[Federal Register Volume 91, Number 125 (Wednesday, July 1, 2026)]
[Proposed Rules]
[Pages 40102-40133]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2026-13239]
[[Page 40101]]
Vol. 91
Wednesday,
No. 125
July 1, 2026
Part II
Commodity Futures Trading Commission
-----------------------------------------------------------------------
17 CFR Parts 15, 16, and 17
Data Reporting Requirements for Certain Event Contracts; Proposed Rule
Federal Register / Vol. 91 , No. 125 / Wednesday, July 1, 2026 /
Proposed Rules
[[Page 40102]]
-----------------------------------------------------------------------
COMMODITY FUTURES TRADING COMMISSION
17 CFR Parts 15, 16, and 17
RIN 3038-AF73
Data Reporting Requirements for Certain Event Contracts
AGENCY: Commodity Futures Trading Commission.
ACTION: Notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: The Commodity Futures Trading Commission (``Commission'' or
``CFTC'') is proposing revisions to the Commission's regulations that
would set forth an alternate framework for reporting of data for
certain fully collateralized event contracts (the ``Proposal''). These
revisions would require certain reporting markets, futures commission
merchants, clearing members, and foreign brokers to report certain
event contracts pursuant to the regulations in parts 15 through 18
rather than the reporting regulations contained in certain sections of
parts 38, 39, 43 and 45.
DATES: Comments must be received on or before July 31, 2026.
ADDRESSES: You may submit comments, specifically referencing ``Data
Reporting Requirements For Certain Event Contracts'' and RIN 3038-AF73,
by any of the following methods:
Regulations.gov: Go to https://www.regulations.gov and
press the ``Search'' button, then proceed as follows:
1. Under Refine Documents Results--check the box to ``Only show
documents open for comment'';
2. Under Agency--select ``See More'' and check the box for
``Commodity Futures Trading Commission,'' then press the Apply button;
3. Identify this proposal in the list of CFTC documents open for
comment, press the ``Comment'' button to open the submission form, and
follow the instructions on the form.
Alternatively, if you are viewing this proposal on
www.federalregister.gov, click the ``Submit A Public Comment'' button
at the top of the page to open the comment form. Follow the
instructions on the form to submit your comment to Regulations.gov.
Mail: Send to--Christopher Kirkpatrick, Secretary of the
Commission, Commodity Futures Trading Commission, Three Lafayette
Centre, 1155 21st Street NW, Washington, DC 20581.
Hand Delivery/Courier: Address to--CFTC Comment
Submission, Attn: Christopher Kirkpatrick, Secretary of the Commission,
Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st
Street NW, Washington, DC 20581.
Please submit your comments using only one of these methods. To
avoid possible delays with mail or in-person deliveries, submissions
through Regulations.gov are encouraged.
All comments must be submitted in English or, if not, accompanied
by an English translation. Do not include in your comment text or
attachments any personal identifying information or business
information that you do not want published online. Comments (regardless
of submission method) will be published without review for, and without
removal of, any personal identifying information or information your
business may consider confidential.
If you wish to submit confidential information for the Commission's
consideration, please contact the CFTC personnel listed in this
document under FOR FURTHER INFORMATION CONTACT before making any
submission. Please also carefully review the Commission's procedures in
17 CFR 145.9 for requesting confidential treatment under the Freedom of
Information Act (FOIA) of information submitted to the Commission.
The CFTC reserves the right, but shall have no obligation, to
review, pre-screen, filter, or redact all or any part of your comment
submission. The CFTC also reserves the right, without further
notification, to refuse to publish or to remove from public view all or
any part of your submission to the extent it contains content
inappropriate for publication in a comment file, such as--without
limitation--obscene language, threats of violence, solicitations for
commercial sales or illegal activity, or obvious spam. If a submission
that is refused for or withdrawn from publication because of
inappropriate content also contains comments on the merits of this
proposal, such submission will be retained in the record for the matter
and will be considered as required under the Administrative Procedure
Act (``APA'') and other applicable laws, and may be accessible under
the FOIA.
Pursuant to the APA, 5 U.S.C. 553(b)(4), a plain language summary
of the proposed rule is available at Regulations.gov.
FOR FURTHER INFORMATION CONTACT: Stephen Andrews, Deputy General
Counsel for Regulation, [email protected], 202-308-7563, Office of the
General Counsel; Herminio Castro, Associate General Counsel,
[email protected], 202-418-6705; Owen Kopon, Associate Director,
Division of Market Oversight, [email protected], 202-418-5360; Paul
Chaffin, Special Counsel, Division of Market Oversight,
[email protected], 202-418-5185, in each case at the Commodity Futures
Trading Commission, 1155 21st Street NW, Washington, DC 20581.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
A. Introduction
B. Current Reporting Regimes for Swaps and Futures
C. Staff No-Action Letters Issued for Fully-Collateralized Event
Contracts
II. Proposed Rules
A. Sec. 16.03(a): Covered Event Contract
B. Sec. 16.03(b)(2) and Sec. 16.03(b)(3): Market Data and
Transaction Data Reporting Requirements for DCMs
C. Sec. 16.03(b)(1), Sec. 16.03(c), Sec. 17.00(j) and Sec.
17.01(f): Large Trader Reporting Requirements for DCMs, Futures
Commission Merchants, Clearing Members, and Foreign Brokers
D. Sec. 16.03(d): Reports By Traders
E. Sec. 16.03(e): Reporting Levels
F. Sec. 16.03(e): Reportable Trading Volume Level
G. Sec. 16.03(f): Real-Time Dissemination of Market Data
H. Sec. 16.03(g): Requirement That DCMs Obtain Trader-
Identifying Information
I. Sec. 16.03(h): Recordkeeping Obligations
III. Compliance Date
IV. Related Matters
A. Cost-Benefit Considerations
B. Regulatory Flexibility Act
C. Paperwork Reduction Act
D. Antitrust Considerations
E. Executive Orders 12866, 13563, and 14192
List of Subjects
I. Background
A. Introduction
Under the Commodity Exchange Act (``CEA'') and Commission
regulations, different data reporting requirements apply to swaps and
futures transactions. With respect to swaps transactions, reporting
parties must submit certain swap data to swap data repositories
(``SDRs''),\1\ which in turn publicly
[[Page 40103]]
disseminate that data.\2\ With respect to futures transactions, certain
futures data is reported directly to the Commission and also is
publicly disseminated.\3\
---------------------------------------------------------------------------
\1\ CEA section 2(a)(13)(G), 7 U.S.C. 2(a)(13)(G)(requiring that
``[e]ach swap (whether cleared or uncleared) shall be reported to a
registered swap data repository.''). Depending on whether the swap
is executed on or pursuant to the rules of a swap execution facility
(``SEF'') or designated contract market (``DCM'') or is an off-
facility swap, the SEF, DCM, swap dealer (``SD''), major swap
participant (``MSP''), or a designated reporting counterparty
reports swap transaction and pricing data to an SDR as soon as
technologically practicable after execution of the swap. Also,
reporting counterparties, SDs, MSPs, and derivatives clearing
organizations (``DCOs'') report swap continuation, valuation, and
collateral data to an SDR. See 17 CFR 43.3; 17 CFR 45.4; 7 U.S.C.
2(a)(13)(G).
\2\ See CEA section 2(a)(13)(D), 7 U.S.C. 2(a)(13)(D). Section
2(a)(13)(B) of the CEA, 7 U.S.C. 2(a)(13)(B), authorizes the
Commission to make swap transaction data available to the public in
order to enhance price discovery. Typically, under the Commission's
real-time swap reporting rules, SDRs perform this dissemination
function. See 17 CFR 43.4.
\3\ See 17 CFR 16.02.
---------------------------------------------------------------------------
This Proposal addresses the data reporting requirements for certain
fully-collateralized event contracts with a binary payout structure or
a variable payout structure.\4\ The Commission has generally found that
these contracts are covered by the CEA's ``swap'' definition.\5\ Event
contracts may fall under one or more subsections of the ``swap''
definition set forth in section 1a(47) of the CEA.\6\ For example, CEA
section 1a(47)(A)(i) defines the term ``swap'' to include ``any
agreement, contract, or transaction . . . that is a put, call, cap,
floor, collar, or similar option of any kind that is for the purchase
or sale, or based on the value, of 1 or more interest or other rates,
currencies, commodities, securities, instruments of indebtedness,
indices, quantitative measures, or other financial or economic
interests or property of any kind.'' \7\ Section 1a(47)(A)(ii) defines
the term ``swap'' to include ``any agreement, contract, or transaction
. . . that provides for any purchase, sale, payment, or delivery (other
than a dividend on an equity security) that is dependent on the
occurrence, nonoccurrence, or the extent of the occurrence of an event
or contingency associated with a potential financial, economic, or
commercial consequence.'' \8\ Depending on their underlying events,
certain event contracts may be security-based swaps or other
instruments subject to the jurisdiction of the Securities and Exchange
Commission (``SEC''), however, and this Proposal is applicable to only
those event contracts solely within the CFTC's jurisdiction.\9\
---------------------------------------------------------------------------
\4\ A contract with a binary payout structure results, at
settlement, in the payment of an absolute amount to the holder of
one side of the event contract and no payment to the counterparty,
while a contract with a variable payout structure can result in a
payout to both counterparties based on the final settlement price.
\5\ Event contracts might be structured as other instruments
such as futures contracts, which are excluded from the statutory
definition of ``swap.'' CEA section 1a(47)(B), 7 U.S.C. 1a(47)(B)
(providing ``exclusions'' from the definition of ``swap'' under the
CEA, including futures, options on futures, securities such as
options on securities and indexes of securities, security-based
swaps, and debt securities). See also CEA section 2a(1)(A) and (H),
7 U.S.C. 2(a)(1)(A) and (H).
\6\ 7 U.S.C. 1a(47).
\7\ 7 U.S.C. 1a(47)(A)(i). CEA section 1a(36), 7 U.S.C. 1a(36),
defines ``option'' to include ``an agreement, contract, or
transaction that is of the character of, or is commonly known to the
trade as, an `option', `privilege', `indemnity', `bid', `offer',
`put', `call', `advance guaranty', or `decline guaranty'.''
\8\ 7 U.S.C. 1a(47)(A)(ii). See In re Blockratize, inc. d/b/a
Polymarket.com, CFTC Dkt. No. 22-09, at 2 (Jan. 3, 2022) (certain
``event contracts, each of which is composed of a pair of binary
options, constitute swaps''). Commodity Futures Trading Comm'n v.
Trade Exch. Network Ltd., 117 F. Supp. 3d 29, 36 (D.D.C. 2015)
(holding binary option event contracts allowing ``customers to make
predictions on the occurrence of events by either buying or selling
shares'' were ``options''). An event contract could be a swap under
both CEA section 1a(47)(A)(i) and (ii).
\9\ See 7 U.S.C. 1a(47)(B) (providing ``exclusions'' from the
definition of ``swap'' under the CEA, including for securities such
as security based-swaps, certain options, and debt securities); see
also, e.g., 15 U.S.C. 78c(a)(68)(A) (defining ``security-based
swap'' under the Securities Exchange Act of 1934).
---------------------------------------------------------------------------
B. Current Reporting Regimes for Swaps and Futures
The CEA grants the Commission the authority ``to make and
promulgate such rules and regulations as, in the judgment of the
Commission, are reasonably necessary to effectuate any of the
provisions or to accomplish any of the purposes of [the CEA].'' \10\
The CEA provides, in part, that it is the purpose of the CEA to ensure
the financial integrity of transactions subject to the CEA, to avoid
systemic risk, to protect market participants from fraudulent or other
abusive sales practices and misuses of customer assets, and to promote
responsible innovation and fair competition.\11\ The CEA also grants
the Commission plenary authority over commodity options.\12\ And
section 8a(5) of the CEA obligates DCMs to comply with the Core
Principles and any requirements that the Commission may impose by rule
or regulation pursuant to section 8a(5) of the CEA.\13\
---------------------------------------------------------------------------
\10\ See CEA section 8a(5), 7 U.S.C. 12a(5).
\11\ See CEA section 3(b), 7 U.S.C. 5(b).
\12\ See CEA section 4c(b), 7 U.S.C. 6c(b) (stating that ``[n]o
person shall offer to enter into, enter into or confirm the
execution of, any transaction involving any commodity regulated
under this Act which is of the character of, or is commonly known to
the trade as, an ``option'', ``privilege'', ``indemnity'', ``bid'',
``offer'', ``put'', ``call'', ``advance guaranty'', or ``decline
guaranty'', contrary to any rule, regulation, or order of the
Commission prohibiting any such transaction or allowing any such
transaction under such terms and conditions as the Commission shall
prescribe. Any such order, rule, or regulation may be made only
after notice and opportunity for hearing, and the Commission may set
different terms and conditions for different markets.'') To the
extent that event contracts are structured as commodity options,
this is additional plenary rulemaking authority Congress has given
the Commission to regulate commodity option transactions, including
the authority to require less stringent swap reporting for swaps
that are commodity options. See, e.g., Final rule and interim final
rule, Commodity Options, 77 FR 25320, 25327 (Apr. 27, 2012)
(exempting certain trade options from part 45 reporting based on CEA
section 4c(b) authority).
\13\ See CEA section 5(d), 7 U.S.C. 7(d). CEA section 2(e) also
requires that any person other than an eligible contract participant
(``ECP'') may not enter into a swap unless the swap is entered into
on, or subject to the rules of, a designated contract market. 7
U.S.C. 2(e).
---------------------------------------------------------------------------
The Commission promulgated parts 43, 45, and 49 of the Commission's
regulations pursuant to its authority to require the reporting of swap
data and swap transaction and pricing data to SDRs, and to require that
SDRs, in turn, provide swap data to the Commission and disseminate swap
transaction and pricing data to the public.\14\ Part 43 generally
concerns reporting and real-time public dissemination of swap
transaction and pricing data. Part 45 concerns reporting of more
detailed swap data that is made available only to the Commission, which
includes counterparty-identifying information, life-cycle-event data,
and valuation, margin, and collateral data.\15\
---------------------------------------------------------------------------
\14\ See 17 CFR part 43; 17 CFR part 45; 17 CFR part 49,
implementing CEA sections 2(a)(13)(D) and (G), 7 U.S.C. 2(a)(13)(D)
and (G). Section 2(a)(13)(G) of the CEA, 7 U.S.C. 2(a)(13)(G),
requires that ``[e]ach swap (whether cleared or uncleared) shall be
reported to a registered swap data repository.'' Section 2(a)(13)(B)
of the CEA, 7 U.S.C. 2(a)(13)(B), authorizes the Commission to make
swap transaction data available to the public in order to enhance
price discovery. Typically, under the Commission's real-time swap
reporting rules, SDRs perform this dissemination function. See 17
CFR 43.4.
\15\ See, e.g., 17 CFR 45.4. Part 49 of the Commission's
regulations, 17 CFR part 49, set forth the regulations pertaining to
SDRs. Section 49.15, 17 CFR 49.15, addresses the real-time public
reporting by SDRs.
---------------------------------------------------------------------------
The Commission has long overseen the reporting regime set out in
parts 15 through 18, which generally covers futures and options
transactions and positions.\16\ Whereas swap data is sent to SDRs,
which in turn process and provide swap data to the Commission and the
public, futures data generally is sent directly to the Commission,\17\
while certain price, volume, and other transaction information is
separately
[[Page 40104]]
published by DCMs.\18\ The categories of data reports required to be
submitted vary for swaps and futures. For swaps, reporting parties
predominantly submit transaction and pricing data reports,\19\ whereas
for futures, the Commission receives both transaction data reports \20\
and position reports.\21\ The method for public dissemination of data
also varies. For swaps, SDRs disseminate data in real-time,\22\ whereas
for futures, DCMs disseminate market data directly to the Commission
and the public.\23\
---------------------------------------------------------------------------
\16\ See 17 CFR parts 15-18. Such reporting is generally
required for ``futures by commodity or and by future, and, for
options, by underlying futures contract (for options on futures
contracts) or by underlying commodity (for other commodity
options).'' See 17 CFR 16.00(a); see also 17 CFR 17.00(a)(1)
(requiring position reporting for ``each futures position . . . and
each put and call options position . . .'').
\17\ See, e.g., 17 CFR 16.02 (requiring daily ``trade and
supporting data reports'' consisting of ``transaction-level trade
data and related order information for each futures or options
contract''); 17 CFR 17.00(a) (requiring daily reporting of ``each
futures position, separately for each reporting market and for each
future, and each put and call options position separately for each
reporting market . . .'').
\18\ See, e.g., 17 CFR 16.01(e) (requiring publication of daily
volume, price, and other information by DCMs and SEFs); 17 CFR
38.500 (DCM Core Principle 9 requires DCMs to ``provide a
competitive, open, and efficient market and mechanism for executing
transactions that protects the price discovery process of trading in
the centralized market of the board of trade'').
\19\ See 17 CFR 43.3. Certain reporting parties submit position
data for a subset of commodity swaps. See generally 17 CFR part 20.
\20\ See 17 CFR 16.02.
\21\ See 17 CFR 17.00.
\22\ See 17 CFR 43.4.
\23\ See, e.g., 17 CFR 16.01(d) and (e).
---------------------------------------------------------------------------
C. Staff No-Action Letters Issued for Fully Collateralized Event
Contracts
Prior to 2010, event contracts with a binary payout structure were
reported to the Commission as options under the futures and options
reporting regime.\24\ In 2011, the Commission subsequently promulgated
regulations implementing the Dodd-Frank Act and creating the swaps
reporting regime.\25\ Certain reporting markets \26\ and DCOs
(together, ``Registered Entities'') have requested that the Division of
Market Oversight (``DMO'') and the Division of Clearing and Risk
(``DCR'') (hereinafter the ``Divisions'') issue a staff no-action
position with respect to the swap reporting requirements applicable to
certain fully collateralized event contracts with a binary payout
structure or variable payout structure.\27\
---------------------------------------------------------------------------
\24\ See, e.g., Final Rule, Market and Large Trader Reporting,
71 FR 37809 (July 3, 2006) (establishing reporting levels for binary
option event contracts listed on HedgeStreet).
\25\ See 17 CFR part 49.
\26\ A ``reporting market'' is a ``designated contract market or
a registered entity under section 1a(40) of the [CEA].'' 17 CFR
15.00(q).
\27\ See infra note 28.
---------------------------------------------------------------------------
The requesters asked to report the fully collateralized event
contracts under a version of the futures and options reporting regime
instead of the swaps reporting regime set forth in Commission
regulations 38.8(b), 38.10, 38.951 (to the extent that regulation
38.951 requires compliance with part 45 of the Commission's
regulations), 39.20(b)(2), and parts 43 and 45 of the Commission's
regulations (collectively, the ``Relevant Regulations''). In making the
requests, the requesters indicated that contracts for which they
requested relief are swaps, but share most of the characteristics of
exchange-traded futures or options thereon (i.e., fungibility, offset,
exchange traded with standardized terms on a single marketplace) and
lack the indicia of traditional swaps (i.e., bilateral, traded over-
the-counter, and customized). Additionally, requesters generally argued
that because the relevant contracts must be fully collateralized,
potential market participant exposures associated with trading the
contracts were expected to be lower than those associated with
traditional swaps and swaps market participants. Such contracts, the
requesters argued, have no bearing on systemic risk or potential
transmission of risk or contagion to systemically important financial
institutions. For that reason, the requesters noted that the policy
goals of parts 43 and 45 have little applicability to the relevant
contracts.\28\
---------------------------------------------------------------------------
\28\ See, e.g., CFTC Letter No. 17-31 (June 30, 2017), https://
www.cftc.gov/csl/17-31/download; CFTC Letter No. 25-44 (Dec. 11,
2025), https://www.cftc.gov/csl/25-44/download. Certain DCMs have
represented that it would be impractical and uneconomic to report
small-notional-size swaps to an SDR. See, e.g., CFTC Letter No. 25-
44 (Dec. 11, 2025).
---------------------------------------------------------------------------
The Divisions have granted 16 staff no-action letters to date (the
``Staff Event Contract Reporting No-Action Letters'' or ``Staff No-
Action Letters'').\29\ The Divisions took the no-action position set
out in the Staff Event Contract Reporting No-Action Letters based on
the requesters complying with the following conditions: (1) the covered
contracts must be fully collateralized positions, as defined by
Commission regulation 39.2; \30\ (2) the covered contracts must be
cleared; (3) the DCM will publish on its website the following time and
sales data for all covered contract transactions promptly after
execution thereof: trade timestamp, contract, quantity, and price (in
USD); (4) the DCM will provide the Commission with all transactional
information described in Commission regulation 16.02; \31\ (5) the
requesters will otherwise comply with all reporting and recordkeeping
requirements of the CEA and Commission regulations applicable to them
in their capacities as a DCM and a DCO, other than the Relevant
Regulations, including, but not limited to, the applicable requirements
of parts 38 and 39 of the Commission's regulations (the ``Required
Records''); and (6) the requesters will keep the Required Records open
to inspection upon request by any representative of the Commission, the
United States Department of Justice, or the Securities and Exchange
Commission, or by any representative of a prudential regulator as
authorized by the Commission. Furthermore, copies of all such records
must also be provided, at the expense of requesters, to any
representative of the Commission upon request. The requesters must also
provide copies of the Required Records either by electronic means, in
hard copy, or both, as requested by the Commission, with the sole
exception that copies of records originally created and exclusively
maintained in paper form may be provided in hard copy only. One effect
of these conditions was that the contracts subject to the no-action
positions look and trade similarly to the historical HedgeStreet
Contracts addressed in the Commission's 2006 Market and Large Trader
Reporting rulemaking.\32\
---------------------------------------------------------------------------
\29\ See CFTC Letter No. 17-31 (June 30, 2017), https://
www.cftc.gov/csl/17-31/download; CFTC Letter No. 17-32 (June 30,
2017), https://www.cftc.gov/csl/17-32/download; CFTC Letter No. 21-
11 (Apr. 22, 2021), https://www.cftc.gov/csl/21-11/download; CFTC
Letter No. 24-09 (July 12, 2024), https://www.cftc.gov/csl/24-09/
download; CFTC Letter No. 24-12 (Sept. 3, 2024), https://
www.cftc.gov/csl/24-12/download; CFTC Letter No. 24-15 (Oct. 4,
2024), https://www.cftc.gov/csl/24-15/download; CFTC Letter No. 25-
02 (Jan. 31, 2025), https://www.cftc.gov/csl/25-02/download; CFTC
Letter No. 25-23 (Jul. 22, 2025), https://www.cftc.gov/csl/25-23/
download; CFTC Letter No. 25-26 (Aug. 7, 2025), https://
www.cftc.gov/csl/25-26/download; CFTC Letter No. 25-28 (Sept. 3,
2025), https://www.cftc.gov/csl/25-28/download; CFTC Letter No. 25-
35 (Sept. 30, 2025), https://www.cftc.gov/csl/25-35/download; CFTC
Letter No. 25-44 (Dec. 11, 2025), https://www.cftc.gov/csl/25-44/
download; CFTC Letter No. 25-45 (Dec. 11, 2025), https://
www.cftc.gov/csl/25-45/download; CFTC Letter No. 25-47 (Dec. 11,
2025), https://www.cftc.gov/csl/25-47/download; CFTC Letter No. 25-
48 (Dec. 11, 2025), https://www.cftc.gov/csl/25-48/download; and
CFTC Letter No. 26-12 (May 1, 2026); https://www.cftc.gov/csl/26-12/
download. See also CFTC Letter No. 26-14 (May 13, 2026), available
at https://www.cftc.gov/csl/26-14/download (providing a no-action
position that would allow for more streamlined grants of staff no-
action positions effective until a final rule is adopted by the
Commission addressing this matter).
\30\ Commission regulations define ``fully collateralized
position'' as ``a contract cleared by a derivatives clearing
organization that requires the derivatives clearing organization to
hold, at all times, funds in the form of the required payment
sufficient to cover the maximum possible loss that a party or
counterparty could incur upon liquidation or expiration of the
contract.'' 17 CFR 39.2.
\31\ Section 16.02 requires reporting markets to ``provide trade
and supporting data reports to the Commission on a daily basis,''
which include, among other things, ``transaction-level trade data
and related order information for each futures or options
contract.'' 17 CFR 16.02.
\32\ Final Rule, Market and Large Trader Reporting, 71 FR 37809,
37812 (July 3, 2006). HedgeStreet was the first DCM dedicated to
trading event contracts. HedgeStreet listed event contracts on
corporate mergers, weather events, and economic indicators.
Effective June 21, 2009, HedgeStreet changed its name to North
American Derivatives Exchange, Inc. (``NADEX''). Before the
promulgation of the Dodd-Frank Act in 2010, HedgeStreet contracts
were reported under the futures and options reporting regime.
---------------------------------------------------------------------------
[[Page 40105]]
More recently, the Commission has received an increasing number of
applications for DCM designation from entities with a stated interest
in offering event contracts for trading.\33\ The Commission's
experience is that entities seeking DCM designation and seeking to list
event contracts are likely to seek a staff no-action letter similar to
the Staff Event Contract Reporting No-Action Letters. The Commission
anticipates receiving additional similar requests in the future.
---------------------------------------------------------------------------
\33\ As of May 1, 2026, Commission staff are reviewing several
pending applications for DCM designation from entities with a stated
interest in operating prediction markets. Commission staff have
received multiple additional inquiries from other entities
indicating an interest in applying for DCM registration in order to
operate prediction markets. From 2006 through 2020, DCMs listed for
trading an average of approximately five event contracts per year.
In 2021, this number increased to 131, and the number of newly
listed event contracts per year remained at a similar level until
2025, when DCMs certified approximately 1,600 event contracts for
listing for trading.
---------------------------------------------------------------------------
II. Proposed Rules
This Proposal would set forth an alternative reporting regime for a
specific category of event contracts based on the futures and options
reporting regime and eliminate the need for Registered Entities to seek
a staff no-action letter in the manner set forth in the Staff Event
Contract Reporting No-Action Letters. The Proposal would codify into
regulation certain aspects of the Staff Event Contract Reporting No-
Action Letters issued by the Divisions.\34\
---------------------------------------------------------------------------
\34\ If the Proposal is finalized, the Commission expects the
Divisions to withdraw the Staff Event Contract Reporting No-Action
Letters upon the compliance date of a final rule, as a final rule
based on the Proposal would supersede those no-action letters and
render them moot.
---------------------------------------------------------------------------
The Proposal would amend part 16, concerning ``Reports by Contract
Markets and Swap Execution Facilities'' to add a new section 16.03,
titled ``Covered Event Contracts.'' The Proposal would explicitly
provide for reporting pursuant to Sec. 16.00, Sec. 16.01, part 17,
and part 18 that were not specifically identified in the Staff Event
Contract Reporting No-Action Letters, but are nevertheless currently
required for futures and options. The Proposal would also amend part
15, concerning ``General Provisions'' applicable to ``Reports,'' to add
additional sections addressing data reporting requirements applicable
to certain event contracts. In particular, proposed Sec. 16.03 would
(1) define the group of event contracts to which the alternative
reporting regime would apply (``Covered Event Contracts''),\35\ (2)
enumerate the reporting and recordkeeping requirements--the Relevant
Regulations--that, although generally applicable to swaps, shall not
apply to Covered Event Contracts, (3) enumerate reporting and
recordkeeping requirements that do apply to Covered Event Contracts,
(4) establish reporting levels for position reporting for Covered Event
Contracts, (5) establish public data dissemination requirements for
DCMs listing Covered Event Contracts for trade, (6) establish a
requirement that DCMs listing Covered Event Contracts for trade obtain
certain customer-identifying data, and (7) establish a requirement that
DCMs and DCOs comply with recordkeeping requirements applicable to
futures and options.
---------------------------------------------------------------------------
\35\ The proposed ``Covered Event Contract'' definition is not
intended to and should not be construed to define ``event contract''
for any other purpose.
---------------------------------------------------------------------------
Continuing to address these requests serially and ad hoc raises
several concerns. First, the No-Action Letters are not Commission
actions carrying the force of law; they are staff actions providing a
no-action position that beneficiaries of the letters may rely on.
Second, reliance on the ad hoc no-action letter process is an
inefficient approach to a recurrent issue that is best addressed
through rulemaking. A regulatory regime that specifically addresses
Covered Event Contracts reporting would provide a uniform and
consistent approach while ensuring the Commission obtains the necessary
information to address the CEA's objectives of reducing systemic risk,
increasing transparency, and promoting market integrity. Third,
continuing to address Covered Event Contracts reporting through no-
action letters may create uncertainty and unnecessary burdens on
potential registrants during the application process. Reliance on Staff
Event Contract Reporting No-Action Letters without a codified reporting
and recordkeeping regime for event contracts is a tenuous basis to
devote resources and may cause reporting parties to proceed cautiously
in launching new products, thereby inhibiting innovation.\36\ Fourth,
the Commission benefits when data for similar contracts are reported in
a standardized and consistent manner, as this allows aggregation of
data for similar contracts in a single database for purposes of market
monitoring, analysis, or surveillance.
---------------------------------------------------------------------------
\36\ A no-action letter is based on the specific facts and
circumstances addressed by the letter and only the beneficiary of
the no-action letter may rely on it. See Sec. 140.99(a)(2), 17 CFR
140.99(a)(2). Also, simply requesting a no-action letter from staff
pursuant to Sec. 140.99 results in some additional burden. See,
e.g., Final rule, Requests for Exemptive, No-Action and Interpretive
Letters, 63 FR 68175, 68180 (Dec. 10, 1998) (estimating paperwork
burden associated with Sec. 140.99).
---------------------------------------------------------------------------
The Commission has found the reporting regime applicable to futures
and options is better-suited for reporting transaction data for the
event contracts reported pursuant to the Staff Event Contract Reporting
No-Action Letters. While event contracts generally meet the ``swap''
definition, the Covered Event Contracts have characteristics in common
with futures and options on futures, including highly-standardized
terms, exchange-trading protocols, and fungibility.\37\ Additionally,
because Covered Event Contracts must be fully collateralized and
cleared through a DCO, the Commission preliminarily believes that
certain risks associated with trading Covered Event Contracts--
including systemic risk and counterparty credit risk--are lower than
those associated with traditional swaps and swaps market
participants.\38\
---------------------------------------------------------------------------
\37\ See supra notes 5-6 and accompanying text.
\38\ Market risk may nevertheless increase depending on the
given potential volatility involving he underlier at issue for a
given contract and due to absolute nature of payouts.
---------------------------------------------------------------------------
The Proposal would nevertheless require Registered Entities to
provide the Commission and the public with essential data based on the
futures and options regulatory regime, similar to the conditions set
forth in the Staff Event Contract Reporting No-Action Letters. Proposed
Sec. 16.03(b) would apply the futures and options reporting
requirements of Sec. Sec. 16.00, 16.01, and 16.02 to DCMs listing the
Covered Event Contracts.\39\ The market and transaction data reported
pursuant to these provisions would provide the Commission with
information similar to the information required to be reported by part
43 and part 45. This data would enable the Commission to monitor the
Covered Event Contracts markets to ensure their financial integrity and
that market participants are protected from fraudulent or other abusive
sales practices.
---------------------------------------------------------------------------
\39\ See proposed Sec. 16.03(b), applying the provisions of 17
CFR 16.00, 16.01 and 16.02.
---------------------------------------------------------------------------
The Commission would further require Registered Entities to publish
on their website time and sales data, specifically trade timestamp,
contract ticker symbol, trade quantity, and price (in USD) for all
Covered Event Contract transactions as soon as technologically
practicable after execution thereof. Requiring Registered Entities to
publicly disseminate this information on their website would allow
market participants and the public to analyze
[[Page 40106]]
Covered Event Contract transaction and pricing data, ensuring equal
access to the information similar to the goals of the real-time swap
disclosure requirements.\40\ It would also harmonize the timeframe to
make public the reports with the current standard generally applicable
to dissemination of swap data. Accordingly, the Commission believes
that requiring the publication of the Covered Event Contracts
information advances the purposes of the Dodd-Frank Act of price
discovery and transparency.\41\
---------------------------------------------------------------------------
\40\ See Notice of Proposal, Real-Time Public Reporting of Swap
Transaction Data, 75 FR 76140, 76148 (Dec. 7, 2010).
\41\ See Final Rule, Real-Time Public Reporting of Swap
Transaction Data, 77 FR 1182, 1186 note 30 and accompanying text
(Jan. 9, 2012)(noting that CEA section 2(a)(13)(B) provides that the
purpose of section 727 of the Dodd-Frank Act is ``to authorize the
Commission to make swap transaction and pricing data available to
the public in such form and at such times as the Commission
determines appropriate to enhance price discovery.'').
---------------------------------------------------------------------------
The Commission believes that codifying the use of the futures and
options reporting framework for the Covered Event Contracts provides
for a more cost effective method to address the concerns raised by
these requests while still providing the Commission access to the
trading data for these instruments, which it can compile and aggregate,
allowing it greater monitoring ability at a micro and macro level. By
requiring reporting of Covered Event Contracts under the futures and
options regulatory regime, the Proposal provides the right balance of
allowing the Commission to obtain the necessary information to ensure
the CEA's regulatory oversight goals are met, advancing innovation,
rationalizing costs to market participants, and establishing a
reporting framework that accommodates the reporting parties' abilities
to provide Covered Event Contract information.
A. Sec. 16.03(a): Covered Event Contracts
In order to implement the alternate reporting framework set out in
the Proposal, the Commission proposes a new section ``Covered Event
Contracts.'' The proposed section is not intended to and should not be
construed to define ``event contract'' for any other purpose. The
proposed section is intended only to set forth parameters for
determining the applicable data reporting requirements for Covered
Event Contracts and apply them to the types of event contracts that are
subject to the Staff Event Contract Reporting No-Action Letters.
Covered Event Contracts that meet the four prongs set forth in proposed
Sec. 16.03(a) would be subject to the reporting regime of proposed
Sec. 16.03.
The first prong requires the contract to meet the definition of
swap set forth in section 1a(47)(A)(i) or (ii) of the Act. The
Commission preliminarily believes that requiring a contract to be a
swap under these parts of the swap definition will ensure that only
those contracts that are subject to the Staff Event Contract Reporting
No-Action Letters would be subject to the reporting regime of proposed
Sec. 16.03.\42\
---------------------------------------------------------------------------
\42\ In this regard, the Commission preliminarily believes that
a contract that meets the definition of swap set forth in section
1a(47)(A)(iii), for example, is and should remain subject to the SDR
reporting regime. Additionally, as stated in section I.A above,
depending on their underlying events, certain event contracts may be
options on securities or security-based swaps or other instruments
subject to the jurisdiction of the SEC, and this Proposal does not
apply to such event contracts.
---------------------------------------------------------------------------
Second, a contract must be listed for trade on a DCM and cleared
through a DCO. This requirement is consistent with the Staff Event
Contract Reporting No-Action Letters, which require the covered
contracts to trade on a DCM and, therefore, be cleared through a DCO.
Central clearing mitigates both system risk and risk to individual
market participants.\43\ This requirement also ensures that the key
protections provided through the DCM and DCO Core Principles apply to
Covered Event Contract transactions.\44\
---------------------------------------------------------------------------
\43\ See, e.g., Final Rule ``Clearing Requirement Determination
Under Section 2(h) of the CEA for Interest Rate Swaps To Account for
the Transition From LIBOR and Other IBORs to Alternative Reference
Rates,'' 87 FR 52182, 52206 (Aug. 24, 2022).
\44\ See DCM Core Principle 11 (``Financial Integrity of
Contracts''), CEA section 5(d)(11), 7 U.S.C. 7(d)(11); CEA section
2(h)(1), 7 U.S.C. 2(h)(1) (requiring all swaps that are required to
be cleared be cleared by a Commission-registered DCO); 17 CFR
38.601(a). As a practical matter, Covered Event Contract markets
typically include non-ECP participants, and non-ECP retail
participants can only transact in swaps on a DCM. See CEA section
2(e), 7 U.S.C. 2(e).
---------------------------------------------------------------------------
Third, a contract must trade as a fully collateralized position, as
defined in Sec. 39.2 of the Commission's regulations.\45\ Full
collateralization mitigates the systemic risk issues that arise with
margined contracts. In this regard, full collateralization prevents a
DCO from being exposed to credit risk stemming from the inability of a
clearing member or customer of a clearing member to meet a margin call
or a call for additional capital.\46\
---------------------------------------------------------------------------
\45\ See supra note 30.
\46\ See Final Rule, Derivatives Clearing Organization General
Provisions and Core Principles, 85 FR 4800, 4803-4804 (Jan. 27,
2020).
---------------------------------------------------------------------------
Finally, a Covered Event Contract, which may be referred to as a
binary option, must either have (1) a binary payout structure, meaning
that the contract results, at settlement, in the payment of an absolute
amount to the holder of one side of the contract and no payment to the
counterparty; or (2) a variable payout structure, meaning that the
contract results, at settlement, in payment to both counterparties to
the contract based on the final settlement price, though only one
counterparty ultimately profits. The intent of this prong is to apply
the Proposal's alternate data reporting regime to only those swaps that
are structured like those covered by the Staff Event Contract Reporting
No-Action Letters and to ensure that all other swaps--those that
currently comply with Part 43 and Part 45--continue to report data to
SDRs.
Proposed Sec. 16.03(a) also enumerates the Relevant Regulations
that would not apply to a Covered Event Contract. Specifically,
reporting parties for a Covered Event Contract would not be required to
comply with Sec. Sec. 38.8, 38.10, 38.951 (to the extent regulation
38.951 requires compliance with part 45 of the Commission's
regulations), 39.20(b)(2), and parts 43 and part 45 of the Commission's
regulations, or the requirements of the relevant CEA provisions
pursuant to which those regulations were promulgated. Proposed Sec.
16.03(a) is consistent with the Relevant Regulations addressed in the
Staff Event Contract Reporting No-Action Letters.
Covered Event Contracts have a simpler pricing and payout structure
than those the Relevant Regulations were designed to capture.\47\
Furthermore, part 45 includes many fields that may be applicable to
more traditional swaps, such as CDS index attachment point, Exchange
rate, Exchange Rate Basis, Floating rate payment frequency period
multiplier, Original swap USI, Original swap USI, Physical delivery
location, and many others, but are not applicable to Covered Event
Contracts. Requiring Registered Entities to report under the swaps
reporting regime Registered Entities would require investment in
reporting infrastructure that would not lead to the reporting of any
useful information, particularly when a suitable alternative reporting
regime is available. As such, requiring the Registered Entities to
comply with the Relevant Regulations for Covered Event Contracts would
not be economically feasible. And the Commission can obtain the
necessary information pursuant to the futures and options regime to
conduct its regulatory oversight of the Covered Event Contracts. As
discussed above, reporting
[[Page 40107]]
the Covered Event Contracts, through Part 16 and maintaining records
pursuant to the general recordkeeping requirements in Sec. 1.31, would
enable the Commission to monitor the Covered Event Contracts to ensure
their financial integrity and that market participants are protected
from fraudulent or other abusive sales practices. Public dissemination
of the Covered Event Contract information on the Registered Entities'
website would allow market participants and the public to analyze the
swap transaction and pricing data, ensuring equal access to the
information similar to the goals of the real-time swap disclosure
requirements.
---------------------------------------------------------------------------
\47\ See supra note 4 and accompanying text.
---------------------------------------------------------------------------
Subsequent sections of proposed Sec. 16.03, discussed below,
specify the alternate reporting requirements for Covered Event
Contracts. These requirements are intended to ensure that the
Commission receives sufficient data to fulfill its market monitoring,
analysis, and surveillance objectives, and to otherwise satisfy the
relevant purposes of the CEA. In particular, the framework set out in
this Proposal would continue to ensure that swap transaction and
pricing data is made available to the public in a manner that enhances
price discovery and continues to improve reporting and
transparency.\48\
---------------------------------------------------------------------------
\48\ See 7 U.S.C. 2(a)(13)(B), see also Public Law 111-203, 124
Stat. 1376 (2010).
---------------------------------------------------------------------------
Request for Comment
The Commission requests comments on all aspects of the proposed
changes to regulations in part 16, including proposed Sec. 16.03(a).
The Commission requests specific comment on the following:
(1) Whether the proposed definition of Covered Event Contracts in
Sec. 16.03(a) effectively limits the alternate reporting regime set
out in proposed Sec. 16.03 to the types of contracts covered by the
Staff Event Contract Reporting No-Action Letters such that swaps that
have traditionally been reported under the part 43 and part 45 regime
continue to be reported under that regime.
(2) Whether an alternative approach whereby a DCM that lists
Covered Event Contracts registers with the Commission as an SDR and
reports Covered Event Contract data under the part 43 and part 45
regime would be a feasible alternative. What would be the costs and
benefits of a DCM registering as an SDR?
(3) Whether an alternative approach whereby Covered Event Contract
data is reported to an SDR, based on the futures and options reporting
regime and through a different form and manner of reporting than
currently exists for swaps, would be more practical and economically
feasible for reporting parties. What would that form and manner of
reporting be? What would be the costs and benefits of such alternative
reporting to an SDR?
(4) Whether the Proposal undermines, or on the other hand, enhances
transparency, competition, and market integrity. If so, please explain
in detail and provide any examples.
B. Sec. 16.03(b)(2) and Sec. 16.03(b)(3): Market Data and Transaction
Data Reporting Requirements for DCMs
The Proposal would require DCMs to report Covered Event Contracts
in a manner largely consistent with the futures and options reporting
regime for exclusively self-cleared contracts, rather than the SDR
reporting regime applicable to swaps. Specifically, proposed Sec.
16.03(b) would require DCMs to submit to the Commission daily market
data required to be reported pursuant to Sec. 16.01 \49\ and daily
transaction and supplemental data required to be reported pursuant to
Sec. 16.02.
---------------------------------------------------------------------------
\49\ Regulation 16.01 requires daily reporting and public
dissemination of market data for both (a) swaps and (b) futures and
options. See 17 CFR 16.01. As such, Sec. 16.01 was required with
respect to contracts subject to the Staff Event Contract Reporting
No-Action Letters and the parties who received the Staff No-Action
Letters have submitted such data to the Commission. Commission staff
have developed separate data transmission standards and guidebooks
detailing those standards for swaps and for futures and options. For
purposes of proposed Sec. 16.03(b)(2), DCMs should report Sec.
16.01 data pursuant to the data transmission standard applicable to
futures and options. This will facilitate linking data reported
pursuant to Sec. 16.01 with data reported pursuant to Sec. 16.02
and part 17.
---------------------------------------------------------------------------
With respect to market data reported pursuant to Sec. 16.01,
Commission regulations require all DCMs to report daily information
concerning trading volume, open contracts, prices, and critical dates.
Because Sec. 16.01 applies to all DCM-listed contracts regardless of
whether those contracts are swaps or futures, it is not specified as a
condition in the Staff Event Contract Reporting No-Action Letters.\50\
The Proposal would now make explicit that daily reporting pursuant to
Sec. 16.01 is required for Covered Event Contracts.\51\ The Proposal
would also specify that Sec. 16.01 reports must include certain
settlement information, including whether the event that is the subject
of each Covered Event Contract occurred and, if so, the event that
occurred, the time and date the event occurred, and the source used to
determine whether the event occurred. Such information is a necessary
component of the settlement price reported by DCMs pursuant to Sec.
16.01(b)(2)(ii).\52\ With respect to Sec. 16.02, the proposal would
require that DCMs provide trade and supporting data reports to the
Commission. These reports were specifically included as one of the
conditions of the Staff No-Action Letters and the Commission is
continuing to require these reports of transaction-level trade data and
related order information for the Covered Event Contracts. As it noted
when adopting the Sec. 16.02 final rules, the Commission uses market,
transaction, and large trader reporting collectively to effectuate its
surveillance programs.\53\
---------------------------------------------------------------------------
\50\ Regulation 16.00 was also not specifically included in the
Staff Event Contract Reporting No-Action Letters, but it is
generally applicable to DCMs. Regulation 16.00 is addressed in
section II.C. below as part of the large trader discussion.
\51\ Regulation 16.02 was specifically included as one of the
conditions of the Staff Event Contract Reporting No-Action Letters.
\52\ 17 CFR 16.01(b)(2)(ii). The Commission currently receives
such settlement information from DCMs listing contracts that would
meet the Proposal's definition of Covered Event Contracts in a
separate ``settlement file.''
\53\ See Final Rule ``Significant Price Discovery Contracts on
Exempt Commercial Markets,'' 74 FR 12178, 12179 (Mar. 23, 2009).
---------------------------------------------------------------------------
Although submitted in a different form and manner than the swap
data required to be reported pursuant to part 45, reporting of Covered
Event Contracts pursuant to Sec. Sec. 16.01 and 16.02 would provide
granular market and transaction data more suitable for Covered Event
Contracts that, based on the Commission's experience receiving futures
and options reporting for the past nine years for the Covered Event
Contracts, the Commission believes would meet similar goals of the
swaps reporting regime. Reporting pursuant to part 16 would be
sufficient to support the CEA's objectives of reducing systemic risk,
increasing transparency, and promoting market integrity.\54\ This data
would enable the Commission to monitor Covered Event Contract markets
to ensure their financial integrity and that market participants are
protected from fraudulent or other abusive sales practices. Therefore,
the Commission believes that receiving Sec. Sec. 16.01 and 16.02 data
in lieu of part 45 swap data will not diminish the quality or
granularity of data needed to carry out the Commission's market and
financial surveillance programs. Additionally, given Sec. 16.02 data
was required as part of the Staff Event Contract Reporting
[[Page 40108]]
No-Action Letters, the Commission preliminarily believes that the costs
of including this data reporting requirement in the Proposal will be
minimal.
---------------------------------------------------------------------------
\54\ Cf., e.g., Final Rule, Significant Price Discovery
Contracts on Exempt Commercial Markets, 74 FR 12178, 12179 (Mar. 23,
2009) (describing use of Sec. 16.01 and Sec. 16.02 data to
effectuate the Commission's market and financial surveillance
programs, including to detect and prevent market manipulation and to
measure the financial and systemic risks that large contract
positions may pose).
---------------------------------------------------------------------------
C. Sec. 16.03(b)(1), Sec. 16.03(c), Sec. 17.00(j) and Sec.
17.01(f): Large Trader Reporting Requirements for DCMs, Futures
Commission Merchants, Clearing Members, and Foreign Brokers
The Commission's large trader reporting scheme requires reporting
of information by DCMs, futures commission Merchants (``FCMs''),
clearing members, and foreign brokers with respect to positions in open
contracts in futures and options, including the size of daily positions
of ``special accounts'' \55\ that exceed certain reporting
thresholds,\56\ information identifying the owners and controllers of
special accounts,\57\ information identifying the owners and
controllers of volume threshold accounts reported on Form 102,\58\
information concerning omnibus accounts reported on Form 71,\59\ and
information necessary to identify the traders of such accounts reported
on Form 40.\60\ Position data reporting has historically served as a
cornerstone of the Commission's market surveillance program.\61\
---------------------------------------------------------------------------
\55\ 17 CFR 15.00(r) (defining ``special account'' as any
commodity futures or option account in which there is a ``reportable
position''). See also Sec. 15.01, 17 CFR 15.01 (setting forth
persons required to report).
\56\ See generally 17 CFR 17.00.
\57\ See generally 17 CFR 17.01(a).
\58\ See generally 17 CFR 17.01(b).
\59\ See generally 17 CFR 17.01(c).
\60\ See generally 17 CFR part 18.
\61\ See, e.g., Final Rule, Extension of Large-Trader Reporting
Requirements to Newly Regulation Commodities, 40 FR 23994, 23994-
23995 (June 4, 1975) (``The large-trader reporting system is an
important part of the Commission's regulatory program. It serves as
a basic tool for market surveillance in the detection and prevention
of market congestion, price manipulation, and distortion.''); see
also generally William E. McDonnell, Jr. & Susan K. Freund, ``The
CFTC's Large Trader Reporting System: History and Development,'' 38
Bus. Law. 917, 917 (1983) (``Since 1922, the CFTC and its
predecessors have been fashioning the basic tool of market
surveillance, the large trader reporting system.'').
---------------------------------------------------------------------------
For futures and options,\62\ Commission staff uses such data to,
among other things, assess individual traders' activities and potential
market power, enforce speculative position limits, monitor for
disruptions to market integrity, and calculate statistics that the
Commission publishes to enhance market transparency.\63\ Obtaining
ownership and control information pursuant to Sec. 17.01 for accounts
with large positions is particularly important for identifying
customers of omnibus accounts or natural person owners of legal entity
accounts, as the transaction-level data the Commission receives
pursuant to Sec. 16.02 may not always contain such information.\64\
---------------------------------------------------------------------------
\62\ The Commission maintains separate regulations for obtaining
similar types of position data for swaps. See, e.g., 17 CFR part 20;
17 CFR 49.12(e).
\63\ See Final Rule, Ownership and Control Reports, Forms 102/
102S, 40/40S, and 71, 78 FR 69178, 69181 (Nov. 18, 2013). Obtaining
ownership and control information for special accounts through part
17 reporting can enable the Commission to link special accounts
across DCMs and to aggregate special accounts by trader, among other
purposes.
\64\ See, e.g., 78 FR at 69187 (``Form 71 is designed to permit
[omnibus originators] to report the required [identifying
information] directly to the Commission without requiring such firms
to disclose information regarding customers to potential
competitors.'').
---------------------------------------------------------------------------
The Staff Event Contract Reporting No-Action Letters do not address
part 17 reporting requirements for either daily position data or
ownership and control information. However, Commission regulations
generally require such reports for options traded on DCMs.\65\ The
Proposal would make explicit that part 17 position reporting is
required for Covered Event Contracts. Specifically, proposed Sec.
16.03(c) would identify part 17 as applicable to the relevant reporting
party.
---------------------------------------------------------------------------
\65\ Regulation 17.00(a) applies to ``put and call options''
traded on DCMs. 17 CFR 17.00(a). The definition of ``Reportable
position'' explicitly contemplates that a special account would
consist of ``long or short put or call commodity options that have
identical expirations and exercise into the same commodity, on any
one reporting market.'' 17 CFR 15.00(p)(1(ii). Regulation 16.00
requires DCMs to provide clearing member reports. 17 CFR 16.00.
---------------------------------------------------------------------------
For futures and options, large trader position data reporting is
conducted by either the DCM or the intermediary, depending on whether a
given contract is ``exclusively self-cleared.'' \66\ In the case of
exclusively self-cleared contracts, DCMs would be required to submit
position data reports required to be reported pursuant to Sec. 17.00
\67\ and ownership and control information required to be reported
pursuant to Sec. 17.01.\68\ Because part 17 provides for DCMs
reporting of exclusively self-cleared contracts, DCMs would not be
required to submit clearing member reports pursuant to Sec.
16.00(c),\69\ as such reporting would be redundant. For contracts that
are not exclusively self-cleared, the intermediaries--FCMs, clearing
members, and foreign brokers--would be required to report position data
and ownership and control information under part 17,\70\ and DCMs would
be required to submit clearing member reports pursuant to Sec.
16.00.\71\
---------------------------------------------------------------------------
\66\ 17 CFR 15.00(h) (``Exclusively self-cleared contract means
a cleared contract for which no persons, other than a reporting
market and its clearing organization, are permitted to accept any
money, securities, or property (or extend credit in lieu thereof) to
margin, guarantee, or secure any trade.'').
\67\ See 17 CFR 17.00(i) (``Unless determined otherwise by the
Commission, reporting markets that list exclusively self-cleared
contracts shall meet the requirements of paragraphs (a) through (h)
of this section, as they apply to trading in such contracts by all
clearing members, on behalf of all clearing members.'').
\68\ See 17 CFR 17.01(d) (``Unless determined otherwise by the
Commission, reporting markets that list exclusively self-cleared
contracts shall meet the requirements of paragraphs (a) and (b) of
this section, as they apply to trading in such contracts by all
clearing members, on behalf of all clearing members.'').
\69\ See 17 CFR 16.00(c) (``Unless determined otherwise by the
Commission, paragraph (a) of this section shall not apply to
transactions involving exclusively self-cleared contracts.'').
\70\ See generally 17 CFR 17.00, 17.01.
\71\ See generally 17 CFR 16.00.
---------------------------------------------------------------------------
Currently, some DCMs listing Covered Event Contracts permit
participation of intermediaries, and some do not. For DCMs that do not
permit intermediaries to participate, the Commission expects the DCM to
provide part 17 reporting, consistent with the original design of the
rule establishing the definition of ``exclusively self-cleared
contracts.'' \72\ For DCMs that rely on clearing intermediation, the
Commission expects the ``exclusively self-cleared contracts''
definition would not apply, and that therefore clearing members--
whether FCMs, foreign brokers, or direct clearing members--would
provide part 17 reporting as required.
---------------------------------------------------------------------------
\72\ The 2006 rulemaking establishing the definition of
``exclusively self-cleared contracts'' and the alternate reporting
structure was issued to address reporting by HedgeStreet, Inc., a
DCM that, at the time, listed ``small sized and fully collateralized
European style binary options on various commodities in a market
structure that permits no intermediary to handle the orders or funds
of traders.'' Final Rule, Market and Large Trader Reporting, 71 FR
37809, 37812 (July 3, 2006).
---------------------------------------------------------------------------
The Commission recognizes that some DCMs listing Covered Event
Contracts for trade may permit both intermediated and non-intermediated
retail participants in the same contract market. In this mixed
intermediation scenario, contracts would not qualify as ``exclusively
self-cleared'' because some persons ``other than a reporting market and
its clearing organization, are permitted to accept . . . money,
securities, or property . . . to margin, guarantee, or secure any
trade.'' \73\ But requiring direct clearing members who are also retail
traders to report in this context would conflict with the Commission's
expressed intention in promulgating the ``exclusively self-
[[Page 40109]]
cleared contract'' definition. Specifically, the regulations concerning
exclusively self-cleared contracts are designed to place large trader
reporting obligations on sophisticated firms and not on retail
traders.\74\ Regulations 16.00(c), 17.00(i), and 17.01(d), apply
``[un]less determined otherwise by the Commission.'' \75\ In order to
ensure that retail traders are not burdened with daily large trader
reporting obligations in this scenario, the Proposal would add
provisions to Sec. 17.00 and Sec. 17.01 specifying that, for Covered
Event Contracts, DCMs will provide large trader reporting and ownership
and control reporting for special accounts carried by clearing members
trading in their own name and not on behalf of any customer.
---------------------------------------------------------------------------
\73\ 17 CFR 15.00(h); see also 71 FR at 37813 n.53 (``The
reporting framework for exclusively self-cleared contracts is
narrowly tailored to be contract specific. In other words, a
reporting market may list both exclusively self-cleared and other
contracts. The alternative reporting approach, however, would only
apply to exclusively self-cleared contracts.'').
\74\ See id. (stating that ``[w]ith respect to exclusively self-
cleared contracts, traders in general may not have the requisite
resources or regulatory experience to comply with Part 17'' and
therefore, ``[i]n order to not place any daily reporting burden on
traders, the Commission is . . . adopting final rules that place
reporting markets in the regulatory position of market participants
that trade in exclusively self-cleared contracts'').
\75\ 17 CFR 16.00(c), 17.00(i), 17.01(d).
---------------------------------------------------------------------------
The Commission also notes the format for submitting large trader
position reports required under Sec. 17.00 is subject to change due to
rule amendments published in 2024.\76\ The compliance date for those
amendments is June 3, 2026.\77\ However, DMO has published a no-action
letter stating that DMO will not recommend an enforcement action
against any DCM, FCM, clearing member, or foreign broker for failure to
comply with those rule amendments until certain conditions are met, in
order to facilitate time for testing and implementation.\78\ It is
expected that this no-action position will expire on July 26, 2027,\79\
at which point market participants will comply with the revised part 17
reporting requirements. Because the 2024 rulemaking modernizes the data
reporting format and submission standard, and to the extent reporting
parties require more time for testing and implementation, the
Commission is proposing that the implementation date for proposed Sec.
16.03(b)(1) and Sec. 16.03(c) be the later of either (a) six months
following publication of a final rule stemming from this notice in the
Federal Register or (b) July 26, 2027.
---------------------------------------------------------------------------
\76\ See Final Rule, Large Trader Reporting Requirements, 89 FR
47439 (June 3, 2024).
\77\ See 89 FR at 47439.
\78\ CFTC Letter No. 26-02 (Jan. 27, 2026), available at https:/
/www.cftc.gov/csl/26-02/download. Specifically, CFTC Letter No. 26-
02 states that DMO ``will not recommend the Commission initiate an
enforcement action against an FCM, clearing member, foreign broker,
or DCM for failure to comply with the Final Rule until eighteen
months after Commission staff has (1) publicly announced the
commencement of calls with market participants regarding
implementation; (2) announced the availability of the CFTC Portal
for testing for a period; and (3) published a revised Part 17
Guidebook,'' on the condition that market participants continue to
submit part 17 reporting pursuant to the regulations in effect on
June 2, 2024. Id. at 2.
\79\ Press Release, CFTC Staff Issues No-Action Letter,
Announces Implementation Updates to 2024 Large Trader Reporting
Rule, CFTC Release No. 9174-26 (Jan. 27, 2026), available at https:/
/www.cftc.gov/PressRoom/PressReleases/9174-26.
---------------------------------------------------------------------------
Request for Comment
The Commission requests comments on all aspects of the proposed
changes to regulations in part 16, including proposed Sec. Sec.
16.03(b)(1), 16.03(c), 17.00(j), and 17.01(f). The Commission requests
specific comment on the following:
(5) Whether adopting proposed Sec. 17.00(j) and Sec. 17.01(f) to
require DCMs to provide part 17 reporting for direct clearing members,
and intermediaries to provide part 17 reporting for their customers
would create operational challenges for DCMs or intermediaries
participating in those contract markets where there exists both direct
and intermediated clearing.
(6) Whether proposed Sec. 17.00(j) and Sec. 17.01(f) are
sufficiently narrow to capture only retail traders and not
institutional or other traders that may be better equipped to submit
routine large trader reporting on their own behalf.
D. Sec. 16.03(d): Reports By Traders
Proposed Sec. 16.03(d) would specifically require traders to file
reports pursuant to part 18 for Covered Event Contracts, upon receiving
a special call from the Commission.\80\ Such reporting would be
consistent with the reporting structure applicable to futures and
options contracts. Regulation 18.04 requires, after a special call of
the Commission, each trader holding or controlling a reportable
position file with the Commission a ``Statement of Reporting Trader''
on Form 40, at such time and place as directed in the call.\81\ Form 40
information supports the Commission's ability to perform effective
surveillance by providing the Commission with more detailed data
concerning large traders, including such traders' relationships with
other entities and relationships with other persons that influence or
exercise control over their trading. Additionally, Form 40 provides the
Commission with information about the business activities of the
reporting trader. Form 40 also enables the Commission to compare the
trading goals that a reporting trader reports with its subsequent
market activity.
---------------------------------------------------------------------------
\80\ Part 18 was not specifically included in the Staff Event
Contract Reporting No-Action Letters, but it was still required to
be followed under the Staff Event Contract Reporting No-Action
Letters.
\81\ 17 CFR 18.04.
---------------------------------------------------------------------------
Request for Comment
The Commission requests comments on all aspects of the proposed
changes to regulations in part 16, including proposed Sec. 16.03(d).
E. Sec. 16.03(e): Reporting Levels
As discussed above, the Commission's large trader reporting scheme
requires reporting of information by DCMs, FCMs, clearing members and
foreign brokers with respect to positions in open contracts in futures
and options, including the size of daily positions of special
accounts.\82\ Whether large trader position reporting requirements
apply to a particular account depends on whether that account equals or
exceeds the relevant reporting level set out in Sec. 15.03 of the
Commission's regulations.\83\ Section 15.03(b) enumerates specific
reporting levels applicable to specific contracts and applies a default
reporting level of 25 contracts to all other contracts.\84\
---------------------------------------------------------------------------
\82\ See supra notes 55-59 and accompanying text.
\83\ See 17 CFR 15.00, 15.03. The firms that carry accounts that
become reportable are required to identify those accounts on Form
102 and report positions in the accounts to the Commission. See 17
CFR 17.00, 17.01.
\84\ 17 CFR 15.03(b).
---------------------------------------------------------------------------
With respect to liquid contracts, the Commission typically
calibrates Sec. 15.03 reporting levels with the goal of ensuring that
the aggregate of positions reported to the Commission represents
approximately 70 to 90 percent of the open interest in any given
contract.\85\ The Commission also analyzes factors such as the terms
and conditions of a contract, its trading volume, its level of open
interest, its typical open position size, and the Commission's
regulatory experience with similar contracts prior to revising or
codifying new contract reporting levels in Sec. 15.03(b).\86\
---------------------------------------------------------------------------
\85\ See 71 FR at 37810 n.12; Final Rule, Reporting Levels and
Recordkeeping, 69 FR 76392, 76393 (Dec. 21, 2004).
\86\ See id.
---------------------------------------------------------------------------
The reporting level applicable to event contracts would generally
be the default 25-contract threshold applicable to ``Other
Commodities.'' \87\ The Commission is proposing a different reporting
level for Covered Event Contracts. Covered Event Contracts commonly pay
a maximum of $1 per contract. Accordingly, the Commission proposes a
reporting level based on contracts that pay a maximum of $1. Proposed
changes to Sec. 15.03(b) would add a reporting level of 125,000
[[Page 40110]]
contracts for ``Covered Event Contracts (1 USD)'' (or the equivalent
notional value with a contract size other than 1 USD), as further
explained below.\88\ As the Commission has previously noted, ``[s]ince
the default contract reporting level is strict and set at 25, its
application to some newly listed contracts is (on occasion) inefficient
from a regulatory surveillance perspective.'' \89\ In proposing to
establish a separate reporting level applicable to Covered Event
Contracts, the Commission is mindful of the burden associated with
reporting requirements and reviews them with an eye to streamlining
that burden to the extent compatible with its responsibilities for
rigorous surveillance applicable to the commodity options markets.\90\
---------------------------------------------------------------------------
\87\ 17 CFR 15.03.
\88\ The Commission also proposed to remove the ``Hedge Street
Products'' reporting level, as no DCM currently does business under
that name.
\89\ See 71 FR at 37810.
\90\ 69 FR at 76393.
---------------------------------------------------------------------------
Given the variety of currently-listed contracts that may be covered
by proposed Sec. 16.03(a), the Commission believes it is impractical
to establish a common reporting level intended to capture 70 to 90
percent of open interest on any given business day. Moreover, given the
significant retail participation in trading of event contracts,
including the Covered Event Contracts and the relatively low contract
size of such contracts, a reporting level set to capture 70 to 90
percent of open interest on any given business day could capture retail
traders that would not typically be considered large traders.\91\ This
could impose an undue reporting burden on DCMs listing Covered Event
Contracts and on retail traders participating on such trading. To avoid
imposing such a burden, the Commission proposes a flat reporting level
of 125,000 contracts with an equivalent contract size of $1.\92\
---------------------------------------------------------------------------
\91\ See also Final rules, Reporting Levels and Recordkeeping,
69 FR at 76394 (``Because of the relatively low notional value of
[HedgeStreet's European-style commodity options that paid a fixed
$10.00 when in the money upon expiration], the reporting levels
otherwise applicable to such contracts, including the default
reporting level of 25 contracts, may place an undue reporting burden
on HedgeStreet and its members without substantially facilitating
the Commission's objective of, and responsibility for, meaningful
market surveillance.'').
\92\ For Covered Event Contracts with contract sizes other than
1 USD, the applicable reporting level would be based on the notional
value equivalent to 125,000 USD. For example, for a contract with
100 USD contract size, a reporting level of 1,250 contracts would
apply. Establishing a notional-equivalent reporting level will allow
DCMs to list contracts in contract sizes other than 1 USD without
necessitating separate rulemakings to establish appropriate
reporting levels based on different contract sizes.
---------------------------------------------------------------------------
Based on the Commission's experience and analysis of transaction
data, a reporting level representing an end-of-day position with a
$125,000 notional value will exclude the vast majority of retail
traders from large trader reporting for most markets and will generally
capture a relatively small number of significant traders in more liquid
markets, such as market makers and institutional traders.\93\ The
proposed 125,000 reporting level could result in a 97 to 99 percent
reduction in the number of potentially reportable special accounts.\94\
Based on the Commission's analysis of certain event contract markets,
the Commission expects such a reporting level would still result in
DCMs reporting the most liquid event contracts. For less liquid event
contract markets, the Commission would expect to receive no large
trader reporting.
---------------------------------------------------------------------------
\93\ The Commission has regulatory experience setting reporting
levels for retail-focused, small-notional-value European-style
options with a binary payout structure. In 2004, the Commission set
a reporting level of 125,000 contracts for Hedge Street Products,
which consisted of contracts that paid a maximum of $10. 69 FR at
76394. A comparable reporting level for Event Contracts (1 USD)
would be 1,250,000 contracts. Based on current volumes of trade for
event contracts that may be covered by proposed Sec. 16.03(a), the
Commission believes that setting a reporting level at the equivalent
of $1.25 million would, for many contract markets, obviate all
position reporting.
\94\ See infra section IV.6 (Cost-Benefits Considerations) for
further discussion of the reporting levels impact.
---------------------------------------------------------------------------
The Commission believes that a reporting level of 125,000 contracts
is appropriate for Covered Event Contracts (1 USD), as that level will
enable the Commission to receive daily position information and
detailed trader-identifying information for the largest participants in
Covered Event Contract markets. At the same time, that level will
ensure that retail participants with relatively low notional value
positions are not swept into a reporting system typically used to
analyze positions of significant institutional traders and subjected to
burdens to which they are not well-suited, as well as to overwhelm the
Commission with less useful data.
Request for Comment
The Commission requests comments on all aspects of the proposed
changes to regulations in part 16, including proposed Sec. 16.03(e).
The Commission requests specific comment on the following:
(7) Whether the reporting levels in proposed Sec. 16.03(e) are
appropriate for Covered Event Contracts or, if not, what reporting
levels would be appropriate.
(8) Whether the Commission should publish reporting levels that
vary by sub-category of Covered Event Contracts contract (for example,
``Weather,'' ``Government Statistics,'' ``Economic Indicators'') rather
than the uniform reporting level in proposed Sec. 16.03(e).
F. Sec. 16.03(e): Reportable Trading Volume Level
Section 17.01(b) of the Commission's regulations requires ownership
and control reporting for accounts for which trading volume exceeds a
reportable trading volume level.\95\ Specifically, Sec. 15.04 sets out
a broadly applicable reportable trading volume level of 50
contracts,\96\ during a single trading day, on a single reporting
market that is a board of trade designated under Sec. 5h of the CEA,
in all instruments that such reporting market designates with the same
product identifier (including purchases and sales, and inclusive of all
expiration months).\97\
---------------------------------------------------------------------------
\95\ 17 CFR 17.01(b).
\96\ Since 2014, DMO has taken a series of no-action positions
with respect to ownership and control reporting requirements. See
generally CFTC Letter No. 24-14, at 1 (Sept. 25, 2024), available at
https://www.cftc.gov/csl/24-14/download (discussing history of no-
action letters). Among other things, those no-action positions
provide that DMO will not recommend an enforcement action against a
reporting party for failure to report a CM volume threshold account
based on a reportable trading volume level of 50 contracts, provided
that such reporting party reports instead based on a reportable
trading volume level of 250 or more contracts per day. See id. at 6.
\97\ 17 CFR 15.04.
---------------------------------------------------------------------------
The purpose of volume-based reporting, as opposed to the position-
based reporting required by Sec. 17.00(a), is to identify trading
accounts based solely on their trading volume, independently of such
accounts' contribution to open interest.\98\ When establishing the 50-
contract reportable trading volume level, the Commission determined
such level would identify ``approximately 85 percent of the trading
volume in approximately 90 percent of the products sampled by the
Commission'' over a six-month sample period and identified
``approximately one-third of the trading accounts in the sample set.''
\99\ Thus, the Commission determined the 50-contract reportable trading
volume level would capture accounts responsible for the large majority
of trading volume and a meaningful absolute number of trading accounts
active in Commission-regulated markets.\100\ The Commission concluded
that identifying both accounts responsible for the majority of trading
volume and a meaningful
[[Page 40111]]
absolute number of active trading accounts was ``important in improving
the Commission's ability to perform robust and comprehensive market
surveillance.'' \101\
---------------------------------------------------------------------------
\98\ See Final Rule, Ownership and Control Reports, Forms 102/
102S, 40/40S, and 71, 78 FR 69178, 69192 (Nov. 18, 2013).
\99\ Id.
\100\ Id.
\101\ Id.
---------------------------------------------------------------------------
The Commission believes that applying a 50-contract reportable
trading volume level to Covered Event Contracts would impose a
disproportionate burden on market participants vis-[agrave]-vis the
benefit to the Commission.\102\ Given that a significant majority of
Covered Event Contracts have a contract size of one dollar, a 50-
contract reportable trading volume level would require the submission
Form 102B for every account with a $50 trading volume. Obtaining
detailed ownership and control information for accounts with $50 in
trading volume is unlikely to enhance the Commission's surveillance and
market monitoring functions and would impose significant burdens on
market participants while overwhelming the Commission with less useful
data.
---------------------------------------------------------------------------
\102\ The Commission received a comment letter to this effect in
2012. See generally 78 FR at 69192 (discussing commenter's
recommendation that the Commission apply a reportable trading volume
level of 5,000 to contracts with a notional value of one thousand
dollars or less).
---------------------------------------------------------------------------
Based on analysis of trading volumes in Covered Event Contracts,
the Proposal would establish in Sec. 15.04 a new reportable trading
volume level applicable solely to Covered Event Contracts and would set
that level at 125,000. The Commission estimates a reportable trading
volume level of 125,000 would capture approximately 150 accounts with
significant trading volume in Covered Event Contracts. This may include
accounts that trade in significant volume but maintain relatively low
open positions, such that the Commission would not otherwise obtain
ownership and control information through large trader position reports
required under Sec. 17.00(a).
Request for Comment
The Commission requests comments on all aspects of the proposed
changes to regulations in part 16, including proposed Sec. 16.03(e).
The Commission requests specific comment on the following:
(9) Whether the reportable trading volume level in proposed Sec.
15.04(b) is appropriate for Covered Event Contracts or, if not, what
reportable trading volume level would be appropriate. Please provide
reasoning and data to support comments in response to this request for
comment.
G. Sec. 16.03(f): Real-Time Dissemination of Market Data
Reporting requirements for swap data generally require near-real-
time dissemination of swap transaction and pricing data.\103\ To
address this requirement, the Staff Event Contract Reporting No-Action
Letters condition the no-action positions granted therein on the
requesting DCMs' disseminating publishing time and sales data for all
transactions ``promptly'' after execution.\104\ Proposed Sec. 16.03(f)
would codify in regulation a substantially similar requirement.
Specifically, it would require DCMs to publish for each Covered Event
Contract the execution timestamp, contract ticker symbol, trade
quantity, and price. Rather than requiring such dissemination occur
``promptly,'' which is not defined in Commission regulations, proposed
Sec. 16.03(f) would require such transaction information be published
``as soon as technologically practicable,'' which is the standard
generally applicable to dissemination of swap transaction and pricing
data.\105\
---------------------------------------------------------------------------
\103\ See 7 U.S.C. 2(a)(13) (requiring the Commission to
promulgate regulations for real-time public reporting of swap
transaction and pricing data); 17 CFR 43.3(b) (regarding public
dissemination of swap transaction and pricing data by SDRs in real-
time).
\104\ See, e.g., CFTC Letter No. 17-31, at 3 (June 30, 2017),
available at https://www.cftc.gov/csl/17-31/download (``. . . Nadex
publishes on its website the following time and sales data for all
Nadex Contracts transactions promptly after execution thereof--
business date, execution time, instrument type, periodicity, display
name, expiration date, price (in USD), and volume''); CFTC Letter
No. 17-32, at 4 (June 30, 2017), available at https://www.cftc.gov/
csl/17-31/download (``CX continues to publish on its website the
following information on all CX Binary Options transactions promptly
after execution thereof: trade timestamp; contract; quantity; and
price''); CFTC Letter No. 21-11, at 4 (Apr. 22, 2021), available at
https://www.cftc.gov/csl/21-11/download (``Kalshi will publish on
its website the following information on all Kalshi Binary Options
transactions promptly after execution thereof: trade timestamp,
contract, quantity, and price'').
\105\ See 17 CFR 43.3(b)(1) (requiring SDRs to ``publicly
disseminate swap transaction and pricing data as soon as
technologically practicable after such data is received . . . unless
such swap transaction and pricing data is subject to a time delay
described in Sec. 43.5''); see 17 CFR 43.2(a) (defining ``as soon
as technologically practicable'' to mean ``as soon as possible,
takin into consideration the prevalence, implementation, and use of
technology by comparable market participants'').
---------------------------------------------------------------------------
The Commission believes this will harmonize the reporting of
Covered Event Contracts with the current industry standard and
otherwise required by the current regulations. It would create parity
across DCMs listing Covered Event Contracts for trade and ensure the
public has timely and equal access to market data on a consistent basis
to allow market participants and the public to analyze the swap
transaction and pricing data. Proposed Sec. 16.03(f) also introduces a
requirement that DCMs listing Covered Event Contracts for trade make
transaction data publicly available on their website for a period of at
least one year, which mirrors requirements imposed on SDRs with respect
to swap transaction and pricing data.\106\
---------------------------------------------------------------------------
\106\ See 17 CFR 43.3(c).
---------------------------------------------------------------------------
Additionally, proposed Sec. 16.03(f) provides certain additional
clarifications with respect to the form and manner for reporting
execution timestamp, contract ticker symbol, trade quantity, and price.
First, it would specify that ``execution timestamp'' should be provided
in the form and manner applicable to the ``Event Timestamp'' data
element in appendix A to part 43 of the Commission's regulations.\107\
That format currently is YYYY-MM-DDThh:mm:ssZ, based on UTC
(Coordinated Universal Time), the primary time standard globally used,
with the time element required to be reported as specific as is
technologically practicable. Maintaining formatting for dates in a
manner consistent with those applicable to swap transaction and pricing
data may facilitate combining data for Covered Event Contracts across
DCMs and with other swaps for analysis or surveillance.
---------------------------------------------------------------------------
\107\ The form and manner for reporting data elements set out in
appendix A to part 43 of the Commission's regulations is set out in
a technical specification published by the Commission's Division of
Data. See 17 CFR 43.3(d)(1) (``In reporting swap transaction and
pricing data to [an SDR], each reporting counterparty, swap
execution facility, or designated contract market shall report the
swap transaction and pricing data as described in the elements in
appendix A of this part in the form and manner provided in the
technical specification published by the Commission pursuant to
Sec. 43.7.''); 17 CFR 43.7(a)(1) (delegating authority to the
Division of Data ``[t]o publish the technical specification
providing the form and manner for reporting and publicly
disseminating the swap transaction pricing data elements in appendix
A of this part . . .''). The Division of Data's current technical
specification for swap reporting is available on the Commission's
website. See CFTC Division of Data, CFTC Technical Specification
version 3.3 (Dec. 13, 2023), available at https://www.cftc.gov/
media/9921/Part43_45TechnicalSpecification12132023CLEAN/download.
---------------------------------------------------------------------------
Second, ``contract ticker symbol'' should be populated with a code
or symbol assigned by the DCM to identify the contract. This contract
ticker symbol should, where practicable, be the symbol used as a unique
instrument code (``UIC'') for purposes of part 17 reporting.\108\ Use
of UICs permits
[[Page 40112]]
linking contracts to Product Reference File data, which may reduce
reporting burdens by allowing reporting parties to remove certain
``static data'' elements from reports.\109\
---------------------------------------------------------------------------
\108\ A unique instrument code is ``[a]n exchange assigned code
[that] serves as a primary key for the product reference file and
uniquely identifies the derivatives contract at the instrument
level.'' See Final Rule, Large Trader Reporting, 89 FR 47439, 47447
n.98 (June 3, 2024).
\109\ See 89 FR at 47446-47447.
---------------------------------------------------------------------------
Third, ``trade quantity'' should be populated with a number greater
than or equal to zero. This requirement will ensure data disseminated
by different DCMs will be interoperable.
Fourth, ``price'' should be populated with a numeric value
expressed as a decimal. This requirement will likewise ensure data
disseminated by different DCMs will be interoperable.
Request for Comment
The Commission requests comments on all aspects of the proposed
changes to regulations in part 16, including proposed Sec. 16.03(f).
The Commission requests specific comment on the following:
(10) Whether DCMs listing Covered Event Contracts for trade should
be required to publish any additional transaction data elements beyond
execution timestamp, contract ticker symbol, trade quantity, and price.
H. Sec. 16.03(g): Requirement That DCMs Obtain Trader-Identifying
Information
Proposed Sec. 16.03(g) would introduce an explicit requirement
that DCMs must obtain trader-identifying data for all traders.
Specifically, proposed Sec. 16.03 would require that the DCM listing a
Covered Event Contract obtain from all customers data that identifies
each trader, by name, physical address, email address, phone number,
occupation, and employer. Also, if persons guarantee the trading
accounts of the trader or have a financial interest of 10 percent or
more in the reporting trader or the trading accounts of the reporting
trader, they would be required to obtain the names of such persons, for
each transaction or order for the Covered Event Contract. And the DCM
shall maintain such data throughout the life of the Covered Event
Contract and for a period of at least five years following the final
termination of the Covered Event Contract. This requirement is intended
to ensure the Commission obtains trader-identifying information that
would otherwise not be obtained pursuant to part 17 and Sec.
16.02.\110\ As further explained below, Sec. 16.02 does not require
submission of trader-identifying information by a DCM.
---------------------------------------------------------------------------
\110\ As noted above, in section II.E., the Commission's large
trader reporting pursuant to part 17 requires reporting of
information mainly by FCMs, clearing members, and foreign brokers.
---------------------------------------------------------------------------
Section 16.02 requires reporting markets to submit to the
Commission daily trade and supporting data reports, which include
``transaction-level trade data and related order information for each
futures or options contract,'' ``time and sales data,'' ``reference
files,'' and ``other information as the Commission or its designee may
require.'' \111\ Importantly, Sec. 16.02 requires DCMs to provide
``data that identifies or facilitates identification of each trader for
each transaction or order'' ``if the [DCM] maintains such data,'' \112\
and does not require DCMs to obtain such trader-identifying data. The
Commission declined to require DCMs to obtain such information when
promulgating Sec. 16.02 because it determined that ``DCMs do not, as a
matter of routine practice, collect detailed trader-identifying data.''
\113\ In making that determination, the Commission relied on the fact
that ``all contracts on DCMs are funneled through clearing members that
also are subject to the large trader reporting rules,'' such that data
provided pursuant to Sec. 16.02 was not the Commission's only source
of trader-identifying information.\114\
---------------------------------------------------------------------------
\111\ 17 CFR 16.02.
\112\ Id.
\113\ Final Rule, Significant Price Discovery Contracts on
Exempt Commercial Markets, 74 FR 12178, 12185 (Mar. 23, 2009).
\114\ See 74 FR at 12185 n.64.
---------------------------------------------------------------------------
When the Commission declined to expressly require DCMs to collect
trader-identifying information in 2009, it did so due to the presence
of intermediation and large trader reporting requirements.\115\
---------------------------------------------------------------------------
\115\ See id.
---------------------------------------------------------------------------
Today's event contract markets present different circumstances. In
contrast to the DCMs registered in 2009, many of the DCMs listing
contracts that would be considered Covered Event Contracts, offer non-
intermediated trading or a combination of intermediated and non-
intermediated trading. Moreover, the large trader reporting level the
Proposal would apply is not intended to capture the vast majority of
retail traders who make up a significant number of event contract
traders. The effect of the proposed reporting level is to limit the
ownership and control reporting for retail traders. As the Commission
would not have a steady stream of trader information, the Commission's
only source of trader-identifying information for these markets is
Sec. 16.02. For Covered Event Contracts, the source of information
would commonly be the DCM, in particular given the large number of
direct participants. The DCM's Core Principles require that the DCM
have rules that provide the DCM the ability and authority to obtain any
information to perform the DCM's functions.\116\ Thus, DCMs are
responsible for obtaining accurate information from traders. The
Commission understands that DCMs listing Covered Event Contracts
generally already collect trader-identifying information for both
intermediated and non-intermediated customers.
---------------------------------------------------------------------------
\116\ DCM Core Principle 2, 7 U.S.C. 7(d)(2).
---------------------------------------------------------------------------
Accordingly, the Commission intends proposed Sec. 16.03(g) to set
forth what trader-identifying information must be collected by both
current DCMs and prospective DCMs. Proposed Sec. 16.03(g) would
explicitly require DCMs listing Covered Event Contracts to obtain data
for all customers that identifies each trader, by name, physical
address, email address, and phone number. Additionally, proposed Sec.
16.03(g) would require DCMs to obtain occupation and employer
information. Finally, if any other persons guarantee the trading
accounts of the trader or has a financial interest of 10 percent or
more in the trader or the trading accounts of the trader, proposed
Sec. 16.03(g) would require DCMs to obtain the names of such persons.
This mirrors the information the Commission ordinarily receives through
the ownership and control reporting.\117\
---------------------------------------------------------------------------
\117\ In traditional futures markets, the Commission obtains
such information through ownership and control reporting via the
large trader reporting regime. See generally 17 CFR 17.01.
---------------------------------------------------------------------------
Trader-identifying information is particularly important to
monitoring and surveilling the Covered Event Contracts markets. Trader-
identifying information is necessary to detect insider trading and
prevent wash trading.\118\ Additionally, given that multiple DCMs often
list economically similar contracts, obtaining trader-identifying
information is necessary to conduct cross-market surveillance.\119\
---------------------------------------------------------------------------
\118\ For example, absent obtaining trader-identifying
information for all trading accounts, a DCM may have difficulty
identifying instances where a trader with accounts carried at
multiple intermediaries matches against itself.
\119\ Historically, liquidity for futures contracts on a
particular commodity has often aggregated on a single DCM. See,
e.g., Final rules, Large Trader Reporting for Physical Commodity
Swaps, 76 FR 43851, 43854 (July 22, 2011) (discussing enumeration of
``linked contracts'' by commodity and exchange); Final rule,
Position Limits for Derivatives, 86 FR 3236, 3236-3237 n.2 (Jan. 14,
2021) (discussing legacy agricultural products specific to
particular DCMs that ``have been subject to Federal position limits
for decades''). For event contracts that would be considered Covered
Event Contracts under proposed Sec. 16.03(a), multiple DCMs may
list contracts on the same underlying event. For example, at least
three DCMs have self-certified event contracts that settle based on
United States Gross Domestic Product growth as reported by the
Bureau of Economic Analysis. Cross-platform surveillance is
important with respect to such contracts in order to holistically
understand traders' positions and trading with respect to a
commodity traded on multiple DCMs.
---------------------------------------------------------------------------
[[Page 40113]]
Request for Comment
The Commission requests comments on all aspects of the proposed
changes to regulations in part 16, including proposed Sec. 16.03(g).
The Commission requests specific comment on the following:
(11) What burdens, if any, would be imposed on DCMs,
intermediaries, traders, or others by proposed Sec. 16.03(g)?
(12) What additional trader-identifying information, if any, should
DCMs collect to support surveillance programs?
I. Sec. 16.03(h): Recordkeeping Obligations
Proposed Sec. 16.03(h) would require that DCMs and DCOs reporting
Covered Event Contracts comply with the recordkeeping requirements
applicable to futures and options \120\ rather than the recordkeeping
requirements applicable to swaps, as it would allow the Commission to
conduct an efficient review of the Covered Event Contracts markets, if
necessary. Specifically, proposed Sec. 16.03(h)(1) would require that,
in connection with any Covered Event Contract, the listing DCM and the
DCO clearing the Covered Event Contract shall comply with all
applicable swap reporting and recordkeeping requirements of the CEA and
Commission regulations, other than recordkeeping requirements contained
in Regulation 38.8, Regulation 38.10, Regulation 38.951 (only to the
extent Regulation 38.951 requires compliance with part 45), Regulation
39.20(b)(2), part 43, and part 45. Proposed Sec. 16.03(h)(2) would
also require DCMs and DCOs to keep required records open to inspection
upon request by the Commission, the United States Department of
Justice, or the Securities and Exchange Commission, or by any
representative of a prudential regulator as authorized by the
Commission. Such records are essential to carrying out the regulatory
functions of not only the Commission but also the Department of Justice
and other financial regulators. Furthermore, the records would form the
basis for conducting appropriate risk management by Registered Entities
themselves.
---------------------------------------------------------------------------
\120\ See generally 17 CFR part 38; 17 CFR 1.31.
---------------------------------------------------------------------------
Request for Comment
The Commission requests comments on all aspects of the proposed
changes to regulations in Part 16, including proposed Sec. 16.03(h).
III. Compliance Date
Given that the Proposal largely codifies an alternative reporting
regime that closely follows the Staff Event Contract Reporting No-
Action Letters, the Commission believes that DCMs and DCOs already have
in place the mechanisms to comply with most of these proposed
requirements, therefore, the Proposal should require little to no time
to implement. As a result, the Commission is setting a compliance date
for the proposed rules to be 60 days following publication of a final
rule in the Federal Register. The Commission also proposes to direct
staff to withdraw the Staff Event Contract Reporting No-Action Letters
on the compliance date of any final rule, as they will become
superfluous at that time.
However, the Commission understands that DCMs and DCOs may require
some additional time to revise systems and processes to comply with
large trader reporting for the Covered Event Contracts pursuant to part
17. In addition, as discussed in section II.C above, the Commission
separately amended part 17 in a rulemaking published on June 3, 2024
with a compliance date of June 3, 2026,\121\ and DMO has separately
published a no-action letter stating that DMO will not recommend an
enforcement action against any DCM, FCM, clearing member, or foreign
broker for failure to comply with those rule amendments until,
effectively, July 26, 2027, in order to facilitate time for testing and
implementation.\122\ Because the 2024 rulemaking introduces data
elements that would facilitate reporting of position data for the
Covered Event Contracts, the Commission is proposing that the
implementation date for proposed Sec. 16.03(b)(1) and Sec. 16.03(c)--
or an alternative requiring that all Covered Event Contracts be
reported in the manner applicable to exclusively self-cleared
contracts--be the later of either (a) sixty days following publication
of a final rule stemming from this notice in the Federal Register or
(b) July 26, 2027.
---------------------------------------------------------------------------
\121\ Final Rule, 89 FR at 47439.
\122\ CFTC Letter No. 26-02 (Jan. 27, 2026), available at
https://www.cftc.gov/csl/26-02/download; Press Release, CFTC Staff
Issues No-Action Letter, Announces Implementation Updates to 2024
Large Trader Reporting Rule, CFTC Release No. 9174-26 (Jan. 27,
2026), available at https://www.cftc.gov/PressRoom/PressReleases/
9174-26.
---------------------------------------------------------------------------
General Request for Comment
The Commission requests comments on all aspects of the proposed
changes to regulations in part 16, part 17, and part 15, including the
proposed Compliance Date.\123\
---------------------------------------------------------------------------
\123\ The Commission published an advance notice of proposed
rulemaking (ANPRM) in the Federal Register on March 16, 2026,
requesting comments related to prediction markets the Commission.
Among other comment, the ANPRM requested comment on the reporting of
event contract swaps reporting to an SDR. The Commission received
comments requesting that the Commission require reporting to
identify insider trading and fraud, scaled position reporting
thresholds, and mandatory reporting by market participants deploying
AI-driven trading strategies. Another commenter supported a
regulator-mandated per-contract identifier at listing (following the
CUSIP/LEI/UPI operating model). This Proposal would provide an
alternative reporting under the futures and options regime with
adjusted reporting level and trading volume thresholds for Covered
Event Contracts. The commenters' requests are otherwise outside the
scope of this Proposal. See Prediction Markets; Advance Notice of
Proposed Rulemaking, 91 FR 12516, 12520 (Mar. 16, 2026).
---------------------------------------------------------------------------
IV. Related Matters
A. Cost-Benefits Considerations
1. Introduction
Section 15(a) of the CEA requires the Commission to consider the
costs and benefits of its actions before promulgating a regulation
under the CEA.\124\ 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 (collectively, the ``section
15(a) factors''). In conducting its analysis, the Commission may, in
its discretion, give greater weight to any one of the five enumerated
areas of concern and may determine that, notwithstanding its costs, a
particular rule is necessary or appropriate to protect the public
interest or to effectuate any of the provisions or to accomplish any of
the purposes of the CEA. Although the Commission believes these rules
will create meaningful benefits for market participants and the public,
the Commission also recognizes associated costs. The Commission has
endeavored to enumerate these costs and, when possible, assign a
quantitative value to the costs reporting firms might face given the
changes. Where it is not possible to reasonably quantify costs and
benefits, those costs and benefits are discussed qualitatively.
---------------------------------------------------------------------------
\124\ 7 U.S.C. 19(a).
---------------------------------------------------------------------------
[[Page 40114]]
2. Background
The CEA requires that swaps be reported to an SDR.\125\ Part 43 and
part 45 of the Commission's regulations, among other regulations,
implement that requirement.\126\ Additionally, the Commission's
regulations require DCMs, FCMs, clearing members, foreign brokers, and
traders to report various data concerning commodity options
transactions and positions directly to the CFTC.\127\ Covered Event
Contracts as defined in proposed Sec. 16.03(a) may fall under one or
more subsections of the ``swap'' definition of section 1a(47)(A)(i)
and/or (ii) of the CEA, and are therefore subject to being reported to
SDRs pursuant to part 43 and part 45 of the Commission's regulations.
---------------------------------------------------------------------------
\125\ See 7 U.S.C. 2(a)(13)(G) (``Each swap (whether cleared or
uncleared) shall be reported to a registered swap data
repository.'')
\126\ See generally 17 CFR part 43; 17 CFR part 45.
\127\ See generally 17 CFR 16; 17 CFR 17; 17 CFR 18.
---------------------------------------------------------------------------
As discussed above, beginning in 2017, the Divisions have issued
Staff Event Contract Reporting No-Action Letters to DCMs listing
certain event contracts from certain swap reporting and recordkeeping
requirements.\128\ Specifically, these staff no-action letters inform
registrants that the Divisions will not recommend the Commission
enforce SDR reporting requirements for specific contracts. Currently,
consistent with conditions enumerated in the Staff Event Contract
Reporting No-Action Letters, DCMs listing event contracts provide
reports pursuant to Sec. Sec. 16.01 and 16.02 of the Commission's
regulations, which provides the Commission with market-level data on
volume and open interest, and detailed information on transactions on a
daily basis.\129\
---------------------------------------------------------------------------
\128\ See supra note 28.
\129\ Regulations 16.00 and 16.01 were not specifically included
in the Staff Event Contract Reporting No-Action Letters, but they
were still required to be followed under the Staff Event Contract
Reporting No-Action Letters and the Commission has always received
information under these provisions.
---------------------------------------------------------------------------
The number of DCMs listing Covered Event Contracts and the volume
of trading in such contracts have increased significantly in recent
years. Currently twelve DCMs either offer or have stated an intention
to offer contracts that would likely be Covered Event Contracts. The
Commission notes it has designated seven new DCMs since the beginning
of 2025, and that currently more than twenty DCM applications are
pending.\130\ Many of these pending DCM applications have the stated
intention of offering contracts that could be considered Covered Event
Contracts. In one of the largest DCMs during the calendar month
February 2026, the Commission estimated a daily average of
approximately 91,000 event contracts with trading volume. The
Commission's experience is that entities seeking DCM designation and
seeking to list Covered Event Contracts may wish to receive a staff no-
action letter similar to the Staff Event Contract Reporting No-Action
Letters. The Commission anticipates receiving additional similar
requests in the future.
---------------------------------------------------------------------------
\130\ See CFTC, Designated Contract Markets, https://
www.cftc.gov/IndustryOversight/IndustryFilings/TradingOrganizations
(last visited May 22, 2026).
---------------------------------------------------------------------------
Request letters resulting in the Staff Event Contract Reporting No-
Action Letters have generally argued that the contracts for which they
seek a no-action position with respect to reporting are economically
quite different from the vast majority of the swaps reported under part
43 and part 45. Swaps reported pursuant to part 43 and part 45
typically have large notional values, long tenors, and are typically
margined. Traditionally, swaps reported pursuant to Commission
regulations are in some instances standardized, but the potential and
observed scope of contract customization between a SD and a bilateral
counterparty is large. Swaps may or may not be cleared with a central
counterparty, may include complex economic terms such as schedules of
payments or reference quantities of underlying instruments, and they
may contain substantial embedded optionality. Swap market participants
often modify their portfolio exposure by initiating new swaps in order
to adjust the risk profile of their portfolio, as it is often
impractical or impossible to identify and terminate specific swaps that
would achieve the desired risk profile.
In contrast, Covered Event Contracts and their associated portfolio
transactions are much simpler than the possible range of swaps
contemplated in part 43 and part 45 regulations.\131\ Covered Event
Contracts are cleared, standardized, typically have a $1 payoff per
contract, and are often resolved soon after contract initiation.
Because Covered Event Contracts are standardized, market participants
can readily offset a position in a given contract by trading again in
that same contract. Also, whereas futures and options on futures
typically trade on DCMs that allow for leveraged positions, Covered
Event Contracts would be fully collateralized.\132\ Thus, for
intermediated trades of Covered Event Contracts, FCMs and brokers do
not hold margin, and users are not subject to margin calls.
Consequently, Covered Event Contracts carry different risks than
traditional futures or options contracts. Specifically, trading in
fully collateralized contracts should not generally expose the DCO to
credit or default risk.\133\
---------------------------------------------------------------------------
\131\ Part 45 reporting was designed to accommodate complex,
bespoke, bilateral swaps, not exchanged-traded options. As such, it
includes many fields that are not relevant for Covered Event
Contracts including items such as CDS index attachment point,
Exchange rate, Exchange Rate Basis, Floating rate payment frequency
period multiplier, Original swap USI, Physical delivery location,
among many others.
\132\ 17 CFR 39.2 (``Fully collateralized position means a
contract cleared by a derivatives clearing organization that
requires the derivatives clearing organization to hold, at all
times, funds in the form of the required payment sufficient to cover
the maximum possible loss that a party or counterparty could incur
upon liquidation or expiration of the contract.'').
\133\ See, e.g., Final Rule, Reporting and Information
Requirements for Derivatives Clearing Organizations, 88 FR 53664,
53664 (Aug. 8, 2023) (``[F]ully collateralized positions do not
expose the DCO to any credit or default risk stemming from the
inability of a clearing member to meet a margin call or a call for
additional capital.'').
---------------------------------------------------------------------------
As noted earlier, reliance on Staff Event Contract Reporting No-
Action Letters without a reporting and recordkeeping regime for the
Covered Event Contracts is a tenuous basis to devote resources and may
cause reporting parties to proceed cautiously in launching new
products, thereby inhibiting innovation. Accordingly, the Commission is
proposing an alternative reporting regime for Covered Event Contracts.
The Proposal would set forth a separate reporting regime for Covered
Event Contracts, which would be exempted from certain swap data
reporting and recordkeeping requirements. Rather than being subject to
swap data reporting requirements, event contracts that would be
considered Covered Event Contracts under proposed Sec. 16.03(a) would
be reported pursuant to part 16, part 17, and part 18, in largely the
same manner as futures and options contracts are reported.
3. The Baseline
The Commission identifies and considers the benefits and costs of
the Proposed Rule relative to the baseline of those generated by the
current statutory and regulatory framework applicable to the issues
addressed by this Proposal, i.e., the current status quo. The baseline
in this Proposal is the existing statutory and regulatory framework
applicable to market participants that must comply with the existing
swap reporting rules. Covered Event Contracts' treatment as swaps means
that Registered Entities are required to report transaction information
under parts 43 and 45. Part
[[Page 40115]]
43 implements rules relating to the reporting and public dissemination
of certain swap transaction and pricing data in near real time. Part 45
regulations require SEFs, DCMs, and reporting counterparties to report
swap data to SDRs. SDRs collect and maintain data related to swap
transactions, keeping such data electronically available for regulators
or the public.
The Proposal would remove these part 43 and part 45 requirements
for the Covered Event Contracts and would set up an alternative
reporting regime under part 16, part 17, and part 18 of the
Commission's regulations. Part 16 concerns requirements for reporting
trade information for futures and options. In particular, Sec. 16.02
requires price and quantity information similar to that required under
part 43. Part 17 requires reporting position and ownership and control
information for accounts identified as special accounts under
Commission regulations, and part 18 requires reporting certain trader-
identifying information upon a special call. The Proposal would amend
both the reporting level and reportable trading volume level for
purposes of part 17 and part 18 to raise both thresholds to 125,000
contracts for Covered Event Contracts.\134\
---------------------------------------------------------------------------
\134\ The proposed reporting level is 125,000 contracts for
Covered Event Contracts with a $1 maximum payout. For those that
have a higher payout, the threshold is $125,000 notional.
---------------------------------------------------------------------------
The Staff Event Contract Reporting No-Action Letters set forth no-
action positions by the Divisions that provide for reporting of Covered
Event Contracts by Registered Entities under the futures and options
regulatory regime. The Staff No-Action Letters are not Commission
actions carrying the force of law and thus do not establish any
regulations. Although costs and benefits are calculated based on the
regulatory baseline, the Commission recognizes a de facto baseline for
Registered Entities that have relied on these Staff Event Contract
Reporting No-Action Letters and submit Covered Event Contract
information to the Commission pursuant to the futures and options
reporting regime of part 16 of the Commission regulations. Because the
Staff No-Action Letters have effectively lowered the compliance burden
relative to the swaps reporting regulatory baseline for many
participants, complying with a reversion to the regulatory baseline
would result in new costs. For existing Registered Entities submitting
information pursuant to a Staff No-Action Letter, the actual costs and
benefits of the amendments in this Proposal may net out to little, if
any, change in those cases where the Proposal would establish
regulations requiring reporting in a format and timeframe that closely
align with the existing Staff Event Contract Reporting No-Action
Letters. For New Registered Entities not currently relying on a Staff
Event Contract Reporting No-Action Letter, the regulatory and de facto
baselines would similarly apply to the extent new entities would avail
themselves of a staff no-action letter for their Covered Event
Contracts.
When comparing the Proposal to the baseline, where possible the
Commission has engaged in a quantitative analysis; however, where data
is unavailable or estimates depend on the cost structure and business
model of the registrant, the Commission has addressed these costs and
benefits on a qualitative basis. In conducting the cost-benefit
analysis, the Commission has considered more and less stringent
alternatives in addition to the preferred option set forth in the
Proposal. As discussed below, the Commission has identified the
alternative of proceeding with the current regulations which requires
reporting under the swaps reporting and recordkeeping regulations (in
addition to the options reporting requirements), the alternative of
requiring reporting under current regulations absent no-action relief,
reporting under the options regime with the default (25-contract
position/50-contract volume) threshold, reporting to an SDR only (i.e.,
retaining the parts 43 and 45 requirement, but not the parts 16, 17 and
18), and the alternative of a DCM choosing to register as an SDR or
registering an affiliated SDR, and the chosen Proposal. Based on our
preliminary analysis, the Commission believes the Proposal detailed
above is likely to yield the greatest net benefit among these options.
Broadly summarizing the economic analysis described in more detail
in the following sections, the Commission preliminarily concludes that
there are significant sources of net benefit associated with both the
proposed changes that eliminate swap reporting for Covered Event
Contracts, as well as proposed changes to the reporting under existing
regulations for large trader reporting levels. By eliminating part 43
and part 45 SDR reporting requirements as well as certain parts 38 and
39 recordkeeping and reporting requirements for the Covered Event
Contracts, the Proposal would eliminate the costs of swap reporting for
Covered Event Contracts. The Proposal would also reduce costs by
substantially raising the threshold for special account and volume
threshold account status for accounts held by traders from a position
of 25 contracts or a daily volume of 50 contracts to a proposed level
of 125,000 contracts of position or volume to meet the reporting
threshold, thereby eliminating DCM, FCM, and trader reporting
requirements associated with special accounts. Costs associated with
the Proposal include those for a DCM to collect and transmit basic
identifying information, not previously required, on all traders. For
instance, the Proposal would require occupation information that would
be relevant for Commission surveillance programs of Covered Event
Contracts. However, the Commission preliminarily believes that these
costs would be offset by the elimination of the swap data reporting and
the increase in the reporting level thresholds.
4. Proposed Codification of the No-Action Position With Respect to SDR
Reporting and Recordkeeping Requirements
Proposed Sec. 16.03(a) would exempt Covered Event Contracts from
regulations requiring reporting to the SDRs for the DCMs that list
these contracts. Although the transaction-level reporting requirements
found under these rules are typically required for swaps, the
Commission notes that Covered Event Contracts differ from many other
swaps in that Covered Event Contracts (a) are standardized and listed
on DCMs; (b) are fully collateralized; (c) have significant retail
participation and typically trade as one-dollar contracts. In requests
for no-action positions, certain DCMs represented that it would be
impractical and uneconomic to report small-notional-size swaps to an
SDR.
In lieu of receiving transaction data via SDR reporting, pursuant
to the Proposal, the Commission would receive transaction data directly
pursuant to Sec. Sec. 16.00, 16.01 and 16.02, which apply to futures
and options transactions. The Commission believes that the transaction-
level reporting under these sections would provide a suitable record
for the Commission's purposes for most transactions when combined with
additional reporting for large traders. The Commission has extensive
experience with the part 16 data format as a tool for market
monitoring, market analysis, and surveillance. Given the economic
similarities between event contracts that would be considered Covered
Event Contracts and options for which the Commission typically receives
transaction data, and given the Commission's nearly nine years of
experience receiving transaction data for event contracts in the part
16 format, the
[[Page 40116]]
Commission believes this format is sufficient to obtain the transaction
information necessary to support the Commission's mission.
a. Benefits
Under the Proposal, Sec. 16.03(a) defines the ``Covered Event
Contracts'' which will not be subject to reporting and recordkeeping
requirements under Sec. Sec. 38.8, 38.10, 38.951, 39.20(b)(2), and
part 43 and part 45. By reducing reporting and recordkeeping
requirements from the regulatory baseline, the Proposal would benefit
the reporting parties by enabling them to avoid certain reporting
costs. The Commission believes the costs avoided by not subjecting DCMs
to the above-cited swap reporting and recordkeeping requirements fall
into at least three categories: (1) costs associated with registering
with and connecting to an SDR, (2) costs associated with modifying
reporting party systems, and (3) costs associated with SDR reporting
fees. Under the regulatory baseline, DCMs currently trading other event
contracts and swaps in addition to Covered Event Contracts would have
already connected to an SDR and hence would not incur costs in the
first two categories. In addition, those Registered Entities that are
already connected to an SDR to report data on their traditional swap
business but choose to start listing Covered Event Contracts would also
not incur costs in these categories.
First, with respect to costs associated with registering with and
connecting to an SDR, the Commission estimates avoided costs would vary
across SDRs. Costs to DCMs and other market participants may include
legal costs associated with completing user agreements and registration
fees associated with receiving an LEI. Such costs may also include the
cost of building a connection to an SDR. The Commission acknowledges
that these costs might change over time. A DCM listing contracts that
would be considered Covered Event Contracts, or a DCO clearing the
same, might make a business decision to register as an SDR or open an
affiliate SDR. In the short term, any such cost reduction might be
offset by costs associated with registering with the Commission as an
SDR and setting up reporting systems. This is discussed in more detail
below.
Second, with respect to the costs associated with modifying
reporting systems to submit data in the form and manner required by an
SDR, the Commission previously estimated the cost for a reporting
entity to design, test, and implement an updated data system based on
the part 45 data elements, the Commission's technical specification,
and applicable validation requirements would range between $24,000 and
$73,225 per reporting party to modify systems, plus an hourly burden of
0.01 hours per report submitted.\135\
---------------------------------------------------------------------------
\135\ See Final Rule, Swap Data Recordkeeping and Reporting
Requirements, 85 FR 75503, 75553 (Nov. 25, 2020). See also
discussion of costs related to sending information to an SDR in
section 8 below.
---------------------------------------------------------------------------
Third, with respect to costs associated with SDR reporting fees,
avoided costs would vary across SDRs and may depend upon trading volume
and average notional sizes of trades. SDRs charge fees for the services
they provide. Some SDRs require an annual account management fee, and
some SDRs require per transaction reporting fees that may vary by
notional size, product, or asset class. Where fees vary based on the
number of reported swap transactions, an exact estimate of the total
avoided costs depends on the number of trades and other
characteristics. For example, assuming reporting fees of $0.005 per
swap transaction, total annual reporting costs could exceed $5 million
for a large DCM that offers Covered Event Contracts.\136\
---------------------------------------------------------------------------
\136\ The largest DCM with Covered Event Contracts had 24.3
million weekly transactions in the week ending May 15, 2026.
Assuming a swap reporting fee of $0.005, the annual reporting cost
would be approximately = $0.005 x 24.3 million swaps x 50 weeks = $
5,850,000. Event contract volume source: https://defirate.com/
prediction-markets/volume/.
---------------------------------------------------------------------------
In addition to avoided costs, proposed Sec. 16.03(a) would also
enable DCMs and DCOs listing and clearing event contracts to avoid
continual ad hoc adjustments to Staff Event Contract Reporting No-
Action Letters to account for new developments, innovation, or
competitive adjustments not contemplated at the time of the original
request for a no-action position.\137\ As discussed above in section
II, a regulatory regime that specifically addresses the reporting of
event contracts would provide a uniform and consistent approach to
event contracts reporting while at the same ensuring the Commission
obtains the necessary information to address the CEA's objectives of
reducing systemic risk, increasing transparency, and promoting market
integrity.
---------------------------------------------------------------------------
\137\ As noted earlier, in some instances, Registered Entities
have received no-action positions concerning SDR reporting that
include contracts with slightly different payout structures, such as
variable payout contracts. Whereas an event contract typically
results, at settlement, in the payment of an absolute amount to the
holder of one side of the event contract and no payment to the
other, a variable payout structure can result to a payout to both
parties based on the amplitude by which the price at expiration
exceeds the strike or strike price. The Proposal would accommodate
both binary and variable payout structures and obviate the need for
Registered Entities to seek modified no-action positions to address
technical changes.
---------------------------------------------------------------------------
b. Costs
Removing the requirement that DCMs provide parts 43 and 45
information to the Commission changes the information available to
conduct surveillance of Covered Event Contracts relative to the
information available with respect to other swaps. The Commission
nevertheless believes that for Covered Event Contracts, the information
provided in parts 16, 17 and 18 would serve similar purposes to
relevant provisions in parts 38, 39, 43 and 45, and does not anticipate
any impact on oversight. The information provided under the traditional
futures and options reporting regime would ensure parallel treatment
that the Commission believes is appropriate for Covered Event
Contracts. Because the transaction data reported pursuant to the Sec.
16.02 reporting format overlaps in large part with the transaction data
reported pursuant to the part 45 reporting format, the Commission does
not anticipate material loss of data would result from receiving
transaction data in the Sec. 16.02 reporting format rather than the
part 45 reporting format. For example, the Commission receives
information concerning uncleared swaps through specific part 45 data
elements \138\ that it would not expect to receive in the Sec. 16.02
reporting format. However, given all Covered Event Contracts are fully
collateralized and traded on-exchange, the absence of such information
in a transaction data report is unlikely to impact data quality.
---------------------------------------------------------------------------
\138\ See generally 17 CFR part 45, appendix 1.
---------------------------------------------------------------------------
To the extent that information not captured under Sec. 16.02
reporting is necessary for Commission activity, a special call pursuant
to part 21 \139\ may be required to receive such information. But, as
detailed above, because these event contracts trade on a DCM with
publicly available contract information, the Commission does not
anticipate such special calls. As such, the Commission anticipates
little change in its ability to monitor these markets.
---------------------------------------------------------------------------
\139\ See generally 17 CFR part 21.
---------------------------------------------------------------------------
c. Request for Comment
The Commission requests comment on its consideration of the costs
and benefits of the Proposal, including regarding issues and questions
specifically identified below. Please provide data, statistics, or
other supporting information for positions asserted.
(1) How, if at all, would event contract markets change if the
Staff
[[Page 40117]]
Event Contract Reporting No-Action Letters were withdrawn, such that
DCMs listing event contracts for trade would be required to submit part
43 and part 45 reporting for such contracts? For instance, would the
minimum size of a tradeable contract increase in notional value to
reduce the burden of per-dollar SDR fees?
(2) Whether and how the SDR data for Covered Event Contracts is
used by interested parties.
5. Reporting Requirements for DCMs
Proposed Sec. 16.03(b) would require DCMs to report pursuant to
Sec. 16.00 \140\ (clearing member reports), Sec. 16.01 \141\ (market-
level data), and Sec. 16.02 \142\ (trade and supporting data). The
Proposal would codify the conditions set forth in the Staff Event
Contract Reporting No-Action Letters for the Covered Event Contracts.
However, the Proposal contains modifications to the de facto baseline
of the reporting set forth in the Staff Event Contract Reporting No-
Action Letters. Generally, the reporting conducted under Sec. Sec.
16.00-16.02 would apply to Covered Event Contracts to the same extent
that such provisions would apply to a DCM in connection with any
futures or option contract, except that, with regards to reporting
pursuant to Sec. 16.01, the Proposal would in addition require the DCM
to record information related to the settlement of the contract,
including whether the event that is the subject of each contract
occurred and, if so, the event that occurred, the time and date the
event occurred, and the source used to determine whether the event
occurred.\143\
---------------------------------------------------------------------------
\140\ 17 CFR 16.00.
\141\ 17 CFR 16.01.
\142\ 17 CFR 16.02.
\143\ As noted earlier, Regulations 16.00 and 16.01 were not
specifically included in the Staff Event Contract Reporting No-
Action Letters, but they were still required to be followed under
the Staff Event Contract Reporting No-Action Letters and the
Commission has always received information under these provisions.
---------------------------------------------------------------------------
Proposed Sec. Sec. 16.03(c) and (d) would apply parts 17 and 18 to
Covered Event Contracts. Proposed Sec. 16.03(e) would amend the
reporting level for purposes of part 17 and part 18. Currently, under
part 15, an account is in special account status or volume threshold
account status if, respectively, either its end-of-day position in a
contract market (Sec. 15.03) exceeds 25 contracts, or its daily number
of trades (Sec. 15.04), exceeds 50 contracts. The Proposal would raise
both thresholds to 125,000 contracts for Covered Event Contracts.
Proposed Sec. 16.03(f) would require DCMs to disseminate transaction
data ``as soon as technologically practicable,'' a standard that better
aligns reporting with what is required of SDRs. Under proposed Sec.
16.03(g), DCMs would be required to obtain from direct participants,
FCMs, foreign brokers, and any other clearing members certain ownership
information of traders. And, under Proposed Sec. 16.03(h), the
Registered Entities trading and clearing Covered Event Contracts would
be required to comply with all swap reporting and recordkeeping
requirements of the CEA other than the recordkeeping requirements of
the Relevant Regulations and to keep all record pursuant to Sec. 1.31
of the Commission regulations. Sections 16.03(c) through (e) are
further discussed in section 6 below.
a. Benefits
As discussed, proposed Sec. 16.03(a) through (b) would, in large
part, codify into regulation the Staff Event Contract Reporting No-
Action Letters. Based on the Commission's experience receiving data
reported pursuant to the Staff No-Action Letters, the Commission
believes additional specificity would ensure a uniform approach across
DCMs in the reporting of trader-identifying information to the
Commission and in publicly disseminating transaction data in real time.
Codification of the reporting rules creates a known regulatory
environment for current and future DCMs, without necessitating ongoing
and ad hoc no-action positions or other staff intervention.\144\ Taken
together, the reporting framework under parts 16, 17 and 18 is a well-
established and effective mechanism for collecting trader level
information of contracts under DCMs. This framework is already integral
to futures and options markets and relies on a consistent set of
reporting elements--including daily trade level data and ownership and
control information--that are familiar to registrants and well-
integrated into the Commission's surveillance systems. In addition,
given the high degree of standardization of Covered Event Contracts,
certain granular fields required by parts 43 and 45 that are designed
to capture detailed contract specific attributes might create reporting
costs without providing meaningful incremental value to the Commission.
The Commission believes that these existing reports, including those
identifying persons with more than 10 percent ownership interest in an
account, offer a sufficiently robust foundation for surveillance,
monitoring, and enforcement, while avoiding unnecessary additional
burdens.
---------------------------------------------------------------------------
\144\ For example, when a DCM reporting pursuant to the Staff
Event Contract Reporting No-Action Letters arranges to clear through
a new DCO, that DCM and that new DCO have generally amended the no-
action position to include the new DCO. But see CFTC Letter No. 26-
14 (May 13, 2026), available at https://www.cftc.gov/csl/26-14/
download (providing a no-action position intended to obviate the
need for such amendments). The Proposal would eliminate the need to
modify no-action letters to reflect business changes, as long as the
contracts at issue fell within the proposed ``Covered Event
Contracts'' parameters set forth in Sec. 16.03(a).
---------------------------------------------------------------------------
The requirement in proposed Sec. 16.03(b) to include settlement
file information along with other market data as required in Sec.
16.01 would provide the Commission with information already required by
DCMs under part 16. As noted earlier, such information is a necessary
component of the settlement price reported by DCMs pursuant to Sec.
16.01(b)(2)(ii).\145\ The daily collection of this information, of
which most or all is typically published online, in a standardized
format integrated with other reporting, would allow the Commission to
respond in a timely way to trading irregularities and would assist the
Commission in identifying how the contract was determined. This in turn
could benefit market participants by ensuring the financial integrity
of event contracts markets, in particular, by ensuring that the
contract determination process would be auditable.
---------------------------------------------------------------------------
\145\ The Commission currently receives such settlement
information from DCMs listing contracts that would meet the
Proposal's definition of Covered Event Contracts in a separate
``settlement file.''
---------------------------------------------------------------------------
Proposed Sec. 16.03(f) would require DCMs to provide real-time
dissemination of market data. The Staff Event Contract Reporting No-
Action Letters contain a similar requirement. Whereas the Staff No-
Action Letters typically require such data to be disseminated
``promptly,'' the Proposal clarifies that this information shall be
published ``as soon as technologically practicable,'' the same standard
required for public dissemination of swap transaction and pricing data
reported pursuant to part 43.\146\ This would ensure that the public
may access trade data in near real-time. Benefits of public
dissemination on an ``as soon as technologically practicable'' timeline
include enhanced price discovery and
[[Page 40118]]
enhanced price competition, among other transparency-related
benefits.\147\ The Proposal would also harmonize the reporting of
Covered Event Contracts with the current industry standard and
otherwise required by the current regulations. It would create parity
across DCMs listing Covered Event Contracts for trade and ensure the
public has timely and equal access to market data on a consistent basis
to allow market participants and the public to analyze the swap
transaction and pricing data.
---------------------------------------------------------------------------
\146\ See 17 CFR 43.3(b)(1) (requiring SDRs to ``publicly
disseminate swap transaction and pricing data as soon as
technologically practicable after such data is received . . . unless
such swap transaction and pricing data is subject to a time delay
described in Sec. 43.5''); see 17 CFR 43.2(a) (defining ``as soon
as technologically practicable'' to mean ``as soon as possible,
taking into consideration the prevalence, implementation, and use of
technology by comparable market participants'').
\147\ See generally, Final Rule, Real-Time Public Reporting of
Swap Transaction Data, 77 FR 1182, 1234 (Jan. 9, 2012) (discussing
benefits of reporting and public dissemination requirements for part
43).
---------------------------------------------------------------------------
Proposed Sec. 16.03(g) would require DCMs to obtain data for all
customers that identifies each trader by name, physical address, email
address, and phone number, as well as occupation and employer
information and the names of any other persons guaranteeing the trading
account or with a financial interest of 10 percent or more in the
trading account. Although Sec. 16.02 does not expressly require DCMs
to obtain trader-identifying information for intermediated
accounts,\148\ DCMs generally do collect identifying information for
each customer in the ordinary course of business, and in turn report
such information to the Commission pursuant to Sec. 16.02. By
specifying trader-identifying information that DCMs collect, proposed
Sec. 16.03(g) would create a level playing field for intermediaries,
which, currently, may not all communicate trader-identifying
information to DCMs in a consistent form and manner. The minimum
trader-identifying information to be collected under proposed Sec.
16.03(g) would ensure uniform reporting across DCMs, FCMs, foreign
brokers, and clearing members, which allows the Commission to aggregate
this data for more efficient and effective monitoring and analysis.
Proposed Sec. 16.03(g) would also ensure that DCMs and the Commission
together with other provisions of proposed Sec. 16.03 have access to
trader-identifying information critical for identifying insider trading
and other potential violations of the CEA, the Commission's
regulations, or a DCM's rules.\149\ Given that the frequency and volume
of intermediated clearing and execution of trades on DCMs offering
event contracts may continue to increase, collection of trader-
identifying information and ownership and control information is
critical to the Commission's market monitoring and surveillance
programs.
---------------------------------------------------------------------------
\148\ See 17 CFR 16.02 (``Upon request, [trade and supporting
data reports] . . . shall be accompanied by data that identifies or
facilitates the identification of each trader for each transaction
or order included in a submitted data report if the reporting market
maintains such data.'') (emphasis added); see also Final Rule,
Significant Price Discovery Contracts on Exempt Commercial Markets,
74 FR 12178, 12185 (Mar. 23, 2009).
\149\ As discussed in section II.H above, trader-identifying
information is valuable to both the Commission and to DCMs for
market monitoring and surveillance purposes. See, e.g., CFTC Press
Release, ``CFTC Enforcement Division Issues Prediction Markets
Advisory,'' Release No. 9185-26 (Feb. 25, 2026), available at
https://www.cftc.gov/PressRoom/PressReleases/9185-26 (discussing
``[m]isappropriation of confidential information in breach of a pre-
existing duty of trust and confidence to the source of the
information (commonly known as `insider trading'),'' among other
potential ``illegal trading practices occurring on any DCM'').
---------------------------------------------------------------------------
b. Costs
Under the regulatory and de facto baselines, DCMs are responsible
for reporting clearing member reports under Sec. 16.00, market data
under Sec. 16.01 and transaction data pursuant to Sec. 16.02. The
Proposal would establish additional requirements for the Covered Event
Contracts, including requirements to record contract settlement
information, to obtain certain trader-identifying information, and to
publicly disseminate trade data on an ``as soon as technologically
practicable'' basis, as well as recordkeeping requirements. As
enumerated below, these additional requirements could result in some
costs for registrants compared to the de facto baseline, as they would
have to build out current systems to obtain this data. The Commission
is of the view that this information is generally required to be
collected under the regulatory baseline, and, in practice, such costs
would be marginal, to the extent DCMs already have the infrastructure
to collect and report futures and options data pursuant to part 16.
(i) Transmission of Settlement File Under Sec. 16.01
Proposed Sec. 16.03(b) would specify that Sec. 16.01 reports must
include certain settlement information, including whether the event
that is the subject of each contract occurred and, if so, the event
that occurred, the time and date the event occurred, and the source
used to determine whether the event occurred. Such information is a
necessary component of the settlement price reported by DCMs pursuant
to Sec. 16.01(b)(2)(ii). This information is currently transmitted to
the Commission generally on a monthly basis by DCMs. While DCMs
currently have this information available for contract determination,
dispute, and settlement, the Commission acknowledges that there may be
minor modifications to current internal systems to send the information
on a daily basis, and ongoing costs associated with daily transmissions
that adhere to the correct fields and formats requested. The
Commissison preliminarily believes that DCMs would incur a one-time
cost of 50 hours to update electronic systems to transmit settlement
file information along with market data, and an ongoing cost of 2 hours
per month to ensure the smooth transmission of this information and to
resolve any errors or inconsistencies in said transmission. At an
hourly rate of $235 per hour, this equates to a one-time cost of
$11,750 and an ongoing annual cost of $5,640.\150\ Across the 12 DCMs
that are currently registered and have started trading or stated an
intent to trade Covered Event Contracts, that amounts to a one-time
cost of $141,000 and an ongoing cost of $67,680 per year.
---------------------------------------------------------------------------
\150\ The wage estimate of $235/hour is based on the
occupational categories that are most likely to be involved in the
implementation of this Proposed Rulemaking. The Commission is using
a composite wage based on the following BLS categories: Software and
Web Developers, Programmers, and Testers (50%), Database and Network
Administrators and Architects (25%), Lawyers (25%), with wage
estimates taken from the BLS' Occupational Employment and Wage
Statistics (located online at https://data.bls.gov/oes/#/industry/
523000); adjusted for inflation to May 2026 using the BLS CPI
inflation calculator (located online at https://www.bls.gov/data/
inflation_calculator.htm); and further adjusted with a multiple of
2.5 to account for benefits and overhead costs.
---------------------------------------------------------------------------
(ii) Requirement of Real-Time Reporting
Under proposed Sec. 16.03(f), DCMs are required to publish for
each transaction certain information, including the quantity and price,
``as soon as technologically practicable.'' \151\ This standard differs
from ``promptly,'' which was the standard established in the Staff
Event Contract Reporting No-Action Letters. The Proposal would be
adopting the current publication standard and the costs of the Proposal
should not increase as compared to the current practice. Furthermore,
the Commission does not believe the Proposed Rule would impose
additional burdens on DCMs to disseminate data ``as soon as
technologically practicable'' rather than ``promptly.'' In either
standard, the reporting party would need to publish the information in
such a way that it should be readily available. In addition, the
Proposal would establish the fields that must be
[[Page 40119]]
reported and for how long they must be made publicly available,\152\
which would create parity among DCMs and standardize the information
received by the Commission and the public. In general, the Commission
believes that most DCMs would not have to make any changes to the way
that this information is currently disseminated, and any changes would
be relatively minor. As a result, the Commission estimates that the
burden required to fulfill this requirement would be de minimis for
most reporting parties.
---------------------------------------------------------------------------
\151\ See 17 CFR 43.3(b)(1) (requiring SDRs to ``publicly
disseminate swap transaction and pricing data as soon as
technologically practicable after such data is received . . . unless
such swap transaction and pricing data is subject to a time delay
described in Sec. 43.5''); see 17 CFR 43.2(a) (defining ``as soon
as technologically practicable'' to mean ``as soon as possible,
takin into consideration the prevalence, implementation, and use of
technology by comparable market participants'').
\152\ For instance, proposed Sec. 16.03(f) requires that trade
information be publicly available on the DCMs' website for a period
of at least one year. Similarly, Sec. 43.3(c)(1) requires SDRs to
``make swap transaction and pricing data available on their websites
for a period of time that is at least one year after the initial
public dissemination of such data and shall make instructions freely
available on their websites on how to download, save, and search
such data.'' 17 CFR 43.3(c)(1).
---------------------------------------------------------------------------
(iii) Collection of Ownership Information by Intermediaries
Proposed Sec. 16.03(g) would require DCMs to obtain trader-
identifying information for all traders, including occupation and
employer information. This would allow for transaction information
reported pursuant to Sec. 16.02 to contain trade ownership
information. Currently, for non-intermediated contracts that would be
considered Covered Event Contracts, DCMs obtain most of such
information directly from their customers. In those instances, the
Proposal would standardize the minimum information required to be
collected. For intermediated contracts, DCMs must generally obtain
trader-identifying information as well as any other account information
from the intermediary that carries the account, and as noted above, the
Commission understands that DCMs generally collect such information
from FCMs. However, proposed Sec. 16.03(g) would require DCMs that do
not collect trader-identifying information or collect only some of the
trader-identifying information to collect the enumerated information
set forth in proposed Sec. 16.03(g). For these DCMs, there may be some
costs associated with the collection and transmission of this
information. But this information is required to be reported in
connection with the Commission's large trader reporting scheme,\153\
intermediaries collect this information about certain traders, and the
electronic systems maintained by FCMs and foreign brokers to place
trades may accommodate any additional information requested. As a
result, as in the case of real-time reporting, the Commission estimates
that the cost to update information flows to fulfill requirements under
proposed Sec. 16.03(g) will be de minimis for most reporting parties.
Similarly, proposed Sec. 16.03(h), Registered Entities trading and
clearing Covered Event Contracts would be required to comply with all
recordkeeping requirements of the CEA pursuant to Sec. 1.31 of the
Commission regulations that these entities are already required to
comply. The Staff Event Contract Reporting No-Action Letters and the
Proposal do not remove the general recordkeeping requirements that
apply to DCMs under Sec. 1.31. As a result, DCMs offering event
contracts would continue to be subject to the requirements under Sec.
1.31 that apply to all DCMs. Because DCMs already comply with this
requirement, the Commission preliminarily believes that the Proposal
would not create any additional costs.
---------------------------------------------------------------------------
\153\ See, e.g., 17 CFR 17, appendix A (Form 102); 17 CFR 18,
appendix A (Form 40).
---------------------------------------------------------------------------
6. Large Trader Reporting Requirements
Proposed Sec. 16.03(c) and Sec. 16.03(e) would explicitly require
large trader reporting pursuant to part 17 of the Commission's
regulation for Covered Event Contract positions. The Staff Event
Contract Reporting No-Action Letters do not address part 17 reporting
requirements for either daily position data or ownership and control
information. Commission regulations nevertheless generally require such
reports for futures and options traded on DCMs.\154\ The Proposal would
make explicit that DCMs, clearing members, and foreign brokers must
provide large trader reporting under part 17 and would establish a
reporting level and a reportable volume threshold level applicable to
Covered Event Contracts.
---------------------------------------------------------------------------
\154\ See Regulation 15.00(o) defines ``option'' to mean,
``unless specifically provided otherwise . . . any contract for the
purchase or sale of a commodity option that is executed on or
subject to the rules of a reporting market, including all
agreements, contracts and transactions that are treated by a
clearing organization as fungible with such contracts.'' 17 CFR
15.00(o). Regulation 17.00(a) applies to ``put and call options''
traded on DCMs. 17 CFR 17.00(a).
---------------------------------------------------------------------------
Section 17.00(a) requires reporting markets, FCMs, clearing
members, and foreign brokers to submit large trader position reports
for ``special accounts,'' \155\ which are accounts with a daily
position that exceeds the applicable reporting level established in
Sec. 15.03.\156\ Section 17.01(a) requires submission of Form 102,
which provides certain ownership and control information, for such
special accounts.\157\ Section 17.01(b) requires submission of Form 102
for volume threshold accounts, which are trading accounts that carry
reportable trading volume.\158\ Reportable trading volume levels are
enumerated in Sec. 15.04. Pursuant to Sec. 18.04, the Commission or
its designee may, in its discretion, request additional information
from traders of special accounts or volume threshold reportable
accounts by special call.\159\
---------------------------------------------------------------------------
\155\ 17 CFR 17.00(a).
\156\ See 17 CFR 15.00(f) (defining ``special account'' as ``any
commodity futures or option account in which there is a reportable
position''); 17 CFR 15.00(p)(1)(ii) (defining a ``reportable
position'' as ``any open contract position that at the close of the
market on any business day equals or exceeds the quantity specified
in Sec. 15.03 in . . . [l]ong or short put or call commodity
options that have identical expirations and exercise into the same
commodity, on any one reporting market''); 17 CFR 15.03 (enumerating
reporting levels).
\157\ 17 CFR 17.01(a).
\158\ 17 CFR 17.01(b); 17 CFR 15.00(x) (defining volume
threshold account).
\159\ 17 CFR 18.00.
---------------------------------------------------------------------------
The Proposal would amend the reportable positions and trading
volume applicable solely to Covered Event Contracts. It would establish
a Sec. 15.03 reporting level of 125,000 1 USD contracts (or the
equivalent notional value with a contract size other than 1 USD) and a
Sec. 15.04 reportable volume threshold level of $125,000 in
transactions during a single trading day on a single reporting market.
The Commission assesses the benefits and costs of proposed Sec. Sec.
16.03(c) and 16.03(e) by comparing these proposed levels with the
baseline of a currently applicable reporting level of 25 contracts
position \160\ and a reportable volume threshold level of 50
transactions during a single trading day on a single reporting
market.\161\
---------------------------------------------------------------------------
\160\ 17 CFR 15.03(b) (the ``other commodity'' reporting level
is 25 contracts).
\161\ 17 CFR 15.04. The Commission notes that, in practice,
market participants typically apply a reportable volume threshold
level of 250 contracts, consistent with the staff no-action position
taken by DMO in CFTC Letter No. 24-14 and preceding no-action
letters. See CFTC Letter No. 24-14, at 6 (Sept. 25, 2024), available
at https://www.cftc.gov/csl/24-14/download (``. . . DMO will not
recommend that the Commission commence an enforcement action, during
the extended period defined in this letter, against a Reporting
Party relying on this no-action position for failure to report a DCM
volume threshold account based on a reportable trading volume level
of 50 contracts, provided that such Reporting Party reports instead
based on a reportable trading volume level of 250 or more contracts
per day.'').
---------------------------------------------------------------------------
In establishing the new reporting threshold, the Commission
examined the number of event contracts with open interest or volume
large enough to potentially trigger a reportable position under both
the current reporting thresholds (25 event contracts for position and
50 event contracts for volume) and the proposed position and volume
thresholds of 125,000 event
[[Page 40120]]
contracts. In the analysis that follows, an ``event contract'' refers
to a specific individual contract, and unlike traditional futures--
where reportable positions are determined by aggregating traders'
positions on a DCM across all expiry months for a given underlying
asset and contract size--each event contract is considered on its own.
Exhibit 1--Number of Contract Markets Above Certain Volume and Open Interest Thresholds for DCM A
----------------------------------------------------------------------------------------------------------------
Number of covered event contracts
---------------------------------------------------------------------------
Date Above 125,000 Above 125,000 Above 25 (OI) or Positive volume
(OI) (vol) 50 (volume) or open interest
----------------------------------------------------------------------------------------------------------------
2/4/2026............................ 514 370 70,224 90,249
2/8/2026............................ 442 600 199,141 226,738
2/11/2026........................... 440 383 79,970 102,718
2/15/2026........................... 473 455 44,563 57,596
----------------------------------------------------------------------------------------------------------------
Exhibit 1 reflects open interest and transaction data reported by a
DCM (``DCM A'') listing event contracts. Exhibit 1 demonstrates that,
at one large DCM, the overwhelming majority of event contracts lack
sufficient open interest to contain any reportable positions under the
proposed Sec. 16.03(e) reporting threshold. In total, no more than
roughly 1,000 event contracts have either open interest or volume
exceeding the proposed reporting levels, and only a subset of those
markets would, in practice, have participants with positions or trading
activity above those thresholds. In contrast, under the current
effective 25-contract position reporting level, there would be tens of
thousands of contract markets with reportable positions. The proposed
$125,000 reporting level could result in a 97 to 99 percent reduction
in the number of potentially reportable special accounts, based on the
dates examined in Exhibit 1. Further discussion of the effect of the
increase in reporting thresholds follows below.
Exhibit 2--Retail Market Coverage in the CFTC Commitment of Traders Report
[February 10, 2026]
----------------------------------------------------------------------------------------------------------------
Reportable positions as
Number of percent of open interest
Futures contract reportable -------------------------------
traders Long Short
----------------------------------------------------------------------------------------------------------------
MICRO E-MINI DJIA............................................... 20 37.6 55.9
MICRO E-MINI S&P 500 INDEX...................................... 36 64.5 31.2
MICRO E-MINI NASDAQ-100 INDEX................................... 61 62.5 66.3
MICRO E-MINI RUSSELL 2000 INDEX................................. 29 72.5 10.8
MICRO BITCOIN................................................... 236 77.2 90.9
MICRO ETHER..................................................... 302 97.2 99.5
MICRO SOL....................................................... 26 78.4 87.3
MICRO GOLD...................................................... 38 43.0 60.3
MICRO COPPER.................................................... 20 29.7 87.3
----------------------------------------------------------------------------------------------------------------
Although each derivatives market is different and the Commission
receives varying information based on the size of the market, the
reporting levels, the number of traders, and trader behavior, a
comparison with other retail futures contract markets is instructive
for analysis of markets for event contracts that would be considered
Covered Event Contracts. Exhibit 2 shows several active event contracts
by a significant number of retail traders. Reportable positions in
these contracts cover between 10.8 and 99.5 percent of the short side,
and 29.7 to 97.2 percent of the long side.
Exhibit 3--Effect of Reporting Thresholds on DCMs A-D on February 8, 2026
----------------------------------------------------------------------------------------------------------------
Number of participants above threshold
Threshold -----------------------------------------------
Position Volume Either
----------------------------------------------------------------------------------------------------------------
25.............................................................. 1,143,270 857,002 1,184,165
50,000.......................................................... 1,103 739 1,362
125,000......................................................... 312 227 402
250,000......................................................... 152 117 197
----------------------------------------------------------------------------------------------------------------
The Commission currently receives transaction data on Covered Event
Contracts under Sec. 16.02, which it used to construct Exhibit 3.
Exhibit 3 presents the Commission's estimate of the number of unique
traders at DCM A whose positions or daily trading volume exceeded
various reporting thresholds on February 8, 2026. A trader is counted
once even if they exceed a threshold in multiple markets. February 8 is
a high-volume trading day, making it a useful reference point for
assessing the potential scope of reporting activity.
[[Page 40121]]
The estimates include all event contracts expected to be active on
February 8, 2026. The analysis is conducted at the event contract
level--the most granular level at which contracts are listed and traded
on DCM A. For event contracts that continue trading beyond that date,
positions are measured as of the end of the calendar day; for those
that expired earlier on February 8, positions are measured as of their
last trading time.
As shown in Exhibit 3, higher reporting thresholds substantially
reduce the number of traders who would trigger reporting. Increasing
the threshold from 50,000 to 250,000 event contracts lowers the number
of traders above the position- or volume-based threshold--from roughly
1,360 to about 200--for whom DCMs would be required to submit Form
102s.
Although the number of reportable traders decreases significantly
at higher thresholds, the Commission would still obtain substantial
information about large traders, comparable to what it receives in
other derivatives markets. For instance, on February 8, the 125,000
contract position threshold would cover approximately 14 percent of the
long side, and 72 percent of the short side of the top 50 Covered Event
Contract markets on the largest DCM, ranked by open interest. Lowering
the reporting threshold to 50,000 contracts would increase coverage to
22 and 81 percent, respectively, increasing the number of reportable
positions for a relatively small increase in coverage. While a low
threshold would increase the coverage to at least 99 percent of open
positions, as shown in Exhibit 3 above, this would substantially
increase the reporting burden on DCMs, FCMs, brokers, and traders
through increased numbers of forms 102 and 40.
a. Benefits
The Commission believes that, in general, the DCMs, FCMs, clearing
members, foreign brokers, and traders responsible for large trader
reporting under part 17 and part 18 would see a decreased burden
relative to baseline due to the significantly higher reporting level
and reportable volume threshold level the Proposal would establish,
which would result in a corresponding lower level of large traders.
Moreover, the reporting level and reportable volume threshold level the
Proposal would establish are designed to be sufficiently high to
exclude the vast majority of retail traders from large trader reporting
regime.\162\
---------------------------------------------------------------------------
\162\ See supra Exhibit 2.
---------------------------------------------------------------------------
Under the existing regulations, the threshold for determining when
a trader is considered large is either a position of 25 contracts \163\
or 50 daily trades.\164\ The Proposal would raise the reporting level
for Sec. 17.00(a) reporting to 125,000 contracts (or the $125,000
notional value equivalent for contracts with contract sizes other 1
USD). It would also raise the Sec. 17.01(b) reportable trading volume
for a given contract market to daily trading volume of 125,000
contracts. Accordingly, under the Proposal, far fewer traders would
qualify as large traders and therefore be subject to part 17 reporting.
Based on data analysis of Exhibit 3, applying the proposed Sec.
16.03(e) reporting levels would reduce the number of accounts with
reportable positions by more than 1 million. Applying the estimate of
0.33 burden hours per form, this equates to at least 330,000 hours in
cost savings.\165\ This reduced burden may encourage additional traders
to participate in event contract markets (or, put differently, would
not discourage such additional participants), and hence the change
could make some event contracts viable. Additionally, applying an
elevated reporting level would ensure that limited, if any, retail
traders are required to submit Form 40 in response to a special call
issued pursuant to Sec. 18.00.\166\
---------------------------------------------------------------------------
\163\ 17 CFR 15.03(b) (reporting level of 25 contracts
applicable to ``All Other Commodities'').
\164\ 17 CFR 15.04. The nominal value of contracts varies
widely. For instance, on CME, a micro bitcoin contract is one-tenth
the value of one bitcoin or $7,700 on May 18th, 2026. A WTI contract
is 1,000 barrels of oil, or $102,000.
\165\ See infra note 224, section IV. C.
\166\ 17 CFR 18.00.
---------------------------------------------------------------------------
DCMs, FCMs, clearing members, and foreign brokers incur costs
related to collecting information on large traders and transmitting
that information to the Commission. The Commission has previously
estimated the average burden hours per respondent for reporting large
trader position information pursuant to Sec. 17.00(a) as 52 hours per
respondent.\167\ The Commission has previously estimated the average
burden hours per respondent for submitting ownership and control
information required by Sec. 17.01(a) and trader information required
by Sec. 18.04 to be approximately 104 hours per reporting party.\168\
Although the Commission believes that much of this information
collection will be automated, raising the applicable reporting levels
will result in market participants submitting fewer large trader
reports, Forms 102, and Forms 40 to the Commission. Hence, the Proposal
would result in a reduced burden relative to baseline for DCMs, FCMs,
and foreign brokers. Additionally, the Proposal would require the
Commission to process fewer Form 102s than the baseline, which would
consequently decrease the amount of time spent by registrants and
traders waiting for clarification and error resolution.
---------------------------------------------------------------------------
\167\ See ICR Ref. No. 202402-3038-002 (concluded July 24,
2024).
\168\ See ICR Ref. No. 202308-3038-002 (concluded Dec. 21,
2023).
---------------------------------------------------------------------------
b. Costs
As a general matter, raising the threshold to eliminate the
reporting requirement for retail traders is unlikely to reduce the
Commission's ability to detect manipulation and similar behavior. The
Commission recognizes that while DCMs are required to collect
information on the employment and occupation of all traders under the
Proposed Rule, there is not an automatic mechanism similar to Forms
102A and 102B to transmit this information to the Commission.
Consequently, while the Commission will receive information on the
natural persons who own or control each of the trading accounts below
the revised reporting level, the information received will be less
complete than under the regulatory baseline. But, as detailed above,
the Commission preliminarily believes that it will be sufficient for
monitoring and surveillance purposes.
Proposed Sec. 17.00(j) and Sec. 17.02(f) would also set forth
which entities are responsible for submitting large trader position
reports pursuant to Sec. 17.00(a) and ownership and control reporting
pursuant to Sec. 17.01(f). Specifically, the Proposal would require
that DCMs must provide large trader reporting on behalf of non-
intermediated clearing members for contracts for which both
intermediated and non-intermediated participants may trade. This is a
new burden on DCMs relative to de facto baseline.\169\ However, the
Commission does not believe this new burden will impose significant
costs on DCMs, given that DCMs are independently required to maintain
position information on large traders for monitoring and surveillance
purposes.\170\
---------------------------------------------------------------------------
\169\ Pursuant to current regulations, DCMs must submit large
trader reporting on behalf of clearing members for exclusively self-
cleared contracts, defined as ``cleared contract[s] for which no
persons, other than a reporting market and its clearing
organization, are permitted to accept any money, securities, or
property (or extend credit in lieu thereof) to margin, guarantee, or
secure any trade.'' 17 CFR 15.00(h).
\170\ See, e.g., 17 CFR 38.254(b) (``A designated contract
market with participants trading through intermediaries must either
use a comprehensive large-trader reporting system (LTRS) or be able
to demonstrate that it can obtain position data from other sources
in order to conduct an effective surveillance program.'').
---------------------------------------------------------------------------
[[Page 40122]]
c. Request for Comment
The Commission requests comment on its consideration of the costs
and benefits of the Proposal, including regarding issues and questions
specifically identified below. Please provide data, statistics, or
other supporting information for positions asserted.
(1) Some event contracts markets, although listed as separate
contracts, may be closely related. For example, a contract that settles
based on whether the average gas price in the US will be above $3.70 in
a given month may in many cases resolve to the same outcome as a
contract that settles based on whether the average gas prices in the US
will be above $3.80 in the same month. How should the Commission
measure the size of an account's position for the determination of
whether a trader exceeds the applicable reporting level when the trader
has positions in closely related markets?
(2) The Commission's data analysis suggests that under the $125,000
contract reporting level, the percentage of open interest accounted for
by large traders is roughly consistent with the percentage in other
retailer-oriented regulated markets. Are there characteristics of event
contract markets (relative to the other markets) that suggest the
threshold should be set to capture a smaller or larger share of open
interest? That is, should the threshold be larger or smaller than
$125,000, or should it differ across different types of event contracts
depending on some observable characteristics? Please provide evidence
to support any alternative.
7. Trader Reports
Each reportable account may be subject to individual trader
reports. Proposed Sec. 16.03(d) would specifically require traders to
file reports pursuant to part 18 for Covered Event Contracts, upon
receiving a special call from the Commission.\171\ Regulation 18.04
requires, after a special call of the Commission, each trader holding
or controlling a reportable position to complete a Form 40. Form 40
provides the Commission with information about the ownership and
control structure of each account, as well as the business interests
reporting entity. In a similar manner, omnibus accounts containing
reportable positions may be subject to a special call for a Form
71.\172\
---------------------------------------------------------------------------
\171\ As noted in section II.D, part 18 was not specifically
included in the Staff Event Contract Reporting No-Action Letters,
but it was still required to be followed under the Staff Event
Contract Reporting No-Action Letters.
\172\ See generally 17 CFR 18.00; 17 CFR 17.01(c).
---------------------------------------------------------------------------
a. Benefits
Proposed Sec. 16.03(d) has two distinct benefits. It supports the
Commission's surveillance and enforcement divisions and contributes to
market integrity while also decreasing the potential burden on traders
by raising the threshold for a reportable account. Part 18 collections
support the Commission's market surveillance program, including
detecting patterns of trading that may indicate manipulation, attempted
manipulation, fraud, or other abusive practices prohibited under the
CEA. These collections allow the Commission to identify the persons who
ultimately control or benefit from large positions and improve the
Commission's understanding of market participants' ownership and
control structures. This furthers the public's confidence that the
markets operate without fraud and manipulation.
In addition, increasing the applicable reportable trading volume
level under proposed Sec. 15.04(b) from the regulatory baseline of 50
contracts would decrease the number of potential Form 40 requests
originated by the Commission. Similarly, increasing the applicable
reporting level from baseline would likely decrease the number of
potential Form 71 requests originated by the Commission, as special
calls to originators of omnibus accounts are issued to accounts for
which a Form 102 has been submitted, avoiding a costs on traders that
might otherwise be incurred.\173\ Because the Commission preliminarily
believes that Forms 40 and 71 requests would be limited to large
traders captured under the higher threshold, it does not foresee a
reduction in reporting burden for the raising of the reporting
threshold.
---------------------------------------------------------------------------
\173\ See 17 CFR 17.01(c).
---------------------------------------------------------------------------
b. Costs
Sections 18.04 and 18.05 require traders who hold or control
reportable positions and persons who carry omnibus accounts to furnish
to the Commission, upon special call, information relating to the
ownership, control, and composition of such accounts. Traders submit
this information using Form 40 (Statement of Reporting Trader). The
Commission may also issue a special call to owners of omnibus accounts
using Form 71. Form 71 enables the Commission to ``look through''
omnibus accounts to identify the beneficial owners or sub-accounts that
may hold or control reportable positions. However, the Commission is
not currently aware of any omnibus accounts that hold positions in
Covered Event Contract and therefore believes that there will be no
costs incurred absent changes to the market.
While the Commission retains the discretion to issue Form 40 and
Form 71 requests to traders, the Commission preliminarily believes that
Form 102 information will be sufficient for many large traders. Using
the number of reportable positions noted in Exhibit 3 above, we find
that 402 traders had reportable positions in February of 2026. While
the Commission retains the right to ask for these reports under current
regulation, the Commission acknowledges that traders have not been
requested for this information as of this Proposal. The Commission is
making explicit in proposed Sec. 16.03(d) that traders are subject to
part 18. However, traders of Covered Event Contracts are currently
subject to this requirement, and they would not incur new cost vis-a-
vis the regulatory baseline.
8. Alternatives
In this section, we present several alternatives considered and
discuss their benefits and costs relative to the Proposal. The
Commission recognizes that under the regulatory baseline, participants
are required to report under both the swaps regime (parts 43 and 45) as
well as under the regulations for futures and options (parts 16, 17,
and 18). In addition to the chosen Proposal, which requires reporting
under parts 16, 17 and 18, but not the Relevant Regulations,
alternatives discussed below includes (a) reporting under current
regulations absent no-action relief; (b) reporting under the options
regime with the default (25-contract position/50-contract volume)
threshold; (c) reporting to an SDR only (i.e., retaining the parts 43
and 45 requirement, but not the parts 16, 17 and 18); and, (d) a DCM
choosing to register as an SDR or registering an affiliated SDR.
Alternative (a) is the regulatory baseline, and comparing the costs
and benefits of the baseline compared to the Proposal is the basis of
the foregoing analysis. As noted above, under Option (b), holding
trading volume at current levels, a threshold of 25-contract position
or 50-contract daily trades, would result in over one million traders
being subject to part 17 reporting, based on Commission analysis of the
market in February 2026. The Commission believes this would entail
substantial costs, with little benefit in terms of
[[Page 40123]]
enhanced enforcement. It also may discourage trading in these markets.
Option (c) would allow DCMs to avoid the costs of providing trade
and position information under parts 16 and 17 but require them to
provide trade information to SDRs under parts 43 and 45. The Commission
preliminarily estimates that the annual costs to DCMs of providing
information under parts 16 and 17 would involve about 1,100 hours per
DCM. This work will primarily be conducted by surveillance analysts,
although other professionals will also be involved. The Commission
estimates the blended hourly total compensation for these individuals
to be roughly $235/hour. In addition, we estimate some additional
infrastructure will be required for storage, monitoring, etc., which
adds about $25,000/year to the operating costs. Hence, the total per
year would be approximately $300,000 per DCM. Against these savings,
the Commission needs to consider the costs of requiring DCMs to provide
information to SDRs under parts 43 and 45. A major component of these
costs are the SDR reporting fees. While there is considerable
uncertainty regarding how these fees will evolve over time, on the
basis of current fees, these fees may amount to $5 million per DCM
annually. Hence, the Commission's preliminary conclusion is that this
alternative would be substantially more expensive to DCMs than the
Proposal and provide little additional useful information to the
Commission. This conclusion regarding costs is supported by the
observation that DCMs requested relief from the reporting requirements
of parts 43 and 45 in favor of requirements that closely resemble those
in the proposal.
Under option (d), The Commission recognizes that a DCM listing and
trading Covered Event Contracts might choose to register itself or use
an affiliated entity as an SDR and report Covered Event Contract DCM
transactions in its capacity as an SDR or use the affiliated SDR,
rather than submit transactions to an unaffiliated SDR. An entity might
optimally choose this strategy if the setup and ongoing costs were low
enough to justify the choice, or if the firm strategically chose to
enter this new line of business. In either case, the SDR would have to
comply with CFTC regulations regarding the operation of an SDR and
offer reporting and related regulatory services to other market
participants.
SDRs are required to register with the CFTC and comply with part 49
rules promulgated by the CFTC, including real-time reporting of swap
transaction and pricing data. In order to maintain its registration, an
SDR must comply with the three core principles established in section
21(f) of the CEA, and part 49 of the CFTC regulations. These core
principles cover areas such as antitrust considerations, governance
arrangements, and conflicts of interest. Additionally, an SDR must
disclose financial resources, meet other disclosure requirements, and
have non-discriminatory access and fees.
In 2011, the Commission estimated the initial start-up cost for the
estimated 15 SDR registrants to be between $105.5 and $135.5 million,
or between $7.03 and $9.03 million per SDR.\174\ Adjusted to 2026
dollars,\175\ the total costs come to between $10.34 (1.47 x $7.03) and
$13.28 (1.47 x $9.03) million per SDR. The Commission has previously
estimated annual ongoing costs for SDRs to be between $47.07 and $77.07
million for all SDRs, or between $3.14 and $5.14 million per SDR. This
includes technological costs. Adjusted to 2026 dollars, these ongoing
technological costs come to between $4.61 (1.47 x $3.14) and $7.55
(1.47 x $5.14) million per SDR annually. The Commission preliminarily
finds these figures to be plausible estimates for the start-up and
ongoing costs of launching an SDR.
---------------------------------------------------------------------------
\174\ Final rule, Swap Data Repositories: Registration
Standards, Duties and Core Principles, 76 FR 54538, 54573 (Sept. 1,
2011).
\175\ Using a CPI adjustment of 1.47, based on BLS inflation
estimates of a 47% increase in the CPI since 2011, using the BLS
Inflation Calculator.
---------------------------------------------------------------------------
Separately, the Commission has estimated burden hours for SDRs in
the PRA section for multiple part 49 rulemakings.\176\ SDR annual hour
burden estimates have been established for recordkeeping requirements
(Sec. 49.12), compliance and rulebook maintenance (Sec. 49.26 and
Sec. 49.29), chief compliance officer annual report (Sec. 49.22),
system safeguards (cybersecurity) (Sec. 49.24), real-time public
reporting (Sec. 49.15), non-public reporting/regulatory access (Sec.
49.17), SDR-participant connectivity and testing, and disclosure and
confidentiality requirements (Sec. 49.16 and Sec. 49.21). Together,
the total monetized burden hours for an SDR to remain in compliance
with CFTC part 49 rules are between $472,350 and $766,100 annually.
---------------------------------------------------------------------------
\176\ These include PRA analysis used in 76 FR 54538, 85 FR
75503, 85 FR 74438, and 85 FR 75601.
---------------------------------------------------------------------------
As noted above, choosing to register as an SDR would require
significant capital investment to start a new line of business, and
would incur ongoing annual expenses to maintain. As detailed above,
these costs are estimated at between $10.34 and $13.28 million to
become an SDR and between $4.61 and $7.55 million annually for
technological costs and an additional $472,350 to $766,100 annually for
compliance costs. As such (and based DCM requests for no-action
letters), the Commission does not believe that most DCMs would choose
this option.
9. Section 15(a) Considerations
CEA Sec. 15(a) requires the Commission to consider the costs and
benefits of the changes by the Proposal with respect to the following
factors: (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.\177\ A discussion of the
Proposal in light of the CEA section 15(a) factors is set out below.
---------------------------------------------------------------------------
\177\ 7 U.S.C. 19(a).
---------------------------------------------------------------------------
a. Protection of Market Participants and the Public
Relative to the status quo, the Proposal would amend part 16 to set
forth an alternative reporting regime for Covered Event Contracts by
Registered Entities similar to the current regime for futures and
options reporting, rather than both this reporting regime and the swaps
reporting requirements. The futures and options reporting requirements
capture data elements that are more tailored to the event contracts
price and payout structure than are the swap reporting requirements.
The futures reporting requirement of part 16, for example, allows
reporting to the Commission, by product type and by expiry of the
contract that captures the information inherent in Covered Event
Contracts,\178\ and daily trade and supporting data.\179\ This data
would enable the Commission to monitor the event contracts to ensure
their financial integrity and that market participants are protected
from fraudulent or other abusive sales practices.
---------------------------------------------------------------------------
\178\ See 17 CFR 16.01.
\179\ See 17 CFR 16.02, (requiring trade and supporting data
reports to the Commission on a daily basis, including transaction-
level trade data and related order information, time and sales data,
reference files and other information as the Commission or its
designee may require).
---------------------------------------------------------------------------
Proposed Sec. 16.03(g) would ensure the Commission receives
identifying trader information even when traded through brokers or
clearing members and allow the Commission to conduct an efficient
review of the Covered Event Contracts markets, if necessary. Proposed
Sec. 16.03(f) would ensure that transaction data for event contracts
is publicly disseminated in real time. That latter requirement would
harmonize the
[[Page 40124]]
reporting of Covered Event Contracts with the current industry standard
and is otherwise required by the current regulations. It would create
parity across DCMs listing Covered Event Contracts for trade and ensure
the public has timely and equal access to market data on a consistent
basis to allow market participants and the public to analyze the
Covered Event Contract transaction and pricing data.
Furthermore, the Commission expects that the revised reporting
level and reportable volume threshold level of proposed Sec. 15.03 and
Sec. 15.04 and amendments to part 17 reporting will result in large
trader reporting that would improve the Commission's ability to collect
and analyze data on large traders, including the ownership and control
structure of large accounts, and to identify individuals or entities
that trade through omnibus accounts.
Covered Event Contract markets could potentially be subject to
manipulation, fraud, and insider trading.\180\ To conduct robust
surveillance and enforcement, the Commission needs consistent
information on traders, especially large traders across markets. The
Proposal would allow DCMs and the Commission to continue their
surveillance and enforcement activities, as the threshold is calibrated
to ensure the collection of relevant data for these purposes.
---------------------------------------------------------------------------
\180\ See, e.g., CFTC Press Release, ``CFTC Enforcement Division
Issues Prediction Markets Advisory,'' Release No. 9185-26 (Feb. 25,
2026), available at https://www.cftc.gov/PressRoom/PressReleases/
9185-26.
---------------------------------------------------------------------------
The Proposal would also improve the Commission's ability to analyze
and/or respond to market disruptions. Such disruptions could result in
costs to the investing and general public, in the form of reduced price
discovery and ability to hedge risk.
b. Efficiency, Competitiveness, and Financial Integrity of Futures
Markets
The Commission believes the Proposal would improve the accuracy and
completeness of event contract information available to the Commission
by standardizing reporting requirements and providing Commission staff
with necessary information based on the futures and options regulatory
regime, and requiring public dissemination of the information, thereby
enabling price discovery and competition. Further, the Proposal would
require DCMs to obtain and to report trader-identifying information for
transactions in a standardized manner, including intermediated trades.
The Proposal would also establish rules for reporting ownership and
control information for special accounts and reportable volume
threshold accounts necessary for ensuring the financial integrity of
these markets.
Codification of the Staff Event Contract Reporting No-Action
Letters would reduce both Commission time spent on individual requests
and also increase competition among Registered Entities and potential
new entrants and incumbent entrants seeking to list new contracts.
Furthermore, these changes may encourage small traders to use these
markets, as they would not be subject to reporting requirements under
the current part 17 thresholds. The Proposal may also improve the
financial stability of DCMs offering Covered Event Contracts by
reducing their reporting costs.
c. Price Discovery
The Commission believes that to the extent the Proposal would
result in more event contracts becoming economically viable, this may
increase the number and frequency of trades, resulting in additional
price discovery for these markets.
Additionally, the Commission expects that proposed Sec. 16.03(f),
which would require real-time dissemination of transaction information
for Covered Event Contracts would also support public price
transparency, as the market is able to absorb real time data for more
accurate pricing.
d. Sound Risk Management Practices
The Proposal would allow the Commission to more effectively
identify disruptive or manipulative trading activity through the
collection of more detailed information on large traders, as necessary.
These improvements in the reporting regime would allow the Commission
to evaluate risk throughout existing Covered Event Contract markets as
well as related markets because this detailed information would allow
the Commission to link trading across these markets. The Commission
does not believe that the costs arising from the Proposal would
threaten the ability of market participants to manage risks.
Conversely, to the extent that small traders incur a lower cost to
access event contract markets, additional traders would be able to
hedge their existing risk using these markets.
e. Other Public Interest Considerations
The Commission believes that the increased reliability and detail
resulting from improvements to data reporting would further other
public interest considerations, including transparency to the public
concerning event contract markets and detection of fraud or
manipulation.
The reduction in the costs of trading event contracts that would
result from the Proposal would lower the costs to traders, both through
reductions in the amount of time required to fill out Form 40s and
through lower trading fees, due to lessened reporting compliance costs
to DCMs under the futures and options reporting regime. The Commission
also expects that the lower cost of trading would encourage the
development of these markets.
10. General Request for Comment
The Commission generally requests comments on all aspects of its
consideration of costs and benefits, including the baseline; the
identification and assessment of any costs and benefits not discussed
herein; data and any other information to assist or otherwise inform
the Commission's ability to quantify or qualitatively describe the
costs and benefits of the proposed amendments; and substantiating data,
statistics, and any other information to support positions posited by
commenters with respect to the Commission's discussion. The Commission
welcomes comment on such costs and benefits, particularly from
Registered Entities that can provide quantitative cost and benefit data
based on their respective experiences. The Commission also welcomes
comments on alternatives to the proposed amendments that may be
preferable on cost-benefit grounds, and why.
B. Regulatory Flexibility Act
The Regulatory Flexibility Act \181\ (``RFA'') requires federal
agencies, in proposing rules, to consider the impact of those rules on
small entities, and to provide a regulatory flexibility analysis with
respect to such impact.\182\ The regulations proposed herein would
directly affect DCMs, DCOs, FCMs, large traders, and other similar
entities. The Commission has previously determined that that DCMs,
large traders, and FCMs are not considered ``small entities'' for
purposes of the RFA.\183\ Similarly, clearing members, foreign brokers,
and traders would be subject to the Proposal only if clearing,
carrying, or holding large positions. For these reasons, under
[[Page 40125]]
section 3(a) of the RFA,\184\ the Chairman, on behalf of the
Commission, certifies that this Proposal will not have a significant
economic impact on a substantial number of small entities. The
Commission nonetheless invites comment on this determination.
---------------------------------------------------------------------------
\181\ 5 U.S.C. 601 et seq.
\182\ See 5 U.S.C. 603. The RFA applies to rules subject to
notice and comment rulemakings issued pursuant to section 553(b) of
the Administrative Procedure Act, 5 U.S.C. 553(b), or any other law.
Id.
\183\ See Policy Statement and Final Establishment of
Definitions, 47 FR 18618 (Apr. 30, 1982).
\184\ 5 U.S.C. 605(b).
---------------------------------------------------------------------------
C. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (``PRA'') \185\ imposes certain
requirements on federal agencies, including the Commission, in
connection with conducting or sponsoring any ``collection of
information,'' 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'').\186\ 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, and to ensure the
greatest possible benefit and utility of information created,
collected, maintained, used, shared, and disseminated by or for the
Federal Government.\187\ The PRA applies to all information, regardless
of form or format, whenever the Federal 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.\188\
---------------------------------------------------------------------------
\185\ 44 U.S.C. 3501 et seq.
\186\ See 44 U.S.C. 3507(a)(3); 5 CFR 1320.5(a)(3).
\187\ See 44 U.S.C. 3501.
\188\ See 44 U.S.C. 3502(3).
---------------------------------------------------------------------------
The Proposal affects collections of information for which the
Commission has previously received control numbers from the Office of
Management and Budget (``OMB''). The titles for these existing
collections of information are: OMB control number 3038-0009, Large
Trader Reports (``OMB Collection 3038-0009''),\189\ OMB control number
3038-0061, Daily Trade and Supporting Data Reports (``OMB Collection
3038-0061''), OMB control number 3038-0012, Futures Volume, Open
Interest, Price, Deliveries and Purchases/Sales of Futures for
Commodities or for Derivatives Positions (``OMB Collection 3038-112''),
and OMB control number 3038-0103, Ownership and Control Reports, Forms
102/102S, 40/40S, and 71 (Trader and Account Identification Reports)
(``OMB Collection 3038-0103''). The Commission therefore is submitting
this proposal to the OMB for its review in accordance with the
PRA.\190\
---------------------------------------------------------------------------
\189\ For the previously approved estimates, see ICR Reference
No: 202303-3038-002, available at https://www.reginfo.gov/public/do/
PRAViewICR?ref_nbr=202303-3038-002.
\190\ See 44 U.S.C. 3507(d) and 5 CFR 1320.11.
---------------------------------------------------------------------------
If the proposed regulations are adopted, responses to this
collection of information would be mandatory. The Commission will
protect any proprietary information according to the Freedom of
Information Act and part 145 of the Commission's regulations.\191\ In
addition, section 8(a)(1) of the CEA strictly prohibits the Commission,
unless specifically authorized by the CEA, from making public any
``data and information that would separately disclose the business
transactions or market positions of any person and trade secrets or
names of customers.'' \192\ Finally, the Commission is also required to
protect certain information contained in a government system of records
according to the Privacy Act of 1974.\193\
---------------------------------------------------------------------------
\191\ See 5 U.S.C. 552; see also 17 CFR part 145 (Commission
Records and Information).
\192\ 7 U.S.C. 12(a)(1).
\193\ 5 U.S.C. 552a.
---------------------------------------------------------------------------
1. Information Collection Requirements
The Proposal would amend existing regulations and create new
regulations concerning reporting certain event contracts. Among other
amendments, the Proposal would: (1) codify a requirement that DCMs
listing Covered Event Contracts report pursuant to Sec. 16.02; (2)
codify a requirement that DCMs listing Covered Event Contracts report
and publish market data pursuant to Sec. 16.01; (3) codify large
trader reporting requirements specified in Sec. Sec. 15.03, 16.00,
17.00, and 18.03; (4) codify ownership and control reporting
requirements in Sec. 17.02; and (5) codify real-time public
dissemination requirements.
For purposes of the PRA, the term ``burden'' means the ``time,
effort, or financial resources expended by persons to generate,
maintain, or provide information to or for a Federal Agency.'' \194\
This total includes the anticipated burden associated with the
reporting and recordkeeping obligations contained in the Proposal.
---------------------------------------------------------------------------
\194\ 44 U.S.C. 3502(2).
---------------------------------------------------------------------------
As of February 8, 2026, the Commission estimates that there are 470
covered entities that would become subject to the Proposal (12
DCMs,\195\ 8 FCMs, and approximately 450 large traders). The Commission
notes that these DCMs, FCMs, and traders represent a subset of the
DCMs, FCMs, and traders subject to the regulations addressed in OMB
Collections 3038-0009, 3038-0012, 3038-0061, and 3038-0103. The
estimated burden associated with the proposed information collections
is calculated as follows:
---------------------------------------------------------------------------
\195\ As of May 1, 2026, the Divisions have issued 16 Staff
Event Contract Reporting No-Action Letters. See supra note 29.
---------------------------------------------------------------------------
OMB Collection 3038-0009, Large Trader Reports (Sec. Sec. 16.00,
17.00, Part 21)
OMB Collection 3038-0009 reflects burdens resulting from clearing
member reporting under Sec. 16.00,\196\ large trader position
reporting for special accounts required under Sec. 17.00,\197\ and the
burdens associated with the special call authority under part 21.\198\
Section 16.00 requires DCMs to submit a report for each business day
showing position information by account for each clearing member \199\
With respect to Sec. 16.00, DCMs are generally required to submit
daily clearing member reports concerning clearing members' open
positions and contracts bought and sold.\200\ The Proposal would not
require any reporting market that is not currently required to submit
such reports to begin doing so. Accordingly, the Commission is
retaining its existing burden associates associated with Sec. 16.00 of
the Commission's rules.\201\
---------------------------------------------------------------------------
\196\ 17 CFR 16.00.
\197\ 17 CFR 17.00.
\198\ 17 CFR part 21.
\199\ 17 CFR 16.00.
\200\ 17 CFR 16.00.
\201\ The Commission has estimated that the burden associated
with reporting under this section totaled 1,332 burden hours and
$123,876 in associated labor costs. See ICR Ref. No. 202402-3038-002
(concluded July 24, 2024).
---------------------------------------------------------------------------
Section 17.00 requires that FCMs, clearing members, foreign
brokers, and, in certain circumstances, DCMs submit a report for each
business day showing position information for each special
account.\202\ Generally, the Proposal would not require any firm that
is not currently required to submit such reports to begin doing so.
Additionally, the Proposal would not affect the content of such reports
or the form and manner in which such reports are submitted. However,
the Commission is revising its PRA estimates to account for some DCMs
submitting additional Sec. 17.00 reports for non-intermediated
accounts. The Proposal would provide that such DCMs are required to
submit Sec. 17.00 large trader position reporting for positions of
clearing members for ``exclusively self-cleared contracts'' and would
add requirements that, in markets featuring a mix of
[[Page 40126]]
intermediated and non-intermediated trading, DCMs must submit, for
contracts that trade as fully collateralized positions, special
accounts carried by clearing members trading in their own name and not
on behalf of any customer.
---------------------------------------------------------------------------
\202\ 17 CFR 17.00.
---------------------------------------------------------------------------
Accordingly, the Commission proposes to update its burden estimates
for Sec. 17.00. These updated burden estimates are based on
anticipated reporting from an estimated 322 respondents (an increase
from the Commission's previous estimate of 310 respondents). This
reflects the Commission's expectation that each of the twelve DCMs that
currently offer contracts that may be considered Covered Event
Contracts may be required to submit Sec. 17.00 reports from time to
time.
Accordingly, the Commission estimates the updated annual burden
associated with the proposed regulation, if adopted, as follows: \203\
---------------------------------------------------------------------------
\203\ Previously, the Commission estimated that the burden
associated with reporting under this section totaled 16,120 burden
hours and $1,499,160 in associated labor costs. See ICR Ref. No.
202402-3038-002 (concluded July 24, 2024). Accordingly, the revised
estimates reflect an estimated increase in burden of 624 burden
hours and $141,752 in associated labor costs. The Commission is
adopting these updated estimates to ensure its PRA estimates reflect
the potential increase in reporting volume that is likely to occur
under the revised regulatory structure proposed here as DCMs begin
to undertake reporting for the specified event contracts at volume.
As the Commission notes in its analysis of cost-benefit
considerations, however, the Commission's proposal has increased
reporting thresholds in a manner that will ultimately offset the
potential burden associated with reporting for specified event
contacts. As noted in the analysis of cost-benefit considerations,
based on an analysis of transaction data for contracts that would be
considered Covered Event Contracts, the Commission estimates the
existing 25-contract reporting level in Sec. 15.03 would result in
more than one million trading accounts meeting the definition of
``special account.'' The Commission estimates that raising the
applicable reporting level for Covered Event Contracts to 125,000
contracts would reduce the number of special accounts for Covered
Event Contracts to between 300 and 400. This estimated reduction in
special accounts would result in an estimated 250,000 burden hours
in cost savings (1 million x 0.25 burden hours per Sec. 17.00(a)
large trader position report = 250,000 burden hours). Based on
average wage rate of $98 per hour, the Commission estimates these
cost savings could amount to approximately $2,450,000 over time
(250,000 estimated burden hours x $98 per hour = $2,450,000).
---------------------------------------------------------------------------
Estimated number of respondents: 322.
Estimated frequency/timing of responses: Daily.
Estimated number of annual responses per respondent: 208.
Estimated number of annual responses for all respondents: 66,976.
Estimated annual burden hours per response: 0.25.
Estimated total annual burden hours per respondent: 52.
Estimated total annual burden hours for all respondents: 16,744.
Estimated total annual labor cost: $1,640,912.\204\
---------------------------------------------------------------------------
\204\ The annualized costs per affected registrant and in the
aggregate were determined using an average salary of $98 per hour.
Commission staff arrived at this hourly rate using figures from a
weighted average of salaries and bonuses across different
professions contained in the most recent BLS Occupation Employment
and Wages Report (May 2024). See U.S. Bureau of Labor Statistics,
Occupational Employment and Wage Statistics (May 2024), https://
www.bls.gov/oes/tables.htm. The Commission estimated wage rate is a
weighted national average of mean hourly wages for the following
occupations: (1) ``General and Operations Managers'' in the
``Securities, Commodity Contracts, and Other Financial Investments
and Related Activities Industry,'' which is $114.88 (33% weight) (2)
``Lawyers'' in the same industry, which is $128.34 (33% weight), and
(3) ``Compliance Officers'' in the same industry, which is $49.34
(33% weight). See id. Commission staff chose this methodology to
account for the variance in skill sets that may be used to
accomplish the collection of information. The estimated total annual
labor cost of $1,712,256 is calculated as 17.472 total annual burden
hours x estimated average burden hour cost of $98.
---------------------------------------------------------------------------
The Commission does not anticipate that the Proposal would result
in additional capital costs or operating and maintenance costs
associated with this collection. DCMs are independently required to
maintain position information on large traders for monitoring and
surveillance purposes.\205\ Also, reporting parties of large trader
position information are reporting markets or well-capitalized
intermediaries, and to the extent reporting parties of large trader
position information for Covered Event Contracts have not previously
reported such information, such firms generally already have systems in
place for reporting such information for accounts trading futures.
---------------------------------------------------------------------------
\205\ See, e.g., 17 CFR 38.254(b) (``A designated contract
market with participants trading through intermediaries must either
use a comprehensive large-trader reporting system (LTRS) or be able
to demonstrate that it can obtain position data from other sources
in order to conduct an effective surveillance program.'').
---------------------------------------------------------------------------
OMB Collection 3038-0012, Futures Volume, Open Interest, Price,
Deliveries and Purchases/Sales of Futures for Commodities or for
Derivatives Positions (Sec. 16.01)
OMB Collection 3038-0012 reflects burdens resulting from Sec.
16.01's requirement that DCMs submit a daily market data report
reflecting trading volume and open interest.\206\
---------------------------------------------------------------------------
\206\ 17 CFR 16.01.
---------------------------------------------------------------------------
Previously, the Commission estimated a total annual time-burden for
reporting markets of 9,500 hours for compliance with Sec. 16.01. The
estimate was based on an estimate that 38 reporting markets would
provide an average of 250 market data reports to the Commission per
year, and would incur a burden of approximately two hours to compile
and submit each report. All DCMs are required to submit market data
reports pursuant to Sec. 16.01 and the Proposal would not require any
reporting market that is not currently submitting such reports to begin
doing so. Accordingly, the Commission is retaining its existing burden
estimates for OMB Collection 3038-0012.\207\
---------------------------------------------------------------------------
\207\ The Commission has estimated that the burden associated
with reporting under this section totaled 9,500 burden hours and
$524,210 in associated labor costs. See ICR Ref. No. 202506-3038-001
(concluded Sept. 5, 2025).
---------------------------------------------------------------------------
The Commission anticipates, however, that the requirement in
proposed Sec. 16.03(b) that DCMs include certain settlement
information in daily market data reports may require minor
modifications to the systems that DCMs use to submit such reports. The
Commission estimates DCMs would incur a one-time burden of $11,750 in
capital/start-up costs to update electronic systems to transmit the
settlement information specified in proposed Sec. 16.03(b).\208\ This
yields a total of $141,000 in capital start-up costs for the 12 DCMs
that list event contracts to update their systems to ensure accurate
reporting of certain settlement information (12 DCMs x $11,750).
---------------------------------------------------------------------------
\208\ The Commission estimates these capital costs by estimating
that each DCM will contract for system upgrades that will require
approximately 50 hours at an hourly rate of $235 per hour, yielding
a total cost of $11,750. The wage estimate of $235 per hour is based
on the occupational categories that are most likely to be involved
in the implementation of this Proposed Rulemaking. The Commission is
using a composite wage, based on the following BLS categories:
Software and Web Developers, Programmers, and Testers (50%),
Database and Network Administrators and Architects (25%), and
Lawyers (25%), with wage estimates taken from the Bureau of Labor
Statistics' Occupational Employment and Wage Statistics. See U.S.
Bureau of Labor Statistics, Occupational Employment and Wage
Statistics (May 2024), available at https://www.bls.gov/oes/
tables.htm. The Commission has adjusted that composite rate for
inflation to May 2026 using the BLS CPI inflation calculator. See
U.S. Bureau of Labor Statistics, CPI Inflation Calculator, available
at https://www.bls.gov/data/inflation_calculator.htm). The
Commission has further adjusted the composite wage with a multiple
of 2.5 to account for benefits and overhead costs.
---------------------------------------------------------------------------
The Commission also estimates that these DCMs will incur ongoing
annual operational and maintenance costs to maintain required systems.
The Commission estimates that these capital costs will total $5,640
\209\ annually for a total cost to all DCMs of $67,680 (12 DCMs x
$5,640). Together these capital
[[Page 40127]]
costs total $208,680 in capital startup and ongoing operational and
maintenance costs for 38 DCMs. The Commission does not anticipate that
the Proposal would result in other additional capital costs or
operating and maintenance costs associated with this collection. DCMs
are already required to submit reports required by Sec. 16.01 and will
continue to do so even absent the amendments proposed as part of the
Proposal.
---------------------------------------------------------------------------
\209\ The Commission estimates that covered DCMs will be
required to contract for an estimated 24 hours of ongoing
operational and maintenance systems support at a cost of $235 per
hour, yielding a total annual cost of $5,640 per DCM (24 hours x
$235 = $5,640).
---------------------------------------------------------------------------
OMB Collection 3038-0061, Daily Trade and Supporting Data Reports
(Sec. 16.02)
OMB Collection 3038-0061 reflects burdens resulting from daily
transaction data reporting. Section 16.02 requires that reporting
markets submit daily trade and supporting data reports to the
Commission.\210\ Previously, the Commission estimated a total annual
time-burden for reporting markets of 10,000 hours for compliance with
Sec. 16.02.\211\ The estimate was based on an estimate that 20
reporting markets would provide an average of 250 daily trade and
supporting data reports to the Commission per year, and would incur a
burden of approximately two hours to compile and submit each report.
The Commission understands that all DCMs currently submit trade and
supporting data reports pursuant to Sec. 16.02. The Proposal would not
require any reporting market that is not currently submitting such
reports to begin doing so. The Commission also does not anticipate that
the Proposal would alter the content of required reports or the form
and manner for submitting Sec. 16.02 trade and supporting data
reports.
---------------------------------------------------------------------------
\210\ 17 CFR 16.02.
\211\ See ICR Ref. No. 202504-3038-001 (concluded Sept. 10,
2025).
---------------------------------------------------------------------------
Proposed Sec. 16.03(g) would formally require DCMs to obtain
trader-identifying information for accounts trading on the DCM. Because
DCMs generally currently obtain such information for their own
surveillance purposes, the Commission does not expect proposed Sec.
16.03(g) to impose new information collection burdens. Accordingly, the
Commission is retaining its existing burden estimates associated with
OMB Collection 3038-0061.\212\
---------------------------------------------------------------------------
\212\ The Commission has estimated that the burden associated
with reporting under this section totaled 10,000 burden hours and
$1,026,200 in associated labor costs. See ICR Ref. No. 202504-3038-
001 (concluded Sept. 10, 2025).
---------------------------------------------------------------------------
The Commission anticipates that the Proposal would not result in
additional capital costs or operating and maintenance costs associated
with this collection. DCMs must submit reports required by Sec. 16.02
and will continue to do so even absent the proposed amendments.
OMB Collection 3038-0103, Ownership and Control Reports, Forms 102/
102S, 40/40S, and 71 (Trader and Account Identification Reports) (Sec.
17.01, Sec. 18.04(a), Sec. 18.05)
OMB Collection 3038-0103 reflects information collection burdens
associated with the filing of ownership and control reports. Section
17.01(a) requires FCMs, clearing members, foreign brokers, and certain
reporting markets to submit Form 102As concerning special accounts for
futures and options.\213\ Section 17.01(b)'s requires clearing members
to submit Form 102Bs concerning volume threshold accounts.\214\ Section
17.01(c) requires FCMs, clearing members, and foreign brokers to submit
Form 71 for certain omnibus accounts.\215\ Section 18.04(a) requires
certain traders to submit Form 40 for special accounts.\216\ Section
18.04(b) requires certain traders to submit Form 40 for volume
threshold accounts.\217\ Section 18.05 contains books and records
requirements for traders.\218\ The proposed amendments provide for
event contracts that may be Covered Event Contracts of proposed Sec.
16.03(a) to be largely treated as futures for reporting purposes.
Accordingly, the Proposal does not impact burdens associated with the
Form 102S or Part 20 requirements addressed in OMB Control Number 3038-
0103, as such requirements concern swaps.
---------------------------------------------------------------------------
\213\ 17 CFR 17.01(a).
\214\ 17 CFR 17.01(b).
\215\ 17 CFR 17.01(c).
\216\ 17 CFR 18.04(a).
\217\ 17 CFR 18.04(b).
\218\ 17 CFR 18.05.
---------------------------------------------------------------------------
As described below, the Commission provides estimates based on an
anticipated increase in trading of Covered Event Contracts that will
result in the submission of additional forms. These estimates reflect
the substantial growth in the market for event contracts from the last
time the collection was submitted for approval by OIRA. These factors
would yield anticipated increases in the volume of reporting based
largely on the estimated size of the market subject to the proposed
reporting regime, but as described further in the Commission's analysis
of cost-benefit considerations and summarized below, the Commission is
proposing steps to limit the burden associated with filing requirements
under the proposed regime.
Whether an account or trader is subject to reporting requirements
under part 17 and part 18 depends on whether a given account is a
``special account''--namely, a ``commodity futures or option account in
which there is a reportable position'' \219\--or a ``volume threshold
account''--namely, a ``trading account that carries reportable trading
volume.'' \220\ For Covered Event Contracts, the Proposal would
increase the reporting level that determines whether an account is a
``special account'' from 25 contracts to 125,000 contracts, and would
increase the reportable volume threshold that determines whether an
account is a ``volume threshold account'' from a trading volume of 50
or more contracts to a trading volume of 125,000 or more contracts. The
Commission expects increasing these thresholds for Covered Event
Contracts would result in the filing of substantially fewer Form 102As,
Form 102Bs, Form 71s, and Form 40s than the Commission would otherwise
receive. While the Commission is updating below its PRA burden estimate
for the collection to adjust the number of respondents subject to this
collection to account for the increase in the anticipated number of
Covered Event Contract the Commission expects to receive, the proposed
increase in reportable volume thresholds is designed to reduce the
reporting burden for covered entities.
---------------------------------------------------------------------------
\219\ 17 CFR 15.00(r).
\220\ 17 CFR 15.00(x).
---------------------------------------------------------------------------
Form 102A: The Commission has previously estimated that it receives
Form 102As, which identify special accounts, from approximately 312
reporting parties per year, and estimates each of those reporting
parties will spend 106 annual burden hours on average on that
reporting.\221\ Based on an analysis of transaction data, the
Commission anticipates the Proposal would result in DCMs, FCMs,
clearing members, and foreign brokers submitting Form 102As for
approximately 800 additional special accounts on an average business
day.\222\ Accordingly, the Commission anticipates that the estimated
total of annual responses will increase by 200,000 (800 responses x 250
days), resulting in a revised estimate of 303,430 (the previous
estimate of 103,430 \223\ + 200,000 estimated additional responses)
total annual responses.
---------------------------------------------------------------------------
\221\ See ICR Ref. No. 202308-3038-002 (concluded Dec. 21,
2023).
\222\ See supra Exhibit 3.
\223\ See ICR Ref. No. 202308-3038-002 (concluded Dec. 21,
2023).
---------------------------------------------------------------------------
Accordingly, the Commission estimates the updated annual burden
[[Page 40128]]
associated with the proposed regulation, if adopted, as follows: \224\
---------------------------------------------------------------------------
\224\ Previously, the Commission estimated that the burden
associated with reporting under this section totaled 33,072 burden
hours and $3,670,992 in associated labor costs. See ICR Ref. No.
202308-3038-002 (concluded Dec. 21, 2023). Accordingly, the revised
estimates reflect an estimated increase in burden of 64,026 burden
hours and $8,381,808 in associated labor costs. As described in the
analysis of cost-benefit considerations, absent the Commission's
proposed change in reporting thresholds, the Commission estimates
the existing 25-contract reporting level in Sec. 15.03 would result
in more than one million trading accounts meeting the definition of
``special account.'' Section 17.01(a) requires FCMs, clearing
members, foreign brokers, and certain DCMs to submit Form 102A for
each special account. The Commission estimates that raising the
applicable reporting level for Covered Event Contracts to 125,000
contracts would reduce the number of special accounts for Covered
Event Contracts to between 300 and 400. This estimated reduction in
special accounts would result in an estimated 330,000 burden hours
in cost savings (1 million x 0.33 burden hours per Form 102A =
330,000 burden hours). Based on average wage rate of $124 per hour,
the Commission estimates these cost savings could amount to
approximately $40,920,000 (330,000 estimated burden hours x $124 per
hour = $40,920,000).
---------------------------------------------------------------------------
Estimated number of respondents: 324.
Estimated frequency/timing of responses: On occasion.
Estimated number of annual responses per respondent: 937.
Estimated number of annual responses for all respondents: 303,430.
Estimated annual burden hours per response: 0.32.
Estimated total annual burden hours per respondent: 300.
Estimated total annual burden hours for all respondents: 97,200.
Estimated total annual labor cost: $12,052,800.\225\
---------------------------------------------------------------------------
\225\ The annualized costs per affected registrant and in the
aggregate were determined using an average salary of $124 per hour.
Commission staff arrived at this hourly rate using figures from a
weighted average of salaries and bonuses across different
professions contained in the most recent BLS Occupation Employment
and Wages Report (May 2024) multiplied by 1,3 to account for
overhead and other benefits. See U.S. Bureau of Labor Statistics,
Occupational Employment and Wage Statistics (May 2024), https://
www.bls.gov/oes/tables.htm. The Commission estimated wage rate is a
weighted national average of mean hourly wages for the following
occupations (and their relative weight): ``Lawyers'' in the
``Securities, Commodity Contracts, and Other Financial Investments
and Related Activities Industry,'' which is $128.34 (25% weight);
``Financial Managers'' in the same industry, which is $126.19 (25%
weight); ``Compliance Officers'' in the same industry, which is
$49.34 (25% weight); ``Software and Web Developers, Programmers, and
Testers'' in the same industry, which is $78.14 (25% weight).
Commission staff chose this methodology to account for the variance
in skill sets that may be used to accomplish the collection of
information. The estimated total annual labor cost of $12,052,800 is
calculated as 97,200 total annual burden hours x estimated average
burden hour cost of $124.
---------------------------------------------------------------------------
Form 102B: The Commission has previously estimated that it receives
Form 102Bs, through which clearing members of DCMs identify volume
threshold accounts, from approximately 114 reporting parties per year,
and estimates each of those reporting parties will spend 163 annual
burden hours on average on that reporting.\226\ Based on an analysis of
transaction data, the Commission anticipates that, under the proposed
reporting regime, clearing members would submit Form 102Bs for
approximately 150 additional reportable volume threshold accounts on an
average business day. Accordingly, the Commission is increasing its
estimate of total annual responses by 37,500 (150 responses x 250
days), resulting in a revised estimate of 566,500 (the previous
estimate of 529,000 \227\ + 37,500 estimated additional responses)
total annual responses.
---------------------------------------------------------------------------
\226\ See id.
\227\ See id. The Commission notes that, in practice, it
receives fewer Form 102Bs than this estimate as a result of a no-
action position taken by DMO in CFTC Letter No. 24-14. See CFTC
Letter No. 24-14, at 1 (Sept. 25, 2024), available at https://
www.cftc.gov/csl/24-14/download.
---------------------------------------------------------------------------
Accordingly, the Commission estimates the updated annual burden
associated with the proposed regulation, if adopted, as follows: \228\
---------------------------------------------------------------------------
\228\ Previously, the Commission estimated that the burden
associated with reporting under this section totaled 18,550 burden
hours and $2,059,050 in associated labor costs. See ICR Ref. No.
202308-3038-002 (concluded Dec. 13, 2023). Accordingly, the revised
estimates reflect an estimated increase in burden of 4,136 burden
hours and $754,014 in associated labor costs. As described in the
analysis of cost-benefit considerations, absent the Commission's
proposed change in reporting thresholds, the Commission estimates
the existing reportable contract volume of 50 in Sec. 15.04 would
result in more than 800,000 trading accounts meeting the definition
of ``volume threshold account.'' Section 17.01(b) requires clearing
members to submit Form 102B for each volume threshold account. The
Commission estimates that raising the applicable reportable trading
volume level to trading volume of 125,000 contracts would result in
clearing members submitting Form 102Bs for between 200 and 300
volume threshold accounts on an average business day. This estimated
reduction in volume threshold accounts would result in an estimated
32,000 burden hours in cost savings (800,000 x 0.04 burden hours per
Form 102B = 32,000 burden hours). Based on average wage rate of $124
per hour, the Commission estimates these cost savings could amount
to approximately $3,968,000 (32,000 estimated burden hours x $124
per hour = $3,968,000).
---------------------------------------------------------------------------
Estimated number of respondents: 114.
Estimated frequency/timing of responses: On occasion.
Estimated number of annual responses per respondent: 4,969.
Estimated number of annual responses for all respondents: 566,500.
Estimated annual burden hours per response: 0.04.
Estimated total annual burden hours per respondent: 199.
Estimated total annual burden hours for all respondents: 22,686.
Estimated total annual labor cost: $2,813,064.\229\
---------------------------------------------------------------------------
\229\ The estimated total annual labor cost of $2,813,064 is
calculated as 22,686 total annual burden hours x estimated average
burden hour cost of $124.
---------------------------------------------------------------------------
Form 71: The Commission does not anticipate the Proposal will
result in any change in the number of Form 71s submitted. Form 71 is
submitted in response to a special call from the Commission or its
designee.\230\ The Commission believes its previous estimate that 762
respondents on average will be required to submit Form 71s annually
sufficiently accounts for any Form 71s that may be submitted by omnibus
account originators with positions in Covered Event Contracts.
Accordingly, the Commission is retaining its existing burden estimates
for this collection.
---------------------------------------------------------------------------
\230\ 17 CFR 17.01(c).
---------------------------------------------------------------------------
Form 40 (Special Accounts): Sending a special call for Form 40 to a
trader who owns, holds or controls, or has held, owned or controlled, a
special account is within the Commission's discretion.\231\ Based on an
analysis of transaction data for contracts that would fit the proposed
Covered Event Contracts definition, under the existing 50-contract
reporting level in Sec. 15.03, the Commission estimates that in excess
of one million special accounts would be eligible to receive a special
call in connection with positions in Covered Event Contracts.\232\ The
Commission has previously estimated that the CFTC receives
approximately 3,000 Form 40 records filings per year arising from
required Form 102A filings, and estimated that each such filing will
require five hours to complete.\233\ Based on analysis of transaction
data and the Commission's experience with Form 40, the Commission
estimates the Proposal would result in as many as 210 additional
respondents submitting Form 40 for special accounts.\234\ Accordingly,
the Commission is increasing its estimate for total annual responses by
2,100 (210 additional respondents x 10 estimated reports per respondent
annually).
---------------------------------------------------------------------------
\231\ 17 CFR 18.04(a).
\232\ See supra Exhibit 3.
\233\ See ICR Ref. No. 202308-3038-002 (concluded Dec. 21,
2023).
\234\ Issuing a special call for Form 40 pursuant to Sec.
18.04(a) is discretionary. 17 CFR 18.04(a). The Commission does not
anticipate the number of respondents submitting Form 40s will be
coterminous with the number of entities identified in Form 102s.
---------------------------------------------------------------------------
Accordingly, the Commission estimates the updated annual burden
associated with the proposed regulation, if adopted, as follows: \235\
---------------------------------------------------------------------------
\235\ Previously, the Commission estimated that the burden
associated with reporting under this section totaled 15,000 burden
hours and $1,665,000 in associated labor costs. See ICR Ref. No.
202308-3038-002 (concluded Dec, 21, 2023). Accordingly, the revised
estimates reflect an estimated increase in burden of 10,500 burden
hours and $1,487,000 in associated labor costs. As described in the
analysis of cost-benefit considerations, absent the Commission's
proposed change in reporting thresholds, the Commission estimates
that in excess of one million special accounts would be eligible to
receive a special call in connection with positions in Covered Event
Contracts. Based on analysis of transaction data and the
Commission's experience with Form 40, the Commission estimates the
Proposal's reporting level of 125,000 would instead result in 300 to
400 respondents submitting Form 40 for special accounts. The
Commission therefore estimates that if the Proposal were finalized,
it would avoid greater increases in reporting burden than those
included here to recognize the size of the market under the proposed
reporting regime. This estimated reduction in Form 40 special calls
based on the proposed reporting would result in an estimated
5,000,000 burden hours in cost savings (1,000,000 x 5 burden hours
per Form 40 = 5,000,000 burden hours). Based on average wage rate of
$124 per hour, the Commission estimates these cost savings could
amount to approximately $620,000,000 (5,000,000 estimated burden
hours x $124 per hour = $620,000,000). The Commission notes that
these estimated cost savings would likely be, to some extent,
duplicative of cost savings estimated below related to submission of
Form 40s for volume threshold accounts, as under the currently
applicable reporting level and reportable trading volume level, many
respondents would be eligible for special calls based on both
special account status and volume threshold account status.
---------------------------------------------------------------------------
[[Page 40129]]
Estimated number of respondents: 510.
Estimated frequency/timing of responses: On occasion.
Estimated number of annual responses per respondent: 10.
Estimated number of annual responses for all respondents: 5,100.
Estimated annual burden hours per response: 5.
Estimated total annual burden hours per respondent: 50.
Estimated total annual burden hours for all respondents: 25,500.
Estimated total annual labor cost: $3,162,000.\236\
---------------------------------------------------------------------------
\236\ The estimated total annual labor cost of $3,162,000 is
calculated as 25,500 total annual burden hours x estimated average
burden hour cost of $124.
---------------------------------------------------------------------------
Form 40 (Reportable Volume Threshold Accounts and Reportable Sub-
Accounts): Sending a special call for Form 40 to a trader who owns,
holds or controls, or has held, owned or controlled, a volume threshold
account is within the Commission's discretion.\237\ Based on analysis
of transaction data and the Commission's experience with Form 40, the
Commission estimates the Proposal would result in as many as 100
additional respondents submitting Form 40 for reportable volume
threshold accounts. Previously, the Commission estimated it receives
approximately 18,920 total annual responses for reportable volume
threshold accounts and reportable sub-accounts. Based on an analysis of
transaction data, the Commission anticipates the Proposal would result
in clearing members submitting Form 40s for approximately 112 volume
threshold accounts on an average business day. Accordingly, the
Commission is increasing its estimate of total annual responses by
2,000, resulting in a revised estimate of 20,920 responses (the
previous estimate of 18,920 \238\ + 2,000 estimated additional
responses) total annual responses.
---------------------------------------------------------------------------
\237\ 17 CFR 18.04(a).
\238\ This estimate is based on an estimated average of 166
annual reports per respondent. Based on analysis of transaction data
for event contracts that would be considered a Covered Event
Contract under proposed Sec. 16.03(a), the Commission estimates
that the Proposal, if adopted, would result in an average of 112
annual reports per respondent. Form 40s are submitted in response to
special calls, which are made at the discretion of the Commission or
Commission staff. Because a substantial portion of trading volume
for Covered Event Contracts is non-intermediated, the Commission
expects to obtain sufficient ownership and control information from
DCMs in many instances. See, e.g., Final Rule, Market and Large
Trader Reporting, 71 FR 37809, 37813 (July 3, 2006) (discussing the
ability of reporting markets to provide ``identifying data'' for
traders in markets where retail traders are direct clearing
members). Accordingly, the addition of these new respondents may
reduce the overall average number of special calls per respondent.
---------------------------------------------------------------------------
Accordingly, the Commission estimates the updated annual burden
associated with the proposed regulation, if adopted, as follows: \239\
---------------------------------------------------------------------------
\239\ Previously, the Commission estimated that the burden
associated with reporting under this section totaled 94,600 burden
hours and $10,500,600 in associated labor costs. See ICR Ref. No.
202308-3038-002 (concluded Dec. 21, 2023). Accordingly, the revised
estimates reflect an estimated increase in burden of 10,260 burden
hours and $2,502,040 in associated labor costs. As described in the
analysis of cost-benefit considerations, absent the Commission's
proposed change in reporting thresholds, the Commission estimates
that in excess of 800,000 volume threshold accounts with trading
volume in Covered Event Contracts would be eligible to receive a
special call for a Form 40. Based on analysis of transaction data
and the Commission's experience with Form 40, the Commission
estimates the Proposal's reportable trading volume level of 125,000
would instead result in approximately 200 respondents submitting
Form 40 for volume threshold accounts in Covered Event Contracts.
The Commission therefore estimates that if the Proposal were
finalized, it would avoid costs. This estimated reduction in Form 40
special calls would result in an estimated 4,000,000 burden hours in
cost savings (800,000 x 5 burden hours per Form 40 = 4,000,000
burden hours). Based on average wage rate of $124 per hour, the
Commission estimates these cost savings could amount to
approximately $496,000,000 (4,000,000 estimated burden hours x $124
per hour = $496,000,000). The Commission notes that these estimated
cost savings would likely be, to some extent, duplicative of cost
savings estimated above related to submission of Form 40s for
special accounts, as under the currently applicable reporting level
and reportable trading volume level, many respondents would be
eligible for both special calls based on special account status and
volume threshold account status.
---------------------------------------------------------------------------
Estimated number of respondents: 214.
Estimated frequency/timing of responses: On occasion.
Estimated number of annual responses per respondent: 98.
Estimated number of annual responses for all respondents: 20,920.
Estimated annual burden hours per response: 5.
Estimated total annual burden hours per respondent: 490.
Estimated total annual burden hours for all respondents: 104,860.
Estimated total annual labor cost: $13,002,640.\240\
---------------------------------------------------------------------------
\240\ The estimated total annual labor cost of $13,002,640 is
calculated as 104,860 total annual burden hours x estimated average
burden hour cost of $124.
---------------------------------------------------------------------------
Other Related Collections That Are Not Impacted
Absent the Proposal and the Staff Event Contract Reporting No-
Action Letters, certain DCMs and DCOs would be subject to swap data
reporting and recordkeeping requirements generally applicable to event
contracts.\241\ If finalized, the Proposal would ensure that these DCMs
and DCOs are not subject to these reporting requirements and the
associated costs entailed with compliance.
---------------------------------------------------------------------------
\241\ See 17 CFR 43.3; 17 CFR 45.2, 17 CFR 45.3, 17 CFR 45.4.
---------------------------------------------------------------------------
With respect to recordkeeping requirements, the Staff Event
Contract Reporting No-Action Letters provided a no-action position
concerning recordkeeping requirements reflected in Sec. 38.8, Sec.
38.10, Sec. 38.951 (only to the extent Sec. 38.951 requires
compliance with part 45), Sec. 39.20(b)(2), part 43, and part 45.
Sections 38.8, 38.10, 38.951, and 39.20(b)(2) each contain a
requirement that DCMs comply with recordkeeping requirements
specifically applicable to swap data.\242\ Because the Proposed
Rulemaking would not require DCMs to report swap data for Covered Event
Contracts, the Proposal would similarly exclude DCMs from recordkeeping
requirements that would otherwise require maintaining records of data
in the part 43 or part 45 reporting format.
---------------------------------------------------------------------------
\242\ See 17 CFR 38.8 (requiring DCMs to obtain codes for
purposes of assigning ``unique swap identifiers''); 17 CFR 38.10
(requiring DCMs to ``maintain and report specified swap data as
provided under parts 43 and 45''); 17 CFR 38.951 (requiring DCMs to
``maintain such records, including trade records and investigatory
and disciplinary files, in accordance with the requirements of Sec.
1.31 . . . and in accordance with part 45 . . . if applicable''); 17
CFR 39.20(b)(2) (requiring DCOs to ``maintain swap data in
accordance with the requirements of part 45 of this chapter'').
---------------------------------------------------------------------------
The Staff Event Contract Reporting No-Action Letters and the
Proposal do
[[Page 40130]]
not remove the general recordkeeping requirements that apply to DCMs
under Sec. 1.31. As a result, DCMs offering event contracts would
continue to be subject to the requirements under Sec. 1.31 that apply
to all DCMs. The burden associated with recordkeeping under Sec. 1.31
is already covered under the information collection applicable to part
38 of the Commission's regulations,\243\ and to avoid double-counting,
no adjustment is being made to that information collection.\244\
---------------------------------------------------------------------------
\243\ For the current burden estimates associated with OMB
Collection 3038-0052, Core Principles & Other Requirements for DCMs,
see ICR Ref. No. 202503-3038-001 (concluded Sept. 5, 2025).
\244\ See, e.g., Final rule, Core Principles and Other
Requirements for Designated Contract Markets, 77 FR 36612, 36663
(June 19, 2012) (where Sec. 1.31 requirements are incorporated by
reference, the Commission does not perform duplicative burden
analysis because ``[t]he Sec. 1.31 requirements are already covered
by the existing information collection for part 38'').
---------------------------------------------------------------------------
2. Request for Comment
The Commission invites the public and other federal agencies to
comment on any aspect of the reporting and recordkeeping burdens
discussed above. Pursuant to 44 U.S.C. 3506(c)(2)(B), the Commission
will consider public comments on this proposed collection of
information in:
(1) Evaluating whether the proposed collection of information is
necessary for the proper performance of the functions of the
Commission, including whether the information will have practical
utility;
(2) Evaluating the accuracy of the Commission's estimate of the
burden of the proposed collection of information, including the degree
to which the methodology and the assumptions that the Commission
employed were valid;
(3) Enhancing the quality, utility, and clarity of the information
proposed to be collected; and
(4) Minimizing the burden of the collection of information on
covered entities, including through the use of appropriate automated,
electronic, mechanical, or other technological information collection
techniques, e.g., permitting electronic submission of responses.
A copy of the supporting statements for the collections of
information discussed above are available from the CFTC Clearance
Officer, 1155 21st Street NW, Washington, DC 20581, 202-418-5714, or
from https://www.RegInfo.gov. Organizations and individuals desiring to
submit comments on the proposed information collection requirements
should send those comments to:
The Office of Information and Regulatory Affairs, Office
of Management and Building, New Executive Office Building, Washington,
DC 20503, Attn: Desk Officer of the Commodity Futures Trading
Commission;
Submit comments electronically via www.RegInfo.gov by searching for
the relevant OMB control number to locate the information collection
request associated with this rulemaking. Please provide the Commission
with a copy of submitted comments so that all comments can be
summarized and addressed in the final rulemaking. Please refer to the
ADDRESSES section of this notice of proposed rulemaking for comment
submission instructions to the Commission. OMB is required to decide
concerning the collection of information between 30 and 60 days after
publication of this document in the Federal Register. Therefore, a
comment is best assured of receiving full consideration if OMB (and the
Commission) receives it within 30 calendar days of publication of this
notice. Nothing in the foregoing affects the deadline enumerated above
for public comment to the Commission on the proposed rule.
D. Antitrust Considerations
CEA section 15(b) 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
objectives of the CEA in issuing any order or adopting any Commission
rule or regulation.
The Commission does not anticipate that the proposed amendments to
part 15, part 17, or part 16 would result in anticompetitive behavior.
The Proposal would require public dissemination of the Covered Event
Contract's information that would allow price discovery and also
increase competition among Registered Entities and potential new
entrants and incumbent entrants seeking to list new contracts. The
Commission encourages comments from the public on any aspect of the
proposal that may have the potential to be inconsistent with the
antitrust laws or anticompetitive in nature.
E. Executive Orders 12866, 13563, and 14192
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select those regulatory approaches that
maximize net benefits (including potential economic, environmental,
public health and safety, and other advantages; and distributive
impacts). Section 3(f) of Executive Order 12866 defines a ``significant
regulatory action'' as any regulatory action that is likely to result
in a rule that may: (1) have an annual effect on the economy of $100
million or more or adversely affect in a material way the economy, a
sector of the economy, productivity, competition, jobs, the
environment, public health or safety, or State, local, or tribal
governments or communities; (2) create a serious inconsistency or
otherwise interfere with an action taken or planned by another agency;
(3) materially alter the budgetary impact of entitlements, grants, user
fees, or loan programs or the rights and obligations of recipients
thereof; or (4) raise novel legal or policy issues arising out of legal
mandates, or the President's priorities.
The Office of Management and Budget (OMB) has determined that this
action is a significant regulatory action as defined in Executive Order
12866 under section 3(f) of Executive Order 12866 and therefore this
action has been reviewed by the OMB, consistent with Executive Order
14215.
This Proposal, if finalized as proposed, is expected to be an
Executive Order 14192 deregulatory action.
List of Subjects in 17 CFR Parts 15, 16, and 17
Commodity futures, Consumer protection, Fraud, Reporting and
recordkeeping requirements, Swaps.
For the reasons stated in the preamble, the Commodity Futures
Trading Commission proposes to amend 17 CFR chapter I as follows:
PART 15--REPORTS--GENERAL PROVISIONS
0
1. The authority citation for part 15 continues to read as follows:
Authority: 7 U.S.C. 2, 5, 6a, 6c, 6f, 6g, 6i, 6k, 6m, 6n, 7,
7a, 9, 12a, 19, and 21, as amended by Title VII of the Dodd-Frank
Wall Street Reform and Consumer Protection Act, Pub. L. 111-203, 124
Stat. 1376 (2010).
0
2. In Sec. 15.03, revise paragraph (b) to read as follows:
Sec. 15.03 Reporting Levels
* * * * *
(b) The quantities for the purpose of reports filed under parts 17
and 18 of this chapter are as follows:
[[Page 40131]]
------------------------------------------------------------------------
Number of
Commodity contracts
------------------------------------------------------------------------
Agricultural:
Cocoa............................................ 100
Coffee........................................... 50
Corn............................................. 250
Cotton........................................... 100
Feeder Cattle.................................... 50
Frozen Concentrated Orange Juice................. 50
Lean Hogs........................................ 100
Live Cattle...................................... 100
Milk, Class III.................................. 50
Oats............................................. 60
Rough Rice....................................... 50
Soybeans......................................... 150
Soybean Meal..................................... 200
Soybean Oil...................................... 200
Sugar No. 11..................................... 500
Sugar No. 14..................................... 100
Wheat............................................ 150
Broad-Based Security Indexes:
Municipal Bond Index............................. 300
S&P 500 Stock Price Index........................ 1,000
Other Broad-Based Securities Indexes............. 200
Financial:
30-Day Fed Funds................................. 600
3-Month (13-Week) U.S. Treasury Bills............ 150
2-Year U.S. Treasury Notes....................... 1,000
3-Year U.S. Treasury Notes....................... 750
5-Year U.S. Treasury Notes....................... 2,000
10-Year U.S. Treasury Notes...................... 2,000
30-Year U.S. Treasury Bonds...................... 1,500
1-Month LIBOR Rates.............................. 600
3-Month Eurodollar Time Deposit Rates............ 3,000
3-Month Euroyen.................................. 100
2-Year German Federal Government Debt............ 500
5-Year German Federal Government Debt............ 800
10-Year German Federal Government Debt........... 1,000
Goldman Sachs Commodity Index.................... 100
Major Foreign Currencies......................... 400
Other Foreign Currencies......................... 100
U.S. Dollar Index................................ 50
Natural Resources:
Copper........................................... 100
Crude Oil, Sweet................................. 350
Crude Oil, Sweet--No. 2 Heating Oil Crack Spread. 250
Crude Oil, Sweet--Unleaded Gasoline Crack Spread. 150
Gold............................................. 200
Natural Gas...................................... 200
No. 2 Heating Oil................................ 250
Platinum......................................... 50
Silver Bullion................................... 150
Unleaded Gasoline................................ 150
Unleaded Gasoline--No. 2 Heating Oil Spread Swap. 150
Security Futures Products:
Individual Equity Security....................... 1,000
Narrow-Based Security Index...................... 200
Event Contracts:
Event Contract (1 USD)........................... \1\ 125,000
TRAKRS............................................... \1\ 50,000
All Other Commodities................................ 25
------------------------------------------------------------------------
\1\ For purposes of part 17 of this chapter, the Event Contract (1 USD)
reporting level applies to Covered Event Contracts, described in Sec.
16.03 of this chapter. For Covered Event Contracts with contract size
other than 1 USD, the applicable reporting level of notional value
equivalent to 125,000 USD. For example, for a contract with 100 USD
contract size, a reporting level of 1,250 contracts applies. For
purposes of part 17 of this chapter, positions in TRAKRS should be
reported by rounding down to the nearest 1,000 contracts and dividing
by 1,000.
0
3. Revise Sec. 15.04 to read as follows:
Sec. 15.04 Reportable trading volume level.
(a) The volume quantity for the purpose of reports filed under
parts 17 and 18 of this chapter is trading volume of 50 or more
contracts, during a single trading day, on a single reporting market
that is a board of trade designated as a contract market under section
5 of the Act or a swap execution facility registered under section 5h
of the Act, in all instruments that such reporting market designates
with the same product identifier (including purchases and sales, and
inclusive of all expiration months).
[[Page 40132]]
(b) Paragraph (a) of this section does not apply to contracts
reported pursuant to a reporting level applicable to Covered Event
Contracts (as described in Sec. 16.03 of this chapter) in Sec.
15.03(b). The volume quantity for the purpose of reports filed under
parts 17 and 18 of this chapter for Covered Event Contracts (as
described in Sec. 16.03 of this chapter) is trading volume of 125,000
or more contracts, during a single trading day, on a single reporting
market that is a board of trade designated as a contract market under
section 5 of the Act, in all instruments that such reporting market
designates with the same product identifier (including purchases and
sales, and inclusive of all expiration months).
PART 16--REPORTS BY CONTRACT MARKETS AND SWAP EXECUTION FACILITIES
0
4. The authority citation for part 16 is revised to read as follows:
Authority: 7 U.S.C. 2, 6a, 6c, 6g, 6i, 7, 7b-3, and 12a, unless
otherwise noted.
0
5. Add Sec. 16.03 to read as follows:
Sec. 16.03 Covered Event Contracts.
(a) Subject to paragraphs (b), (c), (d), (e), (f), (g), and (h) of
this section, Sec. Sec. 38.8, 38.10, 38.951 of this chapter (to the
extent Sec. 38.951 of this chapter requires compliance with part 45 of
the Commission's regulations in this chapter), Sec. 39.20(b)(2) of
this chapter, part 43 of this chapter, and part 45 of the Commission's
regulations in this chapter, or the requirements of the relevant CEA
provisions pursuant to which those regulations were promulgated, shall
not apply to any Covered Event Contract. For purposes of this section,
a Covered Event Contract is any contract that:
(1) Is a swap under section 1a(47)(A)(i) and/or (ii) of the Act;
(2) Is listed for trade on a designated contract market and is
cleared through a derivatives clearing organization;
(3) Trades as a fully collateralized position, as defined in Sec.
39.2 of this chapter; and
(4) Either has:
(i) A binary payout structure that results, at settlement, in a
payment of an absolute amount to the holder of one side of the contract
and no payment to the counterparty; or
(ii) A variable payout structure that results, at settlement, in
the payment to both counterparties to the contract based on the final
settlement price, though only one of the counterparties ultimately
profits.
(b) In connection with any Covered Event Contract, the following
provisions shall apply to the listing designated contract market:
(1) Section 16.00, to the same extent that such provision would
apply to such designated contract market in connection with any futures
or option contract;
(2) Section 16.01, to the same extent that such provisions would
apply to such designated contract market in connection with any futures
or option contract, except that in addition the designated contract
market shall record information related to the settlement of the
contract, including: whether the event that is the subject of each
contract occurred and, if so, the event that occurred, the time and
date the event occurred, and the source used to determine whether the
event occurred; and
(3) Section 16.02, to the same extent that such provisions would
apply to such designated contract market in connection with any futures
or option contract.
(c) In connection with any Covered Event Contract, part 17 of this
chapter shall apply to any designated contract market, futures
commission merchant, clearing member, or foreign broker to the same
extent that such provisions would apply to such designated contract
market, futures commission merchant, clearing member, or foreign broker
in connection with any futures or option contract;
(d) In connection with any Covered Event Contract, part 18 of this
chapter shall apply to any trader to the same extent that part 18 of
this chapter would apply to such trader in connection with any futures
or option contract.
(e) In connection with any Covered Event Contract, the reporting
level for purposes of part 17 of this chapter shall be the reporting
level for the ``Covered Event Contract (1 USD)'' commodity enumerated
in Sec. 15.03 of this chapter and the reportable trading volume level
for purposes of part 18 of this chapter shall be the reportable trading
volume level set out in Sec. 15.04(b) of this chapter.
(f) In connection with any Covered Event Contract, the designated
contract market shall publish, as soon as technologically practicable,
for each Covered Event Contract transaction, the execution timestamp,
contract ticker symbol, trade quantity, and price. The designated
contract market shall make such data publicly available on its website
for a period of time that is at least one year after the initial public
dissemination of such data and shall make instructions freely available
on its website on how to download, save, and search such data. Data
that is publicly disseminated pursuant to this paragraph shall be made
available free of charge.
(1) As used in paragraph (f) of this section, execution timestamp
means the date and time of execution, as determined by the designated
contract market, in the form and manner applicable to the ``Event
Timestamp'' data element in appendix A to part 43 of the Commission's
regulations in this chapter.
(2) As used in paragraph (f) of this section, contract ticker
symbol means a code or symbol assigned by the designated contract
market to identify the contract.
(3) As used in paragraph (f) of this section, trade quantity means
the number of contracts bought or sold in a transaction. This data
element shall be populated with a numeric value greater than or equal
to zero.
(4) As used in paragraph (f) of this section, price means the price
at which the trade was executed. This data element shall be populated
with a numeric value expressed as a decimal.
(g) In connection with any Covered Event Contract, the designated
contract market listing for trade such event contract shall obtain from
all customers data that identifies each trader, by name, physical
address, email address, phone number, occupation, employer, and, if any
other persons guarantee the trading accounts of the trader or have a
financial interest of 10 percent or more in the trader or the trading
accounts of the trader, the names of such persons, for each transaction
or order for the Covered Event Contract and shall maintain such data
throughout the life of the Covered Event Contract and for a period of
at least five years following the final termination of the Covered
Event Contract.
(h) In connection with any Covered Event Contract, the designated
contract market listing for trade such Covered Event Contract and the
derivatives clearing organization clearing such event contract shall:
(1) Comply with all swap reporting and recordkeeping requirements
of the Act and Commission regulations applicable, other than
recordkeeping requirements contained in Sec. Sec. 38.8, 38.10, 38.951
of this chapter (only to the extent Sec. 38.951 of this chapter
requires compliance with part 45 of this chapter), Sec. 39.20(b)(2) of
this chapter, part 43 of this chapter, and part 45 of this chapter.
(2) Keep all records required to be kept pursuant to Sec. 1.31 of
this chapter open to inspection upon request by any representative of
the Commission, the United States Department of Justice, or the
Securities and Exchange
[[Page 40133]]
Commission, or by any representative of a prudential regulator as
authorized by the Commission. Copies of all such records shall be
provided, at the designated contract market's expense, to any
representative of the Commission upon request. The designated contract
market shall provide copies of the Required Records either by
electronic means, in hard copy, or both, as requested by the
Commission, with the sole exception that copies of records originally
created and exclusively maintained in paper form may be provided in
hard copy only.
PART 17--REPORTS BY REPORTING MARKETS, FUTURES COMMISSION
MERCHANTS, CLEARING MEMBERS, AND FOREIGN BROKERS
0
6. The authority citation for part 17 continues to read as follows:
Authority: 7 U.S.C. 2, 6a, 6c, 6d, 6f, 6g, 6i, 6t, 7, 7a, and
12a.
0
7. In Sec. 17.00, add paragraph (j) to read as follows:
Sec. 17.00 Information to be furnished by futures commission
merchants, clearing members and foreign brokers.
* * * * *
(j) Covered Event Contracts. Unless determined otherwise by the
Commission, reporting markets that list Covered Event Contracts (as
described in Sec. 16.03 of this chapter) shall meet the requirements
of paragraphs (a) through (h) of this section for all special accounts
carried by clearing members trading in their own name and not on behalf
of any customer (as defined in Sec. 1.3 of this chapter), on behalf of
all clearing members.
0
8. In Sec. 17.01, add paragraph (f) to read as follows:
Sec. 17.01 Identification of special accounts, volume threshold
accounts, and omnibus accounts.
* * * * *
(f) Covered Event Contracts. Unless determined otherwise by the
Commission, reporting markets that list Covered Event Contracts (as
described in Sec. 16.03 of this chapter) shall meet the requirements
of paragraphs (a) and (b) of this section for all special accounts
carried by clearing members trading in their own name and not on behalf
of any customer (as defined in Sec. 1.3 of this chapter), on behalf of
all clearing members.
Issued in Washington, DC, on June 26, 2026, by the Commission.
Christopher Kirkpatrick,
Secretary of the Commission.
Note: The following appendix will not appear in the Code of
Federal Regulations.
Appendix to Data Reporting Requirements for Certain Event Contracts--
Commission Voting Summary
On this matter, Chairman Selig voted in the affirmative. No
Commissioner voted in the negative.
[FR Doc. 2026-13239 Filed 6-30-26; 8:45 am]
BILLING CODE 6351-01-P