which 
would constitute the entirety of Proposed Form CPO-PQR, to add LEIs for 
each CPO and pool, (2) moving Schedule B's ``Schedule of Investments'' 
section to Schedule A, and (3) rescinding the remainder of the Form's 
current Schedules B and C.\64\ Additionally, the Commission is 
proposing to permit the filing of NFA Form PQR with NFA in lieu of 
filing Form CPO-PQR by CPOs registered with the Commission. Therefore, 
the Commission is also proposing herein to amend Collection 3038-0005, 
such that the collection is consistent with the proposed restructuring 
of Form CPO-PQR, and reflects the expected adjustment in burden hours 
for registered CPOs filing the form, if revised as proposed, including 
the ability to file NFA Form PQR in lieu of filing Revised Form CPO-
PQR.
---------------------------------------------------------------------------

    \64\ See supra pt. III.A.
---------------------------------------------------------------------------

    This Proposal is not expected to impose any significant new burdens 
on CPOs. Rather, because approximately half of registered CPOs are Mid-
Sized or Large CPOs under the current filing regime and will have to 
answer fewer questions as compared to the current filing requirements, 
and because the Commission anticipates that CPOs currently classified 
as Small CPOs will file their NFA Form PQR in lieu of the Revised Form 
CPO-PQR, it is reasonable for the Commission to infer that the proposed 
amendments will generally prove to be either less burdensome or without 
new net burden for all CPOs. The Commission is, however, amending the 
burden associated with the collection to reflect the increased 
frequency of filing for all CPOs to quarterly and increasing the hours 
per filing to reflect the addition of the pool schedule of investments 
to the questions in Revised Form CPO-PQR that were derived from current 
Schedule A. Although these proposed amendments result in an increase in 
the burden hours associated with Revised Form CPO-PQR, the Commission 
preliminarily expects that, in practice, CPOs will either experience no 
change in their burden or a decrease in burden.
    As discussed above, the Commission is proposing herein to accept 
the filing of NFA Form PQR in lieu of a filing on Revised Form CPO-PQR. 
Because under the proposal any data filed on NFA Form PQR would become 
data collected by the Commission, the burden associated with NFA Form 
PQR must be included in a collection of information with an OMB control 
number. Therefore, the Commission is amending the current burden 
associated with OMB Control Number 3038-0005 to also reflect the burden 
resulting from NFA Form PQR, which the Commission estimates to be 
substantively identical to that derived from Revised Form CPO-PQR.
    Despite the fact that the Commission is proposing to accept the 
filing of NFA Form PQR in lieu of a filing on Revised Form CPO-PQR, the 
Commission preliminarily believes that it is necessary to retain its 
own form for data collection purposes to ensure that it retains the 
authority to address its data needs regarding CPOs in the future on a 
unilateral basis should the need arise. Moreover, given the 
Commission's preliminary expectation that it would incorporate the 
information collected on Revised Form CPO-PQR more consistently with 
its other data streams, the Commission preliminarily believes that 
retaining its own form independent of NFA's form avoids any appearance 
of the Commission leveraging NFA to avoid complying with the 
obligations associated with rulemaking. The Commission also 
preliminarily believes that doing so will ensure that members of the 
public will be able to exercise their rights to engage in comment as to 
the content and structure of the form consistent with the 
Administrative Procedures Act going forward.\65\ Therefore, the 
Commission has preliminarily concluded that the amendments to Form CPO-
PQR proposed herein are not unnecessarily duplicative to information 
otherwise reasonably accessible to the Commission.
---------------------------------------------------------------------------

    \65\ 5 U.S.C. 500 et. seq.
---------------------------------------------------------------------------

2. Revisions to the Collections of Information: OMB Control Number 
3038-0005
    Collection 3038-0005 is currently in force with its control number 
having been provided by OMB, and it was renewed recently on January 30, 
2019.\66\ As stated above, Collection 3038-0005 governs responses made 
pursuant to part 4 of the Commission's regulations, pertaining to the 
operations of CPOs and CTAs, including the required responses of 
registered CPOs on Form CPO-PQR pursuant to Sec.  4.27. Generally, the 
Commission is proposing adjustments, discussed below, to the 
information collection that result in an increase in the burden hours 
associated with the collection of information on the Revised Form CPO-
PQR. The Commission preliminarily believes, however, as previously 
stated, that CPOs currently categorized as either Mid-Sized or Large 
CPOs are expected to experience a reduction in burden relative to the 
current filing requirements under Sec.  4.27 and Form CPO-PQR, and 
Small CPOs under the current filing requirements are expected to 
experience no increase in burden because they are currently required to 
file NFA Form PQR, which includes a schedule of investments that is 
identical to that under Revised Form CPO-PQR, on a quarterly basis, 
and, under this proposal, such CPOs would be permitted to file NFA Form 
PQR in lieu of filing Revised CPO-PQR.
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    \66\ See Notice of Office of Management and Budget Action, OMB 
Control No. 3038-0005, available at https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=201701-3038-005 (last retrieved July 31, 
2018).

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[[Page 26386]]

    The currently approved total burden associated with Collection 
---------------------------------------------------------------------------
3038-0005, in the aggregate, is as follows:

    Estimated number of respondents: 45,097.
    Annual responses for all respondents: 118,824.
    Estimated average hours per response: 3.16.\67\
---------------------------------------------------------------------------

    \67\ The Commission rounded the average hours per response to 
the second decimal place for ease of presentation.
---------------------------------------------------------------------------

    Annual reporting burden: 375,484.
    The portion of the aggregate burden that is derived from the 
current Form CPO-PQR filing requirements is as follows.
    Schedule A (for non-Large CPOs and Large CPOs filing Form PF):

    Estimated number of respondents: 1,450.
    Annual responses for all respondents: 1,450.
    Estimated average hours per response: 6.
    Annual reporting burden: 8,700.

    Schedule A (for Large CPOs not filing Form PF):
    Estimated number of respondents: 250.
    Annual responses for all respondents: 1,000.
    Estimated average hours per response: 6.

    Annual reporting burden: 6,000.

    Schedule B (for Mid-Sized CPOs):
    Estimated number of respondents: 400.
    Annual responses for all respondents: 400.
    Estimated average hours per response: 4.
    Annual reporting burden: 1,600.

    Schedule B (for Large CPOs not filing Form PF):
    Estimated number of respondents: 250.
    Annual responses for all respondents: 1,000.
    Estimated average hours per response: 4.
    Annual reporting burden: 4,000.

    Schedule C (for Large CPOs not filing Form PF):
    Estimated number of respondents: 250.
    Annual responses for all respondents: 1,000.
    Estimated average hours per response: 18.
    Annual reporting burden: 18,000.

    The burden associated with NFA Form PQR is as follows:
    Estimated number of respondents: 1,700.
    Annual responses by each respondent: 6,800.
    Estimated average hours per response: 8.
    Annual reporting burden: 54,400.
    Total annual reporting burden for all CPOs for current Form CPO-PQR 
and NFA Form PQR: 86, 900.
    The Commission is proposing to no longer estimate burden hours 
according to each individual Schedule of Form CPO-PQR, because, 
pursuant to the Proposal, Revised Form CPO-PQR will only consist of one 
schedule. Therefore, the Commission is proposing to simplify the 
collection for Form CPO-PQR compliance to a single burden hours 
estimate for each registered CPO completing Revised Form CPO-PQR in its 
entirety.\68\ As noted above, the Commission is also proposing to 
require that Revised Form CPO-PQR be filed quarterly by each registered 
CPO, regardless of the size of their operations, which would result in 
four (4) annual responses by each respondent. Further, in the 
Commission's experience, the schedule of investments comprised a 
considerable portion of the burden hours previously associated with 
completing Schedule B, depending on the complexity of a CPO's 
operations and the number of pools it operates. Thus, the Commission is 
proposing an estimated average hours per response to ensure that burden 
continues to be counted. As noted above, although the estimated hours 
per response is expected to increase due to the retention of the 
schedule of investments and the frequency of response will increase as 
well for Small and Mid-Sized CPOs, as well as those Large CPOs filing 
Form PF, CPOs should not experience an increase in burden because all 
CPOs are already required to provide an identical schedule of 
investments as part of their existing NFA Form PQR filing requirement, 
which must be submitted on a quarterly basis, and the Commission 
preliminarily believes that CPOs will continue to make such filing in 
lieu of the Revised Form CPO-PQR.
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    \68\ The Commission is also proposing to accept NFA Form PQR in 
lieu of Revised Form CPO-PQR filing requirement, which the 
Commission has designed purposefully to be very similar. See supra 
pt. III.B. The PRA estimates proposed herein assume that all 
registered CPOs will either file Revised Form CPO-PQR on a quarterly 
basis, or NFA Form PQR, but in no event will a CPO be required to 
file both.
---------------------------------------------------------------------------

    Therefore, the Commission estimates the burden to registered CPOs 
for completing Revised Form CPO-PQR, as proposed herein, and NFA Form 
PQR, because of the option to file this form in lieu of Revised Form 
CPO-PQR, to be as follows:

    For Revised Form CPO-PQR and NFA Form PQR for All Registered CPOs:
    Estimated number of respondents: 1,700.
    Annual responses by each respondent: 6,800.
    Estimated average hours per response: 8.
    Annual reporting burden: 54,400.
    The new total burden associated with Collection 3038-0005, in the 
aggregate, reflecting the adjustment in burden associated with Sec.  
4.27 and Revised Form CPO-PQR, is as follows:
    Estimated number of respondents: 43,062.
    Annual responses for all respondents: 113,980.
    Estimated average hours per response: 3.25.
    Annual reporting burden: 370,467.
3. Request for Comments on Collection
    The Commission invites the public and other Federal agencies to 
comment on any aspect of the proposed information collection 
requirements discussed above. Pursuant to 44 U.S.C. 3506(c)(2)(B), the 
Commission solicits comments in order to (i) evaluate whether the 
proposed collections of information are necessary for the proper 
performance of the functions of the Commission, including whether the 
information will have practical utility; (ii) evaluate the accuracy of 
the Commission's estimate of the burden of the proposed collections of 
information; (iii) determine whether there are ways to enhance the 
quality, utility, and clarity of the information proposed to be 
collected; and (iv) minimize the burden of the proposed collections of 
information on those who are to respond, including through the use of 
appropriate automated collection techniques or other forms of 
information technology.
    Those desiring to submit comments on the proposed information 
collection requirements should submit them directly to the Office of 
Information and Regulatory Affairs, OMB, by fax at (202) 395-6566, or 
by email at [email protected]. Please provide the Commission 
with a copy of submitted documents, so that all comments can be 
summarized and addressed in the final rule preamble. Refer to the 
ADDRESSES section of this NPRM for comment submission instructions to 
the Commission. A copy of the supporting statements for the collections 
of information discussed above may be obtained by visiting https://www.RegInfo.gov. OMB is required to make a decision concerning the 
collections of information between 30 and 60 days after publication of 
this document in the Federal Register. Therefore, a comment is best 
assured of

[[Page 26387]]

having its full effect if OMB receives it within 30 days of 
publication.

C. Cost-Benefit Considerations

    Section 15(a) of the CEA requires the Commission to consider the 
costs and benefits of its discretionary actions before promulgating a 
regulation under the CEA or issuing certain orders.\69\ Section 15(a) 
further specifies that the costs and benefits shall be evaluated in 
light of five broad areas of market and public concern: (1) Protection 
of market participants and the public; (2) efficiency, competitiveness, 
and financial integrity of swaps markets; (3) price discovery; (4) 
sound risk management practices; and (5) other public interest 
considerations. The Commission considers the costs and benefits 
resulting from its discretionary determinations with respect to the CEA 
section 15(a) considerations.
---------------------------------------------------------------------------

    \69\ 7 U.S.C. 19(a).
---------------------------------------------------------------------------

    As discussed above, the Commission is proposing amendments to Form 
CPO-PQR that would significantly reduce the amount of reporting 
required thereunder. Specifically, the proposal would: (1) Eliminate 
the pool-specific reporting requirements in existing Schedules B and C 
of Form CPO-PQR, other than the pool schedule of investments (question 
6 of Schedule B); (2) amend the information in existing Schedule A of 
the form to request LEIs for CPOs and their operated pools and to 
eliminate questions regarding the pool's auditors and marketers; (3) 
require all CPOs to submit all information retained in Revised Form 
CPO-PQR on a quarterly basis; and (4) allow CPOs to file NFA Form PQR 
in lieu of filing the Revised Form CPO-PQR, to the extent NFA Form PQR 
is amended to include LEIs. In the sections that follow, the Commission 
considers the various costs and benefits associated with each of aspect 
of the proposal. The baseline against which these costs and benefits 
are compared is the regulatory status quo, represented by Form CPO-PQR 
as currently codified in appendix A to part 4.
    The consideration of costs and benefits below is based on the 
understanding that the markets function internationally, with many 
transactions involving U.S. firms taking place across international 
boundaries; with some Commission registrants being organized outside of 
the United States; with some leading industry members typically 
conducting operations both within and outside the United States; and 
with industry members commonly following substantially similar business 
practices wherever located. Where the Commission does not specifically 
refer to matters of location, the discussion of costs and benefits 
below refers to the effects of this proposal on all activity subject to 
the proposed and amended regulations, whether by virtue of the 
activity's physical location in the United States or by virtue of the 
activity's connection with or effect on U.S. commerce under CEA section 
2(i).\70\ Some CPOs are located outside of the United States.
---------------------------------------------------------------------------

    \70\ 7 U.S.C. 2(i).
---------------------------------------------------------------------------

1. Elimination of Pool-Specific Reporting Requirements in Schedules B 
and C
    The Commission is proposing to eliminate the pool-specific 
reporting requirements in existing Schedules B and C of Form CPO-PQR, 
other than the pool schedule of investments (question 6 of Schedule B). 
The Commission acknowledges that this change, if adopted, could result 
in less information available to the Commission and, potentially, to 
FSOC. The detailed and specific information requested in Schedules B 
and C of Form CPO-PQR is not available to the Commission through any 
other of its data streams and, if put to its full use, would allow for 
monitoring of CPOs and their operated pools in a way that could help 
identify trends and points of stress. A main reason for the 
Commission's proposal to eliminate collection of this information stems 
from the challenges associated with the data set, including that it is 
only reported to the Commission on a quarterly basis, at its most 
frequent. Given the limitations associated with the data collected, the 
Commission has prioritized its limited resources to pursue other key 
regulatory initiatives.
    However, considering the alternate data streams currently available 
to the Commission, the Commission preliminarily believes that the 
Commission could nevertheless effectively exercise its oversight of 
CPOs and their operated pools and potentially do so in a more efficient 
manner if Revised Form CPO-PQR were adopted as proposed. Furthermore, 
the Commission notes that, due in part to the identified data quality 
issues, FSOC has never received any Form CPO-PQR data; however, the 
Commission acknowledges that FSOC may receive less data as a result of 
the proposal, as some CPOs that are filing CFTC-only pool information 
through Form PF may stop doing so should this proposal be adopted as 
final. The Commission does not, however, believe that FSOC's monitoring 
abilities would be materially affected compared to the current status 
quo should Schedules B and C largely be eliminated.
    The Commission's proposal to eliminate these reporting requirements 
would also reduce the ongoing variable compliance costs for Mid-Sized 
and Large CPOs, as they would no longer need to devote resources to 
compiling and reporting this data. Nor would CPOs be required to 
monitor their AUM with the specific purpose of determining their filing 
obligations as there would be a single requirement for all CPOs. It is 
possible that such cost savings may allow those CPOs to devote 
resources to other compliance or operational initiatives, or to 
potentially pass them on to pool participants through reduced fees. 
These cost savings would be minimized, however, for any CPO that is 
dually registered with the SEC and required to file Form PF, which 
requires reporting of information substantially similar to that 
required in Schedules B and C of current Form CPO-PQR. Additionally, 
the proposal would not alleviate any fixed costs affected CPOs may have 
already spent in developing systems and procedures designed to meet the 
reporting requirements in Schedules B and C, particularly if, again, 
such CPOs are also required to file Form PF.
2. Revised Form CPO-PQR
    The proposal would amend the information in existing Schedule A of 
the form to request LEIs for CPOs and their operated pools. The 
addition of this question would allow the Commission to be able to 
integrate the data provided in Revised Form CPO-PQR with the 
Commission's other more current data streams. Leveraging these other 
data sources would enable the Commission to continue its oversight and 
monitoring of counterparty risk and liquidity risk for some of the 
largest pools within the Commission's jurisdiction, thereby focusing on 
areas that are relevant for assessing market and systemic risk, while 
eliminating the burden associated with the collection of the more 
detailed information in current Schedules B and C, particularly with 
respect to pools that may meet the current Large Pool threshold in the 
future. The addition of this field should create a one-time cost for 
CPOs required to file Revised Form CPO-PQR, as LEIs do not change over 
time, potentially allowing fields for those questions to be 
prepopulated for subsequent filings.
    The proposal would further eliminate questions regarding the pool's 
auditors and marketers. This amendment will result in reduced reporting 
costs for reporting CPOs while not affecting the

[[Page 26388]]

scope of information available to the Commission, as the Commission 
already receives information regarding CPO's accountants and has 
alternate means of obtaining information about a pool's marketers. For 
example, persons soliciting for pool participation units are typically 
either associated persons of the CPO or registered representatives of a 
broker dealer. Such persons are subject to regulation by either the 
Commission and NFA, or the SEC and FINRA.
    Currently, all CPOs other than Large CPOs submit the information in 
Schedule A on an annual basis. Increasing the frequency of reporting of 
this information will assist the Commission in its efforts to integrate 
Revised Form CPO-PQR with the Commission's other more timely data 
sources, so as to improve the effectiveness of its ability to monitor 
and oversee the activities of CPOs and their operated pools. Although 
this would result in an increased regulatory cost for Small and Mid-
Sized CPOs compared to the regulatory status quo, the costs as actually 
realized by these CPOs may not be as significant, as they are already 
reporting this information on a quarterly basis to NFA via NFA Form 
PQR.
    Under current Form CPO-PQR, only Mid-Sized and Large CPOs are 
required to submit a pool schedule of investments, and Mid-Sized CPOs 
only submit that information annually. The proposal would require all 
CPOs to submit that information quarterly. The Commission believes that 
receiving this information from all CPOs and more frequently would, 
when combined with the proposed LEI requirements, further enhance its 
ability to integrate the information in Revised CPO-PQR with its other 
more current data streams and identify trends on a more timely basis, 
with the ultimate goal of supporting its oversight and monitoring of 
CPOs and their operated pools for market and systemic risk. As with the 
change in reporting frequency for the information in Schedule A, this 
change would result in an increased regulatory cost compared to the 
regulatory status quo for Small and Mid-Sized CPOs, as Small CPOs would 
be required to develop the procedures and systems necessary to take on 
the additional reporting obligations for the pool schedule of 
investments and both Small and Mid-Sized CPOs would now report that 
information on a quarterly basis. However, all CPOs are already 
required to report this information on a quarterly basis to NFA via NFA 
Form PQR, meaning the actual costs as realized by these CPOs may not be 
as significant.
    The proposal would allow CPOs to file NFA Form PQR in lieu of 
filing the Revised Form CPO-PQR, to the extent NFA Form PQR is amended 
to include LEIs, as the Commission understands NFA has planned. Under 
NFA's rules, all CPOs regardless of size are currently required to file 
NFA Form PQR on a quarterly basis. This provision would therefore 
operate to help CPOs maintain their current filing costs without 
affecting the scope of information available to the Commission under 
Revised Form CPO-PQR.
    As mentioned above, the Commission acknowledges that, through the 
proposed revision of Sec.  4.27(d), the proposal could result in less 
data being collected on Form PF as compared to the current status quo. 
Many dually registered CPOs currently include commodity pools that are 
not private funds in data that they report on Form PF, in lieu of a 
filing on Form CPO-PQR for such pools, in reliance on Sec.  4.27(d). If 
Sec.  4.27(d) is revised, these CPOs could decide to stop including 
these pools in their Form PF filing. The Commission preliminarily 
believes, however, that this loss of data to the SEC and FSOC would not 
meaningfully impact the efficacy and intent of Form PF in furthering 
the oversight of the private fund industry, given that it would only 
result in the loss of data with respect to non-private fund pools; 
however, the Commission acknowledges that FSOC may lose data for a 
specific type of private fund asset class, managed futures.
3. Alternatives
    In lieu of amending Form CPO-PQR as proposed, the Commission could 
require all CPOs, regardless of whether they are dually registered, to 
file Form PF. The Commission preliminarily believes that this 
alternative could operate to increase the reporting burdens for CPOs 
that are not dually registered with the SEC without feeding information 
directly to the Commission that could be integrated with its other data 
sources to develop its internal oversight initiatives over CPOs and 
their operated pools.
    Alternatively, the Commission could devote resources to rectifying 
the challenges with the data reported under current Form CPO-PQR, and 
amend the Form to require greater consistency and frequency of 
reporting of the data fields proposed to be eliminated in this 
proposal. However, the Commission preliminarily believes that its 
limited resources could be better directed in line with its regulatory 
priorities, and that its objectives with respect to oversight of CPOs 
and their operated pools could be effectively and potentially, more 
efficiently, achieved through integration with existing data streams.
    The Commission preliminarily believes that the proposed changes to 
Form CPO-PQR, relative to the alternatives, would permit the Commission 
to discharge its regulatory duties with respect to CPOs and their 
operated pools that might have the greatest impact on market and 
systemic risk while easing reporting obligations on a significant 
number of CPOs. The Commission requests comments and data on how 
potential alternatives would impact the potential costs and benefits to 
market participants and the public. Are there any other alternatives 
that may provide preferable costs or benefits than the costs and 
benefits related to the Proposal?
4. Section 15(a) Factors
a. Protection of Market Participants and the Public
    The Commission preliminarily believes that the proposal would 
enhance the ability of the Commission to protect derivatives markets, 
its participants, and the public by allowing it to integrate the data 
provided in Revised Form CPO-PQR with other existing, more up-to-date, 
data streams in a way that would allow the Commission to better 
exercise its oversight of CPOs and their operated pools. The Commission 
notes that the amendments proposed herein could result in a loss of 
data available to FSOC, which could limit FSOC's visibility into the 
activities of CPOs and their operated pools.
b. Efficiency, Competitiveness, and Financial Integrity of Markets
    The Commission preliminarily believes that the proposal would 
assist the Commission in its efforts to support market efficiency, 
competitiveness, and financial integrity. Under the proposal, CPOs 
would continue to provide useful information about themselves and their 
pools to the Commission in a way that it could incorporate with other 
data streams to improve its oversight of CPOs, their pools, and how 
they operate within and affect the derivatives markets. Additionally, 
the Commission preliminarily believes that the specific requirement 
that a CPO prepare a pool schedule of investments on a quarterly basis 
for each of its operated pools could result in heightened diligence by 
the CPO with respect to the pools' ongoing operations and encourage 
particularly smaller CPOs to adopt more formalized controls for their 
businesses,

[[Page 26389]]

which the Commission preliminarily believes would enhance the 
confidence of other market participants in transacting with CPOs and 
their operated pools.
c. Price Discovery
    The Commission has not identified any impact that the Proposal 
would have on price discovery.
d. Sound Risk Management Practices
    Although the Commission is proposing that it no longer require CPOs 
and their operated pools to report certain risk information, the 
Commission recognizes that CPOs will likely continue to benefit from 
possessing systems that collect and review risk-related information. 
The Commission has not identified any other impact that the Proposal 
would have on sound risk management practices.
e. Other Public Interest Considerations
    The Commission has not identified any impact on any other public 
interest considerations that the Proposal would have, but seeks public 
comment on any public interest the Commission should consider in this 
rulemaking.
5. Request for Comments
    The Commission invites public comment on its cost-benefit 
considerations, including the Section 15(a) factors described above. 
Commenters are invited to submit with their comment letters any data or 
other information that they may have that quantifies the costs and 
benefits of the Proposal. In addition, the Commission invites the 
public comment on the following questions.
    1. Has the Commission misidentified any costs or benefits? If so, 
please explain.
    2. Please explain whether CPO compliance costs would increase or 
decrease as a result of reduced reporting requirements in this 
Proposal? Please provide all quantitative and qualitative costs, 
including, but not limited to personnel costs and technological costs.
    3. Would harmonization of Form CPO-PQR with other similar forms, 
such as Form PF, provide a greater savings in compliance costs? If so, 
please describe all quantitative and qualitative savings. Please 
provide all quantitative and qualitative costs, including, but not 
limited to personnel costs and technological costs.

D. Antitrust Laws

    Section 15(b) of the CEA requires the Commission to take into 
consideration the public interest to be protected by the antitrust laws 
and endeavor to take the least anticompetitive means of achieving the 
purposes of the CEA, in issuing any order or adopting any Commission 
rule or regulation (including any exemption under CEA section 4(c) or 
4c(b)), or in requiring or approving any bylaw, rule, or regulation of 
a contract market or registered futures association established 
pursuant to section 17 of this Act.\71\
---------------------------------------------------------------------------

    \71\ 7 U.S.C. 19(b).
---------------------------------------------------------------------------

    The Commission preliminarily believes that the public interest to 
be protected by the antitrust laws is generally to protect competition. 
The Commission requests comment on whether the Proposal implicates any 
other specific public interest to be protected by the antitrust laws.
    The Commission has considered the Proposal to determine whether it 
is anticompetitive and has preliminarily identified no anticompetitive 
effects. The Commission requests comment on whether the Proposal is 
anticompetitive and, if it is, what the anticompetitive effects are.
    Because the Commission has preliminarily determined that the 
Proposal is not anticompetitive and has no anticompetitive effects, the 
Commission has not identified any less anticompetitive means of 
achieving the purposes of the Act. The Commission requests comment on 
whether there are less anticompetitive means of achieving the relevant 
purposes of the Act that would otherwise be served by adopting the 
Proposal.

List of Subjects in 17 CFR Part 4

    Advertising, Brokers, Commodity futures, Commodity pool operators, 
Commodity trading advisors, Consumer protection, Reporting and 
recordkeeping requirements.

    For the reasons stated in the preamble, the Commodity Futures 
Trading Commission proposes to amend 17 CFR part 4 as set forth below:

PART 4--COMMODITY POOL OPERATORS AND COMMODITY TRADING ADVISORS

0
1. The authority citation for part 4 continues to read as follows:

    Authority:  7 U.S.C. 1a, 2, 6(c), 6b, 6c, 6l, 6m, 6n, 6o, 12a, 
and 23.

0
2. Amend Sec.  4.27 by revising paragraphs (c)(1) and (d) to read as 
follows:


Sec.  4.27  Additional reporting by commodity pool operators and 
commodity trading advisors.

* * * * *
    (c) * * *
    (1) Each reporting person shall file with the National Futures 
Association, a report with respect to the directed assets of each pool 
under the advisement of the commodity pool operator consistent with 
appendix A to this part or commodity trading advisor consistent with 
appendix C to this part; Provided that, a commodity pool operator 
required to file NFA Form PQR with the National Futures Association for 
the reporting period may make such filing in lieu of the report 
required under this section consistent with appendix A to this part.
* * * * *
    (d) Investment advisers to private funds. CPOs and CTAs that are 
dually registered with the Securities and Exchange Commission, and that 
are required to file Form PF under the rules promulgated under the 
Investment Advisers Act of 1940, shall file Form PF with the Securities 
and Exchange Commission. Dually registered CPOs and CTAs that file Form 
PF with the Securities and Exchange Commission will be deemed to have 
filed Form PF with the Commission for purposes of any enforcement 
action regarding any false or misleading statement of a material fact 
in Form PF.
* * * * *
0
3. Revise appendix A to part 4 to read as follows:

Appendix A to Part 4--Form CPO-PQR

BILLING CODE 6351-01-P

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[GRAPHIC] [TIFF OMITTED] TP04MY20.020

BILLING CODE 6351-01-C

    Issued in Washington, DC, on April 16, 2020, by the Commission.
Robert Sidman,
Deputy Secretary of the Commission.

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

Appendices to Amendments to Compliance Requirements for Commodity Pool 
Operators on Form CPO-PQR--Commission Voting Summary and Commissioners' 
Statements

Appendix 1--Commission Voting Summary

    On this matter, Chairman Tarbert and Commissioners Quintenz, 
Behnam, Stump, and Berkovitz voted in the affirmative. No 
Commissioner voted in the negative.

Appendix 2--Supporting Statement of Chairman Heath P. Tarbert

    The esteemed 19th century mathematician Charles Babbage asked 
``if you put into the machine the wrong figures, will the right 
answers come out?'' \1\ Baggage foresaw what would evolve in the 
20th century as the ``garbage-in, garbage-out'' predicament--a 
potential pitfall now only magnified in the 21st century by the 
combination of computing technology and vast amounts of data. Since 
becoming Chairman, I have prioritized improving the CFTC's approach 
to collecting data. As a federal agency, we must be selective about 
the data we collect, and then make sure we are actually making good 
use of the data for its intended purpose.
---------------------------------------------------------------------------

    \1\ Charles Baggage, Passages from the Life of a Philosopher 
(London 1864).
---------------------------------------------------------------------------

    This issue has arisen in a number of contexts here at the CFTC. 
For example, we recently proposed amendments to our swap data 
reporting rules, which cover both regulatory reporting and the 
disclosure of certain swap transaction data to the public at 
large.\2\ The purpose of those amendments is to simplify the swap 
data reporting process to ensure that market participants are not 
burdened with unclear or duplicative reporting obligations that do 
little to reduce market risk or facilitate price discovery. If those 
amendments are adopted, the CFTC will no longer collect data that 
does not advance our oversight of the swaps markets.\3\ And we will 
start collecting additional data that does.
---------------------------------------------------------------------------

    \2\ See Proposed Rule: Amendments to the Real-Time Public 
Reporting Requirements (Part 43) (Feb. 20, 2020) (publication in the 
Federal Register forthcoming); and Proposed Rule: Amendments to the 
Swap Data Recordkeeping and Reporting Requirements (Part 45) (Feb. 
20, 2020) (publication in the Federal Register forthcoming).
    \3\ See Heath P. Tarbert, Chairman, CFTC, Statement in Support 
of Proposed Rules on Swap Data Reporting (Feb. 20, 2020), available 
https://www.cftc.gov/PressRoom/SpeechesTestimony/tabertstatement022020.
---------------------------------------------------------------------------

    Today we are engaged in a similar exercise. We are considering 
amendments to the compliance requirements for commodity pool 
operators (``CPOs'') on Form CPO-PQR. These amendments reflect the 
CFTC's reassessment of the scope of Form CPO-PQR and how it aligns 
with our current regulatory priorities. By refining our approach to 
data collection, today's amendments--in conjunction with our current 
market surveillance efforts--would enhance the CFTC's ability to 
gain more timely insight into the activities of CPOs and their 
operated pools. At the same time, the amendments would reduce 
reporting burdens for market participants.

Background on Form CPO-PQR

    Form CPO-PQR requests information regarding the operations of a 
CPO, and each pool that it operates, in varying degrees of frequency 
and complexity, depending upon the assets under management (``AUM'') 
of both the CPO and the operated pool(s). When adopting Form CPO-PQR 
in 2012, the Commission determined that form data would be used for 
several broad purposes, including:
     Increasing the CFTC's understanding of our registrant 
population;
     assessing the market risk associated with pooled 
investment vehicles under our jurisdiction; and
     monitoring for systemic risk.\4\
---------------------------------------------------------------------------

    \4\ See Commodity Pool Operators and Commodity Trading Advisors: 
Compliance Obligations, 77 FR 11252 (Feb. 24, 2012).
---------------------------------------------------------------------------

    For the majority of more pool-specific questions on Form CPO-
PQR, the Commission believed the incoming data would assist the CFTC 
in monitoring commodity pools to identify trends over time. For 
example, the CFTC would get information regarding a pool's exposure 
to asset classes, the composition and liquidity of a pool's 
portfolio, and a pool's susceptibility to failure in times of 
stress.\5\
---------------------------------------------------------------------------

    \5\ See Commodity Pool Operators and Commodity Trading Advisors: 
Amendments to Compliance Obligations, 76 FR 7976, 7981 (Form CPO-PQR 
Proposal) (Feb. 11, 2011).
---------------------------------------------------------------------------

Shortcomings of Form CPO-PQR

    Seven years of experience with Form CPO-PQR, however, have not 
born out that vision. To begin with, in an effort to take into 
account the different ways CPOs maintain information, the Commission 
has allowed CPOs flexibility in how they calculate and present 
certain of the data elements. As a result, it has been challenging, 
to say the least, for the CFTC to identify trends across CPOs or 
pools using Form CPO-PQR data. In addition, taking into account the 
volume and complexity of the data it was requesting, the Commission 
decided not to require the data to be provided in real-time, but 
instead mandated only post hoc quarterly or annual filings.
    As the CFTC staff has reviewed the data over the years, it has 
become apparent that the disparate, infrequent, and delayed nature 
of CPO reporting has made it difficult to assess the impact of CPOs 
and their operated pools on markets. This is largely because 
conditions and relative CPO risk profiles may have changed, 
potentially significantly, by the time Form CPO-PQR is filed with 
the CFTC. This was not entirely unforeseen. When Form CPO-PQR was 
adopted, some criticized the rulemaking, raising concerns about 
whether the information gathered would enable the CFTC to monitor 
commodity pools for systemic risk effectively.\6\ They likewise 
questioned

[[Page 26411]]

whether the CFTC even had the resources to do so and in fact would 
do so.\7\
---------------------------------------------------------------------------

    \6\ See, e.g., Jill E. Sommers, Commissioner, CFTC, Dissenting 
Statement, Commodity Pool Operators and Commodity Trading Advisors: 
Amendments to Compliance Obligations (Feb. 9, 2012), available 
https://www.cftc.gov/PressRoom/SpeechesTestimony/sommersstatement020912a.
    \7\ Id.
---------------------------------------------------------------------------

Sound Regulation Means Collecting Information We Intend To Use

    What we need is not over-regulation or even de-regulation, but 
rather sound regulation.\8\ In the midst of the coronavirus 
pandemic, when we are facing the greatest economic challenge since 
the 2008 financial crisis, and possibly since the Great Depression, 
the fact that we are asking market participants to put all this time 
and effort into providing us data that is difficult to integrate 
with the CFTC's other more timely and standardized data streams is 
not sound regulation. Frankly, it is wasteful and an example of bad 
government.
---------------------------------------------------------------------------

    \8\ See CFTC Vision Statement, available https://www.cftc.gov/About/Mission/index.htm.
---------------------------------------------------------------------------

    My colleague Commissioner Dan Berkovitz recently made the 
following observation: ``In addition to obtaining accurate data, the 
Commission must also develop the tools and resources to analyze that 
data.'' \9\ He is spot on. I believe the converse is also true. We 
should not collect data we cannot use effectively. In the case of 
Form CPO-PQR, this means not requiring market participants to 
provide information that the CFTC has neither the resources nor the 
ability to analyze with our other data streams. Our credibility as a 
regulator is strengthened when we honestly admit that our 
regulations ask for data that we both have not used effectively and 
have no intention of using going forward. That is what we are doing 
today.
---------------------------------------------------------------------------

    \9\ Dan M. Berkovitz, Commissioner, CFTC, Statement on Proposed 
Amendments to Parts 45, 46, and 49: Swap Data Reporting Requirements 
(Feb. 20, 2020), available https://www.cftc.gov/PressRoom/SpeechesTestimony/berkovitzstatement022020b.
---------------------------------------------------------------------------

Alternative Sources of Data Are Available to the Commission

    Although we would be eliminating some components of Form CPO-
PQR--those required data that the CFTC has not used in meeting its 
mission--Form CPO-PQR is not our only source of data regarding 
commodity pools. The CFTC has devoted substantial resources to 
developing other data streams and regulatory initiatives designed to 
enhance our ability to surveil financial markets for risk posed by 
all manner of market participants, including CPOs and their operated 
pools. These data streams include extensive information related to 
trading, reporting, and clearing of swaps. Importantly, most of the 
transaction and position information the CFTC uses for our 
surveillance activities is available on a more timely and frequent 
basis than the data received on the current iteration of Form CPO-
PQR. Furthermore, CFTC programs to conduct surveillance of 
exchanges, clearinghouses, and futures commission merchants already 
include CPOs and do not rely on the information contained in 
Schedules B and C of Form CPO-PQR.
    Taken together, the CFTC's other existing data efforts have 
enhanced our ability to surveil financial markets, including with 
respect to the activities of CPOs and the pools they operate. In 
general, the CFTC's alternate data streams provide a more timely, 
standardized, and reliable view into relevant market activity than 
that provided under Form CPO-PQR. The proposal contemplates a 
revised Form CPO-PQR that would be more easily integrated with these 
existing and more developed data streams. This would enable the CFTC 
to oversee and assess the impact of CPOs and their operated pools in 
a way that is both more effective for us and less burdensome for 
those we regulate.

Legal Entity Identifiers Are Something We Need

    Our proposal does more than simply eliminate certain data 
collections. It would also require the collection of an additional 
piece of key information: Legal entity identifiers (``LEIs'') for 
CPOs and their operated pools. LEIs are critical to understanding 
the activities and interconnectedness within financial markets. 
Although LEIs have been around since 2012 and authorities in over 40 
jurisdictions have mandated the use of LEI codes to identify legal 
entities involved in a financial transaction,\10\ this would be a 
new requirement for Form CPO-PQR. The lack of LEI information for 
CPOs and their operated pools has made it challenging to align the 
data collected on Form CPO-PQR with the data received from 
exchanges, clearinghouses, swap data repositories, and futures 
commission merchants. As a result, we cannot always get a full 
picture of what is happening in the markets we regulate.
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    \10\ See Financial Stability Board, Thematic Review on 
Implementation of the Legal Entity Identifier, Peer Review Report 
(May 28, 2019), available https://www.fsb.org/wp-content/uploads/P280519-2.pdf.
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    The Commission is therefore proposing to amend Form CPO-PQR to 
include a question seeking the LEIs of both CPOs and the operated 
pools. The inclusion of LEIs within this smaller data set on the 
amended Form CPO-PQR should enable the CFTC to synthesize the 
various data streams on an entity-by-entity basis more efficiently 
and accurately. Inclusion of LEIs may also permit better use of swap 
data repository and other data to illuminate any risks inherent in 
pools and pool families.
    In addition, the proposal would better align Form CPO-PQR with 
Form PQR of the NFA, which all CPOs must file quarterly and which 
the NFA may revise to include questions regarding LEIs. Under these 
circumstances, we could permit a CPO to file NFA Form PQR in lieu of 
our Form CPO-PQR as revised. In doing so, we would offer CPOs 
greater filing efficiencies without compromising our ability to 
obtain relevant data.

Data Sharing With the OFR Could Be Improved

    The Dodd-Frank Act established the Office of Financial Research 
(``OFR'') nearly a decade ago to look across our financial system 
for risks and potential vulnerabilities.\11\ It was contemplated 
that the OFR would have access to data from other U.S. financial 
regulators. Yet to date, the CFTC has shared none of the Form CPO-
PQR data with the OFR, largely because of the shortcomings outlined 
above.
---------------------------------------------------------------------------

    \11\ See Sections 151-56 of the Dodd-Frank Wall Street Reform 
and Consumer Protection Act, Public Law 111-203, 124 Stat. 1376 
(2010), available https://www.gpo.gov/fdsys/pkg/PLAW-111publ203/pdf/PLAW-111publ203.pdf.
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    Another benefit of today's proposal is that we intend to share 
with the OFR the information collected on Form CPO-PQR once it is 
revised. To this end, we are presently in the process of negotiating 
a memorandum of understanding with the OFR, which will allow us for 
the first time to provide the information we collect regarding CPOs.

Conclusion

    For these reasons, I am pleased to support the Commission's 
proposal to amend the compliance requirements for CPOs on Form CPO-
PQR. Form CPO-PQR as revised would focus on the collection of data 
elements that can be used with other CFTC data streams and 
regulatory initiatives to facilitate oversight of CPOs and their 
pools. The proposal would reduce data collection requirements for 
market participants, while mandating disclosure of LEIs by CPOs and 
their operated pools. Focusing on enhancing data collection by the 
agency is no doubt tedious. Nonetheless, I am convinced it leads to 
smarter regulation that helps promote the integrity, resilience, and 
vibrancy of U.S. derivatives markets.

Appendix 3--Supporting Statement of Commissioner Brian Quintenz

    I support today's proposal that would simplify and streamline 
the reporting obligations of commodity pool operators (CPOs) on Form 
CPO-PQR. The proposal would eliminate much of existing Schedules B 
and C, which together contain roughly 72 distinct questions, if one 
includes all the separately identifiable subparts. Many of these 
questions are challenging for CPOs to calculate precisely and 
require numerous underlying assumptions that vary from firm to firm, 
making it difficult, if not impossible, for the Commission to 
perform an apples-to-apples comparison across the commodity pool 
industry.
    Moreover, in my opinion, many of these questions are more 
academic than pragmatic in nature--information that may be nice for 
the Commission to have, but data that is certainly not necessary for 
the Commission to effectively oversee commodity pools and the 
derivatives markets. For example, under the proposal, the Commission 
would no longer request information about the geographical breakdown 
of a pool's investments or the aggregate value of a pool's 
derivatives positions--the latter of which provides almost no 
insight into a pool's actual risk because it does not take into 
account collateral. I would also note that large pools file the Form 
CPO-PQR within 60 days of the end of a calendar quarter. This means 
that by the time Commission staff receives the

[[Page 26412]]

information on the form, it is already stale and out-of-date, which 
seriously diminishes its utility for purposes of real-time 
monitoring of risk or market activity.
    Importantly, the proposal retains questions regarding a pool's 
schedule of investments, which contains information that is critical 
for the National Futures Association's and the Commission's 
supervision and examination programs for CPOs. The proposed 
revisions to Form CPO-PQR would also align the Commission's form 
with the NFA's Form PQR, which will simplify the filing process for 
CPOs and ensure the Commission has the same visibility as the NFA 
into the operations of CPOs. I am also pleased the proposal would 
require CPOs and their operated pools to include their legal entity 
identifiers (LEIs), to the extent they have LEIs due to their swap 
trading activity. The inclusion of LEIs will enable the Commission 
to aggregate the information reported on the Form CPO-PQR with the 
swap data information reported to the Commission under Part 45. Over 
time, I hope this will provide the Commission with a greater 
understanding of how a CPO's swap activities complement its other 
investment activities.
    The proposal also requests comment on whether there are ways the 
Commission could clarify or refine its instructions for completing 
the Form CPO-PQR. I encourage market participants to take a close 
look at the form's instructions and related frequently asked 
questions documents to determine if the filling process can be 
simplified.
    In closing, I would like to thank the Division of Swap Dealer 
and Intermediary Oversight for its hard work in advancing this 
important proposal.

Appendix 4--Concurring Statement of Commissioner Rostin Behnam

    I respectfully concur with the Commodity Futures Trading 
Commission's (the ``Commission'' or ``CFTC'') issuance of a proposed 
rule (the ``Proposal'') to amend Regulation 4.27 and Form CPO-PQR. 
In devising the Proposal, Commission staff judiciously evaluated 
several years of returns on the Commission's collection of detailed 
data from commodity pool operators (CPOs)--data anticipated to 
provide valuable insights to both the Commission and the Financial 
Stability Oversight Counsel (FSOC) as we collectively moved into a 
new era of Wall Street reform on the heels of the 2008 financial 
crisis. In my view, the general conclusion that the Proposal 
elucidates: the information collected in the current Form CPO-PQR as 
well as its frequency of collection is simply not fit for purpose.
    The determination to bring seven years of data collection aimed 
at supporting the goals of the Dodd-Frank Act \1\ to an abrupt end 
may, in this particular instance, be an appropriate revision. The 
Proposal intends to markedly reduce the Commission's collection of 
granular, pool-specific data from a significant population of CPOs. 
However, the evidence suggests that the challenges of working with 
such data have undercut its potential value. Therefore, any data 
loss should not undermine the Commission's oversight or FSOC's 
current monitoring efforts. At this point in time, the Commission 
should take the opportunity to make strategic, programmatic and 
disciplined changes.
---------------------------------------------------------------------------

    \1\ The Dodd-Frank Wall Street Reform and Consumer Protection 
Act, Public Law 111-203, 124 Stat. 1376 (2010) (the ``Dodd-Frank 
Act'').
---------------------------------------------------------------------------

    In terms of the data and the transactions the Commission thought 
possible within our Form CPO-PQR database, results have been mixed. 
The Proposal aims to make targeted corrections, without forgoing the 
possibility of future adjustments should the Commission later 
determine that additional data collection would support regulatory 
initiatives or would be responsive to FSOC requirements to fulfill 
statutorily mandated duties and initiatives aimed at identifying and 
monitoring risks to financial stability.\2\
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    \2\ See Proposal at I. Not only is the Commission among those 
agencies that could be asked to provide information necessary for 
the FSOC to perform its statutorily mandated duties, but the FSOC 
may issue recommendations to the Commission regarding more stringent 
regulation of financial activities that FSOC determines may create 
or increase systemic risk. See Dodd-Frank Act Sec. Sec.  112(d)(1), 
120; See also Reporting by Investment Advisers to Private Funds and 
Certain Commodity Pool Operators and Commodity Trading Advisors on 
Form PF, 76 FR 71128, 71129 (Nov. 16, 2011); Commodity Pool 
Operators and Commodity Trading Advisors: Compliance Obligations, 77 
FR 11252, 11253 (Feb. 24, 2012).
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    The 2008 financial crisis exposed numerous weaknesses in the 
U.S. financial regulatory framework. Unfortunately, many were at the 
expense of main street Americans. The legislative response was swift 
and effective in reforming our nation's financial regulatory regime. 
One of the more pressing needs that the Dodd-Frank Act addressed 
relates to data collection and analysis as a tool to monitor, 
surveil and detect financial market risk. All with the intention of 
anticipating and catching stability and resiliency concerns before 
it is too late. As all U.S. regulators continue to adapt to the new 
framework--even a decade later--adopting reforms quickly in some 
cases, and more gradually in others, we all collectively continue to 
learn and develop better practices at data collection and analysis. 
Although not perfect, our regulatory purpose and mission is clear, 
and the importance of efficient and effective data to fulfilling our 
statutory mandate cannot be understated. As we all are experiencing 
the evolution of the nation's tech economy, it is hard to ignore the 
engine of its success: Data. This is the world we live in, and 
policymakers and regulators alike must keep pace while exercising 
appropriate discipline in collecting, handling, and managing data.
    This Proposal focuses on the Commission's data needs in support 
of CPO and commodity pool oversight. The Proposal seeks to account 
for: (1) Other data streams, regulatory initiatives, and risk 
surveillance programs that support the Commission's monitoring of 
CPO and commodity pool activities as enhanced by improvements to the 
Commission's data integration and analysis capabilities; (2) the 
Commission's statutory obligations to make data available to the 
FSOC and the impact of the proposed amendments on FSOC's monitoring 
abilities; (3) the duties of CPOs that are dually registered with 
the Securities and Exchange Commission (SEC) as private fund 
advisors and are required to file Form PF as well as the scope of 
current Form PF; (4) the data elicited by the National Futures 
Association's (NFA's) Form PQR, a form comparable to Form CPO-PQR 
filed by all CFTC-registered CPOs, regardless of size, used to 
support NFA's risk-based examination program for CPOs; and (5) 
reduced reporting burdens and increased filing efficiencies for 
affected CPOs. I appreciate the Commission's and its staff's ongoing 
engagement with the SEC and FSOC, as well as with NFA, throughout 
the drafting of this Proposal and am encouraged that discussions are 
ongoing. I also appreciate staff's consideration and inclusion of 
several of my suggested edits to this Proposal.
    I support issuance of the Proposal; however, I am concerned that 
in proposing to amend Regulation 4.27(d) to no longer accept Form PF 
filing in lieu of the proposed revised Form CPO-PQR, less data may 
be collected on Form PF from dually regulated CPOs.\3\ Should the 
Proposal be finalized in its current form, FSOC may receive less 
data from certain CPOs who have been reporting information on 
commodity pools that are not private funds in the data they report 
on Form PF in lieu of filing Form CPO-PQR for such pools, as 
currently permitted under Regulation 4.27(d). To the extent the 
Proposal may have the side-effect of undermining ongoing FSOC 
surveillance and monitoring efforts by eliminating the incentivized 
reporting of CFTC-pool only information on Form PF, I urge members 
of the public to respond to related requests for comment embedded in 
the Proposal.\4\ Notwithstanding my concerns, I am pleased that, to 
the extent the interests of the SEC and FSOC may be impacted, each 
has had and continues to have ample opportunity to weigh-in. 
Moreover, should the FSOC determine that it requires additional data 
from dually regulated CPOs or CPOs generally; it has authority to 
request such data submissions directly from the Commission or, 
alternatively, consult with the SEC--and more indirectly, with the 
CFTC--regarding the form and content of Form PF.\5\
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    \3\ See Proposal at III.C.
    \4\ See Proposal at IV.
    \5\ See note 2.
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    I would like to close by again thanking staff for all of their 
hard work on this important Proposal, specifically in these 
difficult and unique times, and look forward to considering comments 
from the public. To that end, if needed, I encourage market 
participants to request an extension of the comment period. As we 
all continue to endure the challenges of new realities at home and 
in the workplace as a result of the Covid-19 pandemic, I firmly 
believe the Commission needs to be as flexible as necessary to 
accommodate market participants and the general public in their 
efforts to provide us with the best comments to rulemakings. I have 
made my position clear on what and how the Commission

[[Page 26413]]

should be allocating its resources during these unprecedented times.

Appendix 6--Statement of Commissioner Dan M. Berkovitz

    I am voting in favor of this proposed rule to amend Regulation 
4.27 and Form CPO-PQR (``Proposal''). The information in Form CPO-
PQR that no longer would be required under the Proposal has not 
proven to be useful to the Commission in identifying or measuring 
systemic or idiosyncratic risk.
    In the wake of the financial crisis and the enactment of the 
Dodd-Frank Act, the Commission required certain commodity pool 
operators (``CPOs'') to report on Form CPO-PQR a variety of data 
that, at the time, the Commission believed would enable it to assess 
risks presented by pooled commodity investment vehicles, such as a 
pool's exposure to certain asset classes and susceptibility to 
market stress.\1\ As the Proposal explains, however, the 
Commission's experience over the past seven years has unfortunately 
demonstrated that some of the information on Schedules B and C of 
Form CPO-PQR has not been useful for these purposes. The Proposal 
would amend the Form CPO-PQR requirements to eliminate the 
information that has not proven to be of value to the Commission, 
yet retain the requirements to report useful information, such as 
the pool schedule of investments.\2\
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    \1\ See Final Rule, Commodity Pool Operators and Commodity 
Trading Advisors: Amendments to Compliance Obligations, 77 FR 11252, 
11252 (Feb. 24, 2012).
    \2\ ``The eliminated data elements include detailed, pool-
specific information, provided on both the individual and aggregate 
level, such as questions about investment strategy and counterparty 
credit exposure, asset liquidity and concentration of positions, 
clearing relationships, risk metrics, financing, and investor 
composition.'' Proposal, Amendments to Compliance Requirements for 
Commodity Pool Operators on Form CPO-PQR, at Sect. III.A.
---------------------------------------------------------------------------

    At the same time as the Commission streamlines its data 
collection requirements, it must also make better use of the data 
that it does collect. The Commission gathers a diverse and large 
array of data on a daily basis for over-the-counter and exchange-
traded derivatives transactions.\3\ As the Proposal notes, these 
data sets have the potential to be more useful for risk monitoring 
and surveillance purposes than certain static information collected 
quarterly through Form CPO-PQR. But the Commission still has a long 
way to go before it can use such data to perform a comprehensive, 
forward-looking analysis of our markets. The Commission should 
improve its strategies and capabilities for aggregating and 
analyzing the information it will continue to receive.
---------------------------------------------------------------------------

    \3\ See generally id. at Sect. III.
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    The Proposal would take one step in this direction by requiring 
CPOs using the swap markets to report legal entity identifiers 
(``LEIs''). Collecting LEIs is important because they allow the 
Commission to aggregate SDR data from related pools, thereby 
furthering our understanding of the role these pools play in our 
markets. However, the Proposal does not require all firms, such as 
those that do not trade swaps, to obtain and report LEIs, so this 
amendment will not allow the Commission to aggregate all derivatives 
transactions by pools under common control. The Commission can and 
should do more to integrate and analyze all of the data at its 
disposal.
    Finally, I am pleased that the comment period for this Proposal 
is 60 days. Providing the public with sufficient time to prepare 
meaningful comments to our rules in these extraordinary times is 
good public policy.
    I encourage the public to comment on this Proposal. In 
particular, the Proposal acknowledges that by removing from Form 
CPO-PQR some of the pool-specific data in Schedules B and C, less 
information would be available to the Financial Stability Oversight 
Counsel (``FSOC''). The Proposal also notes, however, that FSOC 
otherwise receives comparable data for the large portion of dually 
registered CPOs via Form PF. I am interested in commenters' views on 
whether this amendment would affect FSOC's ability to monitor for 
systemic risk.
    I would like to thank the staff, particularly the Division of 
Swap Dealer and Intermediary Oversight, for their engagement with my 
office on this Proposal. I look forward to the Commission 
articulating further steps to enhance its surveillance of commodity 
pools, and our markets more broadly.

[FR Doc. 2020-08496 Filed 5-1-20; 8:45 am]
BILLING CODE 6351-01-P