REVISED SUPPORTING STATEMENT FOR NEW
INFORMATION COLLECTIONS
Part 40, Provisions Common to Registered Entities
OMB CONTROL NUMBER 3038-AD07
1. Explain the circumstances that make the collection of information necessary. Identify any legal or administrative requirements that necessitate the collection. Attach a copy of the appropriate section of each statute and regulation mandating or authorizing the collection of information.
The Commission’s final regulations implement, among other provisions, Section 745 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”), which, effective July 15, 2011, amends Section 5c of the Commodity Exchange Act (“Act”) to provide new procedures for the submission of rules and rule amendments by designated contract markets, swap execution facilities, derivatives clearing organizations, and swap data repositories. The Commission’s final regulations also revise existing requirements for the submission of new products.
Section 5c(c)(1) of the Act, as amended by Dodd-Frank, reads as follows:
A registered entity may elect to list for trading or accept for clearing any new contract, or other instrument, or may elect to approve and implement any new rule or rule amendment, by providing to the Commission . . . a written certification that the new contract or instrument or clearing of the new contract or instrument, new rule, or rule amendment complies with this Act (including regulations under this Act)(emphasis added).
The Commission’s final §§ 40.2, 40.3, 40.4, 40.5 and 40.6 establish the procedures for submitting the “written certification” required by Section 5c of the Act. In connection with a product or rule certification, the registered entity must provide a concise explanation and analysis of the submission and its compliance with statutory provisions of the Act.
Section 5c of the Act contemplates the provision of “adequate information” before new rules and rule amendments become effective. In fact, Section 5c of the Act authorizes the Commission to stay certain submissions, including those accompanied by inadequate explanations. Section 5c(c)(2) of the Act, as amended by Dodd-Frank, reads in relevant part as follows:
The new rule or rule amendment . . . shall become effective, pursuant to the certification of the registered entity . . . on the date that is 10 business days after the date on which the Commission receives the certification . . . unless the Commission notifies the registered entity . . . that it is staying the certification because there exist novel or complex issues that require additional time to analyze, an inadequate explanation by the submitting registered entity, or a potential inconsistency with this Act (including regulations under this Act)(emphasis added).
Accordingly, new rules or rule amendments must be accompanied by concise explanations and analyses of the purposes, operations, and effects of the submissions. This information may be submitted as part of the same submission containing the statutorily required “written certification.”
The explanation and analysis is necessary for administrative purposes. Recent product and rule submissions have included minimal supporting analyses and, in certain cases, no evidentiary basis for certifications of compliance at all. Without prompt receipt of supporting information, staff must expend significant resources and time to replicate an existing analysis or to otherwise independently establish a product or rule’s compliance with applicable law. The final provisions permit registered entities to support product and rule certifications in the manner that is most effective and least costly under the circumstances.
The Commission also is adopting special submission procedures for certain risk-related rules proposed by a systemically important derivatives clearing organization (“SIDCO”). The SIDCO regulations implement Section 806(e)(1) of the Dodd-Frank Act by requiring, among other things, 60-days advance notice of proposed rules that may materially affect the nature or level of risk presented by the SIDCO. Section 806(e)(1)(A) of the Dodd-Frank Act reads as follows:
A designated financial market utility shall provide notice 60 days in advance notice to its Supervisory Agency of any proposed change to its rules, procedures, or operations that could, as defined in rules of each Supervisory Agency, materially affect, the nature or level of risks presented by the designated financial market utility.
The information collections required by § 40.10 of the Commission’s regulations are mandated by this provision and should be only minimally burdensome for registered entities.
Finally, the Commission is adopting the previously proposed provisions in § 40.12, which governs the Commission’s review of certain novel derivative products subject to jurisdictional determinations by the Commission or the Securities and Exchange Commission (“SEC”). Importantly, § 40.12(a) permits—but does not require—registered entities to submit a notice of any new product submission or proposal to both the Commission and the SEC, with a statement that written notice has been provided to both agencies through an appropriate means provided in each Commission’s regulations. Section 718(a)(1)(A) of the Dodd-Frank Act reads as follows:
Any person filing a proposal to list or trade a novel derivative product that may have elements of both securities and contracts of sale of a commodity for future delivery (or options on such contracts or options on commodities) may concurrently provide notice and furnish a copy of such filing with the Securities and Exchange Commission and the Commodity Futures Trading Commission. Any such notice shall state that notice has been made with both Commissions (emphasis added).
The final regulation codifies language from the statute and does not require any action on the part of registered entities. Thus, the information collection burden should be minimal.
2. Indicate how, by whom, and for what purpose the date would be used. Except for a new collection, indicate the actual use the agency has made of the information received from the current collection.
The requested information is essential to the staff’s review of submissions and the Commission’s oversight of each registered entity’s self-regulatory actions. Staff generally conducts a due diligence review of new submissions and makes an independent determination concerning the registered entity’s compliance with the Act and regulations thereunder.
For new products, registered entities must submit information complying with either § 40.2 or
§ 40.3 as follows:
§ 40.2 requires: (1) a concise explanation and analysis of the new product and its compliance with applicable law (with appropriate references to data sources) and (2) a certification that the submission was posted on the registered entity’s website at the time of filing.
-or-
§ 40.3 requires: (1) a concise explanation and analysis of the new product and its compliance with applicable law (with appropriate references to data sources) and (2) a certification that the submission was posted on the registered entity’s website at the time of filing.
These regulations, as discussed, are necessary to the Commission’s administration of the Act, which requires new contracts to, among other things, not be susceptible to manipulation and have specified position limits or accountability levels. Without explanations and analyses of new submissions and certain certifications concerning prices and pricing sources, the Commission cannot effectively exercise its oversight responsibilities under the Act.
For general rules and rules implementing changes to the terms and conditions of products, registered entities must comply with either § 40.5 or § 40.6 as follows:
§ 40.5 requires: (1) an explanation and analysis of the purpose, operation, and effect of the proposed rule change; and, for each submission amending the terms and conditions of a previously certified contract and(2) a certification that the submission was posted on the registered entity’s website at the time of filing..
§ 40.6 requires two submissions: (1) a concise explanation and analysis of the operation, purpose, and effect of the rule submission; (2) a certification that the submission was posted on the registered entity’s website at the time of filing.
These regulations, as discussed, are contemplated by the statute and necessary to the Commission’s administration of the Act.
For certain risk management rules of SIDCOs, registered entities must comply with § 40.10 as follows:
§ 40.10 requires two submissions: (1) an advanced notice of any proposed rule changes that may materially affect the nature or level of risks presented by a systemically important derivatives clearing organization; and (2) if requested, supplementary information that is necessary for the Commission’s staff to review in order to assess the effect of any proposed rule changes.
Consistent with the Dodd-Frank Act’s purpose to mitigate systemic risks, Section 806 and this regulation thereunder ensure that large clearing institutions do not make operational or policy changes that could increase the risks to the financial system.
Finally, for certain novel derivative products, registered entities may—but are not required—to comply with § 40.12 as follows:
§ 40.12 permits registered entities to submit to the Commission or the Securities and Exchange Commission (“SEC”) a notice of the filing of a novel derivative product having elements of both securities and contracts for the sale of a commodity for future delivery (or options on such contracts or options on a commodity).
This promotes regulatory certainty, assists in ensuring appropriate oversight of novel financial instruments, and encourages less duplicative and more effective regulation by the Commission and the SEC.
3. Describe whether, and to what extent, the collection of information involves the use of automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g. permitting electronic submission of responses, and the basis for the decision for adopting this means of collection. Also describe any consideration of using information technology to reduce burden.
The Commission’s final regulations require all submissions to be submitted to the Commission electronically, which is consistent with existing regulations. The Commission intends to continue its practice of publishing all incoming submissions on its website and will continue developing an improved web portal at cftc.gov that, once completed, should expedite both Commission and public review of submissions. The Commission also intends to facilitate submissions and public comment on such submissions through the Commission’s website.
4. Describe efforts to identify duplication. Show specifically why any similar information already available cannot be used or modified for use for the purposes described in Item 2 above.
The regulations require registered entities to submit certain information—product terms and conditions, explanations of the cash market and other aspects of the product and its compliance with applicable law, rule changes and explanations of the operation, purpose and effect of such changes, notices of the certain risk management rules and novel derivatives products—that is not available from any other source and generally is specific to the registered entity.
5. If the collection of information involves small business or other small entities (Item 5 of OMB From 83-I), describe the methods used to minimize burden.
This collection of information will not have a significant impact on a substantial number of small entities.
6. Describe the consequence to the Federal Program or policy activities if the collection were conducted less frequently as well as any technical or legal obstacles to reducing burden.
The Commission’s Part 40 regulations do not require the submission of information on a periodic basis. Rather, submissions are required only at such time that registered entities seek to list new products or adopt new rules or rule amendments. The frequency of the required submissions depends on the frequency that registered entities seek to take one or more actions that require a filing with the Commission.
7. Explain any special circumstances that require the collection to be conducted in a manner:
requiring respondents to report information to the agency more often than quarterly;
As noted, registered entities are required to submit information to the Commission each time a new rule, rule amendment or product is adopted by the entity, or whenever a registered entity seeks Commission approval of a new rule, rule amendment or product.
requiring respondents to prepare a written response to a collection of information in fewer than 30 days after receipt of it:
The Commission is amending its proposed § 40.3(a)(11) to permit, at its discretion and upon receipt of written request from the registered entity, an extension of time for the submission of additional information. However, the default deadline for the submission of such information is two business days. The Commission notes that it has a limited timeframe for making final determinations under the product approval provisions of § 40.3 and the prompt receipt of requested information frequently is requisite to its determination regarding the submission.
requiring respondents to submit more that an original and two copies of any document;
Not applicable.
requiring respondents to retain records other than health, medical, government contract, grant-in-aid, or tax records, for more than three years;
Part 40 does not have provisions concerning the retention of documents.
in connection with a statistical survey, that is not designed to produce valid and reliable results that can be generalized to the universe of study;
Not applicable.
requiring the use of a statistical data classification that has not been reviewed and approved by OMB;
Not applicable.
that includes a pledge of confidentiality that is not supported by authority established in statue or regulation, that is not supported by disclosure and data security policies that are consistent with the pledge, or which unnecessarily impedes sharing of data with other agencies for compatible confidential use; or
Not applicable.
requiring respondents to submit proprietary trade secrets, or other confidential information unless the agency can demonstrate that it has instituted procedures to protect the information's confidentiality to the extent permitted by law.
In certain circumstances, registered entities must provide proprietary information in order for Commission staff to review rules and products for compliance with the Act and Commission regulations. Registered entities may request confidential treatment pursuant to § 40.8 and § 145.9 of 17 CFR Chapter 1.
8. If applicable, provide a copy and identify the date and page number of publication in the Federal Register of the agency's notice required by 5 CFR 1320.8(d), soliciting comments on the information collection prior to submission to OMB. Summarize public comments received in response to that notice and describe actions taken by the agency in response to these comments. Specifically address comments received on cost and hour burden.
A Federal Register Notice soliciting comments on this collection was published in the Federal Register (75 FR 67282 – 11/2/2010). The Commission did not receive public comments specific to its cost-benefit estimates and considerations during the notice’s public comment period. The Commission also invited the public “to submit any data or other information that [it] may have quantifying or qualifying the costs and benefits of the proposal with their comment letters.” The Commission received no such data or other information.
The Commission did, however, receive comments generally discussing the “burden” associated with the documentation and certification requirements proposed in §§ 40.2, 40.3, 40.5, and 40.6. Those comments suggested that the new provisions could substantially increase the time and resources required to prepare submissions and could potentially delay the introduction of new products and implementation of rules. Two comments suggested that the overall benefits of the regulations, as proposed, would not outweigh the overall costs to registered entities.
The Commission final rulemaking also addressed a post-comment period submission by a registered entity. This entity stated that the Act was amended to streamline the product and rule submission process and to eliminate the “substantial unnecessary paperwork” previously required to be submitted to the Commission. In its view, the documentation and pricing source certification requirements effectively reinstated the previous submission process by mandating that registered entities submit “massive amounts of documentation” for Commission review. The Commission notes that this comment related to proposed provisions that have been eliminated or revised in the final rulemaking.
In light of these comments, the Commission determined to adopt amendments to its proposed regulations to substantially reduce the information collection burdens on registered entities as follows:
the Commission revised the proposed documentation requirements in § 40.2 and § 40.3 to permit the submission of an appropriately detailed and cited explanation and analysis in lieu of documentation;
the Commission amended § 40.2 to apply only to designated contract markets and swap execution facilities and intends to implement new product clearing submission requirements in a new § 39.5 (in a separate rulemaking);
the Commission eliminated the documentation requirements in § 40.5 and § 40.6;
the Commission provided new provisions for class certifications of certain swaps;
the Commission amended § 40.6(a) to make rules delisting or withdrawing the certification of products effective upon submission;
the Commission eliminated a previously proposed certification provision concerning the use of third-party prices;
the Commission revised § 40.3 to permit registered entities to request additional time for the submission of certain supplementary information;
the Commission eliminated a previously proposed provision requiring “[w]henever possible, all proposed swap or contract terms and conditions [to] conform to industry standards or those terms and conditions adopted by comparable contracts;”
The Commission limited the application of § 40.12 to novel derivative products that are not subject to the forthcoming provisions of § 1.8.
These amendments should result in significant cost reductions relative to initially proposed regulations. In fact, as discussed, the average annual burden for the 70 anticipated registered entities may be reduced by nearly 40%—from an estimated 335 hours per year per registered entity to approximately 202 hours per year per registered entity.
To the extent that the Commission’s final regulations impose any additional costs or burdens on registered entities, these costs or burdens would require a single part-time staff person to handle new requirements related to product and rule submissions to the Commission. Thus, the Commission believes that its final regulations impose only the minimum requirements necessary to enable it to perform its oversight functions and to carry out its statutory responsibilities under the Act.
Describe efforts to consult with persons outside the agency to obtain their views on the availability of data, frequency of collection, the clarity of instructions and recordkeeping disclosure, or reporting format (if any, and on the data elements to be recorded, disclosed, or reported.
The Commission shared its final regulations with the Securities and Exchange Commission, the U.S. Department of the Treasury, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Board of Governors of the Federal Reserve System. These agencies did not recommend changes to the Commission’s final rulemaking. In addition, the Commission invited the public “to submit any data or other information that [it] may have quantifying or qualifying the costs and benefits of the proposal with their comment letters.” The Commission received no such data or other information.
Consultation with representatives of those from whom information is to be obtained or those who must compile records should occur at least once every 3 years - even if the collection of information activity is the same as in prior periods. There may be circumstances that may preclude consultation in a specific situation. These circumstances should be explained.
Not applicable.
9. Explain any decision to provide any payment or gift to respondents, other than remuneration of contractors or grantees.
Not applicable.
10. Describe any assurance of confidentiality provided to respondents and the basis for the assurance in statute, regulations, or agency policy.
The Commission does not provide respondents with an assurance of confidentiality. However, the Commission must comply with Section 8(a)(1) of the Act, which strictly prohibits the Commission, unless specifically authorized by the Act, from making public “data and information that would separately disclose the business transactions or market positions of any person and trade secrets or names of customers.” §§ 40.8 and 145.9 allow registered entities to request confidential treatment of information submitted pursuant to Part 40.
11. Provide additional justification for any questions of a sensitive nature, such as sexual behavior and attitudes, religious beliefs, and other matters that are commonly considered private. This justification should include the reasons why the agency considers the questions necessary, the specific uses to be made of the information, the explanation to be given to persons from whom the information is requested, and any steps to be taken to obtain their consent.
None of the regulations require the submission of sensitive information, as that term is used in Question 11.
12. Provide estimates of the hour burden of the collection of information. The Statement should:
Indicate the number of respondents, frequency of response, annual hour burden and an explanation of how the burden was estimated. Unless directed to do so, agencies should not conduct special surveys to obtain information on which to base hour burden estimates. Consultation with a sample (fewer than ten) of potential respondents is desirable. If the hour burden on respondents is expected to vary widely because of differences in activity, size or complexity, show the range of estimated hour burden, and explain the reasons for the variance. Generally, estimates should not include burden hours for customary and usual business practices.
If the request for approval covers more than one form, provide separate hour burden estimates for each form and aggregate the hour burdens in Item 13 of OMB Form 83-I.
Provide estimates of annualized cost to respondents for the hours burdens for collections of information, identifying and using appropriate wage rate categories. The cost of contracting our or paying outside parties for information collection activities should not be included here. Instead, this cost should be included in Item 13.
See Attachment A. The Commission estimates that approximately 70 respondents will file a total of 7,040 responses annually. The estimated average number of hours per response varies, as noted below.
13. Provide an estimate of the total annual cost burden to respondents or recordkeepers resulting form the collection of information. (Do not include the cost of any hour burden shown in Items 12 and 14).
The cost estimate should be split into two components; (a) a total capital and start-up cost component (annualized over its expected useful life) and (b) a total operation and maintenance and purchase of services component. The estimates should take into account costs associated with generating, maintaining, and disclosing or providing the information. Include descriptions of methods used to estimate major costs factors including system and technology acquisition, expected useful life of capital equipment, the discount rate(s), and the time period over which costs will be incurred. Capital and start-up costs include, among other items, preparations for collecting information such as purchasing computers and software, monitoring, sampling, drilling and testing equipment, and record storage facilities.
If cost estimates are expected to vary widely, agencies should present ranges of cost burdens and explain the reasons for the variance. The cost of purchasing or contracting out information collection services should be a part of this cost burden estimate, agencies may consult with a sample of respondents (fewer than ten), utilize the 60-day pre-OMB submission public comment process and use existing economic or regulatory impact analysis associated with the rulemaking containing the information collection, as appropriate.
Generally, estimates should not include purchases of equipment or services, or portions thereof, made: (1) prior to October 1, 1995, (2) to achieve regulatory compliance with requirements not associated with the information collection, (3) for reasons other than to provide information or keep records for the government, or (4) as part of customary and usual business or private practices.
Total costs are estimated to be $988,444.80 or approximately $14,120.64 per registered entity per year (using a $70 per hour compliance officer figure). See Appendix A below.
14. Provide estimates of the annualized costs to the Federal Government. Also provide a description of the method used to estimate cost, which should include quantification of hours, operational expenses (such as equipment, overhead, printing and support staff), and any other expense that would not have been incurred without this collection of information. Agencies may also aggregate cost estimates from Items 12, 13, and 14 in a single table.
The final regulations should reduce the time and resources required for review of new product and rule filings made by registered entities. The regulations require no new start-up or operations and maintenance costs.
15. Explain the reasons for any program changes or adjustments reported in Items 13 or 14 of the OMB Form 83-I.
Many of the changes or adjustments to the Commission’s regulations are required by the Dodd-Frank Act, which substantially revised the Act and its regulatory regime. For additional detail, please see above.
16. For collection of information whose results are planned to be published for statistical use, outline plans for tabulation, statistical analysis, and publication. Provide the time schedule for the entire project, including beginning and ending dates of the collection of information, completion of report, publication dates, and other actions.
Not applicable.
17. If seeking approval to not display the expiration date for OMB approval of the information collection, explain the reasons that display would be inappropriate.
Not applicable.
18. Explain each exception to the certification statement identified in Item 19, "Certification for Paperwork Reduction Act Submissions," of OMB Form 83-I.
Not applicable.
Attachment A
Part 40 – Rules Pertaining to Contract Markets and Their Members
OMB Collection File 3038-AD07
Number of Respondents 70
Estimated Average Hours Per Response 2-5 (see below)
% of Responses Collected Electronically 100
Frequency of Reporting No required periodic filings.
Burden |
Responses |
Burden Hours |
Burden Costs ($70/hr) |
New |
7,040 |
14,120.64 |
$988,444.80 |
Previous |
5,978 |
15,084 |
$1,055,880 |
Difference |
1,062 |
(8,280) |
($67,435.20) |
Final §§ 40.2, 40.3, 40.5 and 40.6 require each registered entity to comply with new certification and approval requirements when seeking to implement new products, rules, and rule amendments, including changes to product terms or conditions. In light of the amendments to the Commission’s final regulations, noted above, the Commission revises its previous estimates as follows:
Estimated number of respondents: 701
Annual responses by each respondent: 1002
Estimated average hours per response: 2.003
Aggregate annual reporting burden: 14,000
§ 40.10 requires SIDCOs to provide to the Commission 60 days advance notice of proposed changes to rules, procedures or operations that could materially affect the nature or level of risks presented by the SIDCO.
Estimated number of respondents: 4
Annual responses by each respondent: 2
Estimated average hours per response: 5
Aggregate annual reporting burden: 40
§ 40.12 permits registered entities to provide notice to the Commission and the Securities and Exchange Commission when certifying, submitting for approval, or otherwise filing a proposal to list a product (other than a novel swap product subject to the forthcoming provisions of § 1.8 of this chapter) having elements of both a security and a contract for the sale of a commodity for future delivery (or an option on such contract or an option on a commodity). The Commission has determined to promulgate rules governing jurisdictional disputes over novel swap products in a separate and forthcoming rulemaking. Accordingly, it is adjusting its estimates to reflect that fact that jurisdictional determinations concerning novel swap submissions will not be subject to the provisions of § 40.12.
Estimated number of respondents: 8
Annual responses by each respondent: 4
Estimated average hours per response: 2.52
Aggregate annual reporting burden: 80.64
1 The Commission originally estimated that 45 registered entities would be subject to the information collection requirements in §§ 40.2, 40.3, 40.5 and 40.6. The Commission based this estimate on the number of registered and exempt entities at the time of proposal. However, the Commission has increased its estimate to account for a number of anticipated registered entities, a few of which do not currently operate a registered or exempt entity. The 70 registered entity figure only minimally alters the per registered entity estimate of time that will be required to comply with Part 40. However, on account of this increased estimate, the aggregate number of responses increased from 5,978 in the Commission’s proposed rulemaking to 7,040 in its final rulemaking.
? The Commission initially estimated 120 responses per year from registered entities. In light of the revisions to the documentation requirements and the ability of registered entities to certify certain swap contracts as a class under § 40.2(d), the number of estimated submissions has been reduced.
3 The Commission reduced the estimated hourly burden in light of revisions to the documentation requirements in §§ 40.2 and 40.3 and the elimination of the documentation requirements in §§ 40.5 and 40.6.
| File Type | application/msword |
| File Title | SUPPORTING STATEMENT FOR NEW AND |
| Author | vhill |
| Last Modified By | WMcobb |
| File Modified | 2011-10-14 |
| File Created | 2011-10-14 |