[Federal Register Volume 89, Number 158 (Thursday, August 15, 2024)]
[Rules and Regulations]
[Pages 66201-66210]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-17828]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 48

RIN 3038-AF37


Foreign Boards of Trade

AGENCY: Commodity Futures Trading Commission.

ACTION: Final rule.

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SUMMARY: The Commodity Futures Trading Commission (CFTC or Commission) 
is amending its regulations to permit a foreign board of trade (FBOT) 
registered with the Commission to provide direct access to its 
electronic trading and order matching system to an identified member or 
other participant located in the United States and registered with the 
Commission as an introducing

[[Page 66202]]

broker (IB) for submission of customer orders to the FBOT's trading 
system for execution. The Commission is also establishing a procedure 
for an FBOT to request revocation of its registration, and removing 
certain outdated references to ``existing no-action relief.''

DATES: The rules will become effective September 16, 2024.

FOR FURTHER INFORMATION CONTACT:  Alexandros Stamoulis, Associate 
Director, Division of Market Oversight, Commodity Futures Trading 
Commission, (646) 746-9792, [email protected], 290 Broadway, 6th 
Floor, New York, NY 10007; Roger Smith, Associate Chief Counsel, 
Division of Market Oversight, Commodity Futures Trading Commission, 
(202) 418-5344, [email protected], 77 West Jackson Blvd., Suite 800, 
Chicago, IL 60604; Jennifer Diamantis, Special Counsel, (202) 418-5762, 
[email protected], Commodity Futures Trading Commission, Division of 
Market Oversight, Three Lafayette Centre, 1151 21st Street NW, 
Washington, DC 20581.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Background
II. Final Regulations
    A. Section 48.4--Registration Eligibility and Scope
    B. Section 48.8--Conditions of Registration
    C. Section 48.9--Revocation of Registration
    D. Section 48.6--Foreign Boards of Trade Providing Direct Access 
Pursuant to Existing No-Action Relief
III. Related Matters
    A. Regulatory Flexibility Act
    B. Paperwork Reduction Act
    C. Cost Benefit Considerations
    D. Antitrust Considerations

I. Background

    Under part 48 of the Commission's regulations, an FBOT must be 
registered with the Commission in order to provide its members or other 
participants located in the United States with direct access to its 
electronic trading and order matching system.\1\ Part 48 is authorized 
by section 738 of the Dodd-Frank Act, which amended section 4(b) of the 
Commodity Exchange Act (CEA), to provide that the Commission may adopt 
rules and regulations requiring FBOTs that wish to provide U.S. persons 
with direct access to register with the Commission.\2\ Prior to 
enactment of the part 48 FBOT registration procedures in 2011, FBOTs 
relied on no-action letters that were requested by the FBOT and issued 
by Commission staff in order to provide direct access to U.S. 
persons.\3\
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    \1\ See Registration of Foreign Boards of Trade, Final Rule, 76 
FR 80674 (Dec. 23, 2011); 17 CFR part 48. ``Direct access'' is 
defined as an explicit grant of authority by a foreign board of 
trade to an identified member or other participant located in the 
United States to enter trades directly into the trade matching 
system of the foreign board of trade. CEA section 4(b)(1)(A), 7 
U.S.C. 6(b)(1)(A); 17 CFR 48.2(c).
    \2\ See Sec. 738, Dodd-Frank Wall Street Reform and Consumer 
Protection Act, Public Law 111-203, 124 Stat. 1376, 1726-1728 (2010) 
(codified at 7 U.S.C. 6(b)).
    \3\ See 76 FR 80674 at 80674-80675.
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    Part 48 provides the procedures, requirements, and conditions to be 
met by FBOTs that seek to provide their members and other participants 
in the U.S. with direct access to the FBOT's trade matching system. The 
regulations set forth, among other things, procedures an FBOT must 
follow in applying for registration, requirements that an FBOT must 
meet in order to obtain registration, conditions that an FBOT must 
satisfy on a continuing basis upon obtaining registration, and 
provisions for the termination of registration.
    On March 1, 2024, the Commission released a proposal \4\ to amend 
Sec.  48.4 to broaden the types of intermediaries eligible for direct 
access for submission of customer orders to the FBOT to include IBs 
registered with the Commission as such and located in the United 
States.\5\ An IB is generally defined as an individual or organization 
that solicits or accepts orders to buy or sell futures contracts, 
commodity options, retail off-exchange forex or commodity contracts, or 
swaps, but does not accept money or other assets from customers to 
support these orders.\6\ Currently, Sec.  48.4 only includes certain 
futures commission merchants (FCMs), commodity pool operators (CPOs), 
and commodity trading advisors (CTAs) as intermediaries that are 
eligible for entering orders on behalf of customers or commodity pools 
(in the case of CPOs) via direct access on a registered FBOT.
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    \4\ Foreign Boards of Trade, 89 FR 15083 (Mar. 1, 2024) (the 
Proposal).
    \5\ Intermediaries are entities that act on behalf of another 
person with respect to trading derivatives. They are generally 
required to register with the Commission and, depending on the 
nature of their activities, may be subject to various financial, 
disclosure, reporting, and recordkeeping requirements.
    \6\ IB is defined, subject to certain exclusions and additions, 
in CEA section 1a(31) as any person (except an individual who elects 
to be and is registered as an associated person of a futures 
commission merchant) (i) who (I) is engaged in soliciting or in 
accepting orders for (aa) the purchase or sale of any commodity for 
future delivery, security futures product, or swap; (bb) any 
agreement, contract, or transaction described in section 
2(c)(2)(C)(i) or section 2(c)(2)(D)(i); (cc) any commodity option 
authorized under section 4c; or (dd) any leverage transaction 
authorized under section 19; and (II) does not accept any money, 
securities, or property (or extend credit in lieu thereof) to 
margin, guarantee, or secure any trades or contracts that result or 
may result therefrom; or (ii) who is registered with the Commission 
as an IB. 7 U.S.C. 1a(31). IB is further defined, subject to certain 
exclusions and additions, in Commission regulation 1.3(mm) as (1) 
Any person who, for compensation or profit, whether direct or 
indirect: (i) Is engaged in soliciting or in accepting orders (other 
than in a clerical capacity) for the purchase or sale of any 
commodity for future delivery, security futures product, or swap; 
any agreement, contract or transaction described in section 
2(c)(2)(C)(i) or section 2(c)(2)(D)(i) of the CEA; any commodity 
option transaction authorized under section 4c; or any leverage 
transaction authorized under section 19; or who is registered with 
the Commission as an IB; and (ii) Does not accept any money, 
securities, or property (or extend credit in lieu thereof) to 
margin, guarantee, or secure any trades or contracts that result or 
may result therefrom. 17 CFR 1.3(mm). IBs are subject to 
registration with the Commission under CEA section 4d(g) and 
Commission regulation 3.4(a). 7 U.S.C. 6d(g) and 17 CFR 3.4(a).
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    In addition, the Proposal proposed to amend Sec.  48.9 to provide 
registered FBOTs with a procedure to request revocation of their FBOT 
registration. Further, the Commission proposed to delete Sec.  48.6, 
which provides for an alternate registration procedure for FBOT's 
operating under the preexisting staff no-action letter process, because 
such no-action letter process and no-action letters are no longer in 
effect.
    The Commission received seven comment letters regarding the 
Proposal.\7\ After considering the comments, the Commission is adopting 
the rule amendments described herein as proposed. The Commission 
believes the amendments are an appropriate response to market 
developments that have occurred since part 48 was promulgated in 2011, 
and will benefit affected markets and their participants by improving 
competition, risk management and liquidity--while also maintaining the 
Commission's longstanding protections available to U.S. customers that 
trade foreign futures and options.
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    \7\ The following persons and entities submitted relevant 
comment letters: Everett Mein, Eurex Deutschland (Eurex), Futures 
Industry Association (FIA), Intercontinental Exchange Inc. (ICE), 
New Zealand Exchange Limited (NZX), NIBA, and the Wholesale Markets 
Brokers' Association, Americas (WMBAA).
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II. Final Regulations

A. Section 48.4--Registration Eligibility and Scope

1. Proposed Regulations
    The Commission proposed to amend Sec.  48.4(b) to permit FBOTs to 
provide direct access to eligible IBs to enter orders directly into an 
FBOT's trading and order matching system on behalf of U.S. 
customers.\8\ Section 48.4(b)

[[Page 66203]]

identifies the types of members or other participants located in the 
U.S. that may enter orders directly into the trading and order matching 
system of a registered FBOT, and the types of accounts for which orders 
may be submitted by such members or other participants. In this regard, 
the types of members or other participants identified in existing Sec.  
48.4(b) represent the types of members or other participants that were 
trading via direct access on FBOTs that operated in reliance on CFTC 
staff no-action letters at the time part 48 was promulgated.\9\ 
Specifically, Sec.  48.4(b)(1) provides that any member or other 
participant located in the U.S. may enter orders for their proprietary 
accounts.\10\ Further, Sec.  48.4(b)(2) provides that registered FCMs 
may submit orders on behalf of their customers. Section 48.4(b)(3) 
permits certain CPOs to submit orders on behalf of U.S. commodity pools 
and certain CTAs to submit orders on behalf of U.S. customers provided, 
however, all trades by the CPO or CTA effected through submission of 
such orders are guaranteed by a clearing firm registered as an FCM or 
exempt from FCM registration pursuant to Sec.  30.10.\11\ The 
Commission proposed to amend Sec.  48.4(b) by inserting a new paragraph 
(b)(4) to provide that eligible IBs may submit orders on behalf of 
their customers, provided that a registered FCM or firm exempt from FCM 
registration pursuant to Sec.  30.10 acts as a clearing firm and 
guarantees all trades of the IB effected through submission of U.S. 
customer orders to the trading system. The Commission also proposed to 
amend paragraph (b)(3) to insert the words ``registered as such'' 
following ``futures commission merchant'' to clarify that the reference 
is limited to FCMs registered with the Commission as such.\12\
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    \8\ The term ``eligible IB'' is used in this release to mean an 
IB that is located in the United States and registered with the 
Commission as an IB. Direct access, as defined in the CEA and part 
48, refers explicitly to members or other participants of an FBOT 
that are located in the United States. See footnote 1, supra. For 
purposes of this rulemaking and as used herein, the terms ``U.S. 
customer'' and ``United States customer'' refer to customers located 
in the United States, its territories or its possessions.
    \9\ See Registration of Foreign Boards of Trade, Notice of 
Proposed Rulemaking, 88 FR 61432, 70977 (Nov. 19, 2010).
    \10\ Under Sec.  48.2(l), member or other participant is defined 
as a member or other participant of an FBOT and any affiliate 
thereof that has been granted direct access by the FBOT. 17 CFR 
48.2(l). Proprietary account is defined in Sec.  1.3, 17 CFR 1.3.
    \11\ A Sec.  30.10 exemptive order permits firms subject to 
regulation by a foreign regulator to conduct business from locations 
outside of the U.S. for U.S. persons on FBOTs without registering as 
FCMs, based upon the firm's substituted compliance with a foreign 
regulatory structure found comparable to that administered by the 
Commission under the CEA. Used herein, U.S. commodity pool refers to 
a commodity pool that does not meet the criteria set forth in Sec.  
3.10(c)(5)(iii)(A) through (F), 17 CFR 3.10(c)(5)(iii)(A) through 
(F).
    \12\ The addition of the words ``registered as such'' here is 
intended as a technical change rather than a substantive change; 
i.e., that the reference is intended to refer to registered FCMs is 
already implied by the subsequent clause ``or a firm exempt from 
such registration . . .''
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    Direct access is defined in the CEA and part 48 of the Commission's 
regulations to mean an explicit grant of authority by an FBOT to an 
identified member or other participant located in the U.S. to enter 
trades directly into the trade matching engine of the FBOT.\13\ This 
means that the FBOT, as opposed to its members or participants, has 
identified and permitted a member or participant to enter trades 
directly into the FBOT's order matching and trade entry system from the 
United States.\14\ For example, a registered FBOT may authorize its 
members or other participants eligible to handle U.S. customer orders 
to enter orders on behalf of their U.S. customers or to otherwise 
permit their U.S. customers to access the trading system using the 
member's or participant's identifier and grant of authority. In such 
cases the FBOT permits an identified exchange member or other 
participant to allow their U.S. customers, who have not been granted 
direct access by the FBOT, to have access to the exchange's trading 
systems, subject to a guarantee from an exchange member or other 
participant. The proposed amendment to Sec.  48.4(b) would permit 
registered FBOTs to grant explicit authority to eligible IBs to act in 
such capacity, provided that all trades effected by the IB through 
submission of U.S. customer orders are guaranteed by a registered FCM 
or a firm exempt from FCM registration pursuant to Sec.  30.10.
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    \13\ CEA section 4(b)(1)(A), 7 U.S.C. 6(b)(1)(A); 17 CFR 
48.2(c).
    \14\ Conversely, a person located in the U.S. who accesses an 
FBOT through an intermediary (whether such intermediary is located 
in the United States or not) and without an explicit grant of 
authority by the FBOT (i.e., such person is not an identified member 
or other participant of the FBOT) would not meet the definition of 
``direct access'' for purposes of part 48. See, e.g., 76 FR 80674 at 
80688.
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2. Public Comments
    All comment letters received generally support the proposed 
amendment to Sec.  48.4(b) to permit registered FBOTs to provide direct 
access to eligible IBs to enter orders on behalf of U.S. customers.\15\ 
Commenters agree that permitting eligible IBs to submit customer orders 
via direct access to FBOTs would benefit affected markets and market 
participants.\16\ Several commenters observe that markets have evolved 
and the role of IBs serving as executing brokers has grown since the 
Commission's adoption of part 48 in 2011.\17\ In light of these 
changes, commenters support the Commission's efforts to update part 48 
to ensure that its regulations remain current and reflect changes in 
the market.\18\ Commenters further opine that the Proposal, if adopted, 
is likely to: provide greater customer choice in, and promote fair 
competition among, brokers; \19\ improve the ability for U.S. 
participants to manage risk; \20\ and increase liquidity in affected 
markets.\21\
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    \15\ See Eurex Letter; FIA Letter; ICE Letter; Mein Letter; NZX 
Letter; NIBA Letter; and WMBAA Letter.
    \16\ See Eurex at 1-4; FIA at 2; ICE at 2; Mein at 5-6, 8 NIBA 
at 2; WMBAA at 2.
    \17\ See Eurex at 3-4; FIA at 2; WMBAA at 2.
    \18\ See Eurex at 2-4; WMBAA at 2.
    \19\ See FIA at 2; NZX at 1; NIBA at 2; WMBAA at 2-3.
    \20\ See Eurex at 3-4; FIA at 2; WMBAA at 2; NIBA at 1. 
Commenters specifically note that the Proposal would allow U.S. 
participants to better conduct risk management by enabling on-
exchange trades in foreign markets through IBs during the U.S. 
business day following the close of European markets. Id.
    \21\ ICE posits that the proposed changes to Sec.  48.4 would 
enable additional types of market participants to access FBOTs, 
which would improve liquidity and reduce fragmentation while 
promoting competitiveness in derivatives markets. ICE at 2. NIBA and 
WMBAA generally state that they believe the Proposal would improve 
liquidity. NIBA at 2; WMBAA at 2.
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    The Commission received several comments specifically in support of 
the proposed condition in Sec.  48.4(b)(4) requiring U.S. customer 
orders submitted by IBs to be guaranteed by a registered FCM or a firm 
exempt from FCM registration pursuant to Sec.  30.10.\22\ Commenters 
note that they support the proposed condition because it would extend 
access to IBs located in the U.S. on the same terms that U.S. CPOs and 
CTAs currently access FBOTs.\23\
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    \22\ See FIA at 2; Eurex at 3-4, 6, 8; ICE at 2; NIBA at 2; NZX 
at 1.
    \23\ Id. Eurex further states that it does not believe there is 
any reason to require a different standard for IBs than what is 
presently required for CPOs or CTAs, and asserts that the 
Commission's framework for assessing applications for exemptions 
under Sec.  30.10 provides a comprehensive and robust process to 
assess whether the foreign jurisdiction offers a comparable 
regulatory scheme (including with respect to the protection of 
customer funds, and anti-money laundering (AML)). Eurex at 6-7. ICE 
states that the condition reflects the different ways U.S. customers 
access clearing and avoids unnecessary limitations on customers 
trading through FBOTs. ICE at 2. Further, Eurex states that it does 
not believe there is any additional information the Commission 
should receive from FBOTs that provide direct access to IBs under 
the proposed amendment to Sec.  48.4(b)(4). Eurex at 8. Eurex notes 
that all quarterly, annual, and prompt-notice reporting requirements 
that pertain to an FBOT's members under Sec.  48.8(b)(1) would apply 
to IBs as well as existing categories of participants. Eurex at 8. 
In addition, Eurex asserts that IBs are already subject to a wide 
range of CFTC and NFA regulatory record keeping and reporting 
requirements, which provides the Commission with the necessary 
reporting for oversight. Eurex at 8. Eurex further opines that it 
does not believe there are any additional registration requirements 
under Sec.  48.7 that the Commission should consider for FBOTs that 
provide direct access to IBs under proposed Sec.  48.4(b)(4). Eurex 
at 7.

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    Two commenters requested clarification that proposed Sec.  
48.4(b)(4) would permit IBs to submit block trades to an FBOT (or 
otherwise not prohibit them from doing so).\24\
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    \24\ See Eurex at 4; WMBAA at 3. In addition, WMBAA requests 
clarification as to whether permitting IBs located in the U.S. to 
engage in block trades would require an unregistered foreign board 
of trade to be registered as an FBOT under part 48. WMBAA at 3. 
Generally speaking, a board of trade that is not a designated 
contract market (DCM) or registered FBOT may, depending on the 
nature of its activities within the United States, be liable for 
violating section 4(a) of the CEA, 7 U.S.C. 6(a). Without knowing 
the specifics of how each potential unregistered foreign board of 
trade operates with respect to block trades involving IBs located in 
the U.S. as well as other U.S. located participants, the Commission 
is not in a position to opine generally on WMBAA's request. However, 
the Commission notes that unregistered foreign boards of trade 
seeking guidance concerning FBOT registration and its application to 
their particular operations may request informal guidance from the 
Division of Market Oversight.
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3. Commission Determination
    The Commission is adopting, as proposed and as supported by 
commenters, the amendment to Sec.  48.4(b) to permit FBOTs to provide 
direct access to eligible IBs to enter orders directly into an FBOT's 
trading and order matching system on behalf of U.S. customers.\25\ The 
Commission agrees with commenters that permitting eligible IBs to 
submit customer orders via direct access to FBOTs would benefit market 
participants and affected markets,\26\ and is an appropriate update to 
part 48 of the Commission's regulations given the increased role that 
IBs now serve in derivatives markets.\27\ As discussed above, existing 
Sec.  48.4(b) permits registered FBOTs to provide direct access to 
eligible FCMs, CPOs and CTAs for submission of client orders. DCMs may 
provide for IBs to act as executing brokers for customer accounts that 
in turn use FCM clearing members to whom executed trades are given up 
for clearing and through which such customer accounts are carried.\28\ 
FBOTs may similarly permit IBs located outside of the United States to 
enter trades directly into the trading system of the FBOT on behalf of 
their customer accounts.\29\ The Commission agrees with commenters that 
the amendment to Sec.  48.4 will permit registered IBs located in the 
U.S. to act in a comparable capacity on registered FBOTs in cases where 
an FBOT grants direct access to the IB for the purpose of submitting 
customer orders for execution.\30\ The Commission believes, as 
supported by commenters, that allowing eligible IBs to have direct 
access to registered FBOTs to execute transactions on behalf of their 
U.S. clients is likely to: provide U.S. market participants that wish 
to trade in foreign derivatives contracts with greater choice in 
brokers and broker arrangements, and increase competition among firms 
offering execution brokerage services to customers on registered FBOTs; 
\31\ improve the ability for U.S. participants to manage risk; \32\ and 
increase liquidity on affected markets.\33\ The Commission furthermore 
believes, as supported by commenters, that permitting U.S. IBs access 
to FBOTs on par with FCMs, CPOs, CTAs, and foreign brokers will not 
undermine or otherwise adversely affect protections available to U.S. 
customers because their trades must be guaranteed by a registered FCM 
or firm exempt from FCM registration under Sec.  30.10,\34\ and will be 
subject to required risk disclosures relating to foreign futures and 
options transactions.\35\
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    \25\ See Eurex Letter; FIA Letter; ICE Letter; NZX Letter; NIBA 
Letter; WMBAA Letter; and Mein Letter.
    \26\ See Eurex at 1-4; FIA at 2; ICE at 2, NIBA at 2; Mein at 5-
6, 8.
    \27\ See Eurex at 3-4; FIA at 2; WMBAA at 2.
    \28\ The Commission also agrees with ICE that the amendment to 
48.4(b) ``would establish a similar structure that is already in 
place on [DCMs] whereby IBs submit customer orders via direct 
electronic access.'' ICE at 2.
    \29\ See Eurex at 3; WMBAA at 3.
    \30\ See WMBAA at 2-3. See also Eurex at 4; FIA at 2.
    \31\ See FIA at 2; NZX at 1; NIBA at 2; WMBAA at 2-3.
    \32\ See Eurex at 3-4; FIA at 2; WMBAA at 2; NIBA at 1.
    \33\ See footnote 21, supra.
    \34\ Including the provision relating to the guarantee of U.S. 
customer trades in new Sec.  48.4(b)(4) will ensure that U.S. 
customer trades executed by eligible IBs via direct access are 
guaranteed by a firm that is registered as an FCM or exempt from FCM 
registration under Sec.  30.10. In so doing, the final rule will act 
to reinforce adherence with part 30, insofar as part 30 generally 
requires intermediaries holding funds of U.S. customers in 
connection with the offer or sale of foreign futures and options to 
be registered as FCMs or exempt from FCM registration under Sec.  
30.10. Part 30 of the Commission's regulations governs the offer and 
sale of foreign futures and options to customers located in the 
United States. These regulations are designed to carry out 
Congress's intent that foreign futures and options offered or sold 
in the U.S. be subject to regulatory safeguards comparable to those 
applicable to domestic transactions. Section 30.4 of the 
Commission's regulations requires that in order to accept any money, 
securities or property (or extend credit in lieu thereof) to margin, 
guarantee or secure transactions conducted by U.S. persons on an 
FBOT, a person must be registered as an FCM. See 17 CFR 30.4(a). The 
Commission may grant and has granted exemptions to this requirement 
to register as an FCM based on petitions filed pursuant to 17 CFR 
30.10. See footnote 11, supra. See also Eurex at 5-7; ICE at 2.
    \35\ Section 30.6 of the Commission's regulations requires FCMs 
and IBs to provide a statement to customers disclosing the risks of 
trading foreign futures and options outside the United States. 17 
CFR 30.6. This requirement also applies to exempt foreign IBs, CPOs, 
and CTAs. 17 CFR 30.5(c). Petitions for exemptive relief under Sec.  
30.10 for firms seeking an exemption from FCM registration must 
demonstrate that such firms are subject to a comparable regulatory 
program that includes, among other elements, minimum sales practice 
standards, including ``disclosure of the risks of futures and 
options transactions and, in particular, the risk of transactions 
undertaken outside the jurisdiction of domestic law.'' 17 CFR part 
30, Appendix A, Sales Practice Standards. See also Eurex at 4.
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    Therefore, for the reasons stated above, the Commission is adopting 
as proposed the amendment to Sec.  48.4(b) to permit FBOTs to provide 
direct access to eligible IBs to enter orders directly into an FBOT's 
trading and order matching system on behalf of U.S. customers.
    Eurex and WMBAA each requested that the Commission clarify that the 
Proposal would permit IBs to submit block trades to an FBOT (or 
otherwise not prohibit them from doing so).\36\ Section 48.4(b) 
provides that an FBOT may apply for registration under part 48 ``in 
order to permit the members and other participants of the [FBOT] that 
are located in the United States to enter trades directly into the 
trading and order matching system of the foreign board of trade[. . 
.].'' \37\ The Commission confirms and clarifies that this may include 
block trades submitted to an FBOT. As such, and for the avoidance of 
doubt, an FBOT registered under part 48 is not prohibited by this final 
rule from allowing an eligible IB to which it has granted direct access 
to submit block trades to the FBOT on behalf of the IB's U.S. clients.
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    \36\ See Eurex at 4; WMBAA at 3.
    \37\ 17 CFR 48.4(b).
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B. Section 48.8--Conditions of Registration

1. Proposed Regulations
    The Commission proposed conforming amendments that will include 
eligible IBs in Sec. Sec.  48.8(a)(4)(ii) and (a)(5)(i) and (iii) 
alongside FCMs, CPOs and CTAs.
    Section 48.8(a)(4)(ii) requires all orders transmitted via direct 
access and pursuant to an FBOT's registration to be for a member's or 
other participant's proprietary trading account unless transmitted by a 
registered FCM, CPO or CTA (or exempt CPO or CTA). The Commission 
proposed to include IBs in this section along with FCMs, CPOs and CTAs, 
to conform with the proposed changes to Sec.  48.4(b) that would allow

[[Page 66205]]

eligible IBs to transmit orders via direct access on behalf of the 
accounts of their customers. The Commission also proposed to add the 
words ``registered as such'' following the final reference to ``futures 
commission merchant'' in Sec.  48.8(a)(4)(ii) to conform to the 
proposed amendment to Sec.  48.4(b)(3).\38\
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    \38\ See footnote 12, supra, and accompanying text.
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    Section 48.8(a)(5)(i) provides that a registered FBOT must require 
each current and prospective member or other participant granted direct 
access and not registered with the Commission as an FCM, CPO or CTA to 
agree to and submit to the jurisdiction of the Commission with respect 
to activities conducted pursuant to the FBOT's registration. Registered 
FCMs, CPOs and CTAs are excluded from this requirement because they are 
otherwise subject to the jurisdiction of the Commission as Commission 
registrants. Registered IBs are likewise subject to the jurisdiction of 
the Commission as registrants and the Commission therefore proposed to 
include IBs alongside FCMs, CPOs and CTAs in Sec.  48.8(a)(5)(i).
    Section 48.8(a)(5)(iii) provides that a registered FBOT, its 
clearing organization, and each current and prospective member or other 
participant granted direct access that is not registered with the 
Commission as an FCM, CPO or CTA must maintain with the FBOT written 
representations stating that such entity will provide prompt access to 
books, records, and premises upon the request of the Commission, U.S. 
Department of Justice and, if appropriate, the National Futures 
Association (NFA). Registered FCMs, CPOs and CTAs are excluded from 
this requirement because they are otherwise required to provide such 
access to books, records, and premises as Commission registrants and, 
where applicable, NFA members.\39\ Registered IBs, as Commission 
registrants and NFA members, are likewise required to provide such 
access to books, records, and premises by the Commission, U.S. 
Department of Justice, and NFA, and the Commission therefore proposed 
to include IBs alongside FCMs, CPOs and CTAs in Sec.  48.8(a)(5)(iii).
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    \39\ Subpart C of part 170 of the Commission's regulations 
provides for certain exceptions to the general requirement that 
Commission-registered FCMs and CTAs must become NFA members. See 17 
CFR 170.15 and 170.17.
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2. Public Comments
    The Commission received no comments regarding the proposed 
conforming amendments to include eligible IBs in Sec. Sec.  
48.8(a)(4)(ii) and (a)(5)(i) and (iii) alongside FCMs, CPOs and CTAs.
3. Commission Determination
    The Commission is adopting, as proposed, the amendments to 
Sec. Sec.  48.8(a)(4)(ii) and (a)(5)(i) and (iii).

C. Section 48.9--Revocation of Registration

1. Proposed Regulations
    The Commission proposed to amend Sec.  48.9 to establish a 
procedure for FBOTs to request voluntary revocation of registration. 
Section 48.9 addresses certain events which could lead the Commission 
to revoke an FBOT's registration, including the failure to satisfy 
registration requirements or conditions, and certain other specified 
events.\40\ However, part 48 presently does not contain any provisions 
for an FBOT to request voluntary revocation of its registration. In 
order to allow registered FBOTs to more easily ascertain the steps 
required to request revocation, the Commission proposed to amend Sec.  
48.9(b) (``Other Events that Could Result in Revocation'') by adding a 
new paragraph (b)(5).
---------------------------------------------------------------------------

    \40\ See 17 CFR 48.9.
---------------------------------------------------------------------------

2. Public Comments
    The Commission received one comment regarding the proposed 
amendments to Sec.  48.9 to establish a procedure for FBOTs to request 
voluntary revocation of registration. NZX commented that it supports 
the introduction of a revocation process for FBOTs because it will 
provide greater certainty for entities that no longer wish to retain 
their status as a registered FBOT.\41\
---------------------------------------------------------------------------

    \41\ NZX at 3.
---------------------------------------------------------------------------

3. Commission Determination
    The Commission agrees with NZX that the amendment will provide 
greater certainty for entities that no longer wish to retain their 
status as a registered FBOT.\42\ Therefore, for the reasons stated 
above and as supported by public comment, the Commission is adopting as 
proposed the addition of Sec.  48.9(b)(5) which makes clear that the 
Commission may revoke an FBOT's registration in response to a voluntary 
request by an FBOT to do so, and provides that an FBOT can make such 
request via email to the Commission.
---------------------------------------------------------------------------

    \42\ Id.
---------------------------------------------------------------------------

D. Section 48.6--Foreign Boards of Trade Providing Direct Access 
Pursuant to Existing No-Action Relief

1. Proposed Regulations
    Section 48.6 provides for a limited registration application 
procedure for FBOTs that had been operating under existing staff no-
action letters and FBOTs that had submitted a complete application for 
a staff no-action letter that was pending as of the effective date of 
part 48. Those limited application provisions are no longer applicable 
because all FBOTs with previously existing staff no-action letters have 
been registered under part 48 and all such no-action letters have been 
revoked. Accordingly, the Commission proposed to delete Sec.  48.6. As 
a conforming amendment the Commission also proposed to delete Sec.  
48.2(h) (definition of ``existing no-action relief'') as that 
definition will no longer be applicable or necessary once existing 
Sec.  48.6 is removed.
2. Public Comments
    The Commission received one comment generally in support of the 
proposed deletion of Sec.  48.6 and the conforming deletion of Sec.  
48.2(h).\43\
---------------------------------------------------------------------------

    \43\ NZX states that it supports the removal of Sec.  48.6, 
which is obsolete, and the removal of Sec.  48.2(h) as a conforming 
amendment. NZX at 3.
---------------------------------------------------------------------------

3. Commission Determination
    Therefore, for the reasons stated above, the Commission is adopting 
as proposed the deletion of Sec.  48.6 and the conforming deletion of 
Sec.  48.2(h).

III. Related Matters

A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) requires agencies to consider 
whether the regulations they promulgate will have a significant 
economic impact on a substantial number of small entities and, if so, 
provide a regulatory flexibility analysis with respect to such 
impact.\44\ The Commission has previously established certain 
definitions of ``small entities'' to be used by the Commission in 
evaluating the impact of its regulations on small entities in 
accordance with the RFA.\45\ The amendments to part 48 would impact 
FBOTs. The Commission has previously determined that FBOTs are not 
small entities for purposes of the RFA.\46\
---------------------------------------------------------------------------

    \44\ 5 U.S.C. 601 et seq.
    \45\ See Policy Statement and Establishment of ``Small 
Entities'' for purposes of the Regulatory Flexibility Act, 47 FR 
18618 (Apr. 30, 1982).
    \46\ 76 FR 80698.
---------------------------------------------------------------------------

    The amendments to part 48 would also impact eligible IBs by 
providing

[[Page 66206]]

them with the potential to gain direct access to FBOTs that incorporate 
the new regulatory provisions allowing such IBs direct access. The 
Commission has previously established that IBs may in some cases be 
deemed ``small entities'' for the purposes of the RFA.\47\ However, the 
final rules do not impose any new burden on eligible IBs. Instead, the 
final rules would remove a regulatory barrier preventing these small 
entities from accessing FBOTs. Accordingly, the Commission believes 
that the regulation will be less burdensome to small-entity, eligible 
IBs and will not impose any additional costs on them.
---------------------------------------------------------------------------

    \47\ 85 FR 78718, 78733 (Dec. 7, 2020).
---------------------------------------------------------------------------

    Therefore, the Chairman, on behalf of the Commission, pursuant to 5 
U.S.C. 605(b), hereby certifies that the final rules will not have a 
significant economic impact on a substantial number of small entities.

B. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (PRA) \48\ imposes certain 
requirements on Federal agencies (including the Commission) in 
connection with conducting or sponsoring any ``collection of 
information,'' \49\ as defined by the PRA. 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).\50\ The PRA is 
intended, in part, to minimize the paperwork burden created for 
individuals, businesses, and other persons as a result of the 
collection of information by Federal agencies, to ensure the greatest 
possible benefit and utility of information created, collected, 
maintained, used, shared, and disseminated by or for the Federal 
Government.\51\ The PRA applies to all information, ``regardless of 
form or format,'' whenever the government is obtaining, causing to be 
obtained, or soliciting information, and includes required disclosure 
to third parties or the public, of facts or opinions, when the 
information collection calls for answers to identical questions posed 
to, or identical reporting or recordkeeping requirements imposed on, 
ten or more persons.\52\
---------------------------------------------------------------------------

    \48\ 44 U.S.C. 3501 et seq.
    \49\ See 44 U.S.C. 3502(3)(A).
    \50\ See 44 U.S.C. 3507(a)(3); 5 CFR 1320.5(a)(3).
    \51\ See 44 U.S.C. 3501.
    \52\ See 44 U.S.C. 3502(3).
---------------------------------------------------------------------------

    This final rulemaking amends regulations that contain collections 
of information for which the Commission has previously received a 
control number from OMB: 3038-0101, Registration of Foreign Boards of 
Trade (17 CFR part 48).\53\ This collection addresses the information 
collection requirements associated with part 48's registration 
requirement and related registration procedures and conditions that 
apply to FBOTs that wish to provide direct access to their electronic 
trading and order matching systems. The final rulemaking allows 
eligible IBs to act as direct access participants on registered FBOTs, 
provides a process for FBOTs to request voluntary revocation of their 
registration, and removes outdated references to ``no action relief.''
---------------------------------------------------------------------------

    \53\ The Commission's most recent burden estimates for this 
collection are available at https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202301-3038-001.
---------------------------------------------------------------------------

    The Commission believes that these amendments do not contain any 
new collections of information and will not increase the burden 
associated with the information collections under part 48. While the 
amendments establish a new process for FBOTs to submit requests for 
revocation of their registration, the regulations allow FBOTs to submit 
their requests electronically via email to the Commission and do not 
mandate any specific form or format for such requests. Accordingly, 
this new submission method does not constitute a collection of 
information under the PRA. In addition, the amendments do not affect 
the provisions of part 48 covered in the current PRA approval (Sec.  
48.8 (periodic data submissions to the Commission), Sec.  48.9 
(demonstration of compliance); and Sec.  48.10 (listing additional 
futures and options contracts)). Accordingly, the Commission is 
retaining its existing estimates for the burden associated with the 
information collections under OMB Collection 3038-0101. The Commission 
received no comments related to the PRA analysis or this determination.

C. Cost-Benefit Considerations

1. Introduction
    Section 15(a) of the CEA \54\ requires the Commission to ``consider 
the costs and benefits'' of its actions before promulgating a 
regulation under the CEA or issuing certain orders. CEA section 15(a) 
further specifies that the costs and benefits shall be evaluated in 
light of five broad areas of market and public concern: (1) protection 
of market participants and the public; (2) efficiency, competitiveness, 
and financial integrity of futures markets; (3) price discovery; (4) 
sound risk management practices; and (5) other public interest 
considerations. The Commission considers the costs and benefits 
resulting from its discretionary determinations with respect to the CEA 
section 15(a) factors.
---------------------------------------------------------------------------

    \54\ 7 U.S.C. 19(a).
---------------------------------------------------------------------------

    The Commission has endeavored to assess the expected costs and 
benefits of the amendments in quantitative terms, including Paperwork 
Reduction Act (PRA)-related costs, where practicable. In situations 
where the Commission is unable to quantify the costs and benefits, the 
Commission identifies and considers the costs and benefits of the 
applicable amendments in qualitative terms. The Commission did not 
receive any comments from commenters which quantified or attempted to 
quantify the costs and benefits of the Proposal.
    The Commission notes that this consideration of costs and benefits 
is based on, inter alia, its understanding that the derivatives markets 
regulated by the Commission function internationally, with (1) 
transactions that involve entities organized in the United States 
occurring across different international jurisdictions, (2) some 
entities organized outside of the United States that are prospective 
Commission registrants, and (3) some entities that typically operate 
both within and outside the United States, and that follow 
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 the 
regulations on all relevant derivatives activity, whether based on 
their actual occurrence in the United States or on their connection 
with activities in, or effect on, U.S. commerce.\55\
---------------------------------------------------------------------------

    \55\ See, e.g., 7 U.S.C. 2(i).
---------------------------------------------------------------------------

    In the following consideration of costs and benefits, the 
Commission first identifies and discusses the benefits and costs 
attributable to the rule amendments. The Commission, where applicable, 
then considers the costs and benefits of the rule amendments in light 
of the five public interest considerations set out in section 15(a) of 
the CEA.
2. Final Regulations
    The Commission is amending certain rules in part 48 of its 
regulations relating to FBOTs. The Commission identifies the costs and 
benefits of the amendments relative to the baseline of the regulatory 
status quo. In particular, the baseline against which the Commission 
considers the costs and benefits of these rule amendments is the 
statutory and regulatory requirements of the CEA and Commission 
regulations

[[Page 66207]]

now in effect, in particular CEA section 4(b) and part 48 of the 
Commission's regulations.
Amendments to Sec.  48.6
    The final rules delete Sec.  48.6, which provided for an alternate 
registration procedure for FBOTs acting under the preexisting staff no-
action letter process, because such no-action letter process and no-
action letters are no longer in effect. Deletion of Sec.  48.6 and 
elimination of the alternate registration procedure will not increase 
costs to FBOTs because Sec.  48.6 and the alternate registration 
procedure are already in effect obsolete.
Amendments to Sec.  48.9
    The amendment to Sec.  48.9 establishes a procedure for FBOTs to 
request voluntary revocation of registration. This amendment would not 
impose a new requirement for FBOTs. The baseline is the current 
practice of the Commission, whereby requests for voluntary revocation 
are processed on an ad-hoc basis. The primary benefit will be to allow 
registrants to more easily ascertain the steps required to request 
revocation. The amendments are not expected to increase costs to 
registered FBOTs compared to the status quo.
Amendments to Sec.  48.4 and Conforming Amendments to Sec.  48.8
    The amendments to Sec.  48.4 and conforming amendments to Sec.  
48.8 permit a registered FBOT to provide direct access to its 
electronic trading and order matching system to an identified member or 
other participant located in the U.S. and registered with the 
Commission as an IB for submission of customer orders to the FBOT's 
trading system for execution, provided that all trades effected through 
submission of U.S. customer orders are guaranteed by a registered FCM 
or a firm exempt from FCM registration pursuant to Sec.  30.10.
    There are presently 24 FBOTs registered with the Commission. Under 
the current rules, eligible intermediaries permitted direct access on 
registered FBOTs for purposes of entering trades on behalf of non-
proprietary client accounts include certain FCMs, CTAs, and CPOs. The 
amendments would add eligible IBs to the existing list of eligible 
intermediaries. Similar to trades submitted by CTAs and CPOs via direct 
access, the trades executed by eligible IBs on behalf of customers 
located in the U.S. would be required to be guaranteed by a registered 
FCM or a firm exempt from FCM registration pursuant to Sec.  30.10. IBs 
specialize in soliciting and executing orders for their clients. The 
field of trade execution is continuously evolving with technological 
advances, and has helped bring down execution costs. As of July 2024, 
the following numbers of intermediaries were registered with the 
Commission.\56\
---------------------------------------------------------------------------

    \56\ NFA website, https://www.nfa.futures.org/registration-membership/membership-and-directories.html.

      Intermediaries Registered With the Commission as of July 2024
------------------------------------------------------------------------
 
------------------------------------------------------------------------
CTAs \1\....................................................       1,237
CPOs \1\....................................................       1,188
IBs.........................................................         919
FCMs........................................................          62
Swap Dealers................................................         107
------------------------------------------------------------------------
\1\ These categories are not mutually exclusive, i.e., a CPO may also be
  registered as a CTA.

    The table above shows that the number of IBs is more than one 
quarter of all Commission-registered intermediaries. The Commission 
does not know how many FBOTs will choose to provide direct access to 
eligible IBs for purposes of entering trades on behalf of non-
proprietary client accounts or how many eligible IBs will become direct 
access members or participants of registered FBOTs pursuant to this 
final rule. There could also be new IB entrants that are granted direct 
access to registered FBOTs. However, by permitting FBOTs the option to 
provide direct access to eligible IBs for submission of customer 
orders, the amendments could lead to a significant increase in the 
number of choices for U.S. customers with respect to execution of 
trades on FBOTs.
    Although the Commission lacks the data and information to 
quantitatively estimate the costs and benefits of permitting IBs 
located in the U.S. to have direct access to registered FBOTs pursuant 
to this final rule, it has endeavored to assess the expected costs and 
benefits of the proposal in qualitative terms. The lack of data and 
information to estimate costs is attributable in part to uncertainty 
regarding how FBOTs will choose to respond to the amendments to part 48 
and how IBs located in the U.S. will choose to respond to potential new 
opportunities to participate on registered FBOTs.
    The baseline is the status quo in which Sec.  48.4 permits FBOTs to 
provide direct access to certain FCMs, CPOs and CTAs for purposes of 
transmission of orders for certain client accounts. Furthermore, 
foreign IBs not located in the U.S. may have similar arrangements on 
FBOTs whereby their customer orders are transmitted to an FBOT.\57\ IBs 
are not included in Sec.  48.4 as intermediaries eligible to have 
direct access and transmit trades on behalf of customers. As such, 
registered FBOTs currently do not provide direct access to IBs located 
in the United States to enter orders on behalf of their customers.
---------------------------------------------------------------------------

    \57\ The definition of ``direct access'' does not include 
identified members or other participants of an FBOT that are located 
outside of the United States. See 17 CFR 48.2(c).
---------------------------------------------------------------------------

    Relative to the baseline, the primary effect of the amendment to 
Sec.  48.4 is to allow registered FBOTs to provide direct access to 
eligible IBs in order to transmit orders of U.S. customers. This could 
promote competition among execution-only brokers on registered FBOTs. 
There may be advantages to customers from having additional choices in 
brokers and brokerage arrangements to trade foreign derivatives on 
registered FBOTs--for example, lower trading costs or the use of 
advantageous proprietary execution algorithms developed by such IBs. 
Several commenters assert that the amendments will allow U.S. 
participants to better conduct risk management by enabling trades to be 
submitted to FBOTs through IBs during the U.S. business day following 
the close of European markets.\58\ From the standpoint of registered 
FBOTs, allowing eligible IBs to become direct access participants for 
submission of customer orders will open up potential new distribution 
channels that could lead to additional trading volume. This in turn 
could improve the viability of some traded instruments. Similarly, 
eligible IBs may be able to pursue new business models and/or expand 
existing business models onto new foreign markets.
---------------------------------------------------------------------------

    \58\ Eurex at 3-4; FIA at 2; NIBA at 1.
---------------------------------------------------------------------------

    FBOTs that decide to provide direct access to eligible IBs pursuant 
to this final rule and that do not already have necessary structures in 
place to do so may incur certain costs relating to, for example, 
modification of rules, procedures and/or systems to enable direct 
access to eligible IBs to submit customer orders to the FBOT's trading 
system for execution.
    The Commission did not receive any comments which quantified or 
attempted to quantify any of the costs and benefits described above, or 
which quantified or attempted to quantify any other costs or benefits 
associated with eligible IBs having direct access to registered FBOTs.
Section 15(a) Factors
    Section 15(a) of the CEA requires the Commission to consider the 
costs and

[[Page 66208]]

benefits of the amendments to part 48 with respect to the following 
factors: protection of market participants and the public; efficiency, 
competitiveness, and financial integrity of markets; price discovery; 
sound risk management practices; and other public interest 
considerations.
(i) Protection of Market Participants and the Public
    The changes to part 48 would not affect the basic protection for 
customers with respect to their foreign futures and options 
transactions. Under the rule, U.S. customer assets are required to be 
maintained by registered FCMs or similar entities exempt from FCM 
registration pursuant to Sec.  30.10.
(ii) Efficiency, Competitiveness, and Financial Integrity of Markets
    The current part 48 treats IBs differently from certain FCMs, CTAs 
and CPOs in that certain FCMs, CTAs and CPOs have the ability to be 
granted direct access to registered FBOTs for the submission of client 
orders. Similarly, non-U.S. intermediaries (which are outside of the 
scope of part 48) may also, under the status quo, be granted similar 
access to registered FBOTs for the purpose of offering execution 
services to U.S. and non-U.S. customers. The adopted amendments to part 
48 will permit eligible IBs to offer competing execution services on 
registered FBOTs. The adopted amendments may also open access to 
foreign derivatives markets for existing IB customers that otherwise 
would not have access to trading on a registered FBOT (i.e., customers 
that choose not to or cannot become direct access participants or 
otherwise seek out an eligible FCM, CPO, CTA, or foreign broker to 
transact on an FBOT). Greater competition among introducing brokers and 
potentially additional and new types of customers participating in 
affected markets may lead to increased market efficiencies and greater 
financial integrity. Furthermore, that trades of U.S. customers must be 
guaranteed by registered FCMs or comparable foreign firms promotes the 
financial integrity of affected markets by ensuring that intermediaries 
handling U.S. customer funds are subject to certain regulatory 
safeguards.
(iii) Price Discovery
    There is a potential for the adopted changes to part 48 to 
positively affect price discovery in futures markets. Participation of 
eligible IBs as direct access members may lead to increased 
participation and volume on registered FBOTs, in particular during 
hours when U.S. brokers are more active than foreign brokers.
(iv) Risk Management Practices
    As noted above, the changes will not affect how customer assets are 
treated. However, registered FCMs and firms exempt from FCM 
registration pursuant to Sec.  30.10 may need to expand their risk 
mitigation processes to ensure that they have robust processes for 
managing the risk associated with eligible IBs executing trades on 
registered FBOTs via direct access.
(v) Other Public Interest Considerations
    As noted above, the changes may enable new and distinct kinds of 
market participants to access registered FBOTs, which could help 
improve liquidity and reduce fragmentation in affected markets.

D. Antitrust Considerations

    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 this Act, in issuing any order or adopting any Commission 
rule or regulation (including any exemption under 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.\59\
---------------------------------------------------------------------------

    \59\ 7 U.S.C. 19(b).
---------------------------------------------------------------------------

    The Commission believes that the public interest to be protected by 
the antitrust laws is generally to protect competition. The Commission 
has considered the modified rule to determine whether it is 
anticompetitive and has identified no anticompetitive effects.\60\ 
Because the Commission has determined that the modified rule is not 
anticompetitive and has no anticompetitive effects, the Commission has 
not identified any less anticompetitive means of achieving the purposes 
of the Act.
---------------------------------------------------------------------------

    \60\ The Commission received several comments stating that the 
modified rule may increase competition and/or promote fair 
competition among brokers. See FIA at 2 (stating that the rule may 
``work to increase competition in brokering foreign products''); 
NIBA at 2 (stating that ``IBs should have the same access to FBOTs 
as CPOs and CTAs currently enjoy'' and that the modified rule ``can 
provide additional market choices for IBs and their customers''); 
WMBAA at 2-3 (stating that the rule will ``promote competition among 
firms offering execution brokerage services to customers on 
registered FBOTs,'' and that the rule ``allows for the growth of 
competitive markets without impeding liquidity formation'').
---------------------------------------------------------------------------

List of Subjects in 17 CFR Part 48

    Registration of foreign boards of trade.

    For the reasons stated in the preamble, the Commodity Futures 
Trading Commission amends 17 CFR part 48 as follows:

PART 48--REGISTRATION OF FOREIGN BOARDS OF TRADE

0
1. The authority citation for part 48 continues to read as follows:

    Authority:  7 U.S.C. 5, 6 and 12a, unless otherwise noted.


Sec.  48.2  [Amended]

0
2. In Sec.  48.2 remove paragraph (h) and redesignate paragraphs (i) 
through (l) as paragraphs (h) through (k), respectively.

0
3. In Sec.  48.4 revise paragraph (b) to read as follows:


Sec.  48.4  Registration eligibility and scope.

* * * * *
    (b) A foreign board of trade may apply for registration under this 
part in order to permit the members and other participants of the 
foreign board of trade that are located in the United States to enter 
trades directly into the trading and order matching system of the 
foreign board of trade, to the extent that such members or other 
participants are:
    (1) Entering orders for the member's or other participant's 
proprietary accounts;
    (2) Registered with the Commission as futures commission merchants 
and are submitting customer orders to the trading system for execution;
    (3) Registered with the Commission as a commodity pool operator or 
commodity trading advisor, or are exempt from such registration 
pursuant to Sec.  4.13 or Sec.  4.14 of this chapter, and are 
submitting orders for execution on behalf of a United States pool that 
the member or other participant operates or an account of a United 
States customer for which the member or other participant has 
discretionary authority, respectively, provided that a futures 
commission merchant registered with the Commission as such or a firm 
exempt from such registration pursuant to Sec.  30.10 of this chapter 
acts as clearing firm and guarantees, without limitation, all such 
trades of the commodity pool operator or commodity trading advisor 
effected through submission of orders to the trading system; or
    (4) Registered with the Commission as introducing brokers and are 
submitting customer orders to the trading system for execution, 
provided that a futures commission merchant registered with the 
Commission as such or a firm exempt from such registration pursuant to 
Sec.  30.10 of this chapter acts as a clearing firm and guarantees, 
without limitation, all trades of the introducing

[[Page 66209]]

broker effected through submission of orders for United States 
customers to the trading system.


Sec.  48.6  [Removed and Reserved]

0
4. Remove and reserve Sec.  48.6.

0
5. In Sec.  48.8, revise paragraphs (a)(4)(ii) and (a)(5)(i) and (iii) 
to read as follows:


Sec.  48.8  Conditions of registration.

* * * * *
    (a) * * *
    (4) * * *
    (ii) All orders that are transmitted to the foreign board of 
trade's trading system by a foreign board of trade's identified member 
or other participant that is operating pursuant to the foreign board of 
trade's registration will be solely for the member's or trading 
participant's own account unless such member or other participant is 
registered with the Commission as a futures commission merchant or such 
member or other participant is registered with the Commission as an 
introducing broker, commodity pool operator or commodity trading 
advisor, or is exempt from registration as a commodity pool operator or 
commodity trading advisor pursuant to Sec.  4.13 or Sec.  4.14 of this 
chapter, provided that a futures commission merchant registered with 
the Commission as such or a firm exempt from such registration pursuant 
to Sec.  30.10 of this chapter acts as clearing firm and guarantees, 
without limitation, all trades of the introducing broker, commodity 
pool operator or commodity trading advisor effected through submission 
of orders for United States pools or customers to the trading system.
    (5) * * *
    (i) Prior to operating pursuant to registration under this part and 
on a continuing basis thereafter, a registered foreign board of trade 
will require that each current and prospective member or other 
participant that is granted direct access to the foreign board of 
trade's trading system and that is not registered with the Commission 
as a futures commission merchant, an introducing broker, a commodity 
trading advisor or a commodity pool operator, file with the foreign 
board of trade a written representation, executed by a person with the 
authority to bind the member or other participant, stating that as long 
as the member or other participant is authorized to enter orders 
directly into the trade matching system of the foreign board of trade, 
the member or other participant agrees to and submits to the 
jurisdiction of the Commission with respect to activities conducted 
pursuant to the registration.
* * * * *
    (iii) The foreign board of trade, clearing organization, and each 
current and prospective member or other participant that is granted 
direct access to the foreign board of trade's trading system and that 
is not registered with the Commission as a futures commission merchant, 
an introducing broker, a commodity trading advisor, or a commodity pool 
operator will maintain with the foreign board of trade written 
representations, executed by persons with the authority to bind the 
entity making them, stating that as long as the foreign board of trade 
is registered under this part, the foreign board of trade, the clearing 
organization or member of either or other participant granted direct 
access pursuant to this part will provide, upon the request of the 
Commission, the United States Department of Justice and, if 
appropriate, the National Futures Association, prompt access to the 
entity's, member's, or other participant's original books and records 
or, at the election of the requesting agency, a copy of specified 
information containing such books and records, as well as access to the 
premises where the trading system is available in the United States.
* * * * *

0
6. In Sec.  48.9, add paragraph (b)(5) to read as follows:


Sec.  48.9  Revocation of registration.

* * * * *
    (b) * * *
    (5) The Commission may revoke a foreign board of trade's 
registration in response to a voluntary request by the foreign board of 
trade to vacate its registration. A foreign board of trade may file a 
request to vacate its registration with the Secretary of the Commission 
at [email protected].
* * * * *

    Issued in Washington, DC, on August 6, 2024, 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 Foreign Boards of Trade--Voting Summary and Chairman's 
and Commissioners' Statements

Appendix 1--Voting Summary

    On this matter, Chairman Behnam and Commissioners Johnson, and 
Goldsmith Romero, Mersinger, and Pham voted in the affirmative. No 
Commissioner voted in the negative.

Appendix 2--Statement of Chairman Rostin Behnam

    I support this final rule, which amends the CFTC regulations for 
foreign boards of trade (FBOTs). The amendments permit a registered 
FBOT to provide direct access to its electronic trading and order 
matching system to a registered introducing broker (IB) located in 
the United States for submission of customer orders to the FBOT's 
trading system for execution. Based upon more than ten years of 
Commission experience with the existing rules for FBOTs, the 
amendments also enhance and modernize the ruleset.
    The existing FBOT rules were promulgated in 2011. Today's 
amendments demonstrate the Commission's ongoing consideration of its 
existing rules and my commitment to ensuring that our rules address 
the reality of today's markets and their structure. The changes 
enable new types of market participants to access registered FBOTs, 
improving liquidity and promoting healthier markets.
    I thank staff in the Division of Market Oversight, Office of the 
General Counsel, and the Office of the Chief Economist for all of 
their work on this final rule.

Appendix 3--Statement of Commissioner Kristin N. Johnson

    The Commodity Futures Trading Commission (Commission) approved a 
final rule that amends Part 48 to permit a foreign board of trade 
(FBOT) registered with the Commission to provide introducing brokers 
(IBs) located in the United States and registered with the 
Commission direct access to submit orders to trade foreign futures 
and options on behalf of customers located in the United States 
(Final Rule).\1\ Under the Final Rule, FBOTs will be able to provide 
registered IBs located in the United States with direct access to 
execute customer trades, provided that they submit such orders for 
clearing to a Commission-registered FCM or a firm exempt from FCM 
registration under CFTC Regulation 30.10.
---------------------------------------------------------------------------

    \1\ The Commission is also establishing a procedure for an FBOT 
to request the revocation of its registration, and removing certain 
outdated references to ``existing no-action relief.''
---------------------------------------------------------------------------

    Over the course of my tenure as a Commissioner, I have 
consistently supported the Commission's efforts to advance the 
protection of customer funds. I appreciate the thoughtful comments 
regarding the Commission's 30.10 framework in the context of the 
Final Rule and the attention given to the need to ensure that the 
foreign regime has comparable customer protection, disclosure, and 
anti-money laundering requirements.
    I support the Final Rule, which includes important protections 
for U.S. customers, while also facilitating market access. I commend 
the careful work of the staff of the Division of Market Oversight, 
including Alexandros Stamoulis, Roger Smith, Maura Dundon, and David 
Reiffen, on the Final Rule.

[[Page 66210]]

Appendix 4--Statement of Commissioner Caroline D. Pham

    I support the Foreign Boards of Trade (FBOT) Final Rule because 
it promotes access to markets for U.S. participants, competition, 
and liquidity. I would like to thank Maura Dundon, Roger Smith, and 
Alexandros Stamoulis in the CFTC's Division of Market Oversight for 
their work on this rulemaking.
    I will reiterate key points from my statement on the FBOT 
proposed rule.\1\ As a CFTC Commissioner, I have made it clear that 
I believe in good policy that enables growth, progress, and access 
to markets.\2\ Accordingly, I am pleased to support Commission 
efforts that take a pragmatic approach to issues that hinder market 
access and cross-border activity. I continue to believe that this 
rulemaking exemplifies policy that ensures a level playing field, 
and I applaud this step in the right direction for market structure.
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    \1\ Statement of Commissioner Caroline D. Pham in Support of 
Foreign Board of Trade Proposal (Feb. 20, 2024), https://www.cftc.gov/PressRoom/SpeechesTestimony/phamstatement022024.
    \2\ See, e.g., Keynote Address by Commissioner Caroline D. Pham, 
98th Annual Convention of the American Cotton Shippers Association 
(June 22, 2022), https://www.cftc.gov/PressRoom/SpeechesTestimony/opapham2; Statement of Commissioner Caroline D. Pham on Staff Letter 
Regarding ADM Investor Services, Inc. (June 16, 2023), https://www.cftc.gov/PressRoom/SpeechesTestimony/phamstatement061623.
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    FBOTs have been a critical piece of the CFTC's markets for 
decades and provide access for U.S. market participants to non-U.S. 
markets in realization of the global economy and international 
business.\3\ The main substantive amendment in the FBOT Final Rule 
is to Regulation 48.4, which will now include introducing brokers 
(IBs) \4\ as a permissible intermediary, in addition to futures 
commission merchants (FCMs), commodity pool operators (CPOs), and 
commodity trading advisors (CTAs), to enter orders on behalf of 
customers or commodity pools via direct access on a registered 
FBOT.\5\ I believe that the FBOT Final Rule will provide more choice 
in brokers and broker arrangements for U.S. market participants that 
trade foreign futures and ensure that appropriate customer 
protections are in place.
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    \3\ While FBOTs initially had operated pursuant to no-action 
relief, in 2011, following the Dodd-Frank Wall Street and Consumer 
Protection Act of 2010, the Commission began registering FBOTs. See 
Registration of Foreign Boards of Trade, Final Rule, 76 FR 80674 
(Dec. 23, 2011), https://www.federalregister.gov/documents/2011/12/23/2011-31637/registration-of-foreign-boards-of-trade.
    \4\ The Commission generally defines an IB as an individual or 
organization that solicits or accepts orders to buy or sell futures 
contracts, commodity options, retail off-exchange forex or commodity 
contracts, or swaps, but does not accept money or other assets from 
customers to support these orders. Commodity Exchange Act (CEA) 
section 1a(31); 17 CFR 1.3(mm). The Commission registers IBs under 
CEA section 4d(g) and CFTC Regulation 3.4(a). 7 U.S.C. 6d(g) and 17 
CFR 3.4(a).
    \5\ 17 CFR 48.4.
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    As sponsor of the CFTC's Global Markets Advisory Committee 
(GMAC),\6\ I have devoted a significant part of my Commissionership 
to supporting solutions that will enhance the resiliency and 
efficiency of global markets.\7\ The FBOT Final Rule is policy that 
mitigates market fragmentation and the associated impact on 
liquidity, and promotes the overall competitiveness of our 
derivatives markets. I am pleased to support the FBOT Final Rule.
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    \6\ CFTC Global Markets Advisory Committee, https://www.cftc.gov/About/AdvisoryCommittees/GMAC. See Commissioner Pham 
Announces New Members and Leadership of the CFTC's Global Markets 
Advisory Committee and Subcommittees (June 30, 2023), https://www.cftc.gov/PressRoom/PressReleases/8740-23.
    \7\ E.g., Achieving Growth and Progress: Statement of 
Commissioner Caroline D. Pham at the Global Markets Advisory 
Committee June 4 Meeting (June 4, 2024), https://www.cftc.gov/PressRoom/SpeechesTestimony/phamstatement060424; Opening Statement 
of Commissioner Caroline D. Pham before the Global Markets Advisory 
Committee (Feb. 13, 2023), https://www.cftc.gov/PressRoom/SpeechesTestimony/phamstatement021323. To date, the GMAC has 
advanced 13 recommendations and reports to the Commission on a broad 
set of significant global markets issues, including U.S. Treasury 
market liquidity, well-functioning repo and funding markets, capital 
and margin requirements, exchange volatility controls, T+1 
securities settlement, improved collateral management, central 
counterparty (CCP) default simulation, streamlining trade reporting 
data to monitor systemic risk, and a foundational digital asset 
taxonomy to facilitate alignment in regulation across jurisdictions.

[FR Doc. 2024-17828 Filed 8-14-24; 8:45 am]
BILLING CODE 6351-01-P