2015-27535. Fees for Reviews of the Rule Enforcement Programs of Designated Contract Markets and Registered Futures Associations

AGENCY:

Commodity Futures Trading Commission.

ACTION:

Notice of 2015 schedule of fees.

SUMMARY:

The Commodity Futures Trading Commission (“CFTC” or “Commission”) charges fees to designated contract markets and registered futures associations to recover the costs incurred by the Commission in the operation of its program of oversight of self-regulatory organization rule enforcement programs, specifically National Futures Association, a registered futures association, and the designated contract markets. The calculation of the fee amounts charged for 2015 by this notice is based upon an average of actual program costs incurred during fiscal year (“FY”) 2012, FY 2013, and FY 2014.

DATES:

Effective date: Each self-regulatory organization is required to remit electronically the applicable fee on or before December 28, 2015.

FOR FURTHER INFORMATION CONTACT:

Mary Jean Buhler, Chief Financial Officer, Commodity Futures Trading Commission; [phone]; Three Lafayette Centre, 1155 21st Street NW., Washington, DC 20581. For information on electronic payment, contact Jennifer Fleming; [phone]; Three Lafayette Centre, 1155 21st Street NW., Washington, DC 20581.

SUPPLEMENTARY INFORMATION:

I. Background Information

A. General

This notice relates to fees for the Commission's review of the rule enforcement programs at the registered futures associations ^[1] and designated contract markets (“DCM”), each of which is a self-regulatory organization (“SRO”) regulated by the Commission. The Commission recalculates the fees charged each year to cover the costs of operating this Commission program.^[2] The fees are set each year based on direct program costs, plus an overhead factor. The Commission calculates actual costs, then calculates an alternate fee taking volume into account, and then charges the lower of the two.^[3]

B. Overhead Rate

The fees charged by the Commission to the SROs are designed to recover program costs, including direct labor costs and overhead. The overhead rate is calculated by dividing total Commission-wide overhead direct program labor costs into the total amount of the Commission-wide overhead pool. For this purpose, direct program labor costs are the salary costs of personnel working in all Commission programs. Overhead costs generally consist of the following Commission-wide costs: Indirect personnel costs (leave and benefits), rent, communications, contract services, utilities, equipment, and supplies. This formula has resulted in the following overhead rates for the most recent three years (rounded to the nearest whole percent): 161 percent for FY 2012, 181 percent for FY 2013, and 180 percent for FY 2014.

C. Conduct of SRO Rule Enforcement Reviews

Under the formula adopted by the Commission in 1993, the Commission calculates the fee to recover the costs of its rule enforcement reviews and examinations, based on the three-year average of the actual cost of performing such reviews and examinations at each SRO. The cost of operation of the Commission's SRO oversight program varies from SRO to SRO, according to the size and complexity of each SRO's program. The three-year averaging computation method is intended to smooth out year-to-year variations in cost. Timing of the Commission's reviews and examinations may affect costs—a review or examination may span two fiscal years and reviews and examinations are not conducted at each SRO each year.

As noted above, adjustments to actual costs may be made to relieve the burden on an SRO with a disproportionately large share of program costs. The Commission's formula provides for a reduction in the assessed fee if an SRO has a smaller percentage of United States industry contract volume than its percentage of overall Commission oversight program costs. This adjustment reduces the costs so that, as a percentage of total Commission SRO oversight program costs, they are in line with the pro rata percentage for that SRO of United States industry-wide contract volume.

The calculation is made as follows: The fee required to be paid to the Commission by each DCM is equal to the lesser of actual costs based on the three-year historical average of costs for that DCM or one-half of average costs incurred by the Commission for each DCM for the most recent three years, plus a pro rata share (based on average trading volume for the most recent three years) of the aggregate of average annual costs of all DCMs for the most recent three years. The formula for calculating the second factor is: 0.5a + 0.5 vt = current fee. In this formula, “a” equals the average annual costs, “v” equals the percentage of total volume across DCMs over the last three years, and “t” equals the average annual costs for all DCMs. NFA has no contracts traded; hence, its fee is based simply on costs for the most recent three fiscal years. This table summarizes the data used in the calculations of the resulting fee for each entity:

	Actual total costs			3-Year average actual costs	3-Year percent of volume	Volume adjusted costs	2015 Assessed fee
	FY 2012	FY 2013	FY 2014
CBOE Futures	$29,278	$235,567	$—	$88,282	0.98	$50,853	$50,853
Chicago Board of Trade	238,392	164,974	55,515	152,960	30.02	281,079	152,960
Chicago Mercantile Exchange	757,347	391,917	225,701	458,322	44.93	535,344	458,322
ELX Futures	34,593	134,267		56,287	0.026	28,320	28,320
ICE Futures U.S.	221,813	360,223	81,176	221,071	8.56	168,880	168,880
Kansas City Board of Trade	34,335	559		11,631	0.12	6,615	6,615
Minneapolis Grain Exchange	60,897	220,975	47,648	109,840	0.04	55,225	55,225
NADEX North American	11,293	101,252	980	37,842	0.033	19,147	19,147
New York Mercantile Exchange ..	7,411	135,316	225,672	122,800	14.69	161,480	122,800
NYSE LIFFE US	71,317	24,802		32,039	0.34	18,354	18,354
One Chicago	55,755	128,599	31,196	71,850	0.241	37,568	37,568
Subtotal	1,522,431	1,898,451	667,888	1,362,924	100	1,362,865	1,119,044
National Futures Association	487,328	186,499	292,102	321,976			321,976
Total	2,009,759	2,084,950	959,990	1,684,900			1,441,020

An example of how the fee is calculated for one exchange, the Chicago Board of Trade, is set forth here:

a. Actual three-year average costs equal $152,960.

b. The alternative computation is: (.5) ($152,960) + (.5) (.30) ($1,347,041) = $278,695.

c. The fee is the lesser of a or b; in this case $152,960.

As noted above, the alternative calculation based on contracts traded is not applicable to NFA because it is not a DCM and has no contracts traded. The Commission's average annual cost for conducting oversight review of the NFA rule enforcement program during fiscal years 2012 through 2014 was $321,976. The fee to be paid by the NFA for the current fiscal year is $321,976.

II. Schedule of Fees

Fees for the Commission's review of the rule enforcement programs at the registered futures associations and DCMs regulated by the Commission are as follows:

	3-Year average actual cost	3-Year percent of volume	2015 Fee lesser of actual or calculated fee
CBOE Futures	$88,282	0.98	$50,853
Chicago Board of Trade	152,960	30.02	152,960
Chicago Mercantile Exchange	458,322	44.93	458,322
ELX Futures	56,287	0.03	28,320
ICE Futures U.S.	221,071	8.56	168,880
Kansas City Board of Trade	11,631	0.12	6,615
Minneapolis Grain Exchange	109,840	0.04	55,225
NADEX North American	37,842	0.03	19,147
New York Mercantile Exchange	122,800	14.69	122,800
NYSE LIFFE US	32,039	0.34	18,354
One Chicago	71,850	0.2412	37,568
Subtotal	1,362,924	100	1,119,044
National Futures Association	321,976		321,976
Total	1,684,900		1,441,020

III. Payment Method

The Debt Collection Improvement Act (DCIA) requires deposits of fees owed to the government by electronic transfer of funds. See 31 U.S.C. 3720. For information about electronic payments, please contact Jennifer Fleming at [phone] or [e-mail], or see the CFTC Web site at www.cftc.gov,, specifically, www.cftc.gov/​cftc/​cftcelectronicpayments.htm.

(Authority: 7 U.S.C. 16a)

Issued in Washington, DC, on October 23, 2015, by the Commission.

Christopher J. Kirkpatrick,

Secretary of the Commission.

Footnotes

1.  National Futures Association is the only registered futures association.

2.  See Section 237 of the Futures Trading Act of 1982, 7 U.S.C. 16a, and 31 U.S.C. 9701. For a broader discussion of the history of Commission fees, see 52 FR 46070, Dec. 4, 1987.

3.  58 FR 42643, Aug. 11, 1993, and 17 CFR part 1, app. B.