01-15435. Study of the Commodity Exchange Act and Rules Thereunder

AGENCY:

Commodity Futures Trading Commission.

ACTION:

Notice of solicitation of comments.

SUMMARY:

The Commodity Futures Trading Commission (Commission) is soliciting comments to assist it in conducting a study of the Commodity Exchange Act (Act) and the Commission's rules and orders governing the conduct of registrants under the Act, as mandated by Section 125 of the Commodity Futures Modernization Act of 2000 (CFMA). That provision requires that the Commission, in conducting the study, solicit the views of the public, Commission registrants, registered entities and registered futures associations, and that an analysis of comments received be included in the report of the results of the study to the Commission's Congressional oversight committees.

DATES:

Comments must be received by August 21, 2001.

ADDRESSES:

Comments may be sent to Jean A. Webb, Secretary of the Commission, Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street, NW., Washington, DC 20581. In addition, comments may be sent by facsimile transmission to [phone], or by electronic mail to [e-mail]. Reference should be made to “Intermediaries Study.”

FOR FURTHER INFORMATION CONTACT:

Lawrence B. Patent, Associate Chief Counsel, or Barbara S. Gold, Assistant Chief Counsel, Division of Trading and Markets, Commodity Futures Trading Commission, Three Layfayette Centre, 1155 21st Street NW., Washington, DC 20581. Mr. Patent may be reached by telephone at [phone] or by electronic mail at [e-mail] and Ms. Gold may be reached by telephone at [phone] or by electronic mail at [e-mail].

SUPPLEMENTARY INFORMATION:

The CFMA, enacted last December as part of the Consolidated Appropriations Act, 2001 (Public Law No. 106-554, 114 Stat. 2763), requires the Commission to conduct a study of the Act and the Commission's rules and orders governing the conduct of persons required to register under the Act.^[1] The study must address: (1) The core principles and interpretations of acceptable business practices that the Commission has adopted or intends to adopt to replace provisions of the Act and rules thereunder, and the extent to which these changes have been or may be made pursuant to the Commission's exemptive authority under Section 4(c) of the Act; (2) the rules that the Commission has determined must be retained and the reasons therefor; and (3) the regulatory functions that the Commission performs that can be delegated to a registered futures association and the regulatory functions that the Commission has determined must be retained and the reasons therefor. In conducting the study, the Commission must solicit the views of the public as well as Commission registrants, registered entitles,^[2] and registered futures associations. The study must be completed by December 21, 2001 (which is one year from the date of enactment of the CFMA) and a report of the results of the study, including an analysis of comments received, must be transmitted to the Commission's Congressional oversight committees, the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition and Forestry of the Senate. The Commission is publishing this notice of solicitation of comments to assist it in conducting the study.

Persons wishing to comment should organize their comments as follows: (1) Identify by section number, rule number, or Federal Register citation the particular provision of the Act, the Commission's rules, or the Commission's orders, respectively, upon which comment is being provided; (2) indicate whether that provision should be (a) amended, (b) revoked without replacement, (c) revoked and replaced with a core principle and statement of acceptable business practices, or (d) retained; (3) include the proposed text of any suggested amendment or core principle and statement of acceptable business practices; (4) include a brief discussion in support of the suggested action and describe any problems encountered in complying with the existing relevant statutory and regulatory framework; (5) indicate, if applicable, whether the suggested change may be made pursuant to the Commission's exemptive authority in Section 4(c) of the Act; and (6) identify any regulatory functions that the Commission performs that can be delegated to a registered futures association and include a brief discussion to support such a delegation.

Because of the potential for conflicting comments, it would aid the Commission's analysis if commenters also indicated the relative importance of proposed changes. This can be done by ranking them in priority order or, at least, by categorizing them in some fashion, e.g., high priority, medium priority, and low priority.

Commenters should be aware that the Commission intends, as it has stated previously, to repropose and readopt those provisions of the New Regulatory Framework relating to intermediaries that were adopted and then withdrawn last year that are not affected by the CFMA, with any necessary technical, conforming changes. These new rules and rule amendments address, among other things, the definition of the term “principal,” the addition of a principal, certified financial reports, ethics training, disclosure, account opening procedures, trading standards, reporting requirements, and offsetting positions.^[3] Commenters should also be aware that the Commission has already delegated to a registered futures association certain functions concerning registration processing and statutory disqualification, financial monitoring and auditing, review of sales practices, review of CPO and CTA Disclosure Documents, and matters related to foreign futures and options.

Commenters are reminded that all comments will be available for public inspection and copying and will be posted on the Commission's website, www.cftc.gov. The Commission also requests that any commenter that is a Commission registrant identify itself as such and include its registration category. Following a review of comments received, the Commission or its staff may conduct follow-up discussions with interested parties.

Issued by the Commission in Washington, DC on June 13, 2001.

Jean A. Webb,

Secretary of the Commission.

Footnotes

1.  Section 125 of the CFMA. Persons required to register under the Act include futures commission merchants, introducing brokers, commodity pool operators (CPOs), commodity trading advisors (CTAs), associated persons of any of the foregoing, floor brokers and floor traders. Those terms are defined in Section 1a(20), 1a(23), 1a(5), 1a(6), 4k, 1a(16) and 1a(17), respectively, of the Act, as amended by the CFMA.

2.  The definition of term “registered entities” was added to the Act by the CFMA as new Section 1a(29) and includes designated contract markets, registered derivatives transaction execution facilities, and registered derivatives clearing organizations. Designated contracts markets may include registered national securities exchanges, registered national securities associations, and alternative trading systems whose only futures-related activity involves security futures product. See Section 252(a) of the CFMA, adding a new Section 5f to the Act.

3.  66 FR 14262, 14267-68 (March 9, 2001); see also 65 FR 77993 (Dec. 13, 2000).