[Federal Register Volume 61, Number 34 (Tuesday, February 20, 1996)]
[Rules and Regulations]
[Pages 6310-6315]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-3568]
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COMMODITY FUTURES TRADING COMMISSION
17 CFR Part 17
Reports by Futures Commission Merchants, Members of Contract
Markets, and Foreign Brokers
AGENCY: Commodity Futures Trading Commission.
ACTION: Final rulemaking.
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SUMMARY: The Commodity Futures Trading Commission (Commission or CFTC)
is amending rule 17.01 and modifying the form 102 required to be filed
by clearing members, futures commission merchants (FCMs), and foreign
brokers. This form identifies persons having financial interest in, or
control of, special accounts in futures and options. The amendments
being adopted clarify the information required on the form 102 for
various kinds of special accounts reported to the Commission. The
Commission is also amending rule 17.02 concerning the time in which a
completed form 102 must be filed. The rule requires that firms provide
certain specified identification information upon request by the
Commission or its designee on the day when a special account is first
reported, and that a completed form 102 be filed with the Commission
within three business days.
EFFECTIVE DATE: August 20, 1996.
FOR FURTHER INFORMATION CONTACT: Lamont L. Reese, Supervisory
Statistician, Division of Economic Analysis, Commodity Futures Trading
Commission, Three Lafayette Centre, 1155 21st Street NW., Washington,
DC 20581, (202) 418-5310.
SUPPLEMENTARY INFORMATION:
I. Background
A. Large Trader Reporting System
Part 17 of the Commission's regulations requires that FCMs,
clearing members, and foreign brokers (firms) submit a daily report to
the Commission with respect to futures positions in all special
accounts on their books.1 Information required to be provided to
the Commission includes quantities of reportable futures positions,
exchanges of futures for cash, and delivery notices issued or stopped
by each special account.2 For reporting purposes, futures
positions in all accounts controlled by the same person and those in
which a person has a ten percent or more financial interest must be
combined and treated as if they are held in a single account. The firm
assigns a reporting number to the special account and reports all
information to the Commission using this number.3
\1\ Special account means any commodity futures or option
account in which there is a reportable position, 17 CFR 15.00
(1994). Firms report futures information to the Commission and
option information to the exchanges.
\2\ A reportable position is any open position held or
controlled by a trader at the close of business in any one futures
contract of a commodity traded on any one contract market that is
equal to or in excess of the quantities fixed by the Commission in
Sec. 15.03 of the regulations, 17 CFR 15.03 (1994).
\3\ The firm's reporting number may be the account number
carried on its books. However, as noted above, the number may refer
to a collection of accounts that are owned and/or controlled by the
same person.
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In addition to the reporting number and the position and
transaction information mentioned above, the firm must file a CFTC form
102 showing the information specified under Sec. 17.01 of the
regulations for each special account.4 This information identifies
persons who have a financial interest in or trading control of a
special account, informs the Commission of the type of account that is
being reported, and gives preliminary information whether positions and
transactions are commercial or noncommercial in nature. The form must
be filed when the account first becomes reportable, and updated when
information concerning financial interest in, or control of, the
special account changes.5 In addition to its use by the
Commission, the form 102 is used by the exchanges to identify accounts
reported through their large trader reporting systems for both futures
and options.6
\4\ 17 CFR 17.01 (1994).
\5\ 17 CFR 17.02 (1994).
\6\ Part 17 of the regulations requires that firms identify
large traders in options on the form 102 and transmit the form to
the appropriate exchange in accordance with their rules. Those
exchanges that maintain a futures large trader reporting system also
use the CFTC form 102 for identifying futures large traders.
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B. Proposed Rulemaking
In June 1995 the Commission published in the Federal Register a
proposal to change its form 102 and Secs. 17.01 and 17.02 of its
regulations to resolve some of the ambiguities in the present form,
making it more useful to both the exchanges and the Commission (60 FR
31653 June 16, 1995). The Commission also requested comment on a
proposal set forth by the Chicago Mercantile Exchange (CME) to obtain
information on the form 102 in machine-readable form.
The Futures Industry Association (FIA), two exchanges, and two FCMs
commented on the Commission's proposal. All commentors supported
Commission efforts to clarify information requested on its form 102 and
supported the initiative of the CME to obtain data in machine-readable
form. Some commentors took issue with certain of the new requirements,
asking that they be eliminated or modified. These comments are
discussed in detail below.7 Commission staff will continue to
explore the feasibility of obtaining information on the form 102
electronically, both with the FIA and the exchanges.
\7\ The Commission also proposed to amend rule 17.01 to require
that option and futures accounts be reported using the same
designator, which may be any string of alphanumeric characters up to
the maximum number permitted. Commentors supported this proposal,
since using the same designator for both types of accounts for the
same persons reduces the number of form 102s that firms must file
and that the Commission must process. In view of this, the
Commission is adopting this rule as proposed.
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II. Comments on Proposed Rule Changes
A. Special Account Identifying Information
The proposed form requires that firms provide registration
information if the person reported is registered as a commodity trading
advisor (CTA) or securities investment advisor (SIA). The FIA opined
that the responsibility for monitoring compliance with persons'
registration status rested with the National Futures Association (NFA)
and the Securities and Exchange Commission (SEC). In view of this, they
recommended that this requirement be eliminated.
The Commission currently collects information concerning persons'
registration status through means other than the form 102.8 The
request for firms to provide registration information on the form 102
comes principally from the exchanges. As explained in the notice of
proposed rulemaking, the rules of some exchanges require that they
obtain this information for enforcement purposes. The exchanges,
however, collect information only from their
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members, not from their members' customers. The exchanges, therefore,
rely solely on the form 102 for routine information concerning futures
trading participants. Although the exchanges could design their own
account identification forms to collect this information, a
proliferation of such forms would be burdensome for the industry.
Adding the requirement that this information be included on the form
102 will result in an overall reduction in paperwork and a savings for
all parties involved. Moreover, if the firms provide this information
to the Commission, it will be more timely and complete. In view of the
above, the Commission is adopting this requirement as proposed.
\8\ This is generally through the form 40 filed by reportable
traders and through the NFA (17 CFR Sec. 18.04, 1994).
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The FIA also sought clarification concerning identifying
information that must be provided in four different circumstances. The
Commission announced in its notice of proposed rulemaking that
Commission staff, after consulting with the exchanges, would provide
written advisories on reporting issues raised by firms. The Commission
believes that the questions raised by FIA are in this category and has
asked that the Division of Economic Analysis respond to these issues.
B. Reporting Controlled Accounts
When identifying special accounts controlled by independent account
controllers, the Commission proposed that firms provide the following
information:
1. For publicly-offered managed or guided account programs in which
ten or more accounts participate, the name and account number used for
the program and, in addition, for commodity pools that participate in
the program, the name and address of the commodity pool operator; and
2. For each controlled account not included in 1 above, the account
number and the names and addresses of persons having a ten percent or
more financial interest in the account.
As explained in the Federal Register release, amendments to rule
17.01 were made in June of 1993 to limit the information provided about
controlled accounts (58 FR 33329 June 17, 1993).9
\9\ Previous to these amendments, firms were required to
identify the beneficial owners of all controlled accounts even
though, in general, accounts that were a part of customer trading
programs were held by small traders whose identity for surveillance
purposes was not needed on a routine basis.
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The FIA and the exchanges questioned the need for firms to provide
a name for each customer trading program. The FIA noted that, since no
definition or purpose is provided on the form itself for program name,
firms are likely to provide the wrong information. The Commission
agrees and has changed its form 102 accordingly. Rather than asking for
program names, firms will only indicate whether a person controls ten
or more accounts. Further instructions for reporting will be based on
the answer to this question.
The FIA was also concerned that providing the proposed additional
information for controlled accounts would often pose an administrative
burden on the reporting firms. Except for requiring account numbers,
the proposed requirements are the same as current requirements in
regulation 17.01(b)(6). The Commission believes this information is
important for properly combining accounts for the same traders and will
adopt these amendments as proposed. The proposed amendments also
provide that the required information be updated whenever it changes.
The Commission is amending its proposal so that updates to the
information required by these rules must be provided only on call by
the Commission or its designee. The Commission believes this will
alleviate much of the administrative burden imposed by these
requirements.
C. Two-Part Filing Requirements
The Commission proposed that certain identification information be
provided to the Commission on the first day that an account is reported
to the Commission, and that a completed form be provided within three
business days of that date. The FIA was concerned that the two-part
filing requirement would not be beneficial to the industry and may
impose additional administrative burdens upon operations' personnel.
The FIA proposed that firms provide the identifying information by
facsimile or telephone on the first day that a special account is
reported only in response to a request by the Commission or its
designee. In a majority of cases, Commission staff currently request
form 102s when accounts are first reported. In view of this, the
Commission is amending its proposal as recommended by the FIA. The
Commission emphasizes however, that these amendments in no way
alleviate the responsibility of firms to appropriately combine and
report accounts. Accounts that are not combined to determine reporting
status and for reporting may lead to a loss of important surveillance
information.10
\10\ The Commission also proposed amendments to rule 17.02
concerning the submission of position and transaction information in
hard-copy form. The Commission proposed that this information be
supplied by facsimile or in accordance with instructions by the
Commission or its designee. Since no comments were received
concerning this requirement, the Commission is adopting this
amendment as proposed.
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Two exchanges commenting on the Commission's proposal also
expressed some concern about the two-part filing requirement. Under
Commission regulations, firms report large trader option positions only
to the exchanges which in turn report them to the Commission (17 CFR
16.02). Firms identify reportable option accounts on the form 102 and
provide these to the exchanges. These also are provided to the
Commission by the exchanges. The exchanges expressed concern that the
two-part requirement would affect the current turnover period allowed
the exchanges. Both exchanges suggested that, if it were necessary to
obtain option account identification quickly, the Commission do so
independently through the reporting firms. One exchange suggested that
the Commission receive both the position information and form 102s for
option traders directly from reporting firms to reduce duplication of
effort and avoid delays.
In light of the final rule, which permits filing of the form 102 in
three days unless called for by the Commission, the turnover time for
the exchanges will be unaffected. Moreover, calls for information will
go directly to the reporting firms as the exchanges suggested.
D. Clarification of Required Information
The FIA requested clarification concerning the distinction the
Commission made, if any, between an individual and sole proprietorship,
since both terms were used on the form. The Commission recognizes that
there may be little, if any, distinction between the terms. At times,
however, accounts have been reported in the name of a business
organized as a sole proprietorship. This term has been included on the
form only to prevent confusion when firms specify the organization of
the trader being reported.11
\11\ If the owner of a sole proprietorship trades an account in
the name of the business and separately an individual account, the
accounts should be aggregated and can be reported either in the name
of the individual or the business.
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The FIA also asked whether the omnibus clearing status of a United
States or offshore bank trading for customers was discernible from the
information requested on the form. The regulations require that firms
determine if an account they carry is a house or customer omnibus
account. The Commission relies on reporting firms to
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obtain accurate information concerning the omnibus clearing status for
accounts in whatever manner is necessary. This may require that firms
obtain information not included on the form.
E. Effective Date
One exchange has asked for a substantial period of time between
publication of the final rules in the Federal Register and the
effective date of the amendments in order to change computer software
that captures information on the form. A delayed effective date may
also assist firms in implementing use of the new forms. Accordingly,
the Commission has determined that the effective date of these
amendments be six months after they are published in the Federal
Register. However, the Commission can process the new forms
immediately. Therefore, if at any time prior to the effective date
exchanges request that the new form be used by firms reporting to them,
the firms may also use the new form to identify accounts to the
Commission.
III. Other Related Matters
A. The Regulatory Flexibility Act (RFA)
The RFA requires that agencies consider the impact of substantive
rules on small businesses. These amendments affect large traders, FCMs,
commodity pools, CTAs and other similar entities, such as foreign
brokers and foreign traders. The Commission has defined ``small
entities'' in evaluating the impact of its rule in accordance with the
RFA, 47 FR 18618-18621 (April 30, 1982).
In that statement, the Commission concluded that large traders and
FCMs are not considered to be small entities for purposes of the RFA.
In this regard, the amendments to reporting requirements relating to
the form 102 fall mainly upon FCMs. Similarly, foreign brokers and
foreign traders report only if carrying or holding reportable
positions, i.e., large positions. Thus, pursuant to section 3(a) of the
RFA (5 U.S.C. 605(b)), the Chairman, on behalf of the Commission,
certified in its proposal for rulemaking that these proposed rules
would not have a significant economic impact on a substantial number of
small entities. The Commission however, invited comments from any firm
which believed that these rules would have a significant economic
impact upon its operation. No comments were received.
B. Paperwork Reduction Act (PRA)
The PRA of 1980, 44 U.S.C. 3501 et seq., imposes certain
requirements on Federal agencies (including the Commission) in
connection with their conducting or sponsoring any collection of
information as defined by the PRA. In compliance with the PRA, the
Commission has submitted these rules and their associated information-
collection requirements to the Office of Management and Budget (OMB).
OMB approved the requirements associated with this rule on September
14, 1995.
The burden associated with the entire collection, including this
rule, is as follows:
Average Burden Hours Per Response--.1587 hour.
Number of Respondents--3709.
Frequency of Response--Daily.
The burden associated with this specific proposed rule, is as
follows:
Average Burden Hours Per Response--0.2 hour.
Number of Respondents--6,592.
Frequency of Response--On occasion.
Copies of the OMB-approved information-collection requirements may
be obtained from Jeff Hill, Office of Management and Budget, Room 3228,
NEOB, Washington, DC 20503, (202) 395-7340.
List of Subjects in 17 CFR Part 17
Brokers, Commodity Futures, Reporting and Recordkeeping
Requirements.
In consideration of the foregoing, and pursuant to the authority
contained in the Act and, in particular, sections 4g, 4i, 5, and 8a of
the Act, 7 U.S.C. 6g, 6i, 7, and 12a (1994), the Commission hereby
amends Chapter I of Title 17 of the Code of Federal Regulations as
follows:
PART 17--REPORTS BY FUTURES COMMISSION MERCHANTS, MEMBERS OF
CONTRACT MARKETS AND FOREIGN BROKERS
1. The authority citation for part 17 continues to read as follows:
Authority: 7 U.S.C. 6a, 6d, 6f, 6g, 6i, 7, and 12a.
2. Section 17.01 is revised to read as follows:
Sec. 17.01 Special account designation and identification.
When a special account is reported for the first time, the FCM,
clearing member, or foreign broker shall identify the account to the
Commission or to the contract market on form 102 showing the
information in paragraphs (a) through (f) of this section.
(a) Special account designator. A unique identifier for the
account. Provided, that the same designator is assigned for option and
futures reporting, and the identifier is not changed or assigned to
another account without prior approval of the Commission or its
designee.
(b) Special account identification. The name, address, business
phone, and for individuals, the person's job title and employer for the
following:
(1) The person originating the account, if the special account is a
house omnibus or customer omnibus account; or
(2) The person (i.e., individual, corporation, partnership, etc.)
who owns the special account, if such person (or an employee or
officer) also controls the trading of the special account. And, in
addition:
(i) The registration status of the person as a commodity trading
advisor or a securities investment advisor;
(ii) the legal organization of the person and the person's
principal business or occupation;
(iii) account numbers and account names included in the special
account, if different than supplied in paragraph (b)(2) of this
section;
(iv) the name and location of all persons not identified in
paragraph (b)(2) of this section having a ten percent or more financial
interest in the special account, indicating those having discretionary
trading over the account; and
(v) for special accounts with five or fewer persons having trading
authority, the names and locations of all persons with trading
authority that have not been identified in paragraphs (b)(2) or
(b)(2)(iv) of this section; or
(3) the account controller, if trading of the special account is
controlled by a person or legal entity who is an independent account
controller for the account owners as defined in Sec. 150.1(e). And, in
addition:
(i) the registration status of the person as a commodity trading
advisor or a securities investment advisor;
(ii) if ten or more accounts are controlled by the independent
advisor, the account number and the name of each commodity pool that is
controlled by the advisor and the name and location of the commodity
pool operator;
(iii) if fewer than ten accounts are under control of the
independent advisor, for each account the account number and the name
and location of each person having a ten percent or more financial
interest in the account. For commodity pools, provide the account
number, name of the pool, and name and location of the commodity pool
operator; and
(iv) on call by the Commission or its designee, for each account
controlled by
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the independent advisor, the account number and account name and the
name and location of each person having a ten percent or more financial
interest in the account.
(c) Other accounts. If the person identified in paragraphs (b)(1),
(b)(2) or (b)(3) of this section either controls or has a financial
interest of ten percent or more in an account not included in this
special account, report the account number and the name of the account.
(d) Commercial use. For futures or options, commodities in which
positions or transactions in the account are associated with a
commercial activity of the account owner in a related cash commodity or
activity (i.e., those considered as hedging, risk-reducing, or
otherwise off-setting with respect to the cash commodity or activity).
(e) Account executive. The name and business telephone number of
the associated person of the FCM who has solicited and is responsible
for the account or, in the case of an introduced account, the name and
business telephone number of the introducing broker who introduced the
account.
(f) Reporting firm. The name and address of the FCM clearing
member, or foreign broker carrying the account, the signature, title,
and business phone of the authorized representative of the firm filing
the report, and the date of signing the form 102.
(g) Form 102 updates. If, at the time an account is in special
account status and a form 102 filed by an FCM, clearing member, or
foreign broker is then no longer accurate because there has been a
change in the information required under paragraph (b) of this section
since the previous filing, the FCM, clearing member, or foreign broker
shall file an updated form 102 with the Commission or the contract
market, as appropriate, within three business days after such change
occurs.
3. Section 17.02 is amended by revising the introductory text and
paragraph (b), and adding a new paragraph (c) to read as follows:
Sec. 17.02 Place and time of filing reports.
Unless otherwise instructed by the Commission or its designee, the
reports required to be filed by FCMs, clearing members, and foreign
brokers under Secs. 17.00 and 17.01 shall be filed at the nearest
appropriate Commission office as specified in paragraphs (a), (b), and
(c) of this section, wherein the times stated are eastern times for
information concerning markets located in that time zone, and central
time for information concerning all other markets.
(a) * * *
(b) For data submitted in hard-copy form pursuant to Secs. 17.00
(a), or (h) at a Commission office by facsimile or as otherwise
specified in accordance with instructions by the Commission or its
designee. Data in hard-copy form required under Sec. 17.00(a) shall be
submitted no later than 9 a.m. on the business day following that to
which the information pertains.
(c) For data submitted pursuant to Sec. 17.01 on the form 102;
(1) on call by the Commission or its designee, the type of special
account specified in 1(a), 1(b), or 1(c) of form 102, and the name and
location of the person to be identified in 1(d) on the form 102 by
facsimile or telephone on the same day that the special account in
question is first reported to the Commission; and
(2) a completed form 102 within three business days of the first
day that the special account in question is reported to the Commission.
Note: The following form will not appear in the Code of Federal
Regulations.
Issued in Washington, DC, February 12th, 1996, by the
Commission.
Jean A. Webb,
Secretary of the Commission.
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[FR Doc. 96-3568 Filed 2-16-96; 8:45 am]
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