[Federal Register Volume 62, Number 70 (Friday, April 11, 1997)]
[Rules and Regulations]
[Pages 17700-17702]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-9398]
[[Page 17700]]
=======================================================================
-----------------------------------------------------------------------
COMMODITY FUTURES TRADING COMMISSION
17 CFR Part 1
Contract Market Rule Review Procedures
AGENCY: Commodity Futures Trading Commission.
ACTION: Final rules.
-----------------------------------------------------------------------
SUMMARY: The Commodity Futures Trading Commission (``Commission'') is
amending Regulation 1.41a to revise certain procedures relating to the
review of contract market rules. Related amendments revising the
procedures and time periods applicable to the Commission's review of
contract market rules previously have been adopted.1 The
instant amendments revise Regulation 1.41a, which governs the authority
delegated to the Director of the Division of Trading and Markets and
the Director of the Division of Economic Analysis for purposes of
processing certain contract market rule submissions. Specifically, the
instant amendments revise Regulation 1.41a to conform to the procedures
and time periods previously adopted by the Commission. The instant
amendments also include several clarifying revisions of Regulation
1.41a.
---------------------------------------------------------------------------
\1\ See 62 FR 10427. That notice announced the adoption of
amendments to Commission Regulations 1.41(a) and 1.41(b). These
amendments, which revise the procedures for the review of contract
market rules, will become effective on April 7, 1997.
---------------------------------------------------------------------------
EFFECTIVE DATE: April 11, 1997.
FOR FURTHER INFORMATION CONTACT: Clarence Sanders, Attorney, Division
of Trading and Markets, Commodity Futures Trading Commission, Three
Lafayette Centre, 1155 21st Street NW, Washington, D.C. 20581.
Telephone: (202) 418-5484.
SUPPLEMENTARY INFORMATION:
I. Introduction
Section 5a(a)(12)(A) of the Commodity Exchange Act (``Act''), 7
U.S.C. Sec. 7a(a)(12)(A), provides that all rules 2 of a
contract market that relate to terms and conditions 3 in
futures or options contracts traded on or subject to the rules of a
contract market must be submitted to the Commission for its prior
approval. Section 5a(a)(12)(A) further requires that contract markets
submit all other rules to the Commission. Such other rules may be made
effective ten days after Commission receipt unless, within the ten-day
period, the Exchange requests Commission approval or the Commission
notifies the Exchange that it intends to review the rules for approval.
---------------------------------------------------------------------------
\2\ Commission Regulation 1.41(a)(1) defines ``rule'' of a
contract market to mean:
* * * any constitutional provision, article of incorporation,
bylaw, rule, regulation, resolution, interpretation, stated policy,
or instrument corresponding thereto, in whatever form adopted, and
any amendment or addition thereto or repeal thereof, made or issued
by a contract market, or by the governing board thereof or any
committee thereof.
\3\ Commission Regulation 1.41(a)(2) defines ``terms and
conditions'' to mean:
* * * any definition of the trading unit or the specific
commodity underlying a contract for future delivery of a commodity
or commodity option contract, specification of settlement or
delivery standards and procedures, and establishment of buyers' and
sellers' rights and obligations under the contract. Terms and
conditions shall be deemed to include provisions relating to the
following:
(i) Quality or quantity standards for a commodity and any
applicable exemptions or discounts;
(ii) Trading hours, trading months and the listing of contracts:
(iii) Minimum and maximum price limits and the establishment of
settlement prices;
(iv) Position limits and position reporting requirements;
(v) Delivery points and locational price differentials;
(vi) Delivery standards and procedures, including alternatives
to delivery and applicable penalties or sanctions for failure to
perform;
(vii) Settlement of the contract;
(viii) Payment or collection of commodity option premiums or
margins.
---------------------------------------------------------------------------
As noted above, the Commission recently revised the procedures
under which it conducts reviews of contract market rules. These
revisions generally streamline the procedures and shorten the review
periods applicable to the Commission's review of contract market rules.
The Commission is now revising its rules applicable to the delegation
of authority to the Director of the Division of Trading and Markets and
the Director of the Division of Economic Analysis (collectively, ``the
Directors'') as set out in Commission Regulation 1.41a. Specifically,
Regulation 1.41a delegates to the Directors the authority to make
certain decisions regarding rule submissions. The primary effect of the
instant amendments is to delegate additional authority to the Directors
in order to apply the revised procedures and time periods for
Commission review of contract market rules in an effective manner.
II. Amendments to Regulation 1.41a
A. Regulation 1.41a(2)(ii)--Notification That Rules Require Approval
Several provisions of the Act other than Section 5a(a)(12)(A)
require Commission approval of contract market rules: Section 4b(b)
(crossing of orders); Section 4c(a) (exchange of futures for physicals,
transfer trades and office trades); and Section 4f(b) (financial
requirements for futures commission merchants). Paragraph (a)(2) is
being amended to state that the Directors have delegated authority to
determine and to notify a contract market that a rule submitted
pursuant to Section 5a(a)(12)(A) of the Act and Regulation 1.41(c) for
implementation without Commission approval constitutes a rule that
requires prior Commission approval pursuant to a specific Section of
the Act or under a Commission regulation other than Regulation 1.41(b).
Current Regulation 1.41a delegates to the Directors the authority to
remit such a rule but does not expressly state that the Directors may
notify a contract market of their determination to review such rule for
Commission approval.
B. Regulation 1.41a(3) (i) and (ii)--Notification That Rules May be
Placed into Effect Without Approval
Currently, paragraph (a)(3) states that the Directors may determine
whether rules submitted under Regulation 1.41(c) do not require prior
Commission approval under Section 5a(a)(12)(A) of the Act and
Regulation 1.41(b) and that such rules may become effective prior to
the expiration of the ten day period following the Commission's receipt
of such rules. Under the amendments, paragraph (a)(3) is being divided
into three subparagraphs in order to incorporate the revised procedures
and time periods previously adopted by the Commission for the review of
contract market rules.
New paragraph (a)(3)(i), which includes the pre-existing provisions
of paragraph (a)(3), is being amended to provide that the Directors may
notify a contract market, as well as determine, that rules submitted
for implementation without Commission approval do not require such
approval under either Regulation 1.41(b) or 1.41(c). This change simply
incorporates the condition that contract market rules that do not
relate to terms and conditions, but that require approval under another
provision of the Act or regulations, are to be submitted pursuant to
Regulation 1.41(c) under the Commission's revised procedures for
reviewing contract market rules instead of Regulation 1.41(b), as was
formerly the case.
New paragraph (a)(3)(ii) provides that the Directors may determine
and notify a contract market that rules submitted for Commission
approval under Regulation 1.41(c) do not require prior Commission
approval under Section 5a(a)(12)(A) of the Act and Regulation 1.41(b)
or Regulation 1.41(c) and may be made effective at the expiration of
the applicable review period. As in the case of paragraph (a)(3)(i),
paragraph (a)(3)(ii)
[[Page 17701]]
is being added to Regulation 1.41a to incorporate the requirement that
rules which do not relate to terms and conditions, but which
nonetheless require Commission approval under another provision of the
Act or regulations, must be submitted pursuant to Commission Regulation
1.41(c).
More significantly, paragraph (a)(3)(ii) delegates to the Directors
the authority to determine whether a rule submitted for Commission
approval, but which neither the Act nor the Commission's regulations
require to be reviewed for approval prior to implementation, should be
implemented without Commission approval at the expiration of the
applicable review period. Previously, absent Commission approval, such
implementation was only available at the expiration of 180 days
following Commission receipt of the contract market rule. Thus, the
amendments enable the Directors to make this determination in
conformity with the Commission's previously revised review procedures
and time periods, prior to the expiration of the 180 day
period.4
---------------------------------------------------------------------------
\4\ This amendment of Regulation 1.41a, combined with the
Commission's revised contract market rule review procedures,
authorize the Directors to make the determination to notify a
contract market that a rule voluntarily submitted by a contract
market for Commission approval could be implemented without
Commission approval at the expiration of ten, 45, or 75 days,
whichever was applicable. Absent such amendment, the contract market
rule could not be implemented absent Commission approval until the
expiration of the 180 day period following Commission receipt of the
rule.
---------------------------------------------------------------------------
C. Regulation 1.41a(3)(iii)--Notification that Rules Raise Novel or
Complex Issues
New paragraph (a)(3)(iii) delegates authority to the Directors to
administer those contract market rules submitted for Commission
approval under Regulation 1.41(c) but which raise novel or complex
issues, or are of major economic significance. This amendment simply
provides that the Directors may determine and notify a contract market
that the review period for the rule submission is being extended per
the applicable review periods set out in Regulation 1.41(c)(1)(iii).
III. Related Matters
A. Notice and Comment
The Administrative Procedure Act, 5 U.S.C. Sec. 553(b), requires in
most instances that a notice of proposed rulemaking be published in the
Federal Register and that opportunity for comment be provided when an
agency promulgates new regulations. Section 553(b) sets forth an
exception, however, for rules of agency organization, procedure, or
practice. The instant amendments apply expedited procedures to the
authority delegated to the Directors of the Divisions of Trading and
Markets and Economic Analysis for the review of certain contract market
rules. The Commission has determined that these amendments relate to
internal Commission procedure and therefore that notice and comment is
not required.
Section 553(b) also sets forth an exception to the requirement of
notice and opportunity for public comment when the Commission for good
cause finds such notice and public comment are unnecessary or contrary
to the public interest. Section 553(d) provides that publication of a
substantive rule shall be made not less than thirty days before its
effective date unless as otherwise provided by the agency for good
cause found. The Commission finds that notice and public comment on the
rule changes announced herein are unnecessary and they can be made
effective immediately because the changes do not limit any person's
substantive rights and do not establish any new obligations under the
Act. To the contrary, these changes simplify compliance with the Act by
delegating authority to the Directors to process contract market rules
according to standards which shorten the time periods applicable to the
review of contract market rules and which have been previously adopted
following notice and comment.
B. Regulatory Flexibility Act
The Regulatory Flexibility Act (``RFA''), 5 U.S.C. Sec. 601 et
seq., requires that agencies, in adopting rules, consider the impact of
those rules on small businesses. The RFA defines the term ``rule'' to
mean ``any rule for which the agency publishes a general notice of
proposed rulemaking pursuant to [5 U.S.C.] Sec. 553(b).'' As noted
above, however, Sec. 553(b) does not require that the Commission
publish a notice of proposed rulemaking for the amendments to
Regulation 1.41a, and a flexibility analysis of these amendments is
therefore not required. See Sec. 601(2). See also Secs. 603 and
604.5
---------------------------------------------------------------------------
\5\ A flexibility analysis would not be required in any case in
this matter, since the amendments would affect contract markets,
which the Commission previously has determined are not ``small
entities'' for purposes of the RFA. Thus, these rule amendments
would not have a significant economic impact on a substantial number
of ``small entities.'' See Sec. 605(b).
---------------------------------------------------------------------------
C. Paperwork Reduction Act
The Paperwork Reduction Act of 1980 (``PRA''), 44 U.S.C. Sec. 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. While the rule
amendments adopted herein have no burden, the group of rules (3038-
0022) of which this is a part has the following burden:
Average burden hours per response....... 3,546.26
Number of respondents................... 10,971.00
Frequency of response................... On Occasion
Persons wishing to comment on the information that would be
required by the proposed rulemaking should contact David Rostker,
Office of Management and Budget (``OMB''), Room 3228, NEOB, Washington,
D.C. 20503, (202) 395-7340. Copies of the information collection
submission to OMB are available from Gerald P. Smith, Clearance
Officer, Commodity Futures Trading Commission, Three Lafayette Center,
1155 21st Street N.W., Washington D.C. 20581. Telephone: (202) 418-
5160.
List of Subjects in 17 CFR Part 1
Commodity exchanges, Contract markets, Rule review procedures.
In consideration of the foregoing and pursuant to the authority
contained in the Commodity Exchange Act and, in particular, sections
4c, 5, 5a, 6 and 8a thereof, 7 U.S.C. Secs. 6c, 7, 7a, 8 and 12a, the
Commission hereby amends Title 17, Chapter I, Part 1 of the Code of
Federal Regulations as follows:
PART 1--GENERAL REGULATIONS UNDER THE COMMODITY EXCHANGE ACT
1. The authority citation for Part 1 continues to read as follows:
Authority: 7 U.S.C. 1a, 2, 2a, 4, 4a, 6, 6a, 6b, 6c, 6d, 6e, 6f,
6g, 6h, 6i, 6j, 6k, 6l, 6m, 6n, 6o, 6p, 7, 7a, 8, 9, 12, 12a, 12c,
13a, 13a-1, 16, 16a, 19, 21, 23, and 24.
2. Section 1.41a is amended by revising paragraphs (a)(2) and
(a)(3) to read as follows:
Sec. 1.41a Delegation of authority to the Directors of the Division of
Trading and Markets and the Division of Economic Analysis to process
certain contract market rules.
(a) * * *
(2) Pursuant to Secs. 1.41(b) or 1.41(c) to determine, and to
notify a contract market, that:
(i) Pursuant to Sec. 1.41(b), a rule submitted pursuant to section
5a(a)(12)(A) of the Act and Sec. 1.41(c) relates to terms and
conditions, as defined in Sec. 1.41(a)(2);
[[Page 17702]]
(ii) Pursuant to Sec. 1.41(c), a rule submitted pursuant to section
5a(a)(12)(A) of the Act and Sec. 1.41(c) for implementation without
Commission approval constitutes a rule that requires prior Commission
approval pursuant to a specific section of the Act or Commission
regulations;
(3) Pursuant to Sec. 1.41(c) to determine, and to notify a contract
market, that:
(i) Rules submitted for implementation without Commission approval
under Sec. 1.41(c) do not require prior Commission approval under
section 5a(a)(12)(A) of the Act and Sec. 1.41(b) or Sec. 1.41(c) and
that such rules may become effective prior to the expiration of the ten
day period following the receipt of such rules by the Commission;
(ii) Rules submitted for Commission approval under Sec. 1.41(c) do
not require prior Commission approval under section 5a(a)(12)(A) of the
Act and Sec. 1.41(b) or Sec. 1.41(c) and may be made effective at the
expiration of the applicable review period;
(iii) Rules submitted for Commission approval under Sec. 1.41(c)
raise novel or complex issues, or are of major economic significance,
and that the review period has been extended pursuant to
Sec. 1.41(c)(1)(iii); and
* * * * *
Issued in Washington, D.C., on April 7, 1997, by the Commission.
Jean A. Webb,
Secretary of the Commission.
[FR Doc. 97-9398 Filed 4-10-97; 8:45 am]
BILLING CODE 6351-01-P
