2017-08222. Fees for Reviews of the Rule Enforcement Programs of Designated Contract Markets and Registered Futures Associations

AGENCY:

Commodity Futures Trading Commission.

ACTION:

Notice of 2016 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 (“NFA”), a registered futures association, and the designated contract markets. The calculation of the fee amounts charged for 2016 by this notice is based upon an average of actual program costs incurred during fiscal year (“FY”) 2013, FY 2014, and FY 2015.

DATES:

Effective: Each self-regulatory organization is required to remit electronically the applicable fee on or before June 23, 2017.

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): 181 percent for FY 2013, and 180 percent for FY 2014, and 211 percent for FY 2015.

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	2016 Assessed fee
	FY 2013	FY 2014	FY 2015
CBOE Futures	$235,567		$158,209	$131,259	1.22	$73,074	$73,074
Chicago Board of Trade	164,974	$55,515	17,938	79,476	30.08	223,017	79,476
Chicago Mercantile Exchange	391,917	225,701	540,151	385,923	44.03	461,189	385,923
ELX Futures	134,267			44,756	0.00	22,378	22,378
ICE Futures U.S.	360,223	81,176	105,864	182,421	10.21	153,429	153,429
Kansas City Board of Trade	559			186	0.06	467	186
Minneapolis Grain Exchange	220,975	47,648	147,983	138,868	0.05	69,741	69,741
NADEX North American	101,252	980		34,077	0.08	17,505	17,505
New York Mercantile Exchange	135,316	225,672	118,701	159,897	13.84	164,294	159,897
NYSE LIFFE US	24,802			8,267	0.13	4,909	4,909
One Chicago	128,599	31,196	289	53,362	0.28	28,384	28,384
Subtotal	1,898,452	667,888	1,089,134	1,218,491	100	1,218,387	994,902
National Futures Association	186,499	292,102	401,337	293,312			293,312
Total	2,084,950	959,990	1,490,471	1,511,804			1,288,214

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 $79,476.

b. The alternative computation is: (.5) ($79,476) + (.5) (.30) ($1,218,491) = $223,017.

c. The fee is the lesser of a or b; in this case $79,476.

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 2013 through 2015 was $293,312. The fee to be paid by the NFA for the current fiscal year is $293,312.

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	2016 Fee lesser of actual or calculated fee
CBOE Futures	$131,259	1.22	$73,074
Chicago Board of Trade	79,476	30.08	79,476
Chicago Mercantile Exchange	385,923	44.03	385,923
ELX Futures	44,756	0.00	22,378
ICE Futures U.S	182,421	10.21	153,429
Kansas City Board of Trade	186	0.06	186
Minneapolis Grain Exchange	138,868	0.05	69,741
NADEX North American	34,077	0.08	17,505
New York Mercantile Exchange	159,897	13.84	159,897
NYSE LIFFE US	8,267	0.13	4,909
One Chicago	53,362	0.2795	28,384
Subtotal	1,218,491	100	994,902
National Futures Association	293,312		293,312
Total	1,511,804		1,288,214

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 http://www.cftc.gov,, specifically, http://www.cftc.gov/​cftc/​cftcelectronicpayments.htm.

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

Issued in Washington, DC, on April 19, 2017, by the Commission.

Robert N. Sidman,

Deputy 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.